Friday, February 9, 2024; 8:00PM EST
Matt Custer – President and Chief Executive Officer
Felicia Ladin – Chief Financial Officer
Aloha from Kona, Hawaii. Thank you all for joining us today. I am 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.
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 10Q and fiscal year 2023 10K report filed with the Securities and Exchange Commission.
I will turn it back to Matt for comments on the quarter, Matt:
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 to private label brands to save on costs. 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 messaging on our premium quality and competitive advantages. Our naturally farmed 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?
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, 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%, compared to gross profit of $1,764,000 and gross s 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 trends.
- Net loss for the current quarter was $1,020,000, or $0.16 per diluted share, compared to 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 and $5.4 million, respectively as of March 31, 2023.
I’ll hand the call back to Matt for concluding comments, Matt:
We received two questions this quarter:
Question 1: Please comment on trends in inventories.
Answer: 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 2: 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 USA; 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, in pristine surroundings. How our products are cultivated is our strongest competitive advantage vs. any other in the world. We intend to amplify our consumer education and message on social channels where transparency and authenticity are paramount.
We have 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 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 about how we set the standard of the highest bar for natural microalgae cultivation.
Thank you for attending the call. Aloha