Beyond(BYON) - 2024 Q2 - Quarterly Report

Filer Information This section details Beyond, Inc.'s filer status, outstanding common stock, and stock exchange listing - Beyond, Inc. is classified as a Large Accelerated Filer[4][100] - As of July 26, 2024, 45,750,676 shares of the registrant's common stock were outstanding[5] - The company's common stock trades on the New York Stock Exchange under the symbol BYON[99] Table of Contents This section lists the report's contents and their corresponding page numbers for easy navigation PART I. FINANCIAL INFORMATION This part presents the company's unaudited consolidated financial statements, management's discussion and analysis, and disclosures on market risks and controls SPECIAL CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This section warns readers that the report contains forward-looking statements, which are subject to various risks and uncertainties that could cause actual results to differ materially from projections, advising consideration of specific risks outlined in the report and other SEC filings - Forward-looking statements are identified by words such as 'expect,' 'anticipate,' 'predict,' 'project,' 'potential,' 'continue,' 'contemplate,' 'seek,' 'assume,' 'believe,' 'intend,' 'plan,' 'forecast,' 'goal,' and 'estimate'[8] - Actual results may differ materially due to risks outlined in this report and the Annual Report on Form 10-K, especially under 'Risk Factors' and 'Legal Proceedings'[15] - Key risks include reliance on third-parties, competition, economic downturns, supply chain challenges, brand changes, personnel issues, cybersecurity, and litigation[118][120] ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) This section presents Beyond, Inc.'s unaudited consolidated financial statements, including balance sheets, statements of operations, comprehensive loss, changes in stockholders' equity, and cash flows, along with detailed notes on accounting policies and financial line items Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity at specific points in time Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2024 | December 31, 2023 | | :----- | :------------ | :---------------- | | Total Current Assets | $232,206 | $350,073 | | Total Assets | $496,782 | $635,818 | | Total Current Liabilities | $203,045 | $232,395 | | Total Liabilities | $246,428 | $276,686 | | Total Stockholders' Equity | $250,354 | $359,132 | Consolidated Statements of Operations This section presents the company's financial performance over specific periods, detailing net revenue, gross profit, operating loss, and net loss Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Revenue | $398,104 | $422,211 | $780,385 | $803,351 | | Gross Profit | $80,168 | $107,569 | $154,527 | $209,253 | | Operating Loss | $(47,001) | $(4,249) | $(104,526) | $(12,613) | | Net Loss | $(42,578) | $(73,493) | $(116,506) | $(83,800) | | Basic Net Loss Per Share | $(0.93) | $(1.63) | $(2.55) | $(1.86) | | Diluted Net Loss Per Share | $(0.93) | $(1.63) | $(2.55) | $(1.86) | Consolidated Statements of Comprehensive Loss This section details the company's net loss and other comprehensive income, providing a complete view of changes in equity from non-owner sources Consolidated Statements of Comprehensive Loss Highlights (in thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Loss | $(42,578) | $(73,493) | $(116,506) | $(83,800) | | Other Comprehensive Income | $4 | $4 | $8 | $8 | | Comprehensive Loss | $(42,574) | $(73,489) | $(116,498) | $(83,792) | Consolidated Statements of Changes in Stockholders' Equity This section outlines the changes in the company's stockholders' equity over time, including common stock, additional paid-in capital, and accumulated deficit Consolidated Statements of Changes in Stockholders' Equity Highlights (in thousands) | Metric | June 30, 2024 | June 30, 2023 | | :----- | :------------ | :------------ | | Total Shares of Common Stock Outstanding | 45,750 | 45,202 | | Additional Paid-in Capital (End of Period) | $1,018,619 | $995,904 | | Accumulated Deficit (End of Period) | $(598,177) | $(257,629) | | Total Stockholders' Equity (End of Period) | $250,354 | $573,166 | Consolidated Statements of Cash Flows This section reports the cash inflows and outflows from operating, investing, and financing activities, showing the overall change in cash position Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----------------- | :----------------------------- | :----------------------------- | | Net Cash (Used in) Provided by Operating Activities | $(110,502) | $18,772 | | Net Cash Used in Investing Activities | $(3,308) | $(44,435) | | Net Cash Used in Financing Activities | $(2,597) | $(2,718) | | Net Decrease in Cash, Cash Equivalents, and Restricted Cash | $(116,407) | $(28,381) | | Cash, Cash Equivalents, and Restricted Cash, End of Period | $186,342 | $343,076 | Notes to Unaudited Consolidated Financial Statements This section provides detailed explanations and additional information supporting the unaudited consolidated financial statements, clarifying accounting policies and specific line items 1. DESCRIPTION OF BUSINESS This note describes Beyond, Inc.'s core business as an e-commerce expert connecting consumers with products for families and homes through various online shopping brands - Beyond, Inc. is an e-commerce expert focused on connecting consumers with products and services for families and homes[26] - The company owns and operates online shopping brands including Bed Bath & Beyond, Overstock, and Zulily, featuring millions of products[26] 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the key accounting principles and methods used in preparing the financial statements, including estimates, assumptions, and recent policy changes - Financial statements are prepared in conformity with GAAP, requiring estimates and assumptions for items such as receivables, revenue recognition, and stock-based compensation[35] - The company changed its presentation for merchant fees and customer service costs in Q1 2024, now including them in a separate operating expense line, previously part of Cost of goods sold; this change was applied retrospectively and had no impact on net loss or EPS[36][43][124] - The company is evaluating the impact of new FASB ASUs (2023-07 on Segment Reporting and 2023-09 on Income Tax Disclosures) for future adoption[37][38] 3. FAIR VALUE MEASUREMENT This note details the valuation methodologies and inputs used to measure the fair value of the company's financial assets and liabilities Fair Value Measurements of Assets (in thousands) | Asset Category | June 30, 2024 (Total Fair Value) | December 31, 2023 (Total Fair Value) | | :------------- | :------------------------------- | :----------------------------------- | | Cash equivalents—Money market funds | $146,760 | $246,425 | | Equity securities, at fair value | $32,328 | $41,046 | | Available-for-sale debt securities | $10,733 | $10,484 | | Trading securities held in a "rabbi trust" | $1 | $496 | | Total Assets | $189,822 | $298,451 | Level 3 Investments Activity (in thousands) | Activity | Amount | | :------- | :----- | | Level 3 investments at December 31, 2023 | $51,530 | | Decrease in fair value of Level 3 investments | $(8,718) | | Accrued interest on Level 3 investments | $249 | | Level 3 investments at June 30, 2024 | $43,061 | 4. ASSETS HELD FOR SALE This note describes the company's plan to sell its corporate headquarters and associated building loan, classifying them as assets held for sale - In December 2023, the Company committed to a plan to sell its corporate headquarters and associated building loan, classifying them as held for sale[47] - The corporate headquarters is actively marketed for sale and is expected to sell within one year[47] 5. PROPERTY AND EQUIPMENT, NET This note provides a breakdown of the company's property and equipment, net of accumulated depreciation, and details the depreciation expense for the periods presented Property and Equipment, Net (in thousands) | Category | June 30, 2024 | December 31, 2023 | | :------- | :------------ | :---------------- | | Computer hardware and software | $256,950 | $249,208 | | Furniture and equipment | $10,864 | $10,919 | | Leasehold improvements | $1,765 | $1,795 | | Less: accumulated depreciation | $(241,715) | $(234,345) | | Total property and equipment, net | $27,864 | $27,577 | Total Depreciation Expense (in thousands) | Category | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of goods sold | $98 | $206 | $196 | $440 | | Technology | $3,930 | $3,286 | $7,447 | $7,990 | | General and administrative | $103 | $1,021 | $211 | $2,063 | | Total depreciation | $4,131 | $4,513 | $7,854 | $10,493 | 6. INTANGIBLE ASSETS, NET This note details the company's intangible assets, including recent acquisitions and sales, and their net carrying values - On March 6, 2024, the Company acquired certain intellectual property related to the Zulily brand for $4.9 million, allocated to trade names ($4.1 million) and customer lists ($716,000)[51] - On March 31, 2024, the Company sold intellectual property related to the Wamsutta brand for $10.3 million cash, recognizing the entire amount as a gain in Other income (expense), net for Q2 2024[52] Intangible Assets, Net (in thousands) | Category | June 30, 2024 | December 31, 2023 | | :------- | :------------ | :---------------- | | Intangible assets subject to amortization, net | $3,533 | $3,217 | | Intangible assets not subject to amortization | $27,385 | $22,037 | | Total intangible assets, net | $30,918 | $25,254 | 7. EQUITY SECURITIES This note provides details on the company's equity investments, including those accounted for under the equity method and fair value option, and recognized losses Equity Securities (in thousands) | Category | June 30, 2024 | December 31, 2023 | | :------- | :------------ | :---------------- | | Equity securities accounted for under the equity method (ASC 323) | $97,339 | $114,827 | | Equity securities accounted for under the fair value option | $32,328 | $41,046 | | Total equity securities | $129,667 | $155,873 | - The Company holds significant influence (over 20% voting interest) in Medici Ventures, L.P. (99%), tZERO Group, Inc. (28%), and SpeedRoute, LLC (49%)[60][61] Net Loss Recognized on Equity Method Securities (in thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss recognized on proportionate share | $(7,754) | $(36,237) | $(17,488) | $(43,418) | | Decrease in fair value of equity method securities (fair value option) | $0 | $(44,402) | $(8,718) | $(44,402) | 8. BORROWINGS This note details the company's outstanding debt, including the Senior Note and the repayment of the Mezzanine Note, along with associated covenants - The Company has a $34.5 million Senior Note (4.242% annual interest, 10-year term) and previously had a $13.0 million Mezzanine Note (5.002% annual interest)[57] - The Mezzanine Note was fully repaid in January 2024, and as of June 30, 2024, the outstanding debt on the Senior Note was $34.2 million, classified as held-for-sale[65] - The Senior Note is secured by corporate headquarters and requires maintaining a net worth over $15.0 million and minimum liquid assets of $1.0 million, with the Company in compliance[58] 9. LEASES This note outlines the company's operating lease commitments for various assets and details the associated lease expenses and future maturity schedules - The Company has operating leases for a warehouse, office space, and data centers with remaining terms of one to three years[59] Lease Expenses (in thousands) | Expense Type | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $677 | $1,492 | $1,559 | $2,898 | | Variable lease cost | $163 | $383 | $431 | $747 | Lease Liabilities Maturity (in thousands) | Period | Amount | | :----- | :----- | | 2024 (Remainder) | $1,448 | | 2025 | $1,540 | | 2026 | $250 | | 2027 | $83 | | Total lease payments | $3,321 | | Less interest | $173 | | Present value of lease liabilities | $3,148 | 10. COMMITMENTS AND CONTINGENCIES This note discloses the company's involvement in various litigation and other commitments, noting potential for significant damages and the immateriality of current liabilities - The Company is involved in various litigation, including consumer protection, employment, intellectual property, and securities laws, which could result in significant damages or equitable remedies[74][277] - Liabilities for probable and estimable contingencies are established and included in Accrued liabilities, but were not material as of June 30, 2024, and December 31, 2023[77] 11. INDEMNIFICATIONS AND GUARANTEES This note describes the company's indemnification and guarantee arrangements made in the normal course of business, noting that maximum potential payments are often unquantifiable - The Company has made various indemnities, commitments, and guarantees in the normal course of business, including for loan agreements, facility leases, and directors/officers[72] - The maximum potential future payments under these indemnities are often unlimited and cannot be reasonably estimated, thus no liability has been recorded[72] 12. STOCKHOLDERS' EQUITY This note provides information on the company's common stock, including outstanding shares, at-the-market offerings, and remaining authorization for share repurchases - As of July 26, 2024, 45,750,676 shares of common stock were outstanding[5] - The Company entered into a Capital on Demand Sales Agreement with JonesTrading on June 10, 2024, to conduct 'at the market' public offerings of common stock, with $200.0 million available as of June 30, 2024; no shares were sold under this agreement during Q2 2024[79][83] - The Company did not repurchase any shares under its stock repurchase program during Q2 2024; as of June 30, 2024, $69.9 million remained available for future repurchases through December 31, 2025[84][139] 13. STOCK-BASED AWARDS This note details the company's stock-based compensation plans, including restricted stock, performance shares, and employee stock purchase plans, along with associated expenses - The Company grants stock-based awards (restricted stock, performance shares) and offers an employee stock purchase plan (ESPP)[85] - The vesting schedule for newly granted restricted stock units changed from three years to four years in Q1 2024, with 25% vesting annually[86] - During the six months ended June 30, 2024, 1,472,500 performance-based shares (PSUs) were granted to executive management, with vesting tied to net revenue performance (25%) and stock price hurdles (75%)[89][90] - A performance-based option to purchase 2,250,000 shares was granted to the Executive Chairman, vesting in three installments based on stock price hurdles over four years[81] Stock-Based Compensation Expense (in thousands) | Category | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of goods sold | $3 | $11 | $3 | $30 | | Sales and marketing | $273 | $238 | $495 | $428 | | Technology | $2,028 | $2,609 | $4,008 | $5,031 | | General and administrative | $2,955 | $3,412 | $5,529 | $6,576 | | Total stock-based compensation | $5,259 | $6,270 | $10,035 | $12,065 | 14. REVENUE AND CONTRACT LIABILITY This note provides details on the company's unearned revenue, including loyalty program rewards and gift cards, and the recognition of breakage income Unearned Revenue (in thousands) | Metric | Amount | | :----- | :----- | | Unearned revenue at December 31, 2023 | $49,597 | | Increase due to deferral of revenue at period end, net | $30,719 | | Decrease due to beginning contract liabilities recognized as revenue | $(32,510) | | Unearned revenue at June 30, 2024 | $47,806 | - Total unearned revenue related to outstanding loyalty program rewards was $13.6 million at June 30, 2024[177] - Breakage income from loyalty programs and gift cards recognized in revenue was $2.1 million for the three months ended June 30, 2024 (vs. $1.0 million in 2023) and $3.4 million for the six months ended June 30, 2024 (vs. $1.9 million in 2023)[177] 15. NET LOSS PER SHARE This note presents the calculation of basic and diluted net loss per share, identifying anti-dilutive securities excluded from the diluted EPS calculation Net Loss Per Share (in thousands, except per share data) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss attributable to common shareholders | $(42,578) | $(73,493) | $(116,506) | $(83,800) | | Weighted average shares outstanding—basic | 45,742 | 45,200 | 45,665 | 45,134 | | Basic Net Loss Per Share | $(0.93) | $(1.63) | $(2.55) | $(1.86) | | Diluted Net Loss Per Share | $(0.93) | $(1.63) | $(2.55) | $(1.86) | - Restricted stock units, PSUs, Performance Share Options, and ESPP shares were excluded from diluted EPS calculation as their effect would have been anti-dilutive[173] ITEM 1A. RISK FACTORS This section highlights significant risks that could materially affect the company's business, financial condition, and results of operations, including dependence on internet infrastructure, an evolving business model, and challenges in attracting and retaining key personnel - Any investment in the company's securities involves a high degree of risk, and actual results could differ materially from forward-looking statements[257] - The business is highly dependent on the Internet, its infrastructure, and transaction-processing systems, making it vulnerable to damage or interruption from various events[137][147] - The company's evolving business model, including expanding product and service offerings and changes in inventory approach, increases business complexity and may impact operations and financial resources[138][148][278] - Challenges in attracting, retaining, and engaging key personnel, especially after recent leadership and workforce changes, could significantly harm business growth and operations[149][279] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the company's financial condition and results of operations, discussing key performance drivers, macroeconomic impacts, and a detailed analysis of revenue, expenses, and liquidity Overview This section provides a high-level description of the company's e-commerce business model and its key brands, including Bed Bath & Beyond, Overstock, and Beyond+ services - The company is an e-commerce expert focused on connecting consumers with products and services for families and homes, owning brands like Bed Bath & Beyond, Overstock, and Zulily[182] - The Bed Bath & Beyond brand aims to provide home-related products, focusing on assortment curation and specialized experiences for key life events, leveraging an asset-light supply chain[183][184] - The Overstock brand aims to provide discounted quality goods with a 'treasure hunt-like' experience, expanding into new categories like closeouts and liquidation[185] - The Beyond+ services platform offers add-on services such as warranties, shipping insurance, installation services, and access to home loans[186] Executive Commentary This section provides management's high-level insights into recent financial performance, highlighting changes in net revenue, gross profit, and cash position - Net revenue decreased 5.7% for the three months ended June 30, 2024, compared to the same period in 2023, primarily due to a 13% decrease in average order value, partially offset by an 8% increase in orders delivered[188] - Gross profit decreased 25.5% for the three months ended June 30, 2024, compared to the same period in 2023, with gross margin falling to 20.1% from 25.5% due to increased promotional discounting and carrier costs[197] - Consolidated cash and cash equivalents decreased from $302.6 million as of December 31, 2023, to $186.2 million as of June 30, 2024[199] Additional commentary related to macroeconomic trends This section discusses the company's monitoring of macroeconomic trends, such as geopolitical events, interest rates, and inflation, and their impact on consumer confidence and spending - The company monitors macroeconomic trends, including geopolitical events, higher interest rates, and inflation, which have negatively impacted consumer confidence and spending[200] - As of June 30, 2024, these challenges have not adversely affected liquidity or debt servicing capacity, nor required capital expenditure reductions[200] Results of Operations This section provides a detailed analysis of the company's financial performance, examining key revenue and expense line items and their period-over-period changes Net revenue, cost of goods sold, gross profit and gross margin This section analyzes the company's net revenue, cost of goods sold, gross profit, and gross margin, highlighting the drivers behind their changes Net Revenue, Cost of Goods Sold, Gross Profit, and Gross Margin (in thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Revenue | $398,104 | $422,211 | $780,385 | $803,351 | | Product costs and other cost of goods sold | $317,936 | $314,642 | $625,858 | $594,098 | | Gross Profit | $80,168 | $107,569 | $154,527 | $209,253 | | Net Revenue YoY Change | (5.7)% | N/A | (2.9)% | N/A | | Gross Profit YoY Change | (25.5)% | N/A | (26.2)% | N/A | | Gross Margin | 20.1% | 25.5% | 19.8% | 26.0% | - Net revenue decreased 5.7% (Q2 YoY) and 2.9% (H1 YoY) primarily due to a 13% decrease in average order value (Q2, 17% for H1), partially offset by an 8% increase in orders delivered (Q2, 18% for H1)[195][211] - Gross margin decreased to 20.1% (Q2 2024) from 25.5% (Q2 2023) and to 19.8% (H1 2024) from 26.0% (H1 2023), mainly due to increased promotional discounting and carrier costs[204][214] - Revenue related to merchandise sales is recognized upon delivery to customers, with estimates based on average shipping transit times, which are reviewed and updated quarterly[286] Operating expenses This section provides a detailed breakdown and analysis of the company's various operating expenses, including sales and marketing, technology, general and administrative, and customer service Sales and marketing expenses This section analyzes changes in sales and marketing expenses, attributing increases primarily to enhanced performance marketing and brand advertising efforts Sales and Marketing Expenses (in thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Sales and marketing expenses | $66,290 | $49,242 | $134,196 | $96,290 | | Advertising expense | $63,583 | $46,883 | $128,543 | $91,689 | | Sales and marketing expenses YoY Change | 34.6% | N/A | 39.4% | N/A | | Sales and marketing expenses as % of net revenue | 16.7% | 11.7% | 17.2% | 12.0% | - Sales and marketing expenses increased by 34.6% (Q2 YoY) and 39.4% (H1 YoY), primarily due to increased performance marketing and brand advertising[207][164] - Costs associated with discounted shipping and other promotions are accounted for as a reduction in revenue, not as sales and marketing expenses[224] Technology expenses This section discusses the company's technology investments aimed at enhancing customer experience and operational efficiency, alongside the drivers of changes in technology expenses - The company invests in technology to support operations, enhance customer experience (e.g., machine learning, generative AI), improve automation, and modernize systems[165] Technology Expenses (in thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Technology expenses | $27,342 | $27,706 | $56,923 | $58,252 | | Technology expenses YoY Change | (1.3)% | N/A | (2.3)% | N/A | | Technology expenses as % of net revenue | 6.9% | 6.6% | 7.3% | 7.3% | - Technology expenses decreased by $0.4 million (Q2 YoY) and $1.3 million (H1 YoY), mainly due to reductions in staff-related expenses[159] General and administrative expenses This section analyzes the decrease in general and administrative expenses, primarily attributing it to reductions in staff-related and third-party costs General and Administrative Expenses (in thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | General and administrative expenses | $18,531 | $21,673 | $38,985 | $42,156 | | General and administrative expenses YoY Change | (14.5)% | N/A | (7.5)% | N/A | | General and administrative expenses as % of net revenue | 4.7% | 5.1% | 5.0% | 5.2% | - General and administrative expenses decreased by $3.1 million (Q2 YoY) and $3.2 million (H1 YoY), primarily due to reductions in staff-related and third-party expenses[154][162] Customer service and merchant fees This section details the reclassification of customer service and merchant fees as a separate operating expense and analyzes the drivers behind their increase - The company changed its presentation for merchant fees and customer service costs in Q1 2024, now reporting them as a separate operating expense line[155] Customer Service and Merchant Fees (in thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Customer service and merchant fees | $15,006 | $13,197 | $28,949 | $25,168 | | Customer service and merchant fees YoY Change | 13.7% | N/A | 15.0% | N/A | | Customer service and merchant fees as % of net revenue | 3.8% | 3.1% | 3.7% | 3.1% | - Customer service and merchant fees increased by $1.8 million (Q2 YoY) and $3.8 million (H1 YoY), mainly due to increased outsourced labor from higher order volume and increased credit card costs[158][168] Other income (expense), net This section explains the significant changes in other income (expense), net, primarily driven by decreased losses from equity method securities and a gain on intangible asset sales - The $82.9 million change in other income (expense), net for Q2 2024 YoY was primarily due to a $72.9 million decrease in loss recognized from equity method securities and a $10.3 million gain on the sale of the Wamsutta brand intangible assets[227] - The $71.5 million change in other income (expense), net for H1 2024 YoY was primarily due to a $61.6 million decrease in loss recognized from equity method securities and the $10.3 million gain on the Wamsutta brand sale[228] Income taxes This section details the company's income tax provision and effective tax rates, explaining deviations from the statutory rate due to losses and valuation allowances - The provision for income tax for Q2 2024 was $117,000 (effective tax rate of -0.3%), compared to a benefit of $(8.4) million (effective tax rate of 10.2%) in Q2 2023[230] - The provision for income tax for H1 2024 was $446,000 (effective tax rate of -0.4%), compared to a benefit of $(11.3) million (effective tax rate of 11.8%) in H1 2023[230] - The tax rate differs from the statutory federal rate of 21% primarily due to year-to-date losses on retail operations for which tax benefits are limited[230] - The company maintains a valuation allowance against deferred tax assets for the U.S. jurisdiction due to a cumulative loss position over a three-year period[216] - The OECD's Pillar Two global minimum tax of 15% is expected to apply but not materially increase global tax costs, given current operations[242] Liquidity and Capital Resources This section assesses the company's ability to meet its short-term and long-term financial obligations, detailing cash sources, operating, investing, and financing activities Overview This section provides management's assessment of the company's liquidity, affirming sufficiency of cash and expected future cash flows for the next twelve months - Management believes current cash and cash equivalents and expected future cash flows will be sufficient to continue operations for at least the next twelve months[219] - The company proactively seeks opportunities to improve operational efficiency and realize internal cost savings, including aligning staffing needs and process streamlining[219] Current sources of liquidity This section identifies the company's primary sources of liquidity, including existing cash, accounts receivable, and available funds from its 'at the market' sales program - Principal sources of liquidity are existing cash and cash equivalents ($186.2 million) and accounts receivable, net ($18.7 million) as of June 30, 2024[244] - Cash received from customers generally corresponds to net revenues as customers primarily use credit cards, leading to quick settlement of receivables[245] - The company has $200.0 million available under its 'at the market' sales program with JonesTrading as of June 30, 2024[234] Operating activities This section analyzes the net cash flows from operating activities, detailing the impact of operating losses and changes in operating assets and liabilities - Net cash used in operating activities was $110.5 million for the six months ended June 30, 2024, primarily due to operating losses adjusted for non-cash items ($80.8 million) and cash used by changes in operating assets and liabilities ($29.7 million)[235] - Net cash provided by operating activities was $18.8 million for the six months ended June 30, 2023, primarily due to income from operating activities adjusted for non-cash items ($17.5 million) and cash provided by changes in operating assets and liabilities ($1.3 million)[236] Investing activities This section details the net cash flows from investing activities, including expenditures for property, equipment, intangible assets, and proceeds from asset sales - Net cash outflow from investing activities was $3.3 million for the six months ended June 30, 2024, primarily due to $8.0 million in property and equipment expenditures and $6.2 million in intangible asset purchases, partially offset by $10.3 million from intangible asset sales[246] - Net cash outflow from investing activities was $44.4 million for the six months ended June 30, 2023, primarily due to $22.8 million for purchases of intangible assets, $10.0 million for disbursement of notes receivable, and $12.0 million of expenditures for property and equipment[247] Financing activities This section outlines the net cash flows from financing activities, primarily driven by payments for taxes withheld upon vesting of employee stock awards - Net cash outflow from financing activities was $2.6 million for the six months ended June 30, 2024, primarily due to $3.3 million for payment of taxes withheld upon vesting of employee stock awards[239] - Net cash outflow from financing activities was $2.7 million for the six months ended June 30, 2023, primarily due to $2.1 million for payment of taxes withheld upon vesting of employee stock awards[125] Contractual Obligations and Commitments This section presents a summary of the company's contractual obligations, including operating leases and loan agreements, detailing their maturity profiles Contractual Obligations as of June 30, 2024 (in thousands) | Obligation Type | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | | :-------------- | :---- | :--------------- | :-------- | :-------- | :---------------- | | Operating leases | $3,321 | $2,829 | $492 | $0 | $0 | | Loan agreements | $43,033 | $1,483 | $2,968 | $2,972 | $35,610 | | Total | $46,354 | $4,312 | $3,460 | $2,972 | $35,610 | Tax contingencies This section discloses the company's accrued tax contingencies and the potential for additional assessments within the next twelve months - Accrued tax contingencies were $3.8 million as of June 30, 2024, with potential for additional assessments within the next 12 months[261] Critical Accounting Policies and Estimates This section emphasizes the reliance on estimates and judgments in financial statement preparation and confirms no material changes to critical accounting policies - The preparation of financial statements requires estimates and judgments based on historical experience and reasonable assumptions[262] - No material changes to critical accounting policies and estimates were reported, except as disclosed in Note 2[262] Government Regulation This section highlights the company's exposure to various laws and regulations governing e-commerce, taxation, privacy, and consumer protection, including those in international markets - The company is subject to a wide variety of laws and regulations, including those governing e-commerce, taxation, privacy, data protection, and consumer protection[250] - Expansion into international markets exposes the company to additional foreign and U.S. laws and regulations[263] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section details the company's exposure to market risks, including interest rate changes, foreign currency fluctuations, and changes in the market values of its securities, and assesses their potential impact Interest Rate Sensitivity This section assesses the company's exposure to interest rate changes, noting the fixed rate on its Senior Note and the limited impact on highly liquid cash equivalents - The Senior Note carries a fixed annual interest rate of 4.242%, resulting in no material direct financial statement risk from interest rate changes[131] - Cash and cash equivalents are highly liquid and short-term, so their fair value would not be significantly affected by interest rate changes[251] Foreign Currency Risk This section evaluates the company's foreign currency risk, noting its current immateriality due to U.S. dollar-denominated operations but acknowledging potential future significance - Most sales and operating expenses are U.S. dollar-denominated, so foreign currency risk is not currently significant, but could become more significant with operational growth[265] Investment Risk This section discusses the market volatility and valuation complexities associated with the company's equity and debt securities, particularly those of private companies - Fair values of equity and debt securities are subject to market volatility, investment-specific circumstances, and economic conditions[133] - As of June 30, 2024, $129.7 million in equity securities of private companies were recorded, with $32.3 million of equity securities and $10.7 million of debt securities valued using Level 3 inputs[133] - Valuations of private companies are complex due to lack of market data, making sensitivity analysis impracticable[133] Inflation This section addresses the impact of inflationary pressures on the company's business and supply chain, and its strategies to mitigate cost increases - Inflationary pressures from commodity, shipping, energy, and labor costs impact the business and supply chain[252] - The company works with partners to limit cost increases passed on to customers, but inability to offset higher costs could harm the business[252] - The effects of inflation on historical results have been immaterial, but future impacts are uncertain[252] ITEM 4. CONTROLS AND PROCEDURES This section describes the company's evaluation of its disclosure controls and procedures, concluding on their effectiveness and noting no material changes in internal control over financial reporting during the quarter Evaluation of Disclosure Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures at a reasonable assurance level as of June 30, 2024 - Disclosure controls and procedures were evaluated under the supervision of the principal executive and financial officers and were concluded to be effective at a reasonable assurance level as of June 30, 2024[254][267] Limitations on Disclosure Controls and Procedures This section acknowledges the inherent limitations of any control system, recognizing that absolute assurance against errors and fraud is not possible - Management recognizes that no control system, however well designed, can provide absolute assurance of preventing or detecting all errors and fraud[255] Changes in Internal Control Over Financial Reporting This section confirms that no material changes in internal control over financial reporting occurred during the quarter ended June 30, 2024 - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2024, that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting[136][268] PART II. OTHER INFORMATION This part provides disclosures on legal proceedings, equity security transactions, defaults, mine safety, other information, and exhibits ITEM 1. LEGAL PROCEEDINGS This section details ongoing legal proceedings, including a securities class action lawsuit, a shareholder derivative suit, and an SEC subpoena investigation, all of which the company intends to vigorously defend - A consolidated securities class action lawsuit, filed in September 2019, alleges violations under the Exchange Act; the court granted the company's motion to dismiss twice, but plaintiffs appealed to the Tenth Circuit, with a ruling pending[1] - A shareholder derivative suit, filed in November 2019, alleges breach of fiduciary duties, unjust enrichment, and insider selling; this case is stayed pending the outcome of the securities class action appeal[71] - The company has received multiple SEC subpoenas since October 2019, requesting documents related to a Series A-1 Preferred stock dividend, 10b5-1 trading plans, insider trading policies, and retail guidance; the company continues to cooperate[76] - No estimates of possible losses or range of losses can be made for these legal actions at this time[1][71] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS This section reports on the company's equity security transactions, specifically noting no repurchases under its stock repurchase program during the quarter and the remaining authorization for future repurchases Recent Purchases of Equity Securities This section confirms no common stock repurchases during the quarter and details the remaining authorization for future share repurchases - No shares of common stock were repurchased under the stock repurchase program during the three months ended June 30, 2024[139] - As of June 30, 2024, $69.9 million remained available for future share repurchases under the current authorization through December 31, 2025[139] ITEM 3. DEFAULTS UPON SENIOR SECURITIES This section states that there are no defaults upon senior securities to report - There are no defaults upon senior securities to report[280] ITEM 4. MINE SAFETY DISCLOSURES This section states that there are no mine safety disclosures to report - Mine safety disclosures are not applicable to the company[281] ITEM 5. OTHER INFORMATION This section reports that there is no other information to disclose, specifically regarding insider trading arrangements (c) Insider trading arrangements and policies. This section confirms that no directors or officers adopted or terminated insider trading arrangements during the quarter - No director or officer adopted or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the three months ended June 30, 2024[142] ITEM 6. EXHIBITS This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including agreements, certificates, and financial statements formatted in Inline XBRL - The report includes various exhibits such as the Asset Purchase Agreement, Amended and Restated Certificate of Incorporation, Bylaws, Indenture, Equity Incentive Plan Amendment, and certifications[152] - Financial statements are attached as Exhibit 101, formatted in Inline XBRL[152] SIGNATURE This section contains the signature of the Chief Financial & Administrative Officer, Adrianne B. Lee, certifying the report on behalf of Beyond, Inc. - The report is duly signed on behalf of Beyond, Inc. by Adrianne B. Lee, Chief Financial & Administrative Officer, on July 31, 2024[275][276][284]