Beyond(BYON) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements, showing a year-over-year decline in revenue and a shift to a significant net loss Consolidated Balance Sheets Total assets decreased to $810.6 million from $878.5 million, driven by reduced cash and equity securities, impacting stockholders' equity Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $342,891 | $371,263 | | Equity securities | $208,476 | $296,317 | | Intangible assets, net | $25,583 | $9 | | Total assets | $810,552 | $878,546 | | Total current liabilities | $197,135 | $191,142 | | Total liabilities | $237,386 | $232,720 | | Total stockholders' equity | $573,166 | $645,826 | Consolidated Statements of Operations The company reported a $73.5 million net loss in Q2 2023, a significant downturn from prior year's net income, with revenue down 20% Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2023 | Q2 2022 | 6 Months 2023 | 6 Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Net revenue | $422,211 | $528,122 | $803,351 | $1,064,159 | | Gross profit | $94,372 | $121,105 | $184,085 | $246,317 | | Operating income (loss) | $(4,249) | $11,542 | $(12,613) | $23,996 | | Net income (loss) | $(73,493) | $7,147 | $(83,800) | $17,270 | | Diluted EPS | $(1.63) | $0.12 | $(1.86) | $0.33 | Consolidated Statements of Cash Flows Operating cash flow was $18.8 million, while investing activities used $44.4 million, primarily for intangible asset purchases Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $18,772 | $21,822 | | Net cash used in investing activities | $(44,435) | $(17,169) | | Net cash used in financing activities | $(2,718) | $(65,232) | | Net decrease in cash | $(28,381) | $(60,579) | Notes to Unaudited Consolidated Financial Statements Notes detail accounting policies, the Bed Bath & Beyond IP acquisition, significant equity security losses, and ongoing legal matters - On June 28, 2023, the company acquired certain intellectual property assets of the Bed Bath & Beyond brand for a total purchase price of $25.6 million. This was allocated to trade names ($21.8 million) and customer lists ($3.8 million)[46] - The company recognized a net loss of $80.7 million on equity method securities in Q2 2023, a significant increase from the $2.0 million loss in Q2 2022. For the six-month period, the loss was $88.1 million[77][99][178] - The company continues to cooperate with the SEC regarding subpoenas related to its 2019 Series A-1 Preferred stock dividend, executive 10b5-1 plans, and retail guidance[129] - No shares were repurchased under the stock repurchase program in the first six months of 2023. In the same period of 2022, the company repurchased $60.1 million of its stock. As of June 30, 2023, $19.9 million remained available for future repurchases[109][133] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 20.1% revenue decrease in Q2 2023, impacted by macroeconomic factors and equity investment losses, while confirming sufficient liquidity Results of Operations Q2 2023 revenue declined 20.1% due to lower orders and average order value, with gross margin contraction and significant equity security losses Key Performance Metrics (Q2 2023 vs Q2 2022) | Metric | Q2 2023 | Q2 2022 | Change | | :--- | :--- | :--- | :--- | | Net Revenue | $422.2M | $528.1M | (20.1)% | | Gross Margin | 22.4% | 22.9% | (50 bps) | | Sales & Marketing (% of Revenue) | 11.7% | 11.0% | +70 bps | | Technology Expenses | $27.7M | $30.5M | (9.3)% | - The decrease in revenue was attributed to macroeconomic factors like inflation impacting consumer sentiment, a shift in consumer spending, and the company's strategy to exit non-home product categories[121][147] - Other expense, net, increased to $80.7 million in Q2 2023 from $2.0 million in Q2 2022, primarily due to a $78.4 million increase in losses recognized from equity method securities[178] Liquidity and Capital Resources The company maintains $342.9 million in cash and equivalents, deemed sufficient for future operations, with $18.8 million from operations - As of June 30, 2023, the company had $342.9 million in cash and cash equivalents[187] Six-Month Cash Flow Summary (in thousands) | Activity | 6 Months 2023 | 6 Months 2022 | | :--- | :--- | :--- | | Cash from Operating Activities | $18,772 | $21,822 | | Cash from Investing Activities | $(44,435) | $(17,169) | | Cash from Financing Activities | $(2,718) | $(65,232) | - The primary uses of cash in investing activities for the first half of 2023 were $22.8 million for intangible asset purchases and $12.0 million for property and equipment expenditures[193] Item 3. Quantitative and Qualitative Disclosures About Market Risk Key market risks include interest rates, foreign currency, inflation, and significant valuation volatility in $208.5 million of equity securities - The company has no direct financial statement risk from interest rate changes as its loan agreements carry a fixed blended annual rate of 4.45%[205] - Investment risk is significant, with $208.5 million in equity securities as of June 30, 2023. Valuations of private company investments are complex and subject to fluctuation[208] Item 4. Controls and Procedures Disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal controls over financial reporting - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[210] - No changes occurred during the quarter ended June 30, 2023, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[212] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various legal proceedings, with details referenced in Note 9 of the financial statements - The company is periodically involved in litigation concerning consumer protection, employment, intellectual property, and securities laws. For specific details, the report refers to Note 9—Commitments and Contingencies[219] Item 1A. Risk Factors New risks include potential losses on $208.5 million equity investments and challenges related to the Bed Bath & Beyond brand acquisition - A key risk is the potential to recognize material losses on the $208.5 million held in equity method investments, as these are in private, early-stage companies and may not generate a tax benefit[222] - The company may not realize the expected benefits from the Bed Bath & Beyond asset purchase due to risks such as brand confusion, loss of customers, higher-than-anticipated marketing costs, and disruptions to the existing business[224][225] Other Items (Items 2, 3, 4, 5 & 6) Remaining disclosures include no stock repurchases in Q2 2023, no defaults on senior securities, and no changes to 10b5-1 plans - There were no repurchases of equity securities during the three months ended June 30, 2023. The remaining authorized amount under the stock repurchase program is $19.9 million[226] - No defaults upon senior securities were reported (Item 3), and Mine Safety Disclosures were not applicable (Item 4)[227][228]