Beyond Meat yesterday reported phenomenal financial results for the first quarter ended March 28, 2020. The results follow huge successes including a partnership with Michelle Obama; a $150 million credit facility for global growth; and of course its launch into Starbucks China.
Net revenues were $97.1 million, an increase of 141%, compared to net revenues of $40.2 million in the year-ago period, and gross profit was $37.7 million, or 38.8% of net revenues, compared to gross profit of $10.8 million in 2019.
Net income was $1.8 million, or $0.03 per common diluted share, compared to net loss of $6.6 million, or $0.95 per common share, in the year-ago period; and adjusted EBITDA, which is a non-GAAP financial measure, was $12.7 million compared to an Adjusted EBITDA loss of $2.1 million in the year-ago period.
“I am proud of our first quarter financial results which exceeded our expectations despite an increasingly challenging operating environment due to the COVID-19 health crisis,” said Ethan Brown, Beyond Meat’s President and Chief Executive Officer. “The health and safety of our employees and their families is our top priority and we have implemented a series of measures to minimize risks while supporting business continuity.
“Among other things, these include the creation of an internal task force to actively monitor new developments and maintain a constant dialog with health officials; implementation of various physical distancing and preventative hygienic protocols within our facilities; and increased frequency of our inventory reviews to ensure sufficient floor stocks of key inputs to mitigate against business disruption. During this unprecedented time, we remain steadfast in our resolve to continue to provide great-tasting plant-based meats to consumers, to solidify our support to our retail and foodservice customers, and to continue to lead the global plant-based meat movement.”
First Quarter 2020
Net revenues increased 141% to $97.1 million in the first quarter of 2020, compared to $40.2 million in the first quarter of 2019. Growth in net revenues in the first quarter of 2020 was primarily due to an increase in volume sold, partially offset by lower net price per pound. Growth in volume sold was driven mainly by expansion in the number of distribution points both domestically and abroad, higher sales velocities at existing retail customers, and contribution from new products introduced subsequent to the first quarter of 2019. During the quarter, specifically in the latter half of March, the Company experienced a reduction in sales to foodservice customers as a result of the ongoing COVID-19 health crisis.
Net revenues by channel (unaudited):
| Three Months Ended | Change | ||||||||||||||
| (in thousands) | March 28, 2020 |
March 30, 2019 |
Amount | % | |||||||||||
| U.S.: | |||||||||||||||
| Retail | $ | 49,923 | $ | 19,461 | $ | 30,462 | 157 | % | |||||||
| Foodservice | 22,631 | 8,834 | 13,797 | 156 | % | ||||||||||
| U.S. net revenues | 72,554 | 28,295 | 44,259 | 156 | % | ||||||||||
| International: | |||||||||||||||
| Retail | 5,952 | 118 | 5,834 | 4,944 | % | ||||||||||
| Foodservice | 18,568 | 11,793 | 6,775 | 57 | % | ||||||||||
| International net revenues | 24,520 | 11,911 | 12,609 | 106 | % | ||||||||||
| Net revenues | $ | 97,074 | $ | 40,206 | $ | 56,868 | 141 | % | |||||||
Effective January 1, 2020, the Company began presenting net revenues by geography and distribution channel. Prior period amounts have been recast to conform to the current period presentation. Please see the “Presentation of Net Revenues by Channel” at the end of this release for additional information and a recast of the Company’s 2019 quarterly net revenues by channel.
Gross profit was $37.7 million, or 38.8% of net revenues, in the first quarter of 2020, compared to $10.8 million, or 26.8% of net revenues, in the year-ago period. The increase in gross profit and gross margin was primarily due to an increase in the volume of products sold, production efficiency improvements, direct materials and packaging input cost savings, and direct labor efficiencies in the first quarter of 2020 compared to the year-ago period.
Income from operations in the first quarter of 2020 was $1.8 million compared to loss from operations of $5.3 million in the first quarter of the prior year. The improvement in income from operations in the first quarter of 2020 was driven by the year-over-year increase in gross profit, partially offset by higher operating expenses primarily to support increased personnel levels and higher administrative costs associated with being a public company, higher share-based compensation expense, increases in the Company’s marketing initiatives, higher restructuring expenses, and continued investment in innovation.
Net income was $1.8 million in the first quarter of 2020 compared to net loss of $6.6 million in the year-ago period. Improvement in net income was primarily the result of the increase in net revenues and gross profit, as well as operating expense leverage, compared to the first quarter of 2019.
Adjusted EBITDA was $12.7 million, or 13.1% of net revenues, in the first quarter of 2020 compared to an Adjusted EBITDA loss of $2.1 million, or (5.3)% of net revenues, in the first quarter of 2019. Adjusted EBITDA is a non-GAAP financial measure defined under “Non-GAAP Financial Measures,” and is reconciled to net income (loss), the closest comparable GAAP measure, at the end of this release.
Chief Financial Officer and Treasurer, Mark Nelson commented, “We are pleased with the Company’s first quarter results even as we began to navigate headwinds stemming from the COVID-19 pandemic late in the quarter. We maintained our solid top-line momentum while driving our best-ever performance in production unit cost per pound. Despite near-term challenges ahead stemming from the ongoing global health crisis, our improving operating results and continued strength of our balance sheet give us added confidence about the Company’s long-term financial position.”
Balance Sheet and Cash Flow Highlights
The Company’s cash and cash equivalents balance was $246.4 million as of March 28, 2020 and total outstanding debt was $30.6 million. Net cash used in operating activities was $17.2 million for the quarter ended March 28, 2020, compared to $13.3 million for the prior year period. Capital expenditures totaled $12.4 million for the quarter ended March 28, 2020 compared to $3.8 million for the prior year period. The increase in capital expenditures was primarily driven by growth, as the Company continued to invest in capital production equipment related to capacity expansion initiatives.
On April 22, 2020, the Company announced that it has entered into a new $150 million five-year revolving credit facility, replacing its previous secured credit arrangements. The new credit facility, which includes an accordion feature for up to an additional $200 million, increases the Company’s borrowing capacity, lowers its cost of capital, and enables greater strategic flexibility for future global growth initiatives.
2020 Outlook
The Company continues to expect to benefit from food-at-home consumer demand in its retail channel, however, given the ongoing uncertainty related to the COVID-19 pandemic, including the magnitude and duration of the impact to the foodservice channel, in particular, the Company is suspending its 2020 outlook previously provided on February 27, 2020 until further notice.
Conference Call and Webcast
The Company will host a conference call and webcast to discuss these results with additional comments and details today at 4:30 p.m. Eastern, 1:30 p.m. Pacific. The conference call webcast will be available live over the Internet through the “Investors” section of the Company’s website at www.beyondmeat.com. Investors interested in participating in the live call can dial 866-221-1171 from the U.S. or 270-215-9602 from international locations. A telephone replay will be available approximately two hours after the call concludes through Wednesday, May 20, 2020, by dialing 855-859-2056 from the U.S., or 404-537-3406 from international locations, and entering confirmation code 5337749.
