Beyond(US:BYON)2023-10-30 16:00PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) The unaudited consolidated financial statements for Q3 2023 reveal a significant year-over-year decline in performance, with a wider net loss and reduced assets Consolidated Balance Sheets Total assets decreased to $770.8 million by September 30, 2023, primarily due to reduced cash and equity securities, while liabilities slightly increased Consolidated Balance Sheet Highlights (in thousands of USD) | Account | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $375,729 | $414,509 | | Total Assets | $770,784 | $878,546 | | Total Current Liabilities | $209,391 | $191,142 | | Total Liabilities | $254,600 | $232,720 | | Total Stockholders' Equity | $516,184 | $645,826 | Consolidated Statements of Operations Q3 2023 net revenue decreased 18.9% to $373.3 million, resulting in an operating loss of $40.9 million and a widened net loss of $63.0 million Q3 2023 vs Q3 2022 Statement of Operations (in thousands of USD, except per share data) | Metric | Q3 2023 | Q3 2022 | | :--- | :--- | :--- | | Net Revenue | $373,313 | $460,279 | | Gross Profit | $69,960 | $107,472 | | Operating Income (Loss) | $(40,930) | $5,659 | | Net Loss | $(63,049) | $(36,995) | | Diluted Net Loss Per Share | $(1.39) | $(0.81) | Consolidated Statements of Cash Flows Net cash from operations decreased to $9.1 million for the nine months ended September 30, 2023, with significant cash used in investing activities Cash Flow Summary for Nine Months Ended Sep 30 (in thousands of USD) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $9,131 | $17,596 | | Net cash used in investing activities | $(51,759) | $(28,004) | | Net cash used in financing activities | $(3,356) | $(65,224) | | Net decrease in cash | $(45,984) | $(75,632) | Notes to Unaudited Consolidated Financial Statements Notes detail significant accounting policies, including the $25.6 million Bed Bath & Beyond IP acquisition, increased equity method losses, and ongoing SEC inquiry - On June 12, 2023, the company entered an agreement to acquire certain intellectual property from Bed Bath & Beyond Inc. for a total purchase price of $25.6 million, allocated to trade names ($21.8 million) and customer lists ($3.8 million)65 - The company is cooperating with an SEC inquiry that began in October 2019 related to its Series A-1 Preferred stock dividend, 10b5-1 plans, and 2019 retail guidance114 - As of September 30, 2023, the company had $19.9 million available for future share repurchases under its current authorization, with no shares repurchased during the third quarter118 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 18.9% Q3 revenue decline to lower average order value, with gross margin compression and increased operating expenses Results of Operations Q3 2023 revenue declined 18.9% to $373.3 million, with gross margin compression and increased operating expenses, notably from equity method losses Key Performance Metrics (Q3 2023 vs Q3 2022) | Metric | Q3 2023 | Q3 2022 | | :--- | :--- | :--- | | Net Revenue Change | (18.9)% | - | | Gross Margin | 18.7% | 23.3% | | Sales & Marketing (% of Revenue) | 15.4% | 11.6% | | Technology (% of Revenue) | 7.8% | 6.4% | | G&A (% of Revenue) | 6.5% | 4.1% | - The decrease in Q3 revenue was primarily due to a 21% decrease in average order value, partially offset by a 3% increase in orders delivered following the Bed Bath & Beyond brand launch154150 - The increase in Other expense for the nine months ended Sep 30, 2023 was primarily due to a $77.7 million increase in loss recognized from equity method securities143 Liquidity and Capital Resources The company's liquidity, primarily $325.4 million in cash, is deemed sufficient for the next twelve months despite significant investing outflows - At September 30, 2023, the company had $325.4 million of cash and cash equivalents195109 - For the nine months ended September 30, 2023, investing activities resulted in a net cash outflow of $51.8 million, primarily due to $25.8 million for purchases of intangible assets and $10.0 million for a note receivable175 Contractual Obligations as of September 30, 2023 (in thousands of USD) | Obligation | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating leases | $5,039 | $3,288 | $1,605 | $146 | $— | | Loan agreements | $45,383 | $2,723 | $2,968 | $2,972 | $36,720 | | Total | $50,422 | $6,011 | $4,573 | $3,118 | $36,720 | Item 3. Quantitative and Qualitative Disclosures About Market Risk Primary market risks include inflation and volatility from $169.3 million in equity and debt securities, especially Level 3 private company investments - The company has no direct financial statement risk associated with changes in interest rates as its loan agreements carry a fixed blended annual rate of 4.45%205 - The company faces investment risk from its $169.3 million in equity securities, of which $41.1 million in equity and $10.4 million in debt are in private companies recorded at fair value using Level 3 inputs208 - Inflationary pressures across the business are being monitored, and the company is working with partners to limit passing cost increases to customers207 Item 4. Controls and Procedures Disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal controls over financial reporting - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report229 - No changes occurred during the quarter ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting230 PART II. OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 9 for details on ongoing legal proceedings, including consumer, employment, IP, and securities litigations - For details on legal proceedings, the report refers to Note 9—Commitments and Contingencies in the Notes to Unaudited Consolidated Financial Statements188 Item 1A. Risk Factors Key risks include challenges from re-branding and Bed Bath & Beyond integration, potential losses from $169.3 million in equity investments, and deferred tax asset valuation - The company identifies risks with its re-branding and integration of Bed Bath & Beyond assets, such as brand confusion, unexpected costs, loss of customer traffic, and higher-than-anticipated marketing costs233215 - The company holds $169.3 million in equity method investments in private, early-stage entities, which are inherently risky and could lead to material losses236217 - There is a risk that the company may be unable to generate sufficient future taxable income, which would require a valuation allowance on its deferred tax assets and materially increase expenses237250 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No equity securities were repurchased during Q3 2023, leaving $19.9 million available under the authorized stock repurchase program - There were no stock repurchases made during the three months ended September 30, 2023247 - As of September 30, 2023, the approximate dollar value of shares that may yet be purchased under the stock repurchase program is $19.9 million247118 Item 5. Other Information Three company directors adopted Rule 10b5-1(c) trading plans in September 2023 for common stock sales in early 2024 - Three directors adopted Rule 10b5-1(c) trading plans in September 2023 to sell company stock in Q1 2024241251223 Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and financial statements in XBRL format - The report includes CEO and CFO certifications (Exhibits 31.1, 31.2, 32.1, 32.2) and financial data in XBRL format (Exhibits 101, 104)242