CARLSBAD, Calif., May 15, 2023 /PRNewswire/ -- Natural Alternatives International, Inc. ("NAI") (Nasdaq: NAII), a leading formulator, manufacturer, and marketer of customized nutritional supplements, today announced a net loss of $2.4 million, or $0.41 per diluted share, on net sales of $32.7 million for the third quarter of fiscal year 2023 compared to net income of $2.5 million, or $0.41 per diluted share, in the third quarter of the prior fiscal year. 

Net sales during the three months ended March 31, 2023, decreased $9.7 million, or 22.8%, to $32.7 million as compared to $42.4 million recorded in the comparable prior year period.  During the same period, private-label contract manufacturing sales decreased 19.3% to $30.4 million. Private-label contract manufacturing sales decreased for most of our customers including two key customers, partially offset by increased sales to our largest customer. The primary driver for our sales decline relates to our customers' excess on-hand inventory levels associated with softening consumer demand. In addition, many of our customers maintained larger inventory balances during the previous twelve months related to supply constraints and have now begun to release these excess inventory positions associated with improving supply chain conditions. Sales were also negatively impacted by lower average exchange rates applied to sales denominated in Euro as compared to the prior year period.

CarnoSyn® beta-alanine royalty, licensing and raw material sales revenue decreased 50.6% to $2.3 million during the third quarter of fiscal year 2023, as compared to $4.8 million for the third quarter of fiscal year 2022. This decrease was primarily due to fewer orders from existing customers as a result of market and inflationary factors along with a general slowdown in the Sports Nutrition sales channel. In addition, the three months ended March 31, 2022, included an unusual ramp up of Sports Nutrition sales activity due to easing COVID restrictions on athletic activities with no corresponding factors in the three months ended March 31, 2023.

Net income for the nine months ended March 31, 2023, was $0.5 million, or $0.08 per diluted share, compared to net income of $7.6 million, or $1.22 per diluted share, for the nine months ended March 31, 2022.

Net sales during the nine months ended March 31, 2023, decreased $0.3 million, or 0.3%, to $118.1 million as compared to $118.4 million recorded in the comparable prior year period.  During the nine months ended March 31, 2023, private-label contract manufacturing sales increased 7.7% to $113.0 million, while CarnoSyn® beta-alanine royalty, licensing and raw material sales revenue decreased 62.0% to $5.2 million compared to $13.5 million for the first nine months of fiscal 2022.

While our sales decreased further than anticipated during the third quarter of fiscal 2023, we expect our sales during the fourth quarter of fiscal 2023 will increase as compared to the third quarter.

Based on our current sales order volumes and our customers' forecasts, we anticipate our fiscal 2023 consolidated net sales will decrease between 10% to 12% compared to fiscal 2022, and we will still generate net operating income for our fourth quarter of fiscal 2023 and for the fiscal year ended June 30, 2023. We believe this decline in near term demand from our customer base is consistent with the overall economic trends in our industry. Changes in sales mix, unfavorable foreign exchange rates, and inflationary factors including increased operational costs, increased labor rates, raw material, freight and supply chain costs are anticipated to negatively impact our near-term financial results.

In March 2023, we implemented a workforce restructuring plan eliminating 32 employee positions, representing approximately 9% of our global workforce. The reduction in workforce impacted all of our global locations and is expected to result in reduced operating expenses of approximately $1.8 million on an annualized basis. During the quarter ended March 31, 2023, we recognized restructuring charges of $449,000, primarily related to severance payments associated with this workforce restructuring plan.

We continue to evaluate further cost reduction opportunities, including working with both suppliers and customers, to mitigate the impact of order reductions and higher operational costs.

As of March 31, 2023, we had cash of $15.6 million and working capital of $40.7 million, compared to $21.8 million and $53.5 million respectively, as of June 30, 2022. As of March 31, 2023, we had $10.9 million available under our line of credit.

Mark A. Le Doux, Chairman and Chief Executive Officer of NAI stated, "Despite the recent volatility in our industry, we remain optimistic about the long-term growth trends for nutritional supplements. We anticipate continued near term headwinds associated with both the overall macro-economic environment and factors specific to our industry."

"While we are seeing some normalization with freight costs, these and other costs continue to trend higher than pre-pandemic levels and future operating costs are expected to be impacted by inflationary pressures and are an area of our focus."

"We continue to aggressively seek opportunities to increase our sales and customer base. I'm excited to report that construction on our new powder manufacturing facility in Carlsbad, California is now complete, and this state-of-the art powder plant began full operations in April 2023."

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 increase sales to new and existing customers, 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.

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

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SOURCE Natural Alternatives International, Inc.