Natural Alternatives International, Inc. Announces 2024 Q2 and YTD Results
- Significant decrease in net sales by 40% to $25.2 million in Q2 FY 2024 compared to the previous year.
- Private-label contract manufacturing sales decreased by 44% to $23.0 million in Q2 FY 2024.
- CarnoSyn® beta-alanine revenue increased by 48% to $2.2 million in Q2 FY 2024.
- Experienced an operating loss in Q2 and six months ended December 31, 2023, primarily due to reduced sales.
- Temporary closure of high-speed powder processing facility in Carlsbad, California due to reduced customer orders.
- Anticipated re-opening of the facility in the fourth fiscal quarter of 2024 to support new customer orders in fiscal 2025.
- Expectation of generating a net loss in the second half of fiscal 2024 and overall net loss for the fiscal year.
- Cash of $16.6 million and working capital of $41.0 million as of December 31, 2023.
- Entered into an amendment to credit facility with Wells Fargo Bank, N.A. on February 13, 2024, modifying terms and increasing interest rate.
- Net loss of $3.1 million in Q2 FY 2024.
- Decrease in net sales by 40% to $25.2 million in Q2 FY 2024.
- Operating loss due to slowdown in sales across private-label contract manufacturing segment.
- Not in compliance with income and fixed charge coverage requirements of credit facility as of December 31, 2023.
- Decreased total borrowing capacity on the line of credit to $12.5 million with increased interest rate.
Insights
The reported net loss of $3.1 million by Natural Alternatives International, Inc. (NAI) signifies a concerning reversal from the net income of $1.8 million in the same quarter of the previous fiscal year. This downturn is reflective of a substantial 40% decrease in net sales, which can be attributed to a reduction in orders from key customers. The financial health of NAI is further called into question by their non-compliance with the income and fixed charge coverage requirements of their credit facility. The renegotiation of the credit terms, including a reduction in borrowing capacity and an increased interest rate, indicates a tightening of liquidity and potential concerns about the company's ability to service its debt.
From an investor's perspective, the decrease in private-label contract manufacturing sales by 44% could be seen as a red flag for NAI's core business operations. However, the 48% increase in CarnoSyn® beta-alanine royalty, licensing and raw material sales revenue suggests that there are still growth segments within the company. The contrasting fortunes of these two segments may prompt investors to consider the diversification of NAI's revenue streams and the potential for future growth in the specialty ingredients market.
NAI's performance must be contextualized within the broader nutritional supplement industry. The significant sales decline in the private-label contract manufacturing sector could be indicative of broader market trends, such as increased competition or shifts in consumer demand. The increase in CarnoSyn® beta-alanine sales, however, could suggest that NAI is well-positioned within niche markets that value proprietary ingredients. It is essential to assess whether NAI's growth in this segment aligns with consumer trends towards specialized performance supplements.
Additionally, the temporary closure of the Carlsbad facility points to operational adjustments in response to current market conditions. While this may help manage costs in the short term, it is imperative to evaluate the long-term implications of such closures on the company's production capacity and customer relationships. The anticipated reopening in the fourth fiscal quarter to support new customer orders suggests optimism for a recovery, but the actual impact will depend on market reception and the successful resumption of operations.
The financial results of NAI must be examined against the backdrop of broader economic conditions. The reduction in customer orders leading to decreased sales could be symptomatic of an economic downturn or a shift in consumer spending patterns. The increase in the interest rate on the line of credit, which now stands at 2.25% above the daily simple SOFR rate, can be seen as a response to the current interest rate environment and the perceived risk associated with the company's financial position.
Furthermore, the cash position and working capital levels provide some cushion for NAI, but the overall net loss forecast for fiscal 2024 raises questions about the company's strategic direction and cost management. The company's ability to navigate through these challenging financial conditions and adapt to the economic climate will be crucial for its long-term viability and the confidence of its stakeholders.
CARLSBAD, Calif., Feb. 13, 2024 (GLOBE NEWSWIRE) -- Natural Alternatives International, Inc. ("NAI") (Nasdaq: NAII), a leading formulator, manufacturer, and marketer of customized nutritional supplements, today announced a net loss of
Net sales during the three months ended December 31, 2023, decreased
CarnoSyn® beta-alanine royalty, licensing and raw material sales revenue increased
Our net loss for the six months ended December 31, 2023, was
Net sales during the six months ended December 31, 2023, decreased
We experienced a loss from operations during the three and six months ended December 31, 2023. This operating loss was primarily due to a slowdown in sales across our private-label contract manufacturing segment. We previously announced the temporary closure of our high-speed powder processing facility in Carlsbad, California due to a reduction in customer orders. We currently expect this facility will re-open and resume operations late in our fourth fiscal quarter of 2024 to support anticipated deliveries of new customer orders in the first quarter of fiscal 2025. Subject to our updated consolidated sales forecast, we now expect to generate a net loss in the second half of fiscal 2024 and an overall net loss in fiscal 2024.
As of December 31, 2023, we had cash of
As a result of our loss for the three and six months ended December 31, 2023, we were not in compliance with the income and fixed charge coverage requirements of our credit facility as of December 31, 2023. On February 13, 2024, we entered into an amendment to our credit facility with Wells Fargo Bank, N.A. that, among other changes, waived all prior instances of non-compliance, modified our continuing compliance requirements going forward, decreased our total borrowing capacity on the line of credit to
Mark A. Le Doux, Chairman and Chief Executive Officer of NAI stated, “We remain sanguine about the future growth potential for our business, despite the challenges we currently face. We are gaining momentum with new customer relationships and our efforts to build a strong pipeline of new sales opportunities. While some of our existing customers continue to work through rebalancing their supply and demand, we anticipate these efforts will soon result in the need to replenish their inventories.”
“Our balance sheet continues to be a source of strength and we believe our recently revised credit facility fortifies our working capital position and allows us to further focus on driving sales growth.”
An updated investor presentation will be posted to the investor relations page on our website later today (https://www.nai-online.com/our-company/investors/).
NAI, headquartered in Carlsbad, California, is a leading formulator, manufacturer and marketer of nutritional supplements and provides strategic partnering services to its customers. Our comprehensive partnership approach offers a wide range of innovative nutritional products and services to our clients including scientific research, clinical studies, proprietary ingredients, customer-specific nutritional product formulation, product testing and evaluation, marketing management and support, packaging, and delivery system design, regulatory review, and international product registration assistance. For more information about NAI, please see our website at http://www.nai-online.com.
This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 that are not historical facts and information. These statements represent our intentions, expectations and beliefs concerning future events, including, among other things, our ability to develop, maintain or increase sales to new and existing customers, our ability to attract and retain sufficient labor, COVID-19 and related impacts on the availability of raw materials, our future revenue profits and financial condition, as well as future economic conditions and the impact of such conditions on our business. We wish to caution readers these statements involve risks and uncertainties that could cause actual results and outcomes for future periods to differ materially from any forward-looking statement or views expressed herein. NAI's financial performance and the forward-looking statements contained herein are further qualified by other risks, including those set forth from time to time in the documents filed by us with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K.
SOURCE - Natural Alternatives International, Inc.
CONTACT – Michael Fortin, Chief Financial Officer, Natural Alternatives International, Inc., at 760-736-7700 or investor@nai-online.com.
Web site: http://www.nai-online.com
| NATURAL ALTERNATIVES INTERNATIONAL, INC. | |||||||||||||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | ||||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||
| December 31, | December 31, | ||||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||||
| NET SALES | $ | 25,202 | 100.0 | % | $ | 42,295 | 100.0 | % | $ | 59,171 | 100.0 | % | $ | 85,422 | 100.0 | % | |||||||||||
| Cost of goods sold | 24,815 | 98.5 | % | 36,081 | 85.3 | % | 55,647 | 94.0 | % | 73,837 | 86.4 | % | |||||||||||||||
| Gross profit | 387 | 1.5 | % | 6,214 | 14.7 | % | 3,524 | 6.0 | % | 11,585 | 13.6 | % | |||||||||||||||
| Selling, general & administrative expenses | 3,900 | 15.5 | % | 3,729 | 8.8 | % | 7,581 | 12.8 | % | 7,558 | 8.8 | % | |||||||||||||||
| (LOSS) INCOME FROM OPERATIONS | (3,513 | ) | -13.9 | % | 2,485 | 5.9 | % | (4,057 | ) | -6.9 | % | 4,027 | 4.7 | % | |||||||||||||
| Other expense, net | (318 | ) | -1.3 | % | (199 | ) | -0.5 | % | (658 | ) | -1.1 | % | (423 | ) | -0.5 | % | |||||||||||
| (LOSS) INCOME BEFORE TAXES | (3,831 | ) | -15.2 | % | 2,286 | 5.4 | % | (4,715 | ) | -8.0 | % | 3,604 | 4.2 | % | |||||||||||||
| Income tax (benefit) expense | (761 | ) | 473 | (950 | ) | 738 | |||||||||||||||||||||
| NET (LOSS) INCOME | $ | (3,070 | ) | $ | 1,813 | $ | (3,765 | ) | $ | 2,866 | |||||||||||||||||
| NET (LOSS) INCOME PER COMMON SHARE: | |||||||||||||||||||||||||||
| Basic: | ( | ) | ( | ) | |||||||||||||||||||||||
| Diluted: | ( | ) | ( | ) | |||||||||||||||||||||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | |||||||||||||||||||||||||||
| Basic | 5,850 | 5,866 | 5,850 | 5,893 | |||||||||||||||||||||||
| Diluted | 5,850 | 5,873 | 5,850 | 5,908 | |||||||||||||||||||||||
| NATURAL ALTERNATIVES INTERNATIONAL, INC. | |||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | |||||
| (In thousands) | |||||
| (unaudited) | |||||
| December 31, | June 30, | ||||
| 2023 | 2023 | ||||
| ASSETS | |||||
| Cash and cash equivalents | |||||
| Accounts receivable, net | 10,457 | 7,022 | |||
| Inventories, net | 19,596 | 29,694 | |||
| Other current assets | 7,745 | 6,690 | |||
| Total current assets | 54,393 | 57,010 | |||
| Property and equipment, net | 53,207 | 53,841 | |||
| Operating lease right-of-use assets | 44,994 | 20,369 | |||
| Other noncurrent assets, net | 3,139 | 2,932 | |||
| Total Assets | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||
| Accounts payable and accrued liabilities | 12,981 | 14,450 | |||
| Line of Credit | - | - | |||
| Mortgage note payable | 9,371 | 9,517 | |||
| Operating lease liability | 47,926 | 21,413 | |||
| Total Liabilities | 70,278 | 45,380 | |||
| Stockholders’ Equity | 85,455 | 88,772 | |||
| Total Liabilities and Stockholders’ Equity | |||||
FAQ
What was the net loss reported by Natural Alternatives International, Inc. (NAII) in Q2 of fiscal year 2024?
How much did the net sales decrease in Q2 FY 2024 compared to the previous year for NAII?
What caused the operating loss for NAII in Q2 and six months ended December 31, 2023?
What was the cash position of NAII as of December 31, 2023?
Who did NAII enter into an amendment to their credit facility with on February 13, 2024?
