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 and nine months endedOctober 1, 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.
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 ofSeptember 2022 ,Beyond Meat branded products were available at approximately 188,000 retail and foodservice outlets in more than 85 countries worldwide, 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. The condensed consolidated financial statements for the period endedOctober 1, 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 three months endedOctober 1, 2022 , our retail and foodservice channels accounted for approximately 68.3% and 31.7% of our net revenues, respectively. For the three months endedOctober 2, 2021 , our retail and foodservice channels accounted for approximately 69.3% and 30.7% of our net revenues, respectively. For the nine months endedOctober 1, 2022 , our retail and foodservice channels accounted for approximately 71.8% and 28.2% of our net revenues, respectively. For the nine months endedOctober 2, 2021 , our retail and foodservice channels accounted for approximately 71.6% and 28.4% of our net revenues, respectively. For the three months endedOctober 1, 2022 , ourU.S. and international channels accounted for approximately 75.4% and 24.6% of our net revenues, respectively. For the three months endedOctober 2, 2021 , ourU.S. and international channels accounted for approximately 63.4% and 36.6% of 27 -------------------------------------------------------------------------------- our net revenues, respectively. For the nine months endedOctober 1, 2022 , ourU.S. and international channels accounted for approximately 73.2% and 26.8% of our net revenues, respectively. For the nine months endedOctober 2, 2021 , ourU.S. and international channels accounted for approximately 68.5% and 31.5% of our net revenues, respectively. In the three and nine months endedOctober 1, 2022 , net revenues from both international foodservice channel sales and international retail channel sales decreased as compared to the prior-year periods. International net revenues decreased 47.8% and 20.9% in the three and nine months endedOctober 1, 2022 , respectively, as compared to the prior-year periods. In the three and nine months endedOctober 1, 2022 ,U.S. retail channel net revenues decreased as compared to the prior-year periods. AlthoughU.S. foodservice channel net revenues increased slightly in the three months endedOctober 1, 2022 , they decreased in the nine months endedOctober 1, 2022 .U.S. net revenues in the three and nine months endedOctober 1, 2022 decreased 7.9% and 0.4%, respectively, as compared to the prior-year periods. This decrease was in addition to the decrease in international net revenues, resulting in a 22.5% and 6.9% decrease in total net revenues in the three and nine months endedOctober 1, 2022 , respectively, as compared to the prior-year periods.
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 have been and may continue to 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, particularly for refrigerated plant-based meat, and increased competitive activity, including the deceleration of plant-based meat acrossEurope and our ability to successfully launch extended shelf-life products;
•the impact of high inflation and the plant-based meat sector's premium pricing relative to animal protein, including causing consumers to trade down into cheaper forms of protein, including animal meat;
•our decreased revenue forecast negatively impacting capacity utilization, which could also give rise to underutilization fees and termination fees to exit certain supply chain arrangements and/or the write-off of certain equipment, driving less leverage on fixed costs and delaying the speed at which cost savings initiatives impact our financial results;
•changes in forecasted demand, particularly for Beyond Meat Jerky;
•effectively managing inventory levels, including sales to the liquidation channel and the level of inventory reserves;
•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, rising interest rates, higher transportation, raw materials, energy, labor and supply chain costs;
•increased promotional programs and trade discounts to our retail and foodservice customers, including to bolster support for our core lines, 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.
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Subsequent to the quarter ended October 1, 2022 , on October 11, 2022 , our Board
of Directors approved a plan to reduce our workforce by approximately 200
employees, representing approximately 19% of our total global workforce. This
decision was based on cost-reduction initiatives intended to reduce operating
expenses as the Company focuses on a set of key growth priorities. We may not be
able to fully realize the costs savings and benefits initially anticipated from
these actions, and the expected costs may be greater than expected. See Part II,
Item 1A . "Risk Factors - Risks Related to Our Business - Our strategic
initiatives to reduce our cost structure towards cash flow positive operations
could have long-term adverse effects on our business, and we may not realize the
operational or financial benefits from such actions" and "Our inability to
streamline operations and improve cost efficiencies could result in the
contraction of our business and the implementation of significant cost cutting
measures."
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, lockdowns 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, includingChina , has slowed the reopening process. The COVID-19 pandemic continues to impact the global economy. We have established a cross-functional task force that 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 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 the remainder of 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;
•COVID-19 lockdowns 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, inflation and rising interest rates;
•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;
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--------------------------------------------------------------------------------•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 (the "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 ofthe 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 . 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 and sales to our joint venture, thePlanet Partnership, LLC U.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;
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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 seek 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, Beyond Chicken Tenders, Beyond Meat Jerky, and the recent launches of Beyond Steak, Beyond Chicken Nuggets and Beyond Popcorn Chicken 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 both retail and foodservice customers to support product development and category management, and drive consumer adoption of our products; and
•overall market trends, including consumer awareness and demand for nutritious, convenient and high protein plant-based foods.
In addition to the factors and trends above, we expect the following to positively impact net revenues in the long run, 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 improve our cost of production and increase the availability and speed with which we can get our products to customers internationally.
As we seek to grow our net revenues, we face several challenges, including any lasting effects from COVID-19, which are difficult to quantify, global events such as the conflict inUkraine and their impact on availability of raw materials, broad macroeconomic headwinds including elevated levels of inflation, waning consumer confidence and recessionary concerns, increasing competition in the plant-based meat category, and softening in demand of the plant-based meat category overall, particularly in the refrigerated subsegment among others. 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 over time we will need to continue to offer more trade and promotion discounts to both our retail and foodservice customers, to drive increased consumer trials, in response to COVID-19 and in response to increased competition and pressure on the plant-based meat category. 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$4.6 million and$3.6 million as ofOctober 1, 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 and as consumers trade down among proteins in the context of significant inflationary pressures. In response, we anticipate providing heavier discounting and promotions on some of our products from time to time. 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. 31
-------------------------------------------------------------------------------- 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. For example, in the third quarter of 2022, a combination of overall weaker than expected demand in the category and certain customer and distributor changes such as reducing targeted inventory levels, among other factors, contributed to the decline in net revenues across markets and channels compared to the prior-year period. 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 is 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 2022,U.S. retail channel net revenues during the second quarter were 16% higher than the first quarter. In 2021,U.S. retail channel net revenues during the second quarter were 21% higher than the first quarter. We continue to see additional seasonality effects, especially within our retail channel, with revenue contribution from this channel generally 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, recessionary and inflationary pressures, competition and other factors impacting our business, 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, cost of packaging our
products, inventory write-offs and reserves. Under certain circumstances, our
cost of goods sold may also include underutilization and/or termination fees
associated with our co-manufacturing agreements. Over time, 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,
recessionary and inflationary pressures, competition and other factors impacting
our business, we continue to expect that gross profit improvements will be
delivered primarily through improved volume leverage and throughput, reduced
manufacturing conversion costs, 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
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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.
Gross margin improvement may, however, continue to be negatively impacted by
reduced capacity utilization if demand for our products does not meet our
expectations, investments in our production infrastructure across the U.S. , EU
and China in advance of anticipated demand, investing in production personnel,
partnerships and product pipeline, aggressive pricing strategies and increased
discounting, increases in inventory reserves and potentially increased sales to
the liquidation channel, changes in our product and customer mix, and expansion
into new geographies and markets where cost and pricing structures may differ
from our existing markets. Gross margin improvement may also be negatively
impacted by the impact of lower demand forecast, 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 expenses on research and development assets. Given our intention to reduce overall operating expenses and cash expenditures, we are currently exploring alternatives, including potentially terminating or subleasing ourCommerce, California commercialization center. Our research and development efforts are focused on enhancements to our existing product formulations and production processes in addition to the development of new products. We expect to continue to invest in research and development over time, 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 innovate in order to continue to capture a larger share of consumers who typically eat animal-based meats. We expect research and development expenses in 2023 to decrease from the levels in 2022, as we focus on reducing and optimizing expenses. Over time and subject to the duration, magnitude and effects of the COVID-19 pandemic, recessionary and inflationary pressures, competition 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 expand our business.
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 and non-research and development 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 2023 to decrease from the levels in 2022, as we focus on reducing and optimizing expenses. OnAugust 3, 2022 , we announced a reduction-in-force affecting approximately 4% of our global workforce. This reduction-in-force is expected to result in total annualized savings of approximately$8 million , excluding one-time separation costs of approximately$1 million , which we recorded in the third quarter of 2022 and reflected within the SG&A and Research and Development expenses in the condensed consolidated statement of operations. OnOctober 11, 2022 , our Board of Directors approved a plan to reduce our workforce by an additional approximately 200 employees, representing approximately an additional 19% of our total global workforce, based on cost-reduction initiatives intended to reduce operating expenses. 33 -------------------------------------------------------------------------------- We currently estimate that we will incur one-time cash charges of approximately$4 million in connection with the reduction-in-force ofOctober 11, 2022 , primarily consisting of notice period and severance payments, employee benefits and related costs. We expect that the majority of these charges will be incurred in the fourth quarter of 2022, and that the reduction-in-force will be substantially complete by the end of 2022, subject to local law and consultation requirements, which may extend the process beyond the end of 2022 in certain countries. The charges the Company expects to incur are subject to assumptions, including local law requirements, and actual charges may differ from the estimate disclosed above. 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. Subsequent to the quarter endedOctober 1, 2022 , onOctober 18, 2022 , the parties entered into a confidential written settlement agreement and mutual release in connection with this matter. See Note 3 , Restructuring, and Note 10 , Commitments and Contingencies, to the Notes to Unaudited Condensed Consolidated Financial Statements, included elsewhere in this report. 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 Nine Months Ended
October 1, October 2, October 1, October 2,
(in thousands) 2022 2021 2022 2021
Net revenues $ 82,500 $ 106,432 $ 338,995 $ 364,022
Cost of goods sold 97,340 83,456 359,807 260,986
Gross (loss) profit (14,840) 22,976 (20,812) 103,036
Research and development expenses 13,413 14,862 49,293 44,610
Selling, general and administrative 54,495 56,362 192,624 143,602
expenses
Restructuring expenses 6,993 5,750 14,321 12,068
Total operating expenses 74,901 76,974 256,238 200,280
Loss from operations $ (89,741) $ (53,998) $ (277,050) $ (97,244)
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The following table presents selected items in our condensed consolidated
statements of operations as a percentage of net revenues for the periods
presented:
Three Months Ended Nine Months Ended
October 1, October 2, October 1, October 2,
2022 2021 2022 2021
Net revenues 100.0 % 100.0 % 100.0 % 100.0 %
Cost of goods sold 118.0 78.4 106.1 71.7
Gross (loss) profit (18.0) 21.6 (6.1) 28.3
Research and development expenses 16.3 14.0 14.5 12.3
Selling, general and 66.0 53.0 56.8 39.4
administrative expenses
Restructuring expenses 8.5 5.4 4.3 3.3
Total operating expenses 90.8 72.4 75.6 55.0
Loss from operations (108.8) % (50.8) % (81.7) % (26.7) %
Three and Nine Months Ended
Net Revenues
Net revenues decreased by$23.9 million , or 22.5%, in the three months endedOctober 1, 2022 , as compared to the prior-year period due to a 12.8% decrease in total pounds sold and an approximately 11.2% decrease in net revenue per pound. The decrease in net revenue per pound was primarily attributable to strategic but limited price reductions in theU.S. and broader list price reductions in the EU implemented in the first quarter of 2022, increased trade discounts and unfavorable changes in foreign exchange rates.
The following table presents our net revenues by channel in the three months
ended
Three Months Ended Change
October 1, October 2,
(in thousands) 2022 2021 Amount %
U.S. :
Retail $ 46,177 $ 52,361 $ (6,184) (11.8) %
Foodservice 15,994 15,139 855 5.6 %
U.S. net revenues 62,171 67,500 (5,329) (7.9) %
International:
Retail 10,195 21,391 (11,196) (52.3) %
Foodservice 10,134 17,541 (7,407) (42.2) %
International net revenues 20,329 38,932 (18,603) (47.8) %
Net revenues $ 82,500 $ 106,432 $ (23,932) (22.5) %
Net revenues from U.S. retail channel sales in the three months ended October 1,
2022 decreased $6.2 million , or 11.8%, as compared to the prior-year period,
primarily driven by an 11.8% decrease in pounds sold with net revenue per pound
staying flat. By product, the decrease in sales was primarily due to decreases
in sales of breakfast sausage and dinner sausage and to a lesser extent in
Beyond Burger
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and Beyond Beef, partially offset by sales to TPP of Beyond Meat Jerky
introduced in the first quarter of 2022, which contributed $4.5 million in net
revenues, and, to a lesser extent, by chicken products including Beyond Chicken
Tenders. Beyond Meat branded products were available at approximately 78,000
U.S. retail outlets as of September 2022 .
Net revenues from U.S. foodservice channel sales in the three months ended
October 1, 2022 increased $0.9 million , or 5.6%, as compared to the prior-year
period, primarily driven by a 32.2% increase in pounds sold, partially offset by
lower net revenue per pound. The decrease in net revenue per pound was primarily
due to changes in sales mix and, to a lesser extent, higher trade discounts. By
product, the increase in net revenues was primarily due to increased sales of
chicken products including sales to a large QSR customer, partially offset by
the decrease in sales of Beyond Burger, Beyond Sausage, Beyond Breakfast Sausage
and Beyond Beef Crumble. Beyond Meat branded products were available at
approximately 42,000 U.S. foodservice outlets as of September 2022 .
Net revenues from international retail channel sales in the three months ended
October 1, 2022 decreased $11.2 million , or 52.3%, as compared to the prior-year
period, primarily driven by a 37.0% decrease in pounds sold and a 24.4% decrease
in net revenue per pound. The decrease in net revenue per pound was primarily
due to list price reductions in the EU implemented in the first quarter of 2022,
unfavorable foreign exchange rate impact, changes in sales mix and increased
trade discounts. By product, the decrease in sales was primarily due to
decreases in sales of Beyond Burger, Beyond Sausage and Beyond Beef. Beyond Meat
branded products were available at approximately 35,000 international retail
outlets as of September 2022 .
Net revenues from international foodservice channel sales in the three months
ended October 1, 2022 decreased $7.4 million , or 42.2%, as compared to the
prior-year period, primarily due to a 25.5% decrease in net revenue per pound
and a 22.4% decrease in pounds sold. The decrease in net revenue per pound was
primarily due to changes in sales mix and unfavorable foreign exchange rate
impact. By product, the decrease in sales was primarily due to decreases in
sales of Beyond Burger and chicken products which, in the prior-year period,
benefited from a limited time offering at a QSR customer not repeated in the
three months ended October 1, 2022 . Beyond Meat branded products were available
at approximately 33,000 international foodservice outlets as of September 2022 .
Net revenues decreased by $25.0 million , or 6.9%, in the nine months ended
October 1, 2022 , as compared to the prior-year period, primarily due to a
decrease in net revenue per pound of approximately 11.6%, partially offset by a
5.6% increase in total pounds sold. The decrease in net revenue per pound was
primarily attributable to changes in sales mix, price, including the impact of
sales to liquidation channels and list price reductions in the EU implemented in
the first quarter of 2022, increased trade discounts, and unfavorable changes in
foreign exchange rates.
The following table presents our net revenues by channel in the nine months
ended
Nine Months Ended Change
October 1, October 2,
(in thousands) 2022 2021 Amount %
U.S. :
Retail $ 193,298 $ 193,382 $ (84) - %
Foodservice 54,876 55,842 (966) (1.7) %
U.S. net revenues 248,174 249,224 (1,050) (0.4) %
International:
Retail 50,024 67,134 (17,110) (25.5) %
Foodservice 40,797 47,664 (6,867) (14.4) %
International net revenues 90,821 114,798 (23,977) (20.9) %
Net revenues $ 338,995 $ 364,022 $ (25,027) (6.9) %
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-------------------------------------------------------------------------------- Net revenues fromU.S. retail channel sales in the nine months endedOctober 1, 2022 remained flat as compared to the nine months endedOctober 2, 2021 . Total pounds sold increased 6.8%, offset by a decrease of 6.3% in net revenue per pound attributable to lower pricing including the impact of sales to liquidation channels and list price reductions, changes in product mix and higher trade discounts. The increase inU.S. retail channel net revenues was primarily due to sales toTPP of Beyond Meat Jerky introduced in the first quarter of 2022, which contributed$31.1 million in net revenues, and, to a lesser extent, by chicken products including Beyond Chicken Tenders, and was more than offset by decreases in sales of other products. Net revenues fromU.S. foodservice channel sales in the nine months endedOctober 1, 2022 decreased$1.0 million , or 1.7%, as compared to the prior-year period, primarily driven by a decrease of 8.1% in net revenue per pound partially offset by a 6.9% increase in total pounds sold. By product, the decrease in sales was primarily due to reduced sales of Beyond Breakfast Sausage driven by the discontinuation of distribution at a certain customer, Beyond Burger and Beyond Beef Crumble, partially offset by increased sales of chicken products, including sales to a large QSR customer and sales of Beyond Chicken Tenders and Beyond Sausage. Net revenues from international retail channel sales in the nine months endedOctober 1, 2022 decreased$17.1 million , or 25.5%, as compared to the prior-year period, primarily driven by a 21.9% decrease in net revenue per pound, and a 4.6% decrease in pounds sold. The decrease in net revenue per pound was primarily due to list price reductions in the EU implemented in the first quarter of 2022, increased trade discounts, unfavorable foreign exchange rate impact and changes in sales mix. By product, the decrease in sales was primarily due to decreases in sales of Beyond Burger, Beyond Sausage and Beyond Beef, partially offset by increases in sales of Beyond Breakfast Sausage and chicken products including Beyond Chicken Tenders. Net revenues from international foodservice channel sales in the nine months endedOctober 1, 2022 decreased$6.9 million , or 14.4%, as compared to the prior-year period, primarily due to a 23.9% decrease in net revenue per pound, partially offset by a 12.4% increase in pounds sold. The decrease in net revenue per pound was mainly due to changes in sales mix, unfavorable foreign exchange rate impact and increased trade discounts. By product, the increase in sales was primarily due to increases in sales of Beyond Burger and chicken products including Beyond Chicken Tenders. The following table presents total pounds sold by channel for the periods presented: Three Months Ended Change Nine Months Ended Change October 1, October 2, October 1, October 2, (in thousands) 2022 2021 Amount % 2022 2021 Amount % U.S.: Retail 8,861 10,041 (1,180) (11.8) % 37,371 35,003 2,368 6.8 % Foodservice 3,378 2,556 822 32.2 % 10,095 9,440 655 6.9 % International: Retail 2,364 3,751 (1,387) (37.0) % 10,955 11,485 (530) (4.6) % Foodservice 2,785 3,588 (803) (22.4) % 10,408 9,257 1,151 12.4 % Total pounds sold 17,388 19,936 (2,548) (12.8) % 68,829 65,185 3,644 5.6 % 37
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Cost of Goods Sold
Three Months Ended Change Nine Months Ended Change
October 1, October 2, October 1, October 2,
(in thousands) 2022 2021 Amount % 2022 2021 Amount %
Cost of goods sold $ 97,340 $ 83,456 $ 13,884 16.6 % $ 359,807 $ 260,986 $ 98,821 37.9 %
Cost of goods sold increased $13.9 million , or 16.6%, to $97.3 million , in the
three months ended October 1, 2022 as compared to the prior-year period. Cost of
goods sold as a percentage of net revenues in the three months ended October 1,
2022 increased to 118.0% from 78.4% of net revenues in the prior-year period.
The increase in cost of goods sold was primarily due to increased cost per pound
compared to the prior-year period. The increase in cost per pound was primarily
driven by increases in manufacturing costs including depreciation, increased
materials costs, and higher logistics costs. In addition, Beyond Meat Jerky,
which was introduced in the first quarter of 2022, negatively impacted cost per
pound in the three months ended October 1, 2022 compared to the prior-year
period. Cost of goods sold in the three months ended October 1, 2022 included
underutilization fees and one-time termination costs associated with certain
co-manufacturing agreements in the amount of $7.2 million , in aggregate, as
compared to amounts which were immaterial in the prior-year period. The decrease
in revenue per pound in the three months ended October 1, 2022 compared to the
prior-year period also had the effect of increasing cost of goods sold as a
percentage of net revenues.
Cost of goods sold increased $98.8 million , or 37.9%, to $359.8 million , in the
nine months ended October 1, 2022 as compared to the prior-year period. As a
percentage of net revenues, cost of goods sold in the nine months ended
October 1, 2022 increased to 106.1% from 71.7% of net revenues in the prior-year
period. The increase in cost of goods sold was due to increased cost per pound
and, to a lesser extent, increased pounds sold compared to the prior-year
period. The increase in cost per pound was due to manufacturing costs including
depreciation, increased logistics costs and, to a lesser extent, increased
materials costs. In addition, the introduction of Beyond Meat Jerky in the first
quarter of 2022 negatively impacted cost per pound in the nine months ended
October 1, 2022 compared to the prior-year period. Cost of goods sold in the
nine months ended October 1, 2022 included underutilization fees and one-time
termination costs associated with certain co-manufacturing agreements in the
amount of $10.1 million , in aggregate, as compared to amounts which were
immaterial in the prior-year period. The decrease in revenue per pound in the
nine months ended October 1, 2022 compared to the prior-year period also had the
effect of increasing cost of goods sold as a percentage of net revenues.
Gross Profit and Gross Margin
Three Months Ended Change Nine Months Ended Change
October 1, October 2, October 1, October 2,
(in thousands) 2022 2021 Amount % 2022 2021 Amount %
Gross (loss) profit $(14,840) $22,976 $(37,816) (164.6)% $(20,812) $103,036 $(123,848) (120.2)%
Gross margin (18.0)% 21.6% (3,960) bps N/A (6.1)% 28.3% (3,440) bps N/A
Gross profit in the three months ended October 1, 2022 was a loss of $14.8
million as compared to gross profit of $23.0 million in the prior-year period, a
decrease of $37.8 million . Gross margin in the three months ended October 1,
2022 decreased to a negative gross margin of (18.0)% from a positive gross
margin of 21.6% in the prior-year period. Gross profit and gross margin
decreased primarily as a result of a decrease in total pounds sold of 12.8% and
as a result of increased costs per pound of approximately $1.41 and decreased
net revenue per pound of approximately $0.60 in the three months ended
October 1, 2022 compared to the prior-year period. The increase in cost per
pound was primarily driven
38
--------------------------------------------------------------------------------
by higher manufacturing costs per pound including depreciation, as well as
increased materials and logistics costs per pound. Gross profit in the three
months ended October 1, 2022 was negatively impacted by underutilization fees
and one-time termination costs associated with certain co-manufacturing
agreements in the amount of $7.2 million , in aggregate, of which approximately
$5.9 million of the underutilization fees and one-time termination costs were
associated with Beyond Meat Jerky which negatively impacted gross profit by
approximately $5.8 million in the three months ended October 1, 2022 .
Gross profit in the nine months ended October 1, 2022 was a loss of $20.8
million as compared to gross profit of $103.0 million in the prior-year period,
a decrease of $123.8 million . Gross margin in the nine months ended October 1,
2022 decreased to a negative gross margin of (6.1)% from a positive gross margin
of 28.3% in the prior-year period. Despite a 5.6% increase in total pounds sold,
gross profit and gross margin decreased primarily as a result of increased cost
per pound of approximately $1.23 and decreased net revenue per pound of
approximately $0.65 in the nine months ended October 1, 2022 compared to the
prior-year period. Beyond Meat Jerky negatively impacted gross profit by
approximately $22.8 million in the nine months ended October 1, 2022 . Sales of
Beyond Meat Jerky and sales into the liquidation channel were both headwinds to
gross profit compared to the prior-year period. Approximately $10.1 million , in
aggregate, of the underutilization fees and one-time termination costs
associated with certain co-manufacturing agreements, including $5.9 million
associated with Beyond Meat Jerky, negatively impacted gross profit in the nine
months ended October 1, 2022 .
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 shipping and handling costs as a component of cost of goods sold.
Research and Development Expenses
Three Months Ended Change Nine Months Ended Change
October 1, October 2, October 1, October 2,
(in thousands) 2022 2021 Amount % 2022 2021 Amount %
Research and $ 13,413 $ 14,862 $ (1,449) (9.7) % $ 49,293 $ 44,610 $ 4,683 10.5 %
development expenses
Research and development expenses decreased $1.4 million , or 9.7%, in the three
months ended October 1, 2022 , as compared to the prior-year period primarily due
to a reduction in headcount partially offset by an increase in new product
scale-up expenses. Research and development expenses increased to 16.3% of net
revenues in the three months ended October 1, 2022 from 14.0% of net revenues in
the prior-year period primarily as a result of lower net revenues in the three
months ended October 1, 2022 as compared to the prior-year period.
Research and development expenses increased $4.7 million , or 10.5%, in the nine
months ended October 1, 2022 , as compared to the prior-year period. Research and
development expenses increased to 14.5% of net revenues in the nine months ended
October 1, 2022 from 12.3% of net revenues in the prior-year period primarily
due to an increase in production trial activities compared to the prior-year
period and lower net revenues in the nine months ended October 1, 2022 ,
partially offset by lower expenses resulting from a reduction in headcount.
39
--------------------------------------------------------------------------------
SG&A Expenses
Three Months Ended Change Nine Months Ended Change
October 1, October 2, October 1, October 2,
(in thousands) 2022 2021 Amount % 2022 2021 Amount %
Selling, general and $ 54,495 $ 56,362 $ (1,867) (3.3) % $ 192,624 $ 143,602 $ 49,022 34.1 %
administrative expenses
SG&A expenses decreased $1.9 million , or 3.3%, in the three months ended
October 1, 2022 , as compared to the prior-year period. As a percentage of net
revenues SG&A expenses increased to 66.0% of net revenues in the three months
ended October 1, 2022 , from 53.0% of net revenues in the prior-year period. The
decrease in SG&A expenses was primarily due to $3.2 million in lower marketing
expenses, $3.2 million in lower salaries and related expenses, $2.6 million in
lower outbound freight costs, and $2.3 million in lower consulting fees,
partially offset by $4.5 million in higher product donations, $2.9 million in
higher share-based compensation expense, and $2.0 million in increased
advertising costs.
SG&A expenses increased $49.0 million , or 34.1%, in the nine months ended
October 1, 2022 to 56.8% of net revenues in the nine months ended October 1,
2022 , from 39.4% of net revenues in the prior-year period. The increase in SG&A
expenses was primarily due to $14.7 million in advertising costs, $11.2 million
in higher salaries and related expenses, $7.2 million in higher share-based
compensation expense, $6.1 million in higher product donations, $5.3 million in
higher marketing expenses and $4.4 million in higher consulting 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$7.0 million and$5.8 million in the three months endedOctober 1, 2022 andOctober 2, 2021 , respectively, and$14.3 million and$12.1 million in the nine months endedOctober 1, 2022 andOctober 2, 2021 , respectively. The restructuring expenses were primarily related to legal and other expenses associated with the dispute. As ofOctober 1, 2022 andDecember 31, 2021 , there were$4.1 million and$2.7 million , respectively, in accrued and unpaid restructuring expenses. Subsequent to the quarter endedOctober 1, 2022 , onOctober 18, 2022 , the parties entered into a confidential written settlement agreement and mutual release in connection with this matter. 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 endedOctober 1, 2022 was$89.7 million compared to$54.0 million in the prior-year period. The increase in loss from operations in the three months endedOctober 1, 2022 was primarily driven by lower gross profit, partially offset by a reduction in operating expenses, as compared to the prior-year period. The reduction in operating expenses was primarily attributable to lower selling expenses, reduced general and administrative expenses, and lower non-production headcount expenses, partially offset by increased product donations and restructuring costs. Loss from operations in the nine months endedOctober 1, 2022 was$277.1 million compared to$97.2 million in the prior-year period. The increase in loss from operations in the nine months endedOctober 1, 2022 was primarily driven by lower gross profit, growth in non-production headcount expenses, higher share-based compensation expense, higher product donations, higher marketing-related expenses, higher consulting expenses, increased production trial activities and higher restructuring expenses compared to the prior-year period. 40
--------------------------------------------------------------------------------
Total Other Expense, net
Total other expense, net in the three months endedOctober 1, 2022 of$3.2 million included approximately$3.9 million in realized and unrealized foreign currency transaction losses due to unfavorable changes in foreign exchange rates of the Euro and Chinese Yuan and$1.0 million in interest expense from the amortization of convertible debt issuance costs, partially offset by$1.5 million in interest income. Total other expense of$0.2 million in the prior-year period consisted of$1.0 million in interest expense from the amortization of convertible debt issuance costs and$0.2 million in foreign currency transaction losses, partially offset by$0.9 million in subsidies received from theJiaxing Economic Development Zone Finance Bureau for our investment in BYND JX. Total other expense, net in the nine months endedOctober 1, 2022 of$11.4 million consisted primarily of$10.5 million in realized and unrealized foreign currency transaction losses due to unfavorable changes in foreign exchange rates of the Euro and Chinese Yuan and$3.0 million in interest expense from the amortization of convertible debt issuance costs, partially offset by$2.2 million in interest income. Total other expense, net in the nine months endedOctober 2, 2021 of$3.3 million consisted of$2.3 million in interest expense from the amortization of convertible debt issuance costs,$1.0 million in loss on extinguishment of debt associated with the termination of our bank credit facility,$0.4 million in foreign currency transaction losses and$0.3 million in interest expense associated with our bank credit facility, partially offset by$1.1 million in subsidies received from theJiaxing Economic Development Zone Finance Bureau for our investment in BYND JX.
Net Loss
Net loss was$101.7 million and$299.3 million in the three and nine months endedOctober 1, 2022 , respectively, compared to net loss of$54.8 million and$101.7 million in the prior-year periods. The increase in net loss during the three and nine months endedOctober 1, 2022 as compared to the prior-year periods was primarily due to lower gross profit, higher losses in equity associated withTPP , and higher realized and unrealized foreign currency losses as discussed above. The increase in net loss for the nine months endedOctober 1, 2022 compared to the prior-year period was also driven by higher operating expenses. 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, 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:
41
--------------------------------------------------------------------------------•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 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):
Three Months Ended Nine Months Ended
October 1, October 2, October 1, October 2,
(in thousands) 2022 2021 2022 2021
Net loss, as reported $ (101,678) $ (54,816) $ (299,270) $ (101,734)
Income tax (benefit) expense - (23) 21 27
Interest expense 1,040 1,005 3,173 2,656
Depreciation and amortization
expense 8,435 5,703 23,255 14,910
Restructuring expenses(1) 6,993 5,750 14,321 12,068
Share-based compensation
expense 9,250 6,385 28,848 21,624
Other, net(2) 2,151 (759) 8,177 631
Adjusted EBITDA $ (73,809) $ (36,755) $ (221,475) $ (49,818)
Net loss as a % of net
revenues (123.2) % (51.5) % (88.3) % (27.9) %
Adjusted EBITDA as a % of net
revenues (89.5) % (34.5) % (65.3) % (13.7) %
____________(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
Subsequent to the quarter ended
entered into a confidential written settlement agreement and mutual release in
connection with this matter.
(2) (a) Includes
the three and nine months ended
(b) Includes
termination of the Company's credit facility in the nine months ended
42
--------------------------------------------------------------------------------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, inflation, rising interest rates, overall economic conditions 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. The sale of additional equity would result in additional dilution to our stockholders. The incurrence of debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations. 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; our rate of revenue growth; timing to adjust our supply chain and cost structure in response to material fluctuations in product demand; 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; our investments in real property and joint ventures; the costs required to fund domestic and international operations and 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 or our directors and officers; 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. Subsequent to the quarter endedOctober 1, 2022 , onOctober 11, 2022 , our Board of Directors approved a plan to reduce our workforce by approximately 200 employees, representing approximately 19% of our total global workforce. This decision was based on cost-reduction initiatives intended to reduce operating expenses, as the Company focuses on a set of key growth priorities. We currently estimate that we will incur one-time cash charges of approximately$4 million in connection with the reduction-in-force, primarily consisting of notice period and severance payments, employee benefits and related costs. We expect that the majority of these charges will be incurred in the fourth quarter of 2022, and that the reduction-in-force will be substantially complete by the end of 2022, subject to local law and consultation requirements, which may extend the process beyond the end of 2022 in certain countries. The charges that we expect to incur are subject to assumptions, including local law requirements, and actual charges may differ from the estimate disclosed above. We may not be able to fully realize the costs savings and benefits initially anticipated from these actions, and the expected costs may be greater than expected.
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 43 -------------------------------------------------------------------------------- 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 (see Note 7 , Debt, to the Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere in this report). As ofOctober 1, 2022 , we had$390.2 million in cash and cash equivalents.
In the nine 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.
Nine Months Ended
October 1, October 2,
(in thousands) 2022 2021
Cash (used in) provided by:
Operating activities $ (270,347) $ (191,047)
Investing activities $ (70,704) $ (104,433)
Financing activities $ 385 $ 1,022,120 In the nine months endedOctober 1, 2022 , we incurred a net loss of$299.3 million , which was the primary reason for net cash used in operating activities of$270.3 million . Net cash outflows from changes in our operating assets and liabilities were$52.5 million , primarily due to the escrow payments related to the Campus Lease (see Note 10 , Commitments and Contingencies, to the Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere in this report), and increase in inventory. The cash outflows were partially offset by the decrease in accounts receivable and prepaid expenses and other assets. Net loss in the nine months endedOctober 1, 2022 included$81.4 million in non-cash expenses primarily comprised of share-based compensation expense, depreciation and amortization expense, our portion of the losses in our joint venture and unrealized losses on foreign currency transactions. In the nine months endedOctober 2, 2021 , we recorded a net loss of$101.7 million which was the primary reason for net cash used in operating activities of$191.0 million . Net cash outflows from changes in our operating assets and liabilities were$132.9 million , primarily due to the increase in inventory, increase in accounts receivable balances and escrow payments related to the Campus Lease (see Note 10 , Commitments and Contingencies, to the Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere in this report). The cash outflows were partially offset by the increase in accrued expenses and other current liabilities. Net loss in the nine months endedOctober 2, 2021 included$43.6 million in non-cash expenses primarily comprised of share-based compensation expense and depreciation and amortization expense.
Depreciation and amortization expense was
Net cash used in investing activities primarily relates to capital expenditures to support our investment in property, plant and equipment.
In the nine months endedOctober 1, 2022 , net cash used in investing activities was$70.7 million and consisted of$60.0 million in cash outflows for purchases of property, plant and equipment, primarily driven by continued investments in facilities and production equipment and$10.0 million in payments for investment in 44
-------------------------------------------------------------------------------- joint venture. Subsequent to the quarter endedOctober 1, 2022 , the Company agreed to contribute an additional$6.5 million as its share of the additional investment inTPP , with half to be contributed in the fourth quarter of 2022 and the remaining half in the first quarter of 2023. In the nine months endedOctober 2, 2021 , net cash used in investing activities was$104.4 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 domestically and abroad. Capital expenditures in the nine months endedOctober 2, 2021 include$10.4 million in payments for the purchase of a property that the Company had previously leased under an operating lease.
Net Cash Provided by Financing Activities
In the nine months endedOctober 1, 2022 , net cash provided by financing activities was$0.4 million primarily from$1.6 million in proceeds from stock option exercises, partially offset by$1.1 million in payments of minimum withholding taxes on net share settlement of equity awards and payments under finance lease obligations. In the nine months endedOctober 2, 2021 , net cash provided by financing activities was$1,022.1 million primarily from the proceeds of the Notes of$1,066.1 million and$7.6 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,$2.7 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 nine months endedOctober 1, 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:
Leases
OnJanuary 14, 2021 , we entered into the Campus Lease withHC Hornet Way, LLC , aDelaware limited liability company (the "Landlord"), to house our lab and innovation space and headquarters offices inEl Segundo, California (the "Premises"). Although the Company is involved in the design of the tenant improvements of the Premises, the Company does not have title or possession of the assets during construction. In addition, the Company does not have the ability to control the leased Premises until each phase of the tenant improvements is complete. We contributed$49.1 million and$59.2 million in payments towards the construction of the Premises in the nine months endedOctober 1, 2022 and in the year endedDecember 31, 2021 , respectively. These payments are initially recorded in "Prepaid lease costs, non-current" in the Company's condensed consolidated balance sheets as ofOctober 1, 2022 andDecember 31, 2021 , respectively, which will ultimately be recorded as a component of a right-of-use asset upon lease commencement for each phase of the lease. OnSeptember 15, 2022 , the tenant improvements associated with Phase 1-A were completed, and the underlying asset was delivered to the Company. As such, the Company has recognized a$64.1 million right-of-use asset, which includes the reclassification of$27.7 million of the construction payments previously included in "Prepaid lease costs, non-current," and a$36.6 million lease liability for Phase 1-A of the Campus Lease in its condensed consolidated balance sheet as ofOctober 1, 2022 . Aggregate payments towards base rent over the initial lease term associated with the remaining phases not yet delivered to the Company will be approximately$118.4 million . Concurrent with our execution of the Campus Lease, as a security deposit, we delivered to the landlord a letter of credit under the revolving credit facility in the amount of$12.5 million . Upon termination of the revolving credit facility, the letter of credit continued in effect, unsecured. See Note 4
,
Leases, and Note 10 , Commitments and Contingencies, to the Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere in this report.
45
--------------------------------------------------------------------------------In the nine months endedOctober 1, 2022 , we amended the lease for our facility in the JXEDZ to extend the term for an additional five years without rent escalation. As ofOctober 1, 2022 , we had invested$22.0 million and had advanced$20.0 million to our subsidiary, BYND JX. See Note 10 , Commitments and Contingencies, to the Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere in this report.
Investment in
OnJanuary 25, 2021 , we entered intoTPP , a joint venture with PepsiCo, Inc., to develop, produce and market innovative snack 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$8.7 million and$0.6 million for the three months endedOctober 1, 2022 andOctober 2, 2021 , respectively, and our share of the net losses inTPP in the amount of$10.8 million and$1.2 million for the nine months endedOctober 1, 2022 andOctober 2, 2021 , respectively. In the nine months endedOctober 1, 2022 , we also entered into an agreement for a nonrefundable up-front fee associated with our manufacturing and supply agreement withTPP that will be recognized over the estimated term of the manufacturing and supply agreement. See Note 13 , Related Party Transactions, to the Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere in this report. For the year endedDecember 31, 2021 , we contributed our share of the investment inTPP ,$11.0 million , which was increased in the nine months endedOctober 1, 2022 to$21.0 million . Subsequent to the quarter endedOctober 1, 2022 , we agreed to contribute an additional$6.5 million as our share of the additional investment inTPP , with half to be contributed in the fourth quarter of 2022 and the remaining half in the first quarter of 2023.
Purchase Commitments
As ofOctober 1, 2022 , we had a commitment to purchase pea protein inventory totaling$49.4 million , of which$9.3 million is expected to be purchased in the remainder of 2022, and$40.1 million in 2023, and$84.7 million in fee commitments to manufacture products at a co-manufacturer's facility over a 5-year term (see Note 10 , Commitments and Contingencies, to the Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere in this report). In addition, as ofOctober 1, 2022 , we had approximately$40.7 million in purchase order commitments for capital expenditures primarily to purchase machinery and equipment OnJuly 27, 2022 , we entered into an agreement to purchase certain real property on a neighboring site to our manufacturing facility inEurope located in Enschede,the Netherlands , for cash consideration of approximately €6.3 million. The purchase is expected to close in the second half of 2023.
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. 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 nine months endedOctober 1, 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 46 --------------------------------------------------------------------------------
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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