Cyanotech Corporation (ticker: CYAN (LON:CYAN)), a leader in the cultivation and production of microalgae-based products, reported a decrease in net sales and a larger operating loss in the third quarter of fiscal year 2024 compared to the same period last year. The company's President and CEO, Matt Custer, and CFO, Felicia Ladin, discussed the quarterly results and strategies to navigate the macroeconomic challenges affecting the industry.
Key Takeaways
- Net sales for Q3 of fiscal year 2024 were $5,582,000, a 5% decrease from Q3 of fiscal year 2023.
- Gross profit margin for Q3 decreased slightly to 29.5% from 29.9%.
- Operating loss for the quarter was $848,000, reflecting a decrease due to lower sales and higher manufacturing costs.
- Net loss for Q3 was $1,020,000 or $0.16 per diluted share, compared to a net loss of $598,000 or $0.10 per diluted share in the previous year.
- Cash and working capital as of March 31, 2024, were $661,000 and $3.7 million, respectively.
Company Outlook
- Cyanotech is revitalizing its sales and marketing team, including the addition of a Chief Commercial Officer and strengthening the sales team.
- The company is focusing on enhancing consumer messages about premium quality and competitive advantages.
- Cyanotech emphasizes its U.S. grown products, sustainable practices, and natural sourcing from Hawaii to align with consumer demand.
Bearish Highlights
- The macroeconomic environment has led to lower sales across the portfolio, particularly in Spirulina bulk sales.
- Consumers are trading down to private label brands to save costs, impacting premium product sales.
- The market for bulk material is increasingly price-sensitive with competition from lower-priced international ingredients.
Bullish Highlights
- Cyanotech is leveraging its unique selling proposition of naturally formed microalgae and pristine Hawaiian cultivation conditions.
- The company is enhancing digital capabilities and e-commerce strategies to educate and engage consumers.
Misses
- The company experienced a decrease in net sales and a larger operating loss compared to the previous year's quarter.
- Cyanotech's gross profit and operating loss were negatively impacted by the macroeconomic environment.
Q&A Highlights
- Cyanotech has reduced inventories of bulk Spirulina and Astaxanthin to align with sales demand and conserve cash.
- Initiatives to increase sales include showcasing the natural cultivation process through aerial flyover videos and amplifying consumer education on social media.
- The company has made key team additions, such as the Head of Global Sales and Business Development and a new e-commerce manager, to enhance sales strategies and digital presence.
In conclusion, Cyanotech is facing a challenging macroeconomic environment with lower sales and increased competition from lower-priced international products. However, the company is actively adapting its sales and marketing strategies, focusing on its competitive advantages, and enhancing its digital and e-commerce capabilities to address these challenges and capitalize on consumer demand for transparency and sustainability.
InvestingPro Insights
Cyanotech Corporation (ticker: CYAN) has been navigating a tough macroeconomic landscape, as reflected in the recent quarterly financials. To provide further context to the company's performance and stock behavior, here are some insights based on real-time data from InvestingPro:
InvestingPro Data:
- Market Cap: Cyanotech's market capitalization stands at a modest 3.93M USD, highlighting the company's small-cap status in the marketplace.
- Price / Book: The stock is trading at a low Price / Book multiple of 0.29, which could suggest undervaluation relative to the company's book value.
- Revenue Growth: The company has experienced a revenue decline of 13.19% over the last twelve months as of Q3 2024, consistent with the reported decrease in net sales.
InvestingPro Tips:
- Debt Concerns: Cyanotech operates with a significant debt burden and may face challenges in making interest payments, which investors should consider when evaluating the company's financial health.
- Stock Performance: The stock has taken a considerable hit, with a one-week total price return of -25.84%, and is trading near its 52-week low, indicating recent bearish sentiment among investors.
For those looking to delve deeper into Cyanotech's financials and stock performance, there are additional InvestingPro Tips available at https://www.investing.com/pro/CYAN. These tips can provide valuable guidance for making informed investment decisions. Remember to use coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With the InvestingPro platform, users can access a total of 13 InvestingPro Tips that cover a comprehensive range of financial metrics and stock indicators, offering a nuanced view of Cyanotech's market position and future prospects.
Full transcript - Cyanotech Corp (CYAN) Q3 2024:
Matt Custer: Aloha from Kona, Hawaii. Thank you all for joining us today. I'm Matt Custer, President and Chief Executive Officer of Cyanotech. Joining me on the call today is Felicia Ladin, our Chief Financial Officer. I will turn the call over to Felicia to provide our forward-looking statement.
Felicia Ladin: Thanks, Matt. Our discussion today may include forward-looking statements. We do not undertake any obligation to update forward-looking statements, either as a result of new information, future events or otherwise. Our actual results may differ materially from what is described in these forward-looking statements. Some of the factors that may cause results to differ are listed in our publicly filed documents. For additional information, we encourage you to review our 10-Q and fiscal year 2023 and 10-K report filed with the Securities and Exchange Commission. I will turn it back to Matt for comments on the quarter. Matt?
Matt Custer: The macroeconomic environment led to lower sales across the portfolio on a year-to-date basis being driven particularly by Spirulina bulk sales. Industry data shows consumers are not pulling back from dietary supplements, but they have begun trading down the private label brands to save on cost. The market for bulk material is increasingly price-sensitive with many companies sourcing lower-priced international ingredients. In the face of these challenges, we have revitalized our sales and marketing team, starting with the addition of a Chief Commercial Officer this past August and strengthening the sales team. We have focused on enhancing our consumer message on our premium quality and competitive advantages. Our naturally formed microalgae from our location in Hawaii with pristine waters and natural sourcing practices aligns with rising consumer objectives and growing demand for responsible, sustainable and U.S. grown products. Now I'd like to turn over the call to Felicia to discuss the third quarter. Felicia, please?
Felicia Ladin: Thank you, Matt, and good evening, everyone. Net sales for the third quarter of fiscal year 2024 were $5,582,000 compared to $5,891,000 for the third quarter of fiscal year 2023 and a decrease of 5% due to the reasons Matt mentioned. Gross profit for the third quarter of fiscal year 2024 was $1,649,000, with a gross profit margin of 29.5% and compared to gross profit of $1,764,000 and a gross profit margin of 29.9% in the third quarter of fiscal year 2023. Operating loss for the third quarter was $848,000 compared to operating loss of $404,000 last year, reflecting a decrease of $404,000 due to lower sales and higher manufacturing costs as a result of matching production volumes with demand, which is lower than historical levels. Net loss for the current quarter was $1,020,000 or $0.16 per diluted share compared to a net loss of $598,000 or $0.10 per diluted share in the prior year. The company had cash of $661,000 and working capital of $3.7 million as compared to $974,000 or $5.4 million, respectively, as of March 31, 2023. I'll hand the call back to Matt for concluding comments. Matt?
Matt Custer: We received two questions this quarter. Question one, please comment on trends and inventories. We have drawn down our inventories of bulk Spirulina and Astaxanthin as part of our strategy to conserve cash by aligning on-hand inventory with sales demand. Question two, can you provide additional color or more granular detail about the company's initiatives to increase sales. Today's consumers demand more transparency, they are increasingly conscious and curious about the ingredients that go into products they consume. Our products are not just made in the U.S.A., but grown here in Hawaii. We can visually showcase our farm and facilities with unedited aerial flyover video to show, not tell how we grow the products naturally outdoors and pristine surroundings. How our products are cultivated as one of our strongest competitive advantages for other -- any others in the world. We intend to amplify our consumer education and message on social media channels for transparency and authenticity are paramount. We've also made key additions to the team with newly created Head of Global Sales and Business Development, whose expertise will drive a more value-added, tailored and consultative approach to our business-to-business sales process. Centered around addressing the specific needs of bulk customers across the industries. Finally, we have strengthened our e-commerce and digital capabilities with the addition of a new e-commerce manager whose expertise to build and leverage a user-generated content and social media strategy centered around consumer education and visual storytelling not only to highlight our 40 years of product quality and benefits, but also to share how we set the standard of the highest bar for natural microalgae cultivation. Thank you for attending the call. Aloha.
End of Q&A:
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