Natural Alternatives International Inc. Reports Decline in Financial Performance, Net Loss Increases 185%

Natural Alternatives International Inc. reported a decline in financial performance for the three months ended September 30, 2024, compared to the same period in 2023. Net sales decreased by 2% to $33.15 million from $33.97 million, primarily driven by a 5% drop in private-label contract manufacturing sales due to reduced orders from a major customer. However, revenue from patent and trademark licensing increased significantly by 42% to $2.52 million, up from $1.78 million.

The company's gross profit also fell by 28% to $2.26 million, down from $3.14 million, contributing to a net loss of $1.98 million, compared to a net loss of $0.70 million in the prior year, marking an increase in loss of 185%. The loss from operations rose to $1.84 million from $0.54 million, indicating a 238% increase in operational loss. Selling, general, and administrative expenses increased by 11% to approximately $4.0 million, attributed to higher compensation, benefits, and legal fees.

Cash flow from operating activities turned negative, with a net cash usage of $3.44 million compared to a cash inflow of $4.50 million in the previous year. The company reported a decrease in cash and cash equivalents to $10.16 million from $11.98 million at the end of June 2024. Accounts receivable increased slightly to $17.62 million, while inventories rose to $25.93 million.

Strategically, the company extended its lease for its Vista, California manufacturing facility for an additional 10 years and 5 months, which increased its lease liability and Right of Use asset by approximately $25.9 million. The company is also investing around $2.3 million in a solar electrical generating system for the facility, with partial reimbursement from the landlord.

As of September 30, 2024, the company was not in compliance with certain financial covenants related to net income and anticipates continued non-compliance in the upcoming quarters. The company is negotiating a potential revised credit facility with Wells Fargo Bank, which has advised that they will not exercise options under the Credit Agreement while considering the request.

Overall, Natural Alternatives International Inc. is facing challenges in revenue generation and profitability, while also making strategic investments to enhance its operational capabilities.