Cyanotech Reports 10.6% Sales Increase and Improved Gross Profit in Q3 2024

Cyanotech Corporation reported its financial results for the third quarter and nine months ended December 31, 2024, showing a net sales increase of 10.6% to $6.2 million compared to $5.6 million in the same period last year. For the nine months, total net sales reached $17.9 million, up from $17.1 million in the prior year. The company achieved a gross profit of $2.2 million for the quarter, representing a gross margin of 35.3%, an increase from 29.5% in the previous year. However, the company recorded a net loss of $224,000 for the quarter, a significant improvement from a loss of $1.0 million in the same period last year.

The financial performance reflects a strategic shift in product sales, with notable increases in bulk sales of both astaxanthin and spirulina, which rose by 84.5% and 59.0%, respectively. This growth was partially offset by a decline in packaged sales of astaxanthin. Operating expenses decreased to $2.2 million from $2.5 million year-over-year, primarily due to reduced sales and marketing costs. Despite the overall improvement in sales and gross profit, the company continues to face challenges, including a cumulative net loss of $2.6 million for the nine months, although this is an improvement from a loss of $3.2 million in the prior year.

Cyanotech's operational developments include a focus on cost-saving initiatives and adjustments in production to align with customer demand. The company has implemented measures such as reducing headcount and compensation through attrition and furloughs, as well as eliminating discretionary expenses. Additionally, the company has made changes to its sales and marketing team, including the appointment of a new Chief Commercial Officer, to enhance its market presence. As of December 31, 2024, the company had cash of $359,000 and working capital of $602,000, a decrease from $707,000 and $2.0 million, respectively, at the end of the previous fiscal period.

The company continues to navigate liquidity challenges, with a reliance on a line of credit and a related party loan. As of December 31, 2024, Cyanotech had $890,000 outstanding on its 2023 Loan, which was converted from a line of credit, and $2.75 million on a related party line of credit. The company is subject to annual financial covenants, and while it received waivers for covenant violations in the past, it remains under scrutiny for future compliance. The management has expressed concerns regarding its ability to continue as a going concern, given the ongoing operating losses and cash flow challenges.

Looking ahead, Cyanotech aims to stabilize production volumes and enhance its market position in the natural products sector. The company plans to focus on higher-margin consumer products while exploring opportunities for bulk sales both domestically and internationally. However, management cautions that future results may be impacted by various factors, including market demand fluctuations, competition, and production costs. The company remains committed to improving its operational efficiency and maintaining its reputation for quality in the microalgae product market.