UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| | | | | |
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended April 2, 20221, 2023
OR
| | | | | |
| ☐ | 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)
| | | | | |
| Delaware | 26-4087597 |
(State or other jurisdiction of incorporation 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)
119 Standard Street
El Segundo, CA 90245
(Former address, if changed since last report)
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, $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 ☒ No ☐
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 ☒ No ☐
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.
| | | | | | | | | | | | | | | | | |
| Large accelerated filer | | ☒ | Accelerated filer | | ☐ |
| | | | | |
| Non-accelerated filer | | ☐ | Smaller reporting company | | ☐ |
| | | Emerging growth company | | ☐ |
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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of May 11, 2022,9, 2023, the registrant had 63,542,42664,226,710 shares of common stock, $0.0001 par value per share, outstanding.
Note Regarding Forward-Looking Statements
This report includes forward-looking statements within the meaning of the federal securities 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 effects of the COVID-19 pandemic on our business, financial condition, cash flows and results of operations, including on our supply chain, the demand for our products, our product and channel mix, labor needs at the Company as well as in the supply chain and at customers, the timing and level of retail purchasing, the timing and level of foodservice purchasing, our manufacturing and co-manufacturing facilities and operations, our inventory levels, our ability to expand and produce in new geographic markets or the timing of such expansion efforts, the pace and success of new product introductions, the timing of new foodservice launches, and on overall economic conditions and consumer confidence and spending levels;
•the impact of uncertainty in our domesticinflation and international supply chain,rising interest rates across the economy, including labor shortages and disruption and shipping delays and disruption;
•a resurgence of COVID-19 and the impact of variants of the virus that causes COVID-19, which could slow, halt or reverse the reopening process, or result in the reinstatement of social distancing measures, business closures, restrictions on operations, quarantines and travel bans;
•the impact of uncertainty as a result of doing business in China and Europe;
•government or employer mandates requiring certain behaviors from employees due to COVID-19, including COVID-19 vaccine mandates, which could result in employee attrition at the Company, suppliers and customers as well as difficulty securing futurehigher food, grocery, raw materials, transportation, energy, labor and supply needs;fuel costs;
•the impact of adverse and uncertain economic and political conditions in the U.S. and international markets;markets, including due to an economic recession, downturn or periods of rising or high inflation;
•the volatilityreduced consumer confidence and changes in consumer spending, including spending to purchase our products, and negative trends in consumer purchasing patterns due to levels of capital marketsconsumers’ disposable income, credit availability and other macroeconomic factors,debt levels, and economic conditions, including due to geopolitical tensions orrecessionary and inflationary pressures;
•factors negatively impacting demand in the outbreak of hostilities or war;plant-based meat category;
•our ability to effectively manageaccurately 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 increased competition from our growth inmarket competitors and new market entrants;
•risks and uncertainties related to certain cost-reduction initiatives, workforce reductions, executive leadership changes, and the United Statestiming and abroad;success of achieving certain financial goals or cash flow positive targets;
•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;
•our ability to identifymeasures such as downsizing and execute cost-down initiatives intended to achieve price parity with animal protein;exiting certain operations, domestically and/or abroad;
•the successimpact of operations conducted by joint ventures, suchuncertainty as the Planet Partnership, LLC (“TPP”) with PepsiCo, Inc., where we share ownershipa result of doing business in China 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;Europe;
•the effectsvolatility of increased competition from our market competitors and new market entrants;or inability to access the capital markets, including due to macroeconomic factors, geopolitical tensions or the outbreak of hostilities or war;
•changes in the retail landscape, including the timing 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 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 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 and ability to accurately forecast market growth;
•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 effectively expand or optimize our manufacturing and production capacity, including effectively managing capacity for specific products;products with shifts in demand;
•risks associated with underutilization of capacity which could give rise to increased costs, underutilization fees and termination fees to exit certain supply chain arrangements and/or the write-off of certain equipment;
•our inability to sell our inventory in a timely manner requiring us to sell our products through liquidation channels at lower prices, write-down or write-off obsolete inventory, or increase inventory reserves;
•our ability to accurately forecast our future results of operations and financial goals or targets, including fluctuations in demand for our products and anyin 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;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, and the mix of products sold;
•our ability to successfully enter new geographic markets, manage our international expansion and comply with any applicable laws and 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;
•the effects of global outbreaks of pandemics (such as the COVID-19 pandemic), epidemics or contagious diseasesother public health crises, or fear of such outbreaks, such as COVID-19;crises;
•the success of our marketing initiatives and the ability to maintain and grow brand awareness, maintain, protect and enhance our brand, attract and retain new customers and maintain and grow our market share;
•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 raw materials at competitive prices to manufacture our products, especially those impacted by the conflict in the Ukraine or problems in the global supply chain exacerbated by COVID-19 lockdowns in China;products;
•the availability of pea and other proteins that meetsmeet our standards;
•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;
•the impact of inflation across the economy, including higher food, grocery, raw materials, transportation, energy, labor and fuel costs;
•reduced consumer confidence and consumer spending, including spending to purchase our products; and negative trends in consumer purchasing patterns due to consumers’ disposable income, credit availability, debt levels and inflation;
•real or perceived quality or health issues with our products or other issues that adversely affect our brand and reputation;
•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;
•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, including related to data privacy;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 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 impact of marketing campaigns aimed at generating negative publicity regarding our products, brand and the plant-based industrymeat category;
•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 administrationadministrative costs related to compliance and reporting obligations;
•the sufficiency of our cash and cash equivalents to meet our liquidity needs, including risks associated with adverse developments affecting the financial services industry;
•our significant indebtedness and ability to repay such indebtedness;
•risks related to our debt, including 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;
•estimates of our expenses, future revenues, capital expenditures, capital requirements and our needs for additional financing;
•our ability to meet our obligations under our campus innovationEl Segundo Campus and headquartersInnovation Center ("Campus Headquarters") lease (“Campus Lease”), the timing of occupancy and completion of the build-out of our space, cost overruns, delays, and the impact of COVID-19workforce reductions or other cost-reduction initiatives on our space demands;
•our ability to meet our obligations under leases for our corporate offices, manufacturing facilities and warehouses;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, both in the U.S. and abroad, affecting plant-based meat, the labeling or naming of our products, or our brand name or logo;
•the failure of 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, 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;
•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 sufficiency of our cash and cash equivalents to meet our liquidity needs, and service our indebtedness and our ability to access capital markets upon favorable terms, including due to rising interest rates;
•economic conditions and the impact on consumer spending;
•the impact of increased scrutiny from a variety of stakeholders, institutional investors and governmental bodies on environmental, social and governance (“ESG”) practices, including expanding mandatory and voluntary reporting, diligence and disclosure on ESG matters;
•the outcomes of legal or administrative proceedings, or new legal or administrative proceedings filed against us;
•our, our suppliers’ and our co-manufacturers’ ability to protect our proprietary technology, intellectual property and trade secrets adequately;
•the impact of tariffs and trade wars;
•the impact of changes in tax laws;
•foreign exchange rate fluctuations; and
•the risks discussed in Part I, Item 1A, “Risk“Risk Factors,” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 20212022 filed with the Securities and Exchange Commission (the “SEC”) on March 2, 20221, 2023 (the “2021“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 SEC.
In some cases, you can identify forward-looking statements by the use of wordsterms such as “believe,” “may,” “will,“should,” “will continue,“expects,” “might,” “plans,” “anticipates,” “could,” “will likely result,“intends,” “estimate,“target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” “seek,” “would” or “continue,” “anticipate,” “intend,” “plan,” “predict,” “project,” “expect,” “potential” and variations of these terms and similar expressions, or the negative of these terms or other similar expressions. TheseWe have based these forward-looking statements are basedlargely on our current expectations and assumptionsprojections 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 could causecannot 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 tocould differ materially from those anticipated or impliedprojected 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 data throughas of March 2022.2023. This data involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates and data.
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 because of new information, future events, changes in assumptions or 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.
“Beyond Meat,” “Beyond Burger,” “Beyond Beef,” “Beyond Sausage,” “Beyond Breakfast Sausage,” “Beyond Meatballs,” “Beyond Chicken,” “Beyond Popcorn Chicken,” “Beyond Steak,” “Go Beyond,” the Caped Steer Logo and “Eat What You Love,”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 report are the property of their respective holders. Solely for convenience, the trademarks and trade names contained herein are referred to without the ® and ™ 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 STATEMENTS
| | BEYOND MEAT, INC. AND SUBSIDIARIES | BEYOND MEAT, INC. AND SUBSIDIARIES | | BEYOND MEAT, INC. AND SUBSIDIARIES | |
| Condensed Consolidated Balance Sheets | Condensed Consolidated Balance Sheets | | Condensed Consolidated Balance Sheets | |
| (In thousands, except share and per share data) | (In thousands, except share and per share data) | | (In thousands, except share and per share data) | |
| (unaudited) | (unaudited) | | (unaudited) | |
| | April 2,
2022 | | December 31,
2021 | | | April 1,
2023 | | December 31,
2022 | |
| Assets | Assets | | | | | Assets | | | | |
| Current assets: | Current assets: | | | Current assets: | | |
| Cash and cash equivalents | Cash and cash equivalents | $ | 547,858 | | | $ | 733,294 | | | Cash and cash equivalents | $ | 258,566 | | | $ | 309,922 | | |
| Restricted cash, current | | Restricted cash, current | 2,426 | | | — | | |
| Accounts receivable, net | Accounts receivable, net | 52,675 | | | 43,806 | | | Accounts receivable, net | 42,395 | | | 34,198 | | |
| Inventory | Inventory | 283,754 | | | 241,870 | | | Inventory | 222,370 | | | 235,696 | | |
| Prepaid expenses and other current assets | Prepaid expenses and other current assets | 33,010 | | | 33,078 | | | Prepaid expenses and other current assets | 16,561 | | | 20,700 | | |
| | Assets held for sale | | Assets held for sale | 4,737 | | | 5,943 | | |
| Total current assets | Total current assets | $ | 917,297 | | | $ | 1,052,048 | | | Total current assets | $ | 547,055 | | | $ | 606,459 | | |
| Restricted cash, non-current | | Restricted cash, non-current | 12,600 | | | 12,627 | | |
| Property, plant, and equipment, net | Property, plant, and equipment, net | 241,389 | | | 226,489 | | | Property, plant, and equipment, net | 251,218 | | | 257,002 | | |
| Operating lease right-of-use assets | Operating lease right-of-use assets | 25,692 | | | 26,815 | | | Operating lease right-of-use assets | 75,056 | | | 87,595 | | |
| Prepaid lease costs, non-current | Prepaid lease costs, non-current | 96,166 | | | 59,188 | | | Prepaid lease costs, non-current | 88,035 | | | 85,472 | | |
| Other non-current assets, net | Other non-current assets, net | 6,613 | | | 6,836 | | | Other non-current assets, net | 10,273 | | | 10,744 | | |
| Investment in unconsolidated joint venture | Investment in unconsolidated joint venture | 7,353 | | | 8,023 | | | Investment in unconsolidated joint venture | 2,340 | | | 2,325 | | |
| Total assets | Total assets | $ | 1,294,510 | | | $ | 1,379,399 | | | Total assets | $ | 986,577 | | | $ | 1,062,224 | | |
| Liabilities and Stockholders’ Equity: | | | | | |
| Liabilities and stockholders’ (deficit) equity: | | Liabilities and stockholders’ (deficit) equity: | | | | |
| Current liabilities: | Current liabilities: | | | Current liabilities: | | |
| Accounts payable | Accounts payable | $ | 67,387 | | | $ | 69,040 | | | Accounts payable | $ | 41,131 | | | $ | 55,300 | | |
| Wages payable | 3,406 | | | 155 | | | |
| Accrued bonus | 2,754 | | | 128 | | | |
| Current portion of operating lease liabilities | 4,454 | | | 4,458 | | | |
| | Accrued expenses and other current liabilities | 22,807 | | | 20,226 | | | |
| | Short-term finance lease liabilities | 183 | | | 182 | | | |
| Current portion of operating lease liabilities | | Current portion of operating lease liabilities | 2,960 | | | 3,812 | | |
| Accrued expenses and other current liabilities | | Accrued expenses and other current liabilities | 15,826 | | | 16,729 | | |
| | Total current liabilities | Total current liabilities | $ | 100,991 | | | $ | 94,189 | | | Total current liabilities | $ | 59,917 | | | $ | 75,841 | | |
| Long-term liabilities: | Long-term liabilities: | | | | | Long-term liabilities: | | | | |
| | Convertible senior notes, net | Convertible senior notes, net | $ | 1,130,657 | | | $ | 1,129,674 | | | Convertible senior notes, net | $ | 1,134,591 | | | $ | 1,133,608 | | |
| | Operating lease liabilities, net of current portion | Operating lease liabilities, net of current portion | 21,485 | | | 22,599 | | | Operating lease liabilities, net of current portion | 44,787 | | | 55,854 | | |
| | Finance lease obligations and other long term liabilities | 396 | | | 442 | | | |
| Finance lease obligations and other long-term liabilities | | Finance lease obligations and other long-term liabilities | 416 | | | 469 | | |
| Total long-term liabilities | Total long-term liabilities | $ | 1,152,538 | | | $ | 1,152,715 | | | Total long-term liabilities | $ | 1,179,794 | | | $ | 1,189,931 | | |
| Commitments and Contingencies (Note 10) | 0 | | 0 | | |
| (continued on the next page) | (continued on the next page) | | (continued on the next page) | |
| | BEYOND MEAT, INC. AND SUBSIDIARIES | BEYOND MEAT, INC. AND SUBSIDIARIES | | BEYOND MEAT, INC. AND SUBSIDIARIES | |
| Condensed Consolidated Balance Sheets | Condensed Consolidated Balance Sheets | | Condensed Consolidated Balance Sheets | |
| (In thousands, except share and per share data) | (In thousands, except share and per share data) | | (In thousands, except share and per share data) | |
| (unaudited) | (unaudited) | | (unaudited) | |
| | April 2,
2022 | | December 31,
2021 | | | April 1,
2023 | | December 31,
2022 | |
| Stockholders’ equity: | | | |
| Commitments and Contingencies (Note 10) | | Commitments and Contingencies (Note 10) | | |
| Stockholders’ (deficit) equity: | | Stockholders’ (deficit) equity: | | |
| Preferred stock, par value $0.0001 per share—500,000 shares authorized, none issued and outstanding | Preferred stock, par value $0.0001 per share—500,000 shares authorized, none issued and outstanding | $ | — | | | $ | — | | | 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; 63,525,399 and 63,400,899 shares issued and outstanding at April 2, 2022 and December 31, 2021, respectively | 6 | | | 6 | | | |
| Common stock, par value $0.0001 per share—500,000,000 shares authorized; 64,150,754 and 63,773,982 shares issued and outstanding at April 1, 2023 and December 31, 2022, respectively | | Common stock, par value $0.0001 per share—500,000,000 shares authorized; 64,150,754 and 63,773,982 shares issued and outstanding at April 1, 2023 and December 31, 2022, respectively | 6 | | | 6 | | |
| Additional paid-in capital | Additional paid-in capital | 519,681 | | | 510,014 | | | Additional paid-in capital | 553,805 | | | 544,357 | | |
| Accumulated deficit | Accumulated deficit | (477,430) | | | (376,972) | | | Accumulated deficit | (802,146) | | | (743,109) | | |
| Accumulated other comprehensive loss | Accumulated other comprehensive loss | (1,276) | | | (553) | | | Accumulated other comprehensive loss | (4,799) | | | (4,802) | | |
| Total stockholders’ equity | $ | 40,981 | | | $ | 132,495 | | | |
| Total liabilities and stockholders’ equity | $ | 1,294,510 | | | $ | 1,379,399 | | | |
| Total stockholders’ deficit | | Total stockholders’ deficit | $ | (253,134) | | | $ | (203,548) | | |
| Total liabilities and stockholders’ (deficit) equity | | Total liabilities and stockholders’ (deficit) equity | $ | 986,577 | | | $ | 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 |
| | April 2,
2022 | | April 3,
2021 | | April 1,
2023 | | April 2,
2022 |
| Net revenues | Net revenues | | $ | 109,455 | | | $ | 108,164 | | Net revenues | | $ | 92,236 | | | $ | 109,455 | |
| Cost of goods sold | Cost of goods sold | | 109,265 | | | 75,456 | | Cost of goods sold | | 86,051 | | | 109,265 | |
| Gross profit | Gross profit | | 190 | | | 32,708 | | Gross profit | | 6,185 | | | 190 | |
| | Research and development expenses | Research and development expenses | | 19,678 | | | 15,925 | | Research and development expenses | | 12,432 | | | 19,678 | |
| Selling, general and administrative expenses | Selling, general and administrative expenses | | 75,114 | | | 38,954 | | Selling, general and administrative expenses | | 51,900 | | | 75,114 | |
| Restructuring expenses | Restructuring expenses | | 3,026 | | | 2,474 | | Restructuring expenses | | (426) | | | 3,026 | |
| Total operating expenses | Total operating expenses | | 97,818 | | | 57,353 | | Total operating expenses | | 63,906 | | | 97,818 | |
| Loss from operations | Loss from operations | | (97,628) | | | (24,645) | | Loss from operations | | (57,721) | | | (97,628) | |
| | Other (expense) income, net: | Other (expense) income, net: | | | | | Other (expense) income, net: | | | | |
| Interest expense | Interest expense | | (1,025) | | | (629) | | Interest expense | | (989) | | | (1,025) | |
| | Other, net | Other, net | | (1,124) | | | (1,570) | | Other, net | | 2,908 | | | (1,124) | |
| Total other expense, net | | (2,149) | | | (2,199) | | |
| Total other income (expense), net | | Total other income (expense), net | | 1,919 | | | (2,149) | |
| | Loss before taxes | Loss before taxes | | (99,777) | | | (26,844) | | Loss before taxes | | (55,802) | | | (99,777) | |
| Income tax expense | Income tax expense | | 10 | | | 48 | | Income tax expense | | — | | | 10 | |
| Equity in losses of unconsolidated joint venture | Equity in losses of unconsolidated joint venture | | 671 | | | 374 | | Equity in losses of unconsolidated joint venture | | 3,235 | | | 671 | |
| Net loss | Net loss | | $ | (100,458) | | | $ | (27,266) | | Net loss | | $ | (59,037) | | | $ | (100,458) | |
| Net loss per share available to common stockholders—basic and diluted | Net loss per share available to common stockholders—basic and diluted | | $ | (1.58) | | | $ | (0.43) | | Net loss per share available to common stockholders—basic and diluted | | $ | (0.92) | | | $ | (1.58) | |
| Weighted average common shares outstanding—basic and diluted | Weighted average common shares outstanding—basic and diluted | | 63,465,205 | | | 62,941,748 | | Weighted average common shares outstanding—basic and diluted | | 64,004,894 | | | 63,465,205 | |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
BEYOND MEAT, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Loss
(In thousands)
(unaudited)
| | | Three Months Ended | | Three Months Ended |
| | April 2,
2022 | | April 3,
2021 | | April 1,
2023 | | April 2,
2022 |
| Net loss | Net loss | | $ | (100,458) | | | $ | (27,266) | | Net loss | | $ | (59,037) | | | $ | (100,458) | |
| Other comprehensive loss, net of tax: | Other comprehensive loss, net of tax: | | Other comprehensive loss, net of tax: | |
| Foreign currency translation loss, net of tax | | (723) | | | (1,258) | | |
| Foreign currency translation gain (loss), net of tax | | Foreign currency translation gain (loss), net of tax | | 3 | | | (723) | |
| Comprehensive loss, net of tax | Comprehensive loss, net of tax | | $ | (101,181) | | | $ | (28,524) | | Comprehensive loss, net of tax | | $ | (59,034) | | | $ | (101,181) | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
BEYOND MEAT, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders’ (Deficit) Equity
(In thousands, except share data)
(unaudited)
| | | | | Common Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Income | | Total | | | | Common Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Loss | | Total |
| | | | Shares | | Amount | | | | | Total | | Amount |
| Balance at December 31, 2020 | | | 62,820,351 | | | $ | 6 | | | $ | 560,210 | | | $ | (194,867) | | | $ | 1,748 | | | $ | 367,097 | | |
| Balance at December 31, 2021 | | Balance at December 31, 2021 | | | 63,400,899 | | | $ | 6 | | | $ | 510,014 | | | $ | (376,972) | | | $ | (553) | | | $ | 132,495 | |
| Net loss | Net loss | | | — | | | — | | | — | | | (27,266) | | | — | | | (27,266) | | Net loss | | | — | | | — | | | — | | | (100,458) | | | — | | | (100,458) | |
| Issuance of common stock under equity incentive plans, net | Issuance of common stock under equity incentive plans, net | | | 188,183 | | | — | | | 2,048 | | | — | | | — | | | 2,048 | | Issuance of common stock under equity incentive plans, net | | | 124,500 | | | — | | | 375 | | | — | | | — | | | 375 | |
| Purchase of capped calls related to convertible senior notes | | | — | | | — | | | (83,950) | | | — | | | — | | | (83,950) | | |
| | Share-based compensation for equity classified awards | Share-based compensation for equity classified awards | | | — | | | — | | | 7,376 | | | — | | | — | | | 7,376 | | Share-based compensation for equity classified awards | | | — | | | — | | | 9,292 | | | — | | | — | | | 9,292 | |
| Foreign currency translation adjustment | Foreign currency translation adjustment | | | — | | | — | | | — | | | — | | | (1,258) | | | (1,258) | | Foreign currency translation adjustment | | | — | | | — | | | — | | | — | | | (723) | | | (723) | |
| Balance at April 3, 2021 | | | 63,008,534 | | | $ | 6 | | | $ | 485,684 | | | $ | (222,133) | | | $ | 490 | | | $ | 264,047 | | |
| Balance at April 2, 2022 | | Balance at April 2, 2022 | | | 63,525,399 | | | $ | 6 | | | $ | 519,681 | | | $ | (477,430) | | | $ | (1,276) | | | $ | 40,981 | |
| | | | | Common Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Loss | | Total | | | | Common Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Loss | | Total |
| | | | Shares | | Amount | | | | | Total | | Amount |
| Balance at December 31, 2021 | | | 63,400,899 | | | $ | 6 | | | $ | 510,014 | | | $ | (376,972) | | | $ | (553) | | | $ | 132,495 | | |
| Balance at December 31, 2022 | | Balance at December 31, 2022 | | | 63,773,982 | | | $ | 6 | | | $ | 544,357 | | | $ | (743,109) | | | $ | (4,802) | | | $ | (203,548) | |
| Net loss | Net loss | | | — | | | — | | | — | | | (100,458) | | | — | | | (100,458) | | Net loss | | | — | | | — | | | — | | | (59,037) | | | — | | | (59,037) | |
| Issuance of common stock under equity incentive plans, net | Issuance of common stock under equity incentive plans, net | | | 124,500 | | | — | | | 375 | | | — | | | — | | | 375 | | Issuance of common stock under equity incentive plans, net | | | 376,772 | | | — | | | (117) | | | — | | | — | | | (117) | |
| | Share-based compensation for equity classified awards | Share-based compensation for equity classified awards | | | — | | | — | | | 9,292 | | | — | | | — | | | 9,292 | | Share-based compensation for equity classified awards | | | — | | | — | | | 9,565 | | | — | | | — | | | 9,565 | |
| Foreign currency translation adjustment | Foreign currency translation adjustment | | | — | | | — | | | — | | | — | | | (723) | | | (723) | | Foreign currency translation adjustment | | | — | | | — | | | — | | | — | | | 3 | | | 3 | |
| Balance at April 2, 2022 | | | 63,525,399 | | | $ | 6 | | | $ | 519,681 | | | $ | (477,430) | | | $ | (1,276) | | | $ | 40,981 | | |
| Balance at April 1, 2023 | | Balance at April 1, 2023 | | | 64,150,754 | | | $ | 6 | | | $ | 553,805 | | | $ | (802,146) | | | $ | (4,799) | | | $ | (253,134) | |
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) | (In thousands) | (In thousands) |
| (unaudited) | (unaudited) | (unaudited) |
| | Three Months Ended | | Three Months Ended |
| | April 2,
2022 | | April 3,
2021 | | April 1,
2023 | | April 2,
2022 |
| Cash flows from operating activities: | Cash flows from operating activities: | | | | | Cash flows from operating activities: | | | | |
| Net loss | Net loss | | $ | (100,458) | | | $ | (27,266) | | Net loss | | $ | (59,037) | | | $ | (100,458) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | Adjustments to reconcile net loss to net cash used in operating activities: | | Adjustments to reconcile net loss to net cash used in operating activities: | |
| Depreciation and amortization | Depreciation and amortization | | 7,091 | | | 4,326 | | Depreciation and amortization | | 6,049 | | | 7,091 | |
| Non-cash lease expense | Non-cash lease expense | | 1,118 | | | 724 | | Non-cash lease expense | | 1,783 | | | 1,118 | |
| Share-based compensation expense | Share-based compensation expense | | 9,292 | | | 7,376 | | Share-based compensation expense | | 9,565 | | | 9,292 | |
| Loss on sale of fixed assets | Loss on sale of fixed assets | | 315 | | | 3 | | Loss on sale of fixed assets | | 3,907 | | | 315 | |
| Amortization of debt issuance costs | Amortization of debt issuance costs | | 984 | | | 369 | | Amortization of debt issuance costs | | 984 | | | 984 | |
| Loss on extinguishment of debt | | — | | | 1,037 | | |
| | Equity in losses of unconsolidated joint venture | Equity in losses of unconsolidated joint venture | | 671 | | | 374 | | Equity in losses of unconsolidated joint venture | | 3,235 | | | 671 | |
| | Unrealized gain on foreign currency transactions | | Unrealized gain on foreign currency transactions | | (731) | | | — | |
| Net change in operating assets and liabilities: | Net change in operating assets and liabilities: | | Net change in operating assets and liabilities: | |
| Accounts receivable | Accounts receivable | | (9,108) | | | (963) | | Accounts receivable | | (8,078) | | | (9,108) | |
| Inventories | Inventories | | (43,043) | | | (24,729) | | Inventories | | 13,779 | | | (43,043) | |
| Prepaid expenses and other assets | Prepaid expenses and other assets | | (213) | | | (2,877) | | Prepaid expenses and other assets | | 3,926 | | | (213) | |
| Accounts payable | Accounts payable | | (2,295) | | | 1,098 | | Accounts payable | | (13,271) | | | (2,295) | |
| Accrued expenses and other current liabilities | Accrued expenses and other current liabilities | | 8,527 | | | 10,689 | | Accrued expenses and other current liabilities | | (528) | | | 8,527 | |
| Prepaid lease costs, non-current | Prepaid lease costs, non-current | | (36,978) | | | — | | Prepaid lease costs, non-current | | (3,082) | | | (36,978) | |
| Operating lease liabilities | Operating lease liabilities | | (1,113) | | | (818) | | Operating lease liabilities | | (678) | | | (1,113) | |
| | Net cash used in operating activities | Net cash used in operating activities | | $ | (165,210) | | | $ | (30,657) | | Net cash used in operating activities | | $ | (42,177) | | | $ | (165,210) | |
| | Cash flows from investing activities: | Cash flows from investing activities: | | | | | Cash flows from investing activities: | | | | |
| Purchases of property, plant and equipment | Purchases of property, plant and equipment | | $ | (21,548) | | | $ | (23,363) | | Purchases of property, plant and equipment | | $ | (5,302) | | | $ | (21,548) | |
| Proceeds from sale of fixed assets | | Proceeds from sale of fixed assets | | 2,250 | | | — | |
| | Return (payment) of security deposits | | 49 | | | (18) | | |
| Payments for investment in joint venture | | Payments for investment in joint venture | | (3,250) | | | — | |
| Return of security deposits | | Return of security deposits | | — | | | 49 | |
| Net cash used in investing activities | Net cash used in investing activities | | $ | (21,499) | | | $ | (23,381) | | Net cash used in investing activities | | $ | (6,302) | | | $ | (21,499) | |
| | Cash flows from financing activities: | Cash flows from financing activities: | | | | | Cash flows from financing activities: | | | | |
| | Proceeds from issuance of convertible senior notes | | $ | — | | | $ | 1,150,000 | | |
| Purchase of capped calls related to convertible senior notes | | — | | | (83,950) | | |
| | Debt issuance costs | | — | | | (23,150) | | |
| | Repayment of revolving credit facility | | — | | | (25,000) | | |
| | Principal payments under finance lease obligations | Principal payments under finance lease obligations | | (45) | | | (36) | | Principal payments under finance lease obligations | | $ | (33) | | | $ | (45) | |
| | Proceeds from exercise of stock options | Proceeds from exercise of stock options | | 815 | | | 2,861 | | Proceeds from exercise of stock options | | 136 | | | 815 | |
| Payments of minimum withholding taxes on net share settlement of equity awards | Payments of minimum withholding taxes on net share settlement of equity awards | | (439) | | | (812) | | Payments of minimum withholding taxes on net share settlement of equity awards | | (252) | | | (439) | |
| | Net cash provided by financing activities | | $ | 331 | | | $ | 1,019,913 | | |
| Net cash (used in) provided by financing activities | | Net cash (used in) provided by financing activities | | $ | (149) | | | $ | 331 | |
| | Net decrease in cash, cash equivalents and restricted cash | | Net decrease in cash, cash equivalents and restricted cash | | $ | (48,628) | | | $ | (186,378) | |
| Effect of exchange rate changes on cash | | Effect of exchange rate changes on cash | | (328) | | | 942 | |
| Cash, cash equivalents and restricted cash at the beginning of the period | | 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 | | Cash, cash equivalents and restricted cash at the end of the period | | $ | 273,592 | | | $ | 547,858 | |
| (continued on the next page) | (continued on the next page) | (continued on the next page) |
|
| BEYOND MEAT, INC. AND SUBSIDIARIES | Condensed Consolidated Statements of Cash Flows | | (In thousands) | (In thousands) | (In thousands) |
| (unaudited) | (unaudited) | (unaudited) |
| | Three Months Ended | | Three Months Ended |
| April 2,
2022 | | April 3,
2021 | |
| Net (decrease) increase in cash and cash equivalents | | $ | (186,378) | | | $ | 965,875 | | |
| Effect of exchange rate changes on cash | | 942 | | | 15 | | |
| Cash and cash equivalents at the beginning of the period | | 733,294 | | | 159,127 | | |
| Cash and cash equivalents at the end of the period | | $ | 547,858 | | | $ | 1,125,017 | | |
| | | April 1,
2023 | | April 2,
2022 |
| Supplemental disclosures of cash flow information: | Supplemental disclosures of cash flow information: | | | | | Supplemental disclosures of cash flow information: | |
| Cash paid during the period for: | Cash paid during the period for: | | Cash paid during the period for: | |
| Interest | Interest | | $ | 17 | | | $ | 297 | | Interest | | $ | — | | | $ | 17 | |
| Taxes | Taxes | | $ | 52 | | | $ | 48 | | Taxes | | $ | — | | | $ | 52 | |
| Non-cash investing and financing activities: | Non-cash investing and financing activities: | | Non-cash investing and financing activities: | |
| | Issuance costs of convertible senior notes, accrued not yet paid | | $ | — | | | $ | 455 | | |
| | Non-cash additions to property, plant and equipment | Non-cash additions to property, plant and equipment | | $ | 6,874 | | | $ | 8,148 | | Non-cash additions to property, plant and equipment | | $ | 2,474 | | | $ | 6,874 | |
| | Reclassification of pre-paid lease costs to operating lease right-of-use assets | | Reclassification of pre-paid lease costs to operating lease right-of-use assets | | $ | 519 | | | $ | — | |
| Non-cash additions to financing leases | Non-cash additions to financing leases | | $ | — | | | $ | 580 | | Non-cash additions to financing leases | | $ | 55 | | | $ | — | |
| Operating lease right-of-use assets obtained in exchange for lease liabilities | | $ | — | | | $ | 105 | | |
| | (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 (including its subsidiaries unless the context otherwise requires, the “Company”), is 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 there is a better way to feed our future and that the positive choices we all make, no matter how small, can have a great impact on our personal health and the health of our planet. By shifting from animal-based meat to plant-based protein,meat, we can positively impact four growing global issues: human health, climate change, constraints on natural resources and animal welfare.
As of April 2, 2022,1, 2023, approximately 89.5%83% of the Company’s assets were located in the United States.
COVID-19 Pandemic
On March 11, 2020, the World Health Organization declared COVID-19 a pandemic. The global spread and unprecedented impact of COVID-19 continues to create significant volatility, uncertainty and economic disruption. The Company’s operations and its financial results including net revenues, gross profit, gross margin and operating expenses were negatively impacted by COVID-19 in 2020, 2021 and, to a lesser extent, 2022 and the first quarter of 2022.2023. The extent of COVID-19’s effect on the Company’s operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic (including any resurgences), the impact of variants of the virus that causes COVID-19, the wide distribution and public acceptance of COVID-19 vaccines, labor needs at the Company as well as in the supply chain and at customers, compliance with government or employer COVID-19 vaccine mandates and the resulting impact on available labor, and the level of social and economic restrictions imposed in the United States and abroad in an effort to curb the spread of the virus, all of which are uncertain and difficult to predict. As a result, it is not currently possible to ascertain the overall impact of COVID-19 on the Company’s business, results of operations, financial condition or liquidity. While the ultimate health and economic impact of COVID-19 continues to be highly uncertain, the Company expects that the adverse impact of COVID-19 on its business and results of operations, including its net revenues, gross profit, gross margin, earnings and cash flows, will continue into 2022. Future events and effects related to the COVID-19 pandemic cannot be determined with precision and actual results could significantly differ from estimates or forecasts.
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, 2021,2022, filed with the SEC on March 2, 2022 (“20211, 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 20212022 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 Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in financial statements prepared in
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)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
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued) 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, 20222023 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 20212022 10-K. The condensed consolidated balance sheet as of December 31, 20212022 has been derived from the audited financial statements at that date.
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 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; incremental borrowing rate used to determine operating lease right-of-use assets and operating lease liabilities; assessment of contract-based factors, asset-based factors, entity-based factors and market-based factors to determine the lease term impacting right-of-use assets and lease liabilities; the valuation of the fair value of stock options used to determine share-based compensation expense; and loss contingency accruals in connection with claims, lawsuits and administrative proceedings. These estimates and assumptions are based on 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 financial statements.
Foreign Currency
Foreign currency translation losses,gains (losses), net of tax, reported as cumulative translation adjustments through “Other comprehensive loss” were $0.7 million$3,000 and $1.3$(0.7) million for the three months ended April 1, 2023 and April 2, 2022, and April 3, 2021, respectively. RealizedNet realized and unrealized foreign currency transaction losses, netgains (losses) included in “Other, net” were $1.1$0.3 million and $0.3$(1.1) million during the three months ended April 2, 20221, 2023 and April 3, 2021,2, 2022, respectively.
Fair Value of Financial Instruments
The Company had no financial instruments measured at fair value on a recurring basis as of April 2, 20221, 2023 and December 31, 2021.2022.
There were no transfers of financial assets or liabilities into or out of Level 1, Level 2 or Level 3 for the three months ended April 2, 2022.1, 2023.
Revenue RecognitionRestricted Cash
At the endRestricted cash includes cash held as collateral for stand-alone letter of each accounting period,credit agreements related to normal business transactions. The agreements require the Company recognizes a contra asset to maintain specified amounts of cash as collateral in segregated accounts receivable for estimated sales discounts that have been incurred but not paidto support the letters of credit issued thereunder. The Company had $15.0 million in restricted cash as of April 1, 2023, which totaled $4.3was 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” in the condensed consolidated balance
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued) $3.6sheet and $2.4 million to secure a letter of credit associated with a new third party contract manufacturer in Europe recorded in “Restricted cash, current” in the condensed consolidated balance sheet.
Revenue Recognition
At the end of each accounting period, the Company recognizes a contra asset to accounts receivable for estimated sales discounts that have been incurred but not paid which totaled $4.8 million and $4.6 million as of April 2, 20221, 2023 and December 31, 2021,2022, respectively. The offsetting charge is recorded as a reduction of revenues in the same period when the expense is incurred.
Presentation of Net Revenues by Channel
The following table presents the Company’s net revenues by channel:
| | | Three Months Ended | | | Three Months Ended | |
| (in thousands) | (in thousands) | | April 2,
2022 | | April 3,
2021 | | (in thousands) | | April 1,
2023 | | April 2,
2022 | |
| U.S.: | U.S.: | | | | | | U.S.: | | | | | |
| Retail | Retail | | $ | 68,260 | | | $ | 63,826 | | | Retail | | $ | 44,159 | | | $ | 68,260 | | |
| Foodservice | Foodservice | | 15,493 | | | 16,742 | | | Foodservice | | 14,675 | | | 15,493 | | |
| U.S. net revenues | U.S. net revenues | | 83,753 | | | 80,568 | | | U.S. net revenues | | 58,834 | | | 83,753 | | |
| International: | International: | | | | | | International: | | | | | |
| Retail | Retail | | 16,137 | | | 17,199 | | | Retail | | 14,289 | | | 16,137 | | |
| Foodservice | Foodservice | | 9,565 | | | 10,397 | | | Foodservice | | 19,113 | | | 9,565 | | |
| International net revenues | International net revenues | | 25,702 | | | 27,596 | | | International net revenues | | 33,402 | | | 25,702 | | |
| Net revenues | Net revenues | | $ | 109,455 | | | $ | 108,164 | | | Net revenues | | $ | 92,236 | | | $ | 109,455 | | |
One distributor accounted for approximately 12% of the Company’s gross revenues in the three months ended April 1, 2023; and one customer and one distributor accounted for approximately 12% and 10% of the Company’s gross revenues, respectively, in the three months ended April 2, 2022; and one customer accounted for approximately 11% of the Company’s gross revenues in the three months ended April 3, 2021.2022. No other customer or distributor accounted for more than 10% of the Company’s gross revenues in the three months ended April 2, 20221, 2023 and April 3, 2021.2, 2022.
Investment in Joint 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 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 April 1, 2023 and April 2, 2022 were $3.2 million and April 3, 2021 were $5.9 million, respectively.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued) Change in Accounting Estimate
During the first quarter of 2023, the Company completed a reassessment of the useful lives of its large manufacturing equipment and $3.3 million, respectively.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 a prospective basis effective January 1, 2023. See Note 6. Recently Adopted Accounting Pronouncements
None.
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 April 1, 2023, the Company recorded a credit of $(0.4) million in restructuring expenses primarily driven by a reversal of certain accruals. In the three months ended April 2, 2022, and April 3, 2021, the Company recorded $3.0 million and
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)$2.5 million, respectively, in restructuring expenses related to this dispute, which consisted primarily of legal and other expenses. See Note 10 for further information. As of April 2, 20221, 2023 and December 31, 2021,2022, the Company had $1.3$0.3 million and $2.7$0.7 million, respectively, in accrued and unpaid restructuring expenses.liabilities associated with this contract termination.
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, where the Company’s research and development facility is located, its manufacturing facilities, commercialization center, warehouses and vehicles, and to a lesser extent, certain equipment and finance leases. Such leases generally have original lease terms between two years2 and 12 years, and often include 1one 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 currently considers its renewal options to be reasonably certain to be 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 2two 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 has not recognized an asset or a liability forcontributed $3.1 million and $55.1 million in payments towards the construction of the Campus LeaseHeadquarters in its consolidated balance sheet as of April 2, 2022 because there was no lease commencement during the three months ended April 2, 2022. Therefore,1, 2023 and the Campus Lease is notyear 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
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued) commencement for each phase of the lease. 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.
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 the “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.
Lease costs for operating and finance leases were as follows:
| | | Three Months Ended | | Three Months Ended |
| (in thousands) | (in thousands) | | Statement of Operations Location | | April 2, 2022 | | April 3, 2021 | (in thousands) | | Statement of Operations Location | | April 1, 2023 | | April 2, 2022 |
| Operating lease cost: | Operating lease cost: | | | | | | | Operating lease cost: | | | | | | |
| Lease cost | Lease cost | | Cost of goods sold | | $ | 611 | | | $ | 539 | | Lease cost | | Cost of goods sold | | $ | 410 | | | $ | 611 | |
| Lease cost | Lease cost | | Research and development expenses | | 514 | | | 148 | | Lease cost | | Research and development expenses | | 2,530 | | | 514 | |
| Lease cost | Lease cost | | Selling, general and administrative expenses | | 1,003 | | | 197 | | Lease cost | | Selling, general and administrative expenses | | 365 | | | 1,003 | |
Variable lease cost(1) | Variable lease cost(1) | | Cost of goods sold | | 152 | | | 28 | | Variable lease cost(1) | | Cost of goods sold | | 85 | | | 152 | |
Variable lease cost(1) | | Variable lease cost(1) | | Research and development expenses | | 62 | | | — | |
Variable lease cost(1) | | Variable lease cost(1) | | Selling, general and administrative expenses | | 516 | | | — | |
| Operating lease cost | Operating lease cost | | $ | 2,280 | | | $ | 912 | | Operating lease cost | | $ | 3,968 | | | $ | 2,280 | |
| | Short-term lease cost: | | Short-term lease cost: | | | | |
| Short-term lease cost | Short-term lease cost | | Selling, general and administrative expenses | | $ | 147 | | | $ | 26 | | Short-term lease cost | | Cost of goods sold | | $ | 21 | | | $ | — | |
| | Short-term lease cost | | Short-term lease cost | | Research and development expenses | | 47 | | | — | |
| Short-term lease cost | | Short-term lease cost | | Selling, general and administrative expenses | | 47 | | | 147 | |
| Short-term lease cost | | Short-term lease cost | | $ | 115 | | | $ | 147 | |
| Finance lease cost: | Finance lease cost: | | Finance lease cost: | | | | |
| Amortization of right-of use assets | Amortization of right-of use assets | | Cost of goods sold | | $ | 45 | | | $ | 37 | | Amortization of right-of use assets | | Cost of goods sold | | $ | 53 | | | $ | 45 | |
| Amortization of right-of use assets | | Amortization of right-of use assets | | Research and development expenses | | 3 | | | — | |
| Interest on lease liabilities | Interest on lease liabilities | | Interest expense | | 24 | | | 5 | | Interest on lease liabilities | | Interest expense | | 6 | | | 24 | |
Variable lease cost(1) | | Variable lease cost(1) | | Cost of goods sold | | 1 | | | — | |
| Finance lease cost | Finance lease cost | | $ | 69 | | | $ | 42 | | Finance lease cost | | $ | 63 | | | $ | 69 | |
| Total lease cost(2) | | $ | 2,496 | | | $ | 980 | | |
| Total lease cost | | Total lease cost | | $ | 4,146 | | | $ | 2,496 | |
____________
(1) Variable lease cost primarily consists of common area maintenance, such as cleaning and repairs.
(2) Excludes Campus Lease. See Note 10.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued) Supplemental balance sheet information as of April 2, 20221, 2023 and December 31, 20212022 related to leases are as follows:
| | | | | | | | | | | | | | | | | | | | |
| (in thousands) | | Balance Sheet Location | | April 2, 2022 | | December 31, 2021 |
Assets(1) | | | | | | |
| Operating leases | | Operating lease right-of-use assets | | $ | 25,692 | | | $ | 26,815 | |
| Finance leases, net | | Property, plant and equipment, net | | 570 | | | 615 | |
| Total lease assets | | | | $ | 26,262 | | | $ | 27,430 | |
| | | | | | |
Liabilities(1) | | | | | | |
| Current: | | | | | | |
| Operating lease liabilities | | Current portion of operating lease liabilities | | $ | 4,454 | | | $ | 4,458 | |
| Finance lease liabilities | | Short-term finance lease liabilities | | 183 | | | 182 | |
| Long-term: | | | | | | |
| Operating lease liabilities | | Operating lease liabilities, net of current portion | | 21,485 | | | 22,599 | |
| Finance lease liabilities | | Finance lease obligations and other long-term liabilities | | 396 | | | 442 | |
| Total lease liabilities | | | | $ | 26,518 | | | $ | 27,681 | |
___________
(1) Excludes Campus Lease. See Note 10. | | | | | | | | | | | | | | | | | | | | |
| (in thousands) | | Balance Sheet Location | | April 1, 2023 | | December 31, 2022 |
| Assets | | | | | | |
| Operating leases | | Operating lease right-of-use assets | | $ | 75,056 | | | $ | 87,595 | |
| Finance leases, net | | Property, plant and equipment, net | | 632 | | | 688 | |
| Total lease assets | | | | $ | 75,688 | | | $ | 88,283 | |
| | | | | | |
| Liabilities | | | | | | |
| Current: | | | | | | |
| Operating lease liabilities | | Current portion of operating lease liabilities | | $ | 2,960 | | | $ | 3,812 | |
| Finance lease liabilities | | Accrued expenses and other current liabilities | | 246 | | | 224 | |
| Long-term: | | | | | | |
| Operating lease liabilities | | Operating lease liabilities, net of current portion | | 44,787 | | | 55,854 | |
| Finance lease liabilities | | Finance lease obligations and other long-term liabilities | | 416 | | | 469 | |
| Total lease liabilities | | | | $ | 48,409 | | | $ | 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 April 2, 2022:
| | | | | | | | | | | | | | |
| | April 2, 2022 |
| (in thousands) | | Operating Leases(1) | | Finance Leases |
| Remainder of 2022 | | $ | 4,148 | | | $ | 145 | |
| 2023 | | 5,287 | | | 181 | |
| 2024 | | 3,542 | | | 146 | |
| 2025 | | 2,969 | | | 115 | |
| 2026 | | 2,831 | | | 10 | |
| Thereafter | | 12,983 | | | — | |
| Total undiscounted future minimum lease payments | | 31,760 | | | 597 | |
| Less imputed interest | | (5,821) | | | (18) | |
| Total discounted future minimum lease payments | | $ | 25,939 | | | $ | 579 | |
___________1, 2023: | | | | | | | | | | | | | | |
| | April 1, 2023 |
| (in thousands) | | Operating Leases | | Finance Leases |
| Remainder of 2023 | | $ | 4,319 | | | $ | 206 | |
| 2024 | | 5,752 | | | 210 | |
| 2025 | | 5,288 | | | 178 | |
| 2026 | | 5,170 | | | 73 | |
| 2027 | | 4,672 | | | 34 | |
| Thereafter | | 50,729 | | | — | |
| Total undiscounted future minimum lease payments | | 75,930 | | | 701 | |
| Less imputed interest | | (28,183) | | | (39) | |
| Total discounted future minimum lease payments | | $ | 47,747 | | | $ | 662 | |
(1) Excludes Campus Lease. See Weighted average remaining lease terms and weighted average discount rates were: | | | | | | | | | | | | | | |
| | April 1, 2023 |
| | Operating Leases | | Finance Leases |
| Weighted average remaining lease term (years) | | 13.3 | | 3.2 |
| Weighted average discount rate | | 6.3 | % | | 3.6 | % |
.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued) Weighted average remaining lease terms and weighted average discount rates were:
| | | | | | | | | | | | | | |
| | April 2, 2022 |
| | Operating Leases(1) | | Finance Leases |
| Weighted average remaining lease term (years) | | 8.3 | | 3.4 |
| Weighted average discount rate | | 4.5 | % | | 2.3 | % |
___________
(1) Excludes Campus Lease. See Note 10.
Note 5. Inventories
Major classes of inventory were as follows:
| | (in thousands) | (in thousands) | April 2,
2022 | | December 31,
2021 | (in thousands) | April 1,
2023 | | December 31,
2022 |
| Raw materials and packaging | Raw materials and packaging | $ | 132,209 | | | $ | 129,974 | | Raw materials and packaging | $ | 118,161 | | | $ | 139,509 | |
| Work in process | Work in process | 65,310 | | | 50,227 | | Work in process | 40,345 | | | 37,001 | |
| Finished goods | Finished goods | 86,235 | | | 61,669 | | Finished goods | 63,864 | | | 59,186 | |
| Total | Total | $ | 283,754 | | | $ | 241,870 | | Total | $ | 222,370 | | | $ | 235,696 | |
Note 6. Property, Plant and Equipment
Property,The Company records property, plant and equipment are stated at cost and includes 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 April 2, 20221, 2023 and December 31, 2021,2022, is as follows:
| | (in thousands) | (in thousands) | | April 2,
2022 | | December 31,
2021 | (in thousands) | | April 1,
2023 | | December 31,
2022 |
| Manufacturing equipment | Manufacturing equipment | | $ | 125,489 | | | $ | 115,412 | | Manufacturing equipment | | $ | 192,079 | | | $ | 171,532 | |
| Research and development equipment | Research and development equipment | | 16,861 | | | 16,837 | | Research and development equipment | | 19,032 | | | 16,948 | |
| Leasehold improvements | Leasehold improvements | | 20,343 | | | 20,250 | | Leasehold improvements | | 24,041 | | | 22,740 | |
| Building | Building | | 22,819 | | | 22,937 | | Building | | 22,728 | | | 22,675 | |
| Finance leases | Finance leases | | 867 | | | 867 | | Finance leases | | 1,093 | | | 1,093 | |
| Software | Software | | 1,348 | | | 1,297 | | Software | | 2,916 | | | 2,377 | |
| Furniture and fixtures | Furniture and fixtures | | 867 | | | 868 | | Furniture and fixtures | | 867 | | | 866 | |
| Vehicles | Vehicles | | 584 | | | 584 | | Vehicles | | 584 | | | 584 | |
| Land | Land | | 5,407 | | | 5,434 | | Land | | 5,458 | | | 5,446 | |
| Assets not yet placed in service | Assets not yet placed in service | | 106,969 | | | 95,455 | | Assets not yet placed in service | | 72,007 | | | 93,152 | |
| Total property, plant and equipment | Total property, plant and equipment | | $ | 301,554 | | | $ | 279,941 | | Total property, plant and equipment | | $ | 340,805 | | | $ | 337,413 | |
| Less: accumulated depreciation and amortization | Less: accumulated depreciation and amortization | | 60,165 | | | 53,452 | | Less: accumulated depreciation and amortization | | 89,587 | | | 80,411 | |
| | Property, plant and equipment, net | Property, plant and equipment, net | | $ | 241,389 | | | $ | 226,489 | | Property, plant and equipment, net | | $ | 251,218 | | | $ | 257,002 | |
Depreciation and amortization expense for the three months ended April 1, 2023 and April 2, 2022 and April 3, 2021 was $7.1$6.0 million and $4.3$7.1 million, respectively. Of the total depreciation and amortization expense in the three months ended April 1, 2023 and April 2, 2022, and April 3, 2021, $6.0$5.4 million and $3.4$6.0 million, respectively, were recorded in cost of goods sold, $1.0$0.5 million and $0.9$1.0 million, respectively, were recorded in research and development expenses, and $0.1 million and $0,$0.1 million, respectively, were recorded in SG&A expenses in the Company’s condensed consolidated statements of operations.
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
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued) 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 April 1, 2023 by $5.6 million, impacting cost of goods sold and research and development expenses by $5.1 million and $0.5 million, respectively, and decreased both basic and diluted net loss per share available to common stockholders by $0.09.
The Company concluded that nohad $4.7 million and $5.9 million in property, plant and equipment metconcluded to meet the criteria for assets held for sale as of April 2, 20221, 2023 and December 31, 2021. Previous amounts2022, respectively. Amounts previously classified as assets held for sale were sold in a prior period for amounts that approximated book value for which a note receivable of $3.8 million, net of payments received, had been recorded. The note receivable is included in “Other non-current assets, net” in the Company’s condensed consolidated balance sheet at April 2, 20221, 2023 and December 31, 2021.2022.
Note 7. Debt
The following is a summary of debt balances as of April 2, 20221, 2023 and December 31, 2021:2022:
| | (in thousands) | (in thousands) | | April 2,
2022 | | December 31,
2021 | (in thousands) | | April 1,
2023 | | December 31,
2022 |
| Convertible senior notes | Convertible senior notes | | $ | 1,150,000 | | | $ | 1,150,000 | | Convertible senior notes | | $ | 1,150,000 | | | $ | 1,150,000 | |
| | Debt issuance costs | Debt issuance costs | | (19,343) | | | (20,326) | | Debt issuance costs | | (15,409) | | | (16,392) | |
| | Long-term debt | Long-term debt | | $ | 1,130,657 | | | $ | 1,129,674 | | Long-term debt | | $ | 1,134,591 | | | $ | 1,133,608 | |
Convertible Senior Notes
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 total amount of debt issuance costs of $23.6 million was recorded as a reduction to “Convertible senior notes, net” in the condensed consolidated balance sheet and are being amortized as interest expense over the term of the Notes using the effective interest method. DuringIn each of the three months ended April 2, 20221, 2023 and April 3, 2021,2, 2022, the Company recognized $1.0 million and $0.3 million, respectively, in interest expense related to the amortization of the debt issuance costs related to the Notes. The effective interest rate in both of the three month periods ended April 1, 2023 and April 2, 2022 was 0.09%.
The following is a summary of the Company’s Notes as of April 2, 2022:1, 2023:
| | (in thousands) | (in thousands) | | Principal Amount | | Unamortized Issuance Costs | | Net Carrying Amount | | Fair Value | (in thousands) | | Principal Amount | | Unamortized Issuance Costs | | Net Carrying Amount | | Fair Value |
| Amount | | Leveling | | Amount | | Leveling |
| 0% Convertible senior notes due on March 15, 2027 | 0% Convertible senior notes due on March 15, 2027 | | $1,150,000 | | $19,343 | | $1,130,657 | | $688,563 | | Level 2 | 0% Convertible senior notes due on March 15, 2027 | | $1,150,000 | | $15,409 | | $1,134,591 | | $284,625 | | 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 April 2, 2022,1, 2023, the estimated fair value of the Notes was approximately $0.7 billion.$284.6 million. The Notes are quoted on the Intercontinental Exchange and are 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 April 1, 2022,March 14, 2023, the last business day of the period.
As of April 2, 2022,period when the remaining life of the Notes is approximately 5.0 years.
Revolving Credit Facility
On March 2, 2021, the Company terminated its secured revolving credit agreement, dated as of April 21, 2020 (the “Credit Agreement”).notes were traded.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued) The Company recorded debt issuance costs onAs of April 1, 2023, the revolving credit facility in “Prepaid and other non-current assets, net” in the accompanying condensed consolidated balance sheet. Debt issuance costs associated with the revolving credit facility were amortized as interest expense over the termremaining life of the loan for which amortization of $0 and $40,800, respectively, was recorded during the three months ended April 2, 2022 and April 3, 2021.
In the three months ended April 2, 2022 and April 3, 2021, the Company incurred $0 and $0.3 million, respectively, in interest expense related to its bank credit facilities.
Upon termination of the revolving credit facility, unamortized debt issuance costs of $1.0 million associated with the revolving credit facility were written off as “Loss on extinguishment of debt,” whichNotes is included in “Other, net” in the condensed consolidated statement of operations.
Concurrent with the Company’s execution of the Campus Lease, as a security deposit, the Company delivered to the landlord a letter of credit under the revolving credit facility in the amount of $12.5 million. Upon termination of the revolving credit facility, the letter of credit continued in effect, unsecured.approximately 4.0 years.
Note 8. Stockholders’ (Deficit) Equity
As of April 2, 2022,1, 2023, the Company’s shares consisted of 500,000,000 authorized shares of common stock, par value $0.0001 per share, of which 63,525,39964,150,754 shares of common stock were issued and outstanding, and 500,000 authorized shares of preferred stock, par value $0.0001 per share, of which no shares were issued and outstanding.
As of December 31, 2021,2022, the Company’s shares consisted of 500,000,000 authorized shares of common stock, par value $0.0001 per share, of which 63,400,89963,773,982 shares were issued and outstanding, and 500,000 authorized shares of preferred stock, par value $0.0001 per share, of which no shares 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.
Note 9. Share-Based Compensation
In 2019, the Company’s 2011 Equity Incentive Plan (“2011 Plan”) was amended, restated and re-named the 2018 Equity Incentive Plan (the “2018(“2018 Plan”), and the remaining shares available for issuance under the 2011 Plan were added to the shares reserved for issuance under the 2018 Plan. As of January 1, 2022,2023, the maximum aggregate number of shares that may be issued under the 2018 Plan increased to 20,915,91923,060,440 shares, which includes an increase of 2,144,521 shares effective January 1, 20222023 under the terms of the 2018 Plan.
The following table summarizes the shares available for grant under the 2018 Plan:
| | | | | |
| Shares Available for Grant |
Balance - December 31, 20212022 | 6,515,8077,848,832 | |
| Authorized | 2,144,521 | |
| Granted | (966,978)(1,882,968) | |
| Shares withheld to cover taxes | 9,91714,323 | |
| Forfeited | 37,704164,061 | |
Balance - April 2, 20221, 2023 | 7,740,9718,288,769 | |
| |
As of April 1, 2023 and December 31, 2022, there were 4,714,243 and 3,999,933 shares, respectively, issuable under stock options outstanding, 1,604,302 and 993,313 shares, respectively, issuable under unvested RSUs outstanding, 8,550,850 and 8,145,769 shares, respectively, issued for stock option exercises, RSU settlement, and restricted stock grants, and 8,288,769 and 7,848,832 shares, respectively, available for grant under the 2018 Plan.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued) As of April 2, 2022 and December 31, 2021, there were 4,407,683 and 3,956,364 shares, respectively, issuable under stock options outstanding, 948,684 and 608,175 shares, respectively, issuable under unvested RSUs outstanding, 7,869,381 and 7,730,884 shares, respectively, issued for stock option exercises, RSU settlement, and restricted stock grants, and 7,740,971 and 6,515,807 shares, respectively, available for grants under the 2018 Plan.
Stock Options
Following are the assumptions used in the Black-Scholes valuation model for options granted during the periods shown below:
| | | | | | | | | | | | | | |
| | Three Months Ended |
| | April 2,
2022 | | April 3,
2021 |
| Risk-free interest rate | | 1.7% | | 1.3% |
| Average expected term (years) | | 7.0 | | 7.0 |
| Expected volatility | | 55.0% | | 72.6% |
| Dividend yield | | — | | — |
| | | | | | | | | | | | | | |
| | Three Months Ended |
| | April 1,
2023 | | April 2,
2022 |
| Risk-free interest rate | | 4.1% | | 1.7% |
| Average expected term (years) | | 7.0 | | 7.0 |
| Expected volatility | | 55.3% | | 55.0% |
| Dividend yield | | — | | — |
Option grants to new employees in the three months ended April 2, 20221, 2023 and April 3, 2021 generally vest 25% of the total award on the first anniversary of the vesting commencement date, and thereafter ratably vesting monthly over the remaining 3-year period, subject to continued employment through the vesting date. Option grants to continuing employees in the three months ended April 2, 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 3-year period, subject to continued employment through the vesting date. Option grants to continuing employees in the three months ended April 3, 2021 generally vest monthly over a 48-month period, subject to continued employment through the vesting date. Option grant to one executive officer in the three months ended April 3, 2021 vested over three months from the vesting commencement date.
The following table summarizes the Company’s stock option activity during the three months ended April 2, 2022:1, 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, 2021 | 3,956,364 | | | $ | 27.04 | | | 5.9 | | $ | 180,302 | |
| Granted | 563,286 | | | $ | 47.42 | | | — | | $ | — | |
| Exercised | (95,784) | | | $ | 8.48 | | | — | | $ | 4,205 | |
| Cancelled/Forfeited | (16,183) | | | $ | 92.71 | | | — | | $ | — | |
| Outstanding at April 2, 2022 | 4,407,683 | | | $ | 29.81 | | | 6.2 | | $ | 126,043 | |
| Vested and exercisable at April 2, 2022 | 2,959,174 | | | $ | 15.54 | | | 4.8 | | $ | 115,943 | |
| Vested and expected to vest at April 2, 2022 | 4,095,831 | | | $ | 26.52 | | | 5.9 | | $ | 125,425 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| 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 | (204,335) | | | $ | 0.66 | | | — | | $ | 3,522 | |
| Canceled/Forfeited | (96,073) | | | $ | 57.64 | | | — | | $ | — | |
| Outstanding at April 1, 2023 | 4,714,243 | | | $ | 24.34 | | | 6.2 | | $ | 24,950 | |
| Vested and exercisable at April 1, 2023 | 3,102,199 | | | $ | 21.93 | | | 4.5 | | $ | 24,873 | |
| Vested and expected to vest at April 1, 2023 | 4,413,981 | | | $ | 23.84 | | | 6.0 | | $ | 24,935 | |
__________
(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.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)During the three months ended April 2, 20221, 2023 and April 3, 2021,2, 2022, the Company recorded in aggregate $4.1$4.0 million and $3.4$4.1 million, respectively, of share-based compensation expense related to 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 April 2, 2022,1, 2023, there was $32.5$21.4 million in unrecognized compensation expense related to nonvested stock option awards which is expected to be recognized over a weighted average period of 1.61.5 years.
Restricted Stock Units
RSU grants to new and continuing employees in the three months ended April 1, 2023 generally vest 25% of the total award on the first anniversary of the vesting commencement date, and thereafter vest quarterly over the remaining 3 years of the award, subject to continued employment through the vesting
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued) date. Some of the RSU grants to continuing employees in the three months ended April 1, 2023 vest 50% of the total award on the first anniversary of the vesting commencement date, and thereafter vest quarterly over the remaining 4 quarters of the award, subject to continued employment through the vesting date. Some of the RSU grants to continuing employees in the three months ended April 1, 2023 vest quarterly over 4 quarters, subject to continued employment through the vesting date.
RSU grants to new and continuing employees in the three months ended April 2, 2022 generally vest 25% of the total award on the first anniversary of the vesting commencement date, and thereafter vest quarterly over the remaining 3 years of the award, subject to continued employment through the vesting date. Some of the RSU grants to continuing employees in the three months ended April 2, 2022 vest 50% of the total award on the first anniversary of the vesting commencement date, and thereafter vest quarterly over the remaining 4 quarters of the award, subject to continued employment through the vesting date. RSU awards to nonemployee ambassadors in the three months ended April 2, 2022 vest on varying dates, subject to continued service through the vesting date.
RSU grants to new employees in the three months ended April 3, 2021 vest 25% of the total award on the first anniversary of the vesting commencement date, and thereafter vest quarterly over the remaining 3 years of the award, subject to continued employment through the vesting date. RSU grants to continuing employees in the three months ended April 3, 2021 generally vest quarterly over 16 quarters, subject to continued employment through the vesting date. RSU grants in the three months ended April 3, 2021 include fully vested RSUs granted to an executive officer issued in settlement of the obligation discussed below under Share-Settled Obligation. RSU grant to one executive officer in the three months ended April 3, 2021 vested 100% over three months from the vesting commencement date. There were no RSU grants to nonemployee ambassadors in the three months ended April 3, 2021.
The following table summarizes the Company’s RSU activity during the three months ended April 2, 2022:
| | | | | | | | | | | | | | |
| | Number of Units | | Weighted
Average
Grant Date Fair Value Per Unit |
| Unvested at December 31, 2021 | | 608,175 | | | $ | 89 | |
| Granted | | 403,692 | | | $ | 48.11 | |
Vested(1) | | (41,709) | | | $ | 99.29 | |
| Cancelled/Forfeited | | (21,474) | | | $ | 100.15 | |
| Unvested at April 2, 2022 | | 948,684 | | | $ | 70.75 | |
1, 2023: | | | | | | | | | | | | | | |
| | Number of Units | | Weighted
Average
Grant Date Fair Value Per Unit |
| Unvested at December 31, 2022 | | 993,313 | | | $ | 35.98 | |
| Granted | | 868,250 | | | $ | 17.81 | |
Vested(1) | | (189,273) | | | $ | 35.40 | |
| Canceled/Forfeited | | (67,988) | | | $ | 40.98 | |
| Unvested at April 1, 2023 | | 1,604,302 | | | $ | 26.00 | |
________ (1) Includes 9,91714,323 shares of common stock that were withheld to cover taxes on the release of vested RSUs and became available for future grants pursuant to the 2018 Plan.
During the three months ended April 2, 20221, 2023 and April 3, 2021,2, 2022, the Company recorded in aggregate $5.2$5.5 million and $2.9$5.2 million, respectively, of share-based compensation expense related to RSUs. 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.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)As of April 2, 2022,1, 2023, there was $33.3$23.2 million in unrecognized compensation expense related to unvested RSUs which is expected to be recognized over a weighted average period of 1.51.3 years.
Share-Settled Obligation
Share-based compensation expense in the three months ended April 2, 2022 and April 3, 2021 includes $0 and $0.8 million, respectively, for a liability classified, share-settled obligation to an executive officer related to a sign-on award pursuant to the terms of the executive officer’s offer letter with the Company. The share-based compensation expense related to this share-settled obligation is included in SG&A expenses in the Company’s condensed consolidated statements of operations. Financing activities in the statement of cash flows for the three months ended April 2, 2022 and April 3, 2021 includes $0 and $0.8 million, respectively, noncash reclassification of the share-settled obligation from “Other current liabilities” to “Additional paid-in capital.”
In the first quarter of 2021, a quarterly tranche related to this obligation was earned, and the Company delivered to this executive officer 6,066 fully vested RSUs with a settlement date fair value of $0.8 million.
Restricted Stock to Nonemployees
As of April 2, 2022, no shares of restricted stock had been issued to nonemployee brand ambassadors.
During the three months ended April 2, 2022 and April 3, 2021, the Company recorded in aggregate $0 and $0.2 million, respectively, of share-based compensation expense related to restricted stock issued to nonemployee brand ambassadors, which is included in SG&A expenses in the Company’s condensed consolidated statements of operations.
Employee Stock Purchase Plan
As of April 2, 2022,1, 2023, the maximum aggregate number of shares that may be issued under the 2018 Employee Stock Purchase Plan (“ESPP”) was 2,412,5852,948,715 shares of common stock, including an increase of 536,130 shares effective January 1, 20222023 under the terms of the ESPP. The 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 common stock on specified dates during such offerings. The administrator has not yet approved an offering under the ESPP.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued) Note 10. Commitments and Contingencies
Leases
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 lab and innovation space and headquarters officesCampus Headquarters.
Under the terms of the Campus Lease, the Company will lease an aggregate of approximately 282,000 rentable square feet in a portion of a building located at 888 N. Douglas Street, El Segundo, California.
InCalifornia, to be built out by the three months ended April 2, 2022,Landlord and delivered to the Company paid $0.3 million in payments towards common area maintenance, parking, and insurance. No such payments were made in the three months ended April 3, 2021.
Although the Company is involved in the design of the tenant improvements of the Premises, the Company does not have title or possession of the assets during construction.multiple phases. In addition, the Company does not have the ability to control the leased Premises until each phase of the tenant improvements is complete. As of April 2, 2022, the tenant improvements associated with Phase 1-A had not beenwere completed and the underlying asset had not beenwas delivered to the Company. Accordingly, there was no
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)lease commencement during the three months ended April 2, 2022. Therefore, the Company
has not recognized anbegan recognizing a right-of-use asset
or aand lease liability for
the Campus LeasePhase1-A in its
condensed consolidated balance
sheets as of April 2, 2022 and December 31, 2021. The Company contributed $37.0 million and $59.2 millionsheet in
payments to a construction escrow account in the three months ended April 2, 2022 and the year ended December 31,
2021, respectively. These2022. See Note 4. Aggregate payments are recorded in “Prepaidtowards base rent over the initial lease costs, non-current” interm associated with the Company’s condensed consolidated balance sheets as of April 2, 2022 and December 31, 2021, respectively, whichremaining phases not yet delivered to the Company will ultimately be recorded as a component of a right-of-use asset upon lease commencement.approximately $118.4 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. Upon termination of the revolving credit facility, theThe letter of credit continuedis secured by a $12.6 million deposit reflected in effect, unsecured.the Company’s condensed consolidated balance sheet as “Restricted cash, non-current” as of April 1, 2023 and December 31, 2022.
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 the “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.
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 investment agreement with the Administrative Committee (the “JX Committee”) of 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 had agreed to invest $10.0 million as the registered capital of BYND JX in the JXEDZ through an intercompany investment in BYND JX and BYND JX has agreed to lease a facility in the JXEDZ for a minimum of two years. In connection with such agreement, BYND JX entered into a factory leasing contract with an affiliate of the JX Committee, pursuant to which BYND JX has agreed to lease and renovate a facility in the JXEDZ and lease it for a minimum of two years. In the year ended December 31, 2022, the lease was amended to extend the term for an additional five years without rent escalation. In the fourth quarter of 2021, BYND JX leased an approximately 12,000 square foot facility in Shanghai, China, for a period of 8 years, which is used as a local research and development facility to support the local manufacturing operations. As of April 1, 2023, the Company had invested $22.0 million as the registered capital of BYND JX and advanced $20.0 million to BYND JX.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued) 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 by $30.0to $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 an additional facility thereon.
The Planet Partnership
On January 25, 2021, the Company entered into TPP,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. For the three months ended April 2, 20221, 2023 and April 3, 2021,2, 2022, the Company recognized its share of the net losses in TPP, in the amount of $3.2 million and $0.7 million, and $0.4respectively. 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. In the three months ended April 1, 2023, the Company contributed an additional $3.3 million respectively.as its share of an additional investment in TPP, resulting in a total contribution of $27.6 million as of April 1, 2023. See Note 2 and Note 13. In the first quarter of 2023, the Company continued the process of restructuring certain contracts and operating activities related to Beyond Meat Jerky.
Purchase Commitments
As of April 2, 2022,1, 2023, the Company had committed to purchase pea protein inventory totaling $34.6$40.2 million in 2022.the remainder of 2023.
BEYOND MEAT, INC. AND SUBSIDIARIESOn April 6, 2022, the Company entered into a co-manufacturing agreement (“Agreement”) with a co-manufacturer to manufacture various products for the Company. The 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 quantity limits.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)The following table sets forth the schedule of the fees for the committed quantity under the Agreement. | | | | | | | | |
| (in thousands) | | As of
April 1, 2023 |
| Remainder of 2023 | | $ | 5,910 | |
| 2024 | | 11,820 | |
| 2025 | | 11,820 | |
| 2026 | | 11,820 | |
| 2027 | | 38,452 | |
| Total | | $ | 79,822 | |
Litigation
Don Lee FarmsConsumer Class Actions Regarding Protein Claims
On
From May 25, 2017, Don Lee Farms, a division of Goodman Food Products, Inc.,31, 2022 through January 13, 2023, multiple putative class action lawsuits were filed a complaint against the Company in various federal and state courts alleging that the Superior Courtlabeling and marketing of the State of California for the County of Los Angeles asserting claims for breach of contract, misappropriation of trade secrets, unfair competition under the California Business and Professions Code, money owed and due, declaratory relief and injunctive relief, each arising outcertain of the Company’s decision to terminate an exclusive supply agreement between the Company and Don Lee Farms. The Company denied allproducts is false and/or misleading under federal and/or various states’ laws. Specifically, each 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, the former co-manufacturer filed an amended complaint that addedlawsuits allege one or more of the Company’s then current contract manufacturers as a defendant, principally for claims arising fromfollowing theories of liability: (i) that the then current contract manufacturer’s alleged uselabels and related marketing of the former co-manufacturer’s alleged trade secrets, and for replacingchallenged products misstate the former co-manufacturer as onequantitative amount of protein that is provided by each serving of the Company’s co-manufacturers. The then current contract manufacturer filed an answer denying all of Don Lee Farms’ claimsproduct; (ii) that the labels 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 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. On June 19, 2019, the Company filed an answer denying Don Lee Farms' claims.
On January 24, 2020, a writ judge granted Don Lee Farms a right to attach in the amount of $628,689 on the grounds that Don Lee Farms had established a “probable validity” of its claim that Beyond Meat owes Don Lee Farms money for a small batch of unpaid invoices. This determination was not made by the trial judge.
On January 27, 2020, Don Lee Farms filed a third amended complaint to add 3 individual defendants, all of whom are current or former employeesrelated marketing of the Company, including Mark Nelson, the Company’s former Chief Financial Officer and Treasurer, to Don Lee Farms’ existing fraud claims alleging that those individuals were involved in the alleged fraudulent misrepresentations. On June 23, 2020, the judge denied Beyond Meat and the individual defendants’ motion to dismiss the fraud and negligent misrepresentation claims, allowing the claims to proceed. On July 6, 2020, the Company and the individual defendants filed an answer denying all of Don Lee Farms’ claims, including denying all allegations of fraud and negligent misrepresentation.
On August 11, 2020, the Company filed an amended cross-complaint against Don Lee Farms, its parent Goodman Food Products, Inc. and its owners and employees, Donald, Daniel, and Brandon Goodman. Among other claims, the amended cross-complaint alleges that Don Lee Farms defrauded Beyond Meat, misappropriated its trade secrets, and infringed its trademarks.
On January 28, 2021, Don Lee Farms filed a motion for summary adjudication on its breach of contract and money owed claims and on Beyond Meat’s breach of contract claims. On February 18, 2021, Don Lee Farms and Donald, Daniel and Brandon Goodman filed a motion for summary adjudication on Beyond Meat’s fraud, negligent misrepresentation, and conversion claims.
On February 16, 2021, the Court entered an order consolidating this action with an action that Don Lee Farms filed against CLW Foods, LLC, a current Beyond Meat contract manufacturer. On February 22, 2021, CLW Foods, LLC requested a continuance of the trial date, which the Court granted.
On March 19, 2021, Don Lee Farms requested the dismissal, without prejudice, of Don Lee Farms’ claims against the Company’s former contract manufacturer, ProPortion Foods, LLC and current contract manufacturer CLW Foods, LLC. On, March 23, 2021, ProPortion Foods, LLC requested that its claimschallenged
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued) againstproducts misstate the percent daily value of protein that is provided by each serving of the product; and (iii) that the Company behas 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. On March 26, 2021, the Court granted Don Lee Farms’ request to dismiss its claims against ProPortion Foods, LLC and CLW Foods, LLC; and granted ProPortion Foods, LLC request to dismiss its claims against the Company.prejudice; though they may be refiled.
On May 7, 2021, the Court ruled on Don Lee Farms’ motions for summary adjudication. The Court granted Don Lee Farms’ motion for summary adjudication on its breach of contract and money owed claims, andNovember 14, 2022, Beyond Meat’s negligent misrepresentation and conversion claims. The Court denied Don Lee Farms’ motion for summary adjudication on Beyond Meat’s breach of contract and fraud claims, allowing Beyond Meat’s claims to proceed to trial.
On June 11, 2021, former Beyond Meat employees Mark Nelson and Tony Miller, and current employee, Jessica Quetsch (collectively, the “individual defendants”), filed a motion for summary adjudicationwith the Judicial Panel on Don Lee Farms’ fraud claim asserted against them. On June 11, 2021,Multidistrict Litigation to transfer and consolidate all pending class actions. No party opposed the Company filed a motion, for summary adjudication on Don Lee Farms’ fraud and negligent misrepresentation claims, misappropriation of trade secret claim, and unfair competition claim under the California Business and Professions Code. On August 27, 2021, the Court ruledPanel held oral argument on the individual defendants’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 is due by June 5, 2023, plaintiffs' response is due by July 7, 2023, and the Company’s motions for summary adjudication. The Court denied the individual defendants’ motion for summary adjudication. The Court also denied the Company’s motion for summary adjudication on Don Lee Farms’ fraud and negligent misrepresentation claims. The Court granted the Company’s motion for summary adjudication on Don Lee Farms’ trade secret misappropriation and unfair competition claims. Don Lee Farms’ trade secret misappropriation and unfair competition claims will not proceed to trial.
On January 27, 2022, Don Lee Farms filed a motion for summary adjudication on Beyond Meat’s trade secret misappropriation claim. On April 19, 2022, the Court denied Don Lee Farms motion for summary adjudication on Beyond Meat’s trade secret misappropriation claim. Beyond Meat’s trade secret misappropriation claim will proceed to trial.
The previous trial date, May 16, 2022,reply is due by July 21, 2023. A telephonic conference was continued. Trial is currently set for September 26, 2022.
Don Lee Farms is seeking from Beyond Meat andOctober 17, 2023 for a ruling on the individual defendants unspecified compensatory and punitive damages, declaratory and injunctive relief, and attorneys’ fees and costs. The Company is seeking from Don Lee Farms monetary damages, restitution of monies paidmotion to Don Lee Farms, injunctive relief, including the prohibition of Don Lee Farms’ use or disclosure of Beyond Meat’s trade secrets and the prohibition of Don Lee Farms’ infringing use of Beyond Meat’s trademarks, and attorneys’ fees and costs.dismiss.
The Company believes it was justified in terminating the supply agreement with Don Lee Farms, that the Company is not liable for the fraud or negligent misrepresentation alleged in the third amended complaint, and that Don Lee Farms is liable for the conduct alleged in the Company’s amended cross-complaint. Conversely, as alleged in the Company’s amended cross-complaint, the Company believes Don Lee Farms misappropriated the Company’s trade secrets, defrauded the Company, and ultimately has infringed the Company’s trademarks.
The Company is currently in the process of litigating this matter and intends to vigorously defend itself and its current and former employees against theall claims and to prosecute the Company’s own claims.
The Company cannot provide assurance that Don Lee Farms will not prevail in all or some of their claims against the Company or the individual defendants, or that the Company will prevail in some or all of its claims against Don Lee Farms. For example, if Don Lee Farms succeedsasserted in the lawsuit, the Company could be required to pay damages, including but not limited to contract damages reasonably calculated at what the Company would have paid Don Lee Farms to produce the Company’s products through 2019, the end of the contract term.complaints. Based on the Company’s current knowledge, the Company
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)has determined that the amount of any material loss or range of any losses that is reasonably possible to result from this lawsuitthese lawsuits is not estimable.
Securities Related LitigationThe active lawsuits are:
On January 30, 2020, Larry Tran, a purported shareholder of•Roberts v. Beyond Meat, filedInc., 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)
Interbev
In October 2020, Interbev, a putative securities class action lawsuit in the United States District CourtFrench trade association for the Central District of California against Beyond Meat and 2cattle industry sent a cease-and-desist letter to one of the Company’s executive officers,contract manufacturers alleging that the use of “meat” and meat-related terms is misleading the French consumer. Despite the Company’s President and CEO, Ethan Brown, and the Company’s former Chief Financial Officer and Treasurer, Mark Nelson. As noted here and in previous filings, the Tran securities class action was dismissed with prejudice on October 27, 2020, except for the class allegations of absent putative class members, which were dismissed without prejudice.
On March 16, 2020, Eric Weiner,best efforts to reach a purported shareholder of Beyond Meat, filedsettlement, including a shareholder derivative lawsuit in the United States District Court for the Central District of California, putatively on behalf offormal settlement proposal from the Company against 2 of the Company’s executive officers, the Company’s President and CEO, Ethan Brown, and the Company’s former Chief Financial Officer and Treasurer, Mark Nelson, and each of the Company’s directors, including one former director, who signed the Company’s initial public offering registration statement. The lawsuit asserts claims under Sections 10(b) and 21D of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), claims of breaches of fiduciary duty as directors and/or officers of Beyond Meat, and claims of unjust enrichment and waste of corporate assets, all relating to the Company’s ongoing litigation with Don Lee Farms, related actions taken by Beyond Meat and the named individuals during the period of May 2, 2019 toin March 16, 2020, and the Tran securities case brought against the Company.
On March 18, 2020, Kimberly Brink and Melvyn Klein, purported shareholders of Beyond Meat, filed a shareholder derivative lawsuit in the United States District Court for the Central District of California, putatively on behalf of the Company, against 2 of the Company’s executive officers, the Company’s President and CEO, Ethan Brown, and the Company’s former Chief Financial Officer and Treasurer, Mark Nelson, and each of the Company’s directors, including one former director, who signed the Company’s initial public offering registration statement. The lawsuit asserts claims under Sections 10(b) and 21D of the Exchange Act, claims of breaches of fiduciary duty as directors and/or officers of Beyond Meat, and claims of unjust enrichment and waste of corporate assets, all relating to the Company’s ongoing litigation with Don Lee Farms, related actions taken by Beyond Meat and the named individuals during the period of May 2, 2019 to March 18, 2020, and the Tran securities case brought against the Company.
On May 27, 2020, Kevin Chew, a purported shareholder of Beyond Meat, filed a shareholder derivative lawsuit in the United States District Court of the District of Delaware (the “Chew Derivative Action”), putatively on behalf of the Company, against 2 of the Company’s executive officers, the Company’s President and CEO, Ethan Brown, and the Company’s former Chief Financial Officer and Treasurer, Mark Nelson, and each of the Company’s directors, including one former director, who signed the Company’s initial public offering registration statement. The lawsuit asserts claims under Sections 10(b) and 21D of the Exchange Act and claims of breaches of fiduciary duty, relating to the Company’s ongoing litigation with Don Lee Farms, related actions taken by Beyond Meat and the named individuals during the period of May 2, 2019 to May 27, 2020. On June 16, 2020, the Court entered an order staying all proceedings in the derivative action until (1) the Tran securities class action is dismissed, with prejudice, and all appeals related thereto have been exhausted; or (2) any motion to dismiss the Tran securities class action is denied in whole or in part. On June 17, 2020, the Court entered an order administratively closing the derivative case based on the stay order. On July 29, 2021, the Court entered a Joint Stipulation to Continue the Stay of the Action, staying the case until the resolution of the California Derivative Action.
On April 1, 2020, the United States District Court for the Central District of California entered an order consolidating the Weiner action and the Brink/Klein action for all purposes and designated the
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)consolidated case In re: Beyond Meat, Inc. Derivative Litigation (the “California Derivative Action”). On April 13, 2020, the Court entered an order appointing co-lead counsel for the California Derivative Action. On June 23, 2020, the Court entered an order approving a Joint Stipulation Regarding Stay of Actions. Under the terms of the stay approval order, all proceedings in the California Derivative Action are stayed until (1) the Tran securities class action is dismissed, with prejudice, and all appeals related thereto have been exhausted; or (2) any motion to dismiss the Tran securities class action is denied in whole or in part. As noted herein and in previous filings, the Tran securities class action was dismissed with prejudiceassociation no longer responded. Instead, on October 27, 2020, except for the class allegations of absent putative class members, which were dismissed without prejudice. On April 20, 2021, the parties filed a joint stipulation regarding briefing schedule, and the Court entered a schedule on April 21, 2021.
On May 24, 2021, the plaintiffs in the California Derivative Action filed a First Amended Complaint (“FAC”). The FAC names the same defendants named in the originally-filed consolidated complaint and adds four additional defendants, including ProPortion Foods, LLC (“ProPortion”) and CLW Foods, LLC (“CLW”). The FAC asserts claims under Section 14(a) of the Exchange Act, claims of breach of fiduciary duty, unjust enrichment, waste of corporate assets, abuse of control and gross mismanagement against the individual defendants, and aiding and abetting claims against CLW and ProPortion. All of these claims relate to the Company’s dealings and ongoing litigation with Don Lee Farms, and related actions taken by Beyond Meat and the named individuals during the period of April 2016 to the present. On July 2, 2021, the Court entered a Joint Stipulation Regarding Extension of Briefing Schedule so that the parties could attempt to reach resolution of the lawsuit.
The parties have reached a settlement of the California and Chew Derivative Actions. The proposed settlement, which is subject to final Court approval, includes the Company enacting certain corporate governance reforms and paying plaintiffs’ attorney fees and costs in the amount of $515,000, which amount has been accrued as of April 2, 2022 and December 31, 2021. No other payment is contemplated in the proposed settlement. On October 1, 2021, the parties filed a Joint Report Regarding Settlement in the Central District of California stating that the parties reached a tentative settlement and requesting that the Court (i) vacate the briefing schedule for Defendants’ motion to dismiss, and (ii) issue an order setting November 19, 2021 as the deadline on or before which Plaintiffs must move for preliminary approval of the settlement. On October 4, 2021, the Court entered such an order. The parties requested and received another extension to January 14, 2022 for Plaintiffs to file a motion for preliminary approval. The Stipulation of Settlement was signed on January 14, 2022, and Plaintiffs filed a motion for preliminary approval that same day. On February 8, 2022, the Court entered a Scheduling Notice and Order finding that Plaintiffs’ motion for preliminary approval is appropriate for submission on the papers without oral argument. On March 31, 2022, the Court entered an order preliminarily approving the Stipulation of Settlement. On April 8, 2022, the Company published notice of the preliminary approval and the proposed settlement in accordance with the Stipulation of Settlement. On April 18, 2022, the Company paid to escrow the $515,000 for Plaintiffs’ attorneys’ fees and costs and on April 19, 2022, the Company filed proof of notice with the Court. Plaintiffs’ motion for final approval is due on June 13, 2022, objections to the proposed settlement are due on June 20, 2022, plaintiffs’ reply in support of final approval is due on July 1, 2022, and the Final Approval Hearing is scheduled for July 11, 2022.
Interbev
On March 13, 2022, the Company was served a summons by Interbev a French trade association representing the cattle industry, 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 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. The Company strongly disputes these claims and will defend its position with
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued) the utmost vigor. The filing date for the Company’s response is May 24, 2023. The litigation is expected to take at least 18 months in the first instance, and (iii) damagesif the Court rules against the Company, it could disrupt the Company’s ability to market in France.
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 EUR 200,000.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. The Company’s deadline to respond is July 7, 2023. The Company intendsstrongly disputes these claims and is evaluating appropriate next steps to vigorously defend against all claims assertedits use of the Caped Steer logo.
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 (“Decree”). The 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 Decree, in response to a motion filed by a French trade association. While the Court has not yet handed down a decision on the merits, the suspension indicates that it has serious doubts as to the substantive lawfulness of the Decree.
The Company does not believe that the 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 Decree before the French High Administrative Court. On November 16, 2022, the Company filed a voluntary intervention in the summons.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 makes clear that it will enforce the Decree as a blanket ban on the use of all “meaty” names for plant-based products in France. The Company maintains its position that the Decree is illegal under French and EU law, and will continue to fight the Decree with utmost vigor. On April 20, 2023, a number of plant-based companies voluntarily filed interventions in support of the Company’s case. A decision from the Court is expected sometime during 2023, and should the Court hold that the Decree is lawful, it could impact the Company’s ability to market in France, as it will need to take steps to amend its labels in line with the Decree.
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 matters that are pending or asserted will have a material effect on its financial statements.
Note 11. Income Taxes
For the three months ended April 2, 20221, 2023 and April 3, 2021,2, 2022, the Company recorded $10,000$0 and $48,000$10,000 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 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
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued) substantially all deferred tax assets. If 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 April 2, 2022,1, 2023, the Company did 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.
In response to the COVID-19 pandemic, the United States passed the Coronavirus Aid, Relief, and Economic Security Act in March 2020 and on March 11, 2021 the United States enacted the American Rescue Plan Act of 2021. These Acts include various income and payroll tax measures. The income tax and payroll tax measures did not materially impact the Company’s financial statements.
Note 12. Net Loss Per Share Available to Common Stockholders
The Company calculates basic and diluted net loss per share available to common stockholders in conformity with the two-class method required for companies with participating securities. Pursuant to Accounting Standards Update 2020-06, the Company applies the more dilutive of the if-converted method and the two-class method to its Notes.
Computation of net loss per share available to common stockholders for the three months ended April 1, 2023 excludes the dilutive effect of 4,714,243 shares issuable under stock options and 1,604,302 RSUs outstanding at April 1, 2023 because the Company incurred a net loss and their inclusion would be anti-dilutive. Computation of net loss per share available to common stockholders for the three months ended April 1, 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 months ended April 2, 2022 excludes the dilutive effect of 4,407,683 shares issuable under stock options and 948,684 RSUs outstanding at April 2, 2022 because the Company incurred a net loss and their inclusion would be anti-dilutive. Computation of net loss per share available to common stockholders for the three months ended April 2, 2022 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 months ended April 3, 2021 excludes the dilutive effect of 4,097,076 shares issuable under stock options and 294,296 RSUs outstanding at April 3, 2021 because their inclusion would be anti-dilutive. Computation of net loss per share available to common stockholders for the three months ended April 3, 2021 also excludes the dilutive effect of shares of common stock that were issuable to an officer in settlement of an obligation to deliver a variable number of shares based on a fixed monetary amount (see | | | | | | | | | | | | | | | | | | |
| (in thousands, except share and per share amounts) | | Three Months Ended | | |
| April 1,
2023 | | April 2,
2022 | | | | |
| Numerator: | | | | | | | | |
| Net loss available to common stockholders | | $ | (59,037) | | | $ | (100,458) | | | | | |
| | | | | | | | |
| Net loss available to common stockholders—basic | | (59,037) | | | (100,458) | | | | | |
| Denominator: | | | | | | | | |
| Weighted average common shares outstanding—basic | | 64,004,894 | | | 63,465,205 | | | | | |
| 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 | | 64,004,894 | | | 63,465,205 | | | | | |
| Net loss per share available to common stockholders—basic | | $ | (0.92) | | | $ | (1.58) | | | | | |
| Net loss per share available to common stockholders—diluted | | $ | (0.92) | | | $ | (1.58) | | | | | |
Note 9__________) because the shares to be delivered were not participating securities as they did not have voting rights and were not entitled to participate in dividends until they are issued.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued) | | | | | | | | | | | | | | | | | | |
| (in thousands, except share and per share amounts) | | Three Months Ended | | |
| April 2,
2022 | | April 3,
2021 | | | | |
| Numerator: | | | | | | | | |
| Net loss available to common stockholders | | $ | (100,458) | | | $ | (27,266) | | | | | |
| | | | | | | | |
| Net loss available to common stockholders—basic | | (100,458) | | | (27,266) | | | | | |
| Denominator: | | | | | | | | |
| Weighted average common shares outstanding—basic | | 63,465,205 | | | 62,941,748 | | | | | |
| Dilutive effect of shares issuable under stock options | | — | | | — | | | | | |
| Dilutive effect of RSUs | | — | | | — | | | | | |
| Dilutive effect of share-settled obligation | | — | | | — | | | | | |
Dilutive effect of Notes, if converted(1) | | — | | | — | | | | | |
| Weighted average common shares outstanding—diluted | | 63,465,205 | | | 62,941,748 | | | | | |
| Net loss per share available to common stockholders—basic | | $ | (1.58) | | | $ | (0.43) | | | | | |
| Net loss per share available to common stockholders—diluted | | $ | (1.58) | | | $ | (0.43) | | | | | |
__________
(1) As the Company recorded a net loss forin the three months ended April 2, 20221, 2023 and April 3, 2021,2, 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 April 1, 2023 and April 2, 2022.
Note 13. Related Party Transactions
In connection with the Company’s investment in TPP, a joint venture with PepsiCo, Inc., 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
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued) 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 for products sold tofrom TPP included in the U.S. retail channel net revenues were $5.3 million, including a $2.0 million non-refundable up-front fee, and $10.7 million and $0 for the three months ended April 1, 2023 and April 2, 2022, and April 3, 2021, respectively. Accounts receivable from TPP was $6.0were $1.1 million and $0$0.4 million at April 2, 20221, 2023 and December 31, 2021,2022, respectively. Unrecognized revenue associated with the up-front fee charged to TPP as of April 1, 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.
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 20212022 10-K and Part II, Item 1A, “Risk Factors” and “Note Regarding Forward-Looking Statements” included in this report and those discussed in other documents we file from time to time with 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 in this quarterly report and our audited consolidated financial statements and related notes thereto included in our 20212022 10-K. Our historical results are not necessarily indicative of the results to be expected for any future periods and our operating results for the three months ended April 2, 20221, 2023 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 20222023 or for any other interim period or for any other future year or period.
Overview
Beyond Meat is a leading plant-based meat company offering a portfolio of revolutionary plant-based meats. We build meat directly from plants, an innovation that enables consumers to experience the taste, texture and other sensory attributes of popular animal-based meat products while enjoying the nutritional and environmental benefits of eating our plant-based meat products. Our brand commitment,promise, “Eat What You Love,” represents a strong belief that there is a better way to feed our future and that the positive choices we all make, no matter how small, can have a great impact on our personal health and the health of our planet. By shifting from animal-based meat to plant-based protein,meat, we can positively impact four growing global issues: human health, climate change, constraints on natural resources and animal welfare. The success of our breakthrough innovation model and products has allowed us to appeal to a broad range of consumers, including 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. As of March 2022, our2023, Beyond Meat branded products were available at approximately 135,000191,000 retail and foodservice outlets in more than 9080 countries worldwide, across mainstream grocery, mass merchandiser, club store, convenience store and natural retailer channels, direct-to-consumer, and various food-away-from-home channels, including restaurants, foodservice outlets and schools. The number of outlets carrying Beyond Meat branded products as of March 2023 includes approximately 45,000 U.S. retail outlets unique to Beyond Meat Jerky.
The condensed consolidated financial statements forNet revenues decreased to $92.2 million in the periodthree months ended April 1, 2023 from $109.5 million in the three months ended April 2, 2022, include the accounts of the Company and its foreign subsidiaries, Beyond Meat EU B.V., BYND JX and Beyond Meat Canada Inc. All inter-company balances and transactions have been eliminated.
We operate onrepresenting 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.
For15.7% reduction. In the first quarter ended April 2,of 2023, our net revenues were negatively affected by increasing softness in demand in the plant-based meat category, macroeconomic issues, including inflation, rising interest rates and increasing concerns about the likelihood of a recession, and increased competition. Additionally, there remains uncertainty regarding the long-term effects of the COVID-19 pandemic and certain negative impacts on our business, the plant-based meat category, consumer and customer behavior, and demand levels.
These factors also negatively impacted our 2022 net revenues. In response to the difficult environment and negative impact of these factors on our business and the overall plant-based meat category, beginning in the fourth quarter of 2022 we pivoted our focus toward sustainable long-term growth supported by three pillars: (1) driving margin recovery and operating expense reduction through the implementation of lean value streams across our beef, pork and poultry platforms; (2) inventory reduction and cash flow generation through more efficient inventory management; and (3) focusing on near-term retail and foodservice channels accounted for approximately 77.1%growth drivers while supporting strategic key long-term partners and 22.9% of our net revenues, respectively. Foropportunities. In the first quarterthree months ended April 3, 2021, our retail1, 2023, gross margin was 6.7% (including the impact associated with a change in accounting estimates for useful lives of certain large machinery and foodservice channels accounted for approximately 74.9%equipment resulting in a $5.6 million decrease in depreciation expense impacting cost of goods sold and 25.1% of our net revenues, respectively.
For the first quarter ended April 2, 2022, our U.S.research and international channels accounted for approximately 76.5%development expenses by $5.1 million and 23.5% of our net revenues, respectively. For the first quarter ended April 3, 2021, our U.S. and international channels accounted for approximately 74.5% and 25.5% of our net revenues, respectively.$0.5 million, respectively),
In the first quarter of 2022, net revenues from the international channels, both retail and foodservice, decreased from the prior year. Despite increased pounds of product sold, international net revenues decreased 6.9%compared to 0.2% in the first quarter of 2022 asprior-year period; operating expenses were $63.9 million, compared to the same period$97.8 million in the prior year primarily due to decreased revenue per pound driven by increased trade discounts, recent pricing actions, mix to lower priced SKUsprior-year period; and a softening in the Euro vs the U.S. dollar. In the first quarter of 2022, U.S. foodservice channel net revenues declined but were more than offset by the increase in U.S. retail channel net revenues, resulting in a 4.0% increase in U.S. net revenues.
At April 2, 2022, our inventory balances increased 17.3%decreased 5.7% compared to the levels at December 31, 2021, primarily due2022.
In the first quarter of 2023, we continued the process of restructuring certain contracts and operating activities related to increasesBeyond Meat Jerky. We intend to assume distribution responsibilities for Beyond Meat Jerky starting in finished goods and work-in-process inventories and to a lesser extent due to increases in raw materials and packaging inventory. The increase in finished goods inventory includes the effectfourth quarter of capitalized higher direct labor and production overhead costs.2023.
In addition to the impact of COVID-19 on our business discussed below under “Impact of COVID-19 on Our Business,” our net revenues, gross profit, gross margin, earnings and cash flows have been and may continue to be adversely impacted in 20222023 by the following:
•changes in our product mix including the launch of new products, (especially Beyond Meat Jerky), which may carry lower margin profiles relative to existing products due in part to early cost of production inefficiencies;
•weak demand in the retail channel due to slower category growth, particularly for refrigerated plant-based meat, and increased competitive activity;activity, including the deceleration of plant-based meat across Europe and our ability to successfully launch extended shelf-life products;
•the impact of high inflation and the plant-based meat sector’s premium pricing relative to animal protein, including causing consumers to trade down into cheaper forms of protein, including animal meat;
•negative impacts on capacity utilization as a result of lower than anticipated revenues, which could also give rise to underutilization fees and termination fees to exit certain supply chain arrangements and/or the write-off of certain equipment, driving less leverage on fixed costs and delaying the speed at which cost savings initiatives impact our financial results;
•changes in forecasted demand, including for Beyond Meat Jerky and Beyond Burger, 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 the liquidation channel and the level of inventory reserves;
•price reductions, primarily in the retail channel in Europe, intended to improve price competitiveness relative to competing products;
•increased unit cost of goods sold due to lower production volumes in response to weaker demand, which would adversely impact coverage of fixed production costs within our manufacturing facilities;
•increased unit cost of goods due to input cost inflation, including higher transportation, raw materials, energy, labor and supply chain costs;
•increased promotional programs and trade discounts or a reduction in the efficacy of such programs to our retail and foodservice customers, including to bolster support for our core lines, and shifts in product and channel mix resulting in negative impacts on our gross margins;
•potential disruption to our supply chain and the supply chain more generally caused by distribution and other logistical issues;issues, including the impact of cyber incidents at suppliers and vendors;
•continued effects of the COVID-19 pandemic; and
•labor needs at the Company as well as in the supply chain and at customers.
Impact of COVID-19 on Our Business
The COVID-19 pandemic has had, and we expect will continue to have, certain negative impacts on our business. In response to the COVID-19 pandemic, governments and other authorities around the world implemented significant measures intended to control the spread of the virus, including social distancing measures, business closures or restrictions on operations, quarantines and travel bans. While some of these restrictions were lifted or eased in many jurisdictions as the rates of COVID-19 infections have decreased or stabilized and as various COVID-19 vaccines have become more widely available, a resurgence of COVID-19 and the impact of variants of the virus that causes COVID-19 in some markets has slowed the reopening process.
The COVID-19 pandemic continues to impact the global economy. We have established a cross-functional task force that meets regularly and continually monitors and tracks relevant data, including guidance from local, national and international health agencies. This task force works closely with our senior leadership and is instrumental in making critical, timely decisions and is committed to continuing to communicate to our employees as more information is available to share. In response to COVID-19, we have taken, and continue to take measures to support the health and safety of our employees as well as the communities in which we operate.
It is challenging to estimate the extent of the adverse impact of the COVID-19 pandemic on our results of operations due to continued uncertainty regarding the duration, spread and intensity of the COVID-19
pandemic. While the ultimate health and economic impact of COVID-19 continues to be highly uncertain, our business operations and results of operations, including our net revenues, gross profit, gross margin, earnings and cash flows, may be adversely impacted in 2022, including as a result of:
•variability of demand in the foodservice channel due to the ongoing impact of COVID-19, including the resurgence of COVID-19 and the appearance of variants of the virus, despite the resumption of customer traffic in some foodservice establishments;
•potential disruption or closure of our facilities or those of our suppliers or co-manufacturers due to employee contraction of COVID-19;
•potential shortages in raw materials caused by the conflict in Ukraine, COVID-19 lockdowns in China or other factors;
•the timing and success of strategic QSR partnership launches and resumption of any expansion plans for our product lines for those QSR customers who are in trial or test phase;
•reduced consumer confidence and consumer spending, including spending to purchase our products; and negative trends in consumer purchasing patterns due to consumers’ disposable income, credit availability, debt levels and inflation;
•reduced confidence by our foodservice partners due to the resurgence of COVID-19, as well as reimplementation of safety measures in certain jurisdictions and its potential impact on customer demand levels;
•further foodservice customer closures (including re-closures in connection with resurgences of COVID-19) or further reduced operations;
•our ability to introduce new foodservice products as QSR and other partners look to simplify menu offerings as a result of the pandemic;
•uncertainty in the length of recovery time for the U.S. and world economies; and
•disruptions in our ability to expand to new international locations.
Future events and effects related to COVID-19 cannot be determined with precision and actual results could significantly differ from estimates or forecasts.
Environmental, Social and Governance
As a disruptive leader in the food industry, we have established ourselves as a leading producer of plant-based meat products that deliver a reduced environmental footprint and mitigate the social and welfare issues inherent toassociated with the conventional production and consumption of animal protein. In order to continue that work and position ourselves as a leader in the integration of environmental and social change, we have committed to developing a comprehensive ESG program. As part of the development of our ESG program, we have conducted a materiality analysis to determine which ESG issues are relevant to our business (“ESG (the “ESG
Materiality Analysis”). The term “materiality analysis” is common in the discussion of such assessments; however, the ESG Materiality Analysis was not designed to identify material“material” issues for the purposes of financial reporting, or as defined by the securities laws of the United States. TheWhile the environmental impacts of our products, climate change management, the safety and quality of the products we produce and how we manage our supply chain were all identified as highly relevant as a result of thepriority topics in our ESG Materiality Analysis.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 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 create comprehensive ESG goals that will assist us withinform our strategy and actions under our commitment to ensuringpromoting responsible and sustainable business practices within our organization.
Components of Our Results of Operations and Trends and Other Factors Affecting Our Business
Net Revenues
We generate net revenues primarily from sales of our products to our customers across mainstream grocery, mass merchandiser, club store, convenience store and natural retailer channels, and various food-away-from-home channels, including restaurants, foodservice outlets and schools, mainly in the United States.
We present 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 TPP |
| 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 |
The following factors and trends in our business have driven net revenue growth over prior periods and are expected to be key drivers of our net revenue growth over time, subject to the duration, magnitude and effects of COVID-19 and other challenges as discussed above:
•increased penetration across our retail channel, including mainstream grocery, mass merchandiser, club store, convenience store and natural retailer channels, and our foodservice channel, including increased desire by foodservice establishments, including large Full Service Restaurant and/or global QSR customers, to add plant-based products to their menus and to highlight these offerings;
•the strength and breadth of our partnerships with global QSR restaurants and retail and foodservice customers;
•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;
•distribution expansion, increased sales velocity, household penetration, repeat purchases, buying rates (amount spent per buyer) and purchase frequency across our channels;
•increased international sales of our products across geographies, markets and channels as we continueseek to expand the breadth and depth of our international distribution and grow our numbers of international customers;
•our ability to accurately forecast demand for our products and manage our inventory;
•our operational effectiveness and ability to fulfill orders in full and on time;
•our continued innovation and product commercialization, including enhancing existing products and introducing new products such as Beyond Meatballs, Beyond Breakfast Sausage Patties, Beyond Breakfast Sausage Links, the latest iteration of our Beyond Burger and the recent launches of Beyond Chicken Tenders and Beyond Meat Jerky, across our plant-based platforms that appeal to a broad range of consumers, specifically those who typically eat animal-based meat;
•enhanced marketing efforts as we continue to build our brand, amplify our value proposition around taste, health and sustainability,planet, serve as a best-in-class partner to strategicboth retail and other QSRfoodservice customers to support product development and category management, and drive consumer adoption of our products, including for example, our billboard campaign, food truck tours in selected cities, our first Reddit AMA, our presence on TikTok, our NBA Twitter campaign during the NBA finals, mobile pop-ups in select U.S. cities to give consumers an exclusive first taste of our latest innovative products ahead of in-store availability, increased social media and digital activity to build consumer awareness and excitement, shopper marketing programs to incentivize consumer trial, and a robust Spotify podcast campaign around the launch of the latest iteration of our Beyond Burger;products;
•overall market trends, including growing consumer awareness and demand for nutritious, convenient and high protein plant-based foods; and
•increased production levels as we invest in production infrastructure and scale production to meet demand for our products across our distribution channels both domestically and internationally.
In addition to the factors and trends above, we expect the following to positively impact net revenues going forward, subject to the ultimate duration, magnitude and effects of the COVID-19 pandemic and other challenges discussed above:
•expansion of our own internal production facilities domestically and abroad to produce our woven proteins, blends of flavor systems and binding systems, and finished goods, while forming additional strategic relationships with co-manufacturers; and
•localized production and third-party partnerships to improve our cost of production and increase the availability and speed with which we can get our products to customers internationally.
As we seek to continue to grow our net revenues, we face several challenges. The extentchallenges, including any lasting effects from COVID-19, which are difficult to quantify, global events such as the conflict in Ukraine and their impact on availability of COVID-19’s effect on our operationalraw materials, broad macroeconomic headwinds including elevated levels of inflation, rising interest rates, waning consumer confidence and financial performance will depend on future developments, includingrecessionary concerns, increasing competition in the duration, spreadplant-based meat category, and intensitysoftening in demand of the pandemic (including any additional resurgences), impact of variants of the virus that causes COVID-19, the widespread distribution and public acceptance of the various COVID-19 vaccines and their efficacy against COVID-19 and variants of the virus, labor needs at the Company as well asplant-based meat category overall, particularly in the supply chain and at customers, compliance with government or employer COVID-19 vaccine mandates and the resulting impact on available labor, and the level of social and economic restrictions imposed on the United States and abroad in an effort to curb the spread of the virus, and the impact on consumer behavior, all of which are uncertain and difficult to predict considering the rapidly evolving landscape. For example, the impact of COVID-19 on any of our suppliers, co-manufacturers, distributors or transportation or logistics providers may negatively affect the price and availability of our ingredients and/or packaging materials and impact our supply chain. Labor shortages at retail and foodservice customers may impact our ability to launch new products or planned promotions, or may have other negative effects on customer demand. Additionally, if we are forced to scale back hours of production or close our production facilities or our Manhattan Beach Project Innovation Center in response to the pandemic, we expect our business, financial condition and results of operations would be materially adversely affected. In addition, our growth strategy to expand our operations internationally may be impeded. The uncertainty created by COVID-19 significantly increases the difficulty in forecasting operating results and strategic planning. As a result, it is not currently possible to ascertain the overall impact of COVID-19 on our business, results of operations, financial condition or liquidity. However, the pandemic has had, and we expect may continue to have, a material adverse impact on our business, results of operations, financial condition and cash flows and may adversely impact the trading price of our common stock. Future events and effects related to the COVID-19 pandemic cannot be determined with precision and actual results could significantly differ from estimates or forecasts.refrigerated subsegment among others.
We routinely offer sales discounts and promotions through various programs to customers and consumers. These programs include rebates, temporary on-shelf price reductions, off-invoice discounts, retailer advertisements, product coupons and other trade activities. We anticipate that over time we will need to continue to offer more trade and promotion discounts to both our retail and foodservice customers, to drive increased consumer trial, in response to COVID-19trials and in response to changing consumer and customer behavior and increased competition.competition and pressure on the plant-based meat category. The expense associated with these discounts and promotions is estimated and recorded as a reduction in total gross revenues in order to arrive at reported net revenues. At the end of each accounting period, we recognize a contra asset to “Accounts receivable” for estimated sales discounts that have been incurred but not paid which totaled $4.3$4.8 million and $3.6$4.6 million as of April 2, 20221, 2023 and December 31, 2021,2022, respectively. We expect to face increasing competition across all channels, especially as additional plant-based proteinmeat product brands continue to enter the marketplace.marketplace and as consumers trade down among proteins in the context of significant inflationary pressure. In response, we anticipate providing heavier discounting and promotions on some of our products.products from time to time. Although these actions are intended to build brand awareness and increase consumer trials of our products, they have had and are likely to continue to have a negative impact on our net revenues, gross margins and profitability, impacting period-over-period results.
In addition, because we do not have any purchase commitments from our distributors or customers, the amount of net revenues we recognize will vary from period to period depending on the volume, timing and the channels through which our products are sold, and the impact of customer orders ahead of holidays, causing variability in our results. Similarly, the timing of retail shelf resets are not within our control, and to the extent that retail customers change the timing of such events, variability of our results may also increase. Lower customer orders ahead of holidays, shifts in customer shelf reset activity and changes in the order patterns of one or more of our large retail customers could cause a significant fluctuation in our quarterly results and could have a disproportionate effect on our results of operations for the entire fiscal year. For example, in the third quarter of 2022, a combination of overall weaker than expected demand in the category and certain customer and distributor changes and buying patterns, such as reducing targeted inventory levels, among other factors, contributed to the decline in net revenues across markets and channels compared to the prior-year period.
Our financial performance also depends on our operational effectiveness and ability to fulfill orders in full and on time. For example,Disruptions of 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 the third quarter of 2021 we experienced challenges in operations that led tofull, or at all.
unfulfilled orders, primarily due to severe weather resulting in the temporary loss of potable water in one Pennsylvania facility and water damage to inventory in another.
Further, we may not be able to recapture missed opportunities in later periods, for example if the opportunity 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 2022 and 2021, U.S. retail channel net revenues during the second quarter were 21%34% and 38% higher than the first quarter. In 2020, the impact of COVID-19 amplified this seasonal impact with U.S. retail channel net revenues increasing 80% comparedquarter, respectively. While we expect to the first quarter of 2020. We continue to see additional seasonality effects, especiallyin 2023, as compared to 2022 and 2021, these sequential effects are expected to be more muted in the second and third quarters. In general, the effects of seasonality are 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 uncertainty from recessionary and inflationary pressures, general softness in the impactplant-based meat category, competition and other factors impacting our business, including uncertainty around the long-term impacts of COVID-19, 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-bound and internal shipping and handling costs incurred in manufacturing our products, warehouse storage fees, plant and equipment overhead, depreciation and amortization expense, as well as the cost of packaging our products. In anticipationproducts, inventory write-offs and reserves. Under certain circumstances, our cost of future growth, we have had to very quickly scale production and expand our sources of supply for our core protein inputs such as pea protein.
We intend to continue to increase our production capabilities at our in-house manufacturing facilities in Columbia, Missouri, Devault, Pennsylvania, the Netherlands and China, while expandinggoods sold may also include underutilization and/or termination fees associated with our co-manufacturing
capacity and exploring additional production facilities domestically and abroad. As a result of expansion initiatives,agreements. Over time, we expect our cost of goods sold in absolute dollars to increase as a result of anticipated growth in our sales volume.
Gross profit and gross margin in the three months ended April 1, 2023 as compared to the prior-year period were positively impacted by lower manufacturing costs including lower depreciation expense resulting from a change in the estimated useful lives of certain of our large equipment. See Note 6, Property, Plant and Equipment, to the Notes to Unaudited Condensed Consolidated Financial Statements, included elsewhere in this report.Subject to the ultimate duration, magnituderecessionary and effects of COVID-19,inflationary pressures, competition, general softness in the plant-based meat category and other factors impacting our business, we continue to expect that over time gross profit and gross margin improvements will be delivered primarily through through:
•implementation of lean value streams across our beef, pork and poultry platforms;
•improved volume leverage and throughput, throughput;
•reduced manufacturing conversion costs driven in part by optimization of our production network;
•greater internalization and geographic localization of our manufacturing footprint and footprint;
•finished goods, materials and packaging input cost reductions and scale of purchasing;
•tolling fee efficiencies, efficiencies;
•end-to-end production processes across a greater proportion of our manufacturing network, network;
•scale-driven efficiencies in procurement and fixed cost absorption, absorption;
•diversification of our core protein ingredients, ingredients;
•product and process innovations and reformulations, reformulations;
•cost-down initiatives through ingredient and process innovationinnovation; and
•improved supply chain logistics and distribution costs. We are also working to improve gross
Gross margin through ingredient cost savings achieved through scale of purchasing and through negotiating lower tolling fees. We intend to pass some of these cost savings on to the consumer as we pursue our goal to achieve price parity with animal protein in at least one of our product categories by the end of 2024.
Margin improvement may, however, continue to be negatively impacted by reduced capacity utilization if demand for our focus on investing heavilyproducts does not meet our expectations, investments in our business, including launching new products with manufacturing that may initially be inefficient, establishingproduction infrastructure inacross the U.S., EU and China in advance of anticipated demand, investing in production personnel, partnerships and product pipeline, investing in our headquarters campus and commercialization center and expanding our Manhattan Beach Project Innovation Center, growing our customer base, volume deleveraging, aggressive pricing strategies and increased discounting, increases in inventory reserves and potentially increased sales to the liquidation channel, changes in our product and customer mix, expandingexpansion into new geographies and markets enhancingwhere cost and pricing structures may differ from our production infrastructure, improvingexisting markets, and underutilization fees and termination fees to exit certain supply chain arrangements, driving less leverage on fixed costs and delaying the speed at which cost savings initiatives impact our innovation capabilities, enhancing our product offerings
and increasing consumer engagement to apply increasing pressure on the three key levers of taste, health and cost that we believe are critical for mass adoption. Marginfinancial results. Gross margin improvement may also be negatively impacted by the impact of inflation, increasing labor costs, materials costs and transportation costs.
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of personnel and related expenses for our research and development staff, including salaries, benefits, bonuses, share-based compensation, scale-up expenses, and depreciation and amortization expenseexpenses on research and development assets. We are beginning to incur researchassets, and development expenses associated with our new Commerce, California commercialization center. Design work is underway, with operations expected to commence before the end of 2022.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 research and development and innovation are core elements of our business strategy, and we believe they represent a critical competitive advantage for us. We believe that we need to continue to rapidly innovate in order to continue to capture a larger market share of consumers who typically eat animal-based meats. Over timeWe expect research and subjectdevelopment expenses in 2023 to decrease from the duration, magnitude and effectslevels in 2022 primarily as a result of the COVID-19 pandemicreduction in force implemented in October 2022 and other factors impacting our business, we expect these expenses to increase in absolute dollars, but to decrease as a percentage of net revenues as we continuefocus on reducing and optimizing operating expenses more broadly. Given our intention to scale production volume.reduce overall operating expenses and cash expenditures, on February 14, 2023, we terminated the lease of our Commerce, California commercialization center.
SG&A Expenses
SG&A expenses consist primarily of selling, marketing and administrative expenses, including personnel and related expenses, share-based compensation, outbound shipping and handling costs, non-manufacturing lease expense, depreciation and amortization expense on non-manufacturing and non-research and development assets, consulting fees and other non-production operating expenses. Marketing and selling expenses include advertising costs, share-based compensation awards to brand ambassadors, costs associated with consumer promotions, product donations, product samples and sales aids incurred to acquire new customers, retain existing customers and build our brand awareness. Administrative expenses include expenses related to management, accounting, legal, IT and other office functions.
We expect SG&A expenses in absolute dollars2023 to increasedecrease from the levels in 2022, 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 efforts, expand our marketing efforts, and incur greater outbound shipping and handling costs.
As we continue to grow, including internationally, we expect to expand our sales and marketing force to address additional opportunities. Over time, our administrative expenses are generally expected to increase in absolute dollars with increased personnel to support various functions, including among others, operations and supply chain, accounting, finance, legal, IT and compliance-related functions, but to decrease as a percentage of net revenues.poultry platforms.
Restructuring Expenses
In May 2017, management approved a plan to terminate an exclusive supply agreement with one of our co-manufacturers. ForOn October 18, 2022, the parties entered into a discussion of these expenses seeconfidential written settlement agreement and mutual release in connection with this matter. See Note 3, Restructuring, and Note 10, Commitments and Contingencies, to the Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere in this report.
Results of Operations
The following table sets forth selected items in our condensed consolidated statements of operations for the respective periods presented:
| | | Three Months Ended | | | Three Months Ended | |
| (in thousands) | (in thousands) | | April 2,
2022 | | April 3,
2021 | | (in thousands) | | April 1,
2023 | | April 2,
2022 | |
| Net revenues | Net revenues | | $ | 109,455 | | | $ | 108,164 | | | Net revenues | | $ | 92,236 | | | $ | 109,455 | | |
| Cost of goods sold | Cost of goods sold | | 109,265 | | | 75,456 | | | Cost of goods sold | | 86,051 | | | 109,265 | | |
| Gross profit | Gross profit | | 190 | | | 32,708 | | | Gross profit | | 6,185 | | | 190 | | |
| Research and development expenses | Research and development expenses | | 19,678 | | | 15,925 | | | Research and development expenses | | 12,432 | | | 19,678 | | |
| Selling, general and administrative expenses | Selling, general and administrative expenses | | 75,114 | | | 38,954 | | | Selling, general and administrative expenses | | 51,900 | | | 75,114 | | |
| Restructuring expenses | Restructuring expenses | | 3,026 | | | 2,474 | | | Restructuring expenses | | (426) | | | 3,026 | | |
| Total operating expenses | Total operating expenses | | 97,818 | | | 57,353 | | | Total operating expenses | | 63,906 | | | 97,818 | | |
| Loss from operations | Loss from operations | | $ | (97,628) | | | $ | (24,645) | | | Loss from operations | | $ | (57,721) | | | $ | (97,628) | | |
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 | |
| | April 2,
2022 | | April 3,
2021 | | | April 1,
2023 | | April 2,
2022 | |
| Net revenues | Net revenues | | 100.0 | % | | 100.0 | % | | Net revenues | | 100.0 | % | | 100.0 | % | |
| Cost of goods sold | Cost of goods sold | | 99.8 | | | 69.8 | | | Cost of goods sold | | 93.3 | | | 99.8 | | |
| Gross profit | Gross profit | | 0.2 | | | 30.2 | | | Gross profit | | 6.7 | | | 0.2 | | |
| Research and development expenses | Research and development expenses | | 18.0 | | | 14.7 | | | Research and development expenses | | 13.5 | | | 18.0 | | |
| Selling, general and administrative expenses | Selling, general and administrative expenses | | 68.6 | | | 36.0 | | | Selling, general and administrative expenses | | 56.3 | | | 68.6 | | |
| Restructuring expenses | Restructuring expenses | | 2.8 | | | 2.3 | | | Restructuring expenses | | (0.5) | | | 2.8 | | |
| Total operating expenses | Total operating expenses | | 89.4 | | | 53.0 | | | Total operating expenses | | 69.3 | | | 89.4 | | |
| Loss from operations | Loss from operations | | (89.2) | % | | (22.8) | % | | Loss from operations | | (62.6) | % | | (89.2) | % | |
Three Months Ended April 1, 2023 Compared to Three Months Ended April 2, 2022 Compared to Three Months Ended April 3, 2021 (unaudited)
Net Revenues
Net revenues increased by $1.3 million, or 1.2%, in the three months ended April 2, 2022, as compared to the prior-year period primarily due to an increase in volume sold, partially offset by lower net price per pound resulting from increased trade discounts, pricing reductions, and to a lesser extent, changes in product sales mix, and changes in foreign exchange rates. Growth in net revenues was primarily due to increased retail sales, as a result of contribution from new product introductions. The increase in retail net revenues was partially offset by a decline in foodservice net revenues.
The following table presents our net revenues by channel in the three months ended April 2, 20221, 2023 as compared to the prior-year period:
| | | Three Months Ended | | Change | | Three Months Ended | | Change |
| (in thousands) | (in thousands) | | April 2,
2022 | | April 3,
2021 | | Amount | | % | (in thousands) | | April 1,
2023 | | April 2,
2022 | | Amount | | % |
| U.S.: | U.S.: | | | | | | | | | U.S.: | | | | | | | | |
| Retail | Retail | | $ | 68,260 | | | $ | 63,826 | | | $ | 4,434 | | | 6.9 | % | Retail | | $ | 44,159 | | | $ | 68,260 | | | $ | (24,101) | | | (35.3) | % |
| Foodservice | Foodservice | | 15,493 | | | 16,742 | | | (1,249) | | | (7.5) | % | Foodservice | | 14,675 | | | 15,493 | | | (818) | | | (5.3) | % |
| U.S. net revenues | U.S. net revenues | | 83,753 | | | 80,568 | | | 3,185 | | | 4.0 | % | U.S. net revenues | | 58,834 | | | 83,753 | | | (24,919) | | | (29.8) | % |
| International: | International: | | | | | | | | International: | | | | | | | |
| Retail | Retail | | 16,137 | | | 17,199 | | | (1,062) | | | (6.2) | % | Retail | | 14,289 | | | 16,137 | | | (1,848) | | | (11.5) | % |
| Foodservice | Foodservice | | 9,565 | | | 10,397 | | | (832) | | | (8.0) | % | Foodservice | | 19,113 | | | 9,565 | | | 9,548 | | | 99.8 | % |
| International net revenues | International net revenues | | 25,702 | | | 27,596 | | | (1,894) | | | (6.9) | % | International net revenues | | 33,402 | | | 25,702 | | | 7,700 | | | 30.0 | % |
| | Net revenues | Net revenues | | $ | 109,455 | | | $ | 108,164 | | | $ | 1,291 | | | 1.2 | % | Net revenues | | $ | 92,236 | | | $ | 109,455 | | | $ | (17,219) | | | (15.7) | % |
Net revenues in the three months ended April 1, 2023 decreased by $17.2 million, or 15.7%, as compared to the prior-year period, driven by a decrease in net revenue per pound and a decrease in volume of products sold. The decrease in net revenue per pound was primarily driven by changes in product sales mix, increased trade discounts and unfavorable changes in foreign exchange rates, partially offset by pricing changes.
Net revenues from U.S. retail sales in the three months ended April 2, 2022 increased $4.41, 2023 decreased $24.1 million, or 6.9%35.3%, primarily due to a decrease in volume of products sold and, to a lesser extent, lower net revenue per pound, resulting from higher trade discounts and changes in product sales mix, partially offset by increased pricing for certain items. By product, the introductiondecrease in U.S. retail channel net revenues was primarily due to reduced sales of Beyond Burger, Beyond Meat Jerky, in the first quarterBeyond Sausage, Beyond Breakfast Sausage, Beyond Beef and Beyond Meatballs, partially offset by increased sales of 2022, which contributed $10.7 million in net revenues, and the recently introduced chicken products including Beyond Chicken Tenders. Increases inTenders, Beyond Chicken Nuggets and Beyond Popcorn Chicken, and sales of Beyond Breakfast SausageSteak, which was introduced in the fourth quarter of 2022. Net revenues from sales to TPP included in U.S. retail channel net revenues in the three months ended April 1, 2023 were $5.3 million, including a $2.0 million non-refundable upfront fee associated with Beyond Meat’s manufacturing and supply agreement with TPP. Beyond Meatballs also contributedMeat branded products were available at approximately 78,000 U.S. retail outlets as of March 2023, inclusive of approximately 45,000 U.S. retail outlets unique to the increase in net revenues. These increases were partially offset by declines in sales primarily of Beyond Sausage and Beyond Beef.Meat Jerky.
Net revenues from U.S. foodservice sales in the three months ended April 2, 20221, 2023 decreased $1.2$0.8 million, or 7.5%5.3%, primarily due to decreasesa decrease in volume of products sold, partially offset by an increase in net revenue per pound resulting from changes in product sales mix, partially offset by higher trade discounts. By product, the decrease in U.S. foodservice channel net revenues was primarily due to decreased sales of Beyond Burger and Beyond Breakfast Sausage, drivenpartially offset by the discontinuation of distribution at a certain customer, and decreases inincreased sales of Beyond Beef Crumble, partially offset by increases inBeyond Meatballs, Beyond Beef, and sales of Beyond Burger,Steak which was introduced in the fourth quarter of 2022. Beyond Sausage and Beyond Beef, and from the recently introduced chicken products including Beyond Chicken Tenders. OurMeat branded products were available at approximately 35,000 U.S. retail outlets and 39,00042,000 U.S. foodservice outlets as of March 2022.2023.
Net revenues from international retail sales in the three months ended April 2, 20221, 2023 decreased $1.1$1.8 million, or 6.2%11.5%, primarily due to decreasesreduced net revenue per pound and decreased volume of products sold. The reduction in net revenue per pound was primarily due to unfavorable changes in foreign exchange rates, higher trade discounts and changes in product sales mix. By product, the decrease in international retail channel net revenues was primarily due to decreased sales of Beyond Sausage, Beyond Burger, Beyond Meatballs and Beyond Beef Crumble,Breakfast Sausage, partially offset by increases in sales of Beyond Beef, Beyond Meatballs, Beyond Breakfast Sausage and Beyond Sausage, and from the recently introduced chicken products including Beyond Chicken Tenders. OurTender, Beyond Beef, and sales of Beyond Steak which was introduced in the fourth quarter of 2022. Beyond Meat branded products were available at approximately 31,00036,000 international retail outlets as of March 2022.2023.
Net revenues from international foodservice sales in the three months ended April 2, 2022 decreased $0.81, 2023 increased $9.5 million, or 8.0%99.8%, primarily due to an increase in volume of products sold, partially offset by lower net revenue per pound primarily resulting from changes in product sales mix and unfavorable changes in foreign exchange rates, partially offset by reduced trade discounts. By product, the increase in international foodservice channel net revenues was primarily due to increased sales of chicken and burger products including to large QSR customers and increased sales of Beyond Meatballs, partially offset by decreases in sales of Beyond Beef CrumbleSausage and Beyond Beef partially offset by increases in sales ofCrumble. Beyond Burger, Beyond Meatballs, Beyond Breakfast Sausage, Beyond Pork, and Beyond Sausage, and from the recently introduced chicken products including Beyond Chicken Tenders. OurMeat branded products were available at approximately 30,00035,000 international foodservice outlets as of March 2022.2023.
The following table presents consolidated volume of our products sold in pounds for the periods presented:
| | | Three Months Ended | | Change | | Three Months Ended | | Change |
| (in thousands) | (in thousands) | | April 2,
2022 | | April 3,
2021 | | Amount | | % | (in thousands) | | April 1,
2023 | | April 2,
2022 | | Amount | | % |
| | U.S.: | U.S.: | | | | | | | | | U.S.: | | | | | | | | |
| Retail | Retail | | 12,453 | | | 11,128 | | | 1,325 | | | 11.9 | % | Retail | | 8,315 | | | 12,453 | | | (4,138) | | | (33.2) | % |
| Foodservice | Foodservice | | 2,752 | | | 2,882 | | | (130) | | | (4.5) | % | Foodservice | | 2,551 | | | 2,752 | | | (201) | | | (7.3) | % |
| International: | International: | | International: | |
| Retail | Retail | | 3,530 | | | 2,959 | | | 571 | | | 19.3 | % | Retail | | 3,337 | | | 3,530 | | | (193) | | | (5.5) | % |
| Foodservice | Foodservice | | 2,581 | | | 2,003 | | | 578 | | | 28.9 | % | Foodservice | | 5,549 | | | 2,581 | | | 2,968 | | | 115.0 | % |
| Volume of products sold | Volume of products sold | | 21,316 | | | 18,972 | | | 2,344 | | | 12.4 | % | Volume of products sold | | 19,752 | | | 21,316 | | | (1,564) | | | (7.3) | % |
Cost of Goods Sold
| | | Three Months Ended | | Change | | Three Months Ended | | Change |
| (in thousands) | (in thousands) | | April 2,
2022 | | April 3,
2021 | | Amount | | % | (in thousands) | | April 1,
2023 | | April 2,
2022 | | Amount | | % |
| Cost of goods sold | Cost of goods sold | | $ | 109,265 | | | $ | 75,456 | | | $ | 33,809 | | | 44.8 | % | Cost of goods sold | | $ | 86,051 | | | $ | 109,265 | | | $ | (23,214) | | | (21.2) | % |
Cost of goods sold increaseddecreased by $33.8$23.2 million, or 44.8%21.2%, to $109.3$86.1 million, in the three months ended April 2, 20221, 2023 as compared to the prior-year period. Cost of goods sold in the three months ended April 2, 2022 increased1, 2023 decreased to 99.8%93.3% of net revenues from 69.8%99.8% of net revenues in the prior-year period. The increasedecrease in cost of goods sold was primarily due to lower manufacturing costs including lower depreciation expense resulting from a change in the introductionestimated useful lives of certain of our large equipment, lower logistics costs and lower materials costs, partially offset by higher inventory reserves. The absence of higher costs related to Beyond Meat Jerky in the three months ended April 2, 2022, which has a high initial cost due1, 2023 as compared to its complex manufacturing process. In addition, higher manufacturing costs including depreciation, higher volume of products sold and higher logistics coststhe prior-year period also contributed to the increasedecrease in cost of goods sold, partially offset by reduced direct materials costs and lower inventory reserves. Manufacturing costs associated with Beyond Meat Jerky are expected to significantly moderate beginning in the second half of 2022 with process optimization.sold.
Gross Profit and Gross Margin
| | | Three Months Ended | | Change | | | Three Months Ended | | Change | |
| (in thousands) | (in thousands) | | April 2,
2022 | | April 3,
2021 | | Amount | | % | | (in thousands) | | April 1,
2023 | | April 2,
2022 | | Amount | | % | |
| Gross profit | Gross profit | | $190 | | $32,708 | | $(32,518) | | (99.4)% | | Gross profit | | $6,185 | | $190 | | $5,995 | | 3,155.3% | |
| Gross margin | Gross margin | | 0.2% | | 30.2% | | (3,000) bps | | N/A | | Gross margin | | 6.7% | | 0.2% | | 650 bps | | N/A | |
Gross profit in the three months ended April 2, 20221, 2023 was $0.2$6.2 million as compared to gross profit of $32.7$0.2 million in the prior-year period, a declinean increase of $32.5 million.$6.0 million, or 3,155.3%. Gross margin in the three months ended April 2, 2022 declined1, 2023 increased to 0.2%6.7% from 30.2%0.2% in the prior-year period. TheGross profit and gross margin in the three months ended April 2, 2022 included the launch of Beyond Meat Jerky, which reduced gross margin by an estimated 940 basis points1, 2023 as compared to the year-ago period. In addition to the reduction in gross margin resulting from Beyond Meat Jerky, gross margin was also negativelyprior-year period were positively impacted by reduced net revenue per pound due to increased trade discounts, changes in price and sales mix, increased manufacturing costs per pound includingexcluding depreciation, and higherdecreased logistics costs partially offset by decreased directand, to a lesser extent, lower materials costs per pound, partially offset by lower net revenues per pound and lowerhigher inventory reserves.reserves, which increased costs per pound. In the three months ended April 1, 2023, gross profit and gross margin benefited by $5.1 million and 5.5 percentage points of gross margin, respectively, as a result of a change in the estimated useful lives of certain of our large equipment, as compared to those same measures calculated using our previous estimated useful lives.
WeAs 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 |
| (in thousands) | | April 2,
2022 | | April 3,
2021 | | Amount | | % |
| Research and development expenses | | $ | 19,678 | | | $ | 15,925 | | | $ | 3,753 | | | 23.6 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Change |
| (in thousands) | | April 1,
2023 | | April 2,
2022 | | Amount | | % |
| Research and development expenses | | $ | 12,432 | | | $ | 19,678 | | | $ | (7,246) | | | (36.8) | % |
Research and development expenses increased $3.8decreased $7.2 million, or 23.6%36.8%, in the three months ended April 2, 2022,1, 2023, as compared to the prior-year period. Research and development expenses increaseddecreased to 18.0%13.5% of net revenues in the three months ended April 2, 20221, 2023 from 14.7%18.0% of net revenues in the prior-year period primarily due to higherlower salaries and related expenses resulting from a reduction in headcount and higherlower scale-up expenses compared to the prior-year period.
SG&A Expenses
| | | Three Months Ended | | Change | | Three Months Ended | | Change |
| (in thousands) | (in thousands) | | April 2,
2022 | | April 3,
2021 | | Amount | | % | (in thousands) | | April 1,
2023 | | April 2,
2022 | | Amount | | % |
| Selling, general and administrative expenses | Selling, general and administrative expenses | | $ | 75,114 | | | $ | 38,954 | | | $ | 36,160 | | | 92.8 | % | Selling, general and administrative expenses | | $ | 51,900 | | | $ | 75,114 | | | $ | (23,214) | | | (30.9) | % |
SG&A expenses increased $36.2decreased $23.2 million, or 92.8%30.9%, in the three months ended April 2, 2022 to 68.6%56.3% of net revenues in the three months ended April 2, 2022,1, 2023, from 36.0%68.6% of net revenues in the prior-year period. The increasedecrease in SG&A expenses was primarily due to $9.9 million increase in advertising costs, $8.1$6.8 million in higherlower marketing costs other than advertising and product donation costs discussed below, a $5.0 million decrease in salaries and related expenses resulting from higherlower headcount, $7.4$4.9 million in increased marketinglower advertising costs, $2.7 million in higherlower outbound freight costs, $2.5 million in higher consulting fees, $2.3 million in product donations, $1.9lower consulting fees and $1.8 million in higher share-based compensation expense, and $0.9 million in higher postage and delivery charges, $0.7 million in higher travel-related costs, $0.6 million in higher general insurancelower product donation costs, partially offset by $0.3$3.6 million in lower commissions and $0.3 million in lower legal fees.higher loss on sale or retirement of equipment.
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 $3.0 million and $2.5 million in the three months ended April 2, 2022 and2022. In the three months ended April 3, 2021, respectively.1, 2023, we recorded a credit of $(0.4) million in restructuring expenses, 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 April 2, 20221, 2023 and December 31, 2021,2022, there were $1.3$0.3 million and $2.7$0.7 million, respectively, in accrued and unpaid restructuring expenses. We continueOn October 18, 2022, the parties entered into a confidential written settlement agreement and mutual release pursuant to incur legal feeswhich the parties agreed to dismiss with prejudice all claims and other costscross-claims asserted in connection with our ongoing efforts to resolve this dispute.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. See Note 3, Restructuring, and Note 10, Commitments and Contingencies to the Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere in this report. Loss from Operations
Loss from operations in the three months ended April 2, 20221, 2023 was $97.6$57.7 million compared to $24.6$97.6 million in the prior-year period. The increasedecrease in loss from operations in the three months ended April 2, 20221, 2023 was primarily driven by lowerhigher gross profit, higher advertising costs, higherlower marketing-related expenses growthincluding advertising and product donation costs, reduced non-production headcount expenses primarily as a result of the reduction in overall headcount levels primarily to support increased innovation capabilities and international growth, increasedforce implemented in October 2022, decreased production trial activities, higher share-based compensation expenseexpenses and higherlower outbound freight costs included in our selling expenses compared to the prior-year period.
Total Other Expense,Income (Expense), net
Total other expense,income (expense), net in the three months ended April 1, 2023 of $1.9 million consisted primarily of $2.7 million in interest income and $0.3 million in foreign currency transaction gains, partially offset by $(1.0) million in interest expense. Total other income (expense), net in the three months ended April 2, 2022 of $2.1$(2.1) million consisted primarily of $1.0 million in interest expense. Total other expense, net in the three months ended April 3, 2021 of $2.2 million consisted of $1.0 million in costs associated with early extinguishment of our revolving credit
facility, $0.6$(1.0) million in interest expense on our bank debt including $0.3and $(1.1) million in amortization of debt issuance costs, and foreign currency transaction losses of $0.3 million.losses.
Net Loss
Net loss was $100.5$59.0 million in the three months ended April 2, 2022,1, 2023, compared to $27.3$100.5 million in the prior-year period. NetThe reduction in net loss during the three months ended April 2, 20221, 2023 compared to the prior-year period was primarily due to lower gross profitthe reduction in loss from operations and higher operating expenses discussed above comparedthe increase in total other income (expense), net, partially offset by a $2.6 million increase in losses related to the prior-year period.TPP.
Non-GAAP Financial Measures
We use the non-GAAP financial measures set forth below in assessing our operating performance and in our financial communications. Management believes these non-GAAP financial measures provide useful additional information to investors about current trends in our operations and are useful for period-over-period comparisons of operations. In addition, management uses these non-GAAP financial measures to assess operating performance and for business planning purposes. Management also believes these measures are widely used by investors, securities analysts, rating agencies and other parties in evaluating companies in our industry as a measure of our operational performance. These non-GAAP financial measures should not be considered in isolation or as a substitutesubstitutes for the comparable GAAP measures. In addition, these non-GAAP financial measures may not be computed in the same manner as similarly titled measures used by other companies.
“Adjusted EBITDA” is defined as net loss adjusted to exclude, when applicable, income tax expense, interest expense, depreciation and amortization expense, restructuring expenses, share-based compensation expense, expenses attributable to COVID-19, and Other, net, including interest income loss on extinguishment of debt and foreign currency transaction gains and losses.
“Adjusted EBITDA as a % of net revenues” is defined as Adjusted EBITDA divided by net revenues.
There are a number of limitations related to the use of Adjusted EBITDA and Adjusted EBITDA as a % of net revenues rather than their most directly comparable GAAP measure. Some of these limitations are:
•Adjusted EBITDA excludes depreciation and amortization expense and, although these are non-cash expenses, the assets being depreciated may have to be replaced in the future increasing our cash requirements;
•Adjusted EBITDA does not reflect interest expense, or the cash required to service our debt, which reduces cash available to us;
•Adjusted EBITDA does not reflect income tax payments that reduce cash available to us;
•Adjusted EBITDA does not reflect restructuring expenses that reduce cash available to us;
•Adjusted EBITDA does not reflect expenses attributable to COVID-19 that reduce cash available to us;
•Adjusted EBITDA does not reflect share-based compensation expense and therefore does not include all of our compensation costs;
•Adjusted EBITDA does not reflect Other, net, including interest income loss on extinguishment of debt and foreign currency transaction gains and losses, that may increase or decrease cash available to us; and
•other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.
The following table presents the reconciliation of Adjusted EBITDA to its most comparable GAAP measure, net loss, as reported (unaudited):
| | | Three Months Ended | | Three Months Ended |
| (in thousands) | (in thousands) | | April 2,
2022 | | April 3,
2021 | (in thousands) | | April 1,
2023 | | April 2,
2022 |
| Net loss, as reported | Net loss, as reported | | $ | (100,458) | | | $ | (27,266) | | Net loss, as reported | | $ | (59,037) | | | $ | (100,458) | |
| Income tax expense | Income tax expense | | 10 | | | 48 | | Income tax expense | | — | | | 10 | |
| Interest expense | Interest expense | | 1,025 | | | 629 | | Interest expense | | 989 | | | 1,025 | |
| Depreciation and amortization expense | Depreciation and amortization expense | | 7,091 | | | 4,326 | | Depreciation and amortization expense | | 6,049 | | | 7,091 | |
Restructuring expenses(1) | Restructuring expenses(1) | | 3,026 | | | 2,474 | | Restructuring expenses(1) | | (426) | | | 3,026 | |
| Share-based compensation expense | Share-based compensation expense | | 9,292 | | | 7,376 | | Share-based compensation expense | | 9,565 | | | 9,292 | |
| Other, net(2) | Other, net(2) | | 1,124 | | | 1,570 | | Other, net(2) | | (2,908) | | | 1,124 | |
| Adjusted EBITDA | Adjusted EBITDA | | $ | (78,890) | | | $ | (10,843) | | Adjusted EBITDA | | $ | (45,768) | | | $ | (78,890) | |
| | Net loss as a % of net revenues | Net loss as a % of net revenues | | (91.8) | % | | (25.2) | % | Net loss as a % of net revenues | | (64.0) | % | | (91.8) | % |
| Adjusted EBITDA as a % of net revenues | Adjusted EBITDA as a % of net revenues | | (72.1) | % | | (10.0) | % | Adjusted EBITDA as a % of net revenues | | (49.6) | % | | (72.1) | % |
____________
| | | | | |
| (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. In the three months ended April 1, 2023, we recorded a credit of $(0.4) million 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 $1.0$0.3 million in loss on extinguishment of debtnet foreign currency transaction gains and $1.1 million in net foreign currency transaction losses in the three months ended April 3, 2021.1, 2023 and April 2, 2022, respectively. |
| |
Liquidity and Capital Resources
Convertible Senior Notes
In 2021, the Company 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
In 2022,2023, our cash from operations could be affected by various risks and uncertainties, including, but not limited to, the effects of COVID-19 and other risks detailed in Part I, Item 1A, “Risk“Risk Factors,” of our 20212022 10-K and Part II, Item 1A “Risk Factors”, “Risk Factors” and “Note“Note Regarding Forward-Looking Statements”Statements” included elsewhere in this report. TheInflation, rising interest rates, adverse developments affecting the financial services industry, overall economic conditions, the COVID-19 pandemic and hostilities in Eastern Europe have led to increased disruption and volatility in capital markets and credit markets generally which could adversely affect our liquidity and capital resources in the future. However, based on our current business plan, we believe that our existing cash balances along with 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. The sale of additional equity would result in additional dilution to our stockholders. The incurrence of debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations. Our cash requirements under our significant contractual obligations and commitments are listed below in the section titled “Contractual Obligations and Commitments.” In addition, our ability to meet our cash flow positive targets is subject to a
number of assumptions and uncertainties, including, without limitation, our ability to reduce costs and achieve positive gross margins; our ability to meet certain revenue and operating expense targets, which may be subject to factors beyond our control; and our ability to monetize inventory and manage working capital.
Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth; the impactsuccessful implementation of the COVID-19 pandemic;cost-reduction initiatives described elsewhere in this report; 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 and expanding our Manhattan Beach Project Innovation Center;Campus Headquarters (as defined herein); the expenses associated with our marketing initiatives; our investment in manufacturing and facilities to expand our manufacturing and production capacity; our investments in real property and joint ventures; the costs required to fund domestic and international operations and growth; the scope, progress, results and costs of researching and developing future products or improvements to existing products or manufacturing processes; any lawsuits related to our products or commenced against us including the costs associated withor our current litigation with a former co-manufacturer;directors and officers; the expenses needed to attract and retain skilled personnel; the costs associated with being a public company; the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing
intellectual property claims, including litigation costs and the outcome of such litigation; and the timing, receipt and amount of sales of, or royalties on, any future approved products, if any.
We expect our operating expenses in 2023 to decrease from the levels in 2022, primarily as a result of the reduction in force implemented in October 2022 and as we focus on reducing and optimizing operating expenses more broadly.
Sources of Liquidity
Our primary cash needs are for operating expenses, working capital and capital expenditures to support the planned growth in our business. Prior to our IPO, we financedWe finance our operations through private sales of equity securities andprimarily through sales of our products. Since our inceptionproducts and through our IPO, 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 at a public offering price of $25.00 per share and received approximately $252.4 million in net proceeds. In connection withOn August 5, 2019, we completed a secondary public offering of our Secondary Offering,common stock in which we sold 250,000 shares and certain selling stockholders sold 3,487,500 shares. We sold 250,000 shares of our common stock at a public offering price of $160.00 per share and received approximately $37.4 million in net proceeds.
In March 2021, we issued $1.2 billion in aggregate principal amount of Notes. See Note 7, Debt, to the Notes as discussed above.to Unaudited Condensed Consolidated Financial Statements included elsewhere in this report. As of April 2, 2022,1, 2023, we had $547.9$258.6 million in unrestricted cash and cash equivalents.equivalents and $15.0 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 $2.4 million to secure a letter of credit associated with a new third party contract manufacturer in Europe. Cash Flows
In the three months ended April 2, 2022, approximately $64.6 million in aggregate expenditures to purchase inventory and property, plant and equipment and approximately $121.8 million in net cash outflows from other operating, investing and financing activities were funded with our existing cash balance.
The following table presents the major components of net cash flows used in and provided by operating, investing and financing activities for the periods indicated.
| | | | | | | | | | | | | | |
| | Three Months Ended |
| (in thousands) | | April 2,
2022 | | April 3,
2021 |
| Cash (used in) provided by: | | | | |
| Operating activities | | $ | (165,210) | | | $ | (30,657) | |
| Investing activities | | $ | (21,499) | | | $ | (23,381) | |
| Financing activities | | $ | 331 | | | $ | 1,019,913 | |
| | | | | | | | | | | | | | |
| | Three Months Ended |
| (in thousands) | | April 1,
2023 | | April 2,
2022 |
| Cash (used in) provided by: | | | | |
| Operating activities | | $ | (42,177) | | | $ | (165,210) | |
| Investing activities | | $ | (6,302) | | | $ | (21,499) | |
| Financing activities | | $ | (149) | | | $ | 331 | |
Net Cash Used in Operating Activities
In the three months ended April 1, 2023, we incurred a net loss of $59.0 million, which was the primary reason for net cash used in operating activities of $42.2 million. Net cash outflows from changes in our operating assets and liabilities were $7.9 million, primarily due to payments of accounts payable, an increase in accounts receivable, an increase in prepaid lease costs related to our Campus Headquarters and a decrease in operating lease liabilities. The cash outflows were partially offset by the decrease in raw materials and packaging inventory and a decrease in prepaid expenses and other current assets. Net loss in the three months ended April 1, 2023 included $24.8 million in non-cash expenses primarily comprised of share-based compensation expense, depreciation and amortization expense, loss on sales of fixed assets and equity in losses of TPP.
In the three months ended April 2, 2022, we incurred a net loss of $100.5 million, which was the primary reason for net cash used in operating activities of $165.2 million. Net cash outflows from changes in our operating assets and liabilities was $84.2 million, primarily due to thean increase in finished goods inventory, an increase in prepaid lease costs related to our campus headquartersCampus Headquarters and innovation facility andan increase in accounts receivable. The cash outflows were partially offset by thean increase in accrued expenses and other current liabilities. Net loss in the three months ended April 2, 2022 included $19.5 million in non-cash expenses primarily comprised of share-based compensation expense and depreciation and amortization expense.
In the three months ended April 3, 2021, we incurred a net loss of $27.3 million which was the primary reason for net cash used in operating activities of $30.7 million. Net cash outflows from changes in our operating assets and liabilities was $17.6 million, primarily due to the increase in finished goods inventory. The cash outflows from the increase in inventory was partially offset by the increase in accrued expenses and other current liabilities. Net loss in the three months ended April 3, 2021 included $14.2 million in non-cash expenses primarily comprised of share-based compensation expense and depreciation and amortization expense.
Depreciation and amortization expense was $7.1$6.0 million and $4.3$7.1 million in the three months ended April 1, 2023 and April 2, 2022, and April 3, 2021, respectively.
Net Cash Used in Investing Activities
Net cash used in investing activities primarily relates to capital expenditures to support our growth and investment in property, plant and equipment.
In the three months ended April 1, 2023, net cash used in investing activities was $6.3 million and consisted of cash outflows for purchases of property, plant and equipment, primarily driven by continued investments in production equipment and facilities, and $3.3 million in investment in TPP that was previously committed, partially offset by $2.3 million in proceeds from the sale of certain fixed assets.
In the three months ended April 2, 2022, net cash used in investing activities was $21.5 million and consisted of cash outflows for purchases of property, plant and equipment, primarily driven by continued investments in production equipment and facilities related to our capacity expansion initiatives and international expansion.
Net Cash Provided by Financing Activities
In the three months ended April 3, 2021,1, 2023, net cash used in investingby financing activities was $23.4$0.1 million, and consisted of $23.4primarily from the $0.3 million in cash outflows for purchasespayments of property, plantminimum withholding taxes on net share settlement of equity awards and equipment, primarily drivenpayments under finance lease obligations, partially offset by growth$0.1 million in capital production equipment purchases related to our capacity expansion initiatives and international expansion.proceeds from stock option exercises.
Net Cash Provided by Financing Activities
In the three months ended April 2, 2022, net cash provided by financing activities was $0.3 million, primarily from the $0.8 million in proceeds from stock option exercises, partially offset by $0.4 million in payments of minimum withholding taxes on net share settlement of equity awards, and payments under finance lease obligations.
In the three months ended April 3, 2021, net cash provided by financing activities was $1,019.9 million primarily from the proceeds of the Notes of $1,066.1 million and $2.9 million in proceeds from stock option exercises, partially offset by repayment of revolving credit facility of $25.0 million, debt issuance costs of $23.2 million associated with the Notes and $0.8 million in payments of minimum withholding taxes on net share settlement of equity awards, and payments under finance lease obligations.
Contractual Obligations and Commitments
There have been no significant changes during the three months ended April 2, 20221, 2023 to the contractual obligations disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in the 20212022 10-K, other than the following:
Leases
On January 14, 2021, we 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 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 $3.1 million and $55.1 million in payments towards the construction of the Campus Headquarters in the three months ended April 1, 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. In 2022, the tenant improvements associated with Phase 1-A were completed, and the underlying asset was delivered to us. As such, upon commencement of Phase 1-A, we 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. Aggregate payments towards base rent over the initial lease term associated with the remaining phases not yet delivered to us will be approximately $118.4 million.
On February 14, 2023, we terminated the lease of our Commerce, California commercialization center. As a result of this termination, during the first quarter of 2023, the balances in the “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. See Note 4, Leases, and Note 10, Commitments and Contingencies, to the Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere in this report. China Investment and Lease Agreement
As of April 1, 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. Investment in the Planet Partnership
On January 25, 2021, we entered into TPP,the Planet Partnership, LLC (“TPP”), a joint venture with PepsiCo, Inc., to develop, produce and market innovative snack and beverage products made from plant-based protein. We believe TPP will allow us to reach more consumers by entering new product categories and distribution channels, increasing accessibility to plant-based protein around the world. We recognized our share of the net losses in TPP in the amount of $0.7$3.2 million and $0.4$0.7 million for the three months ended April 1, 2023 and April 2, 2022, 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 three months ended April 1, 2023, we contributed an additional $3.3 million of our share of an additional investment in TPP resulting in a total contribution of $27.6 million as of April 1, 2023. See Note 2, Summary of Significant Accounting Policies, Note 10, Commitments and April 3, 2021, respectively.Contingencies, and Note
13, Related Party Transactions, to the Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere in this report. In the first quarter of 2023, we continued the process of restructuring certain contracts and operating activities related to Beyond Meat Jerky. We intend to assume distribution responsibilities for Beyond Meat Jerky starting in the fourth quarter of 2023 and believe this move will support our gross margin expansion objectives. TPP will remain as a vehicle to evaluate a range of plant-based food and beverage products for potential future business development. 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 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 April 1, 2023, we had $79.8 million in fee commitments to manufacture products at a co-manufacturer’s facility over a 5-year term. For a portion of the contract 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 quantity limits. 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 is expected to close in the second half of 2023.
As of April 2, 2022,1, 2023, we had committed to purchase pea protein inventory totaling $34.6$40.2 million in 2022.the remainder of 2023. In addition, as of April 2, 2022,1, 2023, we had approximately $57.1$26.0 million in purchase order commitments for capital expenditures primarily to purchase property, plant and equipment including machinery and equipment.equipment, including the commitment to purchase the Enschede facility. 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 April 1, 2023 by $5.6 million, impacting cost of goods sold and research and development expenses by $5.1 million and $0.5 million, respectively, and decreased both basic and diluted net loss per share available to common stockholders by $0.09. There have been no other material changes in our critical accounting policies during the three months ended April 2, 2022,1, 2023, as compared to those disclosed in the “Management’s“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies”Policies” in the 2021 10-K other than as described in Note 2, Summary of Significant Accounting Policies, to the Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere in this report.2022 10-K. RecentRecently 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 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, 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. Our investment policy has as its primary objective investment activities which preserve principal without significantly increasing risk.
On March 2, 2021, we terminated the Credit Agreement. In the three months ended April 2, 2022 and April 3, 2021, we incurred $0 and $0.3 million, respectively, in interest expense related to our bank credit facilities. Upon termination of the revolving credit facility, unamortized debt issuance costs of $1.0 million associated with the revolving credit facility were written off as “Loss on extinguishment of debt,” which is included in “Other, net” in our condensed consolidated statement of operations for the three months ended April 3, 2021.There was no similar transaction in the three months ended April 2, 2022.
On March 5, 2021, we issued $1.0 billion aggregate principal amount of our 0% Convertible Senior Notes due 2027 and on March 16, 2021, we issued $150.0 million aggregate principal amount of Additional Notes.additional notes. The proceeds from the issuance of the Notes were approximately $1.0 billion, net of capped call transaction costs of $84.0 million and debt issuance costs totaling $23.6 million. See Note 7, Debt,, to the Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere in this report. The Notes do not bear regular interest, and the principal amount of the Notes do not accrete. However, special interest and additional interest may accrue on the Notes at a rate per annum not exceeding 0.50% (subject to certain exceptions) upon the occurrence of certain events relating to the failure to file certain SEC reports or to remove certain restrictive legends from the Notes. Ingredient Risk
We 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 is sourced from peas grown in the United States, France and 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 yellow peas, the vagaries of the farming businesses, including poor harvests due to adverse weather conditions, natural disasters and pestilence, and changes in national and world economic 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 April 2, 2022,1, 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 $0.8$0.5 million, or a decrease of approximately $0.8$0.5 million, respectively, to cost of goods sold. We are working to diversify our sources of supply and intend to enter into long-term contracts to better ensure stability of prices of our raw materials. As of April 2, 2022,1, 2023, we had a multi-year sales agreement with Roquette for the supply of pea protein which expires in December 2022.2023. See Note10, Commitments and Contingencies, to the Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere in this report. Foreign Currency Risk
We are exposed to foreign currency risks that arise from normal business operations. These risks include the translation of local currency balances of foreign subsidiaries, transaction gains and losses associated with intercompany loans with foreign subsidiaries and transactions denominated in currencies other than a location's functional currency. Our foreign entities use their local currency as the functional currency. For these entities, we translate net assets into U.S. dollars at period end exchange rates, while revenue and expense accounts are translated at average exchange rates prevailing during the periods being reported. Resulting currency translation adjustments are included in “Accumulated other comprehensive income” and foreign currency transaction gains and losses are included in “Other, net.” Transaction gains and losses on long-term intra-entity transactions are recorded as a component of “Other comprehensive loss.” Transactions denominated in a currency other than the reporting entity’s functional currency may give rise to transaction gains and losses that impact our results of operations.
Our foreign exchange risk is primarily related to our intercompany balances denominated in various foreign currencies. We have exposure to the European Euro and the Chinese Yuan. Unrealized translation losses,gains (losses), net of tax, reported as cumulative translation adjustments through “Other comprehensive loss” were $0.7 million$3,000 and $1.3$(0.7) million in the three months ended April 2, 20221, 2023 and April 3, 2021,2, 2022, respectively. Foreign currency transaction lossesgains and (losses) included in “Other, net” were $1.1$0.3 million and $0.3$(1.1) million duringin the three months ended April 1, 2023 and April 2, 2022, and April 3, 2021, respectively. Sensitivity to foreign currency exchange rates was not material
Based on the intercompany balances as of April 2, 20221, 2023, an assumed 5% or 10% adverse change to foreign exchange rates would result in a loss of approximately $4.6 million and December 31, 2021.$9.2 million, respectively, recorded in “Other, net.”
Inflation Risk
Although 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 April 2, 20221, 2023 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 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. The Company establishes an accrued liability for legal matters when those matters present loss contingencies that are both probable and estimable. Although the outcome of these and other claims cannot be predicted with certainty, other than the settlement of certain actions, management is not currently able to estimate the reasonable possible amount of loss or range of loss and does not believe that it is probable that the ultimate resolution of the current matters will have a material adverse effect on our business, financial condition, results of operations or cash flows. However, the final results of any current or future proceeding cannot be predicted with certainty, and until there is final resolution on any such matter that we may be required to accrue for, we may be exposed to loss in excess of the amount accrued. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.
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. ITEM 1A. RISK FACTORS.
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors” in our 20212022 10-K, as updated and supplemented below and in our subsequent filings. These risks could materially harm our business, operating results and financial condition. Additional factors and uncertainties not currently known to us or that we currently consider immaterial also may materially adversely affect our business, financial condition or future results.
Risk Factors
Risks Related to Our Business
The COVID-19 pandemic has had, and we expect will continueWe may not be able to have, a material adverse impact onutilize our business, results of operations, financial condition and cash flows andcapacity efficiently or accurately plan our capacity requirements, which may adversely impact the trading priceaffect our gross margin, business and operating results.
If we overestimate our demand and overbuild our capacity or inventory, we may have significantly underutilized assets. Underutilization of our common stock.
The global spread and unprecedented impact of COVID-19 continues to create significant volatility, uncertainty and economic disruption. COVID-19 has led governmentsmanufacturing and/or co-manufacturing facilities can adversely affect our gross margin and other authorities around the world to implement significant measures intended to control the spread of the virus, including social distancing measures, business closures or restrictions on operations, quarantines and travel bans. While some of these restrictions have been lifted or eased in many jurisdictions as the rates of COVID-19 infections have decreased or stabilized and various COVID-19 vaccines are being distributed, a resurgence of COVID-19 and the impact of variants of the virus that causes COVID-19 in some markets has slowed the reopening process, could halt or reverse the reopening process, or result in the reinstatement of social distancing measures, business closures, restrictions on operations, quarantines and travel bans. Additionally, on November 4, 2021, the U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA) issued a COVID-19 Vaccination and Testing Emergency Temporary Standard requiring all employers with 100 or more employees to ensure that their employees are fully vaccinated or tests for COVID-19 on at least a weekly basis. The OSHA rule also requires that these employers provide paid time for employees to get vaccinated, and ensure all unvaccinated workers wear a face mask in the workplace. While the U.S. Supreme Court stayed the OSHA rule in January 2022, it is not currently possible to predict with any certainty whether the stay will be lifted, the exact impact the new regulation would have on our company, suppliers and customers. As a company with more than 100 employees, under the OSHA rule, we would be required to mandate COVID-19 vaccination of our workforce or require our unvaccinated employees to be tested weekly. Some employers, including the Company, already have implemented requirements for workers regarding vaccination status, testing, and/or other measures in response to COVID-19. The Company has required compliance with its COVID-19 vaccination policy since October 31, 2021 for all California based employees, and December 31, 2021 for all other U.S. based employees, subject to
any special exceptions or other approved reasonable accommodations. This policy and the OSHA standard could result in employee attrition, difficulty securing future labor and supply needs and may have an adverse effect on future profit margins.
Even if not required by governments and other authorities, companies are continuing to take various safety precautions, such as requiring employees to be vaccinated, employees to work remotely, imposing travel restrictions, reducing operating hours, imposing operating restrictions and temporarily closing businesses. These continuing restrictions, and future prevention and mitigation measures, imposed by governments and companies, are likely to continue to have an adverse impact on global economic conditions and consumer confidence and spending (including as a result of lower discretionary income due to unemployment or reduced or limited work as a result of measures taken in response to the pandemic), which has had, and is expected to continue to have, a material adverse impact on theresults. If demand for our products particularlyexperiences 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 accelerate depreciation, which would increase our expenses. For example, in 2022, lower than anticipated revenues negatively impacted our foodservice channel,capacity utilization, which resulted in the Company incurring underutilization fees and could materially adversely affect the supplytermination fees that were required in order to exit certain of our products. Sustained market turmoilsupply chain arrangements.
If demand does not materialize at the rate forecasted, we may not be able to scale back our manufacturing expenses or overhead costs quickly enough to correspond to the lower than expected demand. This could result in lower margins and business disruption due to COVID-19 have negatively impacted and are expected to continue to negativelyadversely impact our business and results of operations, financial condition and cash flows.
Impact of COVID-19operations. Additionally, if product demand decreases or we fail to forecast demand accurately, our results may be adversely impacted due to higher costs resulting from lower manufacturing utilization, causing higher fixed costs per unit produced. Further, we may be required to recognize excess or obsolete inventory write-off charges, or excess capacity charges, which would have a negative impact on our foodservice channel
COVID-19 has impacted business operations and customer and consumer demand in our foodservice channel as restaurants and other foodservice locations have been required to temporarily close or restrict indoor dining to limit the spreadresults of COVID-19 or because of labor shortages. Although certain of these restrictions were lifted pursuant to multi-step reopening plans and exceptions to allow for carry-out and delivery have enabled certain of our customers to continue to generate business, we experienced a significant deterioration in sales to foodservice customers in 2020. For the year ended December 31, 2021, foodservice channel net revenues were $139.9 million compared to $106.2 million in the prior year. For the first quarter of 2022, foodservice channel net revenues were $25.1 million compared to $27.1 million in the prior-year period, a 8% decline. Our foodservice channel net revenues showed recovery in the year ended December 31, 2021 from the severely depressed levels seen in the prior-year period, however foodservice channel net revenues for the first quarter of 2022 declined from the same period in the prior year. There is continued uncertainty related to the COVID-19 infection rates, as well as the reimplementation of safety measures in certain jurisdictions, and potential impact on customer demand levels. We expect to also continue to be impacted by decreased customer and consumer demand as a result of event cancellations and social distancing, government-imposed restrictions on public gatherings and businesses, and temporary restaurant and retail store closures and operating restrictions. Closures or scaled back operations have also resulted in delays in tests or launches of our products among our foodservice customers.
Impact of COVID-19 on our retail channel
While we initially experienced an increase in retail demand during the second quarter of 2020 as consumers shifted toward more at-home consumption as a result of the pandemic, the level of retail demand meaningfully slowed during the third and fourth quarters of 2020 and continued into 2021. For example, for the second quarter ended July 3, 2021, we generated retail channel net revenues of $105.7 million, compared to $73.8 million in the third quarter ended October 2, 2021, and $64.3 million in the fourth quarter ended December 31, 2021. For the first quarter of 2022, retail channel net revenues were $84.4 million compared to $81.0 million in the prior-year period, a 4% increase. The continuing impact of COVID-19 remains highly uncertain. It is, therefore, difficult to predict retail demand levels going forward, including as a result of foodservice establishments opening and potentially offsetting retail demand. Additionally, we could suffer product inventory losses or markdowns and lost revenue in the event of the loss or a shutdown of a major supplier, co-manufacturer or distributor, disruption of our distribution network, or decreased consumer confidence and spending, including because of labor shortages. We also have been providing heavier discounting on some of our products in response to COVID-19 and increased competition. Although these actions are intended to build brand awareness and increase consumer trials of our products, they have and are likely to continue to have aoperations.
negative impact on our net revenues, gross profit, gross margin and profitability, impacting period-over-period results.
Impact of COVID-19 on our suppliers, co-manufacturers and distributors
We source ingredients from multiple suppliers around the world. Currently, the principal ingredient in mostDisruptions of our products is pea protein. In 2020, we scaled back our production in response to COVID-19 and to reduce our existing finished goods and work in process inventory levels, and saw an increase in our pea protein stocks. However, in light of the expected shelf life of our pea protein raw materials, we do not believe there is a risk of inventory obsolescence of these raw materials at this time. The impact of COVID-19 on any of our suppliers, co-manufacturers, distributors or transportation or logistics providers, including government-mandated lockdowns, problems with their respective businesses, finances, labor matters (including illness or absenteeism in workforce, or effects of government or employer vaccine mandates), ability to import raw materials, product quality issues, costs, production, insurance and reputation, may negatively affect the price and availability of our ingredients and/or packaging materials and impact our supply chain. In addition, if the disruptions caused by COVID-19 continue or there are additional resurgences of COVID-19 and the appearance of more virulent variants of the virus that causes COVID-19, our ability to meet the demands of our customers may be materially impacted.
Impact of COVID-19 on our manufacturing operations and workforce
We have implemented and continue to practice a series of hygienic measures at our manufacturing and other facilities. If we are forced to scale back hours of production or close these facilities in response to the pandemic, we expect our business, results of operations, financial condition and cash flows would be materially adversely affected. Beginning in October 2021, we began requiring headquarters-based employees to return to working in the office. In the event that an employee tests positive for COVID-19, we may have to temporarily close one or more of our facilities for cleaning and/or quarantine one or more employees, which could negatively impact our operations and financial results. We have incurred and may be required to continue to incur for an indeterminable period, increased costs related to sanitizing the work environment and overall increased safety measures. The ultimate impact of the COVID-19 pandemic on our operations and financial performance depends on many factors that are not within our control.
Impact of COVID-19 on our international expansion and access to capital
Part of our growth strategy includes increasing the number of international customers and expanding into additional geographies. For example, in the second quarter of 2021, our manufacturing facility in Europe located in Enschede, the Netherlands, completed commercial trial runs for dry blend production and completed commercial trial runs for our extruded product in the third quarter of 2021. As of the end of 2021, this facility is fully operational, manufacturing our extruded product and dry blends that go into making our finished goods.
Also in the second quarter of 2021, several commercial trials of certain of our manufacturing processes were completed in our new end-to-end manufacturing facility in the Jiaxing Economic & Technological Development Zone near Shanghai. In the third quarter of 2021, the facility successfully completed the qualification of extrusion production capabilities and in the fourth quarter of 2021, the facility successfully completed the international Food Safety System Certification (FSSC) 22000 and ISA Halal certification. The facility completed commercialization of end-to-end production at the end of 2021. In the fourth quarter of 2021, we also leased a 12,100 square foot facility in Shanghai, which will be used as a local research and development facility to support our local manufacturing operations. The timing and success of our ongoing international expansion efforts may be negatively impacted by COVID-19, which could impede our anticipated growth.
We may be subject to special COVID-19 related requirements, restrictions and testing, including those applicable to cold-chain food distribution, when our products or ingredients are imported into or circulated through Mainland China. If we do not comply with these requirements and/or our product tests positive for
coronavirus, our ability to import or distribute our product may be negatively impacted and may result in recalls, administrative fines and civil liability, particularly if the problem results in sickness or injury.
Additionally, COVID-19 has created significant disruptions in the credit and financial markets, which could adversely affect our ability to access capital on favorable terms or at all.
The extent of COVID-19’s effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic (including any additional resurgences), impact of variants of the virus that causes COVID-19, the wide distribution and public acceptance of the various COVID-19 vaccines and their efficacy against COVID-19 and variants of the virus, labor needs at the Company as well as in the supply chain and at customers, compliance with government or employer COVID-19 vaccine mandates and the resulting impact on available labor, the level of social and economic restrictions imposed in the United States and abroad in an effort to curb the spread of the virus, and the impact on consumer behavior, all of which are uncertain and difficult to predict considering the rapidly evolving landscape. Furthermore, the uncertainty created by COVID-19 significantly increases the difficulty in forecasting operating results and strategic planning. As a result, it is not currently possible to ascertain the ultimate impact of COVID-19 on our business, results of operations, financial condition or liquidity. However, COVID-19 has had and is expected to continue tocould have a material adverse impacteffect on our business, results of operations,operating and financial conditionresults.
Our ability to make, move and cash flowssell products in coordination with our suppliers, third party contract manufacturers and may adversely impact the trading price ofdistributors is critical to our common stock. While the ultimate health and economic impact of COVID-19 continuessuccess. Damage or disruption to be highly uncertain, our business operations and results of operations,collective supply, manufacturing or distribution capabilities resulting from severe weather, fires or evacuations related thereto, natural disasters, including our net revenues, gross profit, gross margin, earnings and cash flows, may be adversely impacted in 2022. Futureclimate-related events, and effects related topandemics (such as the COVID-19 pandemic cannot be determined with precision and actual results could significantly differ from estimatespandemic) or forecasts. The impact of COVID-19 may also heighten other risks discussed in this report.
Disruptions in the worldwide economy may adversely 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 spreadoutbreaks of contagious diseases, (such as COVID-19) in locations whereagricultural 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 delivering 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. Furthermore, in connection with the recent hostilities between Russia and 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. The uncertainty resulting from the military conflict in Europe may 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 markets, which may make it more difficult for us to raise additional capital. Further escalation of geopolitical tensionsreasons 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 or the global oil and natural gas markets. In addition,impair our ability to manage normal commercial relationships withsource inputs or manufacture, sell or timely deliver our suppliers, co-manufacturers, distributors, retailers, foodservice customers, consumers and creditors may suffer. Consumers may shift purchasesproducts. To the extent we are unable to lower-pricedmitigate the likelihood or other perceived value offerings during economic downturns aspotential impact of such events, there could be 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 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. 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 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. Decreases in demand for our products without a corresponding decrease in costs would put downward pressure on margins and would negatively impact our financial results. Prolonged unfavorable economic conditions or uncertainty may have anmaterial adverse effect on our salesoperating and profitabilityfinancial results.
Additionally, there are increasing expectations in various jurisdictions that companies monitor the environmental and may result in consumers making long-lasting changes tosocial performance of their discretionary spending behavior on a more permanent basis.
Inflationary price pressures of raw materials, labor, transportation, fuel or other inputs used by us and our suppliers, including the effectscompliance with a variety of rising interest rates, could negatively impact our business and results of operations.
Increases in the price of raw materials, labor wages, energy or other inputs that we or our suppliers use in manufacturing and supplying products, along with logistics, transportation, shipping, fuel and other related costs, has led to higher production and shipping costs for our products. Any increase in the cost of inputs to our production could lead to higher costs for our products in our foodservice and retail channels and could negatively impact our operating results and future profitability. General inflation, including rising energy prices, interest rates and wages, currency volatility and monetary, fiscal and policy interventions by national or regional governments in reaction to such events could have negative impacts on our business by increasing our operating costs and our borrowing costspractices, as well as decreasing the capital available for our customers to purchase our products. The impactconsider a wider range of inflation could also reduce consumer confidence and decrease consumer discretionary spending, including spending to purchase our products, and negatively affect trends in consumer purchasing patterns due to changes in consumers’ disposable income, credit availability and debt levels.
Our business and reputation could be negatively impacted by the increased scrutiny from our stakeholders and institutional investors on ESG practices.
There is an increased focus from stockholders, institutional investors and the SEC on corporate ESG practices, including climate change and related ESG disclosure requirements. Certain stockholders 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 implicationspotential environmental and social cost of their investments. Increasing governmental and societal attention to ESG matters, including expanding mandatory and voluntary reporting,the end of life considerations for products. Compliance can be costly, require us to establish or augment programs to diligence and disclosure on topicsor monitor our suppliers, or, in the case of legislation such as climate change, human capital, labor and risk oversight, could expand the nature, scope and complexity of matters that we are requiredUyghur Forced Labor Prevention Act, to control, assess and report. If our ESG practices do not meet the standards set by these stockholders, they may choose notdesign supply chains to invest in our common stockavoid certain suppliers or if our peer companies outperform us in their ESG initiatives, potential or current investors may electregions altogether. Failure to invest with our competitors instead. If we do not comply with investorsuch regulations can result in fines, reputational damage, import ineligibility for certain products or stockholder expectations and standards in connection withraw materials, or otherwise adversely impact 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 could be materially and adversely affected.business.
The Company is subject to accounting estimate risks.
The preparation of the Company’sour 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 reassessment of the useful lives of our large manufacturing and research and development equipment, and 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 a change in accounting estimate and was made on a prospective basis effective January 1, 2023. If actual results differ from our judgments and assumptions, then it may have ana material, adverse impact on theour results of our operations and cash flows. For the three months ended April 1, 2023, this change in accounting estimate decreased depreciation expense by $5.6 million, impacting cost of goods sold and research and development expenses by $5.1 million and $0.5 million, respectively, and decreased both basic and diluted net loss per share available to common stockholders by $0.09.
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 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 failure to agree on major issues. If
such differences caused a joint venture to deviate from its business plan, our results of operations could be adversely affected.
As we continue to restructure 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 intend to transition and assume the distribution responsibilities for Beyond Meat Jerky in-house, starting in the fourth quarter of 2023. Because this transition will both limit our distribution reach for Beyond Meat Jerky and reduce our total number of U.S. retail distribution outlets, such transition may adversely affect our net revenues. If we are unable to successfully 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 margin expansion objectives. Furthermore, if consumer demand for Beyond Meat Jerky continues to decrease, or we fail to successfully market, distribute and sell the product, we may not be able to generate significant revenue, which may require the implementation of additional measures, including downsizing or exiting certain operations. The restructuring efforts may require significant attention of our management and other personnel, which would divert resources from our core business or operations. Our failure to successfully accomplish any of the above activities and goals 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 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. Moreover, a significant subset of our office-based employee population temporarily transitioned to a remote work environment in an effort to mitigate the spread of the COVID-19 pandemic, which may exacerbate certain of these risks due to an increase in the number of points of potential attack, such as laptops and mobile devices. 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 be 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.
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 was approved by California voters in November 2020, will significantly modifybecame 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, and goes into effect and fully supersedes the CCPA on January 1, 2023.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 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, manufacturing and supply, as well as marketing and selling existing and new products. In addition, other unanticipated costs may arise.
As of April 2, 2022,1, 2023, we had cash and cash equivalents and restricted cash of $547.9$273.6 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, such asincluding strategic collaborations. Such financing 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 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;
•our investment in and build out of our Campus Headquarters;
•the expenses associated with our marketing initiatives;
•our investment in manufacturing and facilities to expand our manufacturing and production capacity;
•our investments in real property and joint ventures;
•the costs required to fund domestic and international operations and growth;
•the scope, progress, results and costs of researching and developing future products or improvements to existing products or manufacturing processes;
•any lawsuits related to our products or commenced against us including the costs associated with our current litigation with a former co-manufacturer, or the derivative actions brought against certain of our directors and officers;
•the expenses needed to attract and retain skilled personnel;
•the costs associated with being a public company;
•the impact of the COVID-19 pandemic, or any other pandemic, epidemic or other public health crisis;
•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 our growth and expansion plans; 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 April 1, 2023, we had $15.0 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 $2.4 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.
Risks RelatedAdverse 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 Environment, Climate and Weather
A major earthquake, tsunami, tornado, flood, droughtFederal Deposit Insurance Corporation was appointed as receiver for SVB. Although we did not have a material amount of funds in SVB or other natural disaster or severe weather event could seriously disrupt our entire business.
Weinstitutions that have offices, co-manufacturing and manufacturing facilities located insince closed, we cannot guarantee that the United States and internationally. The impact of a major earthquake, tsunami, tornado, flood, droughtbanks or other natural disasterfinancial 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 severe weather event at any oflimitation on our facilitiescash and overall operations is difficult to predict, but such a natural disaster or severe weather event could seriously disrupt our entire business and 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. Adverse climate conditions, weather patterns and the impact of such conditions and patterns such as drought, flood, wildfires, mudslides and rising ambient temperatures adversely impact product cultivation conditions for farmers and agricultural productivity, including by disrupting ecosystems and severely altering the growing conditions, nutrient levels, soil moisture and water availability necessary for the growth and cultivation of crops, whichcash equivalents would adversely affect our business.
In addition, investor concerns regarding the product quality, availabilityU.S. or cost of certain commodities that are necessary for our products, such as yellow peas, mung beans, sunflowers, rice, faba bean, canola oil and coconut oil. Many of our operations existinternational financial systems could result in water-stressed regions and water is a key ingredient in our products. Due to climate change, we may also be subjected to decreased availability of water, deteriorated quality of water or less favorable pricingcommercial 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 water, whichus 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 impact our manufacturingimpacted by these developments in ways that we cannot predict at this time, there may be additional risks that we have not yet identified, and distribution operations.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
Our operations are subject to FDA governmental regulation and other foreign, federal, state and local 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 foreign, federal, state and local authorities. Specifically, for products manufactured or sold in the United States 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 preventive controls regulations, current good manufacturing practices (“cGMPs”), and supplier verification requirements. Comparable regulations apply in foreign jurisdictions such as the European Union, the United Kingdom and China. Our processing and manufacturing facilities, including those of our co-manufacturers, are subject to periodic inspection by foreign, 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 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 other non-U.S. regulators, 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 inability to manufacture our products or 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 state, local or 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 or prohibitions 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.
We are subject to international regulations that could adversely affect our business and results of operations.
We are 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. If regulators determine that the labeling, advertising and/or composition of any of our products is not in compliance with foreign law or regulations, or if we or our co-manufacturers otherwise fail to comply with applicable laws and regulations in foreign 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 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.
Any changes in, or changes in the interpretation of, 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” or other similar words in connection with plant-based proteinmeat 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, 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 proteinmeat 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 not 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 recently 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, while we do not believethe FDA has announced that USDA has the statutory authority to regulateit is developing guidance on naming plant-based products under the current legislative framework, USDA is considering naming requirements for other types of alternative protein productsmeat 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 prohibition on usinglaw 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 to define, for example, the sanctions in case of non-compliance.non-compliance with the new law. The Decree was due to enterpublished on June 29, 2022, and entered into force in April 2022, but has not yet been adopted. There is a risk that this new law will require labeling of products of non-French origin.on October 1, 2022. We do not believe that the new French decreeDecree complies with the laws of the European Union (EU), in particular the principle of free movement of goods. On July 27, 2022, at the request of a trade association, the French High Administrative Court partially suspended the execution of the Decree. This signals that there are indeed serious doubts as to the lawfulness of the Decree, though the suspension is only partial and temporary until the Court rules on the merits of the case. We understand that at least two more trade associations are also considering litigation. In this context, on October 21, 2022, the Company filed an application for annulment against the Decree. The Company also intervened in favor of the trade association in their pending case against the Decree on November 2021, Beyond Meat co-signed16, 2022. Several plant-based companies filed voluntary intervention in support of the Company’s case on April 20, 2023.
France is the first EU Member State to adopt such a letter from the European Alliance of Plant-Based Foods protesting this law. Should other EU Member State regulatory authorities take action with respect to the use of the term “meat” or similar claims, 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, or required to
identify our products as “imitation” in our product labels, and our business, prospects, results of operations or financial condition could be adversely affected. In October 2021, the Turkish authorities challenged the use of the Caped Longhorn superhero logo, as well as the name “Beyond Meat,” alleging that the consumer is misled as to the characteristics of our products. The local distributor has made a submission that this is an unlawful restriction under the EU-Turkey Free Trade Agreement. In December 2021, the Turkish authorities rejected this submission, and held that references to “plant-based” in combination with “meat” would mislead the consumer. Following this outcome, we have decided to suspend sales in Turkey until market conditions become more favorable. Separately, litigation by competitors against us is a possibility which has materialized in France. In October 2020, Interbev, a French trade association for the cattle industry sent a cease-and-desist letter to one of our contract manufacturers alleging that the use of “meat” and meat-related terms is misleading the French consumer. Despite our 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 from 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 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. The Company strongly denies these claims and will defend its
position with the utmost vigor. The litigation is expected to take at least 18 months in first instance, and if the Court rules against the company, it could disrupt our ability to market in France. Should the case be referred to the Court of Justice of the European Union, this case may have repercussions for the entire plant-based protein industry, in all member states of the European Union.
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 information regarding pending legal proceedings, please see Part II, Item I “Legal Proceedings” , Legal Proceedings, and Note 10, Commitments and Contingencies, to the Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere in 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.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
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 | | |
| 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 April 1, 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) Equity, (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 |
| _________________ |
| ** 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 | | | | | 10-Q | | 6/12/2019 | | 3.1 | | |
| 3.2 | | | | | 10-Q | | 6/12/2019 | | 3.2 | | |
| 4.1 | | | | | S-1/A | | 3/27/2019 | | 4.1 | | |
| 4.2 | | | | | S-1 | | 11/16/2018 | | 4.2 | | |
| 4.3 | | | | 10-K | | 3/19/2020 | | 4.3 | | |
| 4.4 | | | | 8-K | | 3/05/2021 | | 4.1 | | |
| 4.5 | | | | 8-K | | 3/05/2021 | | 4.1 | | |
| 10.1 | | | | | | | | | | X |
| 10.2 | | | | | | | | | | X |
| 10.3+ | | | | | | | | | | X |
| 10.4*+ | | | | | | | | | | X |
| 31.1 | | | | | | | | | | X |
| 31.2 | | | | | | | | | | X |
| 32.1** | | | | | | | | | | X |
| 32.2** | | | | | | | | | | X |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
EXHIBIT INDEX |
Exhibit No. | | Exhibit Description | | Incorporated by Reference | | Filed Herewith |
| | | | Form | | Date | | Number | | |
101 | | | The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended April 2, 2022 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' Equity, (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 |
_________________ |
+ 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 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. |
56
53
SIGNATURES
Pursuant to the requirements 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: | May 12, 202210, 2023 | | By: | /s/ Ethan Brown |
| | | | Ethan Brown |
| | | | President and Chief Executive Officer |
| | | | (Principal Executive Officer) |
| | | | | | | | | | | | | | |
| Date: | May 12, 202210, 2023 | | By: | /s/ Philip E. HardinLubi Kutua |
| | | | Philip E. HardinLubi Kutua |
| | | | Chief Financial Officer, Treasurer |
| | | | (Principal Financial Officer) |
