NAII Narrows Losses on Strong Revenue Growth, Cash Dips

TL;DR

**NAII's revenue jump and narrowed loss are promising, but watch that cash burn – it's a red flag for liquidity.**

AI Summary

Natural Alternatives International, Inc. (NAII) reported a net loss of $291,000 for the three months ended September 30, 2025, a significant improvement from the $1.982 million net loss in the same period last year. Revenue increased to $37.73 million, up from $33.15 million in Q1 2024, representing a 13.8% year-over-year growth. Gross profit more than doubled to $4.397 million from $2.259 million, indicating improved operational efficiency. However, cash and cash equivalents decreased from $12.325 million at June 30, 2025, to $7.744 million at September 30, 2025, primarily due to $4.023 million in cash used in operating activities and $1.030 million in investing activities. The company's total assets grew to $156.945 million from $151.939 million, while total liabilities increased to $87.924 million from $83.513 million. Royalty and licensing income from beta-alanine patents decreased to $1.7 million in Q1 2025 from $2.5 million in Q1 2024.

Why It Matters

NAII's ability to significantly reduce its net loss while growing revenue by nearly 14% is a critical indicator for investors, suggesting a potential turnaround in profitability. The improved gross profit margin reflects better cost management or pricing power, which could enhance long-term financial health. However, the substantial decrease in cash from operations and investing activities, alongside increased inventory, signals potential working capital strain that could impact future liquidity. Competitively, NAII's reliance on beta-alanine patents, despite a dip in related royalty income, remains a key differentiator in the nutritional supplement market, but sustained cash burn could hinder innovation and market expansion.

Risk Assessment

Risk Level: medium — Despite a significant reduction in net loss from $1.982 million to $291,000, NAII experienced a substantial net cash outflow from operating activities of $4.023 million for the three months ended September 30, 2025, compared to $3.443 million in the prior year. This persistent cash burn, coupled with a decrease in cash and cash equivalents from $12.325 million to $7.744 million, indicates ongoing liquidity challenges that could impact future operations and growth.

Analyst Insight

Investors should monitor NAII's next quarter closely for signs of improved cash flow from operations and a reversal in the declining cash balance. While revenue growth is positive, the current cash burn suggests potential short-term liquidity risks. Consider holding if already invested, but new investments should be approached with caution until cash flow trends stabilize.

Financial Highlights

debt To Equity

1.27

revenue

$37.73M

operating Margin

0.8%

total Assets

$156.95M

total Debt

$97.13M

net Income

-$0.29M

eps

N/A

gross Margin

11.6%

cash Position

$7.74M

revenue Growth

+13.8%

Revenue Breakdown

Key Numbers

• $37.73M — Net Sales (Increased from $33.15M in Q1 2024, a 13.8% year-over-year growth.)
• $(0.29)M — Net Loss (Significantly improved from $(1.98)M in Q1 2024.)
• $4.40M — Gross Profit (More than doubled from $2.26M in Q1 2024.)
• $(4.02)M — Net Cash Used in Operating Activities (Increased from $(3.44)M in Q1 2024, indicating higher cash burn.)
• $7.74M — Cash and Cash Equivalents (Decreased from $12.33M at June 30, 2025.)
• $1.7M — Beta-alanine Royalty/Licensing Income (Decreased from $2.5M in Q1 2024.)
• $18.91M — Accounts Receivable (Increased from $14.64M at June 30, 2025, suggesting potential for future cash inflow but also collection risk.)
• $30.65M — Inventories, net (Increased from $24.87M at June 30, 2025, indicating higher stock levels.)
• $20.10M — Accounts Payable (Increased from $15.35M at June 30, 2025.)
• 6,176,778 — Common Shares Outstanding (As of November 12, 2025.)

Key Players & Entities

• NATURAL ALTERNATIVES INTERNATIONAL, INC. (company) — Registrant
• SEC (regulator) — Securities and Exchange Commission
• $37.73 million (dollar_amount) — Net sales for Q1 2025
• $33.15 million (dollar_amount) — Net sales for Q1 2024
• $291,000 (dollar_amount) — Net loss for Q1 2025
• $1.982 million (dollar_amount) — Net loss for Q1 2024
• $4.023 million (dollar_amount) — Net cash used in operating activities for Q1 2025
• $7.744 million (dollar_amount) — Cash and cash equivalents at September 30, 2025
• CarnoSyn (company) — Trademark for beta-alanine
• SR CarnoSyn (company) — Trademark for beta-alanine

FAQ

Risk Factors

• Decreasing Cash Position [medium — financial]: Cash and cash equivalents decreased from $12.325 million to $7.744 million in the quarter, primarily due to $4.023 million in cash used in operating activities. This trend requires careful monitoring to ensure sufficient liquidity.
• Increasing Working Capital Needs [medium — financial]: Accounts receivable increased by $4.268 million to $18.912 million and inventories increased by $5.783 million to $30.654 million. While this can support future sales, it ties up significant cash and increases carrying costs.
• Reliance on Beta-Alanine Royalties [low — financial]: Royalty and licensing income from beta-alanine patents decreased by $0.8 million year-over-year to $1.7 million. A continued decline in this segment could impact overall profitability.
• Increased Operating Expenses [low — operational]: While revenue grew, the net loss improved significantly due to gross profit doubling. However, Selling, general and administrative expenses remained relatively stable at $4.113 million, suggesting that operational efficiencies are being realized.
• Growing Liabilities [low — financial]: Total liabilities increased to $87.924 million from $83.513 million, driven by increases in accounts payable and accrued liabilities. While some of this is tied to increased operations, it warrants attention.

Industry Context

NAII operates in the nutritional supplement industry, a sector characterized by strong consumer demand for health and wellness products, but also by intense competition and evolving regulatory landscapes. The industry is seeing growth in specialized ingredients and personalized nutrition. Companies like NAII often rely on proprietary formulations and efficient manufacturing to maintain market share.

Regulatory Implications

The company operates under regulations governing dietary supplements, such as those from the FDA. Compliance with Good Manufacturing Practices (GMP) is critical. Changes in regulations regarding ingredient claims, labeling, or manufacturing standards could impact operations and product sales.

What Investors Should Do

1. Monitor cash flow trends closely.
2. Analyze working capital management.
3. Evaluate the sustainability of revenue growth.
4. Assess the impact of operating lease liabilities.

Key Dates

• 2025-09-30: End of First Quarter 2025 — Reporting period for the condensed consolidated financial statements, showing improved net loss and revenue growth but a significant decrease in cash.
• 2025-06-30: End of Fiscal Year 2025 — Previous balance sheet date, used for comparison of assets and liabilities, showing an increase in both.
• 2024-09-30: End of First Quarter 2024 — Prior year comparable period for the statement of operations, showing a much larger net loss and lower revenue.

Glossary

Operating lease right-of-use assets

Assets recognized by a lessee for the right to use an underlying asset for the lease term. These are recognized on the balance sheet under ASC 842. (Represents a significant portion of the company's non-current assets ($40.42M), reflecting long-term rental commitments.)

Accumulated other comprehensive loss

A component of equity that includes unrealized gains and losses that are not reported in the income statement. Examples include foreign currency translation adjustments. (The company has an accumulated other comprehensive loss of $0.701 million, which impacts total equity.)

Forward contracts

Financial derivative contracts that obligate parties to buy or sell an asset at a predetermined future date and price. Often used for hedging currency or commodity price risk. (The company had $0.368 million in forward contracts as assets and $1.056 million as liabilities at September 30, 2025, indicating hedging activities.)

Treasury stock

Shares of a company's own stock that it has repurchased from the open market. It is recorded at cost and reduces total stockholders' equity. (NAII holds 3,328,128 shares of treasury stock, valued at $23.259 million, reducing its equity.)

Year-Over-Year Comparison

Compared to the prior year's comparable quarter, NAII has demonstrated significant operational improvement, evidenced by a substantial reduction in net loss from $1.98 million to $0.29 million and a doubling of gross profit. Revenue also saw a healthy 13.8% increase. However, this period also shows a concerning decline in cash and cash equivalents, alongside increases in accounts receivable and inventory, suggesting a higher cash burn and increased working capital requirements.

Key Financial Figures

• $0.01 — ange on Which Registered Common Stock, $0.01 par value per share NAII Nasdaq Sto

Filing Documents

• naii20250930_10q.htm (10-Q) — 971KB
• ex_863074.htm (EX-31.1) — 8KB
• ex_863075.htm (EX-31.2) — 9KB
• ex_863076.htm (EX-32) — 5KB
• 0001437749-25-034473.txt ( ) — 5984KB
• naii-20250930.xsd (EX-101.SCH) — 49KB
• naii-20250930_cal.xml (EX-101.CAL) — 40KB
• naii-20250930_def.xml (EX-101.DEF) — 369KB
• naii-20250930_lab.xml (EX-101.LAB) — 310KB
• naii-20250930_pre.xml (EX-101.PRE) — 395KB
• naii20250930_10q_htm.xml (XML) — 1028KB

Financial Statements

Financial Statements 2 Condensed Consolidated Balance Sheets (unaudited) 2 Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (unaudited) 3 Condensed Consolidated Statements of Stockholders' Equity (unaudited) 4 Condensed Consolidated Statements of Cash Flows (unaudited) 5 Notes to Condensed Consolidated Financial Statements (unaudited) 6 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 15 Item 4.

Controls and Procedures

Controls and Procedures 17 PART II OTHER INFORMATION 18 Item 1.

Legal Proceedings

Legal Proceedings 18 Item 1A.

Risk Factors

Risk Factors 18 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 18 Item 3. Defaults Upon Senior Securities 18 Item 5. Other Information 18 Item 6. Exhibits 19

SIGNATURES

SIGNATURES 20 Table of Contents SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS Certain statements in this report, including information incorporated by reference, are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect current views about future events and financial performance based on certain assumptions. They include opinions, forecasts, intentions, plans, goals, projections, guidance, expectations, beliefs, or other statements that are not statements of historical fact. Words such as "may," "will," "should," "could," "would," "expect," "plan," "believe," "anticipate," "intend," "estimate," "approximate," "predict," "forecast," "project," "future," or "likely," or the negative or other variation of such words, and similar expressions may identify a statement as a forward-looking statement. Any statements that refer to projections of our future financial performance, our anticipated growth and trends in our business, our goals, strategies, focus and plans, and other characterizations of future events or circumstances, including statements expressing general optimism or pessimism about future operating results, are forward-looking statements. Forward-looking statements in this report may include statements about: our ability to develop market acceptance for and increase sales of new products, develop relationships with new customers and maintain or improve existing customer relationships; future financial and operating results, including projections of net sales, revenue, income or loss, net income or loss per share, profit margins, expenditures, liquidity, and other financial items; the sufficiency of our available cash and cash equivalents, including continued access to borrowing under our credit facilities, and potential cash flows from our operations to fund our worki

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS Natural Alternatives International, Inc. Condensed Consolidated Balance Sheets (In thousands, except share and per share data) (Unaudited) September 30, 2025 June 30, 2025 Assets Current assets: Cash and cash equivalents $ 7,744 $ 12,325 Accounts receivable – less allowance for credit losses of $ 0 at September 30, 2025 and June 30, 2025 18,912 14,644 Inventories, net 30,654 24,871 Income tax receivable 184 276 Forward contracts — 368 Prepaids and other current assets 7,557 6,792 Total current assets 65,051 59,276 Property and equipment, net 50,788 50,890 Operating lease right-of-use assets 40,420 41,054 Other noncurrent assets, net 686 719 Total assets $ 156,945 $ 151,939 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 20,095 $ 15,352 Accrued liabilities 3,764 3,105 Accrued compensation and employee benefits 3,026 2,173 Customer deposits 930 1,364 Short-term liability – operating leases 2,270 2,227 Forward contracts 1,056 1,967 Income taxes payable — 411 Mortgage note payable, current portion 308 305 Line of credit – current 2,451 1,900 Total current liabilities 33,900 28,804 Long-term liability – operating leases 45,349 45,970 Long-term pension liability 124 111 Mortgage note payable, net of current portion 8,551 8,628 Total liabilities 87,924 83,513 Commitments and contingencies (Notes E, F, and L) Stockholders' equity: Preferred stock; $ .01 par value; 500,000 shares authorized; none issued or outstanding — — Common stock; $ .01 par value; 20,000,000 shares authorized at September 30, 2025 and June 30, 2025, issued and outstanding (net of treasury shares) 6,176,778 at September 30, 2025 and 6,178,213 at June 30, 2025 93 93 Additional paid-in capital 33,788 33,611 Retained earnings 59,100 59,391 Treasury stock, at cost, 3,328,128 shares at September 30, 2025 and 3,326,693 at June 30, 2025 ( 23,259 )

View Full Filing

View this 10-Q filing on SEC EDGAR