Landec Corporation (LNDC) CEO Albert Bolles on Q1 2020 - Earnings Call Transcript
Landec Corporation (NASDAQ:LNDC) Q1 2020 Results Earnings Conference Call October 2, 2019 11:00 AM ET
Company Participants
Albert Bolles - CEO
Greg Skinner - CFO
Conference Call Participants
Brian Holland - DA Davidson
Anthony Vendetti - Maxim
Chris Krueger - Lake Street Capital Markets
Mike Petusky - Barrington Research
Operator
Good morning, and thank you for joining Landec's First Quarter of Fiscal Year 2020 Earnings Call. With me on the call is Dr. Albert Bolles, Landec's Chief Executive Officer, and Greg Skinner, Landec's Chief Financial Officer.
During today's call, we may make forward-looking statements that involve certain risks and uncertainties that could cause actual results to differ materially. These risks are outlined in our filings with the Securities and Exchange Commission, including the Company's Form 10-K for fiscal year 2019.
Let me turn the call over to Albert.
Albert Bolles
Thank you, and good morning, everyone.
As a leading innovator in diversified health and wellness solutions, Landec is comprised of two operating businesses, Lifecore Biomedical and Curation Foods. Lifecore Biomedical is a fully integrated contract development and manufacturing organization or CDMO, that offers highly differentiated capabilities for development, fill and finish of difficult to manufacture pharmaceutical products distributed in syringes and vials.
As a leading manufacturer of premium injectable Hyaluronic Acid or HA, Lifecore brings over 35 years of expertise as a partner for a global and emerging biopharmaceutical and biotechnology companies across multiple therapeutic categories to bring their innovations to market.
Curation Foods, our natural foods business is focused on innovating plant-based foods of a 100% clean ingredients to retail club and food service channels throughout North America. Curation Foods is able to maximize product freshness to its geographically dispersed network of growers, refrigerated supply chain and patented BreatheWay packaging technology, which naturally extends the shelf life of fruits and vegetables. Curation food brands include, Eat Smart fresh packaged vegetables and salads, Olive premium artisan oil and Vinegar products and Yucatan and Cabo Fresh avocado products.
We are focused on creating shareholder value by delivering against our financial targets, strengthening our balance sheet, implementing our strategic priorities to improve operating margins at Curation Foods and investing in growth and driving top line momentum at Lifecore.
For the first quarter of fiscal '20, consolidated revenues increased 11% to $138 million compared to the first quarter of last year. However, we experienced that planned net loss and a decrease in gross profit in EBTIDA during the first quarter of fiscal '20 compared to the first quarter of last year. This resulted in a first quarter net loss of $0.16 which met our guidance.
We are reiterating our full year fiscal '20 guidance, which calls for consolidated revenue from continuing operations to grow 8% to 10%. EBITDA of $36 million to $40 million and earnings per share of $0.28 to $0.32. As we communicated last quarter, we expect to generate substantial profits in the second half of the fiscal year, and we are positioned to achieve our goals for fiscal '20, well our team is fully engaged in our strategy.
As a reminder, the second half acceleration is due to three factors. Number one, the timing of revenues and profits at Lifecore. Number two, the timing in revenues and profits from the sale of the avocado products. And number three, the impact from our cost out initiatives, which we expect to yield significant cost savings in the second half of fiscal '20.
Before I go into more detail concerning plans or fiscal '20 and beyond, let me turn the call over to Greg for some financial highlights.
Greg Skinner
Thank you, Al and good morning, everyone.
Revenues increased during the first quarter of fiscal 2020, primarily due to the $16.2 million revenue contribution from avocado products, which were acquired on December 1, 2018, and from a $2.2 million or 4% increase in solid revenues compared to the first quarter of last year. These increases were partially offset by first, a $3.2 million decrease in green bean revenues, due to the extremely heavy rains and flooding in the Ohio Valley during May and June, resulting in yields of 35% to 50% of normal.
Second, a planned $1.4 million decrease in revenues in the packaged vegetables in bags and trays business. And third, a $576,000 planned decrease at Lifecore. The Lifecore decrease was a result of lower fermentation revenues during the first quarter of fiscal 2020 compared to the prior year, due - primarily due to the timing of customer shipment within the fiscal year.
The Lifecore revenue decrease was partially offset by a 49% increase in product development revenues, due to an increase in development activities during the quarter. Gross profit decreased during the first quarter of fiscal 2020 compared to the first quarter of last year, primarily due to a $548,000 decrease in the Curation Foods segment from an unfavorable product mix. And from a $453,000 decrease in Lifecore segment, as a result of a decrease in revenues and the timing of production within the fiscal year.
Net income decreased during the first quarter of fiscal 2020 compared to the first quarter of last year, due to first, a $1 million decrease in gross profit. Second, a $3.1 million increase in operating expenses, primarily from the addition of Yucatan Foods.
Third, a $1.3 million increase in interest expense due to the increase in debt from the acquisition of Yucatan Foods. And fourth, no increase in the fair market value of the Company's Windset investment, compared to a $1 million increase during the first quarter of last year. These decreases in net income were partially offset by a $1.5 million decrease in income tax expenses.
EBITDA decreased $3 million to $314,000, during the first quarter of fiscal 2020, compared to the first quarter of last year, due to the decrease in gross profit and from an increase in operating expenses partially offset by an increase in depreciation and amortization expenses.
As Al noted in his opening remarks, we are reiterating our fiscal 2020 guidance set forth in our fourth quarter fiscal 2019 earnings release. We continue to expect consolidated revenues from continuing operations to grow 8% to 10%, with Lifecore growing in the range of 10% to 12% and Curation Foods growing 8% to 10%.
We continue to project consolidated earnings per share to be $0.28 to $0.32 and consolidated EBITDA to be in the range of $36 million to $40 million. At the segment level, after corporate expense allocations, we expect EBITDA for Curation Foods of $19 million to $21 million, and EBITDA for Lifecore to be $21 million to $23 million. Corporate is expected to realize an EBITDA loss of approximately $4 million after allocations to Curation Foods and Lifecore.
For the second quarter of fiscal 2020, we are providing guidance for a consolidated revenues to be in the range of $142 million to $146 million, with a net loss per share of $0.04 to $0.06, due to certain shipments for Lifecore, O and avocado products expected for the second quarter shifting to the third quarter and a portion of the cost out savings for the second quarter delayed to the second half. EBITDA is expected to be in the range of $4 million to $5 million.
During fiscal year 2020, we expect quarterly operating income to increase sequentially each quarter with the fourth quarter generating the highest level of quarterly income. The timing of our income generation during the year is driven by the fact that, first, Lifecore plans to generate over 80% of its operating income for the year, during the second half, in line with historical results based on customer order patterns. Second, all of the operating income from the sale of avocado products will occur in the second half of fiscal 2020.
Third, we expect to recognize a large majority of our cost out savings from our cost out initiatives at Curation Foods during the second half of fiscal 2020. And fourth, our green bean supply has now fully recovered and we expect that business to generate substantial profits in the second half of this fiscal year.
We continue to project cash flow from operations in the range of $26 million to $30 million and capital expenditures in the range of $40 million to $45 million, with a large majority of capital expenditures invested in capacity expansion at Lifecore, and cost out initiatives at Curation Food.
Turning to our financial position. At the end of the first quarter of fiscal 2020, we had approximately $165 million of debt, which translated into a debt to equity ratio of 62%, a debt to tangible assets ratio of 39%.
Our fixed coverage ratio at the end of the first quarter was 1.9, which is well above our covenant of 1.2. Our leverage ratio at the end of the first quarter was 4.4, in compliance with our debt covenant of 4.5 or less. We expect to be in compliance with all of our debt covenants going forward.
Importantly, as we mentioned in the fourth quarter of fiscal 2019 earnings release, at the end of July, we are actively engaged in discussions with our lenders to amend our debt agreements in order to enhance our flexibility. We are discussing our financial structure that will extend the overall terms of the debt, increase the amount of availability and amend our current covenants.
The amendment should give us the necessary liquidity along with cash flow from operations to accelerate our cost out and automation projects and to expand our capacity at Lifecore. We expect to finalize and announce this amendment within the next 30 days.
I'll now turn the call back to Al.
Albert Bolles
Thanks Greg.
We are confident about our plans to drive profitable growth in fiscal '20. Let me go into more detail about the progress we are making in our Lifecore, Curation Food business units. Lifecore continues to see momentum, benefiting from three industry trends. Number one, a growing trend among pharmaceutical and medical device companies to outsource development services and manufacturing.
Number two, a growing number of products seeking FDA approval. And number three, the increasing trend toward injectable drugs. According to report, by global data [indiscernible], the projected incremental demand for injectable drug products is expected to increase by 75 million to 100 million units by 2023. As a highly differentiated and fully integrated CDMO, Lifecore is uniquely positioned to capitalize on these tailwinds.
Through Lifecore's 35 years as a global leader in manufacturing premium injectable grade HA, Lifecore has developed the knowledge to process and manufacture, difficult to formulate and fill pharmaceutical products in both syringes and vials.
This has allowed Lifecore to establish high barriers to competition and create unique business development opportunities, which will continue to augment its businesses on the pipeline of new projects to fill its long-term growth. This has been demonstrated by the 49% increase in our business development revenue during the first quarter of fiscal '20, compared to the prior year period.
Lifecore is also making progress in late stage development customers from Phase 3 clinical studies to commercialization. The planned decrease in Lifecore revenues in the first quarter of fiscal '20 was due to time. We are on track to meet our 10% to 12% Lifecore revenue growth goal for fiscal '20 and Lifecore will be profitable for the remaining three quarters of fiscal '20.
To meet future demand at Lifecore, we'll be investing an approximately $13 million of capacity expansion in fiscal '20. We continue to expect Lifecore to generate on average, low to mid-teen revenue growth over the next five years, as they expand sales to existing customers, and new customers continue to commercialize products that are currently in the development pipeline.
For our Curation Foods business, in the first quarter of fiscal '20, we made progress advancing our strategic priorities to improve financial performance and we will see the benefit of that progress during the third and fourth quarters of this fiscal year.
Our fiscal year '20 strategy for Curation Foods is to focus on growing our higher margin products, optimize our operations, continue to mitigate the cost pressures facing our industry, and to deliver a breakthrough product innovation. Other issues and increased labor costs continue to be the greatest challenge to our business.
Regarding weather, we have taken decisive action to mitigate this risk. First, as part of our gains for fiscal '20, we'll set aside a considerable contingency fund to cover unforeseen produce sourcing issues due to weather-related events, over and above what we have historically set aside in our plans.
Second, in response to weather-related lack of supply green beans in Q1 of fiscal '20, we implemented an over planned strategy in July for green beans. This benefited us greatly, as we have felt very little impact from Hurricane Dorian or heavy rains impacted green bean growing regions. We are forecasting that we'll be able to meet all of our customer demand for green beans this coming holiday season.
Regarding efforts to reduce costs, we advanced our cost out program, which focuses on mitigating risk in our business to offset projected cost increases. Primarily driven by cost of labor, freight and raw material produce sourcing. We met our cost out goal in Q1, we're on track to deliver $18 million to $20 million in savings in fiscal '20.
Our activities focus on managing labor costs and increasing efficiencies in our plants and supply chain. Specifically on labor cost, we moved to a more efficient five day workweek from a six day work week and re-negotiated out labor contract for our Guadalupe facility, contributing $1.8 million in cost savings annually.
Regarding logistics, we captured synergies with the successful integration of Yucatan Food products, by integrating shipments of avocado products, with Eat Smart salad products and our refrigerated trucks.
We also realize additional operational efficiencies and logistics by eliminating low margin delivery round, while continuing to service our customers. These actions resulted in improved service to our customers, will deliver ongoing monthly savings of over $200,000 or roughly $2.5 million annually.
Another example of reducing costs, our R&D operations team work together to reduce packaging material and advertise production for our fast growing, Eat Smart single serve salad business, which grew 27% during the first quarter compared to the prior year quarter, resulting in improving gross margin for the single serve salad products, by 416 basis points.
We'll continue our efforts on improving operational excellence and productivity of automation projects in our facilities. Optimization of the network and moving all of our existing and new packaging designs, formulations to ensure that we're reducing waste and producing product in the most efficient manner.
Further and continuing to strive for operational excellence, in September, the Curation Foods supply chain team successfully started up production in our Mexico facility for avocado products, which is important in order to be processing during the months when avocados are in season and can be purchased at reasonable prices.
Last year due to the timing of the acquisition, the facility was three months late in opening, which resulted in purchasing high cost avocados and production and efficiencies, both of which are significantly impacting margins as we sell through this inventory. With our on-time start up in September, we are purchasing avocados at 50% less than we were purchasing them at the end of last year's production season.
Looking forward to the second quarter of fiscal '20, we have more productivity processes and measures in place to further improve efficiency and improve margins substantially. The positive impact will flow through with the sale of avocado products inventory in Q3 and Q4 of fiscal '20.
A key driver of Curation Foods business growth will be the innovative products that we bring to market, along with focus on growth in our high margin products that deliver on trend. 100% clean ingredients, plant-based food, notably the newer more innovative products in our Eat Smart salad line account for 18% of salad revenues. Consumer demand for plant based foods is rapidly growing.
According to plant-based foods association and the Good Food Institute the retail sales of plant-based food has grown 20% in the last year compared to non-plant based foods growing at only 2%. In line with advancing our innovation strategy, during the first quarter, Curation Foods is in market, testing two breakthrough products that will drive profitable growth. Both of these products are representative of my philosophy and experience, that small changes to existing products deliver major market impact.
Changes we are made to these products are embedded with consumer and customer insights, and we believe the products meet unmet needs. First, we recently launched Yucatan Guacamole Squeeze, a new first of its kind packaged guacamole product in a flexible squeeze pouch that allows for greater usage occasions and convenience. The unique package design allows for guacamole to be used as an everyday condiment.
The technological breakthrough is in the design of the cap and nozzle, which extends the shelf-life and reduces food waste because the guacamole does not brown in the squeeze container after the package is open. Does not only meets an unmet consumer need, but provides us with a competitive advantage. The Yucatan Guacamole Squeeze product is currently in test with Walmart. We are planning for a national expansion once we compile results of the test.
Second, we focused our resources on revamping our patented BreatheWay packaging technology for expansion into new markets. While we'll continue to use our packaging technology to maintain optimal atmosphere for individually packaged produce. We have expanded into new markets with a complete supply chain packaging solution.
The BreatheWay packaging solution is being used to wrap pallets, raspberries addressable from its California Distribution Center. For retailers, this results in reducing shrink, which improves profitability. For consumers, this results can improve product quality and extend its shelf life. We plan to scale this business by extending our solutions to other berry products and to test several other adjacent perishable product categories.
For our natural food brands, we will continue to focus on growing our product lines that deliver high gross margin and growing retail categories. According to Nielsen and IRI syndicated data, each of our natural food brands deliver double digit retail sales growth and outpace the category growth in the first quarter of fiscal '20, compared to the first quarter of last year. Eat Smart sales grew a 11.2%, O brand, premium wine vinegar and olive oil grew 30%, and avocado products grew 16.5%.
We continue to de-emphasize the low margin, low-growth bag and tray fresh cut vegetable products. This shift in our product mix is projected to deliver more than 150 basis points of improvement in gross margin in fiscal '20 compared to fiscal '19.
And all these efforts remain focused on staying true to our mission of protecting our plant for future generations and sustainable business practices. We recently published in our Landec sustainability handbook and are actively setting targets to reduce our environmental impact.
In summary, we have confidence in our guidance for fiscal '20. The Landec team is focused on creating value and delivering against our financial targets, strengthening our balance sheet, implementing our strategic priorities to improve operating margins at Curation Foods, and investing in growth and driving top line momentum at Lifecore. I'm confident in our plan and place to make the changes necessary to be successful and secure our long-term profitable growth to deliver value to our customers, consumers and shareholders.
Thank you for joining us today and for your ongoing interest in Landec. We are now open for questions.
Question-and-Answer Session
Operator
[Operator Instructions] Our first question comes from line of Brian Holland with DA Davidson. Please proceed with your question.
Brian Holland
If you mentioned setting aside in guidance some cushion for sourcing volatility, where do we stand today within that range of outcomes? So in other words, to what extent did the rains and flooding in the Ohio Valley stretch that contingency? And then how quickly can the new produce sourcing initiatives you've spoken to - help to ease some of those pressures?
Greg Skinner
While a lot of our - Brian that's correct. A lot of our - from history, when you look at that - a lot of our contingency uses in the past are probably sourcing issues in the past, have been more of a second quarter, third quarter item. So when we were talking about originally what we had set aside for contingencies, most of that was associated with those quarters.
By time we went out with our guidance for the year in July, we already knew about the green bean issues and the - for the first quarter. So that was factored into our guidance. So we still have a reasonable and what we feel is adequate - more than adequate contingency for the last nine months of the year.
Albert Bolles
Yes. I just want to add, that the over planning strategy is a new approach for us. You know, historically we have not been able to supply green beans, which is a very good product for us, during the holiday season.
And we knew I mean, hurricanes happen every year. So we diversified a geographic regions over plan it and now we are in position, we believe to not be pro-rating customers as we have done historically, which we hope will begin to build that confidence in what we're doing.
Brian Holland
Thank you, appreciate the color and clarity there. With respect to Yucatan, what else do we need to do with respect to heavy lifting there, right? So you've got the production started on time. Sounds like the staff is fully trained. What else do you need to implement there and what is the timing on that look like as we move through the balance of the year? And I'm thinking long-term about initiatives that you have there.
Albert Bolles
Well, you know, we've done a lot of heavy lifting during the summer months to build our staffs. Last year we had a high degree of turnover and we put in extensive training programs this year. So we have the staff in place. We are not seeing high turnover.
And of course, we have started up on time with the low fruit. So that was an heavy lifting we did this year. I think, I've mentioned before we're putting in metrics that weren't there before, around, amount of pounds per day yields, et cetera.
Looking forward, it's about automation for us. We still have a lot of people, particularly under second and tertiary packaging lines doing a lot of handwork. So we see automation there is a way that we will continually improve our margins, just like we're doing it in the Guadalupe facilities. We see that as an opportunity in the future as we get the capital to automate Yucatan.
Brian Holland
Last one for me on the Yucatan, the Guacamole Squeeze product. Curious where the placement is in Walmart for the test? Are you sort of with the dips or with the condiments and where optimally would that product be placed as you think about broader distribution?
Albert Bolles
Yes. So we are roughly 1,300 Walmart's geographically dispersed. We are in the dairy section right now. We have some 16 ounce clock there and we work to the buyer to put it in there. So that's where we are now. We're just accumulating the data and we expect that from that we'll be doing lots of follow-ups with the buyer specific regions, stores to get and understand and mind the data and find the optimal place for us to put and might be a product that goes in more than one spot in the store.
Operator
Our next question comes from line of Anthony Vendetti with Maxim. Please proceed with your question.
Anthony Vendetti
Just to talk about a little bit more about the cost out initiatives and, you know, Al, since you came in, you've been focused on exiting low margin businesses or businesses that didn't make sense as part of the strategy going forward and focusing on high margin products. Can you just give a little more color about - around the exact specificity of those initiatives and what has caused them to get pushed out just a little bit into the second half of this year?
Albert Bolles
Well, there is actually several things that are going on, in the cost out program. We have been fairly aggressive where we can be taking out the low cost - or the high cost low margin SKUs, primarily in our fresh cut vegetable tray and bag line. So that's an ongoing process that we continually doing. The big part of cost out is the installation of the capital that allows us to automate. So that is ongoing. We - as we said, we are a little behind in Q2, but that's only a timing issue because of equipment. We fully expect that to recover in the second half. So we're really focused there on your automation side.
And then thirdly, we have gotten very aggressive in terms of looking at - the kind of packaging we have - how much plastic do we have in the package? Do we have the optimal formulations? All those things we are actively looking at reformulating it, so that we don't disappoint our consumers, but we optimize what we're putting into our bags. That's ongoing and it's pretty much the third leg, if you will, the cost out opportunity that I see.
Anthony Vendetti
Any chance that this gets pushed out into - not just the second half, but into the fourth quarter? Or is it really just right now sounds like a little bit of a timing issue nothing major. And then as you're moving towards these high margin products and calling some of the lower margin products, do you expect because this quarter, right, be the revenue if we exclude Yucatan, which was down, I think 1.5% to 2% - 1.7% I think. Do you expect organic revenue growth to start to show an acceleration as we move into the second half of the year? Or is the current process going to prevent that from happening until fiscal 2021?
Albert Bolles
We see that the organic revenue will grow in the second half. As I mentioned, you know, our single serve salads are really growing - really well for us at retail. We've got a lot of work going on, improve the margins. I think, I mentioned we haven't proved by 460 basis points. So you know our sales continue to grow. We also have a whole new line of restage coming with Eat Smart. It's been a long time since that brand has been refreshed, that consumer data that says, we can drive velocities by the improvements and changes that we have done to the brand restage.
And you'll see that, it's going to be implemented in January. And we have a whole lot coming on as well, which we're projecting a bumper crop and that will continue. And then the second half as well, we see more organic growth coming from our Yucatan line and from Squeeze, continuing to national roll-off.
And you know, just your first question, I don't see - we're not forecasting - we're confident about our cost out number for the year. But cost out is going to be a way of life here. And, we see more in further years, as I mentioned, there is opportunity in Yucatan, and we'll continue to be cost out as part of our culture to improve our margins and our profitability as we continue. And you know, the one area that we still have under investigation is optimizing the network.
There were lot of facilities and we're looking at those - some of the non-strategic assets, procurement logistics. We have a full team dedicated to that and expect to start to see some impact of that, not only in the second half, but in the fiscal year '21 as well.
Operator
[Operator Instructions] Our next question comes from the line of Chris Krueger with Lake Street Capital Markets. Please proceed with your question.
Chris Krueger
Just a couple of questions on the new products. First, on the Guacamole Squeeze product, I believe you stated you're testing at about 1,300 Walmart stores. Is there a timeline for that? How long the test phase will take?
Albert Bolles
Yes. Typically, it's around - about three months, it is the typical test. We've been out there three weeks now, maybe four. We haven't been at all Walmart's, for that a lot of time. But I will tell you, we're getting into the data store-by-store and are seeing some encouraging results.
So we plan on continuing that task. There is a lot going on here with placement, price point - all these things that we just want to test with a partner learn and then we're making plans now for the national launch. You'll see the national launch will be available in the second half of the year, Q3.
Chris Krueger
We'll see national launch not just Walmart but other stores as well?
Albert Bolles
Yes.
Chris Krueger
Okay
Albert Bolles
We're planning on other retailers and maybe even clubs.
Chris Krueger
And then just on the curiosity, how long did it take to develop that product?
Albert Bolles
Well there were some early prototypes done in Q1. I think Q4, Q1 and frankly when I saw and we got into the consumer insights, we accelerated the launch of that product. We wanted to be first mover in the category, and we also have some opportunities to create some competitive barriers to competition.
You'll probably see other Squeeze packages come some follow us, but right now the feature that we are really emphasized on is that we have this proprietary nozzle closure principal package that once you use it, air doesn’t go back in the package and it doesn’t brown which is one of the number one consumer complaints of guacamole.
So there is very little waste with this product. So we - it’s that when we move from the back burner to the front burner got focuses resource designer, put my project management team in place, and executed it I think very well given the short period of time we did.
Chris Krueger
Okay. And my last question is on the BreatheWay Technology to be used for the supply chain of perishable items. I believe in your initial press release you indicated you had a customer already using it for raspberries. Is there a supply - is there a pipeline building within that product and what you see as the market opportunity?
Albert Bolles
So we started with - we started testing with Driscoll's is the largest berry manufacturer in the world and they want to start with raspberries because that's the most perishable berry there is. So we are testing with it now. We're supplying the film and our BreatheWay patch and then we will be retrofitting it on their existing berry launch. So it's in test now, we’re working with them on the details for ramping it up.
But it's a great opportunity for us because it's a low capital play for us and it takes advantage of scaling the BreatheWay Technology which we historically have not really been able to do and provide great value to not only just those but to the customers and to consumers. And we have plans for other adjacent fresh categories as well that are separate from berries that we’ll be testing in the upcoming months.
Operator
Our next question comes from the line of Mike Petusky with Barrington Research. Please proceed with your question.
Mike Petusky
So on the acceleration guidance in salad going forward how much of that hinges on new products et cetera?
Albert Bolles
Well, as I said our single serve salads are growing and have been growing fairly rapidly. So our focus there is to continue to fuel that at retail that's where we are growing and to improve our margins. We do have a new line that we plan to introduce in the second half of the year. We have a major customer who has already agreed to put it into test with us. So we will continue to add innovation to our salads but we’re going to be very, very targeted in what we do.
And we have hired a outside firm innovation firm to help us in terms of being able to find insights with consumers that we can apply to salad. So you're not going to see what we have historically done which just to put a lot of salads out there and see if they stick. We’re doing a much better job upfront and in consumer insights partnering with customers and putting a test and learn process that we can learn together and not pay a high cost of [tuition] in case it doesn't work.
So we have taken a far more targeted approach, but certainly the Eat Smart salads is an area that given where things are going with plant based proteins and just people eating more as I mentioned in my upfront talk that the whole area is plant based foods is really growing. We have a lot of tailwinds here and there, and I think we’re just need to take better advantage of.
Mike Petusky
So it’s not entirely clear, so is the second half - really be acceleration for the rest of the year as I am reading normally, is that around an acceleration in single serve and on new products introduction or is that…
Albert Bolles
So, there is three things so just to be clear, so one is single serve is growing and our focus is to improve the margin as it grows. Number two as we’ll be testing a new line in the second half of the year. And third as I had mentioned on the previous call that, we have a whole restage going out in the Eat Smart brand that we've done several months of testing on and believe that’s going to drive velocities of our existing products.
It's been long time since it’s been a refresh of the Eat Smart brand and it’s frankly outdated and we have some temporary packaging graphics that we believe will improve our velocities.
Mike Petusky
And just a question around the guidance, the third consecutive quarter there wasn't any bump from the fair market value of Windset investment running through the income statement. And I guess what I’m wondering is what’s assuming for the year in terms of that income statement line in your guidance? Thanks.
Greg Skinner
Well right now we just got a new five-year plan from them and whenever we get a new one it kind of reset everything, and then they will be given us their new budget for 2020 coming up probably not until the third quarter. So I would assume for now that the growth as we get closer to the call date is going to slowdown. And so I would think somewhere in the 300,000 range per quarter is probably a reasonable estimate going forward.
Mike Petusky
And you’re seeing 300,000 in the second quarter?
Greg Skinner
That is part of our guidance.
Mike Petusky
And then just last question, just in cash flow if you mentioned that cash flow from ops and CapEx for the quarter? Thanks.
Greg Skinner
Going forward.
Mike Petusky
No, no for Q1?
Greg Skinner
The CapEx - I'm sorry say that again.
Mike Petusky
Cash flow from ops and CapEx?
Greg Skinner
CapEx for the quarter was about 10 million which is about a quarter of the low end of our range for the year and cash flow from operations going to approximate our loss.
Mike Petusky
All right, very good. Thanks guys.
Greg Skinner
Slightly higher.
Operator
Mr. Bolles we have no further questions at this time. I would now like to turn the floor back over to you for closing comments.
Albert Bolles
Once again thank you for joining us today and for your ongoing interest in Landec. Thank you.
Operator
Ladies and gentlemen this does concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.