UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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x☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
For the quarterly period ended MarchSeptember 30, 20192023
OR
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o☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-38879
BEYOND MEAT, INC.
(Exact name of registrant as specified in its charter)
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| Delaware | 26-4087597 |
(State or other jurisdiction of Incorporationincorporation or organization)
| (I.R.S. Employer Identification No.) |
119 Standard
888 N. Douglas Street, Suite 100
El Segundo, CA 90245
(Address, including zip code, of principal executive offices)
(866) 756-4112
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: |
| | | | | | | | | | | | | |
| Title of each class | | Trading
Symbol(s)
| | Name of each exchange on which registered |
Common Stock, $.0001$0.0001 par value | | BYND | | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrantregistrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o☒ No x☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x☒ No o☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
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| Large accelerated filer | | o☒ | Accelerated filer | | o☐ |
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| Non-accelerated filer | | x☐ | Smaller reporting company | | o☐ |
| | | Emerging growth company | | x☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No x☒
As of JuneNovember 7, 2019,2023, the registrant had 60,122,79764,540,906 shares of common stock, $0.0001 par value per share, outstanding.
Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Qreport includes forward-looking statements within the meaning of the federal securities laws.laws that involve risks and uncertainties concerning the business, products and financial results of Beyond Meat, Inc. (including its subsidiaries unless the context otherwise requires, “Beyond Meat,” “we,” “us,” “our” or the “Company”). We have based these forward-looking statements largely on our current opinions, expectations, beliefs, plans, objectives, assumptions and projections about future events and financial trends affecting the operating results and financial condition of our business. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:
•the impact of inflation and rising interest rates across the economy, including higher food, grocery, raw materials, transportation, energy, labor and fuel costs;
•a continued decrease in demand, and the underlying factors negatively impacting demand, in the plant-based meat category;
•risks and uncertainties related to certain cost-reduction initiatives, cost structure improvements, workforce reductions and executive leadership changes, and the timing and success of reducing operating expenses and achieving certain financial goals and cash flow positive objectives;
•the timing and success of narrowing our commercial focus to certain growth opportunities; accelerating activities that prioritize gross margin expansion and cash generation; changes to our pricing architecture within certain channels; and accelerated, cash-accretive inventory reduction initiatives;
•our ability to successfully execute our global operations review, including the potential exit of select product lines; further optimization of our manufacturing capacity and real estate footprint; and a review and potential restructuring of our operations in China;
•the impact of adverse and uncertain economic and political conditions in the U.S. and international markets, including concerns about the likelihood of an economic recession, downturn or periods of rising or high inflation;
•reduced consumer confidence and changes in consumer spending, including spending to purchase our products, and negative trends in consumer purchasing patterns due to levels of consumers’ disposable income, credit availability and debt levels, and economic conditions, including due to recessionary and inflationary pressures;
•our inability to properly manage and ultimately sell our inventory in a timely manner, which could require us to sell our products through liquidation channels at lower prices, write-down or write-off obsolete inventory, or increase inventory reserves;
•any future impairment charges, including due to any future changes in estimates, judgments or assumptions, failure to achieve forecasted operating results, weakness in the economic environment, changes in market conditions and/or declines in our market capitalization;
•the sufficiency of our cash and cash equivalents to meet our liquidity needs, including estimates of our expenses, future revenues, capital expenditures, capital requirements and our needs for additional financing;
•our ability to accurately predict consumer taste preferences, trends and demand and successfully innovate, introduce and commercialize new products and improve existing products, including in new geographic markets;
•the effects of competitive activity from our market competitors and new market entrants;
•disruption to, and the impact of uncertainty in, our domestic and international supply chain, including labor shortages and disruption, shipping delays and disruption, and the impact of cyber incidents at suppliers and vendors;
•our ability to streamline operations and improve cost efficiencies, which could result in the contraction of our business and the implementation of significant cost cutting measures such as further downsizing and exiting certain operations, including product lines, domestically and/or abroad;
•the impact of uncertainty as a result of doing business in China and Europe, including as a result of our review and potential restructuring of our operations in China;
•the volatility of or inability to access the capital markets, including due to macroeconomic factors, geopolitical tensions or the outbreak of hostilities or war—for example, the war in Ukraine and the escalating conflict in Israel, Gaza and surrounding areas;
•changes in the retail landscape, including our ability to maintain and expand our distribution footprint, the timing, success and level of trade and promotion discounts, our ability to maintain and grow market share and increase household penetration, repeat purchases, buying rates (amount spent per buyer) and purchase frequency, and our ability to maintain and increase sales velocity of our products;
•changes in the foodservice landscape, including the timing, success and level of marketing and other financial incentives to assist in the promotion of our products, our ability to maintain and grow market share and attract and retain new foodservice customers or retain existing foodservice customers, and our ability to introduce and sustain offering of our products on menus;
•the timing and success of distribution expansion and new product introductions in increasing revenues and market share;
•the timing and success of strategic Quick Service Restaurant (“QSR”) partnership launches and limited time offerings resulting in permanent menu items;
•foreign currency exchange rate fluctuations;
•our ability to identify and execute cost-down initiatives intended to achieve price parity with animal protein;
•the effectiveness of our business systems and processes;
•our estimates of the size of our market opportunities;opportunities and ability to accurately forecast market growth;
•our ability to effectively manage our growth;
our ability to effectively expandoptimize our manufacturing and production capacity;capacity, and real estate footprint, including consolidating manufacturing facilities and production lines, exiting co-manufacturing arrangements and effectively managing capacity for specific products with shifts in demand;
•risks associated with underutilization of capacity which could give rise to increased costs per unit, underutilization fees, termination fees and other costs to exit certain supply chain arrangements and product lines, and/or the write-down or write-off of certain equipment;
•our ability to accurately forecast our future results of operations and financial goals or targets, including fluctuations in demand for our products and in the plant-based meat category generally and increased competition;
•our ability to accurately forecast demand for our products and manage our inventory, including the impact of customer orders ahead of holidays and shelf reset activities, customer and distributor changes and buying patterns, such as reductions in targeted inventory levels, and supply chain and labor disruptions, including due to the impact of cyber incidents at suppliers and vendors;
•our operational effectiveness and ability to fulfill orders in full and on time;
•variations in product selling prices and costs, the timing and success of changes to our pricing architecture within certain channels, and the mix of products sold;
•our ability to successfully enter new geographic markets, manage our international expansionbusiness and comply with any applicable laws and regulations;regulations, including risks associated with doing business in foreign countries, substantial investments in our manufacturing operations in China and the Netherlands, and our ability to comply with the U.S. Foreign Corrupt Practices Act (“FCPA”) or other anti-corruption laws;
•our ability to protect our brand against misinformation about our products and the plant-based meat category, real or perceived quality or health issues with our products, marketing campaigns aimed at generating negative publicity regarding our products and the plant-based meat category, including
regarding the nutritional value of our products, and other issues that could adversely affect our brand and reputation;
•the effects of increased competition from our market competitors;global outbreaks of pandemics (such as the COVID-19 pandemic), epidemics or other public health crises, or fear of such crises;
•the success of our marketing effortsinitiatives and the ability to maintain and grow our brand awareness, and maintain, protect and enhance our brand;brand, attract and retain new customers and maintain and grow our market share, particularly while we are seeking to reduce our operating expenses;
•our ability to attract, maintain and effectively expand our relationships with key strategic foodservice partners;
•our ability to attract and retain our suppliers, distributors, co-manufacturers and customers;
•our ability to procure sufficient high quality,high-quality raw materials at competitive prices to manufacture our products;
•the availability of pea proteinand other proteins that meetsmeet our standards;
real or perceived quality or health issues•our ability to diversify the protein sources used for our products;
•our ability to differentiate and continuously create innovative products, respond to competitive innovation and achieve speed-to-market;
•our ability to successfully execute our strategic initiatives;
•the volatility associated with ingredient, packaging, transportation and other input costs;
•our ability to keep pace with technological changes impacting the development of our products or other issues that adversely affect our brand and reputation;
changes in the tastes and preferencesimplementation of our consumers;business needs;
•significant disruption in, or breach in security of our or our suppliers’ or vendors’ information technology systems, and resultant interruptions in service and any related impact on our reputation;reputation, including data privacy, and any potential impact on our supply chain, including on customer demand, order fulfillment and lost sales, and the resulting timing and/or amount of net revenues recognized;
•the ability of our transportation providers to ship and deliver our products in a timely and cost effective manner;
•senior management and key personnel changes, the attraction, training and retention of qualified employees and key personnel;personnel, and our ability to maintain our company culture;
•the effects of organizational changes including reductions-in-force and realignment of reporting structures;
•the success of operations conducted by joint ventures where we share ownership and management of a company with one or more parties who may not have the same goals, strategies or priorities as we do and where we do not receive all of the financial benefit;
•the timing, impact and success of restructuring certain contracts and operating activities related to Beyond Meat Jerky and our assumption of distribution responsibilities for Beyond Meat Jerky;
•risks related to use of a professional employer organization to administer human resources, payroll and employee benefits functions for certain of our international employees, and use of certain third party service providers for the performance of several business operations including payroll and human capital management services;
•the impact of potential workplace hazards;
•the effects of natural or man-made catastrophic or severe weather events, including events brought on by climate change, particularly involving our or any of our co-manufacturers’ manufacturing facilities, or our suppliers’ facilities;facilities, or any other vital aspects of our supply chain;
•the effectiveness of our internal controls;
•accounting estimates based on judgment and assumptions that may differ from actual results;
•the requirements of being a public company and effects of increased administrative costs related to compliance and reporting obligations;
•risks related to our debt, including our ability to repay our indebtedness, limitations on our cash flow from operations and our ability to satisfy our obligations under the convertible senior notes; our ability to raise the funds necessary to repurchase the convertible senior notes for cash, under certain circumstances, or to pay any cash amounts due upon conversion; provisions in the indenture governing the convertible senior notes delaying or preventing an otherwise beneficial takeover of us; and any adverse impact on our reported financial condition and results from the accounting methods for the convertible senior notes;
•our ability to meet our obligations under our El Segundo Campus and Innovation Center ("Campus Headquarters") lease (“Campus Lease”), the timing of occupancy and completion of the build-out of our space, cost overruns, delays, the impact of workforce reductions or other cost-reduction initiatives on our space demands, and the timing and success of subleasing excess space at our Campus Headquarters;
•our ability to meet our obligations under leases for our corporate offices, manufacturing facilities and warehouses, or risks related to excess space capacity under our leases due to workforce reductions or other cost-reduction initiatives;
•changes in laws and government regulation affecting our business, including the U.S. Food and Drug Administration (“FDA”) and the U.S. Federal Trade Commission (“FTC”) governmental regulation, and state, local and foreign regulation;
•new or pending legislation, or changes in laws, regulations or policies of governmental agencies or regulators, relating toboth in the U.S. and abroad, affecting plant-based meat, the labeling or naming of our products;products, or our brand name or logo;
•the impactfailure of adverse economic conditions;acquisitions and other investments to be efficiently integrated and produce the results we anticipate;
•risks inherent in investment in real estate;
•the financial condition of, and our relationships with our suppliers, co-manufacturers, distributors, retailers, and foodservice customers;customers, and their future decisions regarding their relationships with us;
•our ability and the ability of our suppliers and co-manufacturers to comply with food safety, environmental or other laws or regulations;regulations and the impact of any non-compliance on our operations, brand reputation, and ability to fulfill customer orders in full and on time;
seasonality;•seasonality, including increased levels of purchasing by customers ahead of holidays, customer shelf reset activity and the timing of product restocking by our retail customers;
•the sufficiencyimpact of our cashincreased scrutiny from a variety of stakeholders, institutional investors and cash equivalents to meet our liquidity needsgovernmental bodies on environmental, social and service our indebtedness;governance (“ESG”) practices, including expanding mandatory and voluntary reporting, diligence and disclosure on ESG matters;
economic conditions and their impact on consumer spending;
•the outcomes of legal or administrative proceedings;proceedings, or new legal or administrative proceedings filed against us;
•our, our suppliers’ and our co-manufacturers’ ability to protect our proprietary technology, and intellectual property and trade secrets adequately;
as well as other statements regarding our future operations, financial condition•the impact of tariffs and prospects,trade wars;
•the impact of changes in tax laws; and business strategies. Forward-looking statements generally can be identified by words such as “believe,” “may,” “will,” “will continue,” “could,” “will likely result,” “estimate,” “continue,” “anticipate,” “intend,” “plan,” “predict,” “project,” “expect,” “potential” and similar expressions, as they relate to our company, our business and our management. These forward-looking statements are based on our current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially from those anticipated or implied in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q, including, without limitation,
•the risks discussed in Part I, Item 1A, “Risk Factors,” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the Securities and Exchange Commission (the “SEC”) on March 1, 2023 (the “2022 10-K”), Part II, Item 1A, "Risk“Risk Factors",” included herein, and those discussed in other documents we file from time to time with the SecuritiesSEC.
In some cases, you can identify forward-looking statements by terms such as “may,” “should,” “expects,” “might,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,”
“predicts,” “potential,” “seek,” “would” or “continue,” or the negative of these terms or other similar expressions. We have based these forward-looking statements largely on our current expectations and Exchange Commission (“SEC”).projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements.
This report also contains estimates and other statistical data obtained from independent parties and by us relating to market size and growth and other data about our industry and ultimate consumers. The number of retail and foodservice outlets where Beyond Meat branded products are available was derived from rolling 52-week data as of September 2023. This data involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates and data. Such data does not reflect our assumption of distribution for Beyond Meat Jerky in the fourth quarter of 2023 which is expected to limit our distribution reach for Beyond Meat Jerky and substantially reduce our total number of U.S. retail distribution outlets in subsequent quarters.
All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above. Forward-looking statements speak only as of the date of this report. You should not put undue reliance on any forward-looking statements. We assume no obligation to publicly update or revise any forward-looking statements to reflect actual results,because of new information, future events, changes in assumptions or changes in other factors affecting forward-looking information,otherwise, except to the extent required by applicable laws. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.
As used herein, the terms “Beyond“Beyond Meat,” “we,” “us,” “our” and “the Company” refer to Beyond Meat, Inc., a Delaware corporation.
“The Beyond“Beyond Burger,” “Beyond Beef,” “Beyond Chicken,” “Beyond Meat,” “Beyond Sausage,” “Beyond Breakfast Sausage,” “The Cookout Classic”“Beyond Meatballs,” “Beyond Chicken,” “Beyond Popcorn Chicken,” “Beyond Steak,” the Caped Steer Logo and “The Future of Protein” and “The Future of Protein Beyond Meat” and design“Eat What You Love” are registered or pending trademarks of Beyond Meat, Inc. in the United States and, in some cases, in certain other countries. All other brand names or trademarks appearing in this Quarterly Report on Form 10-Qreport are the property of their respective holders. Solely for convenience, the trademarks and trade names contained herein are referred to without the ® and TM™ symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.
Part I. Financial Information
ITEM I. FINANCIAL STATMENTSSTATEMENTS
BEYOND MEAT, INC.
Condensed Balance Sheets
(In thousands, except share and per share data)
(unaudited) | | | | | | | | | | | | |
| BEYOND MEAT, INC. AND SUBSIDIARIES | |
| Condensed Consolidated Balance Sheets | |
| (In thousands, except share and per share data) | |
| (unaudited) | |
| September 30,
2023 | | December 31,
2022 | |
| Assets | | | | |
| Current assets: | | | | |
| Cash and cash equivalents | $ | 217,545 | | | $ | 309,922 | | |
| Restricted cash, current | 2,689 | | | — | | |
| Accounts receivable, net | 35,763 | | | 34,198 | | |
| Inventory | 194,570 | | | 235,696 | | |
| Prepaid expenses and other current assets | 20,938 | | | 20,700 | | |
| Assets held for sale | 118 | | | 5,943 | | |
| Total current assets | $ | 471,623 | | | $ | 606,459 | | |
| Restricted cash, non-current | 12,600 | | | 12,627 | | |
| Property, plant, and equipment, net | 245,373 | | | 257,002 | | |
| Operating lease right-of-use assets | 132,671 | | | 87,595 | | |
| Prepaid lease costs, non-current | 60,680 | | | 85,472 | | |
| Other non-current assets, net | 4,550 | | | 10,744 | | |
| Investment in unconsolidated joint venture | 1,711 | | | 2,325 | | |
| Total assets | $ | 929,208 | | | $ | 1,062,224 | | |
| Liabilities and stockholders’ deficit: | | | | |
| Current liabilities: | | | | |
| Accounts payable | $ | 61,861 | | | $ | 55,300 | | |
| | | | |
| | | | |
| Current portion of operating lease liabilities | 3,083 | | | 3,812 | | |
| Accrued expenses and other current liabilities | 13,914 | | | 16,729 | | |
| | | | |
| Total current liabilities | $ | 78,858 | | | $ | 75,841 | | |
| Long-term liabilities: | | | | |
| | | | |
| Convertible senior notes, net | $ | 1,136,558 | | | $ | 1,133,608 | | |
| | | | |
| Operating lease liabilities, net of current portion | 76,382 | | | 55,854 | | |
| | | | |
| | | | |
| Finance lease obligations and other long-term liabilities | 316 | | | 469 | | |
| Total long-term liabilities | $ | 1,213,256 | | | $ | 1,189,931 | | |
| (continued on the next page) | |
|
| | | | | | | |
| | March 30,
2019 | | December 31,
2018 |
| Assets | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 35,409 |
| | $ | 54,271 |
|
| Accounts receivable | 16,194 |
| | 12,626 |
|
| Inventory | 34,281 |
| | 30,257 |
|
| Prepaid expenses and other current assets | 6,525 |
| | 5,672 |
|
| Total current assets | 92,409 |
| | 102,826 |
|
| Property, plant, and equipment, net | 31,861 |
| | 30,527 |
|
| Other non-current assets, net | 887 |
| | 396 |
|
| Total assets | $ | 125,157 |
| | $ | 133,749 |
|
| Liabilities, Convertible Preferred Stock and Stockholders’ Deficit: | | | |
| Current liabilities: | | | |
| Accounts payable | $ | 11,663 |
| | $ | 17,247 |
|
| Wages payable | 1,085 |
| | 1,255 |
|
| Accrued bonus | 3,387 |
| | 2,312 |
|
| Accrued expenses and other current liabilities | 3,094 |
| | 2,391 |
|
| Short-term capital lease liabilities | 36 |
| | 44 |
|
| Stock warrant liability | 2,677 |
| | 1,918 |
|
| Total current liabilities | $ | 21,942 |
| | $ | 25,167 |
|
| Long-term liabilities: | | | |
| Revolving credit line | $ | 6,000 |
| | $ | 6,000 |
|
| Long-term portion of bank term loan, net | 19,533 |
| | 19,388 |
|
| Equipment loan, net | 4,914 |
| | 5,000 |
|
| Capital lease obligations and other long-term liabilities | 406 |
| | 404 |
|
| Total long-term liabilities | $ | 30,853 |
| | $ | 30,792 |
|
| Commitments and Contingencies (Note 9) |
|
| |
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| | | | | | | |
| | March 30,
2019 | | December 31,
2018 |
| Convertible preferred stock: | | | |
| Series A convertible preferred stock, par value $0.0001 per share—3,333,500 shares authorized; 3,333,500 shares issued and outstanding as of March 30, 2019 and December 31, 2018 | $ | 2,000 |
| | $ | 2,000 |
|
| Series B convertible preferred stock, par value $0.0001 per share—4,802,260 shares authorized; 4,680,565 shares issued and outstanding as of March 30, 2019 and December 31, 2018 | 4,999 |
| | 4,999 |
|
| Series C convertible preferred stock, par value $0.0001 per share—8,076,643 shares authorized; 8,076,636 shares issued and outstanding as of March 30, 2019 and December 31, 2018 | 14,882 |
| | 14,882 |
|
| Series D convertible preferred stock, par value $0.0001 per share—8,713,207 shares authorized; 8,713,201 shares issued and outstanding as of March 30, 2019 and December 31, 2018 | 24,948 |
| | 24,948 |
|
| Series E convertible preferred stock, par value $0.0001 per share—4,740,531 shares authorized; 4,701,449 shares issued and outstanding as of March 30, 2019 and December 31, 2018 | 17,214 |
| | 17,214 |
|
| Series F convertible preferred stock, par value $0.0001 per share—4,866,776 shares authorized; 4,866,758 shares issued and outstanding as of March 30, 2019 and December 31, 2018 | 29,840 |
| | 29,840 |
|
| Series G convertible preferred stock, par value $0.0001 per share—5,140,257 shares authorized; 5,114,786 shares issued and outstanding as of March 30, 2019 and December 31, 2018 | 55,658 |
| | 55,658 |
|
| Series H convertible preferred stock, par value $0.0001 per share—4,209,693 shares authorized; 2,075,216 shares issued and outstanding as of March 30, 2019 and December 31, 2018 | 49,999 |
| | 49,999 |
|
| Stockholders’ deficit: | | | |
| Common stock, par value $0.0001 per share—60,000,000 shares and 58,669,600 shares authorized at March 30, 2019 and December 31, 2018, respectively; 7,120,933 and 6,951,350 shares issued and outstanding at March 30, 2019 and December 31, 2018, respectively | 1 |
| | 1 |
|
| Additional paid-in capital | 9,142 |
| | 7,921 |
|
| Accumulated deficit | (136,321 | ) | | (129,672 | ) |
| Total stockholders’ deficit | $ | (127,178 | ) | | $ | (121,750 | ) |
| Total liabilities, convertible preferred stock and stockholders’ deficit | $ | 125,157 |
| | $ | 133,749 |
|
| | | | |
| | | | | | | | | | | | |
| BEYOND MEAT, INC. AND SUBSIDIARIES | |
| Condensed Consolidated Balance Sheets | |
| (In thousands, except share and per share data) | |
| (unaudited) | |
| September 30,
2023 | | December 31,
2022 | |
| Commitments and Contingencies (Note 10) | | | | |
| Stockholders’ deficit: | | | | |
| Preferred stock, par value $0.0001 per share—500,000 shares authorized, none issued and outstanding | $ | — | | | $ | — | | |
| Common stock, par value $0.0001 per share—500,000,000 shares authorized; 64,460,196 and 63,773,982 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively | 6 | | | 6 | | |
| Additional paid-in capital | 567,927 | | | 544,357 | | |
| Accumulated deficit | (926,143) | | | (743,109) | | |
| Accumulated other comprehensive loss | (4,696) | | | (4,802) | | |
| Total stockholders’ deficit | $ | (362,906) | | | $ | (203,548) | | |
| Total liabilities and stockholders’ deficit | $ | 929,208 | | | $ | 1,062,224 | | |
| | | | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
BEYOND MEAT, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In thousands, except share and per share data)
(unaudited)
| | | | Three Months Ended | | Three Months Ended | | Nine Months Ended |
| | March 30,
2019 | | March 31,
2018 | | September 30,
2023 | | October 1,
2022 | | September 30,
2023 | | October 1,
2022 |
| Net revenues | $ | 40,206 |
| | $ | 12,776 |
| Net revenues | | $ | 75,312 | | | $ | 82,500 | | | $ | 269,697 | | | $ | 338,995 | |
| Cost of goods sold | 29,435 |
| | 10,719 |
| Cost of goods sold | | 82,566 | | | 97,340 | | | 268,493 | | | 359,807 | |
| Gross profit | 10,771 |
| | 2,057 |
| |
| Gross (loss) profit | | Gross (loss) profit | | (7,254) | | | (14,840) | | | 1,204 | | | (20,812) | |
| | | | | |
| Research and development expenses | 4,498 |
| | 1,605 |
| Research and development expenses | | 9,118 | | | 13,413 | | | 30,323 | | | 49,293 | |
| Selling, general and administrative expenses | 11,177 |
| | 5,737 |
| Selling, general and administrative expenses | | 53,252 | | | 54,495 | | | 152,607 | | | 192,624 | |
| Restructuring expenses | 394 |
| | 294 |
| Restructuring expenses | | (4) | | | 6,993 | | | (631) | | | 14,321 | |
| Total operating expenses | 16,069 |
| | 7,636 |
| Total operating expenses | | 62,366 | | | 74,901 | | | 182,299 | | | 256,238 | |
| Loss from operations | (5,298 | ) | | (5,579 | ) | Loss from operations | | (69,620) | | | (89,741) | | | (181,095) | | | (277,050) | |
| | | | | |
| Other expense, net: | | | | |
| Other (expense) income, net: | | Other (expense) income, net: | | | | | | | | |
| Interest expense | (733 | ) | | (47 | ) | Interest expense | | (989) | | | (1,040) | | | (2,967) | | | (3,173) | |
| Other, net | (618 | ) | | (70 | ) | Other, net | | 243 | | | (2,151) | | | 4,897 | | | (8,177) | |
| Total other expense, net | (1,351 | ) | | (117 | ) | |
| | | | | |
| Total other (expense) income, net | | Total other (expense) income, net | | (746) | | | (3,191) | | | 1,930 | | | (11,350) | |
| Loss before taxes | (6,649 | ) | | (5,696 | ) | Loss before taxes | | (70,366) | | | (92,932) | | | (179,165) | | | (288,400) | |
| Income tax expense | — |
| | — |
| Income tax expense | | — | | | — | | | 5 | | | 21 | |
| Equity in losses of unconsolidated joint venture | | Equity in losses of unconsolidated joint venture | | 126 | | | 8,746 | | | 3,864 | | | 10,849 | |
| Net loss | $ | (6,649 | ) | | $ | (5,696 | ) | Net loss | | $ | (70,492) | | | $ | (101,678) | | | $ | (183,034) | | | $ | (299,270) | |
| Net loss per common share—basic and diluted | $ | (0.95 | ) | | $ | (0.98 | ) | |
| Net loss per share available to common stockholders—basic and diluted | | Net loss per share available to common stockholders—basic and diluted | | $ | (1.09) | | | $ | (1.60) | | | $ | (2.85) | | | $ | (4.71) | |
| Weighted average common shares outstanding—basic and diluted | 6,974,301 |
| | 5,793,801 |
| Weighted average common shares outstanding—basic and diluted | | 64,398,448 | | | 63,694,592 | | | 64,210,809 | | | 63,579,763 | |
| | | | | |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
BEYOND MEAT, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ DeficitComprehensive Loss
(In thousands, except share data)thousands)
(unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Preferred Stock | | | Common Stock | | Additional Paid-in Capital | | Loans to Related Parties | | Accumulated Deficit | | Total |
| | Shares | | Amount | | | Shares | | Amount | |
| Balance at December 31, 2018 | 41,562,111 |
| | $ | 199,540 |
| | | 6,951,350 |
| | $ | 1 |
| | $ | 7,921 |
| | $ | — |
| | $ | (129,672 | ) | | $ | (121,750 | ) |
| Net loss | — |
| | — |
| | | — |
| | — |
| | — |
| | — |
| | (6,649 | ) | | (6,649 | ) |
| Exercise of common stock options | — |
| | — |
| | | 169,583 |
| | — |
| | 366 |
| | — |
| | — |
| | 366 |
|
| Share-based compensation | — |
| | — |
| | | — |
| | — |
| | 855 |
| | — |
| | — |
| | 855 |
|
| Balance at March 30, 2019 | 41,562,111 |
| | $ | 199,540 |
| | | 7,120,933 |
| | $ | 1 |
| | $ | 9,142 |
| | $ | — |
| | $ | (136,321 | ) | | $ | (127,178 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Preferred Stock | | | Common Stock | | Additional Paid-in Capital | | Loans to Related Parties | | Accumulated Deficit | | Total |
| | Shares | | Amount | | | Shares | | Amount | |
| Balance at December 31, 2017 | 39,361,211 |
| | $ | 148,194 |
| | | 5,724,506 |
| | $ | 1 |
| | $ | 4,823 |
| | $ | (951 | ) | | $ | (99,786 | ) | | (95,913 | ) |
| Net loss | — |
| | — |
| | | — |
| | — |
| | — |
| | — |
| | (5,696 | ) | | (5,696 | ) |
| Exercise of common stock options | — |
| | — |
| | | 92,310 |
| | — |
| | 88 |
| | — |
| | — |
| | 88 |
|
| Share-based compensation | — |
| | — |
| | | — |
| | — |
| | 260 |
| | — |
| | — |
| | 260 |
|
| Issuance of Series G preferred stock, net of issuance costs of $7 | 112,945 |
| | 1,228 |
| | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Balance at March 31, 2018 | 39,474,156 |
| | $ | 149,422 |
| | | 5,816,816 |
| | 1 |
| | $ | 5,171 |
| | $ | (951 | ) | | $ | (105,482 | ) | | $ | (101,261 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30,
2023 | | October 1,
2022 | | September 30,
2023 | | October 1,
2022 |
| Net loss | | $ | (70,492) | | | $ | (101,678) | | | $ | (183,034) | | | $ | (299,270) | |
| Other comprehensive loss, net of tax: | | | | | | | | |
| Foreign currency translation gain (loss), net of tax | | 261 | | | (1,672) | | | 106 | | | (4,654) | |
| Comprehensive loss, net of tax | | $ | (70,231) | | | $ | (103,350) | | | $ | (182,928) | | | $ | (303,924) | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
BEYOND MEAT, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash FlowsStockholders’ Deficit
(In thousands)thousands, except share data)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Common Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Loss | | Total |
| | | | | | Shares | | Amount |
| Balance at December 31, 2021 | | | | | | 63,400,899 | | | $ | 6 | | | $ | 510,014 | | | $ | (376,972) | | | $ | (553) | | | $ | 132,495 | |
| Net loss | | | | | | — | | | — | | | — | | | (100,458) | | | — | | | (100,458) | |
| Issuance of common stock under equity incentive plans, net | | | | | | 124,500 | | | — | | | 375 | | | — | | | — | | | 375 | |
| Share-based compensation for equity classified awards | | | | | | — | | | — | | | 9,292 | | | — | | | — | | | 9,292 | |
| Foreign currency translation adjustment | | | | | | — | | | — | | | — | | | — | | | (723) | | | (723) | |
| Balance at April 2, 2022 | | | | | | 63,525,399 | | | $ | 6 | | | $ | 519,681 | | | $ | (477,430) | | | $ | (1,276) | | | $ | 40,981 | |
| Net loss | | | | | | — | | | — | | | — | | | (97,134) | | | — | | | (97,134) | |
| Issuance of common stock under equity incentive plans, net | | | | | | 117,970 | | | — | | | 165 | | | — | | | — | | | 165 | |
| Share-based compensation for equity classified awards | | | | | | — | | | — | | | 10,306 | | | — | | | — | | | 10,306 | |
| Foreign currency translation adjustment | | | | | | — | | | — | | | — | | | — | | | (2,259) | | | (2,259) | |
| Balance at July 2, 2022 | | | | | | 63,643,369 | | | $ | 6 | | | $ | 530,152 | | | $ | (574,564) | | | $ | (3,535) | | | $ | (47,941) | |
| Net loss | | | | | | — | | | — | | | — | | | (101,678) | | | — | | | (101,678) | |
| Issuance of common stock under equity incentive plans, net | | | | | | 92,256 | | | — | | | (3) | | | — | | | — | | | (3) | |
| Share-based compensation for equity classified awards | | | | | | — | | | — | | | 9,250 | | | — | | | — | | | 9,250 | |
| Foreign currency translation adjustment | | | | | | — | | | — | | | — | | | — | | | (1,672) | | | (1,672) | |
| Balance at October 1, 2022 | | | | | | 63,735,625 | | | $ | 6 | | | $ | 539,399 | | | $ | (676,242) | | | $ | (5,207) | | | $ | (142,044) | |
|
| | | | | | | | |
| | | Three Months Ended |
| | | March 30,
2019 | | March 31,
2018 |
| Cash flows from operating activities: | | | | |
| Net loss | | $ | (6,649 | ) | | $ | (5,696 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | | | | |
| Depreciation and amortization | | 1,905 |
| | 733 |
|
| Share-based compensation expense | | 855 |
| | 260 |
|
| Amortization of debt issuance costs | | 58 |
| | 9 |
|
| Change in preferred and common stock warrant liabilities | | 759 |
| | 129 |
|
| Net change in operating assets and liabilities: | | | | |
| Accounts receivables | | (3,568 | ) | | (991 | ) |
| Inventories | | (4,025 | ) | | (1,144 | ) |
| Prepaid expenses and other assets | | 122 |
| | 60 |
|
| Accounts payable | | (4,349 | ) | | 1,845 |
|
| Accrued expenses and other current liabilities | | 1,608 |
| | (133 | ) |
| Long-term liabilities | | 4 |
| | 40 |
|
| Net cash used in operating activities | | $ | (13,280 | ) | | $ | (4,888 | ) |
| Cash flows used in investing activities: | | | | |
| Purchases of property, plant and equipment | | $ | (3,795 | ) | | $ | (3,719 | ) |
| Proceeds from sale of fixed assets | | 132 |
| | — |
|
| Purchases of property, plant and equipment held for sale | | (829 | ) | | — |
|
| Payment of security deposits | | (501 | ) | | (13 | ) |
| Net cash used in investing activities | | $ | (4,993 | ) | | $ | (3,732 | ) |
| Cash flows from financing activities: | | | | |
| Proceeds from Series G preferred stock offering, net of offering costs | | $ | — |
| | $ | 1,229 |
|
| Repayments on revolving credit line | | — |
| | (2,500 | ) |
| Repayments on term loan | | — |
| | (125 | ) |
| Payments of capital lease obligations | | (9 | ) | | (59 | ) |
| Proceeds from exercise of stock options | | 366 |
| | 87 |
|
| Payments of deferred offering costs | | (946 | ) | | — |
|
| Net cash used in financing activities | | $ | (589 | ) | | $ | (1,368 | ) |
| Net decrease in cash and cash equivalents | | $ | (18,862 | ) | | $ | (9,988 | ) |
| Cash and cash equivalents at the beginning of the period | | 54,271 |
| | 39,035 |
|
| Cash and cash equivalents at the end of the period | | $ | 35,409 |
| | $ | 29,047 |
|
| (continued on next page) |
BEYOND MEAT, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders’ Deficit
(In thousands, except share data) |
| | | | | | | | |
| | | Three Months Ended |
| | | March 30,
2019 | | March 31,
2018 |
| Supplemental disclosures of cash flow information: | | | | |
| Cash paid during the period for: | | | | |
| Interest | | $ | 715 |
| | $ | 38 |
|
| Non-cash investing and financing activities: | | | | |
| Non-cash additions to property, plant and equipment | | $ | 589 |
| | $ | 1,226 |
|
| Deferred offering costs, accrued not yet paid | | $ | 69 |
| | $ | — |
|
| (concluded) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Common Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Loss | | Total |
| | | | | | Shares | | Amount |
| Balance at December 31, 2022 | | | | | | 63,773,982 | | | $ | 6 | | | $ | 544,357 | | | $ | (743,109) | | | $ | (4,802) | | | $ | (203,548) | |
| Net loss | | | | | | — | | | — | | | — | | | (59,037) | | | — | | | (59,037) | |
| Issuance of common stock under equity incentive plans, net | | | | | | 376,772 | | | — | | | (117) | | | — | | | — | | | (117) | |
| Share-based compensation for equity classified awards | | | | | | — | | | — | | | 9,565 | | | — | | | — | | | 9,565 | |
| Foreign currency translation adjustment | | | | | | — | | | — | | | — | | | — | | | 3 | | | 3 | |
| Balance at April 1, 2023 | | | | | | 64,150,754 | | | $ | 6 | | | $ | 553,805 | | | $ | (802,146) | | | $ | (4,799) | | | $ | (253,134) | |
| Net loss | | | | | | — | | | — | | | — | | | (53,505) | | | — | | | (53,505) | |
| Issuance of common stock under equity incentive plans, net | | | | | | 167,492 | | | — | | | (69) | | | — | | | — | | | (69) | |
| Share-based compensation for equity classified awards | | | | | | — | | | — | | | 7,748 | | | — | | | — | | | 7,748 | |
| Foreign currency translation adjustment | | | | | | — | | | — | | | — | | | — | | | (158) | | | (158) | |
| Balance at July 1, 2023 | | | | | | 64,318,246 | | | $ | 6 | | | $ | 561,484 | | | $ | (855,651) | | | $ | (4,957) | | | $ | (299,118) | |
| Net loss | | | | | | — | | | — | | | — | | | (70,492) | | | — | | | (70,492) | |
| Issuance of common stock under equity incentive plans, net | | | | | | 141,950 | | | — | | | (35) | | | — | | | — | | | (35) | |
| Share-based compensation for equity classified awards | | | | | | — | | | — | | | 6,478 | | | — | | | — | | | 6,478 | |
| Foreign currency translation adjustment | | | | | | — | | | — | | | — | | | — | | | 261 | | | 261 | |
| Balance at September 30, 2023 | | | | | | 64,460,196 | | | $ | 6 | | | $ | 567,927 | | | $ | (926,143) | | | $ | (4,696) | | | $ | (362,906) | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| | | | | | | | | | | | | | |
| BEYOND MEAT, INC. AND SUBSIDIARIES |
| Condensed Consolidated Statements of Cash Flows |
| (In thousands) |
| (unaudited) |
| | Nine Months Ended |
| | September 30,
2023 | | October 1,
2022 |
| Cash flows from operating activities: | | | | |
| Net loss | | $ | (183,034) | | | $ | (299,270) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | | | | |
| Depreciation and amortization | | 17,707 | | | 23,255 | |
| Non-cash lease expense | | 5,997 | | | 3,389 | |
| Share-based compensation expense | | 23,791 | | | 28,848 | |
| Loss on sale of fixed assets | | 3,876 | | | 946 | |
| Amortization of debt issuance costs | | 2,951 | | | 2,951 | |
| | | | |
| Equity in losses of unconsolidated joint venture | | 3,864 | | | 10,849 | |
| Write-off of note receivable | | 3,795 | | | — | |
| Unrealized losses on foreign currency transactions | | 2,740 | | | 11,160 | |
| Net change in operating assets and liabilities: | | | | |
| Accounts receivable | | (1,806) | | | 7,703 | |
| Inventories | | 40,470 | | | (12,411) | |
| Prepaid expenses and other assets | | 1,282 | | | 7,802 | |
| Accounts payable | | 8,335 | | | (2,922) | |
| Accrued expenses and other current liabilities | | (2,752) | | | (3,429) | |
| Prepaid lease costs, non-current | | (3,254) | | | (49,063) | |
| Operating lease liabilities | | (3,244) | | | (3,177) | |
| Long-term liabilities | | — | | | 3,022 | |
| Net cash used in operating activities | | $ | (79,282) | | | $ | (270,347) | |
| | | | |
| Cash flows from investing activities: | | | | |
| Purchases of property, plant and equipment | | $ | (8,567) | | | $ | (59,952) | |
| Proceeds from sale of fixed assets | | 2,477 | | | — | |
| | | | |
| | | | |
| Payments for investment in joint venture | | (3,250) | | | (10,000) | |
| Payments of security deposits | | — | | | (752) | |
| Net cash used in investing activities | | $ | (9,340) | | | $ | (70,704) | |
| | | | |
| Cash flows from financing activities: | | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| Principal payments under finance lease obligations | | $ | (168) | | | $ | (152) | |
| | | | |
| Proceeds from exercise of stock options | | 171 | | | 1,610 | |
| Payments of minimum withholding taxes on net share settlement of equity awards | | (391) | | | (1,073) | |
| | | | |
| | | | |
| | | | |
| Net cash (used in) provided by financing activities | | $ | (388) | | | $ | 385 | |
| | | | |
| Net decrease in cash, cash equivalents and restricted cash | | $ | (89,010) | | | $ | (340,666) | |
| Effect of exchange rate changes on cash | | (704) | | | (2,452) | |
| Cash, cash equivalents and restricted cash at the beginning of the period | | 322,548 | | | 733,294 | |
| Cash, cash equivalents and restricted cash at the end of the period | | $ | 232,834 | | | $ | 390,176 | |
| (continued on the next page) |
|
| | | | | | | | | | | | | | |
| BEYOND MEAT, INC. AND SUBSIDIARIES |
| Condensed Consolidated Statements of Cash Flows |
| (In thousands) |
| (unaudited) |
| | Nine Months Ended |
| | September 30,
2023 | | October 1,
2022 |
| Supplemental disclosures of cash flow information: | | | | |
| Cash paid during the period for: | | | | |
| Interest | | $ | — | | | $ | 3 | |
| Taxes | | $ | 9 | | | $ | 21 | |
| Non-cash investing and financing activities: | | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| Non-cash additions to property, plant and equipment | | $ | 2,038 | | | $ | 9,639 | |
| Non-cash additions to financing leases | | $ | — | | | $ | 280 | |
| | | | |
| | | | |
| Reclassification of pre-paid lease costs to operating lease right-of-use assets | | $ | 28,046 | | | $ | 27,718 | |
| Operating lease right-of-use assets obtained in exchange for lease liabilities | | $ | 36,400 | | | $ | 37,134 | |
| | | | |
| | | | |
| | | | |
| (concluded) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
Note 1. Introduction
The Company
Beyond Meat, Inc., a Delaware corporation (the(including its subsidiaries unless the context otherwise requires, the “Company”), is one of the fastest growing food companies in the United States,a leading plant-based meat company offering a portfolio of revolutionary plant-based meats. The Company builds 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 the Company’s plant-based meat products. The Company’s brand commitment,promise, “Eat What You Love,” represents a strong belief that by eatingthere is a better way to feed our future and that the Company’spositive 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 meats, consumersmeat, we can enjoy more, not less, of their favorite meals, and by doing so, help address concerns related topositively impact four growing global issues: human health, climate change, resource conservationconstraints on natural resources and animal welfare.
The Company’s primary production facilities are located in Columbia, Missouri, and research and development and administrative offices are located in El Segundo, California. In addition to its own production facilities, the Company uses co-manufacturers in various locations in the United States to manufacture its products.
The Company sells to a varietyAs of customers in the retail and foodservice channels throughout the United States and internationally through brokers and distributors. AllSeptember 30, 2023, approximately 84% of the Company’s long-lived assets arewere located in the United States.
Initial Public Offering
On May 6, 2019, the Company completed its initial public offering (“IPO”) of common stock, in which it sold 11,068,750 shares, including 1,443,750 shares pursuant to the underwriters’ over-allotment option. The shares began trading on the Nasdaq Global Select Market on May 2, 2019. The shares were sold at an IPO price of $25.00 per share for net proceeds of approximately $252.5 million, after deducting underwriting discounts and commissions of $19.4 million and estimated offering expenses of approximately $4.8 million payable by the Company. Upon the closing of the IPO, all outstanding shares of the Company’s convertible preferred stock automatically converted into 41,562,111 shares of common stock on a one-for-one basis, and warrants exercisable for convertible preferred stock were automatically converted into warrants exercisable for a total of 160,767 shares of common stock.
The accompanying condensed financial statements as of March 30, 2019, including share and per share amounts, do not give effect to the IPO, conversion of the convertible preferred stock, conversion of the convertible preferred stock warrants as of the IPO and such conversions were completed subsequent to March 30, 2019.
Note 2. Summary of Significant Accounting Policies
A detailed description of the Company's significant accounting policies can be found in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 1, 2023 (the “2022 10-K”). There have been no material changes in the Company’s significant accounting policies from those that were disclosed in the 2022 10-K, except as noted below.
Basis of Presentation
The unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the SECSecurities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the condensed consolidated financial statements include all adjustments necessary, which are of a normal and recurring nature, for the fair presentation of the Company’s financial position and of the results of operations and cash flows for the periods presented. These interim results are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2023 or for any other interim period or for any other future fiscal year. These condensed consolidated financial statements should be read in conjunction with the Company's audited financial statements and notes thereto included in the prospectus dated May 1, 2019 (the “Prospectus”) that forms a part of the Company's Registration Statement on Form S-1 (File No. 333-228453), as filed with the SEC pursuant to Rule 424 promulgated under the Securities Act of 1933, as amended, on May 3, 2019.2022 10-K. The condensed consolidated balance sheet as of December 31, 20182022 has been derived from the audited financial statements at that date. There
Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been no material changes in the
BEYOND MEAT, INC.
Notes to Unaudited Condensed Financial Statements (continued)
Company’s significant accounting policies from those that were disclosed in the Prospectus, except as noted below.
Fiscal Year
The Company operates 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. The Company’s fiscal year always begins on January 1 and ends on December 31. As a result, the Company’s first and fourth fiscal quarters may have more or fewer days included than a traditional 91-day fiscal quarter.eliminated.
Management’s Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant accounting estimates made by the Company include trade promotion accruals; useful lives of property, plant and equipment; valuation of deferred tax assets; valuation of inventory; and the valuation of the fair value of common stock and preferred stock used to determine stock compensation expense and in the re-measurement of warrants and liabilities. These estimates and assumptions are based on
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued) current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results could differ from those estimates and such differences may be material to the condensed financial statements.
Reverse Stock SplitForeign Currency
On January 2, 2019, the Company effected a 3-to-2 reverse stock splitForeign currency translation gain (loss), net of its outstanding common stocktax, reported as cumulative translation adjustment through “Other comprehensive loss” was $0.3 million and convertible preferred stock, including outstanding stock options and common and convertible preferred stock warrants. The reverse stock split did not result in an adjustment to par value. All references$(1.7) million in the accompanying condensed financial statementsthree months ended September 30, 2023 and related notes to the number of shares of common stock, convertible preferred stock, warrantsOctober 1, 2022, respectively. Net realized and options to purchase common stockunrealized foreign currency transaction losses included in “Other, net” were $(2.5) million and per share data reflect the effect of the reverse stock split.
Cash and Cash Equivalents
The Company maintains cash balances at one financial institution$(3.9) million in the United States. The cash balances may, at times, exceed federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation or FDIC up to $250,000. The Company considers all highly liquid investments with original maturity datesthree months ended September 30, 2023 and October 1, 2022, respectively.
Foreign currency translation gain (loss), net of 90 days or less to be cash equivalents. Cash equivalents consist primarily of amounts invested in money market accounts.
Deferred Offering Costs
Offering costs, consisting primarily of legal, accounting, printing and filing services, and other direct fees and costs related to the IPO, are capitalized. As of March 30, 2019 and December 31, 2018, $3.4tax, reported as cumulative translation adjustment through “Other comprehensive loss” was $0.1 million and $3.2$(4.7) million of offering costs, respectively, have been capitalized and recorded in prepaid expenses and other current assets in the accompanying condensed balance sheets.
Stock Warrant Liability
The Company accounts for freestanding warrants to purchase shares of its convertible preferred stock or common stock as a liability, as the underlying shares of convertible preferred stocknine months ended September 30, 2023 and common stock are contingently redeemableOctober 1, 2022, respectively. Net realized and therefore, may obligate the Company to transfer assets at some pointunrealized foreign currency transaction losses included in “Other, net” were $(3.3) million and $(10.5) million in the future. The warrants were recorded at fair value upon issuancenine months ended September 30, 2023 and are subject to re-measurement at each balance sheet date. Any change in fair value is recognized in the condensed statements of operations in other expense.
BEYOND MEAT, INC.
Notes to Unaudited Condensed Financial Statements (continued)
As of March 30, 2019, the Company had outstanding warrants to purchase an aggregate of 60,002 shares of its common stock at an exercise price of $3.00 per share, 121,694 shares of its Series B convertible preferred stock at an exercise price of $1.07 per share and 39,073 shares of its Series E convertible preferred stock at an exercise price of $3.68 per share. On May 6, 2019, upon the closing of the IPO, the warrants exercisable for convertible preferred stock were automatically converted into warrants exercisable for a total of 160,767 shares of common stock at the same respective exercise price per share. Subsequent to the closing of the IPO, all outstanding warrants to purchase shares of common stock were exercised.October 1, 2022, respectively.
Fair Value of Financial Instruments
The fair value measurement accounting guidance creates a fair value hierarchy to prioritize the inputs used to measure fair value into three categories. ACompany had no financial instrument’s level within the fair value hierarchy is based on the lowest level of input significant to the fair value measurement, where Level 1 is the highest and Level 3 is the lowest.
The three levels are defined as follows:
Level 1—Unadjusted quoted prices in active markets accessible by the reporting entity for identical assets or liabilities. Active markets are those in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active and model-derived valuations in which significant value drivers are observable.
Level 3—Valuations derived from valuation techniques in which significant value drivers are unobservable.
The Company’s financial instruments include cash equivalents, accounts receivable, accounts payable, and accrued expenses, for which the carrying amounts approximate fair value due to the short-term maturity of these financial instruments. Based on the borrowing rates currently available to the Company for debt with similar terms, the carrying value of the line of credit, term debt with its bank, and equipment loan approximate fair value as well.
The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis based on the fair value hierarchy (in thousands):
|
| | | | | | | | | | | | | | | |
| | March 30, 2019 |
| | Level 1 | | Level 2 | | Level 3 | | Total |
| Financial Liabilities: | | | | | | | |
| Preferred stock warrant liability | $ | — |
| | $ | — |
| | $ | 1,998 |
| | $ | 1,998 |
|
| Common stock warrant liability | — |
| | — |
| | 679 |
| | 679 |
|
| Total | $ | — |
| | $ | — |
| | $ | 2,677 |
| | $ | 2,677 |
|
| | | | | | | | |
| | December 31, 2018 |
| | Level 1 | | Level 2 | | Level 3 | | Total |
| Financial Liabilities: | | | | | | | |
| Preferred stock warrant liability | $ | — |
| | $ | — |
| | $ | 1,441 |
| | $ | 1,441 |
|
| Common stock warrant liability | — |
| | — |
| | 477 |
| | 477 |
|
| Total | $ | — |
| | $ | — |
| | $ | 1,918 |
| | $ | 1,918 |
|
BEYOND MEAT, INC.
Notes to Unaudited Condensed Financial Statements (continued)
at September 30, 2023 and December 31, 2022.
There were no transfers of financial assets or liabilities betweeninto or out of Level 1, Level 2 or Level 3 in the three and nine months ended MarchSeptember 30, 2019 or March 31, 2018.2023.
Restricted Cash
Restricted cash includes cash held as collateral for stand-alone letter of credit agreements related to normal business transactions. The key assumptions usedagreements require the Company to maintain specified amounts of cash as collateral in segregated accounts to support the letters of credit issued thereunder. The Company had $15.3 million in restricted cash as of September 30, 2023, which was comprised of $12.6 million to secure the letter of credit to support the development and leasing of the Company’s Campus Headquarters (as defined in Note 4) recorded in “Restricted cash, non-current” and $2.7 million to secure a letter of credit associated with a new third party contract manufacturer in Europe recorded in “Restricted cash, current” in the Black-Scholes option-pricing model for the valuation of the preferred stock warrant liability and common stock warrant liability upon re-measurement were as follows: |
| | | | | | | | |
| | | For the Three Months Ended |
| | | March 30,
2019 | | March 31,
2018 |
| Expected term (in years) | | 2.0 |
| | 3.0 |
|
| Fair value of underlying shares | | $ | 19.49 |
| | $ | 3.00 |
|
| Volatility | | 55.0 | % | | 55.0 | % |
| Risk-free interest rate | | 2.27 | % | | 1.98 | % |
| Dividend yield | | — |
| | — |
|
Generally, increases or decreases in the fair value of the underlying convertible preferred stock and common stock would result in a directionally similar impact in the fair value measurement of the associated warrant liability.
The following table sets forth a summary of the changes in the fair value of the preferred and common stock warrant liabilities:
|
| | | | | | | | |
| | | For the Three Months Ended |
| (in thousands) | | March 30, 2019 | | March 31, 2018 |
| Beginning balance | | $ | 1,918 |
| | $ | 550 |
|
| Change in fair value of warrant liability | | 759 |
| | 129 |
|
| Ending balance | | $ | 2,677 |
| | $ | 679 |
|
Revenue Recognition
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”), which, along with subsequent ASUs, amends the existing accounting standards for revenue recognition (“Topic 606”). This guidance is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled to receive when products are transferred to customers. ASU 2014-09 was effective for the Company beginning January 1, 2019. The majority of the Company’s contracts with customers generally consist of a single performance obligation to transfer promised goods. Based on the Company’s evaluation process and review of its contracts with customers, the timing and amount of revenue recognized based on ASU 2014-09 is consistent with the Company’s revenue recognition policy under previous guidance. The Company has therefore concluded that the adoption of ASU 2014-09 did not have a material impact on its financial position, results of operations, or cash flows.
Revenue is recognized at the point in which the performance obligation under the terms of a contract with the customer have been satisfied and control has transferred. The Company’s performance obligation is typically defined as the accepted purchase order, or the contract, with the customer which requires the Company to deliver the requested products at agreed upon prices at the time and location of the customer’s choice. The Company does not offer warranties or a right to return on the products it sells except in the instance of a product recall.
Revenue is measured as the amount of consideration the Company expects to receive in exchange for fulfilling the performance obligation. Sales and other taxes the Company collects concurrent with the sale of products are excluded from revenue. The Company's normal payment terms vary by the type and location of its customers and the products offered. The time between invoicing and when payment is due
BEYOND MEAT, INC.
Notes to Unaudited Condensed Financial Statements (continued)
is not significant. None of the Company's contracts as of March 30, 2019 contain a significant financing component.
The Company routinely offers sales discounts and promotions through various programs to its customers and consumers. These programs include rebates, temporary on shelf price reductions, off invoice discounts, retailer advertisements, and other trade activities. Provision for discounts and incentives are recorded in the same period in which the related revenues are recognized. At the end of each accounting period, the Company recognizes a liabilitycontra asset to accounts receivable for estimated sales discounts that have been incurred but not paid which totaled $0.9$4.5 million and $0.8$4.6 million as of MarchSeptember 30, 20192023 and December 31, 2018,2022, respectively. The offsetting charge is recorded as a reduction of revenues in the same period when the expense is incurred.
The Company recognizes the incremental costs
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued) Presentation of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. The incremental cost to obtain contracts was not material.Net Revenues by Channel
The following table presents the Company’s net revenues by platform and channel are included in the tables below:channel:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| (in thousands) | | September 30,
2023 | | October 1,
2022 | | September 30,
2023 | | October 1,
2022 |
| U.S.: | | | | | | | | |
| Retail | | $ | 30,518 | | | $ | 46,177 | | | $ | 123,167 | | | $ | 193,298 | |
| Foodservice | | 12,535 | | | 15,994 | | | 39,974 | | | 54,876 | |
| U.S. net revenues | | 43,053 | | | 62,171 | | | 163,141 | | | 248,174 | |
| International: | | | | | | | | |
| Retail | | 14,153 | | | 10,195 | | | 48,437 | | | 50,024 | |
| Foodservice | | 18,106 | | | 10,134 | | | 58,119 | | | 40,797 | |
| International net revenues | | 32,259 | | | 20,329 | | | 106,556 | | | 90,821 | |
| Net revenues | | $ | 75,312 | | | $ | 82,500 | | | $ | 269,697 | | | $ | 338,995 | |
|
| | | | | | | | |
| | | For the Three Months Ended |
| (in thousands) | | March 30, 2019 | | March 31, 2018 |
| Net revenues: | | | | |
| Fresh Platform | | $ | 38,806 |
| | $ | 9,596 |
|
| Frozen Platform | | 4,512 |
| | 4,748 |
|
| Less: Discounts | | (3,112 | ) | | (1,568 | ) |
| Net revenues | | $ | 40,206 |
| | $ | 12,776 |
|
|
| | | | | | | | |
| | | For the Three Months Ended |
| (in thousands) | | March 30, 2019 | | March 31, 2018 |
| Net revenues: | | | | |
| Retail | | $ | 19,579 |
| | $ | 9,288 |
|
| Restaurant and Foodservice | | 20,627 |
| | 3,488 |
|
| Net revenues | | $ | 40,206 |
| | $ | 12,776 |
|
Two distributors eachOne distributor accounted for approximately 21%12% of the Company’s gross revenues in the three months ended MarchSeptember 30, 2019;2023; and three distributorsone customer accounted for approximately 34%, 14% and 11%, respectively, of the Company’s gross revenues in the three months ended March 31, 2018, which were primarily related to sales in the United States and Canada. Approximately 14%October 1, 2022. One distributor accounted for approximately 12% of the Company’s netgross revenues in the nine months ended September 30, 2023; and one distributor accounted for approximately 11% of the Company’s gross revenues in the nine months ended October 1, 2022. No other customer or distributor accounted for more than 10% of the Company’s gross revenues in the three and nine months ended MarchSeptember 30, 2019 was from international sales excluding sales2023 and October 1, 2022.
Investment in Canada. International salesJoint Venture
The Company uses the equity method of accounting to record transactions associated with its joint venture when the Company shares in joint control of the investee. Investment in joint venture is not consolidated but is recorded in “Investment in unconsolidated joint venture” in the three months ended March 31, 2018 were immaterial.Company’s condensed consolidated balance sheets. The Company recognizes its portion of the investee’s results in “Equity in losses of unconsolidated joint venture” in its condensed consolidated statements of operations. The Company eliminates its proportionate interest in any intra-entity profits or losses in the inventory of the investee at the end of the reporting period and recognizes its portion of the profit and losses when realized by the investee.
Shipping and Handling Costs
Outbound shipping and handling costs included in selling, general and administrative (“SG&A”) expenses in the three months ended MarchSeptember 30, 20192023 and March 31, 2018October 1, 2022 were $1.3$2.8 million and $1.1$3.3 million, respectively. Outbound shipping and handling costs included in SG&A expenses in the nine months ended September 30, 2023 and October 1, 2022 were $8.8 million and $13.5 million, respectively.
Related-Party TransactionsChange in Accounting Estimate
Seth Goldman
TheDuring the first quarter of 2023, the Company entered intocompleted a consulting agreement with Seth Goldman,reassessment of the Company’s Executive Chair,useful lives of its large manufacturing equipment and research and development equipment, and determined that the Company should increase the estimated useful lives for certain of its equipment from a range of 5 to 10 years to a uniform 10 years. This reassessment was accounted for as a change in accounting estimate and was made on March 2, 2016, which was amended and restated on November 15, 2018 and further amendeda prospective basis effective January 1, 2023. See Note 6.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
on April 8, 2019. Pursuant to the consulting agreement, the Company will pay Mr. Goldman $20,210.33 per month for services rendered under the consulting agreement and, on the date of each annual meeting of the Company’s stockholders after which Mr. Goldman’s non-employee service on the board of directors will continue, the Company has agreed to grant Mr. Goldman a restricted stock unit award under the 2018 Equity Incentive Plan (the “Plan”), having a grant date fair value of $105,000. Each restricted stock unit grant will vest based on continued service in equal monthly installments over the 12-month period following the grant date, provided it will vest in full immediately prior to, and contingent upon, a change in control of the company.
The consulting agreement may be terminated by either party at any time upon 120 business days’ written notice. In the event of a default in the performance of the consulting agreement or material breach of any obligations under the consulting agreement, the non-breaching party may terminate the consulting agreement immediately if the breaching party fails to cure the breach within 30 business days after having received written notice by the non-breaching party of the default or breach.
Bernhard van Lengerich
The Company first entered into an advisor agreement with Food System Strategies, LLC in October 2015. Bernhard van Lengerich. Ph.D., a member of the Company’s Board of Directors, is the Chief Executive Officer of Food System Strategies, LLC. Pursuant to this advisor agreement, the Company paid Food System Strategies, LLC $4,000 for each day Dr. van Lengerich provided services, provided the Company paid Food System Strategies, LLC for at least two days of services per month. In February 2016, the Company entered into a new advisor agreement with Food System Strategies, LLC, which superseded the original agreement and provided for a $25,000 monthly retainer and a non-qualified stock option covering 798,848 shares, which vested in equal monthly installments over three years in consideration of Dr. van Lengerich providing services as the Company’s interim Chief Technical Officer and head of research and development, and the increased time commitment associated with these roles. In December 2016, the advisor agreement was amended to provide for a $10,000 monthly retainer to reflect the fact that Dr. van Lengerich would only be providing advisory services five to six days a month going forward. The advisor agreement may be terminated at any time upon written notice to the other party.
Donald Thompson
In the three months ended March 31, 2018, the Company incurred consulting costs payable to a company associated with Donald Thompson, a member of the Company’s Board of Directors, in the amount of $47,162. The Company did not incur any such consulting costs in the three months ended March 30, 2019.
Recently Adopted Accounting Pronouncements
In June 2018, the FASB issued ASU No. 2018-07, “Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). Under ASU 2018-07, the measurement of equity-classified nonemployee awards will be fixed at the grant date, and nonpublic entities are allowed to account for nonemployee awards using certain practical expedients that are already available for employee awards. The amendments in ASU 2018-07 are effective for nonpublic business entities for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but no earlier than the Company’s adoption date of Topic 606. The Company early adopted ASU 2018-07 beginning January 1, 2019 along with its adoption of ASU 2014-09. Pursuant to ASU 2018-07, the measurement of equity classified nonemployee awards will be fixed at the grant date, as compared to the previous requirement to remeasure the awards through the performance completion date.None.
BEYOND MEAT, INC.
Notes to Unaudited Condensed Financial Statements (continued)
New Accounting Pronouncements
As an “emerging growth company,” the Jumpstart Our Business Startups Act, or the JOBS Act, allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The Company has elected to use the adoption dates applicable to private companies. As a result, the Company’s financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective date for new or revised accounting standards that are applicable to public companies.
In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”), which makes amendments to the guidance in GAAP on the classification and measurement of financial instruments. ASU 2016-01 significantly revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. It also amends certain disclosure requirements associated with the fair value of financial instruments. For all entities other than public entities, ASU 2016-01 is effective for fiscal years beginning after December 15, 2018, including interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company expects to adopt and implement ASU 2016-01 for the year ending December 31, 2019 and for interim periods beginning January 1, 2020. The Company does not expect that adoption of ASU 2016-01 will have a material impact on the Company’s financial position, results of operations, or cash flows.
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 requires lessees to generally recognize most operating leases on the balance sheets but record expenses on the income statements in a manner similar to current accounting. ASU 2016-02 along with subsequent ASU’s on Topic 842 is effective for nonpublic companies for the annual reporting period beginning after December 15, 2019, and, therefore, effective for the Company beginning January 1, 2020. Early application is permitted. The Company is currently evaluating the impact ASU 2016-02 will have on its financial statements and currently expects that most operating lease commitments will be subject to ASU 2016-02 and will be recognized as operating lease liabilities and right-of-use assets upon adoption. While the Company has not yet quantified the impact, adjustments resulting from the adoption of ASU 2016-02 will materially increase total assets and total liabilities relative to such amounts reported prior to adoption.
Note 3. Restructuring
In May 2017, management approved a plan to terminate the Company’s exclusive supply agreement (the “Agreement”) with one of its co-manufacturers, due to non-performance under the Agreement and on May 23, 2017, the Company notified the co-manufacturer of its decision to terminate the Agreement. On October 18, 2022, the parties to this dispute entered into a confidential written settlement agreement and mutual release, pursuant to which the parties agreed to dismiss with prejudice all claims and cross-claims asserted in the associated cases filed in the Superior Court of the State of California for the County of Los Angeles and the United States District Court for the Central District of California. The terms of the settlement did not have a material impact on Beyond Meat’s financial position or results of operations. No party admitted liability or wrongdoing in connection with the settlement.
In the three months ended
MarchSeptember 30,
2019 and March 31, 2018,2023, the Company recorded
$0.4a credit of $4,000 in restructuring expenses primarily driven by a reversal of certain accruals. In the three months ended October 1, 2022, the Company recorded $7.0 million
and $0.3 million, respectively, in restructuring expenses related to this dispute, which consisted primarily of legal and other expenses.
See Note 9 for further information. In the nine months ended September 30, 2023, the Company recorded a credit of $0.6 million in restructuring expenses primarily driven by a reversal of certain accruals. In the nine months ended October 1, 2022, the Company recorded $14.3 million in restructuring expenses related to this dispute, which consisted primarily of legal and other expenses.
As of MarchSeptember 30, 20192023 and December 31, 2018, there2022, the Company had $0 and $0.7 million, respectively, in accrued and unpaid restructuring expenses related to this dispute.
Note 4. Leases
Leases are classified as either finance leases or operating leases based on criteria in Accounting Standards Codification 842. The Company has operating leases for its corporate offices, including the Campus Lease, its former Manhattan Beach Project Innovation Center, its manufacturing facilities, warehouses and vehicles, and to a lesser extent, certain equipment and finance leases. Such leases generally have original lease terms between 2 years and 12 years, and often include one or more options to renew. Some leases also include early termination options, which can be exercised under specific conditions. The Company includes options to extend the lease term if the options are reasonably certain of being exercised. The Company does not have residual value guarantees or material restrictive covenants associated with its leases.
On January 14, 2021, the Company entered into the Campus Lease, a 12-year lease with two 5-year renewal options to house its corporate headquarters, lab and innovation space (the “Campus Headquarters”) in El Segundo, California. Although the Company is involved in the design of the tenant improvements of the Campus Headquarters, 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 Campus Headquarters until each phase of the tenant improvements is complete. The Company contributed $3.3 million and $55.1 million in payments towards the construction of the Campus Headquarters in the nine months ended September 30, 2023 and the year ended December 31, 2022, respectively. These payments are initially recorded in “Prepaid lease costs, non-current” in the Company’s condensed consolidated balance sheets and will ultimately be reclassified as a component of a right-of-use asset upon lease commencement for each phase of the lease. On June 1, 2023, the tenant improvements
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued) associated with Phase 1-B were no accrued unpaidcompleted, and the underlying asset was delivered to the Company. As such, upon commencement of Phase 1-B, the Company recognized a $64.9 million right-of-use asset, which included the reclassification of $29.3 million of the construction payments previously included in “Prepaid lease costs, non-current,” and a $35.6 million lease liability. In 2022, the tenant improvements associated with Phase 1-A were completed, and the underlying asset was delivered to the Company. As such, upon commencement of Phase 1-A, the Company recognized a $64.1 million right-of-use asset, which included 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.
Upon completion of the tenant improvements associated with Phase 1-B, the Company moved its headquarters, sales and marketing operations into the newly constructed Campus Headquarters where its innovation center is also located. On June 30, 2023, the Company terminated the lease of its former headquarters, also in El Segundo, California. As a result of this termination, during the second quarter of 2023, the balances in “Operating lease right-of use assets,” “Current portion of operating lease liabilities” and “Operating lease liabilities, net of current portion” were reduced by $1.9 million, $0.5 million and $1.4 million, respectively. Costs associated with this contract termination.lease through its termination date, including termination costs, are included in operating lease costs related to selling, general and administrative expenses and are reflected in the tables below. On February 14, 2023, the Company terminated the lease of its Commerce, California commercialization center. As a result of this termination, during the first quarter of 2023, the balances in “Operating lease right-of use assets,” “Current portion of operating lease liabilities” and “Operating lease liabilities, net of current portion” were reduced by $11.3 million, $0.8 million and $10.5 million, respectively. Costs associated with this lease through its termination date, including termination costs, are included in operating lease costs related to research and development expenses and are reflected in the tables below.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued) Lease costs for operating and finance leases were as follows:
| | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended |
| (in thousands) | | Statement of Operations Location | | September 30, 2023 | | October 1, 2022 |
| Operating lease cost: | | | | | | |
| Lease cost | | Cost of goods sold | | $ | 399 | | | $ | 413 | |
| Lease cost | | Research and development expenses | | 2,507 | | | 806 | |
| Lease cost | | Selling, general and administrative expenses | | 820 | | | 407 | |
Variable lease cost(1) | | Cost of goods sold | | 54 | | | 51 | |
Variable lease cost(1) | | Research and development expenses | | 21 | | | 75 | |
Variable lease cost(1) | | Selling, general and administrative expenses | | 632 | | | 304 | |
| Operating lease cost | | | | $ | 4,433 | | | $ | 2,056 | |
| Short-term lease cost: | | | | | | |
| Short-term lease cost | | Cost of goods sold | | $ | 21 | | | $ | — | |
| Short-term lease cost | | Research and development expenses | | 37 | | | — | |
| Short-term lease cost | | Selling, general and administrative expenses | | 51 | | | 147 | |
| Short-term lease cost | | | | $ | 109 | | | $ | 147 | |
| Finance lease cost: | | | | | | |
| Amortization of right-of use assets | | Cost of goods sold | | $ | 49 | | | $ | 54 | |
| Amortization of right-of use assets | | Research and development expenses | | 4 | | | — | |
| Interest on lease liabilities | | Interest expense | | 5 | | | 3 | |
Variable lease cost(1) | | Cost of goods sold | | 3 | | | — | |
| | | | | | |
| | | | | | |
| Finance lease cost | | | | $ | 61 | | | $ | 57 | |
| Total lease cost | | | | $ | 4,603 | | | $ | 2,260 | |
____________
(1) Variable lease cost primarily consists of common area maintenance, such as cleaning and repairs.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued) | | | | | | | | | | | | | | | | | | | | |
| | | | Nine Months Ended |
| (in thousands) | | Statement of Operations Location | | September 30, 2023 | | October 1, 2022 |
| Operating lease cost: | | | | | | |
| Lease cost | | Cost of goods sold | | $ | 1,210 | | | $ | 1,175 | |
| Lease cost | | Research and development expenses | | 6,979 | | | 1,871 | |
| Lease cost | | Selling, general and administrative expenses | | 1,937 | | | 2,270 | |
Variable lease cost(1) | | Cost of goods sold | | 177 | | | 213 | |
Variable lease cost(1) | | Research and development expenses | | 104 | | | 75 | |
Variable lease cost(1) | | Selling, general and administrative expenses | | 1,800 | | | 304 | |
| Operating lease cost | | | | $ | 12,207 | | | $ | 5,908 | |
| Short-term lease cost: | | | | | | |
| Short-term lease cost | | Cost of goods sold | | $ | 63 | | | $ | — | |
| Short-term lease cost | | Research and development expenses | | 121 | | | — | |
| Short-term lease cost | | Selling, general and administrative expenses | | 148 | | | 446 | |
| Short-term lease cost | | | | $ | 332 | | | $ | 446 | |
| Finance lease cost: | | | | | | |
| Amortization of right-of use assets | | Cost of goods sold | | $ | 154 | | | $ | 144 | |
| Amortization of right-of use assets | | Research and development expenses | | 11 | | | — | |
| Interest on lease liabilities | | Interest expense | | 16 | | | 15 | |
Variable lease cost(1) | | Cost of goods sold | | 8 | | | — | |
| | | | | | |
| | | | | | |
| Finance lease cost | | | | $ | 189 | | | $ | 159 | |
| Total lease cost | | | | $ | 12,728 | | | $ | 6,513 | |
____________
(1) Variable lease cost primarily consists of common area maintenance, such as cleaning and repairs.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued) Supplemental balance sheet information as of September 30, 2023 and December 31, 2022 related to leases are as follows:
| | | | | | | | | | | | | | | | | | | | |
| (in thousands) | | Balance Sheet Location | | September 30, 2023 | | December 31, 2022 |
| Assets | | | | | | |
| Operating leases | | Operating lease right-of-use assets | | $ | 132,671 | | | $ | 87,595 | |
| Finance leases, net | | Property, plant and equipment, net | | 515 | | | 688 | |
| Total lease assets | | | | $ | 133,186 | | | $ | 88,283 | |
| | | | | | |
| Liabilities | | | | | | |
| Current: | | | | | | |
| Operating lease liabilities | | Current portion of operating lease liabilities | | $ | 3,083 | | | $ | 3,812 | |
| Finance lease liabilities | | Accrued expenses and other current liabilities | | 209 | | | 224 | |
| Long-term: | | | | | | |
| Operating lease liabilities | | Operating lease liabilities, net of current portion | | 76,382 | | | 55,854 | |
| Finance lease liabilities | | Finance lease obligations and other long-term liabilities | | 316 | | | 469 | |
| Total lease liabilities | | | | $ | 79,990 | | | $ | 60,359 | |
The following is a schedule by year of the maturities of lease liabilities with original terms in excess of one year, as of September 30, 2023: | | | | | | | | | | | | | | |
| | September 30, 2023 |
| (in thousands) | | Operating Leases | | Finance Leases |
| Remainder of 2023 | | $ | 2,178 | | | $ | 59 | |
| 2024 | | 8,366 | | | 209 | |
| 2025 | | 8,048 | | | 178 | |
| 2026 | | 8,029 | | | 72 | |
| 2027 | | 8,179 | | | 37 | |
| Thereafter | | 96,195 | | | — | |
| Total undiscounted future minimum lease payments | | 130,995 | | | 555 | |
| Less imputed interest | | (51,530) | | | (30) | |
| Total discounted future minimum lease payments | | $ | 79,465 | | | $ | 525 | |
Weighted average remaining lease terms and weighted average discount rates were: | | | | | | | | | | | | | | |
| | September 30, 2023 |
| | Operating Leases | | Finance Leases |
| Weighted average remaining lease term (years) | | 14.3 | | 2.9 |
| Weighted average discount rate | | 6.9 | % | | 3.7 | % |
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued) Note 4.5. Inventories
Major classes of inventory were as follows:
| | | | | | | | | | | |
| (in thousands) | September 30,
2023 | | December 31,
2022 |
| Raw materials and packaging | $ | 104,935 | | | $ | 139,509 | |
| Work in process | 43,101 | | | 37,001 | |
| Finished goods | 46,534 | | | 59,186 | |
| Total | $ | 194,570 | | | $ | 235,696 | |
|
| | | | | | | |
| | March 31, | | December 31, |
| (in thousands) | 2019 | | 2018 |
| Raw materials and packaging | $ | 16,385 |
| | $ | 13,756 |
|
| Work in process | 6,198 |
| | 2,517 |
|
| Finished goods | 11,698 |
| | 13,984 |
|
| Total | $ | 34,281 |
| | $ | 30,257 |
|
BEYOND MEAT, INC.
Notes to Unaudited Condensed Financial Statements (continued)
Note 5.6. Property, Plant and Equipment
Property,The Company records property, plant and equipment are stated at cost and capitalincludes finance lease assets are included.in “Property, plant and equipment, net” in its condensed consolidated balance sheets. A summary of property, plant, and equipment as of MarchSeptember 30, 20192023 and December 31, 2018,2022, is as follows:
| | | (in thousands) | | March 30, 2019 | | December 31, 2018 | (in thousands) | | September 30,
2023 | | December 31,
2022 |
| Manufacturing equipment | | $ | 28,866 |
| | $ | 25,314 |
| Manufacturing equipment | | $ | 199,628 | | | $ | 171,532 | |
| Research and development equipment | | 7,111 |
| | 6,088 |
| Research and development equipment | | 21,801 | | | 16,948 | |
| Leasehold improvements | | 7,166 |
| | 7,080 |
| Leasehold improvements | | 23,620 | | | 22,740 | |
| Capital leases | | 883 |
| | 882 |
| |
| Building | | Building | | 22,611 | | | 22,675 | |
| Finance leases | | Finance leases | | 1,086 | | | 1,093 | |
| Software | | 125 |
| | 60 |
| Software | | 3,590 | | | 2,377 | |
| Furniture and fixtures | | 203 |
| | 195 |
| Furniture and fixtures | | 1,205 | | | 866 | |
| Vehicles | | 210 |
| | 210 |
| Vehicles | | 584 | | | 584 | |
| Land | | Land | | 5,432 | | | 5,446 | |
| Assets not yet placed in service | | 1,877 |
| | 3,374 |
| Assets not yet placed in service | | 65,982 | | | 93,152 | |
| Total property, plant and equipment | | $ | 46,441 |
| | $ | 43,203 |
| Total property, plant and equipment | | $ | 345,539 | | | $ | 337,413 | |
| Less: accumulated depreciation and amortization | | 14,580 |
| | 12,676 |
| Less: accumulated depreciation and amortization | | 100,166 | | | 80,411 | |
| | Property, plant and equipment, net | | $ | 31,861 |
| | $ | 30,527 |
| Property, plant and equipment, net | | $ | 245,373 | | | $ | 257,002 | |
Depreciation and amortization expense forin the three months ended MarchSeptember 30, 20192023 and March 31, 2018,October 1, 2022 was $1.9$5.8 million and $0.7$8.4 million, respectively. Of the total depreciation and amortization expense in the three months ended MarchSeptember 30, 20192023 and March 31, 2018, $1.4October 1, 2022, $5.1 million and $0.6$7.3 million, respectively, were recorded in cost of goods sold, and $0.5 million and $0.1$1.0 million, respectively, were recorded in research and development expenses, and $0.2 million and $0.1 million, respectively, were recorded in SG&A expenses in the Company’s condensed consolidated statements of operations.
Depreciation and amortization expense in the nine months ended September 30, 2023 and October 1, 2022 was $17.7 million and $23.3 million, respectively. Of the total depreciation and amortization expense in the nine months ended September 30, 2023 and October 1, 2022, $15.7 million and $19.8 million, respectively, were recorded in cost of goods sold, $1.4 million and $3.0 million, respectively, were recorded in research and development expenses, and $0.6 million and $0.4 million, respectively, were recorded in SG&A expenses in the Company’s condensed consolidated statements of operations.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued) During the first quarter of 2023, the Company completed a reassessment of the useful lives of its large manufacturing and research and development equipment, and determined that the Company should increase the estimated useful lives for certain of its equipment from a range of 5 to 10 years to a uniform 10 years. The timing of this reassessment was based on a combination of factors accumulating over time, including historical useful life information and changes in the Company’s planned use of the equipment, that provided the Company with updated information that allowed it to make a better estimate of the economic lives of such equipment. This reassessment was accounted for as a change in accounting estimate and was made on a prospective basis effective January 1, 2023. This change in accounting estimate decreased depreciation expense for the three months ended September 30, 2023 by $4.9 million, impacting cost of goods sold and research and development expenses by $4.4 million and $0.5 million, respectively, and decreased both basic and diluted net loss per share available to common stockholders by $0.08. For the nine months ended September 30, 2023, this change in accounting estimate decreased depreciation expense by $16.1 million, impacting cost of goods sold and research and development expenses by $14.6 million and $1.5 million, respectively, and decreased both basic and diluted net loss per share available to common stockholders by $0.25.
The Company has $1.9had $0.1 million and $1.0$5.9 million in property, plant and equipment concluded to meet the criteria for assets held for sale and are included in prepaid expenses and other current assets on the condensed balance sheets as of MarchSeptember 30, 20192023 and December 31, 2018,2022, respectively. The Company expects to sell suchAmounts previously classified as assets held for sale were sold in 2019a prior period for amounts that approximateapproximated book value. In the three months ended September 30, 2023, a $3.8 million note receivable that was previously recorded for assets sold was written off as uncollectible. The note receivable was included in “Other non-current assets, net” in the Company’s condensed consolidated balance sheet at December 31, 2022.
Note 6.7. Debt
The Company’sfollowing is a summary of debt balances are detailed below:as of September 30, 2023 and December 31, 2022:
| | | | | | | | | | | | | |
| (in thousands) | | | September 30,
2023 | | December 31,
2022 |
| Convertible senior notes | | | $ | 1,150,000 | | | $ | 1,150,000 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Debt issuance costs | | | (13,442) | | | (16,392) | |
| | | | | |
| | | | | |
| Long-term debt | | | $ | 1,136,558 | | | $ | 1,133,608 | |
|
| | | | | | | |
| (in thousands) | March 30, 2019 | | December 31, 2018 |
| 2018 Revolving Credit Facility (defined below) | $ | 6,000 |
| | $ | 6,000 |
|
| 2018 Term Loan Facility (defined below) | 20,000 |
| | 20,000 |
|
| Equipment financing loan | 5,000 |
| | 5,000 |
|
| Debt issuance costs | (553 | ) | | (612 | ) |
| Total debt outstanding | $ | 30,447 |
| | $ | 30,388 |
|
| Less: current portion of long-term debt | — |
| | — |
|
| Long-term debt | $ | 30,447 |
| | $ | 30,388 |
|
On March 5, 2021, the Company issued $1.0 billion aggregate principal amount of its 0% Convertible Senior Notes due 2027 (the “Convertible Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. On March 12, 2021, the initial purchasers of the Convertible Notes exercised their option to purchase an additional $150.0 million aggregate principal amount of the Company’s 0% Convertible Senior Notes due 2027 (the “Additional Notes,” and together with the Convertible Notes, the “Notes”), and such Additional Notes were issued on March 16, 2021.
The Company recordstotal amount of debt issuance costs of $23.6 million was recorded as a reduction of carrying value of the debtto “Convertible senior notes, net” in the accompanying condensed consolidated balance sheets. Debt issuance costs, net of amortization, totaled $0.6 million as of March 30, 2019sheet and December 31, 2018. Debt issuance costs areis being amortized as interest expense over the term of the loan for which amortizationNotes using the effective interest method. In each of $58,000 and $9,000 was recorded during the three months ended MarchSeptember 30, 20192023 and March 31, 2018, respectively.
BEYOND MEAT, INC.
Notes to Unaudited Condensed Financial Statements (continued)
Amended and Restated Loan and Security Agreement
In June 2018,October 1, 2022, the Company refinanced its then existing revolving credit facility and term loan facility under a loan and security agreement with Silicon Valley Bank (“SVB”) (the “Amended LSA”). The Amended LSA includes a $6.0recognized $1.0 million revolving credit facility (the “2018 Revolving Credit Facility”) and a term loan facility (the “2018 Term Loan Facility”) comprised of (i) a $10.0 million term loan advance at closing, (ii) a conditional $5.0 million term loan advance, if no event of default has occurred and is continuing through the borrowing date, and (iii) an additional conditional term loan advance of $5.0 million if no event of default has occurred and is continuing based upon a minimum level of gross profit for the trailing 12-month period. The 2018 Term Loan Facility has a floating interest rate that is equal to 4.0% above the prime rate, with interest payable monthly and principal amortizing commencing on January 1, 2020, and will mature in June 2022. Borrowings under the 2018 Revolving Credit Facility carry a variable annual interest rate of prime rate plus 0.75% to 1.25% with an additional 5% on the outstanding balances in the event of a default. The 2018 Revolving Credit Facility matures in June 2020.
The 2018 Term Loan Facility and the 2018 Revolving Credit Facility (the “SVB Credit Facilities,”) contain customary negative covenants that limit the Company’s ability to, among other things, incur additional indebtedness, grant liens, make investments, repurchase stock, pay dividends, transfer assets and merge or consolidate. The SVB Credit Facilities are secured by a blanket lien on all of the Company’s personal property assets. The SVB Credit Facilities also contain customary affirmative covenants, including delivery of audited financial statements. The Company was in compliance with the covenants in the SVB Credit Facilities as of March 30, 2019.
As of March 30, 2019 and December 31, 2018, the Company had $6.0 million and $20.0 million in borrowings on the 2018 Revolving Credit Facility and 2018 Term Loan Facility, respectively, and had no availability to borrow under either of these loan facilities. In the three months ended March 30, 2019 and March 30, 2018, the Company incurred $0.6 million and $18,000 in interest expense related to the SVB credit facilities.amortization of the debt issuance costs related to the Notes. The interest rates on the 2018 Revolving Credit Facility and the 2018 Term Loan Facility at March 30, 2019 were 6.25% and 9.50%, respectively.
Equipment Loan Facility
The Company had $5.0 million in borrowings outstanding as of March 30, 2019 and December 31, 2018 under the equipment loan facility. Theeffective interest rate on the equipment loan facility at March 30, 2019 and December 31, 2018 was 11.75% and 11.5%, respectively. Forin both of the three month periods ended September 30, 2023 and October 1, 2022 was 0.09%. In each of the nine months ended MarchSeptember 30, 20192023 and March 31, 2018,October 1, 2022, the Company recorded $0.1recognized $3.0 million and $0, respectively, in interest expense related to the equipment loan facility.
Warrant Liabilities
In connection with its financing arrangements, the Company has issued warrants to purchase shares of its convertible preferred stock. For oneamortization of the financing arrangements, the Company issued warrants to purchase 121,694 shares of Series B convertible preferred stock at an exercise price of $1.07 per share. For a separate financing arrangement, the Company issued warrants to purchase 39,073 shares of Series E convertible preferred stock at an exercise price of $3.68 per share. In connection with the Company’s refinancing of its credit facilities with SVB, the Company issued to SVB and its affiliates warrants to purchase an aggregate of 60,002 shares of its common stock at an exercise price of $3.00 per share. The warrants remained outstanding as of March 30, 2019 and December 31, 2018. On May 6, 2019, upon the closing of the IPO, the warrants exercisable for convertible preferred stock were automatically converted into warrants exercisable for a total of 160,767 shares of common stock at the same respective exercise price per share. Subsequentdebt issuance costs related to the closing of the IPO, all outstanding warrants to purchase shares of common stock were exercised. See Note 2 for further information on the warrant liabilities.Notes.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
The effective interest rate in both of the nine month periods ended September 30, 2023 and October 1, 2022 was 0.26%.
The following is a summary of the Company’s Notes as of September 30, 2023:
Note 7. Stockholders’ Deficit | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands) | | Principal Amount | | Unamortized Issuance Costs | | Net Carrying Amount | | Fair Value |
| | | | Amount | | Leveling |
| 0% Convertible senior notes due on March 15, 2027 | | $1,150,000 | | $13,442 | | $1,136,558 | | $299,000 | | Level 2 |
| | | | | | | | | | |
The Notes are carried at face value less the unamortized debt issuance costs on the Company’s condensed consolidated balance sheets. As of September 30, 2023, the estimated fair value of the Notes was approximately $299.0 million. The Notes are quoted on the Intercontinental Exchange and Convertible Preferred Stockare classified as Level 2 financial instruments. The estimated fair value of the Notes was determined based on the actual bid price of the Notes on September 29, 2023, the last day of the period when the notes were traded.
As of MarchSeptember 30, 2019,2023, the remaining life of the Notes was approximately 3.5 years.
Note 8. Stockholders’ Deficit
As of September 30, 2023, the Company’s shares consisted of 60,000,000500,000,000 authorized shares of common stock, par value $0.0001 per share, of which 7,120,93364,460,196 shares of common stock were issued and outstanding, and 43,882,867500,000 authorized shares of preferred stock, par value $0.0001 per share, of which 3,333,500no shares of Series A Preferred Stock, 4,680,565 shares of Series B Preferred Stock, 8,076,636 shares of Series C Preferred Stock, 8,713,201 shares of Series D Preferred Stock, 4,701,449 shares of Series E Preferred Stock, 4,866,758 shares of Series F Preferred Stock, 5,114,786 shares of Series G Preferred Stock and 2,075,216 shares of Series H Preferred Stock were issued and outstanding.
Upon the closing of the IPO, all outstanding shares of the Company’s convertible preferred stock automatically converted into 41,562,111 shares of common stock on a one-for-one basis. On May 6, 2019, the Company filed an Amended and Restated Certificate of Incorporation authorizing the Company to issue 500,000,000 shares of common stock, $0.0001 par value per share, and 500,000 shares of undesignated preferred stock, $0.0001 par value per share with rights and preferences determined by the Company’s Board of Directors at the time of issuance of such shares.
As of December 31, 2018,2022, the Company’s shares consisted of 58,669,600500,000,000 authorized shares of common stock, par value $0.0001 per share, of which 6,951,35063,773,982 shares were issued and outstanding, and 43,882,867500,000 authorized shares of preferred stock, par value $0.0001 per share, of which 3,333,500no shares of Series A Preferred Stock, 4,680,565 shares of Series B Preferred Stock, 8,076,636 shares of Series C Preferred Stock, 8,713,201 shares of Series D Preferred Stock, 4,701,449 shares of Series E Preferred Stock, 4,866,758 shares of Series F Preferred Stock, 5,114,786 shares of Series G Preferred Stock and 2,075,216 shares of Series H Preferred Stock were issued and outstanding.
The Company has not declared or paid any dividends, or authorized or made any distribution upon or with respect to any class or series of its capital stock.
Common Stock
Common stock reserved for future issuance consisted of the following: | | | | | | | | | | | | | | |
| | September 30,
2023 | | December 31,
2022 |
| Equity incentive compensation awards granted and outstanding | | 5,783,535 | | | 4,993,246 | |
| Shares available for grant under the 2018 Equity Incentive Plan | | 8,512,215 | | | 7,848,832 | |
| Shares available for issuance under the Employee Stock Purchase Plan | | 2,948,715 | | | 2,412,585 | |
| Shares reserved for potential issuance under the Notes | | 8,234,230 | | | 8,234,230 | |
Total common stock reserved for future issuance(1) | | 25,478,695 | | | 23,488,893 | |
_________________
(1) Total common stock reserved for future issuance excludes shares that may be issued pursuant to the ATM Program discussed below.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued) Shelf Registration Statement
On May 10, 2023, the Company filed an automatically effective shelf registration statement on Form S-3 (the “Shelf Registration Statement”) with the SEC, which allows the Company to sell, from time to time, and at its discretion, shares of its common stock having an aggregate offering price of up to $200.0 million pursuant to an “at the market” offering program (the “ATM Program”). The Company intends to use the net proceeds, if any, from sales of its common stock issued under the ATM Program for general corporate and working capital purposes. The timing of any sales and the number of shares sold, if any, will depend on a variety of factors to be determined by the Company.
The shares will be offered pursuant to an equity distribution agreement (the “Equity Distribution Agreement’) between the Company and Goldman Sachs & Co. LLC, (“Goldman Sachs”), as sales agent. The Company will pay Goldman Sachs a commission equal to 3.25% of the aggregate gross proceeds of any shares sold through Goldman Sachs pursuant to the Equity Distribution Agreement . The Company is not obligated to sell any shares under the Equity Distribution Agreement. As of September 30, 2023, no sales had been made under the Equity Distribution Agreement and the ATM Program’s full capacity remained available.
Note 8.9. Share-Based Compensation
On April 11, 2011,In 2019, the Company’s stockholders approved the 2011 Equity Incentive Plan (“2011 Plan”), and most recently amended the 2011 Plan on April 10, 2019. The 2011 Plan provides for the grant of stock options (including incentive stock options and non-qualified stock options), stock appreciation rights, restricted stock and restricted stock unit awards to eligible participants. Eligible participants are employees, directors and consultants. As of March 30, 2019, there were 9,462,455 shares of common stock authorized for issuance under the 2011 Plan.
The 2011 Plan was amended, restated and re-named the 2018 Equity Incentive Plan (“2018 Plan”), which became effective as of April 30, 2019,and the day priorremaining shares available for issuance under the 2011 Plan were added to the effectivenessshares reserved for issuance under the 2018 Plan. As of January 1, 2023, the registration statement filed in connection with the IPO. The 2018 Plan provides for the grant of stock options (including incentive stock options and non-qualified stock options), stock appreciation rights, restricted stock, restricted stock units, performance units, and performance shares to the Company’s employees, directors, and consultants. The maximum aggregate number of shares that may be issued under the 2018 Plan is 14,482,356increased to 23,060,440 shares, which includes an increase of 2,144,521 shares effective January 1, 2023 under the terms of the Company’s common stock. In addition,2018 Plan.
The following table summarizes the number of shares reservedavailable for issuancegrant under the 2018 Plan will be increased automatically on the first day of each fiscal year beginning with the 2020 fiscal year, by a number equal to the least of: (i) 2,144,521 shares; (ii) 4.0% of the shares of common stock outstanding on the last day of the prior fiscal year; or (iii) such number of shares determined by the Company’s Board of Directors.Plan:
The 2018 Plan may be amended, suspended or terminated by the Company’s Board of Directors at any time, provided such action does not impair the existing rights of any participant, subject to stockholder approval of any amendment to the 2018 Plan as required by applicable law or listing
BEYOND MEAT, INC.
Notes to Unaudited Condensed Financial Statements (continued)
|
| | | | |
| Shares Available for Grant |
| Balance - December 31, 2022 | 7,848,832 | |
| Authorized | 2,144,521 | |
| Granted | (2,172,448) | |
| Shares withheld to cover taxes | 26,016 | |
| Forfeited | 665,294 | |
| Balance - September 30, 2023 | 8,512,215 | |
| |
requirements. Unless sooner terminated by the Company’s Board of Directors, the 2018 Plan will automatically terminate on November 14, 2028.
As of MarchSeptember 30, 20192023 and December 31, 2018,2022, there were 4,900,3284,383,626 and 5,120,2933,999,933 shares, respectively, issuable under stock options outstanding, 4,504,9141,399,909 and 4,335,331993,313 shares, respectively, issuable under unvested RSUs outstanding, 8,862,470 and 8,145,769 shares, respectively, issued for stock option exercises, RSU settlement, and restricted stock grants, and 57,2138,512,215 and 6,8597,848,832 shares, respectively, available for grant under the 20112018 Plan.
As of March 30, 2019, there were 4,577,114 shares of common stock reserved for future grant or issuance under the 2018 Plan, from which (i) options
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to purchase 264,033 shares of common stock were granted on April 3, 2019, having an exercise price of $20.02 per share, (ii) options to purchase (A) 1,000,000 shares of common stock were granted on April 18, 2019, (B) 51,999 shares of common stock were granted on April 29, 2019, and (C) 50,000 shares of common stock were granted on May 1, 2019, in each case to be effective upon and subject to the effectiveness of the registration statement relating to the Company’s IPO and having an exercise price equal to the IPO price of $25.00 per share, and (iii) awards covering 99,433 shares of restricted stock were granted on April 18, 2019 at a purchase price of $0.01 per share and which will be issued upon payment of the purchase price.Unaudited Condensed Consolidated Financial Statements (continued) Stock Options
No stockFollowing are the assumptions used in the Black-Scholes valuation model for options granted during the periods shown below: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30,
2023 | | October 1,
2022 | | September 30,
2023 | | October 1,
2022 |
| Risk-free interest rate | | N/A | | N/A | | 4.1% | | 1.9% |
| Average expected term (years) | | N/A | | N/A | | 7.0 | | 7.0 |
| Expected volatility | | N/A | | N/A | | 55.3% | | 55.0% |
| Dividend yield | | N/A | | N/A | | — | | — |
There were no option grants were awarded in the three months ended MarchSeptember 30, 2019.2023. Option grants in the nine months ended September 30, 2023 and in the three and nine months ended October 1, 2022 generally vest 25% of the total award on the first anniversary of the vesting commencement date, and thereafter ratably vesting monthly over the remaining three-year period, subject to continued employment through the vesting date.
The following table summarizes the Company’s stock option activity during the threenine months ended MarchSeptember 30, 2019:2023:
|
| | | | | | | | | | | | |
| | Number
of
Stock
Options | | Weighted
Average
Exercise
Price | | Weighted
Average
Remaining
Contractual
Life (Years) | | Aggregate Intrinsic Value (in thousands)(1) |
| Outstanding at December 31, 2018 | 5,120,293 |
| | $ | 3.13 |
| | 7.3 | | $ | 81,371 |
|
| Granted | — |
| | $ | — |
| | — | | $ | — |
|
| Exercised | (169,583 | ) | | $ | 2.16 |
| | — | | $ | 2,859 |
|
| Cancelled/Forfeited | (50,382 | ) | | $ | 4.34 |
| | — | | $ | — |
|
| Outstanding at March 30, 2019 | 4,900,328 |
| | $ | 3.15 |
| | 7.0 | | $ | 80,076 |
|
| Vested and exercisable at March 30, 2019 | 2,981,633 |
| | $ | 1.11 |
| | 5.9 | | $ | 54,793 |
|
| Vested and expected to vest at March 30, 2019 | 3,967,483 |
| | $ | 2.16 |
| | 5.9 | | $ | 68,759 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Number
of
Stock
Options | | Weighted
Average
Exercise
Price | | Weighted
Average
Remaining
Contractual
Life (Years) | | Aggregate Intrinsic Value (in thousands)(1) |
| Outstanding at December 31, 2022 | 3,999,933 | | | $ | 25.58 | | | 5.3 | | $ | 20,712 | |
| Granted | 1,014,718 | | | $ | 17.84 | | | — | | $ | — | |
| Exercised | (215,943) | | | $ | 0.79 | | | — | | $ | 3,646 | |
| Canceled/Forfeited | (415,082) | | | $ | 36.76 | | | — | | $ | — | |
| Outstanding at September 30, 2023 | 4,383,626 | | | $ | 23.95 | | | 5.6 | | $ | 13,670 | |
| Vested and exercisable at September 30, 2023 | 3,056,564 | | | $ | 22.82 | | | 4.0 | | $ | 13,670 | |
| Vested and expected to vest at September 30, 2023 | 4,214,949 | | | $ | 23.69 | | | 5.4 | | $ | 13,670 | |
__________
(1) Aggregate intrinsic value is calculated as the difference between the value of common stock on the transaction date and the exercise price multiplied by the number of shares issuable under the stock option. Aggregate intrinsic value of shares outstanding at the beginning and end of the reporting period is calculated as the difference between the value of common stock on the beginning and end dates, respectively, and the exercise price multiplied by the number of shares outstanding.
DuringIn the three months ended MarchSeptember 30, 20192023 and March 31, 2018,October 1, 2022, the Company recorded in aggregate $0.6$2.1 million and $0.2$4.1 million, respectively, of share-based compensation expense related to options issuedoptions. In the nine months ended September 30, 2023 and October 1, 2022, the Company recorded $9.0 million and $12.5 million, respectively, of share-based compensation expense related to employees and nonemployees.options. The share-based compensation expense is included in cost of goods sold, research and development expenses and SG&A expenses in the Company’s condensed consolidated statements of operations.
As of MarchSeptember 30, 2019 and December 31, 2018,2023, there was $2.3 million and $2.4$16.1 million in unrecognized compensation expense related to nonvested stock option awards which is expected to be recognized over 2.7 years and 2.9 years, respectively.a weighted average period of 1.4 years.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
Restricted Stock Units
RSU grants to Nonemployeesemployees in the nine months ended September 30, 2023 and October 1, 2022 generally vest 25% of the total award on the first anniversary of the vesting commencement date, and thereafter vest quarterly over the remaining three years of the award, subject to continued employment through the vesting date. Some of the RSU grants to continuing employees in the nine months ended September 30, 2023 and October 1, 2022 vest 50% of the total award on the first anniversary of the vesting commencement date, and thereafter vest quarterly over the remaining four quarters of the award, subject to continued employment through the vesting date. Some of the RSU grants to continuing employees in the nine months ended September 30, 2023 vest quarterly over four quarters, subject to continued employment through the vesting date.
In October 2018,Annual RSU grants to directors on the Company’s Board of Directors approved(the “Board”) in the issuance of 135,791 shares of restricted stock with a fair value of $17.03 per sharenine months ended September 30, 2023 and a purchase price of $0.02 per share to nonemployees serving as the Company’s brand ambassadors. The Company has the right to repurchase the unvested shares upon a voluntary or involuntary termination of a brand ambassador’s service; however, as sharesOctober 1, 2022 vest monthly over 12a one-year period subject to 24continued service through the vesting date. RSU grants to a new director on the Board in the nine months they are being released fromended September 30, 2023 and October 1, 2022 vest monthly over a three-year period subject to continued service through the repurchase option (and all such shares will be released fromvesting date. RSU grants to nonemployee brand ambassadors and consultants in the repurchase option by Novembernine months ended September 30, 2023 and October 1, 2020).2022 vest on varying dates, subject to continued service through the vesting date.
The following table summarizes the Company’s restricted stockRSU activity during the threenine months ended MarchSeptember 30, 2019:2023: | | | | | | | | | | | | | | |
| | Number of Units | | Weighted
Average
Grant Date Fair Value Per Unit |
| Unvested at December 31, 2022 | | 993,313 | | | $ | 35.98 | |
| Granted | | 1,157,730 | | | $ | 16.52 | |
Vested(1) | | (500,922) | | | $ | 30.74 | |
| Canceled/Forfeited | | (250,212) | | | $ | 28.99 | |
| Unvested at September 30, 2023 | | 1,399,909 | | | $ | 23.01 | |
________ |
| | | | | | | | |
| | Number
of Shares of
Restricted Stock | | Weighted
Average
Remaining
Contractual
Life (Years) | | Weighted Average Grant Date Fair Value Per Share |
| Outstanding at December 31, 2018 | 100,127 |
| | 1.6 | | $ | 17.03 |
|
| Granted | — |
| | — | | $ | — |
|
| Vested/Released | (12,946 | ) | | — | | $ | — |
|
| Cancelled/Forfeited | — |
| | — | | $ | — |
|
| Outstanding at March 30, 2019 | 87,181 |
| | 1.4 | | $ | 17.03 |
|
During the three months ended MarchSeptember 30, 2019,2023 and October 1, 2022, the Company recorded in aggregate $0.3$4.4 million inand $5.2 million, respectively, of share-based compensation expense related to restricted stock issuedRSUs. During the nine months ended September 30, 2023 and October 1, 2022, the Company recorded $14.8 million and $16.4 million, respectively, of share-based compensation expense related to nonemployee brand ambassadors, whichRSUs. The share-based compensation expense is included in cost of goods sold, research and development expenses and SG&A expenses in the Company’s condensed consolidated statements of operations.
As of MarchSeptember 30, 2019,2023, there was $1.4$19.3 million in unrecognized compensation expense related to nonvested restricted stock,unvested RSUs which is expected to be recognized over 1.4a weighted average period of 1.3 years.
In April 2019,Employee Stock Purchase Plan
As of September 30, 2023, the Company’s Boardmaximum aggregate number of Directors approvedshares that may be issued under the issuance of 99,433 shares of restricted stock with a fair value of $20.02 per share and a purchase price of $0.02 per share to nonemployees serving as the Company’s brand ambassadors. The Company has the right to repurchase the unvested shares upon a voluntary or involuntary termination of a brand ambassador’s service; however, as shares vest monthly over 24 months, they are being released from the repurchase option (and all such shares will be released from the repurchase option by May 18, 2021).
Employee stock purchase plan
On November 15, 2018, the Company’s Board of Directors adopted its 2018 Employee Stock Purchase Plan (“2018 ESPP”), which was subsequently approved by the Company’s stockholders and became effective on April 30, 2019, the day immediately prior to the effectiveness of the registration statement filed in connection with the IPO. The 2018 ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code (the “Code”) for U.S. employees. In addition, the 2018 ESPP authorizes grants of purchase rights that do not comply with Section 423 of the Code under a separate non-423 component for non-U.S. employees and certain non-U.S. service providers. The Company has reserved 804,1952,948,715 shares of common stock, for issuanceincluding an increase of 536,130 shares effective January 1, 2023 under the 2018 ESPP. In addition, the number of shares reserved for issuance under the 2018 ESPP will be increased automatically on the first day of each fiscal year for a period of up to ten years, starting with the 2020 fiscal year, by a number equal to the least of: (i) 536,130 shares; (ii) 1%terms of the shares of common stock outstanding on the last day of the prior fiscal year; or (iii) such lesser number of shares determined by the Company’s Board of Directors.ESPP. The 2018 ESPP is expected to be implemented through a series of offerings under which participants are granted purchase rights to purchase shares of the Company’s
BEYOND MEAT, INC.
Notes to Unaudited Condensed Financial Statements (continued)
common stock on specified dates during such offerings. The administrator has not yet approved an offering under the 2018 ESPP.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued) Note 9.10. Commitments and Contingencies
Leases
Effective March 1, 2019,See Note 4.On January 14, 2021, the Company entered into the Campus Lease with HC Hornet Way, LLC, a Delaware limited liability company (the “Landlord”), to house the Company’s Campus Headquarters.
Under the terms of the Campus Lease, the Company will lease for its principal executive officesan aggregate of approximately 282,000 rentable square feet in a portion of a building located at 888 N. Douglas Street, El Segundo, California, to be built out by the Landlord and delivered to the Company in multiple phases. In 2022 and in the second quarter of 2023, the tenant improvements associated with Phase 1-A and Phase 1-B, respectively, were completed and the underlying assets were delivered to the Company. Therefore, the Company began recognizing a right-of-use asset and lease liability for Phase1-A in its consolidated balance sheet in the year ended December 31, 2022 and for Phase 1-B in its consolidated balance sheet in the second quarter ended July 1, 2023. See Note 4. Aggregate payments towards base rent over the initial lease term associated with the remaining phases not yet delivered to the Company will be approximately $79.4 million. Concurrent with the Company’s execution of the Campus Lease, as a security deposit, the Company delivered to the Landlord a letter of credit in the amount of $12.5 million which amount will decrease to: (i) $6.3 million on the fifth (5th) anniversary of the Rent Commencement Date (as defined in the Campus Lease); (ii) $3.1 million on the eighth (8th) anniversary of the Rent Commencement Date; and (iii) $0 in the event the Company receives certain credit ratings; provided the Company is not then in default of its obligations under the Campus Lease. The letter of credit is secured by a $12.6 million deposit included in the Company’s condensed consolidated balance sheet as “Restricted cash, non-current” as of September 30, 2023 and December 31, 2022.
China Investment and Lease Agreement
On September 22, 2020, the Company and its wholly-owned subsidiary, Beyond Meat (Jiaxing) Food Co., Ltd. (“BYND JX”), entered into an initial terminvestment agreement with the Administrative Committee (the “JX Committee”) of 5 years. the Jiaxing Economic & Technological Development Zone (the “JXEDZ”) pursuant to which, among other things, BYND JX has agreed to make certain investments in the JXEDZ in two phases of development, and the Company has agreed to guarantee certain repayment obligations of BYND JX under such agreement.
During Phase 1, the Company agreed to invest $10.0 million as the registered capital of BYND JX in the JXEDZ through intercompany investment in BYND JX. As of September 30, 2023, the Company had invested $22.0 million as the registered capital of BYND JX and advanced $20.0 million to BYND JX.
In the event that the Company and BYND JX determine, in their sole discretion, to proceed with the Phase 2 development in the JXEDZ, BYND JX has agreed in the first stage of Phase 2 to increase its registered capital to $40.0 million and to acquire the land use right to a state-owned land plot in the JXEDZ to conduct development and construction of a new production facility. Following the first stage of Phase 2, the Company and BYND JX may determine, in their sole discretion, to permit BYND JX to obtain a second state-owned land plot in the JXEDZ in order to construct one or more facilities thereon.
The aggregate leasePlanet Partnership
On January 25, 2021, the Company entered into the Planet Partnership, LLC (“TPP”), a joint venture with PepsiCo, Inc. (“PepsiCo”) to develop, produce and market innovative snack and beverage products made from plant-based protein. In the three months ended September 30, 2023 and October 1, 2022, the
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued) Company recognized its share of the net losses in TPP in the amount forof $0.1 million and $8.7 million, respectively. In the five-year term is $2.7nine months ended September 30, 2023 and October 1, 2022, the Company recognized its share of the net losses in TPP in the amount of $3.9 million and $10.8 million, respectively. As of the year ended December 31, 2022, the Company had contributed its share of the investment in TPP in the amount of $24.3 million. The future minimum lease payments required under noncancelable lease obligationsIn the nine months ended September 30, 2023, the Company contributed an additional $3.3 million as its share of an additional investment in TPP, resulting in a total contribution of $27.6 million as of September 30, 2023. See Note 2 and Note 13. In the first nine months of 2023, the Company continued the process of restructuring certain contracts and operating activities related to this lease are $2.6 million due through 2023 (approximately $0.5 million annually) and $0.1 million thereafter.Beyond Meat Jerky.
Purchase Commitments
As of March 30, 2019,On July 1, 2023, the Company hadand Roquette Frères entered into a second amendment (the “Second Amendment”) to the Company’s existing pea protein supply agreement dated January 10, 2020, as amended by the first amendment dated August 3, 2022 (the “First Amendment”). Pursuant to the Second Amendment, the terms of the agreement and existing purchase commitments set forth in the First Amendment were revised and extended through December 31, 2025. Pursuant to the Second Amendment, the purchase commitment was revised such that the Company has committed to purchase pea protein inventory totaling $46.1$1.4 million. in the remainder of 2023, $10.9 million in 2024 and $17.1 million in 2025.
On April 6, 2022, the Company entered into a co-manufacturing agreement (“Co-Manufacturing Agreement”) with a co-manufacturer to manufacture various products for the Company. The Co-Manufacturing Agreement includes a minimum order quantity commitment per month and an aggregate quantity over a 5-year term. For a portion of the contract term, if the minimum order for a month is not fulfilled, the Company may be assessed a fee per pound, which fee may be waived by the co-manufacturer upon reaching certain aggregate quarterly volume requirements.
The following table sets forth the schedule of the fees for the committed quantity under the Co-Manufacturing Agreement. | | | | | | | | |
| (in thousands) | | As of
September 30, 2023 |
| Remainder of 2023 | | $ | 2,955 | |
| 2024 | | 11,820 | |
| 2025 | | 11,820 | |
| 2026 | | 11,820 | |
| 2027 | | 34,475 | |
| Total | | $ | 72,890 | |
Litigation
On May 25, 2017, a former co-manufacturer ofIn connection with the matters described below, the Company filed a complaint against the Companyhas accrued for loss contingencies where it believes that losses are probable and estimable. No loss contingency is recorded for matters where such losses are either not probable or reasonably estimable (or both). Although it is reasonably possible that actual losses could be in the Superior Court of the State of California for the County of Los Angeles asserting claims for (1) breach of contract, (2) misappropriation of trade secrets, (3) unfair competition under California Business & Professions Code Section 17200 Et. Seq., (4) money owed and due, (5) declaratory relief, and (6) injunctive relief, each arising outexcess of the Company’s decision to terminate an exclusive agreement dated December 2, 2014 betweenaccrual, the Company is unable to estimate a reasonably possible loss or range of loss in excess of its accrual, due to various reasons, including, among others, that: (i) the proceedings are in early stages or no claims have been asserted, (ii) specific damages have not been sought in all of these matters, (iii) damages, if asserted, are considered unsupported and/or exaggerated, (iv) there is uncertainty as to the outcome of pending appeals, motions or settlements, (v) there are significant factual issues to be resolved, and/or (vi) there are novel legal
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued) issues or unsettled legal theories presented. It is not possible to predict the ultimate outcome of all pending legal proceedings, and
the former co-manufacturer, pursuant to its terms (see Note 3). The Company denies these claims, filed counter-claims on July 27, 2017, alleging (1) breach of contract, (2) unfair competition under California Business & Professions Code Section 17200 Et. Seq., and (3) conversion, and is in the process of litigating this matter. In October 2018, the former co-manufacturer filed an amended complaint that added onesome of the Company’s current contract manufacturers as a defendant, principally for claims arising from the current contract manufacturer’s alleged use of the former co-manufacturer’s alleged trade secrets, and for replacing the former co-manufacturer as one of the Company’s current co-manufacturers. The current co-manufacturer filed an answer denying all of the former co-manufacturer’s claims, and a cross-complaint against Beyond Meat asserting claims of total and partial equitable indemnity, contribution, and repayment. On March 11, 2019, the former co-manufacturer filed a second amended complaint to add claims of fraud and negligent misrepresentation against the Company. On May 30, 2019, the judge denied the Company’s motion to dismiss the fraud and negligent misrepresentation claims, allowing the claims to proceed. A trial date has been set for May 18, 2020. At this time the Company cannot reasonably estimate the potential liability associated with this litigation, but believes the final resolution of this litigation will notmatters discussed below seek or may seek potentially large and/or indeterminate amounts. Any such loss or excess loss could have a material adverse effect on its financial position,the Company’s results of operations or cash flows.flows or on the Company’s financial condition.
TheIn addition to the matters described below, the Company is involved in various other legal proceedings, claims and litigation arising in the ordinary course of business. Based on the facts currently available, the Company does not believe that the disposition of such other matters that are pending or asserted will have a material effect on its financial statements.
Aliments BVeggie, Inc.
On October 20, 2023, Aliments BVeggie, Inc. (“BVeggie”) advised the Company that it will be filing legal proceedings against the Company before the Superior Court of Quebec’s District of Montreal. BVeggie alleges, among other things that: (i) in 2019, the Company and BVeggie entered into a co-manufacturing agreement, by which BVeggie would produce and deliver products for the benefit of the Company, in exchange for a tolling fee to be paid per pound of product produced and delivered to the Company; (ii) the Company would have made false and misleading statements regarding the volume of purchase orders it would provide BVeggie; (iii) BVeggie invested significant sums to adapt its facilities for the intended production; (iv) the Company fell short of its undertakings and promises; and (v) in March 2023, the Company illegally terminated the business relationship. BVeggie intends to claim damages in the total amount of 129,841,920 CAD, in compensation for its investments, lost profits and the repairs needed to be made to its facility post-termination of the business relationship and removal of the Company’s equipment. The case is at a preliminary stage. The Company intends to vigorously defend against these claims. Retail Wholesale Department Store Union Local 338 Retirement Fund v. Beyond Meat, Inc.
On May 11, 2023, a class action complaint was filed against the Company and certain current and former officers and directors in the United States District Court for the Central District of California, captioned Retail Wholesale Department Store Union Local 338 Retirement Fund v. Beyond Meat, Inc., et al., Case No. 2:23-cv-03602. On July 26, 2023, the Court granted Saskatchewan Healthcare Employees’ Pension Plan’s motion to be appointed lead plaintiff and for its counsel to be appointed lead counsel. On October 9, 2023, the plaintiffs filed an amended complaint to which the defendants must respond to the amended complaint by December 8, 2023. The amended complaint asserts violations of Sections 10(b), 20(a), and 20A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), against the Company and certain of its current and former officers and directors on behalf of a putative class of investors who purchased the Company’s common stock between May 5, 2020 and October 13, 2022, inclusive.
The amended complaint alleges, among other things, that the Company and certain current and former officers and directors made false and misleading statements or omissions regarding the Company’s ability to manufacture its products at scale and to its partners’ specifications. The complaint seeks an order certifying the class; awarding compensatory damages, interest, costs, expenses, attorneys’ and expert fees; and granting other unspecified equitable or injunctive relief. The case is at a preliminary stage. The Company intends to vigorously defend against these claims.
Gervat v. Brown et al.; Brink v. Brown et al.
On July 21, 2023, a derivative shareholder action was filed against certain current and former officers and directors of the Company in the United States District Court for the Central District of California, captioned Gervat v. Brown et al., Case No. 2:23-cv-05954. The complaint asserts claims for breach of fiduciary duty, unjust enrichment and gross mismanagement. It also asserts violations of Section 14(a) of
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued) the Exchange Act against a subset of defendants and seeks contribution for violations of Sections10(b) and 21D of the Exchange Act from the individual defendants named in the related securities class action lawsuit. The Company is named as a nominal defendant only.
The complaint alleges, among other things, that the Company and certain of its current and former officers and directors made false and misleading statements or omissions regarding the Company’s ability to manufacture its products at scale and to its partners’ specifications. The Gervat complaint covers the same period of time as covered by the Retail Wholesale complaint, namely May 5, 2020 through October 13, 2022. The complaint further alleges that a demand on the Board to pursue this action would be futile. The complaint seeks a declaration that the named plaintiff can maintain the action on behalf of the Company and that the individual defendants have breached or aided in breaching fiduciary duties owed to the Company; damages and interest; restitution; costs and fees; an order directing the Company to improve its corporate governance and oversight and provide shareholders more Board control; and other unspecified equitable or injunctive relief.
On July 27, 2023, a second derivative shareholder action was filed against certain current and former officers and directors of the Company in the United States District Court for the Central District of California, captioned Brink v. Brown et al., Case No. 2:23-cv-06110. The complaint asserts claims for breach of fiduciary duty, unjust enrichment, and gross mismanagement. It also asserts violations of Section 14(a) of the Exchange Act against a subset of defendants. The Company is named as a nominal defendant only.
The complaint alleges, among other things, that the Company and certain of its current and former officers and directors made false and misleading statements or omissions regarding the Company’s ability to manufacture its products at scale and to its partners’ specifications. The Brink complaint covers the same period of time as covered by the Retail Wholesale complaintand the Gervat complaint, namely May 5, 2020 through October 13, 2022. The complaint further alleges that a demand on the Board to pursue this action would be futile. The complaint seeks a declaration that the named plaintiff can maintain the action on behalf of the Company and that the individual defendants have breached or aided in breaching fiduciary duties owed to the Company; damages and interest; restitution; costs and fees; an order directing the Company to improve its corporate governance and oversight and provide shareholders more Board control; and other unspecified equitable or injunctive relief.
The Gervat and Brink actions were consolidated into a single matter on August 15, 2023, with Gervat serving as the lead case. On October 13, 2023, the parties stipulated to a stay of the consolidated case pending the defendants’ response to the amended complaint in the above-mentioned Retail Wholesale class action. The consolidated case is at a preliminary stage. The Company intends to vigorously defend against these claims.
Moore v. Nelson et al.
On August 4, 2023, a derivative shareholder action was filed against certain current and former officers and directors of the Company in the Superior Court of the State of California for the County of Los Angeles, captioned Moore v. Nelson et al., Case No. 23STCV18587. The complaint asserts claims for breach of California’s insider trading laws. The Company is named as a nominal defendant only. The Moore complaint covers the same period of time as covered by the Retail Wholesale complaint, the Gervat complaint and the Brink complaint, namely May 5, 2020 through October 13, 2022.
The complaint alleges that certain current and former officers and directors of the Company traded Company shares on the public market while in possession of material, non-public information. The complaint seeks all statutory remedies, including relief “prohibiting insider trading;” restitution, disgorgement of proceeds, and treble damages; prejudgment interest, costs, and fees; and other
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued) unspecified relief. The case is at a preliminary stage. The Company intends to vigorously defend against these claims.
Consumer Class Actions Regarding Protein Claims
From May 31, 2022 through January 13, 2023, multiple putative class action lawsuits were filed against the Company in various federal and state courts alleging that the labeling and marketing of certain of the Company’s products is false and/or misleading under federal and/or various states’ laws. Specifically, each of these lawsuits allege one or more of the following theories of liability: (i) that the labels and related marketing of the challenged products misstate the quantitative amount of protein that is provided by each serving of the product; (ii) that the labels and related marketing of the challenged products misstate the percent daily value of protein that is provided by each serving of the product; and (iii) that the Company has represented that the challenged products are “all-natural,” “organic,” or contain no “synthetic” ingredients when they in fact contain methylcellulose, an allegedly synthetic ingredient. The named plaintiffs of each complaint seek to represent classes of nationwide and/or state-specific consumers, and seek on behalf of the putative classes damages, restitution, and injunctive relief, among other relief. Additional complaints asserting these theories of liability are possible. Some lawsuits previously filed were voluntarily withdrawn or dismissed without prejudice, though they may be refiled.
On November 14, 2022, the Company filed a motion with the Judicial Panel on Multidistrict Litigation to transfer and consolidate all pending class actions. No party opposed the motion, and the Panel held oral argument on the motion on January 26, 2023. The Panel granted the motion on February 1, 2023, consolidating the pending class action lawsuits and transferring them to Judge Sara Ellis in the Northern District of Illinois for pre-trial proceedings.
On March 3, 2023, the court held the initial status conference. The court granted plaintiffs’ motion to appoint interim class counsel and set a briefing schedule on the Company’s anticipated motion to dismiss. On May 3, 2023, plaintiffs filed an amended consolidated complaint. The Company’s motion to dismiss was filed on June 5, 2023, and plaintiffs filed a brief in opposition on July 7, 2023. The Company’s reply in support of the motion to dismiss was filed on July 21, 2023. A telephonic conference is set for November 28, 2023 for a ruling on the motion to dismiss.
The active lawsuits are:
•Roberts v. Beyond Meat, Inc., No. 1:22-cv-02861 (N.D. Ill.) (filed May 31, 2022)
•Cascio v. Beyond Meat, Inc., No. 1:22-cv-04018 (E.D.N.Y.) (filed July 8, 2022)
•Miller v. Beyond Meat, Inc., No. 1:22-cv-06336 (S.D.N.Y.) (filed July 26, 2022)
•Garcia v. Beyond Meat, Inc., No. 4:22-cv-00297 (S.D. Iowa) (filed September 9, 2022)
•Borovoy v. Beyond Meat, Inc., No. 1:22-cv-06302 (N.D. Ill.) (filed September 30, 2022 in DuPage Co., Ill.; removed on Nov. 10, 2022)
•Zakinov v Beyond Meat, Inc., No. 4:23-cv-00144 (S.D. Tex.) (filed January 13, 2023)
The Company intends to vigorously defend against all claims asserted in the complaints.
Interbev
In October 2020, Interbev, a French trade association for the livestock and meat industry sent a cease-and-desist letter to one of the Company’s contract manufacturers alleging that the use of “meat” and meat-related terms is misleading the French consumer. Despite the Company’s best efforts to reach a settlement, including a formal settlement proposal from the Company in March 2021, the association no longer responded. Instead, on March 13, 2022, the Company was served a summons by Interbev to appear before the Commercial Court of Paris. The summons alleges that the Company misleads the French consumer with references to e.g. “plant based meat,” “plant based burger” and related descriptive
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued) names, and alleges that the Company is denigrating meat and meat products. The relief sought by Interbev includes (i) changing the presentation of Beyond Meat products to avoid any potential confusion with meat products, (ii) publication of the judgment of the court in the media, and (iii) damages of EUR 200,000. On October 12, 2022, the Company submitted its brief in defense. On February 1, 2023, the French trade association submitted updated pleadings to the Commercial Court. The association maintains its position that the Company is misleading the consumer, and additionally alleges that it is engaging in unlawful comparative advertising of its products with respect to meat and meat products. The relief sought is unchanged. On May 24, 2023, the Company submitted its defense, strongly disputing these claims. On September 27, 2023, Interbev obtained an extension to submit a response to the Company. In September 2023, the Company submitted a request to stay proceedings in the commercial litigation proceedings, pending the decision of the Court of Justice of the European Union (“CJEU”) in the administrative litigation case against the French Decree prohibiting meat names. On September 27, 2023, Interbev obtained an extension to submit a response to the Company. On October 25, 2023, Interbev submitted its response opposing the Company’s request to stay proceedings and asking that the written procedure of the case be closed. The Company is scheduled to respond on November 22, 2023. The Company expects Interbev to be given the opportunity to respond 4 weeks after, and the Company expects a hearing on the decision to stay proceedings in January or February 2024. The commercial litigation is expected to take at least 24 months in the first instance, and at least 36 months if the stay is granted. If the Court rules against the Company, it could disrupt the Company’s ability to market in France. The Company intends to vigorously defend against these claims.
On April 21, 2023, Interbev filed two actions before the European Union Intellectual Property Office to cancel the Company’s EU trademark registration for the Caped Steer logo. Interbev is seeking cancellation of the trademark, alleging that the trademark is invalid because it allegedly misleads the public about the nature and characteristics of the products offered under the mark. Interbev is also seeking cancellation on the basis of lack of genuine use, despite the fact that the mark is within the five-year grace period where it cannot be challenged for lack of use. On July 7, 2023, the Company submitted its responses to these actions, strongly disputing these claims and defending its use of the Caped Steer logo. Interbev’s response was filed on September 14, 2023, and the Company’s response is due on November 20, 2023.
Decree prohibiting meat names
On June 29, 2022, France adopted a Decree implementing a prohibition of June 2020 on the use of denominations used for foodstuffs of animal origin to describe, market or promote foodstuffs containing plant proteins (“Contested Decree”). The Contested Decree prohibits the use of meat names (such as “sausage” or “meatballs”) for plant-based products, from its date of entry into force on October 1, 2022. On July 27, 2022, the French High Administrative Court issued a temporary and partial suspension of the execution of the Contested Decree, in response to a motion filed by a French trade association. While the Court has not yet handed down a final decision on the merits, the suspension indicates that it has serious doubts as to the substantive lawfulness of the Contested Decree.
The Company does not believe that the Contested Decree complies with the laws of the European Union (EU), and in particular the principle of free movement of goods, nor with French rules requiring laws to be clear and accessible. On October 21, 2022, the Company filed a request for annulment of the Contested Decree before the French High Administrative Court. On November 16, 2022, the Company filed a voluntary intervention in the French trade association’s own application for annulment, to ensure that both the Company’s voice and strong EU law arguments are heard. On January 23, 2023, the French Ministry for the Economy responded to the Company’s request for annulment and intervention. The Ministry’s response made clear that it will enforce the Contested Decree as a blanket ban on the use of all “meaty” names for plant-based products in France. On April 20, 2023, a number of plant-based companies voluntarily filed interventions in support of the Company’s case.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued) On July 12, 2023, the French High Administrative Court issued an intermediate judgment in the proceedings against the French meaty names ban. The Court held that there are a number of difficulties interpreting EU law, which will be decisive for the resolution of the case. For that reason, the French High Administrative Court referred the case to the CJEU, which is the highest court in the EU and can issue a legally binding interpretation of EU law valid in all 27 EU member states, including France. The French High Administrative Court is bound to follow the judgment of the CJEU. The procedure before the CJEU started on August 22, 2023, and the Company filed its submission on October 31, 2023. This procedure is likely take around 15 to 18 months to complete. The judgment of the CJEU will be determinative as to whether the Contested Decree’s ban on meat names for plant-based foods is lawful, or not, under EU law. The judgment of the CJEU will also set a precedent on the naming of plant-based foods for all other EU member states, which may significantly disrupt or facilitate the operations of the Company and the entire plant-based protein industry in France and across the EU.
On August 23, 2023, France published a proposal for a new decree replacing the Contested Decree (“New Decree”). The New Decree has removed some of the Contested Decree’s most open-ended language, but essentially maintains the prohibition on meaty names for plant-based proteins. The New Decree is now subject to administrative review procedure by the European Commission (the EU’s executive body) and the EU member states other than France. The Company is supporting plant-based protein trade associations against the New Decree. If adopted, the New Decree would replace and abrogate the Contested Decree, making the current proceedings before the CJEU and the pending proceedings before the French High Administrative Court without object. Thus, there is a risk that the Company may need to initiate new proceedings before the French High Administrative Court and the CJEU against the New Decree. The Company maintains its position that the Contested Decree and the New Decree are illegal under French and EU law, and will continue to fight the prohibitions on meaty names with utmost vigor.
Note 10.11. Income Taxes
For both the three months ended MarchSeptember 30, 20192023 and March 31, 2018October 1, 2022, the Company recorded no$0 in income tax expense in its condensed consolidated statements of operations. For the nine months ended September 30, 2023 and October 1, 2022, the Company recorded $5,000 and $21,000 in income tax expense, respectively, in its condensed consolidated statements of operations.
The Company has evaluated the available evidence supporting the realization of its deferred tax assets, including the amount and timing of future taxable income, and has determined that it is more likely
BEYOND MEAT, INC.
Notes to Unaudited Condensed Financial Statements (continued)
than not that its net deferred tax assets will not be realized in the U.S.realized. Due to uncertainties surrounding the realization of the deferred tax assets, the Company maintains a full valuation allowance against substantially all deferred tax assets. WhenIf the Company determines that it will be able to realize some portion or all of its deferred tax assets, an adjustment to its valuation allowance on its deferred tax assets will be made and the adjustment would have the effect of increasing net income in the period such determination is made.
As of MarchSeptember 30, 2019,2023, the Company doesdid not have any accrued interest or penalties related to uncertain tax positions. The Company’s policy is to recognize interest and penalties related to uncertain tax positions in income tax expense. The Company is subject to U.S. federal tax authority and U.S. state tax authority examinations for all years with respect to net operating loss and credit carryforwards.
Note 11.12. Net Loss Per Share AttributableAvailable to Common Stockholders
The Company calculates basic and diluted net loss per share attributableavailable to common stockholders in conformity with the two-class method required for companies with participating securities. ThePursuant to Accounting Standards Update 2020-06, the Company considers all seriesapplies the more dilutive of convertible preferred stock issuedthe if-converted method and outstanding prior to the IPO to be participating securities. Under the two-class method the net loss attributable to common stockholders is not allocated to the convertible preferred stock as the holders of convertible preferred stock issued and outstanding prior to the IPO do not have a contractual obligation to share in losses.
The diluted net loss per share attributable to common stockholders is computed by giving effect to all potential dilutive common stock equivalents outstanding for the period. For purposes of this calculation, options to purchase common stock, common stock warrants and securities such as convertible preferred stock and convertible preferred stock warrants that were issued and outstanding before the Company’s IPO, are considered common stock equivalents but have been excluded from the calculation of diluted net loss per share attributable to common stockholders as their effect is antidilutive. Basic and diluted net loss per common share was the same for each period presented, as the inclusion of all potential common shares outstanding would have been antidilutive.its Notes.
|
| | | | | | | | |
| (in thousands, except share and per share amounts) | | Three Months Ended |
| | March 30, 2019 | | March 31, 2018 |
| Numerator: | | | | |
| Net loss attributable to common stockholders | | $ | (6,649 | ) | | $ | (5,696 | ) |
| Denominator: | | | | |
| Weighted average common shares outstanding—basic | | 6,974,301 |
| | 5,793,801 |
|
| Dilutive effect of stock equivalents resulting from stock options, common stock warrants, preferred stock warrants and convertible preferred stock (as converted) | | — |
| | — |
|
| Weighted average common shares outstanding—diluted | | 6,974,301 |
| | 5,793,801 |
|
| Net loss per common share—basic and diluted | | $ | (0.95 | ) | | $ | (0.98 | ) |
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
The following weighted-average outstanding sharesComputation of common stock equivalents were excluded from the computation of diluted net loss per share attributableavailable to common stockholders for the periods presentedthree and nine months ended September 30, 2023 excludes the dilutive effect of 4,383,626 shares issuable under stock options and 1,399,909 RSUs outstanding at September 30, 2023 because the impactCompany incurred a net loss and their inclusion would be anti-dilutive. Computation of net loss per share available to common stockholders for the three and nine months ended September 30, 2023 also excludes the dilutive effect of the Notes because the Company recorded a net loss and their inclusion would be anti-dilutive. Computation of net loss per share available to common stockholders for the three and nine months ended October 1, 2022 excludes the dilutive effect of 4,185,008 shares issuable under stock options and 830,256 RSUs outstanding at October 1, 2022 because their inclusion would be anti-dilutive. Computation of net loss per share available to common stockholders for the three and nine months ended October 1, 2022 also excludes the dilutive effect of the Notes because the Company recorded a net loss and their inclusion would be anti-dilutive. | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands, except share and per share amounts) | | Three Months Ended | | Nine Months Ended |
| September 30,
2023 | | October 1,
2022 | | September 30,
2023 | | October 1,
2022 |
| Numerator: | | | | | | | | |
| Net loss available to common stockholders | | $ | (70,492) | | | $ | (101,678) | | | $ | (183,034) | | | $ | (299,270) | |
| | | | | | | | |
| Net loss available to common stockholders—basic | | (70,492) | | | (101,678) | | | (183,034) | | | (299,270) | |
| Denominator: | | | | | | | | |
| Weighted average common shares outstanding—basic | | 64,398,448 | | | 63,694,592 | | | 64,210,809 | | | 63,579,763 | |
| Dilutive effect of shares issuable under stock options | | — | | | — | | | — | | | — | |
| Dilutive effect of RSUs | | — | | | — | | | — | | | — | |
Dilutive effect of Notes, if converted(1) | | — | | | — | | | — | | | — | |
| Weighted average common shares outstanding—diluted | | 64,398,448 | | | 63,694,592 | | | 64,210,809 | | | 63,579,763 | |
| Net loss per share available to common stockholders—basic | | $ | (1.09) | | | $ | (1.60) | | | $ | (2.85) | | | $ | (4.71) | |
| Net loss per share available to common stockholders—diluted | | $ | (1.09) | | | $ | (1.60) | | | $ | (2.85) | | | $ | (4.71) | |
__________(1) As the Company recorded a net loss in the three and nine months ended September 30, 2023 and October 1, 2022, inclusion of shares from the conversion premium or spread would be anti-dilutive. The Company had $1.2 billion in Notes outstanding as of September 30, 2023 and October 1, 2022.
Note 13. Related Party Transactions
In connection with the Company’s investment in TPP, a joint venture with PepsiCo, the Company sells certain products directly to the joint venture. In the year ended December 31, 2022, the Company also entered into an agreement for a nonrefundable up-front fee associated with its manufacturing and supply agreement with TPP to be recognized over the estimated term of the manufacturing and supply agreement. As part of the restructuring of certain contracts and operating activities related to Beyond Meat Jerky, in the first quarter of 2023, the Company recognized in full the remaining balance of this fee. See Note 10. Net revenues earned from TPP included in U.S. retail channel net revenues were $0 and $4.5 million for the three months ended September 30, 2023 and October 1, 2022, respectively. Net revenues earned from TPP included in U.S. retail channel net revenues were $5.3 million, including them would have been antidilutive:a $2.0 million non-
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued) |
| | | | | | |
| | | March 30, 2019 | | March 31, 2018 |
| Convertible preferred stock (as converted) | | 41,562,111 |
| | 39,474,156 |
|
| Preferred stock warrants (as converted to common stock warrants and subsequently exercised) | | 160,767 |
| | 160,767 |
|
| Common stock warrants (as exercised) | | 60,002 |
| | — |
|
| Total | | 41,782,880 |
| | 39,634,923 |
|
Accounts receivable from TPP were $0 and $0.4 million at September 30, 2023 and December 31, 2022, respectively. Unrecognized revenue associated with the up-front fee charged to TPP as of September 30, 2023 and December 31, 2022 was $0 and $2.0 million, respectively, and included in "Accrued expenses and other current liabilities" in the respective condensed consolidated balance sheets.
Note 14. Subsequent Event
Reduction-in-force
Subsequent to the quarter ended September 30, 2023, on November 1, 2023, the Board approved a plan to reduce the Company’s workforce by approximately 65 employees, representing approximately 19% of the Company’s global non-production workforce (or approximately 8% of the Company’s total global workforce). This decision was based on cost-reduction initiatives intended to reduce operating expenses.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 2022 10-K and Part II, Item 1A.1A, “Risk Factors” and “ Note“Note Regarding Forward-Looking Statements” included elsewhere in this report.report and those discussed in other documents we file from time to time with the SEC. 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 elsewhere in this quarterly report and our audited consolidated financial statements and related notes thereto included in our final prospectus dated May 1, 2019 (the “Prospectus”) that forms a part2022 10-K. Our historical results are not necessarily indicative of the results to be expected for any future periods and our Registration Statement on Form S-1 (File No. 333-228453), as filed withoperating results for the Securitiesthree and Exchange Commission (“SEC”) pursuantnine months ended September 30, 2023 are not necessarily indicative of the results to Rule 424 promulgated underbe expected for the Securities Act of 1933, as amended (the “Securities Act”), on May 3, 2019.fiscal year ending December 31, 2023 or for any other interim period or for any other future year or period.
Overview
Beyond Meat is one of the fastest growing food companies in the United States,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,promise, “Eat What You Love,” represents a strong belief that by eatingthere 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 meats, consumersmeat, we can enjoy more, not less, of their favorite meals, and by doing so help address concerns related topositively impact four growing global issues: human health, climate change, resource conservation,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 flexitarians, 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. They are offeredAs of September 2023, Beyond Meat branded products were available at approximately 183,000 retail and foodservice outlets in ready-to-cook formats (primarily merchandisedmore than 75 countries worldwide, across mainstream grocery, mass merchandiser, club store and natural retailer channels, and various food-away-from-home channels, including restaurants, foodservice outlets and schools. The number of outlets carrying Beyond Meat branded products as of September 2023 includes approximately 46,000 U.S. retail outlets unique to Beyond Meat Jerky. In the first nine months of 2023, we continued the process of restructuring certain contracts and operating activities related to Beyond Meat Jerky. In the fourth quarter of 2023, we assumed distribution responsibilities for Beyond Meat Jerky. This transition is expected to limit our distribution reach for Beyond Meat Jerky and substantially reduce our total number of U.S. retail distribution outlets in subsequent quarters.
In the first nine months of 2023, our operating environment continued to be affected by uncertainty related to macroeconomic issues, including prolonged and further softening of demand in the plant-based meat case),category, high inflation, rising interest rates, and ongoing concerns about the likelihood of a recession, among other things, all of which we referhave had and could continue to have unforeseen impacts on our actual realized results. Our net revenues, gross profit, gross margin, earnings and cash flows have been and may continue to be adversely impacted in 2023 and beyond by the following:
•unfavorable changes in our product mix, including the launch of new products, which may carry lower margin profiles relative to existing products, increased sales to strategic QSR customers, generally carrying a lower selling price per pound as a percentage of our “fresh” platform,total sales, and ready-to-heat formats (merchandisedchanging demand for our core products;
•continued weak demand and its resultant impact on our sales due to slower category growth, particularly for refrigerated plant-based meat, unfavorable changes in consumers’ perceptions about the health attributes of plant-based meats and increased competitive activity;
•deceleration of the adoption of plant-based meat across Europe and our ability to successfully launch extended shelf-life products, which could negatively impact our ability to expand distribution of our 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, beans and other non-animal meat protein sources;
•negative impacts on capacity utilization as a result of lower than anticipated revenues, which have in the freezer),past and could in the future give rise to increased costs per unit, underutilization fees and termination fees and other costs to exit certain supply chain arrangements and product lines, and/or the write-down or write-off of certain equipment, driving less leverage on fixed costs and delaying the speed at which cost savings initiatives positively impact our financial results;
•changes in forecasted demand, including for our core products—namely Beyond Burger, Beyond Beef, and Beyond Sausage—but also Beyond Meat Jerky, among others;
•the timing, impact and success of restructuring certain contracts and operating activities related to Beyond Meat Jerky and our assumption of distribution responsibilities for Beyond Meat Jerky;
•managing inventory levels, including sales to liquidation channels and the level of inventory reserves;
•changes in our pricing strategy, including actions intended to improve our price competitiveness relative to competing products or to improve profitability;
•increased unit cost of goods sold due to lower production volumes in response to weaker demand, which has and may continue in the future to adversely impact coverage of fixed production costs within our manufacturing facilities;
•increased unit cost of goods due to input cost inflation, including higher transportation, raw materials, energy, labor and supply chain costs;
•increased promotional programs and trade discounts or a failure or reduction in the efficacy of such programs to our retail and foodservice customers, including to bolster support for our core products, and shifts in product and channel mix resulting in negative impacts on our gross margins;
•potential disruption to our supply chain generally caused by distribution and other logistical issues, including the impact of cyber incidents at suppliers and vendors; and
•labor needs at the Company, as well as in the supply chain and at customers.
To further reduce operating expenses, in November 2023, we referannounced that we were initiating a review of our global operations, narrowing our commercial focus to ascertain growth opportunities, and accelerating activities that prioritize gross margin expansion and cash generation. These efforts may include the potential exit of select product lines; changes to our “frozen” platform.pricing architecture within certain channels; accelerated, cash-accretive inventory reduction initiatives; further optimization of our manufacturing capacity and real estate footprint; and a review and potential restructuring of our operations in China.
On May 6, 2019, we completed our initial public offering (“IPO”) of common stock, in which we sold 11,068,750 shares, including 1,443,750 shares pursuantSubsequent to the underwriters’ over-allotment option. The shares began tradingquarter ended September 30, 2023, on November 1, 2023, our board of directors approved a plan to reduce our workforce by approximately 65 employees, representing approximately 19% of our global non-production workforce (or approximately 8% of our total global workforce). We may not be able to fully realize the Nasdaq Global Select Marketcost 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 improve our cost structure could have long-term adverse effects on May 2, 2019. The shares were sold at an IPO priceour business, and we may not realize the operational or financial benefits from such actions, including achieving and/or sustaining our cash flow positive operations.”
Environmental, Social and Governance
As a disruptive leader in the food industry, we have established ourselves as a leading producer of $25.00 per share for net proceedsplant-based meat products that deliver a reduced environmental footprint and mitigate the social and welfare issues associated with the conventional production and consumption of approximately $252.5 million, after deducting underwriting discountsanimal protein. In order to continue that work and commissionsposition ourselves as a leader in the integration of $19.4 millionenvironmental and estimated offering expenses of approximately $4.8 million payable by us. Upon the closingsocial change, we have committed to developing a comprehensive ESG program. As part of the IPO, all outstanding sharesdevelopment of our convertible preferred stock automatically converted into 41,562,111 sharesESG program, we have conducted a materiality analysis to determine which ESG issues are relevant to our business (the “ESG Materiality Analysis”). The term “materiality analysis” is common in the discussion of common stocksuch assessments; however, 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. While 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 priority topics in our ESG Materiality Analysis, our discussion of these and other ESG matters herein or elsewhere may include information that is not necessarily “material” for SEC reporting purposes, and is informed by various ESG standards and frameworks (including standards for the measurement of underlying data), and the interests of various stakeholders. Much of this information is subject to assumptions, estimates or third-party information that is still evolving and subject to change. For example, our disclosures based on a one-for-one basis,any standards may change due to revisions in framework requirements, availability of information, changes in our business or applicable government policies, or other factors, some of which may be beyond our control. We continue to work on leveraging the ESG Materiality Analysis to inform our strategy and warrants exercisable for convertible preferred stock were automatically converted into warrants exercisable for 160,767 shares of common stock.actions under our commitment to promoting responsible and sustainable business practices within our organization.
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 on January 1 and ends on December 31. As a result, our first and fourth fiscal quarters may have more or fewer days included than a traditional 91-day fiscal quarter.
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 including The Beyond Burger, Beyond Sausage and other plant-based meat products to our customers which includeacross mainstream grocery, mass merchandiser, club store and natural retailers, as well asretailer channels, and various food-away-from-home channels, including restaurants, and other foodservice outlets and schools, mainly in the United States.
States and the EU.
We have experienced substantial growth inpresent our net revenues by geography and distribution channel as follows:
| | | | | | | | |
| Distribution Channel | | Description |
| U.S. Retail | | Net revenues from retail sales to the U.S. market and, sales to the Planet Partnership, LLC (“TPP”), our joint venture with PepsiCo, Inc.(1) |
| 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, including Canada |
| International Foodservice | | Net revenues from restaurant and foodservice sales to international markets, including Canada |
_____________
(1)There were no net revenues associated with Beyond Meat Jerky sold to TPP in the past three years. months ended September 30, 2023 as we continued the process of restructuring certain contracts and operating activities related to Beyond Meat Jerky in anticipation of assumption of distribution responsibilities for the product line starting in the fourth quarter of 2023.
The following factors and trends in our business have driven net revenue growth over this periodprior periods and are expected to be key drivers of our net revenue growth forover time, subject to the foreseeable future:challenges discussed above:
•increased penetration across our retail channel, including mainstream grocery, mass merchandiser, club store and natural retailer customers,channels, and our restaurant and foodservice channel, including restaurants, foodservice outlets and schools;
increased velocity of our fresh product sales across our channels, by which we mean that the volume of our products sold per outlet has generally increased period-over-period due to greater adoption of and demand for our products;
our continued innovation, including enhancing existing products and introducing new products that appeal to a broad range of consumers, including those who typically eat animal-based meat;
impact of marketing efforts as we continue to build our brand and drive consumer adoption of our products; and
overall market trends, including growing consumer 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 going forward:
increased production levels as we scale production to meet demand for our products across our distribution channels both domestically and internationally, including Australia, Europe, Hong Kong, Israel, South Africa, South Korea and parts of the Middle East; and
increased desire by restaurant and foodservice establishments, including large Full Service Restaurant and/or global QSR customers, to add plant-based products to their menus and to highlight these offerings.offerings;
Net revenues from sales in
•the strength and breadth of our partnerships with global QSR restaurants and retail channel increased by 110.8% in the three months ended March 30, 2019 to $19.6 million from $9.3 million in the three months ended March 31, 2018. Net revenues from sales in our restaurant and foodservice channelcustomers;
•the success of our pivot to focus on sustainable long-term growth, including focusing on near-term retail and foodservice growth drivers while supporting strategic key long-term partners and opportunities, and intensifying focus on channels and geographies that are exhibiting revenue growth;
•distribution expansion, increased by 491.4% insales velocity, household penetration, repeat purchases, buying rates (amount spent per buyer) and purchase frequency across our channels, including the three months ended March 30, 2019success of promotional programs at attracting new users to $20.6 million from $3.5 million in the three months ended March 31, 2018. We expect further growth in bothplant-based meat category;
•increased international sales of our products across geographies, markets and channels as we increaseseek to expand the breadth and depth of our production capacityinternational distribution and grow our numbers of international customers;
•our operational effectiveness and ability to fulfill orders in responsefull and on time;
•our continued innovation and product commercialization, including enhancing existing products and introducing new products across our plant-based platforms that appeal to demand.a broad range of consumers, specifically those who typically eat animal-based meat;
We distribute•enhanced marketing efforts and the success thereof, as we continue to build our brand, use our portfolio and marketing to directly counter misinformation about our products internationally, using distributorsand category, amplify our value proposition around taste, health and planet, 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;
•investment in Australia, Chile, the European Union, Hong Kong, Ireland, Israel, the Middle East, New Zealand, South Korea, Taiwanin-store execution and the United Kingdom. Our international net revenuesfield resources focused on shelf availability and presentation, particularly in the three months ended March 30, 2019U.S. refrigerated meat case, to drive increased sales;
•overall market trends, including consumer awareness and March 31, 2018 were approximately 14%demand for nutritious, convenient and 1%, respectively,high protein plant-based foods; and
•localized production and third-party partnerships to improve our cost of production and increase the availability, accessibility and speed with which we can get our net revenues. All of our long-lived assets are in the United States and we have no long-lived assets in any international locations. Net revenues from salesproducts to the Canadian market are included with net revenues from sales to the United States market.
Over the next few years, the main driver of growth in our net revenues is expected to be sales of our fresh products, primarily The Beyond Burger, in both our retail channel and our restaurant and foodservice channel predominantly in the United States, as well ascustomers internationally. We also expect net revenues and gross margin to benefit from increased sales of our fresh products due to the higher net selling price per pound of our fresh platform products compared to our frozen platform products.
As we seek to continue to rapidly grow our net revenues, we continue to face several challenges. In 2017, continuing into 2018,challenges, including prolonged, weakening demand forwithin the plant-based meat category overall, broad macroeconomic headwinds, including elevated levels of inflation, rising interest rates, waning consumer confidence and recessionary concerns, adverse changes in consumers’ perceptions about the health attributes of our products, exceededincreased competitive activity in the plant-based meat category, and global events such as the war in Ukraine and the escalating conflict in Israel, Gaza and surrounding areas and their potential impact on availability of raw materials and/or distribution of our expectations and production capacity, significantly constraining our net revenue growth relative to our total demand opportunity. While we have significantly expanded our production capacity to address production shortfall, we may experience a lag in production relative to customer demand if our growth rate exceeds our expectations.
products.
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 and in response to changing consumer and customer behavior and competitive activity 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 $4.5 million and $4.6 million as of September 30, 2023 and December 31, 2022, respectively. We continue to face and expect to continue facing competition across all channels, especially if consumers continue to trade down among proteins in the context
of significant inflationary pressure. In response, we anticipate thatproviding heavier discounting and promotions on some of our products from time to time. Although these promotional activities couldactions are intended to build brand awareness and increase consumer trials of our products, these actions may not be successful and they have had, and are likely to continue to have, a negative impact on our net revenues, gross margins and that changes in such activities could impactprofitability, 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 has varied and will vary in the future, from period to period depending on the volume, and mix of our products sold, particularly between products in our fresh and frozen platforms,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 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. Disruptions in our supply chain could affect customer demand, orders that may not materialize due to delayed deliveries and subsequent lost sales that we may not be able to recover in full, or at all.
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 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 U.S. summer grilling season. In 2023, 2022 and 2021, net revenues during the second quarter were 11%, 34% and 38% higher than the first quarter, respectively. While we expected to continue to see seasonality effects in 2023, as compared to 2022 and 2021, we saw more muted effects of seasonality in the third quarter of 2023 as compared to the prior-year period and the second quarter of 2023, primarily reflecting weak category demand. In general, any historical effects of seasonality have been more pronounced within our U.S. 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 heightened uncertainty from recessionary and inflationary pressures, prolonged weakness in the plant-based meat category, 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 and Gross Margin
Gross profit consists of our net revenues less cost of goods sold. Gross margin is gross profit expressed as a percentage of our net revenues. Our cost of goods sold primarily consists of the cost of raw materials including ingredients and ingredients for our products,packaging, co-manufacturing fees, direct and indirect labor and certain supply costs, co-manufacturing fees, in-boundinbound 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 order to keep pace with demand, we had to very quickly scale productionproducts, and we have not always been able to meet all demand for our products. As a result, we have had to quickly expand our sources of supply for our core protein inputs such as pea protein. Our growth has also significantly increased facilityinventory write-offs and warehouse utilization rates. We intend to continue to increase our production capabilities at our two in-house manufacturing facilities in Columbia, Missouri. As a result, we expectreserves. Under certain circumstances, our cost of goods sold may also include underutilization and/or termination fees associated with our co-manufacturing agreements. Gross profit and gross margin in the three and nine months ended September 30, 2023 as compared to increasethe prior-year periods were positively impacted by lower manufacturing costs including lower depreciation expense resulting from a change in absolute dollarsthe estimated useful lives of certain of our large manufacturing equipment. See Note 6, Property, Plant and Equipment, to supportthe Notes to Unaudited Condensed Consolidated Financial Statements, included elsewhere in this report.
Subject to the recessionary and inflationary pressures, competition, prolonged weakness in the plant-based meat category and other factors impacting our growth. However, we expect such expenses to decrease as a percentage of net revenues over time asbusiness, which are discussed above, we continue to expect that long-term gross profit and gross margin improvements will be delivered primarily through:
•implementation of lean value streams across our beef, pork and poultry platforms;
•reviewing and adjusting our pricing architecture within certain channels;
•exiting select product lines in order to eliminate margin-dilutive products or to streamline our supply chain operations;
•improved volume leverage and throughput;
•reduced manufacturing conversion costs driven in part by network consolidation and optimization of our production network;
•greater internalization and geographic localization of our manufacturing footprint;
•finished goods, materials and packaging input cost reductions and scale our business.of purchasing;
Gross margin improved by 10.7 points to 26.8% in the three months ended March 30, 2019 from 16.1% in the three months ended March 31, 2018. Gross margin benefited from an increase in the amount of product sold, improved•end-to-end production efficiencies and fromprocesses across a greater proportion of revenues fromour manufacturing network;
•scale-driven efficiencies in procurement and fixed cost absorption;
•product and process innovations and reformulations; and
•improved supply chain logistics and distribution costs.
Gross margin improvement may, however, continue to be negatively impacted by reduced capacity utilization if demand for our products continues to decline, investments in our fresh platformproduction infrastructure across the U.S., EU and China in advance of anticipated demand which have a higher net selling price per pound. As we continuemay not materialize within the expected timeframe, investing in production personnel, partnerships and product pipeline, aggressive pricing strategies and increased discounting, increases in inventory reserves, write-down or write-off of obsolete inventory and potentially increased sales to expand productionliquidation channels at lower prices, changes in our product and are ablecustomer mix, expansion into new geographies and markets where cost and pricing structures may differ from our existing markets, and underutilization fees, termination fees and other costs to increase manufacturing efficiencyexit certain supply chain arrangements and leverageproduct lines. Gross margin improvement may also be negatively impacted by the costimpact of our fixed productioninflation, increasing labor costs, materials costs and staff costs, we expect to substantially increase our gross margin. We also expect to continue to increase gross margin through ingredient cost savings achieved through scale of purchasing and through expanding our co-manufacturing network and negotiating lower tolling fees.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, depreciation and share-based compensation.amortization expenses on research and development assets, and facility lease costs. 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 substantial amounts in research and development over time, as most recently evidenced in the build-out of our state-of-the-art Manhattan Beach Project Innovation Center. Researchresearch and development and innovation are core elements of our business strategy, asand we believe they represent a critical competitive advantage for us. We believe that we need to continue to rapidly innovate in order to be able to continue to capture a larger market share of consumers who typically eat animal-based meats. We have decreased our research and development expenses year-to-date and expect thesetotal research and development expenses to increase somewhat in absolute dollars, but2023 to decrease from the levels in 2022 primarily as a percentageresult of net revenuesthe reduction-in-force implemented in October 2022 and as we continuefocus on reducing and optimizing operating expenses more broadly. Given our intention to scale production.reduce overall operating expenses and cash expenditures, in February 2023, we terminated the lease of our Commerce, California commercialization center.
SG&A Expenses
SG&A expenses consist primarily of selling, marketing selling and administrative expenses, including personnel and related expenses, share-based compensation, outbound shipping and handling costs, non-manufacturing rentlease expense, depreciation and amortization expense on non-manufacturing and non-research and development assets, consulting fees and other miscellaneousnon-production operating items.expenses. Marketing and selling
expenses include advertising costs, share-based compensation awards to brand ambassadors, costs associated with consumer promotions,
product donations, product samples and sales aids incurred to acquire new customers, retain existing customers and build our brand awareness. Administrative expenses include the expenses related to management, accounting, legal, IT and other office functions. We expecthave decreased our SG&A expenses year-to-date and expect total SG&A expenses in 2023 to increasedecrease from the levels in absolute dollars2022, as a result of the reduction-in-force implemented in October 2022 and as we increasefocus on reducing and optimizing operating expenses more broadly, including as part of the implementation of lean value streams across our domesticbeef, pork and international expansion effortspoultry platforms.
Reduction-in-Force
On November 1, 2023, our board of directors approved a plan to meetreduce our product demandworkforce by approximately 65 employees, representing approximately 19% of our global non-production workforce (or approximately 8% of our total global workforce). This decision was based on cost-reduction initiatives intended to reduce operating expenses.
We currently estimate that we will incur one-time cash charges of approximately $2.0 million to $2.5 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 2023, and that the reduction-in-force will be substantially complete by the end of 2023, subject to local law and consultation requirements, which may extend the process beyond the end of 2023 in certain countries. The charges we expect to incur costs relatedare subject to our status as a public company.assumptions, including local law requirements, and actual charges may differ from the estimate disclosed above.
Our selling and marketing expenseIn aggregate, in 2024, the reduction-in-force, combined with the elimination of certain open positions, is expected to increase, both through a greater focus on marketingresult in approximately $9.5 million to $10.5 million in cash operating expense savings, and through additionsan additional approximately $1.0 million to our sales organizations. We expect$2.0 million in non-cash savings related to significantly expand our marketing efforts to achieve greater brand awareness, attract new customers and increase market penetration. Wepreviously granted, unvested stock-based compensation which would have historically had a very small sales force, with only nine full-time sales employees as of December 31, 2017 growing to 22 full-time sales employees as of March 30, 2019. As we continue to grow, we expect to expand our sales force to address additional opportunities, which could substantially increase our selling expense. Our administrative expenses are expected to increase as a public company with increased personnel costvested in accounting, IT and compliance-related expenses.2024.
Restructuring Expenses
In May 2017, management approved a plan to terminate an exclusive supply agreement with one of our co-manufacturers. On October 18, 2022, the parties entered into a confidential written settlement agreement and mutual release in connection with this matter. See “—Results of Operations—Three Months Ended March 30, 2019 Compared to Three Months ended March 31, 2018—Note 3, Restructuring Expenses” for a discussion of these expenses. Other, Net
Other, net includes expense primarily associated with the remeasurement of our preferred stock warrant liability and common stock warrant liability prior, to the IPO. On May 6, 2019, upon completion of the IPO, the warrants exercisable for convertible preferred stock were automatically converted into warrants exercisable for common stock. SubsequentNotes to the closing of the IPO, all outstanding warrants to purchase shares of common stock were exercised by surrendering shares of common stock towards the exercise price.Unaudited Condensed Consolidated Financial Statements included elsewhere in this report.
Loss from Operations
Loss from operations in the first quarter of 2019 was $5.3 million compared to a loss of $5.6 million in the first quarter of the prior year. This improvement was driven entirely by the year-over-year increase in gross profit, partially offset by higher operating expenses as the Company continues to invest in its internal research and development and marketing capabilities and incur higher absolute costs to support its expanded manufacturing and supply chain operations.
Net Loss
Net loss was $6.6 million in the first quarter of 2019 compared to a net loss of $5.7 million in the prior-year period. The expanded net loss was primarily the result of higher operating expenses, higher interest expense as well as an increase in other non-operating expenses, a majority of which were related to mark-to-market adjustments on outstanding warrants, partially offset by the increase in gross profit.
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 |
| (in thousands) | | September 30,
2023 | | October 1,
2022 | | September 30,
2023 | | October 1,
2022 |
| Net revenues | | $ | 75,312 | | | $ | 82,500 | | | $ | 269,697 | | | $ | 338,995 | |
| Cost of goods sold | | 82,566 | | | 97,340 | | | 268,493 | | | 359,807 | |
| Gross (loss) profit | | (7,254) | | | (14,840) | | | 1,204 | | | (20,812) | |
| Research and development expenses | | 9,118 | | | 13,413 | | | 30,323 | | | 49,293 | |
| Selling, general and administrative expenses | | 53,252 | | | 54,495 | | | 152,607 | | | 192,624 | |
| Restructuring expenses | | (4) | | | 6,993 | | | (631) | | | 14,321 | |
| Total operating expenses | | 62,366 | | | 74,901 | | | 182,299 | | | 256,238 | |
| Loss from operations | | $ | (69,620) | | | $ | (89,741) | | | $ | (181,095) | | | $ | (277,050) | |
|
| | | | | | | | |
| | | Three Months Ended |
| (in thousands) | | March 30,
2019 | | March 31,
2018 |
| Net revenues | | $ | 40,206 |
| | $ | 12,776 |
|
| Cost of goods sold | | 29,435 |
| | 10,719 |
|
| Gross profit | | 10,771 |
| | 2,057 |
|
| Research and development expenses | | 4,498 |
| | 1,605 |
|
| Selling, general and administrative expenses | | 11,177 |
| | 5,737 |
|
| Restructuring expenses | | 394 |
| | 294 |
|
| Total operating expenses | | 16,069 |
| | 7,636 |
|
| Loss from operations | | $ | (5,298 | ) | | $ | (5,579 | ) |
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 | | Three Months Ended | | Nine Months Ended |
| | | March 30,
2019 | | March 31,
2018 | | September 30,
2023 | | October 1,
2022 | | September 30,
2023 | | October 1,
2022 |
| Net revenues | | 100.0 | % | | 100.0 | % | Net revenues | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % |
| Cost of goods sold | | 73.2 |
| | 83.9 |
| Cost of goods sold | | 109.6 | | | 118.0 | | | 99.6 | | | 106.1 | |
| Gross profit | | 26.8 |
| | 16.1 |
| |
| Gross (loss) profit | | Gross (loss) profit | | (9.6) | % | | (18.0) | % | | 0.4 | % | | (6.1) | % |
| Research and development expenses | | 11.2 |
| | 12.6 |
| Research and development expenses | | 12.1 | | | 16.3 | | | 11.2 | | | 14.5 | |
| Selling, general and administrative expenses | | 27.8 |
| | 44.9 |
| Selling, general and administrative expenses | | 70.7 | | | 66.0 | | | 56.6 | | | 56.8 | |
| Restructuring expenses | | 1.0 |
| | 2.3 |
| Restructuring expenses | | — | | | 8.5 | | | (0.2) | | | 4.3 | |
| Total operating expenses | | 40.0 |
| | 59.8 |
| Total operating expenses | | 82.8 | % | | 90.8 | % | | 67.6 | % | | 75.6 | % |
| Loss from operations | | (13.2 | )% | | (43.7 | )% | Loss from operations | | (92.4) | % | | (108.8) | % | | (67.2) | % | | (81.7) | % |
Three and Nine Months Ended MarchSeptember 30, 20192023 Compared to Three and Nine Months Ended March 31, 2018October 1, 2022 (unaudited)
Net Revenues
|
| | | | | | | | | | | | | | |
| | Three Months Ended | | Change |
| (in thousands) | March 30,
2019 | | March 31,
2018 | | Amount | | Percentage |
| Net revenues: | | | | | | | |
| Fresh Platform | $ | 38,806 |
| | $ | 9,596 |
| | $ | 29,210 |
| | 304.4 | % |
| Frozen Platform | 4,512 |
| | 4,748 |
| | (236 | ) | | (5.0 | )% |
| Less: Discounts | (3,112 | ) | | (1,568 | ) | | (1,544 | ) | | 98.5 | % |
| Net revenues | $ | 40,206 |
| | $ | 12,776 |
| | $ | 27,430 |
| | 214.7 | % |
|
| | | | | | | | | | | | | | |
| | Three Months Ended | | Change |
| (in thousands) | March 30,
2019 | | March 31,
2018 | | Amount | | Percentage |
| Net revenues: | | | | | | | |
| Retail | $ | 19,579 |
| | $ | 9,288 |
| | $ | 10,291 |
| | 110.8 | % |
| Restaurant and Foodservice | 20,627 |
| | 3,488 |
| | 17,139 |
| | 491.4 | % |
| Net revenues | $ | 40,206 |
| | $ | 12,776 |
| | $ | 27,430 |
| | 214.7 | % |
NetThe following table presents our net revenues increased by $27.4 million, or 214.7%,channel in the three months ended MarchSeptember 30, 20192023 as compared to the prior-year period:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Change |
| (in thousands) | | September 30,
2023 | | October 1,
2022 | | Amount | | % |
| U.S.: | | | | | | | | |
| Retail | | $ | 30,518 | | | $ | 46,177 | | | $ | (15,659) | | | (33.9) | % |
| Foodservice | | 12,535 | | | 15,994 | | | (3,459) | | | (21.6) | % |
| U.S. net revenues | | 43,053 | | | 62,171 | | | (19,118) | | | (30.8) | % |
| International: | | | | | | | | |
| Retail | | 14,153 | | | 10,195 | | | 3,958 | | | 38.8 | % |
| Foodservice | | 18,106 | | | 10,134 | | | 7,972 | | | 78.7 | % |
| International net revenues | | 32,259 | | | 20,329 | | | 11,930 | | | 58.7 | % |
| | | | | | | | |
| Net revenues | | $ | 75,312 | | | $ | 82,500 | | | $ | (7,188) | | | (8.7) | % |
Net revenues in the three months ended September 30, 2023 decreased $7.2 million, or 8.7%, as compared to the prior-year period, driven by an 11.6% decrease in net revenue per pound, partially offset by a 3.5% increase in volume of products sold. The decrease in net revenue per pound was primarily driven by increased trade discounts and changes in product sales mix, partially offset by favorable changes in foreign currency exchange rates. The increase in volume of products sold was primarily driven by sales to international retail and foodservice channels, partially offset by a decrease in volume of products sold in U.S. retail and foodservice channels due to weak category demand.
Net revenues from U.S. retail sales in the three months ended September 30, 2023 decreased $15.7 million, or 33.9%, as compared to the prior-year period, primarily due to strong growthan 18.8% decrease in sales volumesvolume of products sold, primarily reflecting weak category demand, and an 18.6% decrease in our fresh platform across both ournet revenue per pound, primarily resulting from higher trade discounts, changes in pricing and changes in product sales mix. By product, the decrease in U.S. retail and our restaurant and foodservice channels,channel net revenues was primarily driven by expansion in the numberreduced sales of retailBeyond Burger, Beyond Meat Jerky, Beyond Sausage and foodservice points of distribution, including new strategic customers, and greater demand from our existing customers,Beyond Breakfast Sausage, partially offset by a decrease in net revenues from the frozen platform. We discontinued our frozen chicken strips product line during the first quarter of 2019, causing a decline in frozen product revenues consistent with our shift to concentrate more on our fresh products platform.
Revenues from sales of Beyond Steak and chicken products, in our fresh platform increased $29.2 million, or 304.4%, primarily due to increases in sales of Theincluding Beyond BurgerChicken Tenders, Beyond Chicken Nuggets and Beyond Sausage. Net revenues from retail sales increased $10.3 million, or 110.8%, primarily due to increase in sales of The Beyond Burger.Popcorn Chicken. Net revenues from sales through our restaurant and foodservice channel increased $17.1 million, or 491.4%, primarily due to increases in sales of The Beyond Burger, which was being served in approximately 12,000 restaurant and foodservice outlets as of April 22, 2019, and due to increased sales of Beyond Sausage.
The following tables present volume of our products soldMeat Jerky to TPP were $4.5 million in pounds:the three
|
| | | | | | | | | | | |
| | Three Months Ended | | Change |
| (in thousands) | March 30,
2019 | | March 31,
2018 | | Amount | | Percentage |
| Retail: | | | | | | | |
| Fresh Platform | 2,627 |
| | 860 |
| | 1,767 |
| | 205.5 | % |
| Frozen Platform | 599 |
| | 761 |
| | (162 | ) | | (21.3 | ) |
| Total | 3,226 |
| | 1,621 |
| | 1,605 |
| | 99.0 | % |
|
| | | | | | | | | | | |
| | Three Months Ended | | Change |
| (in thousands) | March 30,
2019 | | March 31,
2018 | | Amount | | Percentage |
| Restaurant and Foodservice: | | | | | | | |
| Fresh Platform | 3,296 |
| | 477 |
| | 2,819 |
| | 591.0 | % |
| Frozen Platform | 316 |
| | 174 |
| | 142 |
| | 81.6 |
|
| Total | 3,612 |
| | 651 |
| | 2,961 |
| | 454.8 | % |
Cost of Goods Sold
|
| | | | | | | | | | | | | | |
| | Three Months Ended | | Change |
| (in thousands) | March 30,
2019 | | March 31,
2018 | | Amount | | Percentage |
| Cost of goods sold | $ | 29,435 |
| | $ | 10,719 |
| | $ | 18,716 |
| | 174.6 | % |
Total cost of goodsmonths ended October 1, 2022. There were no net revenues associated with Beyond Meat Jerky sold increased by $18.7 million, or 174.6%,to TPP in the three months ended MarchSeptember 30, 20192023 as we continued the process of restructuring certain contracts and operating activities related to Beyond Meat Jerky in anticipation of assumption of distribution responsibilities for the product line starting in the fourth quarter of 2023. Beyond Meat branded products were available at approximately 79,000 U.S. retail outlets as of September 2023, inclusive of approximately 46,000 U.S. retail outlets unique to Beyond Meat Jerky.
Net revenues from U.S. foodservice sales in the three months ended September 30, 2023 decreased $3.5 million, or 21.6%, as compared to the prior-year period, primarily due to a 37.7% decrease in volume of products sold, primarily reflecting the cycling of sales to a large QSR customer for a limited time offering in the year-ago period which did not repeat in the third quarter of 2023, partially offset by a 26.0% increase in net revenue per pound, primarily due to changes in product sales mix. By product, the decrease in U.S. foodservice channel net revenues was primarily due to decreased sales of certain chicken products, including those sold to a large QSR customer in the year-ago period, partially offset by increased sales of Beyond Burger as compared to the prior-year period. Beyond Meat branded products were available at approximately 42,000 U.S. foodservice outlets as of September 2023.
Net revenues from international retail sales in the three months ended September 30, 2023 increased $4.0 million, or 38.8%, as compared to the year-ago-period, primarily due to a 42.8% increase in volume of products sold, primarily reflecting strong sales from new product introductions and the lapping of a weak year-ago comparison, partially offset by a 2.8% decrease in net revenue per pound. The decrease in net revenue per pound was primarily due to higher trade discounts and changes in product sales mix, partially offset by favorable changes in foreign currency exchange rates. By product, the increase in international retail channel net revenues was primarily due to increased sales of Beyond Burger and chicken products including Beyond Chicken Tenders. Beyond Meat branded products were available at approximately 36,000 international retail outlets as of September 2023.
Net revenues from international foodservice sales in the three months ended September 30, 2023 increased $8.0 million, or 78.7%, as compared to the year-ago period, primarily due to a 90.9% increase in volume of products sold, primarily reflecting strong sales to a large QSR customer in the EU, partially offset by a 6.3% decrease in net revenue per pound. The decrease in net revenue per pound was primarily due to higher trade discounts and changes in pricing, partially offset by favorable changes in foreign currency exchange rates. By product, the increase in international foodservice channel net revenues was primarily due to the increase in sales of chicken products, including to a large QSR customer, and increased sales of Beyond Burger. Beyond Meat branded products were available at approximately 26,000 international foodservice outlets as of September 2023.
The following table presents our net revenues by channel in the nine months ended September 30, 2023 as compared to the prior-year period:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended | | Change |
| (in thousands) | | September 30,
2023 | | October 1,
2022 | | Amount | | % |
| U.S.: | | | | | | | | |
| Retail | | $ | 123,167 | | | $ | 193,298 | | | $ | (70,131) | | | (36.3) | % |
| Foodservice | | 39,974 | | | 54,876 | | | (14,902) | | | (27.2) | % |
| U.S. net revenues | | 163,141 | | | 248,174 | | | (85,033) | | | (34.3) | % |
| International: | | | | | | | | |
| Retail | | 48,437 | | | 50,024 | | | (1,587) | | | (3.2) | % |
| Foodservice | | 58,119 | | | 40,797 | | | 17,322 | | | 42.5 | % |
| International net revenues | | 106,556 | | | 90,821 | | | 15,735 | | | 17.3 | % |
| | | | | | | | |
| Net revenues | | $ | 269,697 | | | $ | 338,995 | | | $ | (69,298) | | | (20.4) | % |
Net revenues in the nine months ended September 30, 2023 decreased by $69.3 million, or 20.4%, as compared to the prior-year period, driven by a 11.9% decrease in volume of products sold and a 9.7% decrease in net revenue per pound. The decrease in volume of products sold primarily reflected weak category demand and the cycling of significant sell-in of Beyond Meat Jerky to TPP in the first nine months of 2022.The decrease in net revenue per pound was primarily driven by changes in product sales mix and increased trade discounts, partially offset by increased pricing for certain items.
Net revenues from U.S. retail sales in the nine months ended September 30, 2023 decreased $70.1 million, or 36.3%, as compared to the prior-year period, primarily due to a 30.3% decrease in volume of products sold and an 8.5% decrease in net revenue per pound, primarily resulting from weak category demand, higher trade discounts and changes in product sales mix, partially offset by increased pricing for certain items. The decrease in volume of products sold was primarily due to weak category demand and the cycling of significant sell-in of Beyond Meat Jerky to TPP in the first nine months of 2022. By product, the decrease in U.S. retail channel net revenues was primarily due to reduced sales of Beyond Burger, Beyond Meat Jerky, Beyond Sausage, Beyond Breakfast Sausage, Beyond Beef Crumble and Beyond Meatballs, partially offset by increased sales of chicken products, including Beyond Chicken Tenders, Beyond Chicken Nuggets and Beyond Popcorn Chicken, and sales of Beyond Steak. Net revenues from sales of Beyond Meat Jerky to TPP were $5.3 million, including a $2.0 million non-refundable up-front fee in the nine months ended September 30, 2023, as compared to $31.1 million in the nine months ended October 1, 2022.
Net revenues from U.S. foodservice sales in the nine months ended September 30, 2023 decreased $14.9 million, or 27.2%, as compared to the prior-year period, primarily due to a 32.0% decrease in volume of products sold, partially offset by a 7.0% increase in net revenue per pound. The decrease in volume of products sold was primarily due to the lapping of sales to a large QSR customer for a limited time offering in the year-ago period which concluded in the first quarter of 2023. The increase in net revenue per pound was primarily due to changes in product sales mix, partially offset by increased trade discounts and pricing decreases. By product, the decrease in U.S. foodservice channel net revenues was primarily due to decreased sales of Beyond Burger, certain chicken products, including sales to a large QSR customer and Beyond Chicken Tenders, and Beyond Breakfast Sausage.
Net revenues from international retail sales in the nine months ended September 30, 2023 decreased $1.6 million, or 3.2%, as compared to the prior-year period, primarily due to a 0.8% decrease in volume of products sold and a 2.4% decrease in net revenue per pound. The decrease in net revenue per pound was primarily due to higher trade discounts and pricing changes, partially offset by favorable changes in foreign currency exchange rates and product sales mix. By product, the decrease in international retail channel net revenues was primarily due to decreased sales of Beyond Burger and Beyond Sausage, partially offset by increases in sales of chicken products including Beyond Chicken Tenders.
Net revenues from international foodservice sales in the nine months ended September 30, 2023 increased $17.3 million, or 42.5%, as compared to the prior-year period, primarily due to a 62.0% increase in volume of products sold, primarily driven by strong sales to a large QSR customer in the EU, partially offset by a 12.0% decrease in net revenue per pound primarily due to changes in product sales mix and higher trade discounts. By product, the increase in international foodservice channel net revenues was primarily due to increased sales of chicken products and Beyond Burger, including to large QSR customers, partially offset by decreases in sales of Beyond Sausage and Beyond Beef Crumble.
The following table presents consolidated volume of our products.products sold in pounds for the periods presented:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Change | | Nine Months Ended | | Change |
| (in thousands) | | September 30,
2023 | | October 1,
2022 | | Amount | | % | | September 30,
2023 | | October 1,
2022 | | Amount | | % |
| | | | | | | | | | | | | | | | |
| U.S.: | | | | | | | | | | | | | | | | |
| Retail | | 7,199 | | | 8,861 | | | (1,662) | | | (18.8) | % | | 26,064 | | | 37,371 | | | (11,307) | | | (30.3) | % |
| Foodservice | | 2,104 | | | 3,378 | | | (1,274) | | | (37.7) | % | | 6,866 | | | 10,095 | | | (3,229) | | | (32.0) | % |
| International: | | | | | | | | | | | | | | | | |
| Retail | | 3,375 | | | 2,364 | | | 1,011 | | | 42.8 | % | | 10,868 | | | 10,955 | | | (87) | | | (0.8) | % |
| Foodservice | | 5,317 | | | 2,785 | | | 2,532 | | | 90.9 | % | | 16,864 | | | 10,408 | | | 6,456 | | | 62.0 | % |
| Volume of products sold | | 17,995 | | | 17,388 | | | 607 | | | 3.5 | % | | 60,662 | | | 68,829 | | | (8,167) | | | (11.9) | % |
Cost of Goods Sold
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Change | | Nine Months Ended | | Change |
| (in thousands) | | September 30,
2023 | | October 1,
2022 | | Amount | | % | | September 30,
2023 | | October 1, 2022 | | Amount | | % |
| Cost of goods sold | | $ | 82,566 | | | $ | 97,340 | | | $ | (14,774) | | | (15.2) | % | | $ | 268,493 | | | $ | 359,807 | | | $ | (91,314) | | | (25.4) | % |
Cost of goods sold decreased by $14.8 million, or 15.2%, to $82.6 million, in the three months ended September 30, 2023 as compared to the prior-year period. Cost of goods sold in the three months ended September 30, 2023 decreased to 109.6% of net revenues from 118.0% of net revenues in the prior-year period primarily due to lower volume of products sold. On a per pound basis, cost of goods sold benefited from lower manufacturing costs, excluding depreciation, lower materials cost, lower depreciation and lower inventory reserves. In the three months ended September 30, 2023, depreciation expense benefited by $4.4 million as a result of a change in the estimated useful lives of certain of our large manufacturing equipment, relative to depreciation expense utilizing our previous estimated useful lives. See Note 6, Property, Plant and Equipment, to the Notes to Unaudited Condensed Consolidated Financial Statements, included elsewhere in this report. The absence of higher costs related to Beyond Meat Jerky in the three months ended September 30, 2023 as compared to the prior-year period also contributed to the decrease in cost of goods sold. Cost of goods sold decreased by $91.3 million, or 25.4%, to $268.5 million, in the nine months ended September 30, 2023 as compared to the prior-year period. Cost of goods sold in the nine months ended September 30, 2023 decreased to 99.6% of net revenues from 106.1% of net revenues in the prior-year period primarily due to lower volume of products sold. On a per pound basis, cost of goods sold benefited from lower materials costs, reduced manufacturing costs, excluding depreciation, lower logistics costs and lower inventory reserves. In the nine months ended September 30, 2023, depreciation expense benefited by $14.6 million as a result of a change in the estimated useful lives of certain of our large manufacturing equipment, relative to depreciation expense utilizing our previous estimated useful lives. See Note 6, Property, Plant and Equipment, to the Notes to Unaudited Condensed Consolidated Financial Statements, included elsewhere in this report.The reduction in costs related to Beyond Meat Jerky in the nine months ended September 30, 2023 as compared to the prior-year period also contributed to the decrease in cost of goods sold.
Gross (Loss) Profit and Gross Margin
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Change | | Nine Months Ended | | Change |
| (in thousands) | | September 30,
2023 | | October 1,
2022 | | Amount | | % | | September 30,
2023 | | October 1,
2022 | | Amount | | % |
| Gross (loss) profit | | $(7,254) | | $(14,840) | | $7,586 | | 51.1% | | $1,204 | | $(20,812) | | $22,016 | | 105.8% |
| Gross margin | | (9.6)% | | (18.0)% | | 840 bps | | N/A | | 0.4% | | (6.1)% | | 650 bps | | N/A |
|
| | | | | | | | | | | | | | |
| | Three Months Ended | | Change |
| (in thousands) | March 30,
2019 | | March 31,
2018 | | Amount | | Percentage |
| Gross profit | $ | 10,771 |
| | $ | 2,057 |
| | $ | 8,714 |
| | 423.6 | % |
| Gross margin | 26.8 | % | | 16.1 | % | | 10.7 | % | | N/A |
|
Gross profit in the three months ended MarchSeptember 30, 20192023 was $10.8a loss of $7.3 million as compared to $14.8 million in the prior-year period, an improvement of $7.6 million, or 51.1%. Negative gross profit of $2.1 millionmargin in the three months ended March 31, 2018, an improvement of $8.7 million. The improvementSeptember 30, 2023 was (9.6)% as compared to (18.0)% in the prior-year period. Gross profit and gross margin in the three months ended September 30, 2023 as compared to the prior-year period were positively impacted by lower manufacturing costs, excluding depreciation, lower materials costs, lower depreciation and lower inventory reserves per pound, partially offset by lower net revenues per pound. In the three months ended September 30, 2023, gross profit and gross margin was primarily due to an increasebenefited by $4.4 million and 5.9%, respectively, as a result of a change in the amountestimated useful lives of products sold, with resulting operating leverage,certain of our large manufacturing equipment, as compared to those same measures calculated using our previous estimated useful lives. See Note 6, Property, Plant and improved production efficiencies. The greater proportion of product revenues from our fresh platform also contributedEquipment, to the Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere in this report. Gross profit in the nine months ended September 30, 2023 was $1.2 million as compared to a loss of $20.8 million in the prior-year period, an improvement of $22.0 million, or 105.8%. Gross margin in the nine months ended September 30, 2023 increased to 0.4% from a negative gross margin dueof (6.1)% in the prior-year period. Gross profit and gross margin in the nine months ended September 30, 2023 as compared to a higher net selling pricethe prior-year period were positively impacted by lower materials costs, lower manufacturing costs, excluding depreciation, lower logistics costs and lower inventory reserves per pound, partially offset by lower net revenues per pound. In the nine months ended September 30, 2023, gross profit and gross margin benefited by $14.6 million and 5.4%, respectively, as a result of productsa change in the estimated useful lives of certain of our fresh versus frozen platform. Welarge manufacturing equipment, as compared to those same measures calculated using our previous estimated useful lives. See Note 6, Property, Plant and Equipment, to the Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere in this report. As disclosed in Note 2, Summary of Significant Accounting Policies—Shipping and Handling Costs, to the Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere in this report, we include outbound shipping and handling costs within SG&A expenses. As a result, our gross profit and gross margin may not be comparable to other entities that present all shipping and handling costs as a component of cost of goods sold.
Research and Development Expenses
| | | | Three Months Ended | | Change | | Three Months Ended | | Change | | Nine Months Ended | | Change |
| (in thousands) | March 30,
2019 | | March 31,
2018 | | Amount | | Percentage | (in thousands) | | September 30,
2023 | | October 1,
2022 | | Amount | | % | | September 30,
2023 | | October 1,
2022 | | Amount | | % |
| Research and development expenses | $ | 4,498 |
| | $ | 1,605 |
| | $ | 2,893 |
| | 180.2 | % | Research and development expenses | | $ | 9,118 | | | $ | 13,413 | | | $ | (4,295) | | | (32.0) | % | | $ | 30,323 | | | $ | 49,293 | | | $ | (18,970) | | | (38.5) | % |
Research and development expenses increased $2.9decreased $4.3 million, or 180.2%32.0%, in the three months ended MarchSeptember 30, 20192023, as compared to the prior-year period. Research and development expenses increased primarily duedecreased to 86% higher headcount, higher scale-up expenses and depreciation and amortization expense.
SG&A Expenses
|
| | | | | | | | | | | | | | |
| | Three Months Ended | | Change |
| (in thousands) | March 30,
2019 | | March 31,
2018 | | Amount | | Percentage |
| Selling, general and administrative expenses | $ | 11,177 |
| | $ | 5,737 |
| | $ | 5,440 |
| | 94.8 | % |
SG&A expenses increased by $5.4 million, or 94.8%,12.1% of net revenues in the three months ended MarchSeptember 30, 20192023 from 16.3% of net revenues in the
prior-year period primarily due to lower scale-up expenses and lower salaries and related expenses resulting from a reduction in headcount as compared to the prior-year period.
Research and development expenses decreased $19.0 million, or 38.5%, in the nine months ended September 30, 2023, as compared to the prior-year period. Research and development expenses decreased to 11.2% of net revenues in the nine months ended September 30, 2023 from 14.5% of net revenues in the prior-year period primarily due to lower scale-up expenses and lower salaries and related expenses resulting from a reduction in headcount as compared to the prior-year period.
SG&A Expenses
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Change | | Nine Months Ended | | Change |
| (in thousands) | | September 30,
2023 | | October 1,
2022 | | Amount | | % | | September 30,
2023 | | October 1,
2022 | | Amount | | % |
| Selling, general and administrative expenses | | $ | 53,252 | | | $ | 54,495 | | | $ | (1,243) | | | (2.3) | % | | $ | 152,607 | | | $ | 192,624 | | | $ | (40,017) | | | (20.8) | % |
SG&A expenses decreased $1.2 million, or 2.3%, to $53.3 million, or 70.7% of net revenues, in the three months ended September 30, 2023, from $54.5 million, or 66.0% of net revenues, in the prior-year period. The increasedecrease in SG&A expenses was primarily due to $3.0$3.9 million in lower product donation costs, $2.8 million in lower share-based compensation expense, $2.2 million in lower advertising costs, $1.0 million in lower legal costs and $0.6 million in lower outbound freight costs, partially offset by the write-off of an uncollectible note receivable in the amount of $3.8 million, $3.4 million in higher consulting fees, $0.6 million in higher non-headcount-related marketing costs other than product donation and advertising costs discussed above, and $0.5 million in higher salaries and related expenses.
SG&A expenses decreased $40.0 million, or 20.8%, to $152.6 million, or 56.6% of net revenues in the nine months ended September 30, 2023, from $192.6 million, or 56.8% of net revenues, in the prior-year period. The decrease in SG&A expenses was primarily due to a 90% increase$12.6 million decrease in salaries and related expenses resulting from lower headcount, $0.7$10.8 million in lower non-headcount-related marketing costs other than product donation and advertising costs discussed below, $5.8 million in lower product advertising costs, $5.0 million in lower share-based compensation expense, $4.7 million in lower outbound freight costs, $2.7 million in lower product donations, $2.0 million in lower legal fees, $1.6 million in lower consulting fees and $1.2 million in lower distributor commissions, partially offset by the write-off of an uncollectible note receivable in the amount of $3.8 million, $2.9 million in higher marketing service expenses, $0.7loss on sale of assets and $2.4 million in higher consulting and professional fees, $0.4 million in higher supply chain expenses, $0.3 million in higher outbound freight expenses, and $0.3 million in higher broker commissions.promotional samples expense.
Restructuring Expenses
As a result of the termination in May 2017 of an exclusive supply agreement with one of our co- manufacturers due to non-performance under the agreement, we recorded restructuring expenses of $0.4$7.0 million and $0.3$14.3 million in the three and nine months ended MarchOctober 1, 2022, respectively. In the three and nine months ended September 30, 20192023, we recorded a credit of $(4,000) and March 31, 2018,$(0.6) million in restructuring expenses, respectively, primarily driven by a reversal of certain accruals. The restructuring expenses were primarily related to legal and other expenses associated with the dispute. As of MarchSeptember 30, 20192023 and December 31, 2018,2022, there were no$0 and $0.7 million, respectively, in accrued and unpaid liabilitiesrestructuring expenses. On October 18, 2022, the parties entered into a confidential written settlement agreement and mutual release pursuant to which the parties agreed to dismiss with prejudice all claims and cross-claims asserted in the associated with this contract termination, although we continue to incur legal feescases filed in connection with our ongoing efforts to resolve this dispute.the Superior Court of the State of California for the County of Los Angeles and the United States District Court for the Central District of California. See Note 3, Restructuring, to the Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere in Part I, Item 1 of this report and Legal Proceedings in Part II, Item 1 of this report.
Loss from Operations
Loss from operations in the three months ended MarchSeptember 30, 20192023 was $69.6 million compared to $89.7 million in the prior-year period. The decrease in loss from operations in the three months ended September 30, 2023 was primarily driven by the year-over-year improvement in gross profit, reduced restructuring expenses, reduced non-production headcount expenses, primarily as a result of the reduction-in-force implemented in October 2022, lower product donation expenses, decreased scale-up expenses, lower share-based compensation expense and March 31, 2018 we recorded no income taxlower advertising costs compared to the prior-year period.
Loss from operations in the nine months ended September 30, 2023 was $181.1 million compared to $277.1 million in the prior-year period. The decrease in loss from operations in the nine months ended September 30, 2023 was primarily driven by higher gross profit, reduced non-production headcount expenses primarily as a result of the reduction-in-force implemented in October 2022, lower total marketing-related expenses including advertising and product donation costs, lower scale-up expenses, lower legal and consulting fees, lower share-based compensation expense and lower outbound freight costs included in our condensed statementsselling expenses compared to the prior-year period.
Total Other (Expense) Income, net
Total other expense, net, in the three months ended September 30, 2023 of operations. No tax benefit$0.7 million consisted primarily of $2.5 million in realized and unrealized foreign currency transaction losses and $1.0 million in interest expense from the amortization of convertible debt issuance costs, partially offset by $2.8 million in interest income. Total other expense, net, in the three months ended October 1, 2022 of $3.2 million consisted primarily of $3.9 million in realized and unrealized foreign currency transaction losses due to unfavorable changes in foreign currency 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 income, net, in the nine months ended September 30, 2023 of $1.9 million consisted primarily of $8.4 million in interest income, partially offset by $3.0 million in interest expense from the amortization of convertible debt issuance costs and $3.3 million in realized and unrealized foreign currency transaction losses due to unfavorable changes in foreign currency exchange rates of the Euro and Chinese Yuan. Total other expense, net, in the nine months ended October 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 currency 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.
Net Loss
Net loss in the three months ended September 30, 2023 was provided for$70.5 million compared to $101.7 million in the prior-year period. The reduction in net loss was primarily due to the reduction in loss from operations, the decrease in total other expense, net, and an $8.6 million decrease in losses incurred because those losses arerelated to TPP.
Net loss in the nine months ended September 30, 2023 was $183.0 million compared to $299.3 million in the prior-year period. The reduction in net loss was primarily due to the reduction in loss from operations and decrease in total other expense, net, partially offset by a full valuation allowance.$7.0 million increase in losses related to TPP.
Seasonality
Generally, we expect to experience greater demand for certain of our products during the summer grilling season. As our business continues to grow, we expect to see additional seasonality effects, with revenue growth tending to be greater in the second and third quarters of the year.
Non-GAAP Financial Measures
We use the following non-GAAP financial measures set forth below in assessing our operating performance and in our financial communications: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 substitutes 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”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, inventory losses from termination of an exclusive supply agreement with a co-manufacturer, costs of termination of an exclusive supply agreement with the same co-manufacturer, and expenses primarily associated with the conversion of our convertible notesOther, net, including interest income and remeasurement of our preferred stock warrant liabilityforeign currency transaction gains and common stock warrant liability.losses.
“Adjusted EBITDA as a % of net revenues” revenues” is defined as Adjusted EBITDA divided by net revenues.
“Pro forma basic and diluted net loss per common share” is defined as net loss divided by weighted average common shares outstanding—basic and diluted, as adjusted to reflect the conversion of all outstanding shares of convertible preferred stock into shares of common stock on a one-for-one basis and the automatic conversion of all preferred stock warrants to common stock warrants upon closing of the IPO and subsequent exercise of all common stock warrants as if the IPO was completed as of the first day of the applicable period. We believe the presentation of Pro forma basic and diluted net loss per common share allows for comparability with our expected capital structure following the IPO.
We use Adjusted EBITDA and Adjusted EBITDA as a % of net revenues because they are important measures upon which our management assesses our operating performance. We use Adjusted EBITDA and Adjusted EBITDA as a % of net revenues as key performance measures because we believe these measures facilitate operating performance comparison from period-to-period by excluding potential differences primarily caused by the impact of restructuring, asset depreciation and amortization, non-cash share-based compensation and non-operational charges including the impact to cost of goods sold and SG&A expenses related to the termination of an exclusive co-manufacturing agreement, early extinguishment of convertible notes and remeasurement of warrant liability. Because Adjusted EBITDA and Adjusted EBITDA as a % of net revenues facilitate internal comparisons of our historical operating performance on a more consistent basis, we also use those measures for our business planning purposes. In addition, we believe Adjusted EBITDA and Adjusted EBITDA as a % of net revenues are widely used by investors, securities analysts, ratings agencies and other parties in evaluating companies in our industry as a measure of our operational performance.
There are a number of limitations related to the use of Adjusted EBITDA and Adjusted EBITDA as a % of net revenues rather than net loss, which is thetheir most directly comparable GAAP measure.measures. Some of these limitations are:
•Adjusted EBITDA excludes depreciation and amortization expense and, although these are non-cash expenses, the assets being depreciated may have to be replaced in the future increasing our cash requirements;
•Adjusted EBITDA does not reflect interest expense, or the cash required to service our debt, which reduces cash available to us;
•Adjusted EBITDA does not reflect income tax payments that reduce cash available to us;
•Adjusted EBITDA does not reflect restructuring expenses that reduce cash available to us;
•Adjusted EBITDA does not reflect share-based compensation expensesexpense and therefore does not include all of our compensation costs;
•Adjusted EBITDA does not reflect otherOther, net, including interest income (expense)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.
These non-GAAP financial measures should not be considered in isolation or as a substitute for financial information provided in accordance with GAAP. These non-GAAP financial measures may not be computed in the same manner as similarly titled measures used by other companies.
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 |
| (in thousands) | | September 30,
2023 | | October 1,
2022 | | September 30,
2023 | | October 1,
2022 |
| Net loss, as reported | | $ | (70,492) | | | $ | (101,678) | | | $ | (183,034) | | | $ | (299,270) | |
| Income tax expense | | — | | | — | | | 5 | | | 21 | |
| Interest expense | | 989 | | | 1,040 | | | 2,967 | | | 3,173 | |
| Depreciation and amortization expense | | 5,779 | | | 8,435 | | | 17,707 | | | 23,255 | |
Restructuring expenses(1) | | (4) | | | 6,993 | | | (631) | | | 14,321 | |
| Share-based compensation expense | | 6,478 | | | 9,250 | | | 23,791 | | | 28,848 | |
Other, net(2)(3) | | (243) | | | 2,151 | | | (4,897) | | | 8,177 | |
| Adjusted EBITDA | | $ | (57,493) | | | $ | (73,809) | | | $ | (144,092) | | | $ | (221,475) | |
| | | | | | | | |
| Net loss as a % of net revenues | | (93.6) | % | | (123.2) | % | | (67.9) | % | | (88.3) | % |
| Adjusted EBITDA as a % of net revenues | | (76.3) | % | | (89.5) | % | | (53.4) | % | | (65.3) | % |
|
| | | | | | | | |
| | | Three Months Ended |
| (in thousands) | | March 30, 2019 | | March 31, 2018 |
| Net loss, as reported | | $ | (6,649 | ) | | $ | (5,696 | ) |
| Interest expense | | 733 |
| | 47 |
|
| Depreciation and amortization expense | | 1,905 |
| | 733 |
|
Restructuring expenses(1) | | 394 |
| | 294 |
|
| Share-based compensation expense | | 855 |
| | 260 |
|
Other, net(2) | | 618 |
| | 70 |
|
| Adjusted EBITDA | | $ | (2,144 | ) | | $ | (4,292 | ) |
| | | | | |
| Net loss as a % of net revenues | | (16.5 | )% | | (44.6 | )% |
| Adjusted EBITDA as a % of net revenues | | (5.3 | )% | | (33.6 | )% |
_____________
|
| | | | |
| (1) | Primarily comprised of legal and other expenses associated with the dispute with a co-manufacturer with whom an exclusive supply agreement was terminated in May 2017. On October 18, 2022, the parties to this dispute entered into a confidential written settlement agreement and mutual release related to this matter. In the three and nine months ended September 30, 2023, we recorded a credit of $(4,000) and $(0.6) million, respectively, in restructuring expenses, primarily driven by a reversal of certain accruals. See Note 3, Restructuring, to the Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere in this report. |
| (2) | Includes expenses primarily associated with$(2.5) million and $(3.3) million in net foreign currency transaction losses in the remeasurement of our preferred stock warrant liabilitythree and common stock warrant liability.nine months ended September 30, 2023, respectively. Includes $(3.9) million and $(10.5) million in net foreign currency transaction losses in the three and nine months ended October 1, 2022, respectively. |
| (3) | Includes $2.8 million and $8.4 million in interest income in the three and nine months ended September 30, 2023, respectively. Includes $1.5 million and $2.2 million in interest income in the three and nine months ended October 1, 2022, respectively. |
Below we have provided a reconciliation of Pro forma basic and diluted net loss per common share to the most directly comparable financial measure, net loss per common share—basic and diluted, calculated and presented in accordance with GAAP, for each of the periods presented (unaudited):
|
| | | | | | | | |
| | | Three Months Ended |
| (in thousands, except share and per share data) | | March 30, 2019 |
| | March 31, 2018 |
|
| Pro forma basic and diluted net loss per common share: | | | | |
| Numerator: | | | | |
| Net loss, as reported | | $ | (6,649 | ) | | $ | (5,696 | ) |
| | | | | |
| Denominator: | | | | |
| Weighted average common shares outstanding—basic and diluted, as reported | | 6,974,301 |
| | 5,793,801 |
|
| Add: Adjustment to reflect assumed conversion of convertible preferred stock | | 41,562,111 |
| | 39,474,156 |
|
| Add: Adjustment to reflect potential conversion of preferred stock warrants to common stock warrants and subsequent exercise of all common stock warrants | | 220,769 |
| | 160,767 |
|
| Weighted average common shares outstanding used in computing Pro forma basic and diluted net loss per common share | | 48,757,181 |
| | 45,428,724 |
|
| | | | | |
| Net loss per common share—basic and diluted, as reported | | $ | (0.95 | ) | | $ | (0.98 | ) |
| Effect of adjustments to weighted average common shares outstanding | | 0.81 |
| | 0.85 |
|
| Adjusted basic and diluted net loss per common share | | $ | (0.14 | ) | | $ | (0.13 | ) |
| | | | | |
Liquidity and Capital Resources
ATM Program
On May 10, 2023, we filed an automatically effective shelf registration statement on Form S-3 with the SEC, which allows us to sell, from time to time, and at our discretion, shares of our common stock having an aggregate offering price of up to $200.0 million pursuant to an “at the market” offering program (the “ATM Program”). We intend to use the net proceeds, if any, from sales of our common stock issued under the ATM Program for general corporate and working capital purposes. The timing of any sales and the number of shares sold, if any, will depend on a variety of factors to be determined by us.
The shares will be offered pursuant to an equity distribution agreement between us and Goldman Sachs and Co. LLC, (Goldman Sachs”) as sales agent (the “Equity Distribution Agreement”). We will pay Goldman Sachs a commission equal to 3.25% of the aggregate gross proceeds of any shares sold through Goldman Sachs pursuant to the Equity Distribution Agreement. We are not obligated to sell any shares under the Equity Distribution Agreement. As of September 30, 2023, no sales had been made under the Equity Distribution Agreement and the ATM Program’s full capacity remained available.
Convertible Senior Notes
In 2021, we issued $1.15 billion aggregate principal amount of its 0% Convertible Senior Notes due 2027 (the “Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. 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
For the remainder of 2023, our cash from operations could be affected by various risks and uncertainties, including, but not limited to, the risks detailed in Part I, Item 1A, “Risk Factors,” of our 2022 10-K and Part II, Item 1A, “Risk Factors” and “Note Regarding Forward-Looking Statements” included elsewhere in this report. In addition, inflation, rising interest rates, adverse developments affecting the financial services industry, overall economic conditions, ongoing concerns about the likelihood of a recession, lasting effects from the COVID-19 pandemic and hostilities in Eastern Europe and the Middle East have led to increased disruption and volatility in capital markets and credit markets generally, which could adversely affect our ability to access capital resources in the future and potentially harm our liquidity outlook. Our current business plan is to continue to utilize inventory management to reduce working capital. To further reduce operating expenses, we are initiating a review of our global operations, narrowing our commercial focus to certain growth opportunities, and accelerating activities that prioritize gross margin expansion and cash generation. These efforts include the potential exit of select product lines; changes to our
pricing architecture within certain channels; accelerated, cash-accretive inventory reduction initiatives; further optimization of our manufacturing capacity and real estate footprint; and a review and potential restructuring of our operations in China.
Based on our current business plan, we believe that our existing cash balances, including our anticipated cash flow from operations, 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, including through the ATM Program, or securities convertible into or exchangeable for our common stock. Such financing and other potential financings may result in dilution to stockholders, reduction in the market price of our common stock, imposition of debt covenants and repayment obligations, or other restrictions that may adversely affect our business. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. However, we may be unable to raise additional funds or enter into such other arrangements when needed, on favorable terms or at all. 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, among others, demand in the plant-based meat category and for our products; our rate of revenue growth; the results of our review of our global operations and the successful implementation of our ongoing cost-reduction initiatives; 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, including the timing and success of subleasing excess space at our Campus Headquarters; the success of, and expenses associated with, our marketing initiatives; our investment in manufacturing and facilities to optimize our manufacturing and production capacity, including underutilization fees, termination fees and exit costs; 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; variations in product selling prices and costs, the timing and success of changes to our pricing architecture within certain channels and the mix of products sold; the level of trade and promotional spending to support our products appropriately; the expenses associated with our sales force; our management of accounts receivable, inventory, accounts payable and other working capital accounts; the impact of foreign currency exchange fluctuations on our cash balances; 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.
Our operating environment continues to be affected by uncertainty related to macroeconomic issues, including ongoing, further weakened demand in the plant-based meat category, high inflation, rising interest rates, and ongoing concerns about the likelihood of a recession, among other things, all of which have had and could continue to have unforeseen impacts on our actual realized results, including our liquidity outlook. Although in the third quarter of 2023 we met our previously stated target of achieving cash flow positive operations within the second half of 2023, this outcome included the benefit of certain transitory factors which are expected to abate and, as such, we do not expect to sustain free cash flow positive operations in the fourth quarter of 2023. Our ability to make progress toward our goal of achieving sustained cash flow positive operations is dependent on a number of assumptions and uncertainties, including, without limitation, demand in the plant-based meat category and for our products; our ability to reduce costs and achieve positive gross margins; our ability to grow revenues and meet operating expense reduction targets, which may be subject to factors beyond our control; timing of capital expenditures; and our ability to monetize inventory and manage working capital.
Subsequent to the quarter ended September 30, 2023, on November 1, 2023, our board of directors approved a plan to reduce our workforce by approximately 65 employees, representing approximately 8% of our total global workforce. This decision was based on cost-reduction initiatives intended to reduce operating expenses.
We currently estimate that we will incur one-time cash charges of approximately $2.0 million to $2.5 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 2023, and that the reduction-in-force will be substantially complete by the end of 2023, subject to local law and consultation requirements, which may extend the process beyond the end of 2023 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 growth in our business. Prior to our IPO, we financedWe finance our operations through private sales of equity securities andprimarily through sales of our products. Since our inceptionproducts and through March 30, 2019, weexisting cash. We have 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 including 1,443,750 shares pursuant to the underwriters’ over-allotment option, at an IPOa public offering price of $25.00 per share and received approximately $252.5$252.4 million in net proceeds. In 2019, we completed a secondary public offering of our common stock in which we sold 250,000 shares and certain selling stockholders sold 3,487,500 shares. We have also entered intosold 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.
In 2021, we issued $1.2 billion in aggregate principal amount of Notes. See Note 7, Debt, to the credit facilities described belowNotes to Unaudited Condensed Consolidated Financial Statements included elsewhere in this report. On May 10, 2023, we filed an automatically effective shelf registration statement on Form S-3, in connection with Silicon Valley Bank (“SVB”).our ATM Program, discussed above. As of September 30, 2023, no sales had been made under the Equity Distribution Agreement and the ATM Program’s full capacity remained available. As of MarchSeptember 30, 2019,2023, we had $35.4$217.5 million in cash and cash equivalents. We believe that ourunrestricted cash and cash equivalents proceeds fromand $15.3 million in restricted cash, which was comprised of $12.6 million to secure the letter of credit to support the development and leasing of our IPO, cash flow from operating activitiesCampus Headquarters and available borrowings under our$2.7 million to secure a letter of credit facilities will be sufficient to fund our working capital and meet our anticipated capital requirements for at least the next 12 months. Our future capital requirements may vary materially from those currently planned and will depend on many factors, including the number and characteristics of any additional products or manufacturing processes we develop or acquire to serve new or existing markets; 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 involvednew third party contract manufacturer in preparing, filing, prosecuting, maintaining, defending and enforcing patent 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.
Amended and Restated Loan and Security Agreement
In June 2018, we refinanced our then existing revolving credit facility and term loan facility under a loan and security agreement with SVB (the “Amended LSA”). The Amended LSA includes a $6.0 million revolving credit facility (the “2018 Revolving Credit Facility”) and a term loan facility (the “2018 Term Loan Facility”) comprised of (i) a $10.0 million term loan advance at closing, (ii) a conditional $5.0 million term loan advance, if no event of default has occurred and is continuing through the borrowing date, and (iii) an additional conditional term loan advance of $5.0 million if no event of default has occurred and is continuing based upon a minimum level of gross profit for the trailing 12-month period. The 2018 Term Loan Facility has a floating interest rate that is equal to 4.0% above the prime rate, with interest payable monthly and principal amortizing commencing on January 1, 2020, and will mature in June 2022. Borrowings under the 2018 Revolving Credit Facility carry a variable annual interest rate of prime rate plus 0.75% to 1.25% with an additional 5% on the outstanding balances in the event of a default. The 2018 Revolving Credit Facility matures in June 2020.
The 2018 Term Loan Facility and the 2018 Revolving Credit Facility (collectively, the “SVB Credit Facilities”) contain customary negative covenants that limit our ability to, among other things, incur additional indebtedness, grant liens, make investments, repurchase stock, pay dividends, transfer assets and merge or consolidate. The SVB Credit Facilities are secured by a blanket lien on all of our personal property assets. The SVB Credit Facilities also contain customary affirmative covenants, including delivery of audited financial statements. We were in compliance with the covenants in the SVB Credit Facilities as of March 30, 2019.
As of March 30, 2019 and December 31, 2018, we had $6.0 million and $20.0 million in borrowings on the 2018 Revolving Credit Facility and 2018 Term Loan Facility, respectively, and had no availability to borrow under either of these loan facilities. In the three months ended March 30, 2019 and March 30, 2018, we incurred $0.6 million and $18,400 in interest expense related to SVB credit facilities. The interest rates on the 2018 Revolving Credit Facility and the 2018 Term Loan Facility at March 30, 2019 were 6.25% and 9.50%, respectively.
Equipment Loan Facility
In September 2018, we entered into an Equipment Loan and Security Agreement with Structural Capital Investments II, LP (“Structural Capital”) and Ocean II PLO, LLC, as administrative and collateral agent, pursuant to which Structural Capital agreed to provide an equipment loan facility to us in the amount of $5.0 million for the purpose of purchasing equipment.
We are required to pay interest on any unpaid principal amounts at a per annum rate equal to 6.25% plus the greater of 4.75% or the prime rate then in effect. Interest on each advance made to us is due and payable on the first business day of each month. We must begin repaying the aggregate principal amount of all advances we have received in equal monthly installments beginning on June 30, 2019, which may be extended for six or 18 months depending on whether we achieve certain milestones. The unpaid balance of all advances will become due on May 1, 2022. We must also pay a final payment fee of 13% of the facility commitment amount on the maturity date and such other date as the advances become due and such fee will increase by 1% if certain milestones are achieved.
The equipment loan facility has a prepayment penalty of 2% during the first two years of the term and 1% thereafter. The facility contains customary negative covenants that limit our ability to, among other things, grant liens, repurchase stock, pay dividends, transfer assets and merge or consolidate. It is secured by all equipment purchased with cash borrowed under the facility and all of our accounts, money, books, records and any cash or noncash proceeds of the foregoing. The facility also contains customary affirmative covenants, including delivery of audited financial statements. We were in compliance with the covenants contained in the facility as of March 30, 2019.
We had $5.0 million in borrowings outstanding as of March 30, 2019 and December 31, 2018 under the equipment loan facility. The interest rate on the equipment loan facility at March 30, 2019 and December 31, 2018 was 11.75% and 11.5%, respectively. For the three months ended March 30, 2019 and March 31, 2018, we recorded $0.3 million and $0, respectively, in interest expense related to the equipment loan facility.
Europe.
Cash Flows
The following table presents the major components of net cash flows fromused in and used inprovided by operating, investing and financing activities for the periods indicated.
| | | | | | | | | | | | | | |
| | Nine Months Ended |
| (in thousands) | | September 30,
2023 | | October 1,
2022 |
| Cash (used in) provided by: | | | | |
| Operating activities | | $ | (79,282) | | | $ | (270,347) | |
| Investing activities | | $ | (9,340) | | | $ | (70,704) | |
| Financing activities | | $ | (388) | | | $ | 385 | |
|
| | | | | | | | |
| | | Three Months Ended |
| (in thousands) | | March 31,
2019 | | March 31,
2018 |
| Cash used in: | | | | |
| Operating activities | | $ | (13,280 | ) | | $ | (4,888 | ) |
| Investing activities | | $ | (4,993 | ) | | $ | (3,732 | ) |
| Financing activities | | $ | (589 | ) | | $ | (1,368 | ) |
Net Cash Used in Operating Activities
In threethe nine months ended MarchSeptember 30, 2019,2023, we incurred a net loss of $6.6$183.0 million, which was the primary reason for net cash used in operating activities of $13.3$79.3 million. Net cash used in operating activities also included $10.2 million in net cash outflowsinflows from changes in our operating assets and liabilities were $39.0 million, primarily due to a decrease in inventory purchases, an increase in accounts payable and a decrease in prepaid expenses and current assets, partially offset by $3.6cash outflows due to an increase in prepaid lease costs related to our Campus Headquarters, a decrease in operating lease liabilities, a decrease in accrued expenses and other current liabilities, and an increase in accounts receivable. Net loss in the nine months ended September 30, 2023 included $64.7 million in non-cash expenses primarily comprised of share-based compensation expense, depreciation and amortization expense, share-based compensation expense,our portion of the losses in TPP, loss on sales of fixed assets and change in warrant liability.the write-off of an uncollectible note receivable.
In threethe nine months ended March 31, 2018,October 1, 2022, we incurred a net loss of $5.7$299.3 million, which was the primary reason for net cash used in operating activities of $4.9$270.3 million. Net cash used in operating activities also included $0.3 million in 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 $1.1the decrease in accounts receivable and prepaid expenses and other assets. Net loss in the nine months ended October 1, 2022 included $81.4 million in non-cash expenses primarily comprised of share-based compensation expense, depreciation and amortization expense, share-based compensation expense,our portion of the losses in TPP and change in warrant liability.unrealized losses on foreign currency transactions. Depreciation and amortization expense was $1.9$17.7 million and $0.7$23.3 million in threethe nine months ended MarchSeptember 30, 20192023 and March 31, 2018,October 1, 2022, respectively. We anticipate our depreciation and amortization expense will be approximately $2.1 million per quarter in 2019 based on our existing fixed assets and anticipated capital expenditures as we expand our production capabilities to meet increased demand for our products.
Net Cash Used in Investing Activities
Net cash used in investing activities primarily relates to capital expenditures to support our growthmaintenance and investmentinvestments in property, plant and equipment.equipment and investment in TPP, offset by proceeds from sales of certain fixed assets.
In the threenine months ended MarchSeptember 30, 2019,2023, net cash used in investing activities was $5.0$9.3 million and consisted of cash outflows for the purchases of property, plant and equipment, primarily for manufacturing facility improvementsdriven by investments in production equipment and manufacturing equipment, assets purchased for sale to co-manufacturersfacilities, and security deposits.$3.3 million in investment in TPP that was previously committed, partially offset by $2.5 million in proceeds from sales of certain fixed assets.
In the threenine months ended March 31, 2018,October 1, 2022, net cash used in investing activities was $3.7$70.7 million and consisted of $60.0 million in cash outflows for the purchasepurchases of property, plant and equipment, primarily for manufacturing facility improvementsdriven by investments in facilities and manufacturing equipment.
In 2019, we anticipate spending approximately $17.0production equipment and $10.0 million in capital expenditures as we scale our production capacity, including expenditurespayments for additional machinery and equipment, as well as investment facilities and expenditures to replace normal wear and tear of machinery and equipment. in TPP.
Net Cash Used inProvided by Financing Activities
In the threenine months ended MarchSeptember 30, 2019,2023, net cash used in financing activities was $0.6$0.4 million, primarily as a result of $0.9from $0.4 million in payments of deferred offering costs associated with the IPO,minimum withholding taxes on net share settlement of equity awards and $0.2 million in payments under finance lease obligations, partially offset by $0.4$0.2 million in proceeds from stock option exercises.
In the threenine months ended March 31, 2018,October 1, 2022, net cash used inprovided by financing activities was $1.4$0.4 million, primarily as a result of $2.6from $1.6 million in repayments on our revolving credit line and term loan,proceeds from stock option exercises, partially offset by $1.2$1.1 million in payments of minimum withholding taxes on net proceeds from the issuanceshare settlement of our Series G preferred stock.equity awards and payments under finance lease obligations.
As of March 30, 2019, we had borrowed the entire availability of $20.0 million under the 2018 Term Loan Facility and $6.0 million under the 2018 Revolving Credit Facility.
Contractual Obligations and Commitments
There have been no significant changes during the threenine months ended MarchSeptember 30, 20192023 to the contractual obligations disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in the Prospectus2022 10-K, other than the following:
Leases
Effective March 1, 2019,In 2021, we entered into the Campus Lease, a 12-year lease forwith two 5-year renewal options to house our principal executive officescorporate headquarters, lab and innovation space in El Segundo, California,California. Although we are involved in the design of the tenant improvements of the Campus Headquarters, we do not have title or possession of the assets during construction. In addition, we do not have the ability to control the leased Campus Headquarters until each phase of the tenant improvements is complete. We contributed $3.3 million and $55.1 million in payments towards the construction of the Campus Headquarters in the nine months ended September 30, 2023 and the year ended December 31, 2022, respectively. These payments are initially recorded in “Prepaid lease costs, non-current” in our condensed consolidated balance sheets and will ultimately be reclassified as a component of a right-of-use asset upon lease commencement for each phase of the lease.
China Investment and Lease Agreement
As of September 30, 2023, we had invested $22.0 million as the registered capital of our wholly-owned subsidiary Beyond Meat (Jiaxing) Food Co., Ltd. (“BYND JX”) and advanced $20.0 million to BYND JX. See Note 10, Commitments and Contingencies, to the Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere in this report. The Planet Partnership
In 2021, we entered into TPP, a joint venture with PepsiCo, Inc., to develop, produce and market innovative snack and beverage products made from plant-based protein. In the three months ended September 30, 2023 and October 1, 2022, we recognized our share of the net losses in TPP in the amount of $0.1 million and $8.7 million, respectively. In the nine months ended September 30, 2023 and October 1, 2022, we recognized our share of the net losses in TPP in the amount of $3.9 million and $10.8 million, respectively.
As of the year ended December 31, 2022, we had contributed our share of the investment in TPP in the amount of $24.3 million. In the nine months ended September 30, 2023, we contributed an initial termadditional $3.3 million as our share of five years. The aggregate lease amount foran additional investment in TPP resulting in a total contribution of $27.6 million as of September 30, 2023. See Note 2, Summary of Significant Accounting Policies, Note 10, Commitments and Contingencies, and Note 13, Related Party Transactions, to the five-year term is $2.7 million. The future minimum lease payments required under noncancelable lease obligationsNotes to Unaudited Condensed Consolidated Financial Statements included elsewhere in this report. In the first nine months of 2023, we continued the process of restructuring certain contracts and operating activities related to this lease are $2.6 million due through 2023 (approximately $0.5 million annually)Beyond Meat Jerky. We assumed distribution responsibilities for Beyond Meat Jerky in the fourth quarter of 2023. For a discussion of the risks associated with our assumption of the distribution responsibilities for Beyond Meat Jerky, see Part II, Item 1A, “Risk Factors—Risks Related to Our Investments—Joint ventures may not operate according to their business plans if our partners fail to fulfill their obligations, which may adversely affect our results of operations and $0.1 million thereafter.compel us to dedicate additional resources to these joint ventures. Restructuring certain contracts and operating activities related to Beyond Meat Jerky and our assumption of distribution responsibilities for Beyond Meat Jerky may not be successful.” Purchase Commitments
As of MarchSeptember 30, 2019,2023, we had $72.9 million in fee commitments to manufacture products at a co-manufacturer’s facility over a 5-year term. For a portion of the Company hadcontract term, if the minimum order for a month is not fulfilled, we may be assessed a fee per pound, which fee may be waived by the co-manufacturer upon
reaching certain aggregate quarterly volume requirements. See Note 10, Commitments and Contingencies, to the Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere in this report. On July 27, 2022, we entered into an agreement to purchase certain property on a neighboring site to our manufacturing facility in Europe located in Enschede, the Netherlands, for cash consideration of approximately €6.3 million, of which a €0.9 million deposit was made during 2022. The purchase, if completed, is expected to close in the first quarter of 2024, however we are currently evaluating the strategic importance of these assets as part of our global operations review.
On July 1, 2023, we and Roquette Frères entered into a second amendment (the “Second Amendment”) to our existing pea protein supply agreement dated January 10, 2020, as amended by the first amendment dated August 3, 2022 (the “First Amendment”). Pursuant to the Second Amendment, the terms of the agreement and existing purchase commitments set forth in the First Amendment were revised and extended through December 31, 2025. Pursuant to the Second Amendment, the purchase commitment was revised such that we have committed to purchase pea protein inventory totaling $46.1$1.4 million. in the remainder of 2023, $10.9 million in 2024 and $17.1 million in 2025. In addition, as of September 30, 2023, we had approximately $15.6 million in purchase order commitments for capital expenditures to purchase property, plant and equipment including the commitment to purchase the Enschede facility discussed above. Payments for these purchases will be due within twelve months.
Off-balanceOff-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements or any holdings in variable interest entities.
Critical Accounting Policies and Estimates
In preparing our financial statements in accordance with GAAP, we are required to make estimates and assumptions that affect the amounts of assets, liabilities, revenue, costs and expenses, and disclosure of contingent assets and liabilities that are reported in the financial statements and accompanying disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results may differ from these estimates and assumptions. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.
During the first quarter of 2023, we completed a reassessment of the useful lives of our large manufacturing and research and development equipment, and determined that we should increase the estimated useful lives for certain of our equipment from a range of 5 to 10 years to a uniform 10 years. The timing of this reassessment was based on a combination of factors accumulating over time, including historical useful life information and changes in our planned use of the equipment, that provided us with updated information that allowed us to make a better estimate of the economic lives of such equipment. This reassessment was accounted for as a change in accounting estimate and was made on a prospective basis effective January 1, 2023. This change in accounting estimate decreased depreciation expense for the three months ended September 30, 2023 by $4.9 million, impacting cost of goods sold and research and development expenses by $4.4 million and $0.5 million, respectively, and decreased both basic and diluted net loss per share available to common stockholders by $0.08. For the nine months ended September 30, 2023, this change in accounting estimate decreased depreciation expense by $16.1 million, impacting cost of goods sold and research and development expenses by $14.6 million and $1.5 million, respectively, and decreased both basic and diluted net loss per share available to common stockholders by $0.25. There have been no other material changes in our critical accounting policies during the three months ended MarchSeptember 30, 2019,2023, as compared to those disclosed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies”Policies” in the Prospectus and 2022 10-K.
Recently Adopted Accounting Pronouncements
Please refer to Note 2, Summary of Significant Accounting Policies, to the Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere in Part I, Item 1 of this report. Emerging Growth Company Status
We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” We may take advantage of these exemptions until we are no longer an “emerging growth company.” Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards. We have elected to use the extended transition period for complying with new or revised accounting standards and as a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. We may take advantage of these exemptions up until the last day of
the fiscal year following the fifth anniversary of this offering or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1.07 billion in annual revenue, we have more than $700.0 million in market value of our stock held by non-affiliates (and we have been a public company for at least 12 months and have filed one annual report on Form 10-K) or we issue more than $1.0 billion of non-convertible debt securities over a three-year period.
Recent Accounting Pronouncements
Please refer to Note 2,Summary of Significant Accounting Policies, to the Notes to Unaudited Condensed Financial Statements included in Part I, Item 1 of this report for a discussion of recently adopted accounting pronouncements and new accounting pronouncements that may impact us.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to certain market risks in the ordinary course of our business. These risks primarily consist ofbusiness, including fluctuations in interest rates, raw material prices, foreign currency exchange fluctuations, and inflation as follows:
Interest Rate Risk
Our cash consists of amounts held by third-party financial institutions. In May 2019, upon closing of our IPO, we adopted anOur investment policy which has as its primary objective investment activities which preservespreserve principal without significantly increasing risk.
We are subjectIn 2021, we issued a total of $1.15 billion aggregate principal amount of our 0% Convertible Senior Notes due 2027. The proceeds from the issuance of the Notes were approximately $1.0 billion, net of capped call transaction costs of $84.0 million and debt issuance costs totaling $23.6 million. See Note 7, Debt, to the Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere in this report. The Notes do not bear regular interest, rate risk in connection with our SVB Credit Facilities and our equipment loan facility. See “—Liquiditythe principal amount of the Notes do not accrete. However, special interest and Capital Resources—Credit Facilities” and “—Liquidity and Capital Resources—Equipment Loan Facility” above. Basedadditional interest may accrue on the average interestNotes at a rate on our SVB Credit Facilities and equipment loan facility duringper annum not exceeding 0.50% (subject to certain exceptions) upon the three months ended March 30, 2019 andoccurrence of certain events relating to the extent that borrowings were outstanding, we do not believe that a 1.0% change infailure to file certain SEC reports or to remove certain restrictive legends from the interest rate would have a material effect on our results of operations or financial condition.Notes.Ingredient Risk
OurWe are exposed to risk related to the price and availability of our ingredients because our profitability is dependent on, among other things, our ability to anticipate and react to raw material and food costs. Currently, the main ingredient in our products is pea protein, which we sourceis sourced from Canadapeas grown in the United States, France and France.Canada. The prices of pea protein and other ingredients we use are subject to many factors beyond our control, such as the number and size of farms that grow Canadian and European yellow peas, the vagaries of thesethe farming businesses, including poor harvests due to adverse weather conditions, natural disasters and pestilence, and changes in national and world economic conditions.conditions, including as a result of COVID-19. In addition, we purchase some ingredients and other materials offshore, and the price and availability of such ingredients and materials may be affected by political events or other conditions in these countries or tariffs or trade wars. As of March
During the three and nine months ended September 30, 2019,2023, a hypothetical 10% increase or 10% decrease in the weighted-average cost of pea protein, our primary ingredient, would have resulted in an increase of approximately $0.4$0.7 million and $2.5 million, respectively, or a decrease of approximately $0.4$0.7 million and $2.5 million, respectively, to cost of goods sold. We are working to diversify our sources of supply and intend tomay enter into long-term contracts to better ensure stability of prices of our raw materials. As of September 30, 2023, we had a multi-year sales agreement with Roquette which expires in December 2025. See Note 10, Commitments and Contingencies, to the Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere in this report. Foreign ExchangeCurrency Risk
Our revenues and costs areforeign currency exchange risk is primarily related to our intercompany balances denominated in U.S. dollarsvarious foreign currencies. We have exposure to the Euro and are not subjectthe Chinese Yuan. Foreign currency translation gain (loss), net of tax, reported as cumulative translation adjustment through “Other comprehensive loss” was $0.3 million and $(1.7) million in the three months ended September 30, 2023 and October 1, 2022, respectively. Net realized and unrealized foreign currency transaction losses included in “Other, net” were $(2.5) million and $(3.9) million in the three months ended September 30, 2023 and October 1, 2022, respectively.
Foreign currency translation gain (loss), net of tax, reported as cumulative translation adjustment through “Other comprehensive loss” was $0.1 million and $(4.7) million in the nine months ended September 30, 2023 and October 1, 2022, respectively. Net realized and unrealized foreign currency transaction losses included in “Other, net” were $(3.3) million and $(10.5) million in the nine months ended September 30, 2023 and October 1, 2022, respectively.
Based on the intercompany balances as of September 30, 2023, an assumed 5% or 10% adverse change to foreign currency exchange risk. However, torates would result in a loss of approximately $(4.9) million and $(9.8) million, respectively, recorded in “Other, net” in the extent our sourcing strategy changes or we commence generating net revenues outside of the United States that are denominated in currencies other than the U.S. dollar, our results of operations could be impacted by changes in exchange rates.three and nine months ended September 30, 2023.
Inflation Risk
WeAlthough we have seen inflation in certain raw materials, and in the cost of logistics and labor, we do not believe that inflation has had a material effect on the costs of our business, results of operations, or financial condition.inputs to date. Although difficult to quantify, we believe inflation is likely having an adverse effect on our end customers’ ability to purchase our products, resulting in decreased sales. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, results of operations and financial condition.
For additional information, see “Risk Factors—Risks Related to Our Business—Inflationary price pressures of raw materials, labor, transportation, fuel or other inputs used by us and our suppliers, including the effects of rising interest rates, could negatively impact our business and results of operations in Part I, Item 1A, “Risk Factors,” in our 2022 10-K.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and our principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our principal executive officer and principal financial officer have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended MarchSeptember 30, 20192023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our companythe Company have been detected.
Part II. Other Information
ITEM 1. LEGAL PROCEEDINGS.
We are subject to various legal proceedings and claims that arise in the ordinary course of our business. For a description of our material pending legal proceedings, please see Note 10, Commitments and Contingencies of the Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere in this report. In connection with these matters, we have accrued for loss contingencies where we believe that losses are probable and estimable. No loss contingency is recorded for matters where such losses are either not probable or reasonably estimable (or both). Although it is reasonably possible that actual losses could be in excess of our accrual, we are unable to estimate a reasonably possible loss or range of loss in excess of our accrual, due to various reasons, including, among others, that: (i) the proceedings are in early stages or no claims have been asserted, (ii) specific damages have not been sought in all of these matters, (iii) damages, if asserted, are considered unsupported and/or exaggerated, (iv) there is uncertainty as to the outcome of these and other claims cannotpending appeals, motions or settlements, (v) there are significant factual issues to be predicted with certainty, management doesresolved, and/or (vi) there are novel legal issues or unsettled legal theories presented. It is not believepossible to predict the ultimate resolutionoutcome of all pending legal proceedings, and some of the current matters willdiscussed in this report seek or may seek potentially large and/or indeterminate amounts. Any such loss or excess loss could have a material adverse effect on our business, financial condition, results of operations or cash flows.
On May 25, 2017, Don Lee Farms, a division of Goodman Food Products, Inc., filed a complaint against us in the Superior Courtflows or on our financial condition. Regardless of the Stateoutcome, litigation can have an adverse impact on us because of California fordefense and settlement costs, diversion of management resources, and other factors.
ITEM 1A. RISK FACTORS.
In addition to the County of Los Angeles asserting claims for breach of contract, misappropriation of trade secrets, unfair competition underother information set forth in this report, you should carefully consider the California Business and Professions Code, money owed and due, declaratory relief and injunctive relief, each arising out of our decision to terminate an exclusive supply agreement between us and Don Lee Farms. We deny all of these claims and filed counterclaims on July 27, 2017, alleging breach of contract, unfair competition under the California Business and Professions Code and conversion. In October 2018, Don Lee Farms filed an amended complaint that added ProPortion Foods, LLC (one of Beyond Meat’s current contract manufacturers) as a defendant, principally for claims arising from ProPortion’s alleged use of Don Lee Farms’ alleged trade secrets, and for replacing Don Lee Farms as Beyond Meat’s co-manufacturer. ProPortion filed an answer denying all of Don Lee Farms’ claims and a cross-complaint against Beyond Meat asserting claims of total and partial equitable indemnity, contribution, and repayment. On March 11, 2019, Don Lee Farms filed a second amended complaint to add claims of fraud and negligent misrepresentation against us. On May 30, 2019, the judge denied our motion to dismiss the fraud and negligent misrepresentation claims, allowing the claims to proceed. Trial is currently set for May 18, 2020.
Don Lee Farms is seeking from Beyond Meat and ProPortion unspecified compensatory and punitive damages, declaratory and injunctive relief, including the prohibition of Beyond Meat’s use or disclosure of the alleged trade secrets, and attorneys’ fees and costs. We are seeking from Don Lee Farms monetary damages, restitution of monies paid to Don Lee Farms, and attorney’s fees and costs. ProPortion is seeking indemnity, contribution, or repayment from us of any or all damages that ProPortion may be found liable to Don Lee Farms, and attorney’s fees and costs.
We believe we were justifiedfactors discussed in terminating the supply agreement with Don Lee Farms, that we did not misappropriate their alleged trade secrets, that we are not liable for the fraud or negligent misrepresentation alleged in the proposed second amended complaint, that Don Lee Farms is liable for the conduct allegedPart I, Item 1A, “Risk Factors” in our cross-complaint,2022 10-K, as updated and that we aresupplemented below and in our subsequent filings. These risks could materially harm our business, operating results and financial condition. Additional factors and uncertainties not liablecurrently known to ProPortion for any indemnity, contribution, or repayment, including for any damages or attorney’s fees and costs. We are currently in the process of litigating this matter and intend to vigorously defend ourselves against the claims. We cannot assure you that Don Lee Farms or ProPortion will not prevail in all or some of their claims against us or that we will prevail in somecurrently consider immaterial also may materially adversely affect our business, financial condition or all of our claims against Don Lee Farms. For example, if Don Lee Farms succeedsfuture results.
Risk Factors
Risks Related to Our Business
Disruptions in the lawsuit, we could be requiredworldwide economy, including an economic recession, downturn, periods of inflation or economic uncertainty, have affected and may continue to pay damages, including but not limited to contract damages reasonably calculated at what we would have paid Don Lee Farms to produce our products through 2019, the end of the contract term, and Don Lee Farms could also claim some ownership in the intellectual property associated with the production of certain of our products or in the products themselves, and thus claim a stake in the value we have derived and will derive from the use of that intellectual property after we terminated our supply agreement with Don Lee Farms. Based on our current knowledge, we have determined that the amount of any material loss or range of any losses that is reasonably possible to result from this lawsuit is not estimable.
ITEM 1A. RISK FACTORS
An investment in shares of our common stock involves a high degree of risk. You should carefully consider the following risk factors, as well as the other information in this report, before deciding whether to purchase, hold or sell shares of our common stock. The occurrence of any of the following risks could harmadversely affect our business, results of operations and financial condition.
The global economy can be negatively impacted by a variety of factors such as the spread or fear of spread of contagious diseases (such as the COVID-19 pandemic, other pandemics, epidemics or other public health crises) in locations where our products are sold, man-made or natural disasters, severe weather, actual or threatened hostilities or war, terrorist activity, political unrest, civil strife and other geopolitical uncertainty. Such adverse and uncertain economic conditions may impact distributor, retailer, foodservice and consumer demand for our products. For example, in connection with the war in Ukraine, governments in the U.S., U.K. and the EU have each imposed export controls on certain products and financial and economic sanctions on certain industry sectors and parties in Russia. In addition, the intensity, duration and economic effects of the escalating conflict in Israel, Gaza and surrounding areas are difficult to predict. The uncertainty resulting from the military conflicts in Europe and the Middle East have given rise and may continue to give rise to increases in costs of goods and services, scarcity of certain ingredients, increased trade barriers or restrictions on global trade and may increase volatility in financial and capital markets, which may make it more difficult for us to raise additional capital. Further escalation of geopolitical tensions could have a broader impact that expands into other markets where we do business, which could adversely affect our business and/or our supply chain, our international subsidiaries, business partners or customers in the broader region, including potential destabilizing effects that such conflicts may pose for the European continent, the Middle East or the global oil and natural gas markets.
In addition, our ability to manage normal commercial relationships with our suppliers, co-manufacturers, distributors, retailers, foodservice customers, consumers and creditors may suffer.
As global economic conditions continue to be volatile or uncertain and recessionary or inflationary pressures exist, trends in consumer discretionary spending also remain unpredictable and subject to changes. We have seen consumers shift purchases to lower-priced or other perceived value offerings during economic downturns as a result of various factors, including job losses, inflation, higher taxes, reduced access to credit, change in federal economic policy and recent international trade disputes. In particular, consumers have reduced the amount of plant-based food products that they purchase where there are conventional animal-based protein offerings, which generally have lower retail prices. In addition, consumers may choose to purchase private label products rather than branded products because they are generally less expensive. A decrease in consumer discretionary spending may also result in consumers reducing the frequency and amount spent on food prepared away from home. Distributors, retailers and foodservice customers have become more conservative in response to these conditions and have sought to reduce their inventories. Our results of operations depend upon, among other things, our ability to maintain and increase sales volume with our existing distributors, retailers and foodservice customers, our ability to attract new consumers, the financial condition and/of our consumers and our ability to provide products that appeal to consumers at the right price. Decreases in demand for our products without a corresponding decrease in costs has put downward pressure on gross margin and has negatively impacted, and may continue to negatively impact, our financial results. Prolonged unfavorable economic conditions or growth prospects or causeuncertainty would likely have an adverse effect on our actual results to differ materially from those contained in forward-looking statements we have made in this reportsales and those we may make from time to time.
Risks Related to Our Business, Our Brand, Our Products and Our Industryprofitability.
We have a history of losses, and we may be unable to achieve or sustain profitability.
Although we achieved cash flow positive operations during the three months ended September 30, 2023, this outcome included the benefit of certain transitory factors which are expected to abate and, as such, we do not expect to sustain free cash flow positive operations in the fourth quarter of 2023 and may not achieve or sustain cash flow positive operations in other future periods or be profitable in the future. We have experienced net losses in almost every period since our inception. In the three months ended March 30, 2019, we incurred a net loss of $6.6 million. In the years ended December 31, 2016, 20172022, 2021 and 20182020, we incurred net losses of $25.1$366.1 million, $30.4$182.1 million and $29.9$52.8 million, respectively. We anticipate thatAlthough we decreased our operating expenses in the first nine months of 2023 compared to the prior-year period, over time our operating expenses and capital expenditures willmay increase substantially in the foreseeable future as we continue to invest tohire additional employees; support our strategic and other QSR customer relationships; innovate and commercialize products; build our brand, expand our marketing channels and drive consumer adoption of our products; optimize our production capacity through our own internal production facilities, domestically and abroad; build out our Campus Headquarters, including the timing and success of subleasing excess space; increase our customer base, supplier network and co-manufacturing partners, expand our marketing channels, invest in ourpartners; scale production across distribution and manufacturing facilities, hire additional employeeschannels; review geographic expansion; and enhance our technology and production capabilities. Our expansionThese efforts may prove more expensive than we anticipate, and we may not succeed in increasing our revenues and margins sufficiently to offset the anticipated higher expenses.expenses, particularly in light of some of the other challenges we face, for example prolonged, weakening demand within the plant-based meat category and broad macroeconomic headwinds. We incur significant expenses in developing our innovative products, building out our manufacturing facilities, securing an adequate supply of raw materials, obtaining and storing ingredients and other products and marketing the products we offer. In addition, many of our expenses, including some of the costs associated with our existing and any future manufacturing facilities, are fixed. Accordingly, we may not be able to successfully implement our new sustainable growth strategy or achieve or sustain profitability, and we may incur significant losses for the foreseeable future.
Weakness in the plant-based meat category, combined with our volume losses, has had a negative impact on our sales and profits.
Our operating environment continues to be negatively affected by several challenges, including, but not limited to, prolonged weakening demand in the plant-based meat category overall, particularly in the refrigerated subsegment, among others, adverse changes in consumers’ perceptions about plant-based meat, broad macroeconomic headwinds including elevated levels of inflation, rising interest rates, waning consumer confidence and recessionary concerns, and competitive activity in the plant-based meat category. As of the date of this report, consumer demand for plant-based meat products has continued to decline. For example, in the first nine months of 2023, all of our markets and channels other than international foodservice were negatively impacted by weakness in demand in the category.
Partly as a result of this weak demand, we failhave experienced volume losses and declines from historical levels, which has negatively impacted our sales and profitability. In the nine months ended September 30, 2023, volume of products sold decreased by 11.9%, primarily reflecting weak category demand, especially in U.S. retail and U.S. foodservice channels. We expect that demand-related challenges will continue to effectively expandhave a negative impact on our manufacturingsales and production capacity,profitability and, as a result, our results of operations and financial condition, in the future, particularly if we are not able to reduce our costs quickly and significantly enough to offset the lost volume and attain and maintain a profitable customer and product mix. A continued decrease in consumer demand for plant-based meat, or a further prolonged decrease, would likely have a material adverse effect on our profits, business, financial condition and results of operations.
Our strategic initiatives to improve our cost structure could have long-term adverse effects on our business, and we may not realize the operational or financial benefits from such actions, including achieving and/or sustaining cash flow positive operations.
On November 2, 2023, we announced that we are initiating a review of our global operations, narrowing our commercial focus to certain growth opportunities, and accelerating activities that prioritize gross margin expansion and cash generation. Among other things, we will evaluate the potential exit of select product lines, changes to our pricing architecture within certain channels, accelerated cash-accretive inventory reduction initiatives, further optimization of our manufacturing capacity and real estate footprint, and a review and potential restructuring of our operations in China. In addition, on November 1, 2023, our board of directors approved a plan to reduce our current workforce by approximately 65 employees, representing approximately 19% of our global non-production workforce (or approximately 8% of our total global workforce). We currently estimate that we will incur one-time cash charges of approximately $2.0 million to $2.5 million in connection with the reduction in force, primarily consisting of notice period and severance payments, employee benefits and related costs. In aggregate, in 2024, the reduction in force, combined with the elimination of certain open positions, is expected to result in approximately $9.5 million to $10.5 million in cash operating expense savings, and an additional approximately $1.0 million to $2.0 million in non-cash savings related to previously granted, unvested stock-based compensation which would have vested in 2024.
Our global operations review, cost structure improvement measures, cost-reduction initiatives, workforce reductions, and the timing and success of sustaining cash flow positive operations are subject to many risks and uncertainties. The charges associated with the reductions-in-force may be greater than anticipated; we may be unable to realize the contemplated benefits in connection with the workforce reductions, global operations review, cost structure improvement measures and other potential cost-reduction initiatives; and the workforce reductions, global operations review, cost structure improvement measures and other potential cost-reduction initiatives may have an adverse impact on our performance. Additionally, our ability to make progress toward our goal of achieving and/or sustaining cash flow positive operations is dependent on a number of assumptions and uncertainties, including, without limitation, demand in the plant-based meat category and for our products; our ability to reduce costs and achieve and/or sustain positive gross margins; our ability to grow revenues and meet operating expense reduction targets, which may be subject to factors beyond our control; timing of capital expenditures; and our ability to monetize inventory and manage working capital. The other risks described in this report and in our 2022 10-K may also hinder our ability to implement our strategic initiatives. As a result, we
cannot guarantee that we will achieve and/or sustain cash flow positive operations in the future, whether on our expected timelines, or at all.
We may be subject to additional unexpected costs, negative impacts on our cash flows from operations, employee attrition and adverse effects on employee morale and potential failure to meet operational and growth targets due to the loss of employees, any of which may impair our ability to achieve anticipated results from our operations or otherwise adversely affect our business. Additionally, as we are operating our business with fewer employees, we face additional risk that we might not be able to execute on our strategic plans and product roadmap, which may have an adverse effect on our business, financial condition, and operating results.
As we continue to identify areas of cost savings and operating efficiencies, we may consider implementing further measures to help streamline operations and improve cost efficiencies, which could result in the contraction of our business and the implementation of significant cost cutting measures such as further downsizing and exiting certain operations, including product lines, domestically and/or abroad. Any resource realignment, or decision to limit investment in or dispose of or otherwise exit product lines or businesses, may result in loss of significant revenues and investments and/or the recording of special charges, such as write-offs, further workforce reduction or restructuring costs, charges relating to consolidation of excess facilities or capacity underutilization, lease exit or other related costs, contract termination charges, or claims from third parties. Underutilization or cessation of our manufacturing facilities could adversely affect our gross margin and other operating results and we may be required to terminate or make penalty-type payments under certain supply chain arrangements, close or idle facilities and write down our brand reputationlong-lived assets or shorten the useful lives of underutilized assets and accelerate depreciation, which would increase our expenses. In addition, our strategic initiatives may not be adequate to support the long-term operations of our business, particularly under adverse circumstances. Furthermore, we may not be successful in implementing these initiatives or realizing our anticipated savings and efficiencies, including as a result of factors beyond our control. For example, in the event we have excess capacity or vacancy in any of our facilities or office spaces, we may sublease portions of the excess space to third parties and may be unable to sublease our excess space on favorable terms, or at all, or if we are able to sublease space but our subtenants fail to make lease payments to us or otherwise default on their obligations to us, we could incur substantial payment obligations to our landlords.
Our operating environment continues to be harmed.
affected by uncertainty related to macroeconomic issues, including prolonged, weak demand in the plant-based meat category, high inflation, rising interest rates and challenges related to labor availability, among other things, all of which have and may continue to frustrate our cost-reduction initiatives, as well as the achievement and/or sustainment of cash flow positive operations. If we do not have sufficient capacityare unable to meetrealize the anticipated savings and efficiencies of our customers’ demandscost reduction initiatives and related strategic initiatives, our operating and financial results would be adversely affected and could differ materially from our expectations.
Our ability to satisfy increased demand, we will needaccurately forecast our future results of operations is subject to expandmany risks and uncertainties, and our operating and financial results could differ materially from our expectations.
Our ability to accurately forecast our future results of operations supplyis limited by and manufacturing capabilities. However, there is riskdependent on a number of risks and uncertainties, including those described in this report and in our ability2022 10-K. Our historical revenue growth should not be considered indicative of our future performance. Our revenue growth has declined and could continue to decline or slow for a number of reasons, including but not limited to weak demand in the plant-based meat category and for our products, other macroeconomic factors such as rising inflation, high interest rates and concerns about the likelihood of an economic recession, reduced consumer confidence and changes in consumer spending, competitive activity from our market competitors and new market entrants and a continued decrease in demand for the overall plant-based market. In fact, net revenues decreased to $75.3 million in the three months ended September 30, 2023 from $82.5 million in the three months ended October 1, 2022, representing a 8.7% decrease. Net revenues decreased to $269.7 million in the nine months ended September 30, 2023 from $339.0 million in the nine months ended October 1, 2022, representing a 20.4% decrease. If we are unable to identify and execute cost-down initiatives, including those intended to
achieve price parity with animal protein, we may not be able to compete effectively scale production processesin our market and effectively manage our supply chain requirements. We must accurately forecast demand for our products may continue to slow, either of which could continue to adversely affect our revenues and margins. If our assumptions regarding these risks and uncertainties and our future revenue growth are incorrect or change, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations, and our business could suffer.
From time to time, we may release earnings guidance, financial goals or other forward-looking statements in order to ensureour earnings releases, earnings conference calls or otherwise regarding our future performance that represent our management’s estimates as of the date of the release. Some or all of the assumptions of any future guidance or financial goals that we have adequate available manufacturing capacity. Our forecasts are based on multiple assumptions whichfurnish may cause our estimates to be inaccurate and affectnot materialize or may vary significantly from actual future results. For example, our ability to obtain adequate manufacturing capacity (whethermake progress toward our own manufacturing capacity goal of achieving and/or co-manufacturing capacity)sustaining cash flow positive operations is dependent on a number of assumptions and uncertainties, including, without limitation, demand in order to meet the demandplant-based meat category and for our products,products; our ability to reduce costs and achieve positive gross margins; our ability to grow revenues and meet operating expense reduction targets, which could prevent us from meeting increased customer demand and harmmay be subject to factors beyond our brandcontrol; timing of capital expenditures; and our ability to monetize inventory and manage working capital. The other risks described in this report and in our 2022 10-K may also cause our actual future results to differ.
We may not be able to utilize our capacity efficiently or accurately plan our capacity requirements, which may adversely affect our gross margin, business and in some cases may result in fines we must pay customers or distributors if we are unable to fulfill orders placed by them in a timely manner or at all.operating results.
However, ifIf we overestimate our demand and overbuild our capacity or inventory, as we have done in the past, we may have significantly underutilized assets. Underutilization of our manufacturing and/or co-manufacturing facilities can adversely affect our gross margin and other operating results. If demand for our products experiences a prolonged decrease, we may be required to terminate or make penalty-type payments under certain supply chain arrangements, close or idle facilities and write down our long-lived assets or shorten the useful lives of underutilized assets and may experience reduced margins. If we do not accurately alignaccelerate depreciation, which would increase our manufacturing capabilities with demand, if we experience disruptions or delaysexpenses. For example, in 2022, lower than anticipated revenues negatively impacted our capacity utilization, which resulted in the Company incurring underutilization fees and termination fees that were required in order to exit certain of our supply chain or if we cannot obtain raw materials of sufficient quantity and qualityarrangements.
If demand does not materialize at reasonable prices and in a timely manner, our business, financial condition and results of operations may be materially adversely affected.
Because we rely on a limited number of third-party suppliers,the rate forecasted, we may not be able to obtain raw materials on a timely basisscale back our manufacturing expenses or overhead costs quickly enough to correspond to the lower than expected demand. This could result in sufficient quantitieslower margins and adversely impact our business and results of operations. Additionally, if product demand continues to producedecrease or stay flat or we fail to forecast demand accurately, our products or meet the demand for our products.
We rely on a limited number of vendorsresults may be adversely impacted due to supply us with raw materials. Our financial performance depends in large part on our ability to arrange for the purchase of raw materials in sufficient quantities at competitive prices.higher costs resulting from lower manufacturing utilization, causing higher fixed costs per unit produced. We are not assuredrequired to recognize excess or obsolete inventory write-off charges, or excess capacity charges. We routinely monitor and recognize excess or obsolete inventory write-off charges when appropriate, which has negatively impacted our results of continued supply or pricing of raw materials. Anyoperations.
Disruptions of our supplierssupply chain could discontinue or seek to alter their relationship with us.
We currently have two suppliers for the pea protein used in our fresh products. We have in the past experienced interruptions in the supply of pea protein from one supplier that resulted in delays in delivery to us. We could experience similar delays in the future from either or both suppliers. Any disruption in the supply of pea
protein from these suppliers would have a material adverse effect on our business if we cannot replace theseoperating and financial results.
Our ability to make, move and sell products in coordination with our suppliers, in a timely mannerthird party contract manufacturers and distributors is critical to our success. Damage or at all. For more information regarding contract terms, seedisruption to our collective supply, manufacturing or distribution capabilities resulting from severe weather, fires or evacuations related thereto, natural disasters, including climate-related events, pandemics (such as the section of the Prospectus captioned “Business—Supply Agreements.”
In addition, our pea protein suppliers manufacture their products at a limited number of facilities. A natural disaster, fire, power interruption, work stoppageCOVID-19 pandemic) or other calamity affecting anyoutbreaks of thesecontagious diseases, agricultural diseases, cyber incidents, security breaches, system failures, terrorism, governmental restrictions or mandates, political instability, trade restrictions, import restrictions, border closures, freight carrier availability, labor shortages, strikes or other labor unrest, the financial or operational instability of key suppliers and carriers, disruptions, repairs or enhancements at facilities manufacturing or any interruption in their operations,delivering our products or other reasons could negatively impactimpair our ability to obtain required quantitiessource inputs or manufacture, sell or timely deliver our products. To the extent we are unable to mitigate the likelihood or potential impact of pea protein in a timely manner, or at all, whichsuch events, there could materially reduce our net product sales and havebe a material adverse effect on our businessoperating and financial condition.results.
Additionally, there are increasing expectations in various jurisdictions that adversely affect ourcompanies monitor the environmental and social performance of their suppliers, including compliance with a variety of pea protein and other raw material could impair our ability to obtain raw material inventory in the quantities that we desire. Such events include problems with our suppliers’ businesses, finances, labor relations, ability to import raw materials, costs, production, insurance and reputation,practices, as well as natural disasters, fires or other catastrophic occurrences. We continuously seek alternative sourcesconsider a wider range of protein to use in our products, but we may not be successful in diversifyingpotential environmental and social matters, including the raw materials we use in ourend of life considerations for products.
If we need to replace an existing supplier, there Compliance can be no assurance that suppliescostly, require us to establish or augment programs to diligence or monitor our suppliers, or, in the case of raw materials will be available when required on acceptable terms, or at all, or that a new supplier would allocate sufficient capacity to us in order to meet our requirements, fill our orders in a timely manner or meet our strict quality standards. If we are unable to manage our supply chain effectively and ensure that our products are available to meet consumer demand, our operating costs could increase and our profit margins could decrease.
Our future business, results of operations and financial condition may be adversely affected by reduced or limited availability of pea protein that meets our standards.
Our ability to ensure a continuing supply of ingredients at competitive prices depends on many factors beyond our control,legislation such as the number and size of farms that growUyghur Forced Labor Prevention Act, to design supply chains to avoid certain cropssuppliers or regions altogether. Failure to comply with such as Canadian and European yellow peas, the vagaries of these farming businesses (including poor harvests impacting the quality of the peas grown), changesregulations can result in national and world economic conditions and our ability to forecast our ingredient requirements. The high quality ingredients used in many of ourfines, reputational damage, import ineligibility for certain products are vulnerable to adverse weather conditions and natural disasters, such as floods, droughts, frosts, earthquakes, hurricanes and pestilence. Adverse weather conditions and natural disasters can lower crop yields and reduce crop size and quality, which in turn could reduce the available supply of, or increase the price of, quality ingredients. In addition, we purchase some ingredients offshore, and the availability of such ingredients may be affected by events in other countries, including France and Canada. We also compete with other food producers in the procurement of ingredients, and this competition may increase in the future if consumer demand for plant-based protein products increases. If supplies of quality ingredients are reducedraw materials, or there is greater demand for such ingredients from us and others, we may not be able to obtain sufficient supply that meets our strict quality standards on favorable terms, or at all, which couldotherwise adversely impact our ability to supply products to distributors and retailers and may adversely affect our business, results of operations and financial condition.
We use a limited number of distributors for the substantial majority of our sales, and if we experience the loss of one or more distributors and cannot replace them in a timely manner, our results of operations may be adversely affected.
Many retailers purchase our products through food distributors which purchase, store, sell, and deliver our products to retailers. In the three months ended March 30, 2019, our largest distributors in terms of their respective percentage of our gross revenues included the following: United Natural Foods, Inc. (“UNFI”), 21%; and DOT Foods, Inc. (“DOT”), 21%. In 2017, our largest distributors in terms of their respective percentage of our gross revenues included the following: UNFI, 38%; KeHE Distributors, LLC, or KeHE, 10%; and DOT, 10%. In 2018, our largest distributors in terms of their respective percentage of our gross revenues included the following: UNFI, 32%; DOT, 21%; and Sysco Merchandising and Supply Chain Services, Inc., 13%. We expect that most of our sales will be made through a core number of distributors for the foreseeable future. Since these distributors act as intermediaries between us and the retail grocers or restaurants and foodservice providers, we do not have
short-term or long-term commitments or minimum purchase volumes in our contracts with them that ensure future sales of our products. If we lose one or more of our significant distributors and cannot replace the distributor in a timely manner or at all, our business, results of operation and financial condition may be materially adversely affected.
Consolidation of customers or the loss of a significant customer could negatively impact our sales and profitability.
Supermarkets in North America and the European Union, continue to consolidate. This consolidation has produced larger, more sophisticated organizations with increased negotiating and buying power that are able to resist price increases, as well as operate with lower inventories, decrease the number of brands that they carry and increase their emphasis on private label products, all of which could negatively impact our business. The consolidation of retail customers also increases the risk that a significant adverse impact on their business could have a corresponding material adverse impact on our business.
The loss of any large customer, the reduction of purchasing levels or the cancellation of any business from a large customer for an extended length of time could negatively impact our sales and profitability.
Furthermore, as retailers consolidate, they may reduce the number of branded products they offer in order to accommodate private label products and generate more competitive terms from branded suppliers. Consequently, our financial results may fluctuate significantly from period to period based on the actions of one or more significant retailers. A retailer may take actions that affect us for reasons that we cannot always anticipate or control, such as their financial condition, changes in their business strategy or operations, the introduction of competing products or the perceived quality of our products. Despite operating in different channels, our retailers sometimes compete for the same consumers. Because of actual or perceived conflicts resulting from this competition, retailers may take actions that negatively affect us.
We do not currently have any written contracts with our co-manufacturers in the United States. Loss of one or more of our co-manufacturers or our failure to timely identify and establish relationships with new co-manufacturers could harm our business and impede our growth.
A significant amount of our revenue is derived from products manufactured at manufacturing facilities owned and operated by our co-manufacturers. Weco-manufacturers, a portion of which are located internationally. Any of the co-manufacturers with whom we do not currently have a written manufacturing contracts with our co-manufacturers in the United States, including CLW Foods LLC and FPL Food LLC that co-manufacture our top selling products. Because of the absence of such contracts, any of such co-manufacturerscontract could seek to alter or terminate its relationship with us at any time, leaving us with periods during which we have limited or no ability to manufacture our products. If we need to replace a co-manufacturer, there can be no assurance that additional capacity will be available when required on acceptable terms, or at all.
If any of our co-manufacturers fail to comply with food safety, environmental, health and safety or other laws and regulations, or face allegations of non-compliance, their operations may be disrupted and our reputation could be harmed. An interruption in, or the loss of operations at, one or more of our co-manufacturing facilities, which may be caused by work stoppages, labor shortages, strikes or other labor unrest, production disruptions, product quality or safety issues, local economic and political conditions, restrictive governmental actions, border closures, disease outbreaks or pandemics (such as COVID-19), the outbreak of hostilities, acts of war, terrorism, fire, earthquakes, severe weather, flooding or other natural disasters at one or more of these facilities, could delay, postpone or reduce production of some of our products, which could have a material adverse effect on our business, results of operations and financial condition until such time as such interruption is resolved or an alternate source of production is secured.
We believe there are a limited number of competent, high-quality co-manufacturers in the industry that meet our strict quality and control standards, and as we seek to continue to obtain additional or alternative co-manufacturing arrangements in the future, there can be no assurance that we would be able to do so on satisfactory terms, in a timely manner, or at all. Additionally, as we expand our operations internationally, we will need to develop relationships with co-manufacturers overseas to meet sales demand, and there can be no assurance that we will be able to successfully do so. Therefore, the loss of one or more co-manufacturers, any disruption or delay at a co-manufacturer or any failure to identify and engage co-manufacturers for new products, and product extensions and expanded operations could delay, postpone or reduce production of our products, which could have a material adverse effect on our business, results of operations and financial condition.
Our business and reputation could be negatively impacted by ESG matters and/or our reporting of such matters.
We may not be able to compete successfully in our highly competitive market.
We operate in a highly competitive market. Numerous brands and products compete for limited retailer shelf space, foodservice and restaurantThere is an increased focus from lawmakers, regulators, investors, customers, and consumers. In our market, competition is based on, among other things, product quality and taste, brand recognition and loyalty, product variety, interesting or unique product names, product packaging and package design, shelf space, reputation, price, advertising, promotion and nutritional claims.
We compete with conventional animal-protein companies such as Cargill, Hormel, JBS, Tyson and WH Group (including its Smithfield division), who may have substantially greater financialemployees and other resources than usstakeholders on corporate ESG practices, including climate change and whose animal-based products are well-acceptedrelated ESG disclosure requirements. Expectations regarding voluntary ESG initiatives and disclosures may result in the marketplace today. They may also have lower operationalincreased costs and as a result may be able to offer conventional animal meat to customers at lower costs than plant-based meat. This could cause us to lower our prices, resulting in lower profitability or, in the alternative, cause us to lose market share if we fail to lower prices.
We also compete with other food brands that develop and sell plant-based protein products, including,(including but not limited to Boca Foods, Field Roast Grain Meat Co.increased costs related to compliance, stakeholder engagement, contracting and insurance), Gardein, Impossible Foods, Lightlife, Morningstar Farmschanges in demand for certain products, enhanced compliance or disclosure obligations, or other adverse impacts to our business, financial condition or results of operations. In addition, standards for tracking and Tofurky,reporting ESG matters continue to evolve, and with companiesour business may be impacted by new laws, regulations or investor criteria in the U.S., Europe and around the world related to ESG. These legal and regulatory requirements, as well as investor expectations related to ESG practices and disclosures are subject to change, can be unpredictable, and may be difficult and expensive for us to comply with.
While we may at times engage in voluntary initiatives (such as voluntary disclosures, certifications, or goals, among others) to improve the ESG profile of our company and/or products, such initiatives or achievements of such commitments may be costly and may not have the desired effect. Expectations around the Company’s management of ESG matters continues to evolve rapidly, in many instances due to factors that are out of our control. For example, we may not ultimately be able to complete certain goals or initiatives, either on the timelines originally anticipated or at all, due to technical, cost or other factors, which may be more innovative, have more resources and be able to bring new products to market faster and to more quickly exploit and serve niche markets such as lab-grownin or “clean meat.” We compete with these competitors for foodservice and restaurant customers, retailer shelf space and consumers.
Generally, the food industry is dominated by multinational corporations with substantially greater resources and operations than us. We cannot be certainout of our control. Moreover, actions or statements that we will successfully compete with larger competitorsmay take based on expectations, assumptions or third-party information that have greater financial, sales and technical resources. Conventional food companieswe currently believe to be reasonable may acquiresubsequently be determined to be erroneous or be subject to misinterpretation. Even if this is not the case, our competitors or launch their own plant-based protein products, and theycurrent actions may subsequently be abledetermined to use their resources and scale to respond to competitive pressures and changes in consumer preferencesbe insufficient by introducing new products, reducing prices or increasing promotional activities, among other things. Retailers also market competitive products under their own private labels, which are generally sold at lower prices and compete with some of our products. Similarly, retailers could change the merchandising of our productsvarious stakeholders, and we may be unablesubject to investor or regulator engagement on our ESG initiatives and disclosures, even if such initiatives are currently voluntary.
Certain market participants, including stockholders and other capital providers, use third-party benchmarks or scores to measure a company’s ESG practices and decide whether to invest in their common stock or engage with them to require changes to their practices. In addition, certain influential institutional investors are also increasing their focus on ESG practices and are placing importance on the implications and social cost of their investments. If our ESG practices do not meet the standards set by these stockholders, they may choose not to invest in our common stock or if our peer companies outperform us in their ESG initiatives, potential or current investors may elect to invest with our competitors instead. Increasing governmental and societal attention to ESG matters, including expanding mandatory and voluntary reporting, diligence and disclosure on topics such as climate change, human capital, labor and risk oversight, could also expand the nature, scope and complexity of matters that we are required to control, assess and report. For example, to the extent ESG matters negatively impact our reputation, it may also impede our ability to compete as effectively to attract and retain employees, customers, or business partners, which may adversely impact our operations. We may be especially subject to scrutiny on such matters given efforts to portray our operations and products as a more sustainable and conscientious alternative to certain competitor products. As another example, the placement of our productsSEC has proposed rules that would require companies to provide significantly expanded climate-related disclosures in meat cases to effectively compete with animal-protein products. Competitive pressures or other factors could cause us to lose market share,their periodic reporting, which may require us to lower prices, increase marketingincur significant additional costs to comply, including the implementation of significant additional internal controls processes and advertising expenditures, or increase the use of discounting or promotional campaigns, each of which would adversely affect our margins and could result in a decrease in our operating results and profitability. See “Business—Competition”procedures regarding matters that have not been subject to such controls in the Prospectus.past and expanded data collection, analysis and certification with respect to greenhouse gas emissions reporting that may not be complete or accurate, and impose increased oversight obligations on our management and board of directors. These and other regulations, disclosure-related and otherwise, including the new California laws S.B. 253 and S.B. 261, may increase our costs as well as increase scrutiny regarding our ESG efforts, which may enhance the risks discussed in this risk factor. If we do not comply with investor or stockholder expectations and standards in connection with our ESG initiatives, are perceived to have not responded appropriately to address ESG issues within our company, or fail to adapt to or comply with all laws, regulations, policies and related interpretations, our business and reputation could be negatively impacted and our share price and access to/cost of capital could be materially and adversely affected. Additionally, many of our customers and suppliers may be subject to similar expectations, which may augment or create additional risks, including risks that may not be known to us.
We may require additional financingThe Company is subject to achieveaccounting estimate risks.
The preparation of our goals,consolidated financial statements in conformity with generally accepted accounting principles requires management to make significant estimates that affect the financial statements. Estimates are made at specific points in time and based on facts, historical experience and various other factors believed to be reasonable under the circumstances at such time. For example, during the first quarter of 2023, we completed a failure to obtain this necessary capital when needed on acceptable terms, or at all, may force us to delay, limit, reduce or terminatereassessment of the useful lives of our productlarge manufacturing and development, and other operations.
Since our inception, substantially all of our resources have been dedicated to the development of our three core plant-based product platforms of beef, pork and poultry, including purchases of property, plant and equipment, principally to support the development and production of The Beyond Burger, the build-out and equipping of our Manhattan Beach Project Innovation Center, and manufacturing facility improvements and purchases of manufacturing equipment. We believe that we will continue to expend substantial resources for the foreseeable future as we expand into additional markets we may choose to pursue. These expenditures are expected to include costs associated with research and development manufacturingequipment, and supply,determined that we should increase the estimated useful lives from a range 5 to 10 years to a uniform 10 years. The timing of this reassessment was based on a combination of factors accumulating over time, including historical useful life information and changes in our planned use of the equipment that provided us with updated information that allowed us to make a better estimate of the economic lives of such equipment.
This was accounted for as well as marketinga change in accounting estimate and selling existingwas made on a prospective basis effective January 1, 2023. If actual results differ from our judgments and new products. In addition, other unanticipated costsassumptions, then it may arise.
Ashave a material, adverse impact on our results of March 30, 2019, we had cashoperations and cash equivalentsflows. For the three months ended September 30, 2023, this change in accounting estimate decreased depreciation expense by $4.9 million, impacting cost of $35.4 million, prior to giving effect to the net proceeds from our IPO of $252.5 million. Our operating plan may change because of factors currently unknown to us,goods sold and we may need to seek additional funds sooner than planned, through public or private equity or debt financings or other sources, such as strategic collaborations. Such financing may result in dilution to stockholders, imposition of debt covenants and repayment obligations, or other restrictions that may adversely affect our
business. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans.
Our future capital requirements depend on many factors, including:
the number and characteristics of any additional products or manufacturing processes we develop or acquire to serve new or existing markets;
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 patent 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.
Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timely basis, we may be required to:
delay, limit, reduce or terminate our manufacturing, research and development activities;expenses by $4.4 million and $0.5 million, respectively, and decreased both basic and diluted net loss per share available to common stockholders by $0.08. For the nine months ended September 30, 2023, this change in accounting estimate decreased depreciation expense by $16.1 million, impacting cost of goods sold and research and development expenses by $14.6 million and $1.5 million, respectively, and decreased both basic and diluted net loss per share available to common stockholders by $0.25.
Any changes in estimates, judgments and assumptions used in the preparation of financial statements in accordance with GAAP or
delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary to generate revenue and achieve profitability.
Our brand and reputation may be diminished due to real or perceived quality or health issues with our products, which any future impairment charges could have ana material adverse effect on our business, reputation,financial position and operating results.
The preparation of financial statements in accordance with GAAP involves making estimates, judgments and assumptions that affect reported amounts of assets (including intangible assets), liabilities, revenues and expenses. This includes estimates, judgments and assumptions for assessing the recoverability of our assets, pursuant to Financial Accounting Standards Board issued authoritative guidance. If any estimates, judgments or assumptions change in the future, the Company may be required to record additional expenses and/or impairment charges.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under assumptions or conditions that may change in the future. While we believe the assumptions and estimates we make are reasonable, any changes to our assumptions or estimates, or any actual results which differ from our assumptions or estimates, could have a material adverse effect on our financial position and operating results. Improper design and implementation of internal control related to the estimates could result in misstatement of financial reports.
We perform an asset impairment analysis on an annual basis or whenever events occur that may indicate possible existence of impairment. Failure to achieve forecasted operating results, due to weakness in the economic environment or other factors, changes in market conditions and financial condition.
We believe our consumers rely on us to provide them with high-quality plant-based protein products. Therefore, real or perceived quality or food safety concerns or failures to comply with applicable food regulations and requirements, whether or not ultimately based on fact and whether or not involving us (such as incidents involving our competitors), could cause negative publicity and reduced confidencedeclines in our company, brand or products, whichmarket capitalization, among other things, could result in turn harmimpairment of our reputationassets and sales, and could materially adversely affect our business, financial condition and operating results. Although
Our results of operations could be materially negatively affected if we believe we have a rigorous quality control process, there can be no assurance that our products will always complycannot successfully keep pace with technological changes impacting the standards set for our products. For example, although we strive to keep our products free of pathogenic organisms, they may not be easily detected and cross-contamination can occur. In addition, in 2017, before our products were shipped to distributors or customers, we discovered, through our quality control process, that certaindevelopment of our products manufactured by a former co-manufacturer were contaminatedand implementation of our business needs.
Our success depends on our ability to keep pace with salmonella. There is no assurance that this health risk will always be preempted by our quality control processes.
We have no control overrapid technological changes affecting the development of our products once purchased by consumers. Accordingly, consumers may prepare our products in a manner that is inconsistent with our directions or store our products for long periods of time, which may adversely affect the quality and safetyimplementation of our products.business needs. Emerging technological trends such as artificial intelligence, machine learning and automation are impacting industries and business operations. If consumerswe do not perceivesufficiently invest in new technology and industry developments, appropriately implement new technologies or evolve our productsbusiness at sufficient speed and scale in response to be safesuch developments, or of high quality, thenif we do not make the value ofright strategic investments to respond to these developments, our brand would be diminished, and our business,products, results of operations and financial condition would be adversely affected.
Any loss of confidence on the part of consumers in the ingredients used inability to develop and maintain our products or in the safety and quality of our products would be difficult and costly to overcome. Any such adverse effect could be exacerbated by our position in the market as a purveyor of high-quality plant-based protein products and may significantly reduce
our brand value. Issues regarding the safety of any of our products, regardless of the cause, may have a substantial and adverse effect on our brand, reputation and operating results.
The growing use of social and digital media by us, our consumers and third parties increases the speed and extent that information or misinformation and opinions can be shared. Negative publicity about us, our brands or our products on social or digital media could seriously damage our brands and reputation. If we do not maintain the favorable perception of our brands, our sales and profitsbusiness could be negatively impacted.affected. Our competitors or other third parties may incorporate such technologies into their products and business more quickly or more successfully than us, which could impair our ability to compete effectively and adversely affect our results of operations.
Risks Related to Our Products
Food safety and food-borne illness incidents or advertising or product mislabeling may materially adversely affect our business by exposing us to lawsuits, product recalls or regulatory enforcement actions, increasing our operating costs and reducing demand for our product offerings.
Selling food for human consumption involves inherent legal and other risks, and there is increasing governmental scrutiny of and public awareness regarding food safety. Unexpected side effects, illness, injury or death related to allergens, food-borne illnesses or other food safety incidents caused by products we sell, or involving our suppliers or co-manufacturers, could result in the discontinuance of sales of these products or our relationships with such suppliers or co-manufacturers, or otherwise result in destruction and write-off of raw materials or product inventory, delayed or lost sales, increased operating costs, regulatory enforcement actions or harm to our reputation. Shipment of adulterated or misbranded products, even if inadvertent, can result in criminal or civil liability. Such incidents could also expose us to product liability, negligence or other lawsuits, including consumer class action lawsuits. Any claims brought against us may exceed or be outside the scope of our existing or future insurance policy coverage or limits. Any judgment against us that is more than our policy limits or not covered by our policies or not subject to insurance would have to be paid from our cash reserves, which would reduce our capital resources.
The occurrence of food-borne illnesses or other food safety incidents could also adversely affect the price and availability of affected ingredients, resulting in higher costs, disruptions in supply and a reduction in our sales. Furthermore, any instances of food contamination or regulatory noncompliance, whether or not caused by our actions, could compel us, our suppliers, our distributors or our customers, depending on the circumstances, to conduct a recall in accordance with U.S. Food and Drug Administration (“FDA”)FDA regulations, and comparable state laws.laws or foreign laws such as those of the European Union, the United Kingdom and China. Food recalls and other food illness and food safety incidents could result in significant losses due to their costs, the destruction of raw materials or product inventory, lost sales due to the unavailability of the product for a period of time and potential loss of existing distributors or customers and a potential negative impact on our ability to attract new customers due to negative consumer experiences or because of an adverse impact on our brand and reputation. The costs of a recall could exceed or be outside the scope of our existing or future insurance policy coverage or limits.
In addition, food companies have been subject to targeted, large-scale tampering as well as to opportunistic, individual product tampering, and we, like any food company, could be a target for product tampering. Forms of tampering could include the introduction of foreign material, chemical contaminants and pathological organisms into consumer products as well as product substitution. Recently issued FDA regulations will require companies like us to analyze, prepare and implement mitigation strategies specifically to address tampering (i.e., intentional adulteration) designed to inflict widespread public health harm. If we do not adequately address the possibility, or any actual instance, of product tampering,intentional adulteration, we could face possible seizure or recall of our products and the imposition of civil or criminal sanctions, which could materially adversely affect our business, financial condition and operating results.
Sales of The Beyond Burger contribute a significant portion of our revenue. A reduction in sales of The Beyond Burger would have an adverse effect on our financial condition.
The Beyond Burger accounted for approximately 48% and 70% of our gross revenues in 2017 and 2018, respectively. The Beyond Burger is our flagship product and has been the focal point of our development and marketing efforts, and we believe that sales of The Beyond Burger will continue to constitute a significant portion of our revenues, income and cash flow for the foreseeable future. We cannot be certain that we will be able to continue to expand production and distribution of The Beyond Burger, or that customer demand for our other existing and future products will expand to allow such products to represent a larger percentage of our revenue than they do currently. Accordingly, any factor adversely affecting sales of The Beyond Burger could have a material adverse effect on our business, financial condition and results of operations.
The primary components of all of our products are manufactured in our two Columbia, Missouri facilities and any damage or disruption at these facilities may harm our business. Moreover, Columbia, Missouri has a tight labor market and we may be unable to hire and retain employees at these facilities.
A significant portion of our operations are located in our two Columbia, Missouri facilities. A natural disaster, fire, power interruption, work stoppage or other calamity at one or both of these facilities would significantly disrupt our ability to deliver our products and operate our business. If any material amount of our machinery or inventory were damaged, we would be unable to meet our contractual obligations and cannot predict when, if at all, we could replace or repair such machinery, which could materially adversely affect our business, financial condition and operating results.
Our plans for addressing our rapid growth include expanding operations at our Columbia, Missouri facilities and/or seeking an alternative or additional facility. In this tight labor market, we may be unable to hire and retain skilled employees, which will severely hamper our expansion plans, product development and manufacturing efforts. As of March 2019, the Columbia area had an unemployment rate of 2.4%. As a result of this tight labor market, we currently rely on temporary workers in addition to full-time employees, and in the future, we may be unable to attract and retain employees with the skills we require, which could impact our ability to expand our operations.
We may not successfully ramp up operations at our new Columbia, Missouri facility or this facility may not operate in accordance with our expectations.
In June 2018, we commenced manufacturing operations in our new Columbia, Missouri facility and expect to add more production capacity through 2021. Any substantial delay in bringing this facility up to full production on our current schedule may hinder our ability to produce all of the product needed to meet orders and/or achieve our expected financial performance. Opening this facility has required, and will continue to require, additional capital expenditures and the efforts and attention of our management and other personnel, which has and will continue to divert resources from our existing business or operations. In addition, we will need to hire and retain more skilled employees to operate the expanded facility in this tight labor market. Even if our new Columbia, Missouri facility is brought up to full production according to our current schedule, it may not provide us with all of the operational and financial benefits we expect to receive.
Our Columbia, Missouri facilities and the manufacturing equipment we use to produce our products is costly to replace or repair and may require substantial lead-time to do so. For example, our estimate of throughput or our extrusion capacity may be impacted by disruption from extruder lead-in time, calibration, maintenance and unexpected delays. In addition, our ability to procure new extruders may face more lengthy lead times than is typical. We may also not be able to find suitable alternatives with co-manufacturers to replace the output from such equipment on a timely basis and at a reasonable cost. In the future, we may also experience plant shutdowns or periods of reduced production because of regulatory issues, equipment failure or delays in raw material deliveries. Any such disruption or unanticipated event may cause significant interruptions or delays in our business and the reduction or loss of inventory may render us unable to fulfill customer orders in a timely manner, or at all. We have property and business disruption insurance in place for our Columbia, Missouri facilities; however, such insurance coverage may not be sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, or at all.
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Failure to continually innovate and successfully introduce and commercialize new products or successfully improve existing products may adversely affect our ability to continue to grow.
A key element of our long-term growth strategy depends on our ability to develop and market new products and improvements to our existing products that meet our standards for quality and appeal to consumer preferences. The success of our innovation and product development efforts is affected by our ability to anticipate changes in consumer preferences, accurately predict taste preferences and purchasing habits of consumers in new geographic markets, the technical capability of our innovation staff in developing and testing product prototypes, including complying with applicable governmental regulations, commercialization and scale-up of new products, the success of our management and sales and marketing teams in introducing and marketing new products.products, and our ability to adapt to changes in technology, including the successful utilization of data analytics, artificial intelligence and machine learning. Our innovation staff members are continuously testing alternative plant-based proteins to the proteins we currently use in our products, as they seek to find
additional protein options to our current ingredients that are more easily sourced, and which retain and build upon the quality and appeal of our current product offerings. Failure to develop, commercialize and market new products that appeal to consumers may lead to a decrease in our growth, sales and profitability.
Additionally, the development and introduction of new products requires substantial research, development and marketing expenditures, which we may be unable to recoup if the new products do not gain widespread market acceptance. If we are unsuccessful in meeting our objectives with respect to new or improved products, our business could be harmed.
If weRisks Related to Our Investments
Joint ventures may not operate according to their business plans if our partners fail to cost-effectively acquire new customersfulfill their obligations, which may adversely affect our results of operations and compel us to dedicate additional resources to these joint ventures. Restructuring certain contracts and operating activities related to Beyond Meat Jerky and our assumption of distribution responsibilities for Beyond Meat Jerky may not be successful.
The nature of a joint venture requires us to share control in certain areas with unaffiliated third parties. If our joint venture partner does not fulfill its obligations, the affected joint venture may not be able to operate in accordance with its business plan. Under such a scenario, our results of operations may be adversely affected and we may be compelled to increase the level of our resources devoted to the joint venture. Also, differing views among joint venture participants may result in delayed decisions, or retainfailure to agree on major issues. If such differences caused a joint venture to deviate from its business plan, our existing customers, or if we fail to derive revenue from our existing customers consistent with our historical performance, our businessresults of operations could be materially adversely affected.
Our success, and our ability to increase revenue and operate profitably, depends in part on our ability to cost-effectively acquire new customers, to retain existing customers, and to keep existing customers engaged so that theyAs we continue to purchase productsrestructure certain contracts and operating activities related to Beyond Meat Jerky, we may be unable to realize the contemplated benefits in connection with such efforts. We assumed distribution responsibilities for Beyond Meat Jerky in the fourth quarter of 2023. Because this transition is expected to both limit our distribution reach for Beyond Meat Jerky and substantially reduce our total number of U.S. retail distribution outlets, such transition will adversely affect our net revenues from us.Beyond Meat Jerky sales. If we are unable to cost-effectively acquire new customers, retainsuccessfully transition distribution responsibilities in-house, we may require the engagement of third-party retail product distribution or other partners, which could have an adverse impact on our existing customersmargin expansion objectives. Furthermore, if consumer demand for Beyond Meat Jerky continues to decrease, or keep existing customers engaged, our business, financial condition and operating results would be materially adversely affected. Further, if customers do not perceive our product offerings to be of sufficient value and quality, or if we fail to offer newsuccessfully market, distribute and relevantsell the product, offerings, we may not be able to attractgenerate significant revenue, which may require the implementation of additional measures, including downsizing or retain customers or engage existing customers so that they continue to purchase products from us. Weexiting certain operations. The restructuring efforts may lose loyal customers to our competitors if we are unable to meet customers’ orders in a timely manner.
If we fail to manage our future growth effectively, our business could be materially adversely affected.
We have grown rapidly since inception and anticipate further growth. For example, our net revenues increased from $16.2 million at December 31, 2016 to $32.6 million at December 31, 2017 to $87.9 million at December 31, 2018. Net revenues in the three months ended March 30, 2019 were $40.2 million. The numberrequire significant attention of our full-time employees increased from 142 (which included 44 contract employees) at December 31, 2016, to 184 (which included 52 contract employees) at December 31, 2017 and to 383 (which included 104 contract employees) at March 30, 2019. This growth has placed significant demands on our management, financial, operational, technological and other resources. The anticipated growth and expansion of our business and our product offerings will place significant demands on our management and operations teams and require significant additionalother personnel, which would divert resources from our core business or operations. Our failure to meet our needs, which may not be available in a cost-effective manner, or at all. If we do not effectively manage our growth, we may not be able to execute on our business plan, respond to competitive pressures, take advantage of market opportunities, satisfy customer requirements or maintain high-quality product offerings,successfully accomplish any of which could harm our business, brand, results of operationsthe above activities and financial condition.
We face intense competition in our market from our competitors, including manufacturers of animal-based meat products and other brands that produce plant-based protein products, and potential competitors and may lack sufficient financial or other resources to compete successfully.
Our future success depends, in large part, on our ability to implement our growth strategy of expanding supply and distribution, improving placement of our products, attracting new consumers to our brand and introducing new products and product extensions. Our ability to implement this growth strategy depends, among other things, on our ability to:
manage relationships with various suppliers, co-manufacturers, distributors, customers and other third parties, and expend time and effort to integrate new suppliers, co-manufacturers and customers into our fulfillment operations;
continue to compete in the retail channel and the restaurant and foodservice channel;
secure placement in the meat case for our products;
increase our brand recognition;
expand and maintain brand loyalty; and
develop new product lines and extensions.
We may not be able to implement our growth strategy successfully. Our sales and operating results will be adversely affected if we fail to implement our growth strategy or if we invest resources in a growth strategy that ultimately proves unsuccessful.
We may face difficulties as we expand our operations into countries in which we have no prior operating experience.
We intend to continue to expand our global footprint in order to enter into new markets. This may involve expanding into countries other than those in which we currently operate. It may also involve expanding into less developed countries, which may have less political, social or economic stability and less developed infrastructure and legal systems. In addition, it may be difficult for us to understand and accurately predict taste preferences and purchasing habits of consumers in these new geographic markets. It is costly to establish, develop and maintain international operations and develop and promote our brands in international markets. As we expand our business into new countries, we may encounter regulatory, legal, personnel, technological and other difficulties that increase our expenses and/or delay our ability to become profitable in such countries, whichgoals may have a material adverse effect on our net revenues, business, financial condition and results of operations.
Risks Related to Our Intellectual Property, Information Technology, Cybersecurity and Privacy
We rely on information technology systems, and any inadequacy, failure, interruption or security breaches of those systems, including those of third parties upon which we rely, may harm our ability to effectively operate our business.
We and the third parties upon which we rely are dependent on various information technology systems, including, but not limited to, networks, applications and outsourced services in connection with the operation of our business. A failure of our information technology systems to perform as we anticipate could disrupt our business and brand.result in transaction errors, processing inefficiencies and loss of sales, causing our business to suffer. In addition, our information technology systems, and those of the third parties upon which we rely, may be vulnerable to damage or interruption from circumstances beyond our control, including cyber attacks, fire, severe weather, natural disasters, systems failures, viruses and security breaches, particularly in light of many of our employees working remotely. Any such damage or interruption could materially disrupt our systems and operations, supply chain and ability to produce, sell and distribute our products and may have a material adverse effect on our business.
A cybersecurity incident, other technology disruptions or failure to comply with laws and regulations relating to privacy and the protection of data relating to individuals could negatively impact our business, our reputation and our relationships with customers.
We use computers in substantially all aspects of our business operations. We also use mobile devices, social networking and other online activities to connect with our employees, suppliers, co-manufacturers, distributors, customers and consumers. Such uses give rise to cybersecurity risks, including security breaches, espionage, system disruption, theft and inadvertent release of information. Our business involves the storage and transmission of numerous classes of sensitive and/or confidential information and intellectual property, including customers’ and suppliers’ information, private information about employees and financial and strategic information about us and our business partners. Further, as we pursue new initiatives that improve our operations and cost structure, potentially including acquisitions, we may also expand and improve our information technologies, resulting in a larger technological presence and corresponding exposure to cybersecurity risk. If we fail to assess and identify cybersecurity risks associated with new initiatives or acquisitions, we may become increasingly vulnerable to such risks.
Breaches of our data systems, or those of our vendors and other third parties on which we rely, whether from circumvention of security systems, denial-of-service attacks or other cyber-attacks, hacking, “phishing” attacks, computer viruses, ransomware or malware, employee or insider error, malfeasance, social engineering, vendor software supply chain compromises, physical breaches or other actions, could result in material interruptions or malfunctions in our or such third parties’ websites, applications or data processing, or the disruption of other business operations. A successful cyber-attack against any of our supply chain vendors’ information technology systems may disrupt our supply chain. For example, in April 2023, one of our temperature-controlled warehousing vendors began to receive evidence that its computer network was affected by a cybersecurity incident. Although the full impact of the vendor’s cybersecurity incident on our operations and business is not yet known, it and similar disruptions of our supply chain could result in material adverse impacts on our revenue, business, financial condition or results of operations, including affecting customer demand, orders that may not materialize due to delayed deliveries and subsequent lost sales that we may not be able to recover in full, or at all. Additionally, while we have implemented measures to prevent security breaches and cyber incidents, our preventative measures and incident response efforts may not be entirely effective. The theft, destruction, loss, misappropriation, or release of sensitive and/or confidential information or intellectual property, or interference with our information technology systems or the technology systems of third parties on which we rely, could result in business disruption, negative publicity, brand damage, violation of privacy laws, loss of customers, potential liability and competitive disadvantage all of which could have a material adverse effect on our business, financial condition or results of operations. The costs related to cyber or other security threats or disruptions may not be fully insured or indemnified by other means. Currently, we carry cybersecurity insurance
and business interruption coverage to mitigate certain potential losses, but this insurance is limited in amount and may not be sufficient in type or amount to cover us against claims related to a cybersecurity breach and related business and system disruptions. We cannot be certain that such potential losses will not exceed our policy limits, insurance will continue to be available to us on economically reasonable terms, or at all, or any insurer will not deny coverage as to any future claim. In addition, we may be subject to changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements.
Additionally, the SEC has recently released its final rule on Cybersecurity Risk Management, Strategy, Governance and Incident Disclosure which will require public companies to report information relating to certain cyber-attacks or other information security breaches in disclosures required to be made under the federal securities laws and may increase our costs of doing business, expose us to potential compliance risk and impact the manner in which we operate. Any such cyber incidents involving our computer systems and networks, or those of third parties important to our business, could have a material adverse effect on our business, financial condition, results of operations and prospects.
In addition, we are subject to laws, rules and regulations in the United States, the European Union, China and other jurisdictions relating to the collection, use and security of personal information and data. Such data privacy laws, regulations and other obligations may require us to change our business practices and may negatively impact our ability to expand our business and pursue business opportunities. We may incur significant expenses to comply with the laws, regulations and other obligations that apply to us. Additionally, the privacy and data protection-related laws, rules and regulations applicable to us are subject to significant change. Several jurisdictions have passed new laws and regulations in this area, and other jurisdictions are considering imposing additional restrictions. For example, our operations are subject to the European Union’s General Data Protection Regulation, which imposes data privacy and security requirements on companies doing business in the European Union, including substantial penalties for non-compliance. The California Consumer Privacy Act (the “CCPA”), which went into effect on January 1, 2020, imposes similar requirements on companies handling data of California residents and creates a new and potentially severe statutory damages framework for (i) violations of the CCPA and (ii) businesses that fail to implement reasonable security procedures and practices to prevent data breaches. The California Privacy Rights Act, which became effective January 1, 2023, amends and expands the CCPA, including by expanding consumer’s rights in their personal information and creating a new governmental agency to interpret and enforce the statute. Additionally, in August 2021, the National People’s Congress of the People's Republic of China adopted the Personal Information Protection Law, which became effective on November 1, 2021 and provides a comprehensive system for the protection of personal information in China. Privacy and data protection-related laws and regulations also may be interpreted and enforced inconsistently over time and from jurisdiction to jurisdiction. Any actual or perceived inability to comply with applicable privacy or data protection laws, regulations, or other obligations could result in significant cost and liability, litigation or governmental investigations, damage our reputation, and adversely affect our business.
Risks Related to Our Lease Obligations, Indebtedness, Financial Position and Need for Additional Capital
We may require additional financing to achieve our goals, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, may force us to delay, limit, reduce or terminate our product manufacturing and development, and other operations.
Since our inception, substantially all of our resources have been dedicated to the development of our three core plant-based product platforms of beef, pork and poultry, including purchases of property, plant and equipment, principally to support the development and production of our products, the build-out and equipping of our former Manhattan Beach Project Innovation Center and our Innovation Center within our Campus Headquarters, and the purchase, build-out and equipping of manufacturing facilities in the U.S. and abroad. We have and believe that we will continue to expend resources as we expand into additional markets we may choose to pursue. These expenditures are expected to include costs associated with research and development, manufacturing and supply, as well as marketing and selling existing and new products. In addition, other unanticipated costs may arise.
As of September 30, 2023, we had cash and cash equivalents and restricted cash totaling $232.8 million. Our operating plan may change because of factors currently unknown to us, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings or other sources, including strategic collaborations. For example, in May 2023, we established our ATM Program, under which we may offer and sell from time to time and at our discretion shares of our common stock having an aggregate offering price of up to $200.0 million pursuant to the Equity Distribution Agreement. Such financing and other potential financings may result in dilution to stockholders, reduction in the market price of our common stock, imposition of debt covenants and repayment obligations, or other restrictions that may adversely affect our business. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. However, the capital markets may experience extreme volatility and disruption, including rising interest rates and higher borrowing costs, which could make it more difficult for us to raise capital. If we cannot access the capital markets upon favorable terms or at all, it may impact our ability to achieve our goals.
Our future capital requirements may vary materially from those currently planned and will depend on many factors, including, among others:
•demand in the plant-based meat category and for our products;
•our rate of revenue growth;
•the results of our review of our global operations and the successful implementation of our ongoing cost-reduction initiatives;
•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, including the timing and success of subleasing excess space at our Campus Headquarters;
•the success of, and expenses associated with, our marketing initiatives;
•our investment in manufacturing and facilities to optimize our manufacturing and production capacity, including underutilization fees, termination fees and exit costs;
•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;
•variations in product selling prices and costs;
•the timing and success of changes to our pricing architecture within certain channels and the mix of products sold;
•the level of trade and promotional spending to support our products appropriately;
•the expenses associated with our sales force; our management of accounts receivable, inventory, accounts payable and other working capital accounts;
•the impact of foreign currency exchange fluctuations on our cash balances;
•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.
Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timely basis, we may be required to:
•delay, limit, reduce or terminate our manufacturing, research and development activities; or
•delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary to generate revenue and achieve profitability.
Our inability to access and employ the cash that collateralizes our outstanding and future letters of credit may impact our liquidity.
As of September 30, 2023, we had $15.3 million in restricted cash, which was comprised of $12.6 million to secure the letter of credit to support the development and leasing of our Campus Headquarters and $2.7 million to secure a letter of credit associated with a new third party contract manufacturer in Europe. Our inability to access and employ the cash that collateralizes our outstanding and future letters of credit may impact our liquidity and could have an adverse impact on our business, operations and financial condition.
Adverse developments affecting the financial services industry could adversely affect our current and projected business operations, our financial condition and results of operations.
On March 10, 2023, it was announced that Silicon Valley Bank (“SVB”) was unable to continue their operations and that the Federal Deposit Insurance Corporation was appointed as receiver for SVB. Although we did not have a material amount of funds in SVB or other institutions that have since closed, we cannot guarantee that the banks or other financial institutions that hold our funds will not experience similar issues. If failures in financial institutions occur where we hold deposits, we could experience additional risk and any such loss or limitation on our cash and cash equivalents would adversely affect our business. In addition, investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on terms favorable to us, or at all, and could have material adverse impacts on our liquidity, our business, financial condition or results of operations, and our prospects. Our business may be adversely impacted by these developments in ways that we cannot predict at this time, there may be additional risks that we have not yet identified, and we cannot guarantee that we will be able to avoid negative consequences directly or indirectly from any failure of one or more banks or other financial institutions.
Risks Related to Regulatory and Legal Compliance Matters, Litigation and Legal Proceedings
We are or will be subject to international regulations that could adversely affect our business and results of operations.
We are or will be subject to extensive regulations internationally where we manufacture, distribute and/or sell our products. Our products are subject to numerous food safety and other laws and regulations relating to the sourcing, manufacturing, composition and ingredients, storing, labeling, marketing, advertising and distribution
of these products. For example, in early 2018, we received an inquiry from Canadian officials about the labeling and composition of products that we export to Canada. We responded promptly to that inquiry, identifying minor formulation changes that we made under Canadian regulations and have not heard more from regulators in Canada. We have continued to export to Canada without further inquiry from Canadian officials. However, ifregulations. If regulators determine that the labeling, advertising and/or composition of any of our products is not in compliance with Canadianforeign law or regulations, or if we or our co-manufacturers otherwise fail to comply with applicable laws and regulations in Canada or otherforeign jurisdictions where we operate and market products, we could be subject to civil remedies or penalties, such as fines, injunctions, recalls or seizures, warning letters, restrictions on the marketing or manufacturing of the products, or refusals to permit the import or export of products, as well as potential criminal sanctions. In places like Mainland China, government inquiries into product labeling and advertising can be prompted by random inspections of our product on the market by local government authorities or complaints by consumers or competitors to the authorities. The consequences of a labeling or advertising violation in China can lead not only to fines from administrative authorities but also to multiple individual consumer lawsuits for nominal damages in the hundreds of dollars each, which can be costly to defend. In addition, enforcement of existing laws and regulations, changes in legal requirements and/or evolving interpretations of existing regulatory requirements may result in increased compliance costs and create other obligations, financial or otherwise, that could adversely affect our business, financial condition or operating results.
For example, China has recently introduced new regulations on food manufacturing and it may introduce new Food Labeling Supervision Measures that could increase restrictions and require changes to our labels. In addition, with our expanding international operations, we could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act, or FCPA, and similar worldwide anti-bribery laws, which generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials or other third parties for the purpose of obtaining or retaining business. While our policies mandate compliance with these anti-bribery laws, our internal control policies and procedures may not protect us from reckless or criminal acts committed by our employees, contractors or agents. Violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our results of operations, cash flows and financial condition.
IngredientAny changes in, or changes in the interpretation of, applicable laws, regulations or policies of the FDA or U.S. Department of Agriculture (“USDA”), state regulators or similar foreign regulatory authorities that relate to the use of the word “meat” or other similar words in connection with plant-based meat products could adversely affect our business, prospects, results of operations or financial condition.
The FDA and packaging coststhe USDA, state regulators or similar foreign regulatory authorities, such as Health Canada or the CFIA, or authorities of the U.K., the EU or the EU member states, or China, including the State Administration for Market Regulation and its local counterpart agencies, could take action to impact our ability to use the term “meat” or similar words (such as “beef,” “burger” or “sausage,” including the Beyond Meat logo of the Caped Longhorn superhero) to describe or advertise our products. In addition, a food may be deemed misbranded if its labeling is false or misleading in any particular way, and the FDA, CFIA, EU member state authorities or other regulators could interpret the use of the term “meat” or any similar phrase(s) to describe our plant-based meat products as false or misleading or likely to create an erroneous impression regarding their composition.
For example, in 2018, the state of Missouri passed a law prohibiting any person engaged in advertising, offering for sale, or sale of food products from misrepresenting a product as meat that is not derived from harvested production livestock or poultry. The state of Missouri Department of Agriculture has clarified its interpretation that products which include prominent disclosure that the product is “made from plants,” or comparable disclosure such as through the use of the phrase “plant-based,” are volatilenot misrepresented under the Missouri law. Additional states, including Arkansas, Georgia, Mississippi, Louisiana, Oklahoma, South Dakota and Wyoming, have subsequently passed similar laws, and legislation that would impose specific requirements on the naming of plant-based meat products is currently pending in a number of other states. The United States Congress considered (but did not pass) federal legislation, called the Real MEAT Act, that could require changes to our product labeling and marketing, including identifying products as “imitation” meat products, and that would give USDA certain oversight over the labeling of plant-based meat products. If similar bills gain traction and ultimately become law, we could be required to identify our products as “imitation” in our product
labels. Further, the FDA has announced that it is developing guidance on naming plant-based meat alternatives that could impact our naming expectations. Canadian Food and Drug Regulations also provide requirements for “simulated meat” products, including requirements around composition and naming.
In Europe, the Agriculture Committee of the European Parliament proposed in May 2019 to reserve the use of “meat” and meat-related terms and names for products that are manufactured from the edible parts of animals. In October 2020, the European Parliament rejected the adoption of this provision. In the absence of European Union legislation, member states remain free to establish national restrictions on meat-related names. In June 2020, France adopted a law prohibiting names to indicate foodstuffs of animal origin to describe, market or promote foodstuffs containing vegetable proteins. In October 2021, France published a draft implementing decree (the “Contested Decree”) to define, for example, the sanctions in case of non-compliance with the new law, and the Contested Decree went into effect in 2022. We do not believe that the Contested Decree complies with the laws of the EU, in particular the principle of free movement of goods. In July 2022, at the request of a trade association, the French High Administrative Court partially suspended the execution of the Contested Decree, which we believe signals that there are indeed serious doubts as to the lawfulness of the Contested Decree, though the suspension is only partial and temporary until the Court rules on the merits of the case. The Company filed an application for annulment against the Contested Decree and intervened in favor of the trade association in their pending case against the Contested Decree. Several plant-based companies filed voluntary intervention in support of the Company’s case on April 20, 2023. On July 12, 2023, the French High Administrative Court decided to refer the case to the Court of Justice of the European Union ("CJEU"). The CJEU is asked to decide on the lawfulness of the Contested Decree banning “meaty” names for plant-based protein under EU law. The procedure before the CJEU started on August 22, 2023, and the Company filed its submission on October 31, 2023. This procedure will likely take around 15 to 18 months to complete. The judgment of the CJEU will be determinative to whether the Contested Decree’s ban on meat names for plant-based foods is lawful, or not, under EU law. Should the CJEU decide that the ban of the Contested Decree violates EU law, the Company could continue to market in France as-is. However, a decision from the CJEU confirming the lawfulness of the Decree under EU law would impact the Company’s operations in France, and may risealso trigger similar prohibitions in other EU countries, which could significantly whichdisrupt the Company’s operations.
On August 23, 2023, France published a proposal for a new decree (“New Decree”) replacing the Contested Decree. The New Decree has removed some of the Contested Decree’s most open-ended language, but essentially maintains the prohibition on meaty names for plant-based proteins. The New Decree is now subject to administrative review procedure by the European Commission (the EU’s executive body) and the EU member states other than France. The Company is supporting plant-based protein trade associations against the New Decree. If adopted, the New Decree would replace and abrogate the Contested Decree, making the current proceedings before the CJEU and the pending proceedings before the French High Administrative Court without object. Thus, there is a risk that the Company may negatively impactneed to initiate new proceedings before the profitabilityFrench High Administrative Court and the CJEU against the New Decree.
France is the first EU member state to adopt such a law. Should other EU member state regulatory authorities take action with respect to the use of our business.
We purchase large quantities of raw materials, including ingredients derived from Canadian and European yellow peas, mung beans, sunflower seeds, rice, canola oil and coconut oil. In addition, we purchase and use significant quantities of cardboard, film and plastic to package our products. Costs of ingredients and packaging are volatile and can fluctuate due to conditionsthe term “meat” or similar claims, such that are difficult to predict, including global competition for resources, weather conditions, consumer demand and changes in governmental trade and agricultural programs. Volatility in the prices of raw materials and other supplies we purchase could increase our cost of sales and reduce our profitability. Moreover, we may not be able to implement price increases for our products to cover any
increased costs, and any price increases we do implement may result in lower sales volumes. If we are not successful in managing our ingredient and packaging costs, if we are unable to increaseuse those terms with respect to our pricesplant-based products, we could be subject to cover increased costsenforcement action or if such price increases reducerecall of our sales volumes, then such increasesproducts marketed with these terms, we may be required to modify our marketing strategy, or required to identify our products as “imitation” in costs will adversely affectour product labels, and our business, prospects, results of operations andor financial condition.
If we fail to develop and maintain our brand, our businesscondition could suffer.
We have developed a strong and trusted brand that has contributed significantly to the success of our business, and we believe our continued success depends on our ability to maintain and grow the value of the Beyond Meat brand. Maintaining, promoting and positioning our brand and reputation will depend on, among other factors, the success of our plant-based product offerings, food safety, quality assurance, marketing and merchandising efforts and our ability to provide a consistent, high-quality customer experience. Any negative publicity, regardless of its accuracy, could materially adversely affect our business. Brand value is based on perceptions of subjective qualities, and any incident that erodes the loyalty of our customers, suppliers or co-manufacturers, including adverse publicity or a governmental investigation or litigation, could significantly reduce the value of our brand and significantly damage our business.
Consumer preferences for our products are difficult to predict and may change, and, if we are unable to respond quickly to new trends, our business may be adversely affected.
Our business is focused on the development, manufacture, marketing and distribution of a line of branded plant-based protein products as alternatives to meat-based protein products. Consumer demand could change based on a number of possible factors, including dietary habits and nutritional values, concerns regarding the health effects of ingredients and shifts in preference for various product attributes. If consumer demand for our products decreased, our business and financial condition would suffer. In addition, sales of plant-based protein or meat-alternative products are subject to evolving consumer preferences that we may not be able to accurately predict or respond to. Consumer trends that we believe favor sales of our products could change based on a number of possible factors, including a shift in preference from plant-based protein to animal-based protein products, economic factors and social trends. A significant shift in consumer demand away from our products could reduce our sales or our market share and the prestige of our brand, which would harm our business and financial condition.
Our revenues and earnings may fluctuate as a result of our promotional activities.
We routinely offer sales discounts and promotions through various programs to customers and consumers which may occasionally result in reduced margins. These programs include rebates, temporary on shelf price reductions, off-invoice discounts, retailer advertisements, product coupons and other trade activities. We anticipate that, at times, these promotional activities may adversely impact our net revenues and results of operations.
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Litigation or legal proceedings could expose us to significant liabilities and have a negative impact on our reputation or business.
From time to time, we may be party to various claims and litigation proceedings. We evaluate these claims and litigation proceedings to assess the likelihood of unfavorable outcomes and to estimate, if possible, the amount of potential losses. Based on these assessments and estimates, we may establish reserves, as appropriate. These assessments and estimates are based on the information available to management at the time and involve a significant amount of management judgment. Actual outcomes or losses may differ materially from our assessments and estimates.
For
example, on May 25, 2017, following our termination of our supply agreement with Don Lee Farms, a co-manufacturer, Don Lee Farms filed a lawsuit against usinformation regarding material pending legal proceedings, please see Part II, Item I, Legal Proceedings, and Note 10, Commitments and Contingencies, to the Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere in California state court claiming that we wrongfully terminated the parties’ contract and that we misappropriated their trade secrets principally by sharing with subsequent co-manufacturers the processes for manufacturing our products—processes which they claim to have developed. On July 27, 2017 we filed a cross-complaint, alleging that Don Lee Farms (1) breached the supply agreement, including by failing to provide saleable product, as certain of our products manufactured by Don Lee
Farms were contaminated with salmonella and other foreign objects, and that Don Lee Farms did not take appropriate actions to address these issues; (2) engaged in unfair competition in violation of California’s Unfair Competition Law; and (3) unlawfully converted certain Beyond Meat property, including certain pieces of equipment. In October 2018, Don Lee Farms filed an amended complaint that added ProPortion Foods, LLC (one of Beyond Meat’s current contract manufacturers) as a defendant, principally for claims arising from ProPortion’s alleged use of Don Lee Farms’ alleged trade secrets, and for replacing Don Lee Farms as Beyond Meat’s co-manufacturer. ProPortion filed an answer denying all of Don Lee Farms’ claims and a cross-complaint against Beyond Meat asserting claims of total and partial equitable indemnity, contribution, and repayment. On March 11, 2019, Don Lee Farms filed a second amended complaint to add claims of fraud and negligent misrepresentation against us. On May 30, 2019, the judge denied our motion to dismiss the fraud and negligent misrepresentation claims, allowing the claims to proceed. Trial is currently set for May 18, 2020.
Don Lee Farms is seeking from us and ProPortion unspecified compensatory and punitive damages, declaratory and injunctive relief, including the prohibition of our use or disclosure of the alleged trade secrets, and attorneys’ fees and costs. We are seeking from Don Lee Farms monetary damages, restitution of monies paid to Don Lee Farms, and attorneys’ fees and costs. ProPortion is seeking indemnity, contribution, or repayment from us of any or all damages that ProPortion may be found liable to Don Lee Farms, and attorney’s fees and costs. We believe we were justified in terminating the supply agreement with Don Lee Farms, that we did not misappropriate their alleged trade secrets, that we are not liable for the fraud or negligent misrepresentation alleged in the proposed second amended complaint, that Don Lee Farms is liable for the conduct alleged in our cross-complaint, and that we are not liable to ProPortion for any indemnity, contribution, or repayment, including for any damages or attorney’s fees and costs.
We intend to vigorously defend ourselves against the claims and prosecute our own. However, we cannot assure you that Don Lee Farms or ProPortion will not prevail in all or some of their claims against us, or that we will prevail in some or all of our claims against Don Lee Farms. For example, if Don Lee Farms succeeds in the lawsuit, we could be required to pay damages, including but not limited to contract damages reasonably calculated at what we would have paid Don Lee Farms to produce our products through 2019, the end of the contract term, and Don Lee Farms could also claim some ownership in the intellectual property associated with the production of certain of our products or in the products themselves, and thus claim a stake in the value we have derived and will derive from the use of that intellectual property after we terminated our supply agreement with Don Lee Farms. As another example, we also could be required to pay attorney’s fees and costs incurred by Don Lee Farms or ProPortion.this report.
Even when not merited, the defense of these lawsuits may divert our management’s attention, and we may incur significant expenses in defending these lawsuits. The results of litigation and other legal proceedings are inherently uncertain, and adverse judgments or settlements in some of these legal disputes may result in adverse monetary damages, penalties or injunctive relief against us, which could have a material adverse effect on our financial position, cash flows or results of operations. Any claims or litigation, even if fully indemnified or insured, could damage our reputation and make it more difficult to compete effectively or to obtain adequate insurance in the future.
Furthermore, while we maintain insurance for certain potential liabilities, such insurance does not cover all types and amounts of potential liabilities and is subject to self-insured retentions, various exclusions as well as caps on amounts recoverable. Even if we believe a claim is covered by insurance, insurers may dispute our entitlement to recovery for a variety of potential reasons, which may affect the timing and, if the insurers prevail, the amount of our recovery.
Legal claims, government investigations or other regulatory enforcement actions could subject us to civil and criminal penalties.
We operate in a highly regulated environment with constantly evolving legal and regulatory frameworks. Consequently, we are subject to heightened risk of legal claims, government investigations or other regulatory enforcement actions. Although we have implemented policies and procedures designed to ensure compliance with existing laws and regulations, there can be no assurance that our employees, temporary workers, contractors
or agents will not violate our policies and procedures. Moreover, a failure to maintain effective control processes could lead to violations, unintentional or otherwise, of laws and regulations. Legal claims, government investigations or regulatory enforcement actions arising out of our failure or alleged failure to comply with applicable laws and regulations could subject us to civil and criminal penalties that could materially and adversely affect our product sales, reputation, financial condition and operating results. In addition, the costs and other effects of defending potential and pending litigation and administrative actions against us may be difficult to determine and could adversely affect our financial condition and operating results.
Failure by our transportation providers to deliver our products on time, or at all, could result in lost sales.
We currently rely upon third-party transportation providers for a significant portion of our product shipments. Our utilization of delivery services for shipments is subject to risks, including increases in fuel prices, which would increase our shipping costs, and employee strikes and inclement weather, which may impact the ability of providers to provide delivery services that adequately meet our shipping needs. We periodically change shipping companies, and we could face logistical difficulties that could adversely affect deliveries. In addition, we could incur costs and expend resources in connection with such change. Moreover, we may not be able to obtain terms as favorable as those we receive from the third-party transportation providers that we currently use, which in turn would increase our costs and thereby adversely affect our operating results.
Our revenue growth rate and financial performance in recent periods may not be indicative of future performance and such revenue growth rate may slow over time.
We have grown rapidly over the last several years, and therefore, our recent revenue growth rate and financial performance should not be considered indicative of our future performance. From 2017 to 2018, our net revenue growth rate was 170%. In the quarters ended March 30, 2019 and March 31, 2018, our net revenue growth rate was 215%. You should not rely on our revenue for any previous quarterly or annual period as any indication of our revenue or revenue growth rate in future periods. As we grow our business, our revenue growth rates will slow in future periods due to a number of reasons, which may include increasing competition, market saturation, slowing demand for our offerings, increasing regulatory costs and challenges, and our failure to capitalize on growth opportunities.
Fluctuations in our results of operations for our second and third quarters may impact, and may have a disproportionate effect on our overall financial condition and results of operations.
Our business is subject to seasonal fluctuations that may have a disproportionate effect on our results of operations. Historically, we have realized a higher portion of our net revenues, net income and operating cash flows in our second and third quarters due to weather and related increase in outdoor activities such as barbecues. Any factors that harm our second and third quarters operating results, including disruptions in our supply chain, adverse weather or unfavorable economic conditions, may have a disproportionate effect on our results of operations for the entire year.
Historical quarter-to-quarter and period-over-period comparisons of our sales and operating results are not necessarily indicative of future quarter-to-quarter and period-over-period results. You should not rely on the results of a single quarter or period as an indication of our annual results or our future performance.
Failure to retain our senior management may adversely affect our operations.
Our success is substantially dependent on the continued service of certain members of our senior management, including Ethan Brown, our Chief Executive Officer. These executives have been primarily responsible for determining the strategic direction of our business and for executing our growth strategy and are integral to our brand, culture and the reputation we enjoy with suppliers, co-manufacturers, distributors, customers and consumers. The loss of the services of any of these executives could have a material adverse effect on our business and prospects, as we may not be able to find suitable individuals to replace them on a timely basis, if at all. In addition, any such departure could be viewed in a negative light by investors and analysts, which may cause the price of our common stock to decline. We do not currently carry key-person life insurance for our senior executives.
If we are unable to attract, train and retain employees, we may not be able to grow or successfully operate our business.
Our success depends in part upon our ability to attract, train and retain a sufficient number of employees who understand and appreciate our culture and can represent our brand effectively and establish credibility with our business partners and consumers. If we are unable to hire and retain employees capable of meeting our business needs and expectations, our business and brand image may be impaired. Any failure to meet our staffing needs or any material increase in turnover rates of our employees may adversely affect our business, results of operations and financial condition.
Our employees are employed by a professional employer organization.
We contract with a professional employer organization, or PEO, that administers our human resources, payroll and employee benefits functions. Although we recruit and select our personnel, each of our employees is also an employee of record of the PEO. As a result, our personnel are compensated through the PEO, receive their W-2s from the PEO and are governed by the personnel policies created by the PEO. This relationship permits management to focus on operations and profitability rather than human resource administration, but this relationship also exposes us to some risks. Among other risks, if the PEO fails to adequately withhold or pay employer taxes or to comply with other laws, such as the Fair Labor Standards Act, the Family and Medical Leave Act, the Employee Retirement Income Security Act or state and federal anti-discrimination laws, each of which is outside of our control, we would be liable for such violations, and indemnification provisions with the PEO, if applicable, may not be sufficient to insulate us from those liabilities. Court and administrative proceedings related to these matters could distract management from our business and cause us to incur significant expense. If we were held liable for violations by the PEO, such amounts may adversely affect our profitability and could negatively affect our business and results of operations.
We rely on information technology systems and any inadequacy, failure, interruption or security breaches of those systems may harm our ability to effectively operate our business.
We are dependent on various information technology systems, including, but not limited to, networks, applications and outsourced services in connection with the operation of our business. A failure of our information technology systems to perform as we anticipate could disrupt our business and result in transaction errors, processing inefficiencies and loss of sales, causing our business to suffer. In addition, our information technology systems may be vulnerable to damage or interruption from circumstances beyond our control, including fire, natural disasters, systems failures, viruses and security breaches. Any such damage or interruption could have a material adverse effect on our business.
A cybersecurity incident or other technology disruptions could negatively impact our business and our relationships with customers.
We use computers in substantially all aspects of our business operations. We also use mobile devices, social networking and other online activities to connect with our employees, suppliers, co-manufacturers, distributors, customers and consumers. Such uses give rise to cybersecurity risks, including security breaches, espionage, system disruption, theft and inadvertent release of information. Our business involves the storage and transmission of numerous classes of sensitive and/or confidential information and intellectual property, including customers’ and suppliers’ information, private information about employees and financial and strategic information about us and our business partners. Further, as we pursue a strategy to grow through acquisitions and to pursue new initiatives that improve our operations and cost structure, we will also be expanding and improving our information technologies, resulting in a larger technological presence and corresponding exposure to cybersecurity risk. If we fail to assess and identify cybersecurity risks associated with acquisitions and new initiatives, we may become increasingly vulnerable to such risks. Additionally, while we have implemented measures to prevent security breaches and cyber incidents, our preventative measures and incident response efforts may not be entirely effective. The theft, destruction, loss, misappropriation, or release of sensitive and/or confidential information or intellectual property, or interference with our information technology systems or the technology systems of third parties on which we rely, could result in business disruption, negative publicity, brand
damage, violation of privacy laws, loss of customers, potential liability and competitive disadvantage all of which could have a material adverse effect on our business, financial condition or results of operations.
Disruptions in the worldwide economy may adversely affect our business, results of operations and financial condition.
Adverse and uncertain economic conditions may impact distributor, retailer, foodservice and consumer demand for our products. In addition, our ability to manage normal commercial relationships with our suppliers, co-manufacturers, distributors, retailers, foodservice consumers and creditors may suffer. Consumers may shift purchases to lower-priced or other perceived value offerings during economic downturns. In particular, consumers may reduce the amount of plant-based food products that they purchase where there are conventional animal-based protein offerings, which generally have lower retail prices. In addition, consumers may choose to purchase private label products rather than branded products because they are generally less expensive. Distributors and retailers may become more conservative in response to these conditions and seek to reduce their inventories. Our results of operations depend upon, among other things, our ability to maintain and increase sales volume with our existing distributors, retailer and foodservice customers, our ability to attract new consumers, the financial condition of our consumers and our ability to provide products that appeal to consumers at the right price. Prolonged unfavorable economic conditions may have an adverse effect on our sales and profitability.
A major earthquake, tsunami, tornado or other natural disaster could seriously disrupt our entire business.
Our corporate offices and research and development functions are located in El Segundo, California, and our industrial manufacturing facilities are located in Columbia, Missouri. The impact of a major earthquake or tsunami, or both, or other natural disasters in the Los Angeles area, or a tornado or other natural disaster in the Columbia area, on our facilities and overall operations is difficult to predict, but such a natural disaster could seriously disrupt our entire business. Our insurance may not adequately cover our losses and expenses in the event of such a natural disaster. As a result, natural disasters, such as a major earthquake, tsunami or tornado in the Los Angeles or Columbia areas or in areas where our co-manufacturers are located, could lead to substantial losses.
Climate change may negatively affect our business and operations.
There is concern that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global temperatures, weather patterns and the frequency and severity of extreme weather and natural disasters. If such climate change has a negative effect on agricultural productivity, we may be subject to decreased availability or less favorable pricing for certain commodities that are necessary for our products, such as Canadian and European yellow peas, mung beans, sunflowers, rice, canola oil and coconut oil. Due to climate change, we may also be subjected to decreased availability of water, deteriorated quality of water or less favorable pricing for water, which could adversely impact our manufacturing and distribution operations.
Regulatory Risks
Our operations are subject to FDA governmental regulation and state regulation, and there is no assurance that we will be in compliance with all regulations.
Our operations are subject to extensive regulation by the FDA, and other federal, state and local authorities. Specifically, we are subject to the requirements of the Federal Food, Drug and Cosmetic Act and regulations promulgated thereunder by the FDA. This comprehensive regulatory program governs, among other things, the manufacturing, composition and ingredients, packaging, labeling and safety of food. Under this program the FDA requires that facilities that manufacture food products comply with a range of requirements, including hazard analysis and preventative controls regulations, current good manufacturing practices, or cGMPs, and supplier verification requirements. Our processing facilities, including those of our co-manufacturers, are subject to periodic inspection by federal, state and local authorities. We do not control the manufacturing processes of, and rely upon, our co-manufacturers for compliance with cGMPs for the manufacturing of our products that is conducted by our co-manufacturers. If we or our co-manufacturers cannot successfully manufacture products that conform to our specifications and the strict regulatory requirements of the FDA or others, we or they may be
subject to adverse inspectional findings or enforcement actions, which could materially impact our ability to market our products, could result in our co-manufacturers’ inability to continue manufacturing for us, or could result in a recall of our product that has already been distributed. In addition, we rely upon our co-manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority determines that we or these co-manufacturers have not complied with the applicable regulatory requirements, our business may be materially impacted.
We seek to comply with applicable regulations through a combination of employing internal experience and expert personnel to ensure quality-assurance compliance (i.e., assuring that our products are not adulterated or misbranded) and contracting with third-party laboratories that conduct analyses of products to ensure compliance with nutrition labeling requirements and to identify any potential contaminants before distribution. Failure by us or our co-manufacturers to comply with applicable laws and regulations or maintain permits, licenses or registrations relating to our or our co-manufacturers’ operations could subject us to civil remedies or penalties, including fines, injunctions, recalls or seizures, warning letters, restrictions on the marketing or manufacturing of products, or refusals to permit the import or export of products, as well as potential criminal sanctions, which could result in increased operating costs resulting in a material effect on our operating results and business. See “Business—Government Regulation” in the Prospectus.
Changes in existing laws or regulations, or the adoption of new laws or regulations may increase our costs and otherwise adversely affect our business, results of operations and financial condition.
The manufacture and marketing of food products is highly regulated. We, our suppliers and co-manufacturers are subject to a variety of laws and regulations. These laws and regulations apply to many aspects of our business, including the manufacture, packaging, labeling, distribution, advertising, sale, quality and safety of our products, as well as the health and safety of our employees and the protection of the environment.
In the United States, we are subject to regulation by various government agencies, including the FDA, Federal Trade Commission, or FTC, Occupational Safety and Health Administration and the Environmental Protection Agency, as well as various state and local agencies. We are also regulated outside the United States by various international regulatory bodies. In addition, we are subject to certain standards, such as Global Food Safety Initiative, or GFSI, standards and review by voluntary organizations, such as the Council of Better Business Bureaus’ National Advertising Division. We could incur costs, including fines, penalties and third-party claims, because of any violations of, or liabilities under, such requirements, including any competitor or consumer challenges relating to compliance with such requirements. For example, in connection with the marketing and advertisement of our products, we could be the target of claims relating to false or deceptive advertising, including under the auspices of the FTC and the consumer protection statutes of some states.
The regulatory environment in which we operate could change significantly and adversely in the future. Any change in manufacturing, labeling or packaging requirements for our products may lead to an increase in costs or interruptions in production, either of which could adversely affect our operations and financial condition. New or revised government laws and regulations could result in additional compliance costs and, in the event of non-compliance, civil remedies, including fines, injunctions, withdrawals, recalls or seizures and confiscations, as well as potential criminal sanctions, any of which may adversely affect our business, results of operations and financial condition. In particular, recent federal, state and foreign attention to the naming of plant-based meat products could result in standards or requirements that mandate changes to our current labeling.
Any changes in applicable laws, regulations or policies of the FDA or U.S. Department of Agriculture, or USDA, state regulators or similar foreign regulatory authorities that relate to the use of the word “meat” in connection with plant-based protein products could adversely affect our business, prospects, results of operations or financial condition.
The FDA and the USDA, state regulators or similar foreign regulatory authorities could take action to impact our ability to use the term “meat” or similar words (such as “beef”) to describe our products. For example, the state of Missouri recently passed a law prohibiting any person engaged in advertising, offering for sale, or sale of food products from misrepresenting a product as meat that is not derived from harvested production livestock or
poultry. While the state of Missouri Department of Agriculture clarified its interpretation that products which include prominent disclosure that the product is “made from plants,” or comparable disclosure such as through the use of the phrase “plant-based,” are not misrepresented under the Missouri law, other regulators could always take a different position.
In addition, a food may be deemed misbranded if its labeling is false or misleading in any particular way, and the FDA or other regulators could interpret the use of the term “meat” or any similar phrase(s) to describe our plant-based protein products as false or misleading. Recently, the FDA announced that it will reexamine its enforcement of the standard of identity for milk, the official definition of which involves “lacteal secretion,” which may result in the restriction of the use of the term “milk” to only those products that are animal-based (we note there is no comparable FDA standard of identity for “meat” or other terms that we use to label our products). The USDA has also received a petition from industry requesting that the USDA exclude products not derived from the tissue or flesh of animals that have been harvested in the traditional manner from being labeled and marketed as “meat,” and exclude products not derived from cattle born, raised and harvested in the traditional manner from being labeled and marketed as “beef.” The USDA has not yet responded substantively to this petition, but has indicated that the petition is being considered as a petition for a policy change under the USDA’s regulations. We do not believe that USDA has the statutory authority to regulate plant-based products under the current legislative framework. However, should regulatory authorities take action with respect to the use of the term “meat” or similar terms, such that we are unable to use those terms with respect to our plant-based products, we could be subject to enforcement action or recall of our products marketed with these terms, we may be required to modify our marketing strategy, and our business, prospects, results of operations or financial condition could be adversely affected.
Failure by our suppliers of raw materials or co-manufacturers to comply with food safety, environmental or other laws and regulations, or with the specifications and requirements of our products, may disrupt our supply of products and adversely affect our business.
If our suppliers or co-manufacturers fail to comply with food safety, environmental or other laws and regulations, or face allegations of non-compliance, their operations may be disrupted. Additionally, our co-manufacturers are required to maintain the quality of our products and to comply with our product specifications. In the event of actual or alleged non-compliance, we might be forced to find an alternative supplier or co-manufacturer and we may be subject to lawsuits related to such non-compliance by our suppliers and co-manufacturers. As a result, our supply of raw materials or finished inventory could be disrupted or our costs could increase, which would adversely affect our business, results of operations and financial condition. The failure of any co-manufacturer to produce products that conform to our standards could adversely affect our reputation in the marketplace and result in product recalls, product liability claims and economic loss. For example, some of our co-manufacturers also process products with textured vegetable protein, a GMO product, and while we require them to process our products in separate designated quarters in their facilities, cross-contamination may occur and result in genetically modified organisms in our supply chain. Additionally, actions we may take to mitigate the impact of any disruption or potential disruption in our supply of raw materials or finished inventory, including increasing inventory in anticipation of a potential supply or production interruption, may adversely affect our business, results of operations and financial condition.
Risks Related to Our Intellectual Property
We may not be able to protect our proprietary technology adequately, which may impact our commercial success.
Our commercial success depends in part on our ability to protect our intellectual property and proprietary technologies. We rely on a combination of patent protection, where appropriate and available, copyrights, trade secrets and trademarks laws, as well as confidentiality and other contractual restrictions to protect our proprietary technology. However, these legal means afford only limited protection and may not adequately protect our proprietary technology or permit us to gain or keep any competitive advantage. As of March 30, 2019, we had one issued U.S. patent and 21 pending patent applications, including eight in the United States and 13 international patent applications.
We cannot offer any assurances about which, if any, patents will issue from these applications, the breadth of any such patents, or whether any issued patents will be found invalid and unenforceable or will be threatened by third parties. Any successful opposition to these patents or any other patents owned by or, if applicable in the future, licensed to us could deprive us of rights necessary for the successful commercialization of products that we may develop. Since patent applications in the United States and most other countries are confidential for a period of time after filing (in most cases 18 months after the filing of the priority application), we cannot be certain that we were the first to file on the technologies covered in several of the patent applications related to our technologies or products. Furthermore, a derivation proceeding can be provoked by a third party, or instituted by the U.S. Patent and Trademark Office, or USPTO, to determine who was the first to invent any of the subject matter covered by the patent claims of our applications.
Patent law can be highly uncertain and involve complex legal and factual questions for which important principles remain unresolved. In the United States and in many international jurisdictions, policy regarding the breadth of claims allowed in patents can be inconsistent and/or unclear. The U.S. Supreme Court and the Court of Appeals for the Federal Circuit have made, and will likely continue to make, changes in how the patent laws of the United States are interpreted. Similarly, international courts and governments have made, and will continue to make, changes in how the patent laws in their respective countries are interpreted. We cannot predict future changes in the interpretation of patent laws by U.S. and international judicial bodies or changes to patent laws that might be enacted into law by U.S. and international legislative bodies.
Moreover, in the United States, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, enacted in September 2011, brought significant changes to the U.S. patent system, including a change from a “first to invent” system to a “first to file” system. Other changes in the Leahy-Smith Act affect the way patent applications are prosecuted, redefine prior art and may affect patent litigation. The USPTO developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act became effective on March 16, 2013. The Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, which could have a material adverse effect on our business and financial condition.
We may not be able to protect our intellectual property adequately, which may harm the value of our brand.
We believe that our intellectual property has substantial value and has contributed significantly to the success of our business. Our trademarks, including The Beyond Burger, Beyond Beef, Beyond Chicken, Beyond Meat, Beyond Sausage, Beyond Breakfast Sausage, The Cookout Classic, The Future of Protein and The Future of Protein Beyond Meat, are valuable assets that reinforce our brand and consumers’ favorable perception of our products. We also rely on unpatented proprietary expertise, recipes and formulations and other trade secrets and copyright protection to develop and maintain our competitive position. Our continued success depends, to a significant degree, upon our ability to protect and preserve our intellectual property, including our trademarks, trade dress, trade secrets and copyrights. We rely on confidentiality agreements and trademark, trade secret and copyright law to protect our intellectual property rights.
Our confidentiality agreements with our employees and certain of our consultants, contract employees, suppliers and independent contractors, including some of our co-manufacturers who use our formulations to manufacture our products, generally require that all information made known to them be kept strictly confidential. Nevertheless, trade secrets are difficult to protect. Although we attempt to protect our trade secrets, our confidentiality agreements may not effectively prevent disclosure of our proprietary information and may not provide an adequate remedy in the event of unauthorized disclosure of such information. In addition, others may independently discover our trade secrets, in which case we would not be able to assert trade secret rights against such parties. Further, some of our formulations have been developed by or with our suppliers and co-manufacturers. As a result, we may not be able to prevent others from using similar formulations.
We cannot assure you that the steps we have taken to protect our intellectual property rights are adequate, that our intellectual property rights can be successfully defended and asserted in the future or that third parties will
not infringe upon or misappropriate any such rights. In addition, our trademark rights and related registrations may be challenged in the future and could be canceled or narrowed. Failure to protect our trademark rights could prevent us in the future from challenging third parties who use names and logos similar to our trademarks, which may in turn cause consumer confusion or negatively affect consumers’ perception of our brand and products. In addition, if we do not keep our trade secrets confidential, others may produce products with our recipes or formulations. Moreover, intellectual property disputes and proceedings and infringement claims may result in a significant distraction for management and significant expense, which may not be recoverable regardless of whether we are successful. Such proceedings may be protracted with no certainty of success, and an adverse outcome could subject us to liabilities, force us to cease use of certain trademarks or other intellectual property or force us to enter into licenses with others. Any one of these occurrences may have a material adverse effect on our business, results of operations and financial condition.
Risks Related to Being a Public Company
If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could be impaired, investors may lose confidence in our financial reporting and the trading price of our common stock may decline.
Ensuring that we have adequate internal financial and accounting controls and procedures in place to produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be re-evaluated frequently. We are in the process of upgrading our information technology systems and implementing additional financial and management controls, reporting systems and procedures in order to keep up with the requirements of being a reporting company under the Exchange Act. Additionally, the rapid growth of our operations and the IPO have created a need for additional resources within the accounting and finance functions due to the increasing need to produce timely financial information and to ensure the level of segregation of duties customary for a U.S. public company. We have hired additional resources in the accounting and finance function and continue to reassess the sufficiency of finance personnel in response to these increasing demands and expectations.
If we cease to be an “emerging growth company” as defined in the JOBS Act, commencing with our second annual report on Form 10-K that we will file after becoming a public reporting company, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting in our Form 10‑K filing for that year, as required by Section 404 of the Sarbanes Oxley Act. The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation. We expect to expend significant resources in developing the necessary documentation and testing procedures required by Section 404. We cannot be certain that the actions we will be taking to improve our internal controls over financial reporting will be sufficient, or that we will be able to implement our planned processes and procedures in a timely manner.
Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition, results of operations or cash flows. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting once that firm begin its Section 404 reviews, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by NASDAQ, the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.
Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
Our disclosure controls and procedures are designed to reasonably assure that information required to be disclosed by us in reports we file or submit under the Exchange Act is accumulated and communicated to management, recorded, processed, summarized and reported within the time periods specified in the rules and
forms of the SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements or insufficient disclosures due to error or fraud may occur and not be detected.
We are an emerging growth company and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.
We are an “emerging growth company” as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
For as long as we continue to be an emerging growth company, we also intend to take advantage of certain other exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation and exemptions from the requirements of holding non-binding advisory votes on executive compensation and stockholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
The requirements of being a public company will require us to incur increased costs and may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.
As a public company, we have incurred and will continue to incur significant legal, accounting and other expenses that we did not incur as a private company. We are subject to the reporting requirements of the Exchange Act which requires, among other things, that we file with the SEC annual, quarterly and current reports with respect to our business and financial condition. In addition, the Sarbanes-Oxley Act, as well as related rules adopted by the SEC and the Nasdaq Global Select Market, impose significant requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Further, under the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, the SEC adopted rules and regulations related to corporate governance and executive compensation, such as “say on pay” and proxy access. Emerging growth companies are permitted to implement many of these requirements over a longer period and up to five years following the completion of its initial public offering. We intend to take advantage of this legislation for as long as we are permitted to do so. Once we become required to implement these requirements, we will incur additional compliance-related expenses. Additionally, the SEC and other regulators have continued to adopt new rules and regulations and make additional changes to existing regulations that require our compliance. Stockholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact, in ways we cannot currently anticipate, the manner in which we operate our business. We expect the rules and regulations applicable to public companies to continue to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. If these requirements divert the attention of our management and personnel from other business concerns, they could have a material adverse effect on our business, financial
condition and results of operations. The increased costs will decrease our net income or increase our net loss, and may require us to reduce costs in other areas of our business. Furthermore, these rules and regulations could make it more difficult or more costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers. We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements.
Risks Related to Ownership of Our Common Stock
An active trading market may not develop or be sustained following our IPO.
You may not be able to sell your shares quickly or at a recently reported market price if trading in our common stock does not remain active. The lack of an active market may also reduce the fair market value of your shares. An inactive market may also impair our ability to raise capital to continue to fund operations by selling shares and may impair our ability to acquire other companies or technologies by using our shares as consideration.
Our share price has been and may continue to be volatile, and you could lose all or part of your investment.
The market price of our common stock following our IPO has been and is likely to continue to be highly volatile and could be subject to wide fluctuations in response to many factors discussed in this “Risk Factors” section, including:
actual or anticipated fluctuations in our financial condition and operating results, including fluctuations in our quarterly and annual results;
announcements of innovations by us or our competitors;
overall conditions in our industry and the markets in which we operate;
market conditions or trends in the packaged food sales industry or in the economy as a whole;
addition or loss of significant customers or other developments with respect to significant customers;
adverse developments concerning our manufacturers or suppliers;
changes in laws or regulations applicable to our products;
our ability to effectively manage our growth;
actual or anticipated changes in our growth rate relative to our competitors;
announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
additions or departures of key personnel;
competition from existing products or new products that may emerge;
issuance of new or updated research or reports about us or our industry, or positive or negative recommendations or withdrawal of research coverage by securities analysts;
our failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public;
fluctuations in the valuation of companies perceived by investors to be comparable to us;
disputes or other developments related to proprietary rights, including patents, and our ability to obtain intellectual property protection for our products;
litigation matters;
announcement or expectation of additional financing efforts;
our cash position;
sales of our common stock by us or our stockholders;
share price and volume fluctuations attributable to inconsistent trading volume levels of our common stock;
the expiration of contractual lock-up agreements with our executive officers, directors and stockholders;
changes in accounting practices;
ineffectiveness of our internal controls;
general economic, market and political conditions; and
other events or factors, many of which are beyond our control.
Furthermore, the stock markets have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions, interest rate changes, tariffs or international currency fluctuations, may negatively impact the market price of our common stock. In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.
Future sales of our common stock in the public market could cause our share price to fall.
Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. As of May 31, 2019, we had outstanding 60,122,797 shares of common stock, of which 49,054,047 shares are currently restricted as a result of lock-up and/or market standoff agreements and will become eligible for sale on October 29, 2019, subject in some cases to the volume limitations applicable to affiliates. Sales of stock by these stockholders could have a material adverse effect on the trading price of our common stock.
We have registered on Form S-8 under the Securities Act an aggregate of 10,752,818 shares of common stock subject to outstanding stock options and unvested restricted stock and shares of common stock reserved for issuance under our 2018 Plan and 2018 Employee Stock Purchase Plan. As a consequence, these shares can be freely sold in the public market upon issuance and vesting, subject to volume limitations applicable to affiliates, the lock-up and/or market stand-off agreements described above and other restrictions provided under the terms of the applicable plan and/or the award agreements entered into with participants.
If securities or industry analysts issue an adverse or misleading opinion regarding our business or do not publish research or publish unfavorable research about our business, our stock price and trading volume could decline.
The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. If one or more of these analysts does not initiate coverage over us, ceases coverage of our company or fails to publish reports on us regularly, we could lose visibility in the
financial markets, which in turn could cause our stock price or trading volume to decline. Moreover, if any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model or our stock performance, or if our operating results fail to meet the expectations of the investor community, one or more of the analysts who cover our company may change their recommendations regarding our company, and our stock price could decline.
We have never paid dividends on our capital stock and we do not intend to pay dividends for the foreseeable future. Consequently, any gains from an investment in our common stock will likely depend on whether the price of our common stock increases.
We have never declared or paid any dividends on our common stock and do not intend to pay any dividends in the foreseeable future. We anticipate that we will retain all of our future earnings for use in the operation of our business and for general corporate purposes. Accordingly, investors should rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.
Our charter documents and Delaware law could prevent a takeover that stockholders consider favorable and could also reduce the market price of our stock.
Our amended and restated certificate of incorporation and our amended and restated bylaws contain provisions that could delay or prevent a change in control of our company. These provisions could also make it more difficult for stockholders to elect directors and take other corporate actions. These provisions include:
providing for a classified board of directors with staggered, three-year terms;
authorizing our board of directors to issue preferred stock with voting or other rights or preferences that could discourage a takeover attempt or delay changes in control;
prohibiting cumulative voting in the election of directors;
providing that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum;
prohibiting the adoption, amendment or repeal of our amended and restated bylaws or the repeal of the provisions of our amended and restated certificate of incorporation regarding the election and removal of directors without the required approval of at least 66.67% of the shares entitled to vote at an election of directors;
prohibiting stockholder action by written consent;
limiting the persons who may call special meetings of stockholders; and
requiring advance notification of stockholder nominations and proposals.
These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, the provisions of Section 203 of the Delaware General Corporate Law, or the DGCL, govern us. These provisions may prohibit large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us for a certain period of time without the consent of our board of directors.
These and other provisions in our amended and restated certificate of incorporation and our amended and restated bylaws and under Delaware law could discourage potential takeover attempts, reduce the price investors might be willing to pay in the future for shares of our common stock and result in the market price of our common stock being lower than it would be without these provisions.
Insiders have substantial control over us and will be able to influence corporate matters.
Our directors and executive officers and their affiliates and significant stockholders beneficially own, in the aggregate, approximately 28% of our outstanding capital stock as of May 31, 2019. As a result, these stockholders will be able to exercise significant influence over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as a merger or other sale of our company or its assets. This concentration of ownership could limit stockholders’ ability to influence corporate matters and may have the effect of delaying or preventing a third party from acquiring control over us.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware and the federal district courts of the United States of America will be the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for:
any derivative action or proceeding brought on our behalf;
any action asserting a claim of breach of a fiduciary duty owed by, or other wrongdoing by, any of our directors, officers, employees or agents or our stockholders;
any action asserting a claim against us arising under the DGCL, our amended and restated certificate of incorporation, or our amended and restated bylaws; and
any action asserting a claim against us that is governed by the internal-affairs doctrine;
provided, that with respect to any derivative action or proceeding brought on our behalf to enforce any liability or duty created by the Exchange Act or the rules and regulations thereunder, the exclusive forum will be the federal district courts of the United States of America. Our amended and restated certificate of incorporation further provides that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.
These exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers and other employees. If a court were to find either exclusive forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could seriously harm our business. For example, the Court of Chancery of the State of Delaware recently determined that the exclusive forum provision of federal district courts of the United States of America for resolving any complaint asserting a cause of action arising under the Securities Act is not enforceable. However, this decision may be reviewed and ultimately overturned by the Delaware Supreme Court. If the Court of Chancery’s decision were to be overturned, we would enforce the federal district court exclusive forum provision in our amended and restated certificate of incorporation.
Our ability to utilize our federal net operating loss and tax credit carryforwards may be limited under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code.
The limitations apply if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50 percentage point change (by value) in its equity ownership by certain stockholders over a three-year period. If we have experienced an ownership change at any time since our incorporation, we may already be subject to limitations on our ability to utilize our existing net operating losses and other tax attributes to offset taxable income. In addition, future changes in our stock ownership, which may be outside of our control, may trigger an ownership change and, consequently, Section 382 and 383 limitations. Similar provisions of state tax law may also apply to limit our use of accumulated state tax attributes. As a result, if we earn net taxable income,
our ability to use our pre-change net operating loss carryforwards and other tax attributes to offset such taxable income may be subject to limitations, which could potentially result in increased future income tax liability to us.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, AND USE OF PROCEEDS.PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Unregistered Sales of Equity SecuritiesNone.
During the quarter ended March 30, 2019, we issued and sold an aggregate of 169,583 shares of our common stock to current and former employees and consultants at a weighted average exercise price of $2.16 per share pursuant to exercises of options granted under our 2011 Equity Incentive Plan for aggregate cash consideration of $0.4 million.
The stock options and the common stock issuable upon the exercise of such options were issued under the 2011 Equity Incentive Plan in reliance on the exemption provided by Rule 701 promulgated under the Securities Act. Each of the recipients of securities in these transactions had adequate access, through employment, business or other relationships, to information about us.
Use of Proceeds from our Initial Public Offering of Common Stock
On May 1, 2019, our registration statement on Form S-1 (File No. 333-228453) was declared effective by the SEC for our initial public offering. At the closing of the offering on May 6, 2019, we sold 11,068,750 shares of common stock, which included the exercise in full by the underwriters of their option to purchase 1,443,750 additional shares, at an initial public offering price of $25.00 per share and received gross proceeds of $276.7 million, which resulted in net proceeds to us of approximately $252.5 million, after deducting underwriting discounts and commissions of $19.4 million and estimated offering expenses of approximately $4.8 million. None of the expenses associated with the initial public offering were paid to directors, officers, persons owning ten percent or more of any class of equity securities, or to their associates, or to our affiliates. Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, Credit Suisse Securities (USA) LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Jefferies LLC and William Blair & Company, L.L.C. acted as underwriters for the offering. Because the closing of our initial public offering occurred on May 6, 2019, as of March 30, 2019, we had not yet received the net proceeds from the sale of shares of common stock in our initial public offering and therefore had used none of the proceeds as of March 30, 2019.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
Rule 10b5-1 Trading Arrangements
During the fiscal quarter ended September 30, 2023, none of the Company or its directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act or any “non-Rule 10b5-1 trading arrangement,” as such term is defined in Item 408(a) of Regulation S-K.
ITEM 6. EXHIBITS. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| EXHIBIT INDEX |
| Exhibit No. | | Exhibit Description | | Incorporated by Reference | | Filed Herewith |
| | | | Form | | Date | | Number | | |
| 3.1 | | | | | 10-Q | | 6/12/2019 | | 3.1 | | |
| 3.2 | | | | | 8-K | | 4/11/2023 | | 3.1 | | |
| 4.1 | | | | | S-1/A | | 3/27/2019 | | 4.1 | | |
| 4.2 | | | | | S-1 | | 11/16/2018 | | 4.2 | | |
| 4.3 | | | | 10-K | | 3/01/2023 | | 4.3 | | |
| 4.4 | | | | 8-K | | 3/05/2021 | | 4.1 | | |
| 4.5 | | | | 8-K | | 3/05/2021 | | 4.1 | | |
| 10.1 | | | | | | | | | | X |
| 31.1 | | | | | | | | | | X |
| 31.2 | | | | | | | | | | X |
| 32.1** | | | | | | | | | | X |
| 32.2** | | | | | | | | | | X |
| 101 | | | The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Loss, (iv) Condensed Consolidated Statements of Stockholders' Deficit, (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Unaudited Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags. | | | | | | | | X |
| 104 | | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
| | | | | | | | X |
| _________________ |
| * Indicates management contract or compensatory plan or arrangement. |
| **This certification is deemed furnished, and not filed, with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Beyond Meat, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing. |
|
| | | | | | | | | | |
| EXHIBIT INDEX |
| Exhibit No. | | Exhibit Description | | Incorporated by Reference | | Filed Herewith |
| | | | | Form | | Date | | Number | | |
| 3.1 | | | | | | | | | | X |
| 3.2 | | | | | | | | | | X |
| 4.1 | | | | S-1/A | | 3/27/2019 | | 4.1 | | |
| 4.2 | | | | S-1 | | 11/16/2018 | | 4.2 | | |
| 10.1 | | | | S-1 | | 11/16/2018 | | 10.1 | | |
| 10.2 | | | | S-1 | | 11/16/2018 | | 10.2 | | |
| 10.3 | | | | S-1 | | 11/16/2018 | | 10.3 | | |
| 10.4 | | | | S-1 | | 11/16/2018 | | 10.4 | | |
| 10.5 | | | | S-1 | | 11/16/2018 | | 10.5 | | |
| 10.6 | | | | S-1 | | 11/16/2018 | | 10.6 | | |
| 10.7 | | | | S-1 | | 11/16/2018 | | 10.7 | | |
| 10.8 | | | | S-1 | | 11/16/2018 | | 10.8 | | |
| 10.9 | | | | S-1 | | 11/16/2018 | | 10.9 | | |
| 10.10 | | | | S-1/A | | 4/15/2019 | | 10.10 | | |
| 10.11 | | | | S-1/A | | 1/9/2019 | | 10.11 | | |
| 10.12 | | | | S-1/A | | 4/15/2019 | | 10.12 | | |
|
| | | | | | | | | | |
| EXHIBIT INDEX |
| Exhibit No. | | Exhibit Description | | Incorporated by Reference | | Filed Herewith |
| | | | | Form | | Date | | Number | | |
| 10.13 | | | | S-1/A | | 1/9/2019 | | 10.13 | | |
| 10.14 | | | | S-1/A | | 1/9/2019 | | 10.14 | | |
| 10.15 | | | | S-1 | | 11/16/2018 | | 10.15 | | |
| 10.16 | | | | S-1 | | 11/16/2018 | | 10.16 | | |
| 10.17 | | | | S-1 | | 11/16/2018 | | 10.17 | | |
| 10.18 | | | | S-1 | | 11/16/2018 | | 10.18 | | |
| 10.19 | | | | S-1/A | | 4/15/2019 | | 10.19 | | |
| 10.20 | | | | S-1/A | | 1/9/2019 | | 10.20 | | |
| 10.21 | | | | S-1/A | | 4/15/2019 | | 10.21 | | |
| 10.22 | | | | S-1/A | | 4/15/2019 | | 10.22 | | |
| 10.23 | | | | S-1/A | | 3/27/2019 | | 10.23 | | |
| 10.24 | | | | S-1 | | 11/16/2018 | | 10.20 | | |
| 10.25 | | | | 8-K | | 5/20/2019 | | 10.25 | | |
| 31.1 | | | | | | | | | | X |
| 31.2 | | | | | | | | | | X |
| 32.1** | | | | | | | | | | X |
| 32.2** | | | | | | | | | | X |
| 101.INS | | XBRL Report Instance Document | | | | | | | | X |
| 101.SCH | | XBRL Taxonomy Extension Schema Document | | | | | | | | X |
| 101.CAL | | XBRL Taxonomy Calculation Linkbase Document | | | | | | | | X |
|
| | | | | | | | | | |
EXHIBIT INDEX |
Exhibit No. | | Exhibit Description | | Incorporated by Reference | | Filed Herewith |
| | | | Form | | Date | | Number | | |
101.LAB | | XBRL Taxonomy Label Linkbase Document | | | | | | | | X |
101.PRE | | XBRL Presentation Linkbase Document | | | | | | | | X |
101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document | | | | | | | | X |
_________________ |
+ Certain portions of this document that constitute confidential information have been redacted in accordance with Regulation S-K, Item 601(b)(10). |
* Indicates management contract or compensatory plan or arrangement. |
** This certification is deemed not filed for purpose of section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act. |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | | | | | | | | | | | | |
| | | | |
| | | | |
| | | BEYOND MEAT, INC. |
| | | | |
| | | | |
| | | | |
Date: | June 12, 2019 | | By: | /s/ Ethan Brown |
| | | | Ethan Brown |
| | | | President and Chief Executive Officer |
| | | | (Principal Executive Officer) |
|
| | | | |
Date: | June 12, 2019 | | | |
| Date: | November 9, 2023 | | By: | /s/ Ethan Brown |
| | | | Ethan Brown |
| | | | President and Chief Executive Officer |
| | | | (Principal Executive Officer) |
| | | | | | | | | | | | | | |
| Date: | November 9, 2023 | | By: | /s/ Mark J. NelsonLubi Kutua |
| | | | Mark J. NelsonLubi Kutua |
| | | | Chief Financial Officer, and Treasurer |
| | | | (Principal Financial and Accounting Officer) |
