Good afternoon, and welcome to the Beyond Meat Third Quarter 2024 Conference Call. All participants are in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Paul Sheppard, Vice President, FP&A, and Investor Relations. Please go ahead.

Thank you. Hello, everyone, and thank you for your participation on today's call. Joining me are Ethan Brown, Founder, President, and Chief Executive Officer; and Lubi Kutua, Chief Financial Officer and Treasurer. By now, everyone should have access to our third quarter 2024 earnings press release, filed today after market close. This document is available in the Investor Relations section of Beyond Meat's website at www.beyondmeat.com. Before we begin, please note that all the information presented today is unaudited and that during the course of this call, management may make forward-looking statements within the meaning of the Federal Securities Laws. These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Forward-looking statements in our earnings release along with the comments on this call are made only as of today and will not be updated as actual events unfold. We refer you to today's press release, our quarterly reports on Form 10-Q for the quarter ended September 28, 2024, to be filed with the SEC and our annual report on Form 10-K for the fiscal year ended December 31, 2023, along with other filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Please also note that on today's call, management may reference adjusted EBITDA, adjusted loss from operations, and adjusted net loss, which are non-GAAP financial measures. While we believe these non-GAAP financial measures provide useful information for investors, any reference to this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to today's press release for a reconciliation of these non-GAAP financial measures to their most comparable GAAP measures. And with that, I would now like to turn the call over to Ethan Brown.

Thank you, Paul, and good afternoon, everyone. The third quarter marks another period of meaningful progress at Beyond Meat. We returned to growth, continued our gross margin expansion, and reduced operating expenses to their lowest level in four years as we drive the business toward cash flow and profitability objectives. I'll briefly highlight these results before diving deeper into them as I review performance against our five priorities in 2024. Net revenues were $81 million for the third quarter of 2024, reflecting a 7.6% increase year-over-year. Notably, compared to the year-ago period, net revenue per pound rose 15.8%, including a 22.6% increase in our U.S. retail channel net revenue per pound, and a 10.5% increase in our international retail channel net revenue per pound. Increases were driven by a full quarter benefit of price increases on certain products in the U.S. combined with substantially reduced trade discounts in both U.S. and international retail. These factors generated our highest net revenue per pound since the fourth quarter of 2022 and importantly we saw simultaneous improvements in our year-over-year volume trends in three of our four sales channels, encouraging sign regarding price elasticity for our brand. These pricing and reduced promotional spending measures were joined by continued COGS improvement to strengthen gross margin which rose to 17.7% compared to negative gross margin of 9.6% in the third quarter last year. Notably, this gross margin also represented a sequential improvement of 300 basis points vis-a-vis the second quarter of 2024. Operating expenses fell to $45.2 million as we realized greater efficiencies throughout the organization. This marked a $17.2 million reduction year-over-year. Operating expenses were also sequentially down $2.4 million versus second quarter of 2024. Even as we continue to take measures to further tighten operating expenses, as we've articulated previously, the key goal for 2024 has been to bolster the balance sheet. We are not backing off this objective and expect to take measures yet this year to increase the company cash levels. I'd like to now turn to our five priorities for 2024. Our first priority is getting leaner and more efficient. Over the past two years, we continue to implement lean management practices and principles. This effort has enabled us to look at our business in new ways, establishing value streams with the intent of working across business functions to deliver higher value more quickly to our customers and consumers. Though we have miles to travel, we are seeing proof points. We generated higher gross profit, incurred lower operating expenses, and posted a narrower adjusted EBITDA loss on both the year-over-year and sequential basis. Part of our lean implementation is a narrowing of focus around products, markets, specific consumers and messages. Nowhere is this focus more evident than in our emphasis on helping consumers lead healthier lives through great tasting, Beyond Meat products. This brings us to our second priority. This year's launch of Beyond 4, our fourth generation Beyond Burger, Beyond Beef, and Beyond Dinner Sausage. As you will recall, these core platforms reflect years of research and development that successfully advanced both taste and nutrition, resulting in recognition by leading health organizations, with the products being included in the American Diabetes Association's evidence-based nutritional guidelines for its Better Choices for Life program and the American Heart Association's Heart Check Recipe Certification program. Beyond 4 Burger and Beef products blend protein from yellow peas, brown rice, red lentils and fava beans with avocado oil to deliver 21 grams of clean protein with just two grams of saturated fat. By comparison, that's 75% less saturated fat than an equivalently sized 80-20 beef burger. Similarly, the Beyond 4 Dinner Sausage blends protein from yellow peas and brown rice together with avocado oil, also delivering 75% less saturated fat than equivalently sized pork sausage. We believe that Beyond 4's clear health messaging and premium ingredients are contributing to our return to growth where, for example, we are seeing year-over-year increases in base velocity in certain large retailers of our flagship two-pack burger product. Further, we are expanding consumer choice by diversifying our portfolio in new ways. Shortly after our Beyond 4 launch, we introduced Beyond Sun Sausage in three delicious and bold flavors. This is the first product that is not intended to replicate beef, pork, or poultry and delivers 12 grams of protein from yellow peas, brown rice, fava beans, and red lentils with only 1 gram of saturated fat from avocado oil. Beyond Sun Sausage also earned the emblem of the American Heart Association's Heart Check Program and the American Diabetes Association's Better Choices for Life Program. Recently, we were pleased to showcase for media a product that has been in the works for many years in the Beyond Meat's rapid and relentless innovation program, our whole muscle steak line, Beyond Steak Filet. Beyond Steak Filet is made with mycelium, a root-like structure found in mushrooms, legume protein, and a limited number of natural ingredients. I personally love this product not only for its texture and savory taste, but its concise and clean ingredient list, coupled with very high levels of protein, contrasted with very low levels of saturated fat. More generally, you will increasingly hear Beyond Meat proudly share the process we use to make our delicious plant-based meats. The weaponization of the word process, a tactic emphasized in the incumbent industry playbook on how to undermine plant-based meat and preserve the status quo, has grown long in the tooth. It is past time we put it to bed. We plan to do that by applying generous amounts of sunlight to our own process, educating consumers on how we build meat directly from plants. It's a clean process. It's a process that is elegant in its simplicity. And it's a process that produces better outcomes for the human body and earth. I'll take a moment here to explain how we make our currently available steak products, Beyond Steak Tips, a delicious and award-winning product that graced the cover of Time magazine upon launch and is available at retailers nationwide. Farmers, including those in the states of North Dakota and Montana, grow fava beans. The fava beans are harvested and milled, and the resulting flour is placed in an air chamber where reflecting different densities and sizes, protein and starch separate. Together with [indiscernible] gluten and water, the protein is then run through heating, cooling, and pressure. These simple steps of heating, cooling, and pressure shape the proteins into the familiar form of muscle or meat. We then mix in natural flavors, colors from vegetable juice, and oil. The result is a high protein, low saturated fat product that is clean in process and label and that has earned recognition from the American Heart Association, the American Diabetes Association, the Clean Label Project, and has been given Good Housekeeping's Seal of Nutrition. This process is one that should indeed be marketed. It should be celebrated, in fact. Simply put, it is a better and simpler process than that of industrial factory-farmed meat. And we expect consumers to agree once they know the facts. One final update on products. Leading up to this relaunch, Panda Express initially reintroduced Beyond The Original Orange Chicken at 300 stores and recently expanded distribution to nearly 600 locations. It's a delicious product and one I hope you'll go try if you haven't already. Our third priority is to support improved gross margin through our U.S. trade and pricing programs. We are making good progress and the results speak for themselves. As I said earlier, between our pricing actions and significant moderation in trade, net revenue per pound in the U.S. retail channel rose 22.6% as compared to the year ago period. Moreover, we were pleased to see that in aggregate, unit volume stayed well within our expected elasticity range. We encourage that the consumer sees value in our products, including in our use of premium ingredients, and that our messaging on taste, health, and clean label is resonating. Turning now to our fourth priority, the consolidation of our production network, which has substantially been completed on the manufacturing side. And in recent months, we've been rationalizing the warehouse footprint that supported these facilities at sitting five warehouses in the first half of this year. We are now seeing the benefits in the form of reduced tolling fees, better asset utilization and inventory management, the freeing up of working capital, increased overhead absorption, production of logistic efficiencies, and enhanced quality control. These initiatives to reduce COGS, which in Q3 of 2024 reached their lowest levels in just over three years, represent meaningful steps up the ladder toward restored and sustained higher gross margin. Fifth, we are maintaining our investment focus in Europe, and as discussed previously, we're recently able to meet certain shelf life requirements necessary to expand our retail reach in the EU. As a reminder, heretofore, we have been substantially unable to access the retail category in certain attractive EU markets, particularly Germany, where plant-based meats are largely refrigerated at a temperature that precluded our participation. Having worked several years to meet shelf life requirements, we are thrilled to now be in German retailers, Germany being one of the strongest, in my view, plant-based markets in the world. With a clear caution that is very early days, we are seeing encouraging initial sell-through in this important market. Turning now to our food service business in the EU, in France, McDonald's launched a new menu option, Veggie McCain nuggets in more than 1,500 restaurants, bringing our nuggets to one of McDonald's top European markets. The nuggets are currently planned to be a permanent menu addition with France joining Austria, Germany, Malta, the Netherlands, Slovenia, the UK, and Ireland in going beyond at McDonald's. Lastly, on behalf of all Beyond Meat Employees, we are thankful to be included in Fortune's 2024 Change the World list, a prestigious recognition of the top 52 global companies shaping the future by making a positive social impact. As I look back, the third quarter of 2024 serves as a pivotal quarter in our company's history. When we went public in 2019, for a short period, it appeared that a disruption of protein markets would proceed unimpeded and it would cross the chasm from niche to mainstream without a hitch. Turbulence, much of it generated by a concerted campaign supported by incumbent animal protein and pharmaceutical industries, destabilized the food stream within which we traveled and we fell from considerable heights. From this challenging vantage point, we faced a fundamental choice on how to respond. As I've said before, we responded by letting iron sharpen iron. We chose to get stronger, including moving our products along the continuum from relative to absolute health benefits, most notably in our Beyond 4 platform and its broad endorsements from leading health institutions, and we got leaner and more focused. Today, we are pleased to report a quarter of solid growth, our highest gross margin and lowest cost of goods sold in three years, and our lowest operating expenses in four years. I am more than proud of the team that is delivering these results. Each of you is writing history. I've done my fair share of looking to history to help me understand the arc and outcome of disruptions from the growth of mechanized ice to the sputtering and then commanding rise of alternative energy technology in electric vehicles. And to my team, I tell you that history will not only include you, but will reward you for pioneering that which the consumer and the world alike needs. Our journey has not been for the faint of heart, yet our time is ahead of us, and we face it wiser, stronger, and ready to compete and win as we drive Beyond Meat forward. With that, I look forward to taking your questions later and we'll now turn the call over to Lubi.

Thank you, Ethan, and good afternoon, everyone. Before reviewing our quarterly financial results and updating our full year outlook, I would just like to note that Ethan was recently recognized on the inaugural, the Independent Climate 100 list, 2024. This athlete celebrates 100 global leaders making transformative contributions to the environment. Ethan's inclusion reflects his passion, innovation and visionary leadership in inducing the environmental footprint of global food systems and championing sustainable diets worldwide. On behalf of everyone here at Beyond Meat, we applaud his unwavering commitment to tackling climate change. Now let's get to our Q3 results. Net revenues increased 7.6% to $81 million in the third quarter of 2024 compared to $75.3 million in the year ago period representing our first quarter of year-over-year growth since the first quarter of 2022. The increase in net revenues was primarily driven by a 15.8% increase in net revenue per pound, partially offset by a 7.1% decrease in volume of products sold. The increase in net revenue per pound was primarily driven by lower trade discounts, price increases of certain of our products and changes in product sales mix, partially offset by unfavorable changes of foreign currency exchange rates. We are pleased to see a sequential improvement in our year-over-year volume trends despite a tougher year ago comp and a significant increase in net price realization. Breaking this down by channel, U.S. retail channel net revenues increased 14.6% to $35 million in the third quarter of 2024 compared to $30.5 million in the year ago period. The increase in net revenue was primarily due to a 22.6% increase in net revenue per pound, partially offset by a 6.6% decrease in volume of products sold, reflecting soft category demand and price elasticity effects. The increase in net revenue per pound was primarily driven by lower trade discounts and pricing actions, partially offset by changes in product sales mix. U.S. food service channel net revenues increased 15.5% year-over-year to $14.5 million in the third quarter of 2024, primarily due to a 7.9% increase in volume of products sold and a 7% increase in net revenue per pound. Volume sold benefited from sales of chicken products to a US QSR customer that did not occur in the year ago period, while the increase in net revenue per pound was primarily driven by pricing actions and changes in product sales mix, partially offset by higher trade discounts. In a national retail channel, net revenue increased 17% to $16.6 million in the third quarter of 2024 driven by a 10.5% increase in net revenue per pound and a 6% increase in volume of products sold. The increase in net revenue per pound primarily reflected lower trade discounts and changes in product sales mix partially offset by price changes of certain products and unfavorable changes in foreign currency exchange rates. Volume sold benefited from distribution gains and increased demand for our products in certain geographic regions. Lastly, international food service channel net revenue decreased 17.2% to $15 million in the third quarter of 2024, primarily due to a 22.1% decrease in volume of products sold, largely reflecting decreased sales of burger and chicken products to a large QSR customer in the EU. The decrease in volume was partially offset by a 6.2% increase in net revenue per pound driven by lower trade discounts and pricing action, partially offset by changes in product sales mix and unfavorable changes in foreign currency exchange rates. Gross profit in the third quarter of 2024 was $14.3 million, or gross margin of 17.7% compared to a loss of $7.3 million, or gross margin of negative 9.6% in a year ago period. As Ethan noted, this was our highest quarterly gross margin since the third quarter of 2021 and our lowest cost per pound since the second quarter of that year. In addition to the benefit from net price realization, gross margin in the third quarter of 2024 was also positively impacted by decreased cost per pound resulting from lower inventory provision, reduced logistics cost, and lower materials cost per pound. Overall, our cost of production continues to benefit from our network consolidation measures and more efficient inventory management. We are commissioning additional finished goods production capabilities at our facility in Pennsylvania, which we expect will drive further COG savings in 2025 and beyond. Turning to operating expenses, total operating expenses were $45.2 million in the third quarter of 2024 compared to $62.4 million in the year ago period. The decrease in operating expenses was primarily due to reduced general and administrative expenses including a $2 million insurance recovery benefit, reduced non-production salaries and related costs, and reduced selling expenses. As a result, and combined with the year-over-year improvement in gross profit, loss from operations decreased to $30.9 million in the third quarter of 2024, compared to $69.6 million in the year ago period, an improvement of nearly $40 million year-over-year. Below the line, total other income net increased $5.1 million year-over-year, primarily reflecting unrealized foreign currency transaction gains, leading to a net loss of $26.6 million in the third quarter of 2024 compared to $70.5 million in the year-ago period. Net loss for common share was $0.41 in the third quarter of 2024 compared to $1.09 in the year-ago period. Adjusted EBITDA was a loss of $19.8 million or negative 24.4% of net revenues in the third quarter of 2024 compared to an adjusted EBITDA loss of $57.5 million or negative 76.3% of net revenues in the year ago period. Turning to our balance sheet and cash flow highlights, our cash and cash equivalence balance including restricted cash was $134.9 million and total outstanding debt was $1.1 billion as of quarter end on September 28, 2024. Inventory increased by approximately $5.6 million quarter-over-quarter to $125.2 million, primarily driven by an intentional decision to increase stocking levels of certain finished goods items. However, our overall inventory levels remain substantially below year-ago amounts. Looking at cash usage for the quarter, although total cash consumption increased versus the second quarter of this year, our cash conversion cycle and working capital efficiency reflect substantial improvements from prior years. The sequential increase in cash consumption in the third quarter partly reflected large orders from some customers in Q2 ahead of anticipated price increases and promotional periods which resulted in smaller replenishment orders and cash collections in Q3. Overall net cash used in operating activities was $69.9 million in the nine months ended September 28, 2024 compared to $79.3 million in the year ago period. Capital expenditures totaled $4.5 million in the nine months ended September 28, 2024 compared to $8.6 million in the year ago period. In the nine months ended September 28, 2024, net cash used by investing activities included $4.1 million in proceeds from sales of fixed assets compared to $2.5 million in the year ago period. Finally, I'll conclude my remarks by commenting on our full year outlook which we are updating as follows. Net revenues for the full year 2024 are expected to be in the range of $320 million to $330 million. Gross margin is expected to be in the mid-teens range. Operating expenses, excluding the $7.5 million expense relating to the consumer class action settlement approved in the first quarter of 2024 are expected to be in the range of $180 million to $190 million and capital expenditures are expected to be in the range of $10 million to $15 million. Lastly, with regard to our balance sheet, we expect to add additional liquidity through our ATM program by the end of the year, and we'll continue to evaluate other alternatives to bolster our balance sheet even further in the new year. And with that, I'll turn the call over to the operator to open it up for your question. Thank you.

We will now begin the question-and-answer session. [Operator Instructions] The first question is from Peter Saleh with BTIG. Please go ahead.

Great. Thanks for taking the question. I didn't want to ask maybe on the gross margin today. The 17.7% rate, it was nice to see a pretty nice improvement there on the gross margin. Can you just give us a sense of if sales stay where they are and given your projections, do you anticipate you think you can hold this type of gross margin as we head into 2025? Any thoughts on gross margin next year would be really helpful.

Sure. This is Ethan and I'll take that. Appreciate you asking. So I think it is a function of all the work we've been doing around network consolidation, around reducing logistics costs, taking out material costs and better overhead absorption, things like that. And so, I don't think that we would expect to move backwards at all. I think we continue to show progress in the margin, particularly in 2025, as we have an opportunity to make some smaller investments to increase efficiency in our plants. What you've seen us do is take a very large network of co-packers and be able to absorb that into our own footprint with the exception of two additional co-packers. And in doing so, that's really what's driven that reduction in COGS. And then, of course, you have on top of that the higher pricing and then significantly reduced trade. So all of those things I expect to hold and only improve in 2025.

Great. And then just as a quick follow-up on the capital raise, Lubi, I don't know if there's any more color you can provide in terms of -- I know you said before year end, so I know here we are a couple months out. But any more color in terms of how you may go about this or how much you think you may need and are you thinking you'll raise enough capital just to get you through 2025 and 2026 or further? Just any other additional color would be helpful. Thanks.

Yes, sure. Look, what we said, right, is that, we do intend to add additional cash to the balance sheet before the end of the year and, obviously the ATM is a vehicle that we have in place that will allow us to do that. But we also did talk about, and we've been discussing this now for the last couple of calls about how we're looking to bolster and restructure the balance sheet. And so, that's probably more of a holistic restructuring of the balance sheet. We've been working towards that throughout the year. Frankly, the discussions have taken a little bit longer than we initially anticipated, and so we now expect that to carry over into 2025. But that's something we're certainly focused on. We're not going to, at this point, get into how much we may be looking to raise before the end of the year, et cetera. But I'll just reiterate that, yes, we do intend to put additional liquidity on the balance sheet before the end of the year, and then we're still looking at a more holistic sort of balance sheet restructuring at some point in next year.

Thank you very much.

The next question is from Ben Theurer with Barclays. Please go ahead.

Yes, good afternoon. Thanks for taking my question, Ethan, and Lubi. How are you doing? So, first question really was, I'd like to follow up a little bit on what we're seeing in like Nielsen IRR, IRA and so on data, because it felt like the performance, particularly volume was a little worse in US retail than what you reported. So help us maybe reconcile what some of the data is showing and then that being so much off from what you just reported in the quarter that just to kind of like helping understand this what's the sell in, sell out, what might be doing that maybe the turnover of product from -- into Beyond 4.0 and so on, just to help us understand that one. That would be my first piece of question.

Sure. So I think, first of all, if you look at the composition of the year-over-year growth, I think roughly 16% of that in retail is due to an increase in the net revenue per pound. That was offset by about a 7% decrease in volume sold. So overall, you have that 15% increase in retail. And I think, then you go to food service, you see a 15.5% increase, and then international is up 70%. We had on the national food service side, some turbulence that we can walk you through. But overall, three of the four segments showing really good growth year-over-year. What's happening in U.S. retail is exactly what you, I think, alluded to, which is, there's a mismatch between consumption data and sell-in data. And so, we are seeing the benefit of some changes out in retail distribution that allows us to add in revenue that is not necessarily appearing right now in consumption data. Also, some of the recording, whether it spins, etc., isn't picking up all of the volume that we pick up in our retail numbers. And so that accounts for some of the difference. But the main one is what you just articulated when asking your question. There's a difference between sell-in and the consumption data. And so I think you should see more of a true up in the fourth quarter. But overall, I do want to just pause and give a general view on how well the business did this quarter. If you look at those growth rates, the 15% in retail, the nearly 16% in US food service, international was up 17%, you look at the margin, again, rising to nearly 18% now. The COGS number that we produced was the lowest since 2021, our operating expenses are lowest in four years. And how that's showing in the income statement I think is important to look at. We were able to take out a substantial amount of operating expense to bring it down to $45.2 million, which basically cut operating losses more than half once you take into consideration the impact of that gross profit and the reduction in operating expense. Then we were able to reduce net loss by two-thirds as well as adjusted EBITDA loss also by two-thirds. And so both the trajectory of that EBITDA loss as well as the pace, I think, is important to recognize. We're now down an EBITDA loss of $19.8, on a year ago basis, we were at $57.5. So you can see a very steep curve moving in the right direction. And so that's why we feel so confident about our plan to bring the business into profitability. We can't say when, don't want to imply it's going to be anytime soon. But that is where we're headed. And all of these trends you're seeing, the growth, the increase in margin, the reduction in operating expense, and the substantial reductions in net loss and EBITDA loss, all move the business toward where we want it to be. And so I think I'll just take a pause for a minute and congratulate team on that as I did in my remarks.

Perfect. That was very clear and complete. And then just real quick following up on that food service volume impact that you had in the quarter with that large customer who might have been on the chicken product. Is that something that carries into the fourth quarter and beyond? Is that more of a structural problem or was there something one time in the quarter we should just take as a fact and then move on?

Sure. So two things are going on with chicken and food service, or chicken and QSRs. One is the nearly doubling the store count of Panda Express in the US, and then the other is the entry into France, 1,500 new stores in McDonald's with the McCain nugget, which is our chicken nugget. And so those things we obviously be very favorably. There is noise in the Q3 data for international food service and it is driven as you've identified by large QSR. A couple things are going on there. One is, we're seeing in a particular economy that's undergoing its own challenges, we are substantially down in that restaurant, in that economy. And so that's one thing that's driving it. The second is more of an inventory loading timing issue where due to some promotions that were being run by the customer in the second quarter, they took on a lot of inventory, and so we're still seeing sell-through of that inventory. And so that created more of a downturn. Those would be the major drivers for that particular customer.

Okay, understood. Perfect. Thanks for that.

The next question is from Michael Lavery with Piper Sandler. Please go ahead.

Thank you. Good evening. I just was wondering if you could touch on pricing dynamics a little bit better. You had tried lowering price a couple years ago and still had sales down and didn't really get the volume response. Here you've raised it and still have some volume pressure, but sales are up. I guess two parts. One, certainly seems like this is the better approach. Can you just maybe unpack any of what you've learned? But then also as far as maybe what the TAM in one sense looks like, lowering the price didn't seem to broaden the audience very well. Is it really a case of having a smaller target that you can take pricing against, but that limits maybe how far your volume opportunity goes? It appears that way. Is that a fair enough read or are you seeing something else?

So I've obviously thought a lot about this because we have gone through some interesting pricing moves and reactions. If I look back on what we called toward price parity. I'm not sure it would have mattered what we were pricing the product at the moment that we did that, given what the macroeconomic as well as sort of sector issues were. And so, I don't think it really got a good read. There was so much other noise in terms of the campaigns that were being run against the category, the incredible competition with all these different partners -- players coming in that didn't have great products. It kind of just, there was a very difficult period for the category. So you couldn't really get great data on pricing that didn't have a lot of other variables in it that were hard to parse out. I will say this, though, that when we went to a more premium set of ingredients, avocado oil, red lentils, brown rice, fava beans along with the yellow peas, stripped out certain things and offered the consumer Beyond 4 the elasticity we saw was really encouraging. Like if you look at -- we did a 22% increase in US retail and pricing, which precipitated only 6.6% decline in volume, right? And so that's a pretty good trade-off. And I think it's important too to realize that this is somewhat nuanced. It's not like we dropped prices on everything and then raised prices on everything. That price parity commitment that I made when we went public, we actually fulfilled it in certain markets and with certain customers. We are selling to certain customers at a price that is at least I'd say in range with the animal protein equivalent. And so we'll continue to do that where it makes sense for us and where we can still earn decent margin. And so if you think about that, it's really in the food service sector. It's some of our largest customers that we can afford to because of the volume, because of the broader relationships, et cetera. We can afford to be more aggressive and go toward price parity. So I think the answer that I'd give to the last part of your question, that does this sort of present a niche market where it's only highly affluent people who are buying a product, our portfolio is distributed in a certain way. And so we have these much lower cost of goods sold products that we can get into these very large accounts, right? And so we'll continue to pursue that angle. But when we introduce a premium product with premium ingredients where the supply chain is still nascent for us, we're going to offer that at a premium price. Over time, you'll see us retire that version, be able to offer more competitive pricing on it, and introduce the next version. So I don't think this is a case of like, yes, Beyond Meat has just decided to become a niche brand going after affluent customers. It's much more diverse than that, much more nuanced than that in our pricing.

That's really helpful. And just to follow up on some of the skew rationalizations you announced, which if I remember right, we're really getting underway about a year ago. Is that all pretty well done other than kind of ordinary cleanup and tidying up? Or should we keep some of that in mind still going forward?

I think that's exactly what I think about it. There's going to be trimming here and there and things of that nature. We obviously want to be maximizing revenue on the smallest number of products that we can. But there's no immediate plans to do any major discontinuation. In fact, you're seeing us do some, I think, interesting product extensions. If you look at what we launched, sprouts, what we call the sun sausage, very high end, very clean ingredient list. It gets one gram of saturated fat that's from avocado oil, good serving of protein, four different proteins, red lentils, brown rice, yellow peas, and fava beans. That's doing really well at sprouts. We were really pleased to see the reaction to that. And then we're going to be expanding distribution on that soon, make an announcement there. So where it makes sense for us, we are continuing to expand the portfolio, and particularly toward this health narrative that we've really emphasized and has become a defining differentiation for our brand across the category. We will make the tough choices on ingredients and on the overall guard rails that we use to make sure that the customer feels really great about the products they're having and that you see more and more of our products are having the American Heart Association recipe certification program, having more of the American Diabetes Association, clean label project certifications, things of that nature. So when it [indiscernible] expand that direction, we'll keep doing it.

Okay, great. Thanks a lot.

The next question is from Ken Goldman with JP Morgan. Please go ahead.

Hi, thanks and good afternoon. Just a follow-up on Ben's question about the gap between U.S. retail shipments and Nielsen this quarter. And Ethan, I realize you're saying that some of the outlets we use aren't picking up all of the volume, but is it reasonable for us to kind of model a fairly steep reversal in this part of your business in 4Q? And is that -- if so, is that the main reason why you're guiding to what looks like kind of roughly flattish sales year-on-year? Again, I understand the timing of shipments happens and so forth. So it’s -- I'm really just trying to get a sense for how deep of a cut we should give to our volume number in the US retail business for the fourth quarter.

I was actually thinking it the other way, Ken, in the sense that my expectation is that the consumption numbers will start to catch up a little bit with our shipment numbers because we're adding back in some distribution and things of that nature. But there's all this movement going on in the category from the fresh section to the frozen section, and some products are staying in the frozen section, some are staying in the fresh section, some are going to frozen, some are coming out temporarily as they make that transition. So there's just all this movement. So I'd be cautious about giving you guidance on the fourth in terms of how that all will shake out. But the general idea is that, there were some gaps in distribution that occurred, and then we were able to secure either new distribution or bring that distribution back on. And that seems to be creating the most of the delta in the number. And I don't know, Lubi you want to add to that or?

No, I think you covered it.

Okay. So just to be -- and thank you for that Ethan, just to be clear the messaging is consumption should improve. But shipments I thought you were suggesting were higher than they otherwise might have been in the third quarter, so is there a little bit of a lag in the fourth quarter on shipments? Sorry to keep hammering this. I just want to really get a sense for how much the gap, because it was a pretty big gap, as Ben pointed out in his question.

Yes, I think it's that, the way to think about this is, the consumption number should be more -- should be a better reflection of our shipment numbers. The gap should just be smaller. I'm not saying that there'll be any -- I don't think you'll see a massive fall off on our shipments. I think what you'll see is a moderation -- sorry, improvement in the consumption numbers. But this is all speculation.

The other thing to keep in mind is that the non-measured channel for us can be pretty meaningful as well. And so that will drive some of the delta that you see there between consumption and shipments.

Got it, thank you. And then I wanted to ask also, it's a little early and Ethan, I know you did kind of hinted I think for a continued improvement in the gross margin next year. Just given some of your pricing actions that you've taken, the mixed benefits perhaps, some of the limited elasticity. Is it reasonable for us to model total sales growth positive in 2025? Would there be any reason that you can see right now why that wouldn't be the case?

There's a lot of smiling going on in the room, looking at each other. I mean, you know who I am and how I am. I mean, I'm fully expecting it, but what we're actually going to be saying is something different that we'll have to get a lot of sun also. But I like the direction of the business. But it's just way too early for us to model publicly what we think next year's going to look like.

All I hear is I'm fully expecting it, nothing else. All the rest is just [indiscernible].

Based on no data.

Yes, exactly. All right, thank you.

The next question is from John Baumgartner with Mizuho. Please go ahead.

Good afternoon. Thanks for the question. First off, Ethan, just to follow up on your comments to Michael on the elasticity, are the consumers buying these products at higher prices, are they mostly existing consumers? I'm just trying to understand the risk that these higher prices and wider gaps in the short term just sort of end up dissuading new consumers and create more work and more delays for you in driving trial and adoption for that four platform?

We have seen the buyer rate go up. We don't actually have the data as to whether how many are Beyond 4 consumers are repeat versus new. But I tell you, and I emphasize this in my comments, the biggest thing that is dissuading the consumer from our products and plant-based meat is a misperception around the health benefits and around the ingredients. Full stop. That is the number one issue. And that's the issue that you see us hammering away at again and again and again. And I think as time goes on, you'll see more people understand that. You'll see more people, particularly as documentation comes out about how well orchestrated this was, identify that in fact this was something that the incumbent industry, the meat industry, the pharmaceutical industry that's associated with selling antibiotics, livestock, paid people to market about, right? And that is the biggest thing. Whether -- I said it about when we lowered pricing. I'm saying about when we raised pricing. That's what it is. And once we get through that hurdle, because the products obviously look, they taste good, people like the way they taste. We do a ton of tests, we know that data. We know that they're really good for the human body. We've done the tests. I won't bore you guys again with talking about the Stanford study, et cetera. We have another very exciting, ongoing study going right now, which I expect to have really good results on. So that's the issue. We have not seen anyone sort of tap out based on pricing. People do complain about the prices of our products in general, but that's always been the case. And so, I think this particular model of taking premium products, offering them at the right price so we can create a sustainable business. While we do have other products that are selling at a lower cost and a somewhat lower margin for us, that's the right approach. As we gain more and more success, you can see us differentiate our products more, go into other QSRs of that nature at a lower price, but still maintain that premium pricing where it matters.

Okay, thanks for that. And then in terms of the operating expenses, that middle of the P&L, That's been a focus area. You've made a lot of progress there. And you've had this sort of range-bound expense for the last nine months or so. As you consolidate that, how do you think about flexibility for additional efficiencies and OpEx going forward? Are you sort of at the floor now? Are there more efficiencies coming? And then also, should we expect maybe some increase there in 2025 with an uptick in marketing or brand reinvestment?

So I don't think you should expect an increase. You always -- I'm always looking at the P&L, we're always looking at the P&L and then sort of saying, okay, how can we drive this more quickly to profitability? How can we drive it more quickly to cash flow positive? And so, I can't give you definitive answer, but we're certainly looking for ways to do that in 2025. And there are some things that are burning off that will help us do that. But it's again, I think just like Ken's question, it's too early. But the expectation is there that that can be done and will be done.

Okay. Thank you, Ethan.

The next question is from Alexia Howard with Bernstein. Please go ahead.

Good evening. This is Connor Cerniglia stepping in for Alexia Howard.

You don't sound like Alexia.

Even earlier this year you launched the [indiscernible] innovation, which is more flavorful. Can you talk a little bit about the innovation, how it's been received by consumers and how it's impacted overall sales? It seems like you report positive second half sales. I was wondering if today's results are more a reflection of a strength in this new innovation or a strength in more of the legacy products you all have. And then I'll pass it on. Thanks.

Thank you for the question. I absolutely think that it is due to a couple of things. One, so yes, the Beyond 4 platform, if you look, for example, at the two-pack burger in certain grocers, you do see a pretty sizable expansion of velocity. And we think that's attributable to the entire Beyond 4 narrative and ingredients and positioning and certifications and endorsements from nutritionists, dietitians, doctors, national health institutions, things like that. So I do think that's working. I think it's also one of the reasons that you're seeing that kind of favorable elasticity in retail. And I think it's also helping the category. This is something that needed to be done. We were faced with a pretty big crisis, which is the products that we were developing and producing for reasons of human health and climate, et cetera. We're denigrated heavily by a competing campaign against a category. And we faced a choice, as I've talked to those before, do we sort of proclaim our innocence or do we just say, we're going to make our health proposition even stronger. And we really moved the product from the kind of relative health positioning, vis-a-vis meet 35% less saturated fat, stuff like that. It's much more of an absolute offering from a health perspective where it's now 75% less saturated fat, but that saturated fat coming from avocado oil, which is widely recognized as being kind of a heart-healthy oil in the right amounts. And so, it's where we're headed as a brand. It's the right thing to do. Consumers like it. And I think the big thing is people will say, oh, well, you can't expect to grow just by making the products even healthier. They've got to taste great. And to us, we sort of just -- I hear that, and it's sort of like, yes, and then what? Of course, We're a food company. Our products have to taste great. And so we always test them. Are we improving the taste? And if the taste is in any way taking a step backwards as we make the products even healthier, we don't release it. And so that's why we have this amazing research and development center. That's why we have so many folks that are so talented at taking the molecules and ingredients from plants and creating the sensory experience of muscle or animal protein.

This concludes our question-and-answer session. I would like to turn the conference back over to Ethan Brown for any closing remarks.

I don't think I have any other than just let's get back together after the next quarter. And I think you'll see we'll continue to take this extremely seriously, driving the business toward profitability and hope to be able to report good results next time. Thanks.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.