Going veggie. Source: Flickr Image
The debt portion of a company is often a hot topic of discussion. The reason is that debt can bring a company to its knee if there is too much of it. It is no exception for Beyond Meat (NASDAQ: BYND).
As an investor myself, I am often interested to find out how a company manages its debt and equity. That said, I have created this article to explore Beyond Meat’s debt.
Apart from debt, we also look at Beyond Meat’s cash and cash equivalents and compare it with the debt. Debt leverage ratios such as debt-to-equity and debt-to-asset ratios are aother important metrics that we will find out.
Finally, we will briefly look at the company’s interest expenses and compared them with operating income to determine the interest coverage ratio. Let’s get started!
Investors looking for Beyond Meat’s other statistics may find more resources on these pages: Beyond Meat revenue streams, Beyond Meat revenue and cost per pound, and Beyond Meat marketing budget.
Please use the table of contents to navigate this page.
Table Of Contents
Overview And Definitions
O2. How Does Beyond Meat Manage Its Debt?
Consolidated Results
A1. Total Debt
A2. Cash & Cash Equivalents
A3. Net Debt
Leverage Ratios
B1. Debt To Equity Ratio
B2. Debt To Asset Ratio
B3. Debt To Sales Ratio (Debt Margin)
Debt Expenses And Coverage Ratios
C1. Operating Income And Debt Expenses
C2. Interest Coverage Ratio
Debt Due, Liquidity, And Credit Rating
D1. Debt Due And Other Contractual Obligations
D2. Liquidity
D3. Credit Rating
Summary And Reference
S1. Conclusion
S2. References and Credits
S3. Disclosure
Definitions
To help readers understand the content better, the following terms and glossaries have been provided.
Operating Lease Liabilities: Operating lease liabilities refer to the financial obligations that a company has under an operating lease agreement.
An operating lease is a contract that allows the lessee (the user of the asset) to use the asset for a period of time, typically without transferring ownership of the asset.
Key characteristics of operating lease liabilities include:
- Lease Payments: The lessee is obligated to make regular lease payments to the lessor (the owner of the asset) over the lease term.
- Balance Sheet Recognition: Under accounting standards like IFRS 16 and ASC 842, operating lease liabilities must be recognized on the lessee’s balance sheet. This involves recording a right-of-use asset and a corresponding lease liability.
- Measurement: The lease liability is measured at the present value of future lease payments, discounted using the lessee’s incremental borrowing rate or the rate implicit in the lease.
Operating lease liabilities represent the future cash outflows that a company is committed to under its operating lease agreements and are important for understanding a company’s financial obligations and leverage.
Contractual Obligations: Contractual obligations refer to the commitments a company has agreed to under various contracts and agreements. These obligations can span several categories, including:
1. Debt and Interest Payments: The principal and interest payments on the company’s outstanding debt.
2. Leases: Payments for leasing property, equipment, or other assets.
3. Purchase Obligations: Commitments to purchase goods or services from suppliers.
4 Pension and Postretirement Obligations: Contributions to employee pension plans and postretirement benefits.
5. Other Long-term Contracts: Any other long-term contractual commitments, such as service agreements or supply contracts.
These obligations are typically detailed in the notes to the financial statements and give stakeholders an understanding of the company’s future cash outflows and financial commitments.
How Does Beyond Meat Manage Its Debt?
Beyond Meat has been actively managing its debt through several strategies:
1. Debt Restructuring: Beyond Meat is reportedly in talks with bondholders to restructure its debt. This involves renegotiating the terms of its debt to make it more manageable and sustainable.
2. Cost Reduction: The company has implemented cost-cutting measures, including a global operations review, to improve its financial health.
3. Focus on Core Operations: Beyond Meat is concentrating on its core business areas to drive revenue growth and improve profitability.
These efforts are part of Beyond Meat’s strategy to navigate its financial challenges and work towards long-term sustainability.
Total Debt
Beyond Meat’s total debt
(click image to enlarge)
Beyond Meat’s total debt consists of long-term debt and operating lease liabilities. For a definition of operating lease liabilities, check out this section: operating lease liabilities.
As of the end of fiscal year 2023, Beyond Meat’s total debt outstanding was $1.2 billion, roughly in line with the number a year ago.
Beyond Meat’s debt in fiscal year 2023 remained relatively unchanged compared to the figure reported in fiscal 2021, indicating that the company’s indebtedness has stayed the same since 2021.
A significant trend is that Beyond Meat was debt free before 2021, as shown in the chart above. However, in fiscal year 2021, Beyond Meat took on a $1 billion loan, resulting in an increase in debt to more than $1 billion.
The loan, which is a type of convertible senior note, is expected to come due in 2028.
Cash & Cash Equivalents
Beyond Meat cash
(click image to enlarge)
In terms of liquidity, Beyond Meat’s cash and cash equivalents has declined to $190.5 million as of the end of fiscal year 2023 from $733.3 million in fiscal year 2021.
Therefore, Beyond Meat has experienced a decrease in cash position, due primarily to negative operating cash flow, as reported here: Beyond Meat cash flow.
Net Debt
Beyond Meat’s net debt
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After accounting for Beyond Meat’s $190 million cash, the company still owed $995 million as of the end of fiscal year 2023.
In fact, Beyond Meat’s net debt has significantly risen since 2021, primarily driven by the company’s dwindling cash on hand.
A significant trend is that Beyond Meat carried more cash than debt before fiscal year 2021, resulting in the negative net debt, as shown in the chart above.
Debt To Equity Ratio
Beyond Meat’s debt to equity ratio
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As Beyond Meat took on a $1 billion loan in fiscal year 2021, as shown in this section: Beyond Meat debt, its debt-to-equity ratio surged significantly to more than 800% in the same period.
However, going into fiscal year 2022, Beyond Meat’s shareholders’ equity significantly decreased due to the company incurring substantial losses. In fiscal year 2023, Beyond Meat’s shareholders’ equity continued to decrease, resulting in the negative debt-to-equity ratio.
As of the end of fiscal year 2023, Beyond Meat’s debt-to-equity ratio was -237% or -2.37X, primarily due to the negative equity of the company.
Debt To Asset Ratio
Beyond Meat’s debt to assets ratio
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The debt-to-asset ratio reflects Beyond Meat’s capital structure, also known as the debt structure.
In Beyond Meat’s case, its capital structure was 157% debt to assets as of the end of fiscal year 2023, suggesting that the company’s total debt exceeded the total assets. At this ratio, Beyond Meat had $1.57 of debt for every dollar of assets.
The worse part is that Beyond Meat’s debt-to-asset ratio has been on the rise since fiscal year 2021, reaching a record high of 157% as of 2023.
Debt To Sales Ratio
Beyond Meat debt to sales ratio
(click image to enlarge)
Beyond Meat’s debt to sales ratio has soared to 354% as of the end of fiscal year 2023 from 243% in 2021, driven by multiple factors.
Beyond Meat’s rising debt is one factor but the main culprit is the company’s declining revenue. Beyond Meat’s revenue has decreased to $343 million as of fiscal year 2023 from $465 million in 2021, down by 26% in two years, as reported in this article: Beyond Meat revenue.
Operating Income And Debt Expenses
Beyond Meat operating income vs interest expense
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Beyond Meat has not been able to generate operating profits, as shown in the chart above. The company’s unprofitable trend has worsened since fiscal year 2021, resulting in a larger loss in fiscal year 2023.
As of the end of fiscal year 2023, Beyond Meat’s operating loss amounted to $342 million, roughly double the amount in 2021. On the other hand, Beyond Meat’s interest expenses have risen significantly over the last couple of years, reaching $4 million as of the end of fiscal year 2023 .
Since Beyond Meat is unable to make an operating profit, it cannot cover its interest expenses. Therefore, Beyond Meat may have to rely on external capital to cover its debt expenses, which can range from equity offerings to debt issuance.
Interest Coverage Ratio
Beyond Meat interest coverage ratio
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As mentioned in prior discussions, Beyond Meat cannot cover its debt expenses with operating loss, resulting in the negative interest coverage ratio, as shown in the graph above.
As of the end of fiscal year 2023, Beyond Meat’s interest coverage ratio stood at -86.4X, implying that the company incurred more debt expenses than profit.
Debt Due And Contractual Obligations
Beyond Meat contractual-obligations
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An analysis of Beyond Meat’s debt will not be conclusive without a discussion of the corresponding debt due date and contractual obligations. The debt due date and obligations give stakeholders an understanding of the company’s future cash outflows and financial commitments. You can find the definition of contractual obligations here: contractual obligations.
Beyond Meat’s payment due includes not only its debt obligations such as the convertible notes and leases, but also purchase commitments, as well as other commitments. These items represent Beyond Meat’s future commitments which require cash outflow.
That said, Beyond Meat’s total commitments in 2024 amounted $34.5 million, while the total commitments between 2025 and 2027 was $33.4 million. Between fiscal years 2028 and 2030, Beyond Meat’s total commitments escalated to $1.15 billion.
Does Beyond Meat have the cash to settle the upcoming commitments? Let’s find out in the next section.
Sources Of Liquidity
BYND’s estimated liquidity as of 31 Dec 2023.
| Sources Of Liquidity | US$ Millions | |
|---|---|---|
| Committed Capacity | Available Capacity For FY2024 | |
| Cash & Cash Equivalents | – | $190.5 |
| Credit Facilities | – | – |
| Operating Cash Flow | – | -$243.1 (estimated) |
| Total | – | -$52.6 |
Beyond Meat’s sources of liquidity include cash and cash equivalents. The company does not have any credit facilities to draw cash when necessary. Furthermore, it also lacks a favorable operating cash flow.
As shown in the table above, Beyond Meat’s operating cash flow has been negative. Therefore, Byeond Meat’s only source of liquidity is cash and cash equivalents.
As of December 31, 2023, Beyond Meat’s estimated liquidity from cash was $190.5 million. Given the company’s ongoing cash burn, its liquidity could drop to -$52.6 million if this trend continues. Therefore, Beyond Meat is in urgent need of cash to fulfill its commitments.
Excluding the negative operating cash flow, Beyond Meat has $190.5 million in cash. Therefore, it should have no issues covering the obligations in 2024 and between 2025 and 2027 with its cash, as the total amount due is only $70 million, as seen in this section: Beyond Meat’s debt due.
However, for the obligations beyond 2027, the total amount due is $1.15 billion. Beyond Meat’s cash alone is not sufficient to settle these $1.15 billion commitments.
Beyond Meat will definitely need to raise cash for the upcoming payments due in 2028. In fact, the company stated in the 2023 annual report that it will do so in 2024. Here is a quote from the 2023 annual report:
- We anticipate that we will seek to raise additional capital in 2024, which may include the issuance of debt or equity securities, including through our ATM Program, subject to our compliance with applicable laws and the applicable requirements of the Equity Distribution Agreement, or securities convertible into or exchangeable for our common stock.
Credit Rating
Beyond Meat did not publish any credit rating in its 2023 annual report.
Conclusion
In summary, Beyond Meat’s significant debt and negative operating cash flow indicate that the company is facing financial challenges and may need to raise additional capital to meet its obligations.
References and Credits
1. All financial figures presented in this article were obtained and referenced from Beyond Meat’s annual reports published in the investors relation page: Beyond Meat Investor Relations.
2. Flick Images.
Disclosure
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