Welcome to Bellring Brands First Quarter 2020 Earnings Conference Call and Webcast. Hosting the call today from Bellring Brands are Darcy Davenport, President and Chief Executive Officer and Paul Rhode, Chief Financial Officer. Today's call is being recorded and will be available for replay beginning at 1:30 pm Eastern Time. The dial in number is 800-585 8367 and the passcode is 6,89,750. At this time, all participants have been placed in a listen only mode.
It is now my pleasure to turn the floor over to Matt Maynor of Bellring Brands for introduction. You may begin.
Thank you. Good morning and thank you for joining us today. With me are Darcy Davenport, our President and CEO and Paul Rhode, our CFO. Darcy and Paul will begin with prepared remarks, and afterwards, we'll have a brief question and answer session. The press release that supports these remarks is posted on our website in both the Investor Relations and the SEC filings section atbellring.com.
In addition, the release is available on the SEC's website. Before we continue, I would like to remind you that this call will contain forward looking statements, which are subject to risks and uncertainties that should be carefully considered by investors as actual results could differ materially from these statements. These forward looking statements are current as of the date of this call and management undertakes no obligation to update these statements. As a reminder, this call is being recorded, and an audio replay will be available on our website. And finally, this call will discuss certain non GAAP measures.
For a reconciliation of these non GAAP measures to the nearest GAAP measure, see our press release issued yesterday and posted on our website. With that, I will turn the call over to Darcy.
Thanks, Matt, and thank you all for joining us this morning. As most of you know, the Q1 of fiscal 2020 was our Q1 as a publicly traded company. I'm happy to report that we had an excellent quarter and a strong start to the year. I will begin today's discussion by giving an overview of our Q1 performance and then provide an update on distribution, marketing and innovation. Finally, I will give some insight into our 2020 guidance.
Paul will then discuss our financial results and outlook more detail before we open it up for your questions. During our Q1, the convenient nutrition category remained strong, continuing to be a tailwind for us. As reported by Nielsen, the category was up 5.2% versus the same period a year ago with the total liquids subcategory up 7.1%. Macro trends like main streaming of protein, convenience and snacking continue to fuel the growth. Turning to our performance.
We had a strong Q1 with net sales hitting an all time high of $244,000,000 up 31%, driven by Premier Protein Shakes. Adjusted EBITDA grew 43%, driven primarily by higher sales and gross margin. Although significantly better than a year ago, it is generally in line with our expectations. Premier ready to drink shakes, which represents 80% of our portfolio, was up 50% in sales and consumption was up 28% in tracked channels, driven equally by volume and distribution gains. The difference between shipments and consumption is mainly due to customers building inventory in advance of New Year promotions as well as pipeline to new distribution.
In addition to these drivers, our growth also benefited from the lapping of capacity constraints in the prior year. Lastly, we had 2 exciting launches during the quarter in our 30 gram shake line. Pumpkin Spice, our first limited edition, which we tested in e commerce and Cafe Latte, which is our first shake launch with caffeine. Pumpkin Spice was a successful test and Cafe Latte has already become our 3rd best selling flavor in several accounts where it is sold. We continue to be pleased with the results of our flavor strategy.
Dymatize, our 2nd largest brand, continues its successful diversification into e commerce and food drug mass. We had a strong e Commerce sales quarter and secured additional FDM distribution commitments. Dymatized sales are down in the quarter. However, this is mainly due to lapping a significant pipeline fill in the prior year, so we remain encouraged by the brand's momentum. Our international business had a strong quarter as well, up 16% in net sales, driven by premier protein shakes, mainly in Canada.
Diamatize and PowerBar also contributed, both growing single digits. In the EU, all three brands had new distribution gains with PowerBar and Premier Protein making progress against our FBM expansion strategy. I'm happy to report that from an operational standpoint, our Shape co man network is performing well. We have inventory flexibility to aggressively drive demand and execute on our growth plans. As we have discussed, we have multiple strategies for continued growth and our near term focus with our near term focus on increasing household penetration, expanding distribution and driving innovation.
We are making significant progress on all three fronts. We launched our premier protein national marketing campaign in January, including for the first time national television and increased promotional displays in most of our major accounts. We are pleased with the early brand indicators and the in store execution. In fact, we have already seen a 2 point increase in market share since the launch of the advertising as well as a leap in Google organic search, clearly indicating that we are breaking through with consumers. From a distribution standpoint, shake TDPs increased 34 points or 7 percent in the quarter, with gains in cafe latte across multiple accounts as well as an expanded space on our base flavors.
We also gained an additional SKU this quarter in one of our club accounts. We expect to further increase our shelf presence during the spring resets. From an innovation standpoint, I'm proud of the capabilities we have built as an organization. We have many new innovations in the pipeline and some currently hitting the market. For example, we are introducing our 1st shape line extension, premier protein with oats.
It targets consumers looking for wholesome and balanced offering with 20 grams of protein, 7 grams of fiber and the benefit of oats. The line has 3 flavors that can be served cold or hot and started shipping in January. Our step up in innovation has been a deliberate strategy and we expect it to be a competitive differentiator in years to come. Now I'd like to come back to our outlook. Last evening, we reaffirmed our full year guidance.
Outlook, so I want to provide some additional color. We had a strong Q1 and January consumption is off to a great start, with premier protein shakes growing 48% in tracked channels and non tracked growing even faster. However, we have become aware of changes within our customers' promotional calendars, which will shift revenue from Q2 to Q3 and Q4, slightly heavier to Q4. With this change, in addition to our planned step up in marketing and promotional spend, we expect our net sales and EBITDA to be a bit more back loaded than previously anticipated. Overall, I am pleased with our performance during our Q1 as a publicly traded company.
I'm excited about our new advertising and innovations hitting the market and I look forward to updating you next quarter. Thank you for your continued support and I'm going to now turn the call over to Paul.
Thanks, Arce, and good morning, everyone. As Arce mentioned earlier in her remarks, we had a good Q1 and the results were generally in line with our expectations. Net sales grew 31 percent to $244,000,000 and adjusted EBITDA increased 43% to $58,600,000 delivering an EBITDA margin of 24.0 percent. Our overall net sales percent 38%, respectively. This increase was fueled by growth for our ready to drink shakes, including distribution gains in FDM, club and e commerce.
In addition, our shake growth benefited from the lapping of capacity constraints in the Q1 of 2019, which negatively impacted our prior year net sales. Dymatized net sales and volume declined 10% and 4%, respectively, driven by lapping a significant customer pipeline fill in the prior year. We continue to expect diametized performance to be stronger in the second half of the year. PowerBar net sales and volumes declined 12% 28%, respectively, as we continue to see the impacts from our portfolio optimization strategy in North America. We expect to cycle the effect of this reduced power of our distribution in the second half of fiscal twenty twenty.
Turning back to consolidated results, gross profit increased 39% this quarter with gross margin up 210 basis points to 37.4%. Gross margins benefited from higher net selling prices, favorable product mix and lower freight, offset partially by higher raw material cost. SG and A expenses as a percentage of net sales increased 40 basis points to 15%, driven by higher warehousing costs, marketing spend and incremental public and standalone company costs. Adjusted EBITDA for the quarter was $58,600,000 an increase of 43% with adjusted EBITDA margin of 24.0 percent, an improvement of 190 basis points. Our cash balance is approximately $30,000,000 resulting in net debt of 7 $50,000,000 and net leverage of 3.5 times.
Our net leverage target remains 3.0 times and we plan to reach that in fiscal 2021. Turning to fiscal 2020 guidance, we continue to expect fiscal year 2020 net sales and adjusted EBITDA to be 1.0000000000 to $1,050,000,000 $192,000,000 to $202,000,000 respectively. However, as Darcy mentioned earlier, we are expecting a shift in customers' promotional calendars for premier protein shakes, which will move anticipated revenue out of Q2 and into the second half of the fiscal year. This revenue timing shift coupled with incremental Q2 investments behind our national TV advertising campaign will cause both net sales and adjusted EBITDA to be higher in the second half versus the first half of the fiscal year. With that, I would like to turn the call back over to the operator for questions.
And your first question comes from the line of Ken Goldman with JPMorgan.
Hi, good morning and thank you for the question. So the moment, Darcy, that you mentioned the revenue shifting into the second half, the stock took a little bit of a leg lower. Can you add a little bit of color into the timing change
in terms
of the promotion? What happened? Do you think it's sort of just standard fare in terms of sometimes customers decide to move things into a different quarter? Just help
us if
you can understand a little bit more of what happened there.
Sure. Hi, Ken. Hi. Yes. So this I believe that we highlighted this last quarter that we often see changes in the promotional calendar.
And sure enough, we did this year. There is so the move is from Q2 into Q3 and Q4, heavier in Q4, but we see this most competitors, I think, would see this as similar thing and we as well as standard fare.
So it's nothing atypical, it's just something that you think has you've seen in the Is that a fair way of describing it?
Correct.
Something similar? Okay. Thank you. And then a quick follow-up on DYMETYZ. I think you if I were if I go back and look at my notes from before the IPO, I think management was looking for a little bit of a better performance by now for DYMETYZE.
Can you just give us a little more color as to whether it's been a little disappointing or whether that's a timing shift as well? Any help there would be appreciated too.
Yes. So I don't think it's necessarily disappointing. I believe that we still expect the business to rebound from last year. There was an inflection point where it was declining and we were lapping some of the declines of specialty and we started seeing an increase in both e commerce and FDM. The one thing that we are lapping is a large pipeline fill in 1 of our in a club customer last year.
So because those volumes are very large, it's a tough comp. So we still expect the year to land in the positive direction. And we're already we're seeing some good distribution Great. Thanks so
much. Sure. Thanks. Great. Thanks so much.
Sure. Thanks.
Your next question is from Andrew Lazar with Barclays.
Good morning, everybody.
Good morning.
I guess first off, I want to make sure I heard you right. I think you said that in January, for Premier for the ready to drink shakes, consumption was up 48% in tracked and then faster in non tracked. If I heard that right, I'm just trying to get a sense of if that was in line with what you had expected consumption would do or it sounds like a bigger number than I would have expected, but I don't know if it was in line with how you thought about it. And then second would be, it may be too early, but if you can talk a little bit about the or from what you've seen so far around the incrementality of some of the new flavorsproducts that you're putting out there? Thank you.
So for the consumption in January, it is we're very pleased with the number. And then Q1, we were at 28% and then Q1 we were at 28% and then to see January hitting at 45%, we're definitely think it's a little bit better than our expectations. However, we're doing a lot of things we've never done before. So, I think that we were as you know, we've never done national television. We've been pulling back from for the really the last 2 years on promotion, as well as mass marketing.
So this is the first time in years that we've actually been able to press the accelerator. But yes, we're very pleased with the consumption results.
Great. And then the incrementality? Yes.
Yes. Regarding incrementality, Yes. Regarding incrementality, we are still seeing incrementality with our flavor strategy. We are now up to cafe latte will be our 8th flavor in the line. And the way we evaluate incrementality is looking at chocolate the effect of chocolate and vanilla, are base flavors.
It's a little difficult honestly to evaluate that right now because we're lapping the 2 flavor strategy. So we are seeing a decline in chocolate and vanilla currently, but that is more a reaction to the fact that they were the only ones being sold a year ago.
Right.
So it is messy right now. I will just be honest. However, having cafe latte be the number 3 flavor in the line where it's sold in several of our accounts is really encouraging.
Thanks very much.
Thank you.
Your next question is from Chris Growe with Stifel.
Hi, good morning.
Good morning.
Hi. I had a question first if I could and just to better understand the phasing of EBITDA then between the first half and second half. And as you probably know, Post was able to give a little bit more color around the percentages. We already were more second half loaded. Should we be obviously even more second half loaded?
Can you give any relative size of first half versus second half? I guess the question for Paul.
Sure. Yes. So, I think the way we're thinking about it is, yes, we're seeing some shift in promotional timing, which would push a little bit more revenue than we had initially anticipated towards the second half. And so I think the short answer to your question is, yes, I would think that based on I think without there, yes, I think there's a little bit more movement into the second half than the first half, but not dramatically so. So I think a little bit more on the revenue side.
But yes, we do expect to see some movement.
And so And
EBITDA should follow the revenue. Yes.
That's okay. Thank you. That's okay. And then I just want to understand the like the shipment timing for the new products. So, cafe latte, I believe, did that ship last quarter?
And then oats is shipping this quarter. Is that the way to think about it? I'm just trying to understand like the incremental shipment factor from those new products and the timing is sort of the way that they'll benefit the revenue growth.
Correct. Yes, Cafe Latte did start shipping in the Q1 and then we are seeing protein with those in the Q2.
Yes. So just for specifics, Cafe Latte started shipping in October and then Protein with Oats began shipping in e commerce in the beginning of January and is shipping in line on 2one, so just earlier or late last week.
And would that line up with your expectations previously and therefore as we think about the revenue growth and the incremental nature of those incremental shipments, that's pretty well as expected?
As expected, the one thing that I would say is as we gain distribution and watching it on the shelf that will obviously raise or lower our expectations. I I don't think that we expected Cafe Latte to shoot to number 3.
Okay, got you. That's great. Thanks for your time.
Thank you. Your next question is from John Baumgartner with Wells Fargo.
Good morning. Thanks for the question.
I guess first off, Darcy, just coming back to that revenue shift you noted for favoring Q4, because I guess calendar wise at that point it's really getting away from peak consumption season for the category. Are you getting the sense all that retailers are maybe looking to build interest in consumption maybe counter seasonally? And I guess I'm crossed up because you're not the 1st company in the category to mention changes in shipment timing and it seems to run almost counter to normalized patterns this year.
So I think that retailers are experimenting with different timing to maximize their promotions. We've seen different retailers evaluate again different timing, different bundles, etcetera. So absolutely, I believe that's happening. With regards to seasonality of the category, the only seasonality we see is really, we have about a 90 index in November, December, and then that shoots up in Jan, Feb. But actually, back to school timing is actually a good time for the category.
And I think it mainly just follows foot traffic within the store.
Okay. That's helpful. And then just to follow-up on the volume strength for the shakes both in measured and non measured channels. I mean that's included some fairly hard comps
in the last couple of
months and it's also prior to the uptick in the advertising and the impressions in the market, which you would think would have even more of a benefit going forward. So I guess my question is, is there an increasing chance that you can run pretty tight on capacity again, even with the advanced notice that you've had coming into the year? I mean, I hadn't contemplated it, given the pre advance notice you had given your suppliers and all.
But I mean, how do
you think about capacity now versus what your expectations are back in October?
It's a great question. I would say that we have 2 flexibility levers that give me confidence that we have plenty of inventory and capacity. The first is safety stock or shake inventory. We deliberately increased our inventory as we went into Q2, so we could absorb demand increases. And then the second is just the co man network.
And we do have the ability to search higher if needed. So with those two levers that we feel confident that we can, again, surge inventory and manage that increase of demand. Now, I mean, if suddenly the business is tenfold higher, I think that's probably a good issue to have.
Great. So anything short of tenfold. Okay. Sounds good. Thank you very much.
Your next question is from Ken Zaslow with Bank of Montreal.
Good morning, everyone.
Good morning.
Just two quick questions. One is, you kind of said to the higher end of your guidance, both on sales and EBITDA. Can you talk about what is actually driving that? And what is the increased confidence, particularly given that there's a shift to the 4th quarter?
Yes. I think it's a combination of a very strong Q1. And then, the early reads of both the new products as well as the advertising very early, but we're feeling good about where we are. Also, as we talked about earlier in the call, the consumption is we're pleased with where the consumption is in January.
And then second question, in terms of capacity, just to double check, you're not seeing any other building or any other capacity, co packing capacity expansion across any of the premier type of products out there. Is that a valid comment?
I would answer this twofold. The first is there was a there has been a ton of expansion throughout the last 2 years. And so there is a startup curve. So the existing network is now, I would say, over the hump of the startup curve and now is performing very efficiently. So I would say that's the first piece.
The second piece is, I don't think I'm comfortable in this setting to talk about new lines, etcetera. But I think there is some growth in the network that is happening.
Okay. I appreciate it. Thank you. Yes.
Thank you.
Your next question is from Bill Chappell with SunTrust Robinson.
Hi. This is actually Grant on for Bill. Thanks for taking my question. Had one on the consumer base now that you guys have lapped the capacity constraints in the year ago period. Are you seeing kind of the consumers that left the category come back?
Are you seeing new consumers come into the category? Just trying to get a little bit more detail on the breakout of the volume growth this quarter.
So we haven't completely lapped the 2 flavor strategy yet. So we are if you're looking at consumption, and this is actually good for you guys to know. So as you look at consumption, we reintroduced the new flavors basically last year between February April. So all of the new flavors would be back on the shelf for the most part in April. So we are still lapping that.
But back to your question around new consumers, we do believe that we have regained all any of the lost consumers. We actually, during that period of time, lost less consumers than we ever would have thought. They actually went to chocolate and vanilla, and it's more of a testament to the loyalty to the brand as opposed to necessarily a loyalty to a flavor. And I think even more is that we saw our household penetration go from 5% for the brand now to 5.8%. That's percentage wise, that's pretty good jump, although still a small number and highlighting how much room for growth there is.
Got it. Thank you. And then just had a quick one on DYMETYZE. Is there any way you guys could quantify the timing of promotion impact on growth in the quarter? Maybe a consumption number there would help too.
Thank you.
So the you're talking about us lapping the promotion in the prior year, what was the impact of that to their
Correct. Correct.
Yes. It is most of the decline.
Got it. Thank you very much.
Thank you.
Your next question is from Brian Spillane with Bank of America.
Hey, good morning, everyone. Good morning.
So I guess I had just
had two questions related to maybe the impact of the advertising that you've run here early in the year. I guess, 2 things. 1, given that it seems like it's having an effect, right, in terms of market share, any thoughts about how maybe you approach back to school differently in terms of maybe spending more advertising around the back to school timeframe?
I still even though I'm pleased with the results so far, I still would say it's early.
Okay.
But we are evaluating it. So we are going to continue to watch it again a few weeks in. The result, there's been a nice bump to the business as well as, like I said, some of the digital indicators like Google search, which is nice, but we're still watching. And also, the advertising goes for the next through Q2. So we will evaluate the results and then assess our strategy going forward.
And then maybe second, somewhat related is just as you're seeing the increase in consumption here early in the year, Just how have you fared in terms of in stock levels and also just being in stock with the most popular SKUs? So just how you've has there been any sort of static around that as you've gone through January early Feb?
I think it's fairly normal on the existing flavors. We in SDM, we always have in stock issues. Honestly, those are the things that we go back to our retailers and explain why we need more facings of the existing flavors. That is at an extreme when you don't have history like on the new flavors such as cafe latte. So we've seen a fair amount of out of stocks at where we have cafe latte.
But I think over time, retailers see it and they adjust.
Okay, great. Thank you.
Thank you. Your next question is from David Palmer with Evercore ISI.
Hi, good morning. Good morning. I know it's early to talk about out years, but if the new products this year have good repeat and I know that's an assumption, but you've typically had pretty good repeat for your products. How should we think about 2021 in terms of that being is that going to be more of a year like this one where we'll look back on 2020 and say that's a typical year, 2021 will be comparing against a fairly typical year and that you'll have similar amounts of innovation, marketing and spending, even the timing of the new products? Or will or is there something unusual about this year just like the one you're lapping last year?
And then I have a follow-up.
I think 2020 is more typical. This isn't you're going to say this is about as obvious as it comes, but 2020 is more typical than 2019. And I think from an innovation standpoint, I mean, we have a strategy right now of ramping up innovation. So, I think that but there's only so much that the retailers can handle and an organization can handle. So yes, in general, I would say 2020 is a typical year that you can use.
Now having said that, if our marketing efforts surprise us in a positive way, I could see us pushing putting more spend on advertising.
Thank you. And I guess related to that, if you are going to be doing more on the marketing side and perhaps even pursuing new areas of product extensions and innovation pace that cost money. I wonder on the leverage side of that, it costs money to have co packers and certainly have co packers waiting for you. How should we think about the leverage in the model as you get to greater scale? Do you can is there even leverage within this co packing model such that you can have a bit of a flywheel back into marketing?
So I mean
from an overall leverage perspective, I mean I think as we've talked about previously, I mean we have a target leverage of 3 times and we think we can get into that range in the next fiscal year or so. But we feel like within our current model, we can and you mentioned it's an SLI model, we can continue to invest behind our marketing and our debt or to increase our leverage to do that. We feel like we could do that within the confines of our business model as it is.
I mean, I guess, and just to clarify, what I'm really talking about is, if you're a little under 20% EBITDA margins currently, can you reinvest in marketing and have that EBITDA margin continue to creep up into the 20s, say, and find leverage in the model even while as you reinvest in marketing, assuming the new products work? Thanks.
Got it. Sorry, I misinterpreted. Yes. So I think that's a good point. I think we can I think there's a couple of ways for us to think about it?
I think as our business grows and we gain scale, we do think there can be additional gains on the EBITDA margin side, but we also see this as a high growth business that we want to continue to invest behind. And so we will continue to do that so that we drive top line growth. And so as we've looked at our long term algorithm, we've talked about an 18% to 20% EBITDA margin. So I think that would imply that we would continue to invest behind our brand to continue driving that top line double digit growth.
Yes. I think our long term algorithm assumes that we will reinvest in the businesses.
Okay. Thank you.
Thank you. Your next question is from Jason English with Goldman Sachs.
Hey, good morning, everyone. Thank you for spotting me in. Congratulations on a good start to the year. A couple of quick questions for me. The program you shift, the promotional shift with the retailer you're talking about, are they shifting out the program for the entire category?
Or have they just swapped your brand out for another competitive brand?
I'm not sure if we have that information. We know that they have moved like I said, they're experimenting with different bundles as well as timing. So I'm not sure if yes, I don't know if I have that specific information.
Okay. Well, higher order, can you discuss what you're seeing in the competitive landscape? Obviously, it's a focus for Simply Good Foods recently in the shake space. We're seeing Quest push in. We're seeing Pure Protein.
We're seeing Equate to the private label side with a lot of activity and obviously the investment behind some of the brands that are in the coolers too. There's just a lot of activity out there. What are you seeing in terms of impact to your business? And if we think about the competitive landscape more holistically, this health and wellness shaped space had been fragmenting. It looks like it was beginning to reconcentrate, but it's with the mod activity, it looks like we could be on the cusp of another sort of bit of a refragmentation cycle.
Is that fair?
I'm sorry, I know there was a lot in I
will start rambling through that question.
Well, I'll do my best to answer it and then let me know if I missed something. So the category is, I mean, as you guys know, it is attractive and competitive has been competitive for years. Obviously, I still maintain that the competitive activity, again, for the last couple of years. I think what is encouraging is that for the last 2 years, we've in essence as a brand had to watch because we didn't have the ability to press accelerator. And what is nice now is that we can now kind of play our hand and we can get back in there, launch national advertising, accelerate our innovation, push for promotions and displays, which we know drives the business.
So, to answer your question about how it's affecting our business, we have not seen a tremendous unique brand. And we still have a very low household 10 and so we have them to grow.
Makes sense. Thank you.
Thank you.
Your next question is from Rob Dickerson with Jefferies.
Thank you very much.
So a couple of quick questions. I guess first question is going back to the spring reset and digging into what that is. I'd say the number of categories that are fairly large and a little bit more growthy over the past couple of years, we've as outward observers have heard and seen the retailers at times maybe resetting the shelf or taking a little bit longer to reset the shelf than maybe historically done because maybe they're looking to expand overall square footage. Like you said, maybe there's a bundling piece they're testing. So I sit here now and I look at your stock performance on the day, which is obviously pressured.
But I kind of want to give you the opportunity too to say, okay, well, there is a little bit more shift into the back. Sometimes that shift can be perceived as a negative. And sometimes though the negative is not correct because is there a possibility that the shift has something to do with just ongoing retailer support of a subcategory within food, some of which operates in the health and beauty aid section, that's actually done very well. And now the retailers actually say, okay, well, we want to support this more so, but we need to step back. We might need more time, there's more competition and we need to figure out how to really reset the shelf, not just in club, but kind of across channels?
So I do not view the shift as negative. I actually think for our business specifically just because we've come off an odd year where we had eyes because they see that we're one of the most productive SKUs on the shelf. So I believe that we will have a more successful spring reset than we did fall reset. So I don't believe that the back half comment is at all negative. I actually think that could actually be positive because it takes time for a lot of our advertising to set in.
And the other thing that is unique about this category is many categories have one time of the year that the entire nation resets. That is not this category. It is a rolling reset. So I mean, I think I estimated that it's about 50% in the fall, 50% in the spring, but that does change.
Okay, perfect. Great. And then I guess just to touch on cash usage this year. Obviously, there are a number of moving parts since having gone public. But just asset light model, good free cash flow generation, haven't really touched on that much today in the call.
How should we all be thinking about cash usage going forward, if in fact you don't need to really put it into capacity?
Yes. So I mean, this is, as you mentioned, we're an asset light model. It's a strong cash generating business, and we expect that to continue. We did have negative operating cash in the Q1, but that's not atypical for us because we tend to have heavy shipments in the month of December, which drives our receivable balances higher. And so that tends to cause a little bit of a cash outflow.
But we're still expecting strong cash flow for the year. Obviously, we have cash taxes and interest expense, which combined are in the neighborhood of about $80,000,000 but we expect otherwise to generate strong free cash flow. Our CapEx, we continue to guide to $4,000,000 of CapEx. So we still expect strong cash generation for the year.
Yes, I mean, I guess I was kind of asking if we've heard from Post right there levered a little bit lower than historic standards for that company. For you, you're I think around 3 times, but also still kind of under the auspices of Post. So I was trying to gain more color as to I think I've heard you say, yes, we already have an ongoing pipeline, thinking about kind of maximized leverage levels for you and any appetite whatsoever for kind of near term tuck in or just overall acquisition activity would be the next
fiscal year that we could get down to our target of 3 times. We get into next fiscal year that we could get down to our target of 3 times. Yes, acquisition opportunities are we're always looking. I don't know if you want to touch on acquisitions?
Yes, I think that what's fundamentally different between Bellring and Post is that we have a massive organic growth opportunity with Premier. And I think we still believe that it is by far the biggest opportunity in the category. So we are going to feed that and that is our focus. Now having said that, as we look down the road, we will always be watching what's out there. And I think towards the beginning at the end of 2020 and the beginning of 2021, we'll be in a really good cash position to act on something that we find interesting and that would be synergistic with our other businesses.
Super. Thank you.
Thank you.
Your final question comes from the line of Pamela Kaufman with Morgan Stanley.
Hi, good morning. So I wanted to ask about your product innovation pipeline. I'm curious if Cafe Lattes' early success influences the way that you're thinking about new innovation in terms of combining other functional benefits with the core product? And any update on the timing of your plant based shake launch?
So from an innovation standpoint, we are constantly looking at different claims. We're looking at different types of protein. We're looking at even different formats. So and if you remember, it is a long development cycle. So, the we it takes anywhere between 18 24 months to develop a shake.
So we already have several different paths that we are evaluating from an innovation standpoint. And I think that in this forum, I don't think I'm comfortable talking about specific innovation and evaluating where we think, we're looking at the trends and evaluating where we think the next place to mine is.
Thanks. And can you talk about the international opportunity for Premier? You mentioned the growth that it's experiencing in Canada. So how far along are you in the launch in Canada? And where else do you see opportunity for growth internationally?
We see Premier, as well as PowerBar and Dymatize, having a very large opportunity internationally. Our biggest market is Canada for Premier, but we are seeing some solid growth in the EU. We just launched in the U. K. For Premier and getting distribution in the FDM area, and we are also launching in Mexico.
So I think that across the board, and we have a sizable international business for Dymatize, about 40% of the business is in
international through distributors. And then
obviously, we have So overall, I think the I think the So overall, I think the I think the way I've talked about the international opportunity is it takes time. It is absolutely a growth driver. I think we're uniquely positioned because we have an office in Germany. And I think that that will be a growth driver, but it does take time to build it.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.