Good day, ladies and gentlemen, and welcome to the Beyond Meat Second Quarter 2019 Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference maybe recorded. I would now like to turn the call over to your host, Katie Turner. You may begin.

Thank you. Good afternoon and welcome to Beyond Meat’s second quarter 2019 earnings conference call and webcast. On today’s call are Seth Goldman, Executive Chair; Ethan Brown, Founder, President and Chief Executive Officer; and Mark Nelson, Chief Financial Officer and Treasurer. By now everyone should have access to the company's second quarter earnings press release and second quarter Form 10-Q filed today after market close. These documents are available on the Investors Section of Beyond Meat's website at www.beyondmeat.com. Before we begin, please note that all financial information presented on today’s call unaudited and 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 belief and involve risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to second quarter 10-Q, the company's registration statement on Form F1 filed today, and other filings with the Securities and Exchange Commission for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Please note on today’s call management will refer to adjusted EBITDA which is a non-GAAP financial measures. While the company believe this non-GAAP financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation or is a substitute for the financial information presented in accordance with GAAP. Please refer to today’s release for a reconciliation of adjusted EBITDA to its most comparable measures prepared in accordance with GAAP. And now, I would like to turn the call over to Seth Goldman, Executive Chair.

Thank you, Katie, and good afternoon, everyone. We appreciate you joining us for our quarterly earnings call. Today, Ethan will briefly review our second quarter financial and operational highlights and reiterate the key reasons we believe Beyond Meat is well positioned for long-term growth in the U.S. and globally. Mark will then review our financial results in more detail, discuss our raised annual outlook and reiterate our long-term financial targets. After that, we'll open it up for questions. We are very pleased with our strong second quarter financial results. At Beyond Meat, we have made meaningful investments to build a revolutionary business as we expand in the U.S. and multiple markets internationally. While this approach requires strong investment in the short-term, we believe it creates the foundation for us to leverage and scale in the medium to long-term. We believe Beyond Meat is well positioned for growth in the U.S. and internationally. Now before I turn things over to Ethan and Mark, I would like to take a moment to highlight several members of our talented and passionate team who play a critical role in delivering our results. John Lennon said, ‘A dream your dream alone is only a dream. A dream you dream together is reality.’ Today, I want to recognize several leaders and their teams who have been doing remarkable work to make our dream a reality. The crown jewel of Beyond Meat is our team of scientists, engineers and Chefs led by our Chief Innovation Officer Dr. Dariush Ajami. Before joining our team Dariush worked at Scripps Research Institute, specializing in molecular assembly and drug discovery. His team at the Manhattan Beach research project combines the scientific disciplines of biology, chemistry, physics, material sciences and engineering with culinary expertise. Their relentless efforts to continually innovate and improve…

Thank you, Seth for that generous introduction. On behalf of all of us at Beyond Meat, we appreciate your steadfast contributions, your leadership and support. We are pleased to report very strong second quarter operational and financial progress. In the second quarter, we continue to experience robust, broad based momentum and remain excited about the enthusiasm in customers and consumers alike for Beyond Meats, plant-based meat products. Where in the second quarter, we expanded our sales in both retail and food service channels, domestically and abroad, continue to invest in and realize the benefits of our innovation program, while growing our supply chain and operational capabilities. We believe our momentum demonstrates the mainstream consumers, increasing appetite for our plant-based meats. In fact, according to a recent statistic from NPD Group, when dining out, 95% of the people who are purchasing plant-based burgers are also consumers of beef burgers. This speaks to the broad based relevancy of the plant-based meat movement and complements our brand specific data. We are seeing consumers envelop our brand, and a broader movement that they are leading. We believe this movement is infused with an enthusiasm for a future where meat is separated from animals, and one where the consumer can enjoy meet absent emerging concerns they may have regarding its health, environmental, or animal welfare impact. This consumer movement parallels our own thinking. Where in addition of American ingenuity, we are taking the good in this case meat and seeking to make it better and persistent innovation. With this context, I'd like to now turn to the numbers and execution of our growth strategy. Net revenue for the second quarter increased 287% compared to the second quarter of last year. We also saw positive trends in our key profit metrics. Gross profit margin increase nearly…

Thank you, Ethan, and good afternoon, everyone. We are very pleased with our second quarter financial results and the opportunities for growth ahead. As Ethan indicated, net revenue in the quarter was $67.3 million, up 287% compared to the second quarter last year. As I mentioned, on our Q1 call, we expected the second quarter to be one of our seasonally strongest quarters of the year in terms of net revenues, and profit contribution based on the summer grilling season, as well as product innovation launches and new food service distribution expansion. This strong start gives us confidence in our net revenues expectation for the year, which we now expect to exceed $240 million in 2019, representing a year-over-year growth rate in excess of 170% compared to 2018. Growth in net revenues for the second quarter of 2019 was driven primarily by an increase in sales of the Beyond Burger, expansion in the number of retail and food service points of distribution, including new strategic customers, as well as greater demand from our existing customers. From a distribution channel perspective, retail net revenues increased 192%, while restaurant and food service net revenues increased 483% versus the second quarter of 2018. The significant increase in our restaurant and food service sales volume drove our net revenues through this channel to represent 49% of our net revenues in the quarter. On the product side, gross revenues for our fresh platform increased 348% versus the year ago period, representing 92% of our gross revenues for the second quarter of 2019 compared to 77% of gross revenues compared to the second quarter of 2018. Gross revenues for our frozen platform increased 25% year-over-year, despite the discontinuation of our frozen chicken strip product line during the first quarter of 2019. We remained focused on expanding…

Thank you, Mark. In conclusion, we are very pleased with our results for the second quarter and for the first half of 2019. Going forward, we believe Beyond Meat has significant momentum, and our team looks forward to continue to update you on our progress in the coming quarters. With this, I'd like to turn it over to the operator for questions.

[Operator Instructions] Our first question comes from Ken Goldman with JP Morgan. Your line is now open.

Hi, thank you. Two questions for me. First, during your IPO roadshow you highlighted a sort of an ultimate, but rough gross margin target of 35%. I don’t know if that's still your level that you're looking for, but you're fairly close to it right now. But Mark, you had talked about some gross margin drivers ahead. So how do we think about that, has the gross margin bar been raised, or are you thinking look, these are tailwinds to our gross margin going forward, but we'll offset that maybe with some price investments? I just want to get a better sense of how you're thinking about some of the tailwinds and headwinds for that line item?

Yes. Hey, Ken. We had a really good results on margin for the quarter, we were pleased with the gross profit level and gross margin. We were looking at that kind of that mid-30s, mid to high 30s is still a reasonable target for us. One of the goals is to drive the pricing for the product to get to parody on some of the products with animal protein. So that's been something that we've looked to as we've matured as pricing goes, but we do feel comfortable with that mid to high-30s longer term pricing target, and gross margin target for us. And that's still a very valid target.

Okay, thank you for that. And then second question, Ethan, so many restaurants are adding, as you know, better than anyone, alternative meat to the menu. But, some of the world's biggest QSRs still haven't done anything of size on that front. I guess, I'm curious, does it surprise you, at this point, with so much evidence that consumers are willing to pay for this product, plant-based meat right that at least one of those huge QSRs is still on the sidelines? Just wanted to get your thoughts there?

Sure. Thank you, Ken. So I do think it's a function of just the size and complexity of some of the largest, most global QSRs ours out there. I think it's going to take them time to figure out how to integrate into their menu and their operations. So it doesn't necessarily surprise me. I think that the intent is certainly there. And it's just a question of allowing the process to play out.

Thank you.

And our next question comes from Bryan Spillane. Bank of America. Your line open.

Hey, good afternoon, everybody. Just a couple of questions for me. I guess the first one, can you -- Ethan, can you give us any sort of color on where you stand today on service levels out of stocks? Just trying to get a sense for kind of where you stand today as businesses ramped up in the summer selling season?

Sure. Hi, Brian. Thank you for the question. So, as you know, in 2017 and 2018, we really did experience some shortages during the peak seasons. And so we launched, as I mentioned, in my comments, really sustained investment program, not only in operations, but in quality, both personnel and infrastructure to make sure that didn't happen again. And I'm very pleased to report that this summer, we really haven't experiencing anything close to what we did in 2017 and 2018. In fact, between Q1 and Q2, despite the significant increase in demand associated with the peak grilling season, our fill rates actually went up quite a bit. And so we are seeing some pretty strong fill rates, there will be from time-to-time, some very short lived outages on a particular product as we switch from one platform to another, but the fill rates are very consistent with high performing operation to this point. So I don't feel the pressure that we did in 2017 and 2018 on that front.

Okay. And then, Mark, just a follow up, I don't know if he gave guidance on capital spending for this year, I might have missed it. But could you just update us on CapEx for the year? And then, I guess, given the growth that you're seeing now, as we're thinking about probably more in the next year, we see potential for CapEx even accelerate more just to sort of catch up with the demand.

Yes, so for 2019, we're still looking at that $20 million or so CapEx number. We still think that's pretty solid number. For 2020, we're looking at potentially some increased deployment on capital around just some of the production that we do, looking at potentially some of the back end, bringing that in-house. We've talked about that. So we think that capital number maybe in the $35 million to $40 million range for 2020. But we've had a pretty flexible model where a lot of our partners in the back end do the downstream production for us and typically with their assets in their facility. So it's been capital light we’ll additionally look at increasing options for production internationally. But as you know, some of the partners very similar to the model we have now in contract manufacturing internationally will be similar to how it works in the U.S. So we think that's pretty fair number in that $35 million to $40 million range for 2020.

Okay, great. Thank you.

Our next question comes from Alexia Howard with Bernstein. Your line is now open.

Thanks. Good evening, everyone.

Great, how are you doing?

So two questions for me. You started off with some comments about the capacity questions. Could you maybe just explain to us between raw material procurement, your own in-house production as part of the production process? And then your relationship with the co-packers? Where would you say the bottleneck really is? And if it's with the co-packing relationships, how quickly can that capacity be reasonably expanded over time? That will be my first question. And the second one is quite simply, how do you prioritize new areas of growth, you've obviously got the high quality problem of having a lot of people demanding your product, but how would you decide which channel, which restaurant chain, which growth and what types of products you're going to roll out, given the capacity constraints that you have? Thank you.

Thank you, Alexia, very much. So I think just to reiterate, the way that our production system is set up, we really have three main buckets of focus. One is the protein and raw materials. Two is the in-house extrusion and mixing that we do. And then, three is the kind of downstream production partner work that we do, where it's formed into patties and sausage, et cetera. And so, in each case, we really have made substantial investment, we feel very comfortable with our protein supply for the balance of the year and into 2020, that there's a comfortable margin there relative to the forecast that we're sharing. We also feel that more and more providers of protein are coming into the market established names, including DuPont, et cetera, are getting involved, more separation facilities for protein are being constructed, even domestically here in the U.S. And then finally, more crops are coming in. So there's more peak coverage occurring now than before. So on the protein supply side, I feel the last six months, we've made substantial progress in securing what we need. On the extrusion side, we have been very aggressive in ordering and installing new equipment. We will end the year with nearly 100% increase in that capacity area. And we're placing additional orders for distribution potential internationally as well. And then finally, on the downstream side, our team has been really aggressive and active in signing up new high quality production partners for downstream forming and packaging. So in each case, while those have been historically for us areas of constraints, we've taken the measures to alleviate those constraints and build capacity. Again, as I mentioned, that's not to say that we will not have some periodic disruption, we're always introducing new iterations of our…

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

Sure. Thank you.

Our next question comes from Robert Moskow with Credit Suisse. Your line is now open.

Hi. Ethan, I was hoping that you could maybe help us quantify the extent to which your manufacturing capacity has been expanded over the past six months. I mean, I think during the IPO, I had it, in my head that it was going to be $400 million of capacity by the end of 2019. Are you well beyond that now or maybe you can jump ahead to 2020 and give us a number that that might be higher than where you were in 2020. Just to give us a sense of as things keep improving sequentially, that you're staying ahead of the demand?

Yes, it's a really, as you can imagine, important priority for me, having been through some shortage in the past, it's something that we're constantly focused on. So you're absolutely right, I do challenge the team to get well ahead of demand, even as demand escalates. And so yes, the $400 million in terms of capacity for this year is well within reach. Next year, we can also bring on additional capacity, whether in the co-packing network or on the extrusion side, that should take us quite a bit higher than that. I'm a little hesitant to give you exact numbers. But I think it's a very comfortable saying there has been significant adds, both in internal capacity and in downstream forming and packing equipment that would take us above and feel quite comfortable about the 2020 forecast.

Okay. And just to be clear, the CapEx guide for 2020, $35 million to $40 million, that is a lot more than the original estimate, right? And it is tied to -- is it mostly tied to the bringing the co-packing in-house or is it other things too?

Yes, it's a big chunk of it drove more capital, we're still in early phase, the payback from something like that internalization of the back end we’re starting to look at that is very, very accretive. And so we've been considering how we might be able to add capacity, while reducing cost altogether in that step. And so it's still early phase and looking at that, to augment what Ethan said, the pursuit of additional contract manufacturers continues, we continue to qualify and work to qualify additional co-mans, because that it'll be a blended approach as we look to the future.

And can I ask one more question, if you had any consumer response for Beyond 2.0, has anyone gotten back to you saying that this is a lot better, or I like the old formula or anything like that.

Thank you for the question. It's been really a pleasant and gratifying experience to see the consumer reaction to 2.0, we worked so hard on it, it really, kind of things we tried to approach with, as I mentioned in the introduction, really around mouth feel, and the aroma and taste making it more nuanced and subtle. All of those things, I think, did get recognized by the consumer. So we have just -- there's always going to be an outlier that doesn't like this or that, but we have seen just enormous positive feedback around the product. I think it's obviously like I said before, it's not there yet, but it's extremely, it's getting closer and closer. So yes, very, very positive feedback.

Okay, great. Thank you.

Thank you.

Our next question comes from John Anderson with William Blair. Your line is now open.

Good afternoon. Hi, everybody.

Hey, John.

I wanted to stick with the new formulation for a minute. Haven’t tried it myself, but I think it's a significant leap forward. But to Rob's question, Ethan, how would you kind of characterize where that kind of takes you in terms of closing the gap with animal protein, how much more opportunity remains ahead, and does it become more difficult to close that gap from here? And then the second part of the question is around kind of the ingredient deck and how important you feel or you’ve heard consumers and customers that kind of the clean ingredient deck that you have, and I'm thinking about things like GMO and soy, et cetera. And how important that is to an animal protein consuming customer. Thanks.

Yes, both very good questions. So I'll preface my response by just reiterating that I am probably our toughest critic, I think it's quite a bit further in the direction of our true north, which is animal protein, at the same time, acknowledge we have miles to travel, I'd say it's maybe 75% of the way there, and how hard that 25% is. It is going to be harder, but at the same time we are really, really building a tremendous database instead of expertise that I think is unparallel around how to use all natural ingredients from plants and from the plant kingdom globally, to construct meat directly from plants. And so well that last 25% stretch or 30% stretch, where we want to put it at will be more difficult. We also have tools and expertise and capabilities that are giving us I think a lot of enthusiasm for closing that final stretch. On the ingredient deck itself, I think it's vital. This gets back to understanding your consumer, the relationship with the consumer, it comes back to our own families, my own family eats a lot of our products. What does mom feel comfortable serving her children. And I think you complicate the message by including things like genetic modification, artificial ingredients, soy that has questions around its origin and what's in it. So, I think all of these things we have right -- correctly stayed away from and it's helped us to access the broadest base of consumers, it's what you're trying to do is educate consumers, so the way that produce meat that doesn't involve an animal. You don't want to burden yourself with a secondary education message around specifically what the ingredients are. So the simpler and cleaner the ingredient list, the better and we're constantly striving in that direction.

Okay. If I can ask one follow-up, when you think about the protein sources, obviously, pea being the primary source historically. As you think about the business, longer term, is it important to diversify, are you working on diversifying your sources of protein? And kind of what benefits do you think will that allow you to kind of accrue over time whether it be getting the cost down and sharper pricing at retail, et cetera?

Yes, these are great questions and like the capacity question, is one that's constantly top of mind for me. And it's important for a number of reasons. One is the diversification in supply and the ability to exert pricing pressure build on redundancy, et cetera. But to be honest, that's probably, to me almost a secondary consideration. One of the most important considerations is really continues to be around pleasing the consumer. And if you think about the way mom shops or dad shops on a weekend for the family, they're not buying a particular protein in six or seven different form factors, they're buying pork, they're buying beef, they're buying Turkey chicken, et cetera. So for us to credibly take a very, very long run and broad run at the meat case, we need to offer the consumer that same diversity. So I think if you look ahead five years from now, you'll see sausage from us that has different proteins, maybe one sausage will be offered with lentil protein, the other with lupin or camelina. You can kind of name your source. But when you start to think about the plant kingdom as a source of protein, there really just almost an endless number of crops that you can pull it from. And there's fascinating science going on in the area about which crops can yield the highest scores or amino acids. And, not through genetic modification, but through breeding, how you get there. And so I think we're just scratching the surface of an amazing journey in agriculture to grow protein directly for human consumption. And I think it's really important that as a company Beyond Meat leads that charge and bringing new proteins to the market. So if you look at, for example, we're able to do with our breakfast sausage. I'm very proud of that product because I think it points in the direction of where we're headed for the future, it not only has pea protein in it, but it has mung bean protein, brown rice protein and sunflower seed protein. That's really the way to do this. You get a lot of benefits, not only in supply chain, but you get consumer satisfaction with that in terms of having a more diversified protein. But importantly, you also get a pretty big win on the PDCAAS score, which is the measure of protein quality in the human body. And so in that case, when you're combining amino acids from different sources like that, you're able to craft amino acid score that actually exceeds that, in some cases, the pork equivalent. So if you look at our latest breakfast sausage that actually has more protein in it, ounce per ounce, and then it's protein -- then it's animal protein equivalent. So lots of ahead for us on that front.

Thanks so much for all the color, appreciate it.

Sure, yes. Thanks for the question.

Our next question comes from Kevin Grundy with Jefferies. Your line is now open.

Hey, everyone, congrats on the strong quarter.

Thank you.

Question Ethan around some key metrics, awareness, household penetration, repeat purchase rates for your products. So how are you seeing those data points progress, what are you targeting longer term, where do you feel like you're getting the best ROI on investment to improve upon these metrics today? Maybe you could share some of the learnings in those areas. And last on this topic, are you seeing a meaningful day difference with respect to repeat purchase rates of your product and food service versus retail? And then I have a couple follow-ups. Thanks.

Sure. Okay, so let me just take those in sequence. So a lot of really good metrics that we have available to us now on just overall growth of the business. So I'll spin through some of those. And then you get to some of the areas a little bit harder to tease out. So if you look at SPINS data, for example, for the burger, we're up 177% in units over the second quarter a year ago, up 181% in dollars, second quarter over a year ago. Our velocity this is really, this one is amazing to be our velocity is up 140% over a year ago, for the burger according to SPINS data. So much of this growth is being driven by volume, both in terms of the number of points of distribution, but also in that increased velocity. If you look at just our store count alone, going from 30,000 to 53,000, you're seeing a pretty even split between retail and food service retail about 27,000 locations. Food service about 26,000. On the repeat data, we don't actually have fresh data on that. I think we shared this last time that with the Beyond Burger it’s at about 40% repeat, I'm very curious to see what that number is, I am curious around two numbers around the new 2.0. Because I do think it's a much improved product. One is the -- is in repeat and see whether that's going to rise and so we'll do some spend on that to figure that one out. And then second is just the overall velocity of that are we going to see an increase in velocity based on that improved innovation there. So, overall, we're seeing very, very strong trends in terms of investment. One of the things that I'd really like to see is the partnerships we form with these food service organizations that I mentioned in my introductory comments are really meaningful and important. And so to jump in with him and do co-marketing support their marketing, I just went -- I have been twice today to Dunkin Donuts, right down the street. And I've had a couple coffees and a few sausage. And their personnel are wearing our shirts, the signs are everywhere. And I love our product and support our customer I was at Del Taco quite a bit this weekend. And same thing, they're wearing our shirts, they've got our signage up same with Carl's Jr. and [indiscernible] Tim Horton the same. So that, in my view is really where you're going to get the best bang for your buck. Because we really have a campaign around, tasting, it's believing. And man, it's easy to really believe once you go into one of those places the weight of preparing the product I think is really well done. It's a place that people familiar with eating. So in terms of investment, I find that to be a pretty compelling case.

Okay.

Yes, okay.

I didn’t mean to cut you off, and you have something else to add on.

No, I just want to make sure I was in…

No, that's all helpful color. I appreciate. I'll throw in two quick ones and just kind of group them together. So, Ethan, can you -- competitively it's been topical, the seemingly quite down a bit. The potential for impossible to enter U.S. retail, how you're thinking about the risk and the potential timeline, maybe we can get your updated thoughts on that. And then Mark, just housekeeping on the guidance. So EBITDA now up a bit less than $5 million year-to-date. You didn't put a number on it, but now you expect it to be positive. Maybe you can talk a little bit -- drill down a little bit on how you're thinking about EBITDA margin progression to back half the year. So we can kind of have a better sense on how to quantify our models here for EBITDA. Thank you.

Yes, sure. So on the question about competition, I think I actually really do believe this answer, in terms of just people say it all the time. But I think there's real truth to it that it’s a $1.4 trillion industry getting more players in that are willing to market and tell the story, I think is really important. We like competition. We particularly like it when we're winning. But I think overall, competition keeps everybody sharp. In terms of a particular company entering retail, we just stay focused on what we're doing. And I'll tell you, I'm not sure that we're all selling to the same customer, same consumer rather. So if you think about what our value proposition is, we’re building meat directly from plants our promise to the consumers are going to make it indistinguishable at some point, and that we're getting closer and closer. We listen to what they want in terms of ingredients. And so we really stayed away from genetic modification, anything artificial soy, et cetera, in recent years. And so, that I think appeals to a very broad set of consumers you're going to have some that are very comfortable GMOs, but a lot that aren't right. So there's going to be a division within consumers and who's buying what kind of product. Then you look at other companies like Tyson or Purdue, and others that are may be considering these blended products and so that'll appeal to a particular type of consumer. So I feel very good about our strategy as new entrants come into the market, we've got tremendous lead in terms of distribution, in terms of brand awareness. And I think our innovation here is only to get better. So I recognize there's competition out there, but I'm also really eager to compete.

So Kevin, yes, to really reiterate on the EBITDA guidance that we gave, we think positive EBITDA that kind of bracket as we start to scale up, we're going to see some of the benefit, really dropping through. You can see, Q1 to Q2 dropped almost twice the gross profit dollars. At these volume levels, that really starts to drop through the model. As you saw, very, very strong quarter with that gross profit performance. And EBITDA as you know, adds back for things like that, more re-management expense that we had in the quarter, it's a non-cash item anyway. But that in some for us to be at a 10% EBITDA margin in the quarter was very, very strong performance. I think it really highlights the true profitability that we're starting to achieve here. Sequentially in Q3 we -- Q2, Q3 are the stronger quarters for us, we think we're going to have slightly better in Q3, and at these volume levels, we'll still see this gross profit drop through. For the year the fourth quarter, probably seasonally a little lighter for us. And that that volume drop through as well, may not be as strong. But, this is a new plateau of profitability for us. I think, as you look at gross profit, positive operating income in the second quarter. That's a very strong achievement for us as well. And I think these are going to continue to help drive that EBITDA margin for us.

Okay. Thank you guys. Good luck.

Thank you very much.

[Operator Instructions] Our next question comes from Adam Samuelson with Goldman Sachs. Your line is now open.

Yes, thanks. Good afternoon, everyone. I was hoping to get a little bit more color on the longer term investment and on the supply chain side. Specifically, kind of digging more into Rob's question, I guess. And I think, in the prepared remarks, there was an allusion to internalizing kind of some of the supply chain, I think, I guess that was in the relation to some of the co-packing. But given the capital, kind of on the balance sheet, given the growth ahead of you. Do you see a point in time, whether it's 2021, 2022, 2020, where you have to start reaching a decision point on vertically integrating more production, whether that's raw material procurement, co-packing, or you start reaching a point where you minimum need a bigger production based on what you have in Missouri? And then I have a follow up on the guidance.

Sure. So I think it's a foregone conclusion that we will continue to expand our footprint in Missouri. We are adding significant square footage in the next year there. I also think that if you look at our own modeling of production, that there are cost savings available to us through continuous lines that are significant. That said, there are benefits to this model of both segmenting the production of the protein and fat metrics and that system within our own house, and then line of forming a packing to occur outside. So we'll probably always have a blend of those two approaches. And just on that balance of capital requirements and the speed at which we can bring on in our own production facilities, versus where the demand is and the need for external partners will drive that mix. But I think, as you've heard me speak about we are very committed to this notion of in at least one category with one important product within five years or less underprice animal protein and I see internal production as a significant path in that direction. That said, we have a lot of really good partners, and they are on this journey with us. And so they're making modifications to their own system. So I think it's too early to tell whether we're going strongly in one direction versus the other. I think hybrid is probably the best answer right now. Mark, I don’t know if you want to add to that?

No.

Okay.

And then -- appreciate the color. And then just following up on the guidance, I think the revenue guidance went up 30 -- or the baseline went up $30 million from last quarter. And just any color, I presume, I believe last quarter Tim Hortons was not in the guidance. And so presumably it's the inclusion of Tim Hortons and Dunkin is kind of the bigger distribution gains that are now in the guidance, but just where expectations from a channel perspective have exceeded your own, any color there'd be helpful?

Yes, it’s another good question. So Tim Hortons is in the forecast with respect to the sauces they’re offering, but again, to our conservatism, we have excluded there the burger from our internal modeling and forecast, because it's still in what they refer to as LT or test mode. Duncan is not yet in either, because it's still in test mode. So those would be additive. I think some of the things that are really driving the much stronger results really be around both the increased distribution more generally, as well as it's really high velocity number. Both of those are operating in our favor. So I think if you look back at the history of our introduction of key partners in food service, my expectation is that cadence will be followed into the near future. But we haven't baked those into our model yet.

I appreciate the color. I'll pass it on. Thanks.

Great, thank you.

And at this time, I'd like to turn the call back over to Ethan for any closing remarks.

Thank you very much. So in closing, I did want to share an experience that we had at our research center in Los Angeles center, we call them Manhattan Beach project. Chris Paul, who's a professional basketball player and an investor and advocate for Beyond Meat, along with his parents and his broader family brought 30 or so teenage children to visit with us as part of an education initiative with Club 61, a non-profit Chris started in honor of his grandfather. The children who come from communities in each of the cities where Chris has played, New Orleans, Los Angeles and Houston enjoyed a tour of each of our research facilities, and a meal around our new breakfast, sausage patty. To see the children quickly grasp the idea that you can and would want to build meat recommend plants and to feel their contagious excitement on glimpsing the future was truly gratifying. But I share this experience to make a point. It was in there enthusiasm that it became clear that there's a broader movement afoot. Not everyone may appreciate it or see it yet. But the generation represented by these children, we are offering them an opportunity to empower themselves to make a difference in their own health, the health of their families and communities and to make their own statement about their relationship to the earth and the life that we share it with. When a new generation, and the newest generation finds the disruptive to be intuitive, we know the change is on the way. With Chris’s visit that day, we were lucky enough to witness such a moment. So I want to thank you for joining this call for listening to our journey. And we look forward to reporting back to you next quarter. Thank you very much.

Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude the program. You may not disconnect. Everyone, have a great day.