NAII Natural Alternatives International Inc

Natural Alternatives International, Inc. ("NAI") (Nasdaq: NAII), a leading formulator, manufacturer, and marketer of customized nutritional supplements, today announced a net loss of $3.1 million, or $0.52 per diluted share, on net sales of $25.2 million for the second quarter of fiscal year 2024 compared to net income of $1.8 million, or $0.31 per diluted share, in the second quarter of the prior fiscal year.

Net sales during the three months ended December 31, 2023, decreased $17.1 million, or 40%, to $25.2 million as compared to $42.3 million recorded in the comparable prior year period. During the same period, private-label contract manufacturing sales decreased 44% to $23.0 million. Private-label contract manufacturing sales decreased primarily due to reduced orders from several of our larger customers associated with their efforts to reduce excess on-hand inventories, partially offset by increased shipments from other existing customers and shipments to new customers.

CarnoSyn® beta-alanine royalty, licensing and raw material sales revenue increased 48% to $2.2 million during the second quarter of fiscal year 2024, as compared to $1.5 million for the second quarter of fiscal year 2023. The increase in CarnoSyn® beta-alanine royalty, licensing, and raw material sales revenue during the second quarter of fiscal 2024 was primarily due to an increase in orders from existing customers, increased royalty income, and favorable volume rebate activity.

Our net loss for the six months ended December 31, 2023, was $3.8 million, or $0.64 per diluted share, compared to net income of $2.9 million, or $0.49 per diluted share, for the six months ended December 31, 2022.

Net sales during the six months ended December 31, 2023, decreased $26.2 million, or 31%, to $59.2 million as compared to $85.4 million recorded in the comparable prior year period. During the six months ended December 31, 2023, private-label contract manufacturing sales decreased 33% to $55.2 million, as compared to $82.6 million in the comparable prior period. CarnoSyn® beta-alanine royalty, licensing and raw material sales revenue increased 40% to $3.9 million during the first six months of fiscal 2024, as compared to $2.8 million for the first six months of fiscal 2023.

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 $16.6 million and working capital of $41.0 million, compared to $13.6 million and $41.1 million respectively, as of June 30, 2023. As of December 31, 2023, we had zero outstanding on our credit facility.

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 $12.5 million, and increased the interest rate on borrowings on the line of credit to 2.25% from 1.29% above the daily simple SOFR rate.

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:	($0.52		)					$0.31							($0.64		)					$0.49
Diluted:	($0.52		)					$0.31							($0.64		)					$0.49
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	$16,595			$13,604
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	$155,733			$134,152
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	$155,733			$134,152