Q3 2023 Beyond Meat Inc Earnings Call

Speaker 1: Good day and welcome upon Meets Incorporated 2023 third quarter conference call. All participants will be in listen only mode. If you need assistance, please signal conference specialists by pressing the star key followed by zero.

Good day and welcome pawn meets Incorporated's 2023 third quarter conference call.

All participants will be in listen only mode.

You need assistance. Please signal conference specialist by pressing the star key followed by zero.

After the presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad.

What's wrong with your question. Please press Star then two please.

Please note that this event is being recorded.

I'd like to turn the conference over to Paul Shepherd, Vice President of P&A and Investor Relations. Please go ahead.

Speaker 1: Thank you. Good afternoon and welcome. Joining me on today's call are Ethan Brown, founder, president and chief executive officer and Lubbe Koutouha, chief financial officer and treasurer.

Thank you good afternoon and welcome joining me on today's call are Ethan Brown, founder, President and Chief Executive Officer, and Loopy Couture, Chief Financial Officer Treasurer.

Speaker 1: By now, everyone should have access to the company's third quarter 2023 earnings press release file today after market close. This document is available in the investor relations section of Beyond Meat's website at www.beyondmeat.com.

By now everyone should have access to the company's third quarter 2023 earnings press release filed today after market close.

This document is available in the Investor Relations section of beyond meats website, www dot beyond meat Dot com.

Speaker 1: Before we begin, please note that all the information presented on today's call 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 that differ materially from those described in these forward-looking states.

Before we begin please note that all the information presented on today's call. It an audited 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.

The results to differ materially from those described in these forward looking statements.

Speaker 1: Forward-looking statements in today's earnings release, along with the comments on this call, are made only as of today and will not be updated as actual events unfold.

Forward looking statements in today's earnings release, along with the comments on this call are made only as of today and will not be updated as actual events unfold.

Speaker 1: We refer you to today's press release, the company's annual report on Form 10K for the fiscal year ended December 31, 2022. The company's quarterly report on Form 10Q for the quarter ended September 30, 2023 to be filed with the SEC and 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.

We refer you to today's press release, the company's annual report on Form 10-K for the fiscal year ended December 31st 2022, the company's quarterly reports on Form 10-Q for the quarter ended September 30 of 2023 to be filed with the SEC and 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.

Speaker 1: Please also note that on today's call, management may reference adjusted EBITDA, which is a non-GAAP financial measure.

Please also note that on todays call management May reference adjusted EBITDA, which is a non-GAAP financial measure.

Speaker 1: While we believe this non-GAAP financial measure provides 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.

While we believe that non-GAAP financial measure provides 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.

Speaker 1: Please refer to today's press release for a reconciliation of adjusted EBITDA to its most comparable GAAP measure.

Refer to todays press release for a reconciliation of adjusted EBITDA to its most comparable GAAP measure.

Speaker 1: And with that, I would now like to turn the call over to Ethan Brown.

And with that I would now like to turn the call over to Ethan Brown.

Thank you Paul and good afternoon, everyone.

Speaker 2: Having preannounced the LEX financial results for the third quarter last week, I will briefly review these metrics, provide more color on our performance, and then turn attention to what we are doing to adjust our global operations to fit the current macroeconomic reality and business environment.

Pre announced select financial results for the third quarter last week.

Briefly review these metrics provide more color on our performance and then turn our attention to what we're doing to adjust our global operations to fit the current macroeconomic reality and business environment.

Speaker 2: We expected a modest return to growth in the third quarter of 2023, which did not materialize as category-specific and broader consumer headwinds continued and drove weaker than expected sales volumes, reduced promotional effectiveness, and adverse changes in our product sales.

We expected a modest return to growth in the third quarter of 2023, which did not materialize as category specific and broader consumer headwinds continued and grow weaker than expected sales volumes.

Promotional effectiveness.

First changes in our product sales.

Speaker 2: Net revenues for the third quarter were $75.3 million, down approximately 9% year over year.

Net revenues for the third quarter were $75 3 million down approximately 9% year over year.

Speaker 2: In turn, lower volumes, coupled with higher levels of discounting and other factors, exerted significant downward pressure on our gross margin relative to our previous expectations, with gross profits swinging to a loss of approximately $7 million.

In turn lower volumes.

With higher levels of discounting and other factors.

Significant downward pressure on our gross margin relative to our previous expectations with gross profit swing into a loss of approximately <unk> 7 million.

Speaker 2: This result obscured continuing progress we're making on COGS productions, where year over year, we reduced cost of goods sold by 18%.

This result, obscure continuing progress, we're making on Cogs reductions where year over year, we reduce cost of goods sold by 18%.

Speaker 2: Despite these challenging circumstances, we were able to achieve pre-cash flow positive operations for the quarter.

Despite these challenging circumstances, we were able to achieve free cash flow positive operations for the quarter.

Speaker 2: As we indicated when setting this goal one year ago, this outcome reflects a meaningful benefit from working capital as a source of cash and while encouraging, should not be interpreted to mean that we have turned the corner to sustained free cash flow positive operations.

As we indicated when setting this goal one year ago. This outcome reflects a meaningful benefit Morgan capital as a source of cash and while encouraging should not be interpreted to mean that we have.

Turned the corner to sustained free cash flow positive operations.

Speaker 2: We do, however, believe that is indicative of the early progress we're making in our objective to reduce cascamsumption, even as the company takes additional measures to substantiate reduced outbacks, make changes to pricing architecture, and further prioritize current growth opportunities.

We do however believe that is indicative of the early progress we are making in our objective to reduce cash consumption.

Even as the company takes additional measures to substantially reduce opex make changes to pricing architecture and further prioritize growth opportunities.

Speaker 2: I will now dive into our strategy and plan to accelerate our transition to sustainable and ultimately profitable operations.

I will now dive into our strategy and plan to accelerate our transition to sustainable and ultimately profitable operations.

Speaker 2: We are pursuing five main actions to improve our cost structure and overall operating performance.

We are pursuing five main actions to improve our cost structure and overall operating performance.

Speaker 2: One, as previously announced, we are executing a 19% reduction in our global non-production deploy base, immediate step, and a broader troglon to improve our cost work.

One as previously announced we are executing a 19% reduction in our global non production employee base immediate step in a broader program to improve our cost structure.

Speaker 2: 2. We are reviewing our pricing strategy with certain channels to support margin expansion.

True we are reviewing our pricing strategy in certain channels to support margin expansion.

Speaker 2: So we are continuing to utilize inventory management to reduce working capital.

Sorry.

We're continuing to utilize inventory management to reduce working capital.

Speaker 2: Four, we are intensifying our focus on channels and geographies that are exhibiting revenue growth.

Four we are intensifying our focus on channels and geographies that are exhibiting revenue growth.

Speaker 2: And five, in US retail, we are using our portfolio and marketing to directly counter misinformation about our products and categories.

In U S. Retail, we are using our portfolio and marketing to directly counter misinformation about our products and category.

Speaker 2: I will now provide further commentary in each of these five areas.

I will now provide further commentary in each of these five areas.

Operating expense reduction.

Speaker 2: Our reduction in force, combined with the elimination of certain open positions, is expected to result in approximately $10.5 to $12.5 million in operating expense savings in 2024 and is an immediate step in a broader cost-cutting initiative to better align our operating expenses with current revenue.

A reduction in force.

And with the elimination of certain open positions is expected to result in approximately 10.5 to $12 5 million and operating expense savings in 2024.

As an immediate step in a broader cost cutting initiatives to better align our operating expenses with current revenue.

Speaker 2: While necessary, this is a difficult decision for the business given the tremendous talent, expertise and passion of our workforce.

While necessary. This is a difficult decision for the business given the tremendous talent expertise and passion of our workforce.

Speaker 2: Our people are what make us special, and letting these team members go is done with a very heavy heart.

Our people are what makes us special and let him and his team members go is done with a very heavy heart.

Speaker 2: Though we reduced year-to-date operating expenses by 29% or 73.9 million year-to-year, the further cut costs as we look to establish our operating expense base for 2024 at a level that better reflects current revenues, we are initiating review of our global operations focused on narrowing our commercial focus to certain growth opportunities and accelerating activities that prioritize gross margin, expansion, and cast generation.

Though we reduced year to date operating expenses by 29% or $73 9 million year over year.

Further cut costs as we look to establish our operating expense base for 2024 at a level that better reflects current revenues. We are initiating a review of our global operations focused on narrowing our commercial focus certain growth opportunities and accelerating activities that prioritize gross margin expansion and cash generation.

Speaker 2: As part of these efforts, we are evaluating and tend to reduce activities related to certain underperforming geographies, markets, and channels, including a review and potential restructuring of our operations in China.

As part of these efforts, we are evaluating and tend to reduce activities related to certain underperforming geographies markets and channels, including a review and potential restructuring of our operations in China.

Speaker 2: We are further focusing our research and development to near-term product renovations and innovations in a more limited set of breakthrough projects and programs.

We are further focusing our research and development to near term product renovations and innovations and a more limited set of breakthrough projects and programs.

Speaker 2: As I will elaborate on momentarily, we are more narrowly deploying our marketing spend in the US around a primary message of taste and health.

As I will elaborate on momentarily we are more narrowly deploy our marketing spend in the U S around the primary message of taste in health.

Speaker 2: More generally, we continue to invest focus and resources around lean management in support of overall expense reduction and margin expansion, including the potential act to certain product lines and further optimization of our manufacturing capacity in real estate footprint to reduce overall complexity and drive additional cost savings relating to logistics overhead, tolling, and general production.

More generally we continue to invest focusing resources around lean management and support of overall expense reduction and margin expansion.

<unk> potential exit of certain product lines, and further optimization of our manufacturing capacity and real estate footprint to reduce overall complexity and drive additional cost savings relating to logistics overhead tolling and general production.

Pricing architecture.

Speaker 2: As you know, over the last year we've used pricing in an effort to bring new consumers into the category. It's a Port Aranmitoia reduction and Cast Generation objective.

As you know over the last year, we've used pricing in an effort to bring new consumers into the category and to support our inventory reduction and cash generation objectives.

Speaker 2: While these pricing programs were effective in generating cash and inventory, it did not help us move from early adopters to mainstream consumers.

While these pricing programs are effective in generating cash and inventory.

We did not help us move from early adopters to mainstream consumers.

Speaker 2: We believe there are likely several reasons for this outcome. Among them increased consumer confusion over a value profit.

We believe there are likely several reasons for this outcome among them increased consumer confusion over our value proposition and the remaining price delta between beyond meat products and their animal protein equivalent.

Speaker 2: and the remaining Christ Delta between Beyond Meat products and their animal protein equivalent.

Speaker 2: As we look to 2024, we expect to implement a more nuanced pricing strategy, keeping certain programs and pricing in place, while adjusting others in support of gross margin expansion.

As we look to 2024, we expect to implement a more nuanced pricing strategy, keeping certain programs and pricing in place while adjusting others in support of gross margin expansion.

Inventory management.

Speaker 2: We intend to continue to manage inventory levels down to generate cuts.

We intend to continue to manage inventory levels down to generate cash.

Speaker 2: We've made some progress in this regard as inventory levels have fallen by 21% year over year. Yet we have many miles left to travel as we seek to bring inventory in line with lean management principles.

We've made some progress in this regard as inventory levels have fallen by 21% year over year.

We have many miles Love's travel as we seek to bring inventory in line with lean management principles.

Commercial focus on current growth markets and channels.

Speaker 2: We are encouraged by and are investing in markets and partnerships that are currently exhibiting growth. This includes select markets in Europe and in particular, certain strategic partners where we are experiencing year-over-year double budget growth.

We are encouraged by and are investing in markets and partnerships that are currently exhibiting growth. This includes select markets in Europe and in particular certain strategic partners, where we are experiencing year over year double digit growth.

Putting back in U S retail.

Speaker 2: We are pursuing a portfolio and marketing approach intended to restore growth in US retail. We are contending with the

We are pursuing a portfolio and marketing approach tended to restore growth in U S retail.

We are contending with two main headwinds.

Speaker 2: First, there are broader challenges facing the US consumer, in the higher prices and reduced buying power.

First there are broader challenges facing the U S consumer and the higher prices and reduced buying power.

Speaker 2: We believe that the corresponding consumer action of trading down among proteins, that is for growing more expensive cuts of animal meat for cheaper cuts of meat, similarly impacting...

We believe that the corresponding consumer action of trading down among proteins that is for growing more expensive cuts of animals for cheaper cuts of meat.

Similarly impacting our category and brand.

Speaker 2: We are, just by your foreman in pricing programs at certain exceptions, a higher price protein relative to the animal.

We are despite aforementioned pricing programs with certain exceptions are higher priced protein relative to animal protein.

Speaker 2: Second, as I previously mentioned, we continue to face serious category perception challenges.

Second.

I previously mentioned, we continued to face serious category perception challenge.

Speaker 2: As I've long maintained as a brand category, we will cross the chasm to mainstream on the strength of progress across taste, health, and price, and to a lesser extent here in the US, awareness of the planetary benefits of our product.

As I've long maintained as a brand and category, we will cross the chasm to mainstream on the strength of progress across taste health and price and to a lesser extent here in the U S awareness of the planetary benefits of our products.

Speaker 2: We continue to make organ elliptic progress across our portfolio, which the team is racking up recognition in the words as we close the century gap between our products and their animal protein equivalent.

We continue to make organoleptic progress across our portfolio, which the team is wrapping up recognition and awards as we close the century gap between our products and their animal protein equivalent.

Speaker 2: Yet it is an our view the health perception of the category that is the most immediate and important of variable to address in order to restore growth.

And it is in our view health perception of the category that has the most immediate and important variable to address in order to restore growth.

Speaker 2: We must squarely and forcefully counter the broad misinformation that swirls around our category. Before we can more effectively use pricing as a tool to bring new users and the mainstream consumer into our category.

We must squarely unfortunately counter the broad misinformation that swirls Robert category before we can more effectively use pricing as a tool to bring new users in the mainstream consumer into our category.

Speaker 2: There is a loud and steady drumbeat of advertisements, op-eds, and social media posts and activities that seek to negatively influence the consumer regarding our products and categories.

There is a loud and steady drumbeat of advertisements op ads and social media posts and activities that seek to negatively influence the consumer regarding our products and category.

Speaker 2: Generally, this always on attack platform uses one or more three million rhetorical anchors. Safe meat, processed.

Generally this always on attack platform, using one or more screening with cologuard anchors shake meet processed and full of chemicals.

The financial backers of the successful campaign appear to range from more obvious such as various members of the media industry.

Speaker 2: to the less obvious, which may include members of the pharmaceutical industry, the latter seeking to preserve one of the largest global markets for antibiotics.

The less obvious which may include members of the pharmaceutical industry latter seeking to preserve one of the largest global markets for antibiotics livestock.

Speaker 2: As you may know, it's estimated that over 70% of medically important antibiotics are given not to humans, but to life.

As you May know, it's estimated that over 70% of medically important antibiotics are given not to humans, but to livestock.

Speaker 2: As I shared, this effort to sow doubt to confusion regarding our products has worked.

As I shared this effort to sew doubt confusion regarding our products has worked.

Speaker 2: Well, 50% of US consumers believe the plant-based needs were healthy in 2020. By 2022, this number had declined at 38%. And my guess is that this percentage would be lower today.

While 50% of U S consumers believe that plant based meats were healthy in 2020.

By 2022, this number had declined to 38% and my guess is that this percentage will be lower today.

Speaker 2: This well-work-estrated campaign borrows heavily from similar efforts to frustrate tobacco legislation and the tighter regulation of underage consumption of alcohol. And in fact, share some of the same players.

This well orchestrated campaign borrows heavily from similar efforts to frustrate tobacco legislation and the tighter regulation of under age consumption of alcohol and in fact share some of the same players.

Speaker 2: We are confident that the strong health benefits available to consumers, the use for our products, will ultimately overcome these attacks.

We are confident that the strong health benefits available to consumers the use of our products will ultimately overcome these tactics.

Speaker 2: This said, we are not passively waiting, and instead are taking the following steps.

He said, we're not passively waiting and instead are taking the following actions.

Speaker 2: First, to continue to support third party research regarding the health outcomes available to consumers through our products.

First we continue to support third party research regarding the health outcomes available to consumers through our products.

Speaker 2: This research includes our ongoing work with Stanford University School of Medicine and a growing and formal consortium of universities, hospitals and institutions.

This research includes our ongoing work with Stanford University School of Medicine.

Growing in formal consortium of universities hospitals and institutions.

Speaker 2: We derive significant value from the three research and increase two ways. First, we achieve and can share a more precise understanding of the impact of our products on key human health indices, for example, cholesterol levels.

We derive significant value from this research and at least two ways first we achieve and can share more precise understanding of the impact of our products on key human health and disease for example, cholesterol levels.

Speaker 2: Second, we are surrounded by leading medical and nutritional experts who are instrumental in our efforts to over time deliver even greater health benefits in future iterations or our products.

Second we are surrounded by leading medical nutritional experts who are instrumental in our efforts to over time deliver even greater health benefits and future iterations or products.

Speaker 2: Second, we are teaming up with reading associations, validate and help familiarize a consumer with the health benefits of our product.

Second we are teaming up with leading associations validate help familiarize the consumer with the health benefits of our products.

Speaker 2: These partnerships and affiliations include, as we've highlighted, the American Heart Association, which has recently expanded the number of Beyond products, earning its rigorous certification as a heart-healthy food, as well as our multi-year program with the American Cancer Society for their research on plant-based meat and cancer prevention.

These partnerships and affiliations include as we've highlighted the American Heart Association, just recently expanded the number of beyond products, earning its rigorous certification.

Healthy food.

As well as our multi year program with the American Cancer Society further research and plant based meat and cancer prevention.

Speaker 2: In 2024, we expect to announce additional certifications and partnerships that we believe provide important third party endorsements and or recognition of the health benefits of our product.

In 2024, we expect to announce additional certifications and partnerships that we believe provide important third party endorsements and or recognition of the health benefits of our products.

Speaker 2: Third, to make accessible and amplify the positive health outcomes associated with our products, we are teaming up with authentic voices, including ambassadors, medical professionals, and registered dietician and nutritionist.

Third to make accessible and amplify the positive health outcomes associated with our products.

Teaming up with authentic voices, including ambassadors medical professionals and registered dietitian nutritionist.

Speaker 2: counter false narratives, and educate the consumer on the ingredients and process we use for our plant-based meats.

False narratives and educate the consumer on the ingredients and process, we use for our plant based meats.

Speaker 2: There will be more to come on this front in the coming quarters, and we look forward to updating you on our progress reporting.

There'll be more to come on this front in the coming quarters, we look forward to updating you on our progress accordingly.

Speaker 2: In closing, we are disappointed by our third quarter 2023 results and are taking immediate action to pull significant costs out of our operating base as we enter 2024.

In closing we are disappointed by our third quarter 2022 results and are taking immediate action to pull significant costs out of our operating base as we enter 2024.

Speaker 2: simultaneously we're heightening and narrowing our focus around specific geographies and channels where we are experiencing growth, including at NeU, where we're seeing favorable near-term trends such as certain segments of US food service.

Simultaneously, we are heightening and narrowing their focus around specific geographies and channels, where we are experiencing growth, including it in EU.

Where we're seeing stable near term trends such as certain segments of U S. Foodservice.

Speaker 2: As we head into 2024, we believe we have a solid portfolio and marketing strategy to address category and brand headwins in US retail. One built around the fundamental benefits available if we consume them through our carefully designed plant-based meat.

As we head into 2024, we believe we have a solid portfolio and marketing strategy to address category and brand Edwards and U S. Retail one built around the fundamental benefits available to the consumer through our carefully designed based meats.

Speaker 2: Though we believe that our achievement of Casual positive operations for the third quarter is an encouraging directional signal, we are committed to a far more comprehensive and aggressive rebalancing of operating events to current revenues as we plan for the future.

So we believe that our achievement of cash flow positive operations for the third quarter is an encouraging directional signal.

Committed to a far more comprehensive and aggressive rebalancing of operating expense to current revenues as we plan for the future.

Speaker 2: We understand the current results, category challenges, and the intended media coverage and distractments we believe is a far brighter.

We understand the current results category challenges and immediate coverage can distract from what we believe is a far greater future.

Speaker 2: We see this future in colleges and universities here in the US and abroad, including those where youth-driven movements are calling for fully plant-based campuses to fight climate change, growing analogies to university pledges to digests from fossil fuels.

We see this future and colleges and universities here in the U S and abroad, including those where you use driven movements are calling for fully plant based campuses to fight climate change drawing analogies to university pledges to divest from fossil fuels we.

Speaker 2: We see this future in countries where per capita and low meat consumption is the lowest ever and recorded history, such as in the UK and Germany. And the corresponding progress we are experiencing is done off the plant platform in these and other EU economies.

We see this future in countries where per capita meat consumption is the lowest ever recorded history, such as in the UK and Germany and a corresponding progress we are experiencing Mcdonald's the plant platform and these and other EU economies.

Speaker 2: We see this future in cities such as Amsterdam, where officials are taking tangible steps to increase availability of plant-based meats and dairy in support of their target to have 50% of citizens consuming a plant-based diet by 2030. And in South Korea, where the Minister of Agriculture, Food, and Rural Affairs recently announced her strategic plans for the growth and consumption of plant-based meats and alternative approaches.

We see the future in cities such as Amsterdam.

Officials are taking tangible steps to increase availability of plant based meats and dairy and supported their target to have 50% of citizens consuming plant based diet by 2030 and in South Korea, where the minister of Agriculture, Food and Rural Affairs recently announced strategic plan to support the growth and consumption of plant based meats and alternative protein.

Yes.

Speaker 2: And we see this future in the use driven petition to have the upcoming UN climate summit, COP28, a majority climate based, and a UN's acknowledgement of a legitimacy and seeming acquiescence with demand.

And we see this feature in the US driven petition to have the upcoming U N climate Summit Cop 28, the majority of plant based and UNC acknowledgment of the legitimacy and seeming acquiescence this demand.

Speaker 2: Finally, we see this future when together with the medical and nutrition community, we mobilize to push back against incumbent industry propaganda and put in place our stronger sponsor to this troubling misinformation campaign.

Finally, we see this future together with the medical and nutrition community mobilize to pushback against incumbent industry propaganda and put in place are strong response, yet is troubling misinformation campaign.

Speaker 2: In summary, though we did not foresee the current trough in our journey to disrupt.

In summary, though we did not foresee the current trough in our journey of disruption.

Speaker 2: your confidence in our ability to successfully fight through it. And fulfill our vision of being tomorrow's global protein company of size and significance. A company dedicated to empowering consumers through delicious and satiating products to take meaningful action to address the urgent human health, climate, natural resource, and animal welfare challenges facing our global society.

Confidence in our ability to successfully play through it.

Phil our vision of being Tomorrow's global protein company, its size and significance a company dedicated to empowering consumers through delicious and stay shooting products to take meaningful action to address the urgent human health climate natural resource and animal welfare challenges facing our global Society.

Speaker 2: With that, I'll turn it over to Lubbe, our Chief Financial Officer and Treasurer, to walk us through our third quarter financial results in greater detail, as well as update our outlook for 2023.

With that I'll turn it over to our Chief Financial Officer, and Treasurer to walk us through our third quarter financial results in greater detail as well as update our outlook for 2023.

Speaker 3: Thank you, Ethan, and good afternoon, everyone. As Ethan noted, this was a disappointing quarter for us. In light of continued weakness in the plant-based meat category in our largest channel, namely US Retail, we are doubling down on our gross margin expansion and cash generation efforts, hence our decisions to execute a further reduction in force and initiate our global operations review.

Thank you Ethan and good afternoon, everyone.

As Ethan noted this was a disappointing quarter for us in light of continued weakness in the plant based meat category in our largest channel, namely U S. Retail we are doubling down on our gross margin expansion and cash generation efforts, hence our decision to execute a further reduction in force and initiate our global <unk>.

Operations review as.

Speaker 3: As we shared in the press release, that review will consider the potential exit of select product lines, changes to our pricing architecture within certain channels, accelerated cash accretive inventory reduction initiatives, further optimization of our manufacturing capacity and real estate footprint, and a review and potential restructuring of our operations in China.

As we shared in the press release that review will consider the potential exit of select product lines changes to our pricing architecture within certain channels accelerated cash accretive inventory reduction initiatives further optimization of our manufacturing capacity and real estate footprint and a review and potential.

Restructuring of our operations in China.

Speaker 3: As you might expect, this global operations review needs to take its course, and so we will reserve providing further, more detailed information for future periods as individual initiatives become more definitive.

As you might expect this global operations review needs to take its course, and so we will reserve providing further more detailed information for future periods as individual initiatives become more definitive.

Speaker 3: As such, my remarks today will primarily focus on our financial results for the third quarter of 2023, as well as our updated outlook for the full year.

As such my remarks today will primarily focus on our financial results for the third quarter of 2023 as well as our updated outlook for the full year.

Speaker 3: Net revenues for the quarter ended September 30th, 2023, were 75.3 million, a decrease of 7.2 million, or 8.7 percent compared to the prior year.

Net revenues for the quarter ended September 32023 were $75 3 million, a decrease of $7 2 million or eight 7% compared to the prior year period.

Speaker 3: This was driven by an 11.6 percent decrease in net revenue per pound, partially offset by a 3.5 percent increase in volume of products sold. The decrease in net revenue per pound was primarily driven by increased trade discounts, especially in the U.S. retail channel, and changes in product sales mix, partially offset by favorable changes in foreign currency exchange rates.

This was driven by an 11, 6% decrease in net revenue per pound, partially offset by a three 5% increase in volume of products sold.

The decrease in net revenue per pound was primarily driven by increased trade discounts, especially in the U S retail channel and changes in product sales mix, partially offset by favorable changes in foreign currency exchange rates.

Speaker 3: The increase in volumes of product sold was primarily driven by sales to international retail and food service channels, and was partially offset by decreased volume in the US retail and food service channels due to weak category demand and the cycling of certain sales in the food service channel in the year ago period that did not repeat this year.

The increase in volumes of products sold was primarily driven by sales to international retail and foodservice channels and was partially offset by decreased volume in the U S retail and foodservice channels due to weak category demand.

Cycling on certain sales in the foodservice channel in the year ago period that did not repeat this year.

Speaker 3: Breaking down our net revenues by channel, net revenues from US retail sales in the third quarter of 2023 were 30.5 million, a decrease of 15.7 million or 33.9% compared to the prior year period due to an 18.8% decrease in volume of products sold, primarily reflecting continued soft category demand, particularly among our core refrigerated products.

Breaking down our net revenues by channel net revenues from U S retail sales in the third quarter of 2023 with $30 5 million a decrease of $15 7 million or 33, 9% compared to the prior year period due to an 18, 8% decrease in.

Volume of products sold primarily reflecting continued soft category demand, particularly among our core refrigerated product and an 18, 6% decrease in net revenue per pound, resulting from higher trade discount and to a lesser extent changes in pricing and product sales mix.

Speaker 3: And an 18.6% decrease in net revenue per pound, resulting from higher trade discounts and to a lesser extent, changes in pricing and product sales may.

<unk>.

Speaker 3: In U.S. Food Service, the net revenues in the third quarter were 12.5 million, a decrease of 3.5 million, or 21.6% compared to the year ago period.

In U S. Foodservice net revenues in the third quarter were $12 5 million, a decrease of $3 5 million or 21, 6% compared to the year ago period.

Speaker 3: This decline was driven by a 37.7% decrease in volume of products sold, primarily reflecting the cycling of sales to a large QSR customer for a limited time offering in the year ago period, which did not repeat in the current year. Partially offset by a 26% increase in net revenue per pound, primarily driven by changes in product sales.

This decline was driven by a 37, 7% decrease in volume of products sold primarily reflecting the cycling of sales to a large <unk> customer for a limited time offering in the year ago period, which did not repeat in the current year, partially offset by a 26% increase in net.

Revenue per pound, primarily driven by changes in product sales mix excluding.

Speaker 3: excluding the aforementioned sales to a large QSR customer for a limited time offering, U.S. Food Service Channel Net Revenues would have increased by approximately 39% year-over-year.

Excluding the aforementioned sales to a large <unk> customer for a limited time offering U S. Foodservice channel net revenues would have increased by approximately 39% year over year.

Speaker 3: Net revenues from international retail sales in the third quarter of 2023.

Net revenues from international retail sales in the third quarter of 2023 were $14 2 million, an increase of $4 million or 38, 8% compared to the year ago period due to a 42, 8% increase in volume of products sold primarily reflecting.

Speaker 3: We're 14.2 million, an increase of 4 million or 38.8% compared to the year ago period.

Speaker 3: due to a 42.8% increase in volume of product sold, primarily reflecting strong sales from new product introduction and the lapping of a week year ago compared.

Strong sales from new product introductions, and the lapping of a weak year ago comparison, partially offset by a two 8% decrease in net revenue per pound.

Speaker 3: partially offset by a 2.8% decrease in net revenue per pound.

Speaker 3: The decrease in net revenue per pound was primarily due to higher trade discounts and changes in product sales mix, partially offset by favorable changes in foreign currency exchange rates.

The decrease in net revenue per pound was primarily due to higher trade discount and changes in product sales mix, partially offset by favorable changes in foreign currency exchange rates.

Speaker 3: Finally, in international food service, net revenues were 18.1 million in the third quarter of 2023, an increase of 8 million or 78.7% compared to the year-go period.

Finally in international Foodservice net revenues were $18 1 million in the third quarter of 2023, an increase of $8 million or 78, 7% compared to the year ago period.

Speaker 3: This increase was driven by a 90.9 percent increase in volume of products sold, primarily reflecting strong sales to a large QSR customer in the EU, partially offset by a 6.3 percent decrease in net revenue per pound. The decrease in net revenue per pound was primarily due to higher trade discounts, partially offset by favorable changes in foreign currency exchange rates. I'll

This increase was driven by a 99% increase in volume of products sold primarily reflecting strong sales to a large <unk> customer in the EU, partially offset by a six 3% decrease in net revenue per pound.

The decrease in net revenue per pound was primarily due to higher trade discounts, partially offset by favorable changes in foreign currency exchange rates.

I will now move to gross margin.

Speaker 3: Gross profit in the third quarter of 2023 was a loss of 7.3 million or gross margin of negative 9.6 percent compared to a loss of 14.8 million or negative 18 percent in the year ago period.

Gross profit in the third quarter of 2023 was a loss of $7 3 million or gross margin of negative nine 6% compared to a loss of $14 8 million or negative 18% in the year ago period.

Speaker 3: Although this represents over 8 percentage points of margin improvement versus the year-ago period, including the impact on depreciation expense from the change in our accounting estimates associated with the estimated useful lives of our large manufacturing equipment, it fell short of our previously stated expectation to drive sequential margin improvement throughout the year.

Although this represents over eight percentage points of margin improvement versus the year ago period, including the impact on depreciation expense from the change in our accounting estimates associated with the estimated useful lives of our large manufacturing equipment. It fell short of our previously stated expectation to.

Drive sequential margin improvement throughout the year.

Speaker 3: relative to our previous expectation, the variance in gross margin was primarily driven by lower net revenue per pound, reflecting higher than expected trade discounts and less favorable sales mix, and to a lesser extent, higher cogs per pound, mainly driven by warehouse and cost and co-manufacturer on the utilization.

Relative to our previous expectation the variance in gross margin was primarily driven by lower net revenue per pound, reflecting higher than expected trade discount and less favorable sales mix and to a lesser extent higher cogs per pound, mainly driven by warehousing costs and co manufacturer under utilization.

Fees.

Speaker 3: Compared to the year ago period gross profit and gross margin in the third quarter of 2023 were positively impacted by lower manufacturing costs excluding depreciation lower materials cost lower depreciation and lower inventory reserves per pound partially offset by lower net revenues per pound.

Compared to the year ago period, gross profit and gross margin in the third quarter of 2023 were positively impacted by lower manufacturing costs, excluding depreciation lower materials costs, lower depreciation and lower inventory reserves per pound, partially offset by lower <unk>.

Revenues per pound.

Speaker 3: In the third quarter of 2023, gross profit and gross margin benefited by 4.4 million or 5.9 percentage points of gross margin respectively as a result of the change in the estimated useful lives of certain of our large manufacturing equipment as compared to those same measures calculated using our previous estimated useful lives.

In the third quarter of 2023 gross profit and gross margin benefited by $4 4 million or five nine percentage points of gross margin respectively.

As a result of the change in the estimated useful lives of certain of our large manufacturing equipment as compared to those same measures calculated using our previous estimated useful lives.

Speaker 3: Moving down the P&L, operating expenses in the third quarter of 2023 were 62.4 million, a reduction of 12.5 million or 16.7% compared to the prior year period.

Moving down the P&L operating expenses in the third quarter of 2023 were $62 4 million a reduction of $12 5 million or 16, 7% compared to the prior year period.

Speaker 3: The primary drivers with lower legal and restructuring expenses reduced non-production headcount expenses, lower product donation expenses, and reduced scale up expenses partially offset by the right off of an uncollectable note receivable in the amount of $3.8 million associated with a certain co-manufacturer as well as higher consulting expense accrual.

The primary drivers were lower legal and restructuring expenses reduced non production head count expenses lower product donation expenses and reduced Gail up expenses, partially offset by the write off of an uncollectible note receivable in the amount of $3 $8 million associated with a sore.

Co manufacturer as well as higher consulting expense accruals.

Speaker 3: Loss from operations was therefore $69.6 million in the third quarter of 2023, compared to $89.7 million in the prior year period.

Loss from operations was there for $69 $6 million in the third quarter of 2023 compared to $89 $7 million in the prior year period.

Speaker 3: Total other expense net of 0.7 million in the third quarter of 2023 consisted primarily of 2.5 million in realized and unrealized foreign currency transaction losses and 1 million in interest expense from the amortization of convertible debt issuance costs offset by 2.8 million in interest income.

Total other expense net of not $7 million in the third quarter of 2023 consisted primarily of $2 5 million in realized and unrealized foreign currency transaction losses, and $1 million in interest expense from the amortization of convertible debt issuance costs.

Offsetting by $2 8 million in interest income.

Speaker 3: Overall, net loss in the third quarter of 2023 was $70.5 million compared to $101.7 million in the year-go period.

Overall net loss in the third quarter of 2023 was $75 million compared to $101 $7 million in the year ago period.

Speaker 3: Adjusted EBITDA was a loss of $57.5 million, or negative 76.3% of net revenues in the third quarter of 2023, compared to an adjusted EBITDA loss of $73.8 million, negative 89.5% of net revenues in the year-ago period.

Adjusted EBITDA was a loss of $57 5 million or negative <unk> 76, 3% of net revenues in the third quarter of 2023.

<unk> to an adjusted EBITDA loss of $73 $8 million negative 89, 5% of net revenues in the year ago period.

Turning now to our balance sheet, our cash and cash equivalents balance, including current and non current restricted cash was $232 $8 million and total debt outstanding was approximately $1 $1 billion inventory fell to 194.6.

Speaker 3: Our cash and cash equivalent balance, including current and non-current restricted cash, was $232.8 million and total debt outstanding was approximately $1.1 billion.

Speaker 3: Inventory fell to $194.6 million in the third quarter of 2023, representing a sequential quarterly reduction of $12.6 million or 6.1% in our six consecutive quarter of inventory reduction.

In the third quarter of 2023, representing a sequential quarterly reduction of $12 6 million or six 1% and our sixth consecutive quarter of inventory reduction.

Speaker 3: Turning to cash flows, net cash provided by operating activities in the third quarter of 2023 was $9.1 million an increase of $43.7 million compared to the year ago period and capital expenditures total $1.4 million compared to $18 million in the year ago period.

Turning to cash flows net cash provided by operating activities in the third quarter of 2023 was $9 1 million, an increase of $43 7 million compared to the year ago period, and capital expenditures totaled $1 4 million compared.

Compared to $18 million in the year ago period as.

Speaker 3: As a result, free cash flow defined as cash flows from operating activities, less capital expenditures was an increase of $7.6 million in the third quarter of 2023 and total net changing cash, including the effect of foreign currency exchange rate changes on cash was an increase of $6.9 million, compared to a decrease of $64.5 million in the prior year period.

As a result free cash flow defined as cash flows from operating activities less capital expenditures was an increase of $7 $6 million in the third quarter of 2023, and total net change in cash, including the effect of foreign currency exchange rate changes on cash with an increase of six.

$9 million compared.

Compared to a decrease of $64 $5 million in the prior year period.

Speaker 3: Taken together, these year-of-a-year improvements in COGS, operating expenses, inventory drawdown, and cash conservation demonstrate that we continue to make real strides in managing our business more efficient.

Taken together these year over year improvements in Cogs operating expenses inventory draw down and cash conservation demonstrate that we continue to make real strides in managing our business more efficiently.

Speaker 3: Finally, I will provide revised guidance for our full year 2023 outlook. We now expect net revenues to be in the range of $330 million to $340 million representing a decrease of approximately 21% to 19% compared to the full year 2022.

Finally, I'll provide revised guidance for our full year 2023 outlook. We now expect net revenues to be in the range of $330 million to $340 million, representing a decrease of approximately 21% to 19% compared to the full year 2022.

Speaker 3: Gross profit for the full year is now expected to be approximately break even, and we continue to expect operating expenses to be approximately $245 million or less before one-time separation costs and non-cash savings associated with our recent reduction in force.

Gross profit for the full year is now expected to be approximately breakeven and we continue to expect operating expenses to be approximately $245 million or less before onetime separation costs and noncash savings associated with our recent reduction in force.

Speaker 3: We estimate we will incur one time cash charges of approximately $2 million to $2.5 million in connection with the reduction in force. Primarily consisting of notice period and severance payments, employee benefits and related costs. And we expect the majority of these charges will be incurred in the fourth quarter of 2023 subject to local law and consultation requirements, which may extend the process beyond the end of 2023 in certain countries.

Estimate, we will incur onetime cash charges of approximately $2 million to $2 $5 million in connection with the reduction in force, primarily consisting of notice period, and severance payments employee benefits and related costs and we expect the majority of these charges will be incurred in the fourth quarter of 2020.

Three subject to local law and consultation requirements, which may extend the process beyond the end of 2023 in certain countries.

Speaker 3: In aggregate, the reduction in force combined with the elimination of certain open positions is expected to result in approximately 9.5 million dollars to 10.5 million dollars in cash operating expense savings in 2024. And an additional approximately one million dollars to two million dollars in non cash savings related to previously granted. Unvested stock compensation which would have vested in 2024.

In aggregate the reduction in force combined with the elimination of certain open positions is expected to result in approximately $9 $5 million to $10 5 million and cash operating expense savings in 2024, and an additional approximately $1 million to $2 million.

In non cash savings related to previously granted unvested stock compensation, which would've invested in 2024.

Speaker 3: Finally, we now expect capital expenditures to be in the range of 10 million dollars to 15 million dollars for the full year 2023. With that, I'll conclude my remarks and turn the call back over to the operator to open it up for your questions. Thank you. Thank you. Now, begin the question and answer session. To ask a question, I press star, the 1 on your touch phone phone speaker phone. Please pick up your.

Finally, we now expect capital expenditures to be in the range of $10 million to $15 million for the full year 2023.

With that I'll conclude my remarks, and turn the call back over to the operator to open it up for your questions. Thank you.

Thank you now begin the question and answer session to ask a question like Press Star then one on your Touchtone phone.

Using a speakerphone please pick up your handset before pressing the keys.

Withdraw your question. Please press Star then two.

At this time, we'll pause momentarily to assemble the roster.

First question comes from Alexia Howard of Bernstein. Please go ahead.

Good evening everyone.

Speaker 4: Hi, looks good. Hi there. Hi there. So can we hone in on the US sales generally, particularly the grocery channel? It looks as though the measured channel data was better than the numbers that you reported. So I'm wondering first of all what happened in non-measured channels, and then I have a follow up.

Hey, there.

[laughter] honing in on the U S. A.

Sales generally, particularly the grocery channel it looks as though the measured channel data it was better than the numbers that you reported so I'm wondering festival what happened in non measured channels.

And then I have a follow up.

Speaker 3: Yeah, um, sure, I can speak to that Alexia. So, you know, as you know, there's typically a lag right between shipments and

Yes sure.

I can speak to that Alex Yeah. So you know as you know, there's typically a lag right between shipments and the.

Speaker 3: the consumption data. So sometimes some of the trends that you see in the consumption data do not necessarily align. I wouldn't say that there was anything, particularly unusual that happened in non-measured channels. So I think primarily like any differences that you're noting there are primarily driven by just sort of timing differences.

Function data. So so sometimes some of the trends that you see in the consumption data do not necessarily align.

I wouldn't say that there was anything.

Really unusual that happened in non measured channels.

So I think primarily like any differences that you're noting there primarily driven by by just sort of timing differences.

Speaker 4: Great, thank you. And as a follow-up, can you talk about the differences between the dynamics in the international markets versus domestically? Obviously, things are still very challenged domestically with pricing down and so on, and yet you're actually seeing much better performance in the overseas market. So I'm wondering what the difference is in terms of consumer behaviors, competitive trends, et cetera, and I'll pass it on. Thank you.

Great. Thank you and then as a follow up can you talk about the differences between.

The dynamics in the international markets first is domestically, obviously things, it's still very challenged domestically with pricing down and so on and yet youre actually seeing much better performance in the overseas market. So I'm wondering what the difference is in terms of consumer behaviors.

Passage of trends et cetera, and I'll pass it on thank you.

Speaker 2: No, thank you for the question. That's exactly what's happening. And I think the kind of main story that's afloat right now.

No. Thank you for the question and that's exactly what's happening I think the kind of main story, that's a foot right now.

Speaker 2: with our business from a growth perspective. If you look at the EU as an example, you'll retail and food service are both up substantially.

With our business from a growth perspective is if you look at the EU as an example.

Retail and foodservice are both up substantially.

Speaker 2: Some of that's driven by timing of shipments, but the numbers are pretty significant, like 39% for retail and almost 80% for food service. But again, you have to factor in some timing issues with shipments.

Some of Thats, driven by timing of shipments, but the numbers are pretty significant like 39% for retail and almost 80% for foodservice, but again you have to factor in some some timing issues with shipments.

Speaker 2: but overall very directionally encouraging.

But overall very directionally encouraging.

Speaker 2: And then you look at the strategics and what's happening with the McClant platform, for example, in the EU. It continues to get good traction to the point where if you look at Austria, Germany, Ireland, Netherlands, UK, Malta.

And then you look at.

The strategics and what's happening.

With Mcmahon platform for example.

And in the EU It continues to get good traction.

To the point, where if you look at Austria, Germany, Ireland, Netherlands UK motto.

Speaker 2: Portugal and Slovenia, Switzerland, all of those markets are operating and doing well for us. So the main difference is...

Portugal in Slovenia, and Switzerland, all of those markets are operating in.

And doing well for us.

So the main difference rate is.

Speaker 2: The EU, the consumer, is driven not only by taste, you know, wanting to enjoy delicious products.

And do you use a consumer.

Is driven not only by taste, you know wanting to enjoy delicious products, but also climate plays a significant role in the consumer decision around that.

Speaker 2: but also climate plays a significant role in the consumer decision around the food system and food choices as well as health and health does not have the same kind of counter-attack that's going on here in the U.S.

The food system and in food choices.

As well as health and health does not have the same kind of counter attack that's going on here in the U S. B.

Speaker 2: The both on a climate and health perspective, the products are viewed correctly and given credit for their positive impact. So.

Both on our climate and health perspective, the products are viewed correctly and given credit for their positive impact so.

Speaker 2: Continue to see very strong international growth, and if you start to look at the mix of our revenues, it's reflecting that right. I think we're 42% now, international versus 57%.

<unk> continued to see very strong international growth and if you start to look at the mix of our revenues, reflecting that right I think we're 43% now international versus 57% domestic.

Domestic.

Speaker 2: And then in the US, if you look at US food service, we are laughing at an LTO we did a year ago. This past quarter.

And then in the U S. If you look at it.

U S. Foodservice, we are lapping a an L. T O we did a year ago.

This past quarter.

Speaker 2: And if you separate that out for a minute, the U.S. Food Service is also up pretty substantially. So it really gets down to U.S. retail. That's the main issue.

And if you separate that out for a minute.

U S. Foodservice is also up pretty substantially.

So it really gets down to U S retail that's the main issue.

Speaker 2: And so that's why we're spending so much time focusing on how do we

And so that's why we're spending so much time focusing on how do we write the narratives how do we correct the narrative rather.

Speaker 2: Right, the narrative, how do we correct the narrative rather in US retail?

Speaker 2: around our product to bring the consumer back into our value proposition. And as I noted, there's some confusion out there and some misinformation that we just need to do a better job of cleaning up. So very encouraged by the growth of the machine internationally, encouraged by some of the segments in food service.

U S retail.

Around our product to bring the consumer back into our value proposition and as I noted there was some confusion out there and some misinformation that we didn't need to do a better job of cleaning up.

So very encouraged by the growth we're seeing internationally are encouraged by some of the segments in foodservice continued.

Speaker 4: Continue to be concerned about retail, but have a strategy there to try to get to get that ship right it Great, thank you very much. I'll pass it on

Continue to be concerned about retail, but have a strategy there to try to get.

To get that ship right.

Great. Thank you very much I'll pass it on.

Okay.

Thank you.

Something on Google BMO. Please go ahead.

Speaker 5: Hi, this is Daniel Gold. Thanks for taking my question.

Hi, This is Daniel Thanks for taking my question.

Speaker 5: In the pre-announcement, there is a comment about improving margins through pricing. How does that reconcile with targeting price parity with beef?

In the pre announcement there was a comment about improving margins through pricing, how does that reconcile with targeting price parity with beef.

Speaker 2: Sure. So, you know, I think almost, let me see four and a half years ago, I set a target to within five years to be able to price that parity with at least one product and one category. It would actually achieve that with the, with the product, we'll be more on New Zone as we come up on that five year mark. But...

Sure.

So I think almost let me see four five years ago I set a target to within five years to be able to price at parity with at least one product in one category.

They would actually achieve that.

With a with a particular product we'll give more news on that as we as we come up on that five year Mark.

But.

Speaker 2: Overall, when you take a step back, the idea here last year when we went into a focus on driving our pricing structure, closer to animal protein, a couple things are going on. One animal protein was seeing increases in price. So we thought with that narrowing of the gap, we could accelerate and close the delta even further. But the idea was to get across the chasm from

Overall, when you take a step back.

Yeah here last year, when we went into a focus on driving our pricing structure closer to animal protein a couple of things going on one animal protein.

I was seeing increases in price so we thought it would.

That narrowing of the gap, we could accelerate.

Accelerate and close the Delta even further but the idea was to get across the chasm from kind of a niche early adopter of consumer that we do so well with to the mainstream consumer and it didn't work.

Speaker 2: kind of the niche early adopter consumer that we do so well with to the mainstream consumer. And it didn't work. You know, we think that the headwinds that the category is facing, whether it's the misinformation or misunderstanding about the value proposition.

We think that the headwind to the category is facing whether it's the misinformation and misunderstanding about the value proposition.

Speaker 2: or whether it's just the incredible pressure the retail consumer is under and the very established...

Or whether it's just the incredible pressure.

The retail consumer is under in the very established pattern of trading down among high cost proteins, because again, even though we did pricing.

Speaker 2: pattern of trading down among high-cost proteins, again, even though we did pricing programs who were still higher cost.

Programs, we were still higher cost.

Speaker 2: So in that environment, whether it was the sector-specific headwinds of ambiguity around the health benefits and things that made her or whether it was a broader consumer.

So in that environment, whether it was the sector specific headwinds.

The ambiguity around the health benefits and things of that nature or whether it was a broader consumer.

Speaker 2: environment and Re-no reduced buying power things of that nature. It just didn't have an impact and so You know we're gonna go back to pricing the products at a way that gives us a margin that that can sustain our business and You know that's not across the board right some of the pricing programs will stay in place and Others will lift and and it'll be on a case by case basis

Environment and.

And remember just buying power and things of that nature.

Didn't have an impact and so we're going to go back to pricing the products at a way that gives us a margin that can sustain our business.

And that's not across the board right some of the pricing programs will stay in place.

And others will lift in and it'll be on a case by case basis.

Speaker 5: Interesting. That's really helpful. Also, there was some 3Q softness that was attributed to lower than anticipated promotional effectiveness. What can you learn from that and why was that the case?

Interesting that's that's really helpful.

Also there are some.

Three key softness that was attributed to lower than anticipated promotional effectiveness. What can you learn from that and why was that the case.

Speaker 2: I think it's the same feature that I was just highlighting.

I think it's the same feature.

I was just highlighting.

Speaker 2: You know, when there's so much noise, both macroeconomic with the consumer pressure.

When there's so much noise, both macroeconomic with a younger consumer pressure.

Speaker 2: as well as questions about our value proposition, the system of programs was less effective. And so, you know, in hindsight, right, we probably would have done less of it given the.

As well as questions about our value proposition, there's some programs, there's less effective and so in hindsight, we probably would've done less of it.

Speaker 2: just the overall conditions of the market and our particular category. In the long run, we think it's a good thing to do, but we first have to clean up this messaging issue and the perception issue before, I think those type of programs can be effective. In some sense, you just train the consumer if you're not increasing the...

Given the just the overall conditions of the market and in our particular category.

In the long run we think it's a.

Good thing to do.

But.

We first have to clean up this this messaging issue and the perception issue before I think those type of programs can be effective in some sense you just trained the consumer if you're not.

Increasingly.

Speaker 2: The population that's consuming your product, you're just training, and this he wants to wait for those discounts.

The population that's consuming your product you just training existing wants to wait for those discounts so, but we're gonna look heavily at at how we do that and when we do that in the future.

Speaker 6: But we're going to look heavily at how we do that and when we do that in the future. Got it, that makes sense. Thank you. Mm-hmm.

Got it that makes sense. Thank you.

Thank you that question I'll be Ben Theurer of Barclays. Please go ahead.

Speaker 7: No, we are good afternoon and thanks for taking my question. So, I wanted to dig a little bit into the potential of your gross margin and how we should think about this because clearly I know you weren't targeting to be somewhat positive, this quarter, you're talking about break even for a year, this quarter still didn't turn out, but just help us understand what's been driving the cost up so much compared to three, four years ago when you were able to achieve gross margins in the 30% plus range. And is that something you think is achievable or is there something structural to the cost of your product that is impacting and impeding you of reaching those levels you had? Just call it maybe pre-pandemic right before the pandemic.

Oh, yeah, good afternoon and thanks.

Thanks for taking my question.

So even Louie I wanted to dig a little bit into the potential of your gross margin and how we should think about this because clearly I know you were you were.

Targeting could be somewhat positive this quarter.

Talking about breakeven for the year this quarter still didn't turn out, but just help us understand what's been driving the cost up so much compared to three four years ago. When you were able to achieve gross margins in the 30% plus range and is that something you think is.

Cheever ball or is there something structural to the cost of your product that is impacting and impeding U of reaching those levels you had just call. It maybe pre pandemic right before the pandemic.

Speaker 2: That would be my first question. Yeah, no, that's a good question. So I think this is an area that, you know.

Yeah, no. It's a good question. So I think this is an area that.

Speaker 2: Can frustrate our operations team. We're about a year in now to implementing lean management in these eight, it all takes five years to get an organization to be.

Kind of can frustrate our operations team and they were about a year and now to implementing lean management anything at all it takes five years to get an organization to be.

Speaker 2: You know, fully leaned out and operating in court in those principles.

Fully leaned out and operating according to those principles, but we're taking it very seriously and they're doing great work at the plant level.

Speaker 2: But we're taking it very seriously. And they're doing great work at the plant level. You know, they're driving. I think we took like a dollar or so out of COGS on a year over year basis. But two things are working here against against us on that front. One is just pricing, right? Like we've taken down pricing dramatically since the period you referenced.

They're driving I think we took a look at dollar so a lot of Cogs on a year over year basis.

But two things are working here against against US on that front. One is just pricing right like we've taken down pricing dramatically since appeared you referenced.

Speaker 2: Second is mix has changed. You know, there's definitely a pretty significant impact from mix.

The mix has changed.

Definitely.

Pretty significant impact from mix.

Speaker 2: So the games that we're seeing on whether it's, you know, direct labor, direct curial or...

So the gains that we're seeing on whether it's direct.

Direct labor direct material war.

Speaker 2: reduced logistics or things of that nature are kind of being swamped by

Reduced logistics or things of that nature are kind of being swamped by.

Speaker 2: the pricing measures we took, as well as some of the mixed changes. And so, you know, that's why we're so focused right on pricing. We obviously are going to continue to drive down costs and, you know, address the mix issue and things of that nature.

The pricing measures, we took as well as some of the mix changes.

And so that's why we're so focused right on pricing, we obviously can continue to drive down cost.

And.

Can you address the mix issue and things of that nature, but the primary tools that we're looking at from a change.

Speaker 3: the primary tools that we're looking at from a change perspective is moderating and pricing programs, but Louie, I was going to add to that. Yeah, Ben, the only thing I'd add to that is from a COGS per pound perspective, if you look over the last couple of years, say that in the last...

<unk> perspective is moderating our pricing.

Programs, but look I don't want to add to that yes, Ben the only thing I would add to that as you know from a cogs per pound perspective, if you look over the last couple of years say than that for the last 12 to 24 months or so.

Clearly there has been.

Some softness in demand and so there has been an impact from just the volume deleveraging.

And also the impact from under utilization fees right and so we've done a lot of work.

Over the last 12 months or so to really try to consolidate the network. We think we're going to start to to see greater benefits from that.

In future periods, but those are things that I wouldnt consider structural I mean, clearly there's challenges that remain in the category today and we got a.

Figure out a way to stabilize the business in the U S and get that back to growth, but I wouldn't consider those as structural hurdles right.

In terms of the cost structure and so.

As Ian said I think.

Large part of this does come down to two pricing and then I think if we're successful at.

Restoring growth in the business and some of the fixed cost absorption issues in and.

Things like Underutilization, along with the work that we're doing from a network perspective.

Should should sort of resolved itself.

Speaker 2: Yeah, I think that's exactly right and we go.

That's exactly right and we.

Speaker 2: As we look at sort of what chains between August and now, you know, certainly the lower volumes impacted are building to call this one right.

As we looked at sort of what changed between August and now.

Certainly the lower volumes.

Impacted our ability to call. This one right.

Speaker 2: and then I retreated and went right, so it's less on the cogside and more on those factors for right now.

And then higher trade came in right. So it's less on the Cogs side.

More on all of those are on those factors for right now.

Speaker 7: Okay, and then just one for me to like, kind of try to get your thoughts on this idea of the concept of, if.

Okay, and then just one for me to like kind of try to get your thoughts on on this idea of the concept of if you want to you, obviously said that you're going to spend a lot of time on telling.

Speaker 7: You want to, you're obviously set, you're going to spend a lot of time on telling consumers and convincing consumers of the health aspects and just the benefits it has not only to health but also to the environment, etc. So ultimately talking about just being a superior or premium product and usually and consumer product.

Telling consumers and convincing consumers of the health aspect and.

But just the benefits it has not only to health, but also to the environment et cetera. So ultimately talking about just being a superior a premium product and and usually in consumer product for healthier products for superior products. You can charge premium if you ultimately get a better pricing making disk.

Speaker 7: for healthier products, for superior products, you can judge premiums, you ultimately get a better pricing, making this a more exclusive product. So is that something that you would consider within your strategy, particularly in retail, creating brand value, creating something that just on purpose?

More exclusive product so is that something that you would consider within your strategy, particularly in retail.

Creating brand value, creating something that just on purpose is not striving for price parity, but actually for a significant premium because it is something better and to make it profitable through that.

Speaker 7: is not striving for price parity, but actually for a significant premium because it is something better and to make it profitable through that.

Speaker 2: Yeah, that's a great question and you know, I don't want to sort of show too much of our hand, so I can't give.

Yes, that's a great question and you know I don't want to sort of show too much of our hand, so I can't give them.

Speaker 2: particularly detailed answer, but I think the way to think about our pricing and our value proposition is gonna be very, you know, in certain segments, it's gonna be very aggressive in terms of reaching price parity and we're seeing some actually amazing that their team has done such good work.

Detailed answer, but I think the way to think about our pricing and our value proposition is going to be very.

In certain segments, it is going to be very aggressive.

Recent price parity.

And we're seeing some absolutely amazing <unk> team has done such a good work.

Speaker 2: in some of those channels, but in retail, particularly as we try to remove some of the targets, even though we think they're unfair.

And some of those channels.

But in retail, particularly as we tried to remove some of the targets, even though we think they are unfair.

Speaker 2: You know, we are gonna kind of get into that area. It may be a more premium good.

We are going to kind of get into that area. It may be a more premium good.

Speaker 2: And that will, I think, drive, a justification for pricing at a higher level as well. And it gets back to, are we trying to in retail right now across the chasm to the mainstream consumer? Are we kind of regrouping getting our margins right, getting the value proposition cleaned up, and selling, you know, maybe a higher price product to a...

And that will I think drive.

Justification for pricing at a higher level as well and it gets back to are we trying to in retail right now across the chasm to the mainstream consumer.

Or are we kind of regrouping getting our our margins right.

The product value proposition cleaned up and selling.

Maybe a higher priced product too.

Speaker 8: a group of early adopters and early mainstream. So I think the direction of your question, I think, is spot on. Perfect. Ethan, thank you very much. Thank you.

A group of early.

Adapters and early mainstream so I think that you had.

The direction of your question I think is spot on.

Perfect. Thank you very much.

Yes.

Thank you.

It will be from Adam Samuelson Goldman Sachs. Please go ahead.

Yes, Thank you and good evening everyone.

Speaker 9: Um, there is. Hi, so I guess going, continuing on the pricing and margin.

So I guess.

Continuing on the pricing and margin.

Discussion.

Speaker 9: If I look at the business, the US pricing per pound is 80 or so, 80, 90 cents higher than it is internationally, and it moves around in quarter to quarter, a little bit depending on promotions and mix and effects. How big of a difference would you frame the cost to serve that international business?

If I look at the business the U S pricing per pound.

Is <unk> 80, or so 80 to 90 cents higher than it is internationally and it moves around quarter to quarter, a little bit depending on promotions and mix and FX.

How big of a difference would you frame the cost to serve that international business.

Speaker 9: versus versus the domestic. So as part of the plan here, hey, we can we have better, we're seeing better consumption growth, we're seeing better demand, maybe there's less price elasticity, if we can get our pricing points in Europe , closer to where they are.

Versus versus the domestic so it was part of the plan here Hey, we have better we're seeing better consumption growth were seeing better demand, maybe there's less price elasticity. If we can get our pricing points in Europe closer to where they are in the U S.

Speaker 9: or is the point that domestically in retail, we need the price cut, price cuts are not working and so we can make it profitable to raise price even if we have the sacrifice volume. Just trying to dimensionize where along the continuum we are in terms of the plan of attack going forward.

Or is the is.

Is the point that domestically in retail.

Need the price kind of price cut price cuts are not working and so we can make it profitable you raised price even if we have to sacrifice volume I'm, just trying to dimensionalize, where along the continuum. We are in terms of the plan of attack going forward.

Yeah, So so I think.

Speaker 2: You know, in Europe , we're probably less inclined to do any significant price increases in retail, as well as in Europe , because of the heavier action among strategics there. The price point is lower in food service. In U.S. food service, actually, our pricing went up due to mix.

Ian.

In Europe.

Probably less inclined to do any significant price increases in retail.

And as well as in Europe because of the heavier.

Action among strategics there the price point is lower in foodservice.

And in U S foodservice ratio pricing went up due to mix.

Speaker 2: but in retail of course it went down substantially I think the average was 521 to 424

But in retail of course, it went down substantially I think the average was.

<unk> hundred 21% to 424.

Speaker 2: price per pound basis, and that was driven largely by trade discounts and pricing and mix.

Price per pound basis, and that was driven largely by trade discounts on pricing and mix.

Speaker 2: But so I don't, I think, and we're primarily focused on the pricing question and any significant strategy change.

But.

I don't I think we're primarily focused on the pricing question and any significant strategy change in the U S market first in Europe, and I'll leave it here.

Speaker 3: in the US market first in Europe and I'll do it if you want to. Yeah, Adam, what I would add to that is if you recall at the beginning of last year, I believe in 2022.

Adam what I would add to that is if you recall at the beginning of last year I believe in 2022.

Speaker 3: We did do a pretty broad-based pricing reduction in the EU to better align our pricing in the European retail landscape. Now one of the things that's structurally different about

We did do a pretty broad based pricing reduction in the EU to better align our pricing in the.

European retail landscape.

The things that structurally different about Europe retail if you will relative to the U. S is there is a much greater presence of private label over there and so when you look at the competitive landscape.

Speaker 3: Europe retail, if you will, relative to the U.S. is, there is a much greater presence of private label over there, and so, you know, when you look at the competitive landscape

Speaker 3: in the EU, you have to, you know, that the pricing structure is going to be different from the US. Now, we actually think that our pricing, where it's stands today, in the EU, you know, feels like it is where it needs to be relative to the competitive set.

The EU.

You have to you know the pricing structure is going to be different from the U S. Now, we actually think that our pricing where it stands today in the EU.

Feels like it is where it needs to be relative to the competitive set.

Speaker 3: I think there are opportunities for us to drive incremental efficiencies from a COGS perspective. But our margin profile in the EU business is actually pretty good. I think there's opportunities to make improvements there. But I think

I think there are opportunities for us to drive.

Incremental efficiencies from a from a Cogs perspective.

Our.

The margin profile in the EU business is actually.

Pretty good I think theres opportunities to to.

Make improvements there but.

I think.

Speaker 3: You know, when we're thinking about pricing strategy in the EU, I wouldn't necessarily be thinking about price increases. You know, there's always going to be some variations from a promotional perspective and things that we do in that regard. But, you know, we actually went through the exercise a year, over a year ago, right, to make sure that our price points were in the right place.

When we're thinking about.

Pricing strategy in the EU I wouldn't necessarily be thinking about price increases there theres always going to be some variations from a promotional perspective and things that we do and in that regard but.

We actually went through the exercise of a year over a year ago right to make sure that our price points, where in the in the right place.

Speaker 2: And I think the way to think about – so we're undergoing a substantial reduction in –

Your retail and I think the.

Way to think about.

We're undergoing a substantial reduction in operating expense across the company.

Speaker 2: to better fit kind of the newer current conditions, but that in the EU, because of success we're seeing on a relative basis, we're expanding our investment there just because it's such a powerful you know, growth engine for us.

To better fit kind of in your current conditions, but that in the EU because of the success, we're seeing on a relative basis.

Expanding our investment there.

Because it's such a powerful.

Growth engine for us at the moment, Okay, and if I could just ask a follow up on on cash flow. So there was positive cash from operations kind of in the quarter. It seems like a large part of that was your payables actually expanded so that was a source of cash which is not what we would expect to.

Speaker 9: Okay, and if I could just ask a follow-up on cash flow. So there was positive cash from operations kind of in the quarter. It seems like a large part of that was your payables actually expanded, so that was a source of cash, which is not what we would expect to happen if you're...

Speaker 9: Also trying to reduce your purchases and slow down inventory and shrink inventory. So, it's part of the point on the cash flow sustainability that that payable...

Happen. If you are also trying to reduce your purchases and slow down inventory and shrink inventory so.

As part of the point on the cash flow sustainability that payables.

Speaker 9: It's kind of a growth in the quarter, which just becomes a source of cash.

Growth in the quarter, which is becomes a source of cash.

Speaker 9: is not repeatable and that then becomes the headwind as you move 4Q and into next year.

If not repeatable and that then becomes a headwind as you move <unk> into next year.

Speaker 3: Yeah, I think that's right. Adam, so, you know, the

Yeah, I think thats right Adam so.

The.

Speaker 3: Working capital was a pretty significant benefit in the third quarter of this year. Typically we do have a strong quarter from the perspective of accounts receivable in Q3 because that's following what is seasonally our strongest quarter in Q2 and so we collect. I would say AP, typically that tends to move around. It's tends to be more just timing driven but I think you're absolutely right in thinking about as we move forward sequentially and we've said we don't expect to sustain the casual positive in the fourth quarter. One of the headwinds, if you will, in this quarter we don't expect that type of a benefit from accounts payable.

Working capital was a pretty significant benefit in.

In the third quarter of this year typically.

Typically we do have a strong quarter from the perspective of accounts receivable in Q3, because thats following what what is seasonally our strongest quarter in Q2, and so we collect.

I would say AP.

That tends to move around as it tends to be sort of more just timing driven but I think youre, absolutely right and thinking about as we move forward sequentially and we've said, we don't expect to sustain the cash flow positive in the fourth quarter one of the.

Headwinds if you will in this quarter. It will be we don't expect that type of a benefit from from accounts payable. Okay. I appreciate it I'll pass it on thanks.

Speaker 9: Okay, I appreciate it. I'll pass it on. Thanks.

Thank you next question comes from Peter Shale well.

Please go ahead Sir.

Speaker 10: Great. Thanks for taking the question.

Great.

Thanks for taking the question.

Speaker 10: You guys mentioned, I know it's early, the exit of select product lines and or geographies potentially.

You guys mentioned I know it's early.

The exit of select product lines in our geographies potentially.

Speaker 10: restructuring China. I was hoping to give us a little bit more color on at least the early thinking there is this mostly related to you know US retail product lines Also, maybe just a little bit of color on the performance of jerky is that on the

Restructuring, China I was hoping you can give us a little bit more color on at least the early thinking. There is is this mostly related to him you know U S retail product lines.

Also maybe just a little bit of color on the performance of jerky is that on.

Speaker 10: You know in the considerations that and then when you when you mentioned restructuring China this Just a shrinking of the China market or you considering a full on exit just any color around that would be helpful. Thank you

In our in the consideration set and then when you when you mentioned restructuring China is this just a shrinking of the China market or are you considering a full on exit just any color around that would be helpful. Thank you.

Speaker 2: I mean, we can't give too much right for this one about ourselves in but

Sure I mean, we can't give too much rate for just want to box ourselves in but.

Speaker 2: that what's on the table, right, is our product lines that are underperforming in a way that we think is perhaps structural on a margin perspective.

What's on the table right.

Product lines that are underperforming.

No.

In a way that we think is perhaps structural on a margin perspective or.

Speaker 2: or just not exhibiting the growth we want to see. So some of what you mentioned probably falls into that pretty well on China. I think it's just taking a look at what is our strategy for the next two, three years there.

Or just not not exhibiting the growth we want to see.

So some of what you mentioned is probably falls into that pretty well on China.

I think it's just taken a look at what is our strategy for the next two three years there.

Speaker 2: and how big or small do we need to be? You know, it's interesting that part of the world is starting to replicate a little bit of what you're seeing in Europe in a different, early, very nascent way. Like if you look at Europe with all the government programs and incentives or campaigns rather, probably it's better way to put it to reduce animal protein consumption as I mentioned in my prepared remarks.

And how.

How big.

Our small do we need to be.

It's interesting that part of the world is starting to replicate a little bit of what Youre seeing in Europe and are in a.

Early very nascent way like if you look at Europe with all the government programs and incentives or campaigns, rather probably is a better way to put it to reduce animal protein consumption as I mentioned in my prepared remarks.

Speaker 2: whether it's the UK Germany, Netherlands, et cetera, South Korea, as I mentioned as well, just came out with something. You see some interesting activity occurring on a commercial side of things in Japan.

Whether it's the U K, Germany, Netherlands, et cetera, South Korea, as I mentioned as well just came out with something he sees them.

Some interesting activity occurring on a commercial side of things in Japan.

Speaker 10: So it's a little bit too early to give an answer to that. And we're just continuing to look at it, but to drive down the type of cost reduction and operating expense reduction that we're pursuing, kind of everything has to be on the table in it is. Thank you very much. Good. Thank you.

A little bit too early to give an answer to that and we're just we're just continuing to look at it but.

To drive down the type of cost reduction in the operating expense reduction that we're pursuing kind of everything else would be on the table and it is.

Thank you very much.

Yeah.

Thank you again, if you have a question. Please press Star then one.

Next question comes from Michael Library Piper Sandler. Please go ahead.

Thank you good evening.

Okay.

Speaker 11: just would love to understand the table at towards the end of the text in the release better on the distribution points by channel.

Just would love to understand the table it towards the end of the text in the release better on the distribution points by channel.

Speaker 11: Obviously you've done much better in international food service than in the US, but that shows...

Obviously you've done.

Much better than international foodservice than that in the U S, but that shows.

Speaker 11: a sharp decline in distribution points.

A sharp decline in distribution points.

Speaker 11: and a small uptick in the US in food service.

Small uptick in the U S in foodservice.

Speaker 11: Can you just help explain what's going on with those numbers and how to reconcile that with what you've reported that there's somebody that's just out of recent discontinuation or anything we should be sure to be aware of?

Can you just help explain what's going on with those numbers and how to reconcile that with.

What you've reported is there somebody that's just had a recent discontinuation or anything we should be sure to be aware of.

Speaker 3: Yeah, so in international food service, what that's reflective of is basically the discontinuation of distribution at a certain large chain customer. And this is in China, it's not a...

Yeah, So in international Foodservice.

That's reflective of us basically the discontinuation of distribution at a certain large chain customer and this is in is in China, it's not a.

Speaker 3: meaningful percentage of revenues at all. And then I think the second part of your question was related to US food service. Those numbers tend to

Meaningful percentage of revenues at all and then.

I think your the second part of your question was related to U S. Foodservice.

Numbers.

<unk> two <unk>.

Speaker 3: You know, you're from quarter to quarter that have some fluctuations in them. So I don't think there was anything of note to call out in that particular line.

From quarter to quarter.

Fluctuations in them. So I don't think there was anything of note to call out in that particular line item.

Speaker 11: Okay, that's helpful. And even a little bit of rounding, if you know, it's just not a huge move, is what you're saying.

Okay. That's helpful.

Even a little bit of rounding.

It's just not a huge move is what youre, saying.

Just following up on.

Speaker 11: Following up on just some of the outlook on the restructuring or skeurationalizations, I know you don't want to be too specific, but...

Just some of the outlook on the restructuring or SKU rationalizations, I know you don't want to be too specific but.

Speaker 11: just in terms of how we're thinking about modeling 2020-4, which obviously too I know you're not guiding on yet, but anything just directly to, you know, more specific, I guess, in terms of where to, you know, there's watchouts in terms of, you know, even if certain products haven't been pinpointed yet, you know, it's...

Just in terms of how we're thinking about modeling 'twenty 'twenty, four, which obviously too I know youre not guiding on yet but.

Anything just directionally.

More specific I guess in terms of where.

Theres watch outs in terms of you know, even if certain products haven't been pinpointed yet.

Speaker 11: Is it more China focused and US retail? It sounds like we have some of the breadcrumbs, but any more you can give there.

Is it.

More China focused in U S retail it sounds like we have some of the bread crumbs, but anything more you can give there.

Speaker 2: I think you have a lot more additional color, but I think we're not doing anything that would surprise people if you look at it.

Can you give a lot more additional color, but I think it's we're not doing anything it would I think surprise people. If you look at kind of the performance of various product lines and where our emphasis is as a company. You know obviously, we're very focused on beef Burger and.

Speaker 2: of the performance of various product lines and where our emphasis is as a company. Obviously we're very focused on beef and burger and sausage and chicken lines.

Sausage and our chicken lines.

Speaker 2: things of that nature and you know really focused on the partnerships we have in Europe and

Things of that nature.

Really focused on the partnerships, we have in Europe and some.

Speaker 2: and some of the new retail items we've offered there. So it's some of the more underperforming SKUs that if you were to do a quick chart, you'd see.

Some of the new retail items, we've offered there. So it's some of the more underperforming skus that if you were to do a quick chart you can see it.

Speaker 2: It's that's the process going through so I don't think it's anything that's going to surprise people

It's that's the process, we're going through so I don't think it's anything is going to surprise people.

Okay. Thanks, so much.

Thank you. This concludes our question and answer session.

To turn the conference back over to Mr. Brown for closing remarks.

Speaker 2: No, that's it. You know, we are, yeah, I think taking a very hard look at where operating expenses given that the revenue is lower than we need it to be right now. So we're going to be fitting the organizational size into more of the near term opportunity. We're extremely encouraged by the international growth that we're seeing. And the way the world is moving in that direction, you know, the government's...

No that's it.

We are I think taking a very hard look at our operating expenses given the revenue is.

Lower than we needed to be right now.

So we're going to be fitting the organizational size it into more of a near term opportunity. We're extremely encouraged by the international.

Both that we're seeing and in the way the world is moving in that direction the governments.

Speaker 2: In Europe , taking this matter very seriously, they see...

In Europe are taking this matter very seriously they see.

Speaker 2: plant-based foods and a shift from an animal protein-based economy to one that is plant-based.

So plant based foods and a shift from an animal protein based economy to one that is a plant based from.

Speaker 2: from a food-tissue perspective as a very strong lever for climate.

Our food system perspective, as a very strong lever for climate.

Speaker 2: And just so the folks understand this, the reason it's so powerful is that, you know, not all.

And just so that folks understand this the reason, it's so powerful right as you know not all.

Speaker 2: The missions are kind of, you know, equal, right? And methane is a very powerful greenhouse gas. It also moves through the atmosphere at a quicker rate of tafflight as much lower. So you can take it out of the atmosphere much more quickly.

Emissions or kind of equal and methane is a very powerful greenhouse gas. It also moves through the atmosphere at a quicker rate its half life is much lower so you can take it out of the atmosphere much more quickly.

Speaker 2: And so in doing, you can dramatically slow within our lifetime and within the period that matters, you know, the rate of climate change, but more importantly by utilizing the 30% of land that we have globally devoted to livestock.

And in so doing you can dramatically slow within our lifetime and within that period that matters.

<unk>.

The rate of climate change, but more importantly by utilizing the 30% of land that we have globally devoted to livestock.

Speaker 2: for carbon sequestration, you can pretty much take a huge chunk out of the climate problem without any new technology development. That's why this solution is so much more powerful than automotive or energy.

For carbon sequestration, you can pretty much take a huge chunk out of the climate problem without any new technology development such why this solution is so much more powerful than automotive or energy or what are the other areas that gets so much attention is in.

Speaker 2: or the other areas that get so much attention. It's a near term solution that requires very little additional technological development.

Near term solution that requires very little additional technological development and the European government to see that right and do you think that I think some of the Asian governments are starting to say as well U S has been slow it's dominated by.

Speaker 2: European government to see that. And you think I think some of the Asian government are trying to say, well, US has been slow. It's dominated by vested interests and the government is very...

Vested interests and the government is very much.

Speaker 2: much, you know, the hold of them. So this transition here.

The holding to them. So this this transition here.

Speaker 2: is going to be about businesses and the consumer making the change. I don't think we expect the government to step up, but we're doing that. And I think that health is the main driver here and I'm really quite optimistic about what we're going to do next year to help write the narrative.

It's going to be about businesses and the consumer making the change I don't think we expect the government step up but we're doing that and I think that health is the main driver here.

Really.

Quite optimistic about what we're going to do next year to help them to help write the narrative.

Speaker 2: and get back on track with the US consumer in retail. So more to come and we'll talk next time. Thanks.

And get get back on track with the U S consumer and retail so more to come.

We'll talk next time thanks.

Thank you.

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