Beyond Meat Burned Over $100 Million Of Free Cash Flow

A Beyond Meat sandwich. Source: Flickr

Beyond Meat (NASDAQ:BYND) is one of the fastest-growing food packaging companies in the world, offering a portfolio of revolutionary plant-based meats.

The company literally builds meats out of its factories, using plant-based protein. Its plant-based meat products look almost, if not 100%, the same as the animal-based products in terms of not only the physical attribute but also the taste, texture as well as other sensory attributes of animal-based meat products.

For this reason, Beyond Meat has been selling its plant-based meat products like hotcakes, making hundreds of millions of sales annually. Beyond Meat’s revenue growth in 2020 reached nearly 40% compared to 2019, making it one of the few food companies that have been gaining attention from Wall Street since 2020.

The company stock price was valued more than $140 as of this article was published, representing a growth rate of nearly 500% since going public in the mid of 2019 with an IPO share price of only $25.

However, behind the glory and the growth, Beyond Meat has been burning cash like there is no tomorrow. As with all the new startups, Beyond Meat has been not only making losses all these years, to the tune of more than $50 million in fiscal 2020 but also consuming a large amount of cash that was more than $50 million as of 2021 Q1.

In this article, we will examine a couple of Beyond Meat’s cash metrics, including the company’s cash on hand, operating cash flow, capital expenditure, free cash flow and net cash from financing activities.

In this sense, we will try to find out what has been going on with Beyond Meat’s cash flow and why it has been burning so much cash.

Let’s move on!

Beyond Meat’s Net Cash From Operations

Beyond Meat’s net cash from operating activities

Let’s first look at Beyond Meat’s net cash from operations which is shown in the chart above for the period of the latest 2 quarters.

Beyond Meat’s net cash from operations measures the cash inflow and outflow generated primarily from its core business operations.

As the chart above shows, Beyond Meat’s net cash from operations has been in the red in the last 2 quarters from 4Q20 to 1Q21, burning as much as $40 million and more than $50 million on a TTM basis in fiscal 4Q20 and 1Q21, respectively.

The negative net cash from operations implies that Beyond Meat’s core business operations, including the sale of its primary products, have failed to generate enough operating cash flow.

In this aspect, Beyond Meat’s core business operations consumed more cash than it was capable of producing.

To make matter worse, Beyond Meat’s negative net cash from operations actually got worse in fiscal 1Q 2021 compared to the prior quarter.

As of 2021 Q1, Beyond Meat consumed $10 million more net cash from operations compared to the prior quarter.

Beyond Meat’s Capital Expenditures

Beyond Meat’s capital expenditures

Beyond Meat spent quite a considerable amount of cash on capital expenditures as shown in the chart above.

Capital expenditures is a form of investment in properties, plants and equipment.

According to the chart above, Beyond Meat’s cash outflow for capital expenditures totaled $73 million and $84 million on a TTM basis in fiscal 4Q20 and 1Q21, respectively.

In Beyond Meat’s case, the increasing cash outflow for capital expenditures implies that the company has been expanding its production capacity which should bode well for investors as it represents growth for the company.

Beyond Meat’s Free Cash Flow

Beyond Meat’s free cash flow

Free cash flow is defined as operating cash flow minus capital expenditures as shown in the following equation:

Free cash flow = operating cash flow – capital expenditures

Free cash flow is a powerful indicator of the cash generation capability of a company.

As the above chart shows, Beyond Meat’s free cash flow has been declining and the company burned even more cash in fiscal 1Q 2021 compared to the prior quarter.

As of fiscal 2021 Q1, Beyond Meat’s free cash flow declined to -$138 million, a new record for the company.

Beyond Meat’s worsening free cash flow has been primarily driven by the lower net cash from operations and the expanding capital expenditures.

Beyond Meat’s Cash On Hand

Beyond Meat’s cash on hand

Judging from the cash burn rate that had reached more than $100 million from a TTM perspective, how long will Beyond Meat survive?

To answer this question, we can look at the company’s cash on hand which is shown in the chart above for the period from fiscal 2019 to 2021.

According to the chart, Beyond Meat has quite a substantial amount of cash on hand as of fiscal 1Q 2021, totaling more than $1 billion in the latest quarter.

Prior to fiscal 2021 Q1, Beyond Meat’s cash on hand has been slowly declining in the last few quarters, dropping from as much as $312 million in 3Q19 to only $160 million as of fiscal 4Q20.

Thanks to Beyond Meat’s substantial cash burn rate, the company’s cash reserve has been dropping considerably.

Unless the company can generate positive operating cash flow in the coming quarters, Beyond Meat will continue to consume more free cash flow, possibly using up all of its existing cash on hand by the end of fiscal 2021 or early 2022.

Fortunately, Beyond Meat has raised capital in fiscal 1Q 2021 from debt offerings, driving its cash reserves to more than $1 billion in the same quarter.

With this huge sum of cash on hand, Beyond Meat can survive on it for at least another year without having to raise capital again.

Beyond Meat’s Net Cash From Financing Activities

Beyond Meat’s net cash from financing activities

Beyond Meat’s net cash from financing activities shows the cash flow arising from capital raise, debt repayments, dividends and/or share buybacks.

Judging from Beyond Meat’s negative free cash flow, the company would most likely not be paying dividends and buying back shares.

Therefore, the net cash from financing activities should reflect only Beyond Meat’s capital raise and debt repayments.

As seen from the chart above, Beyond Meat’s net cash from financing activities reached more than $1 billion on a TTM basis as of fiscal Q1 2021.

The $1 billion net cash from financing activities shows Beyond Meat’s capital raise which could come from debt or equity offerings.

In Beyond Meat’s case, the company has issued debt to raise cash in fiscal 1Q 2021 according to its filings.

As a result of the capital raise, Beyond Meat’s cash on hand increased significantly higher to more than $1 billion in the same fiscal quarter.

Conclusion

Beyond Meat is a unique company in the sense that it literally manufactures meats out of its facilities, using only plant-based protein.

For this reason, the company has been enjoying a break-neck growth rate from 2018 to 2021, growing its revenue at nearly 40% in fiscal 2020.

Along with the growth, Beyond Meat has also been consuming a large amount of cash flow, thereby generating a negative operating cash flow of more than $50 million on a TTM basis as of fiscal 1Q21.

The negative operating cash flow has resulted in a negative free cash flow of more than $100 million after accounting for capital expenditures in fiscal 2021 Q1.

At this cash burn rate, Beyond Meat will not survive for long without raising capital considering that its core business operations have been incapable of producing positive net cash.

As such, Beyond Meat has raised substantial capital in fiscal Q1 2021 at more than $1 billion USD through debt offerings as seen from the net cash from financing activities.

References and Credits

1. All financial numbers in this article were obtained and referenced from Beyond Meat’s annual and quarterly statements available in Beyond Meat Quarterly and Annual Reports.

2. Featured images in this article are used under creative commons license and sourced from the following websites: Jon Fisher and Open Grid Scheduler / Grid Engine.

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