Earnings call transcript: Cyanotech sees improved gross profit in Q1 2025

Cyanotech Corporation reported its first-quarter 2025 earnings, highlighting a 20% increase in gross profit despite a slight decline in net sales. The company posted a net loss of $926,000, an improvement from the previous year’s $1.2 million loss. The stock experienced a significant drop of 15.38%, closing at $0.33, influenced by the financial results and market conditions. According to InvestingPro, the company’s overall financial health score stands at 0.75, labeled as WEAK, though current analysis suggests the stock may be undervalued compared to its Fair Value.

Key Takeaways

• Gross profit increased by 20% year-over-year.
• Net sales decreased by 1.3% to $5.8 million.
• Stock price fell by 15.38% following the earnings release.
• Significant growth in bulk spirulina and azathiothin sales.
• Operational efficiencies contributed to improved gross profit margins.

Company Performance

Cyanotech’s performance in Q1 2025 showed mixed results. While the company managed to improve its gross profit margin to 30.5% from 25% the previous year, net sales saw a slight decline. The company successfully increased bulk product sales, with spirulina and azathiothin experiencing substantial growth. However, packaged product sales faced a downturn, declining by 12%.

Financial Highlights

• Net sales: $5.8 million, down 1.3% year-over-year.
• Gross profit: $1.8 million, up 20%.
• Gross profit margin: 30.5%, up from 25%.
• Net loss: $926,000, improved from $1.2 million.
• Cash position: $383,000.
• Negative working capital: $255,000.

Outlook & Guidance

Cyanotech remains focused on executing its long-term strategy, emphasizing brand value and operational efficiency. The company projects revenue of $25.06 million for FY2026 and $25.56 million for FY2027. These projections indicate a steady growth outlook despite current challenges.

Executive Commentary

CEO Matt Custer emphasized the company’s commitment to its long-term strategy, stating, "We remain focused on executing our long-term strategy." CFO Jennifer Rogerson highlighted production efficiencies, noting, "The 5.5 percentage point increase was a result of higher efficiencies in production driving our costs down." Custer also praised the team’s resilience and progress.

Risks and Challenges

• Decline in packaged product sales could impact future revenue.
• Negative working capital presents financial management challenges.
• Macroeconomic conditions may affect ingredient demand.
• Dependence on bulk product sales growth for profitability.
• Potential supply chain disruptions could hinder operations.

Cyanotech’s Q1 2025 results reflect both progress and challenges. The company’s focus on operational efficiencies and product mix adjustments has led to improved profitability, but market conditions and specific product line declines pose ongoing risks.

Full transcript - Cyanotech Corporation (CYAN) Q1 2026:

Matt Custer, President and Chief Executive Officer, Cytotec: Aloha from Kona, Hawaii. Thank you all for joining us today to report Cytotec’s first quarter fiscal year twenty twenty six earnings results. I am Matt Custer, President and Chief Executive Officer of Cytotec. Joining me on the call today is Jennifer Rogerson, our Chief Financial Officer. I will turn the call over to Jennifer to provide our forward looking statement.

Jennifer Rogerson, Chief Financial Officer, Cytotec: 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, 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 October and fiscal year twenty twenty five report filed with the Securities and Exchange Commission. I will turn it back to Matt for comments on the quarter. Matt?

Matt Custer, President and Chief Executive Officer, Cytotec: This quarter’s net sales declined 1.3% compared to the same period last year. However, improved production efficiencies and continued disciplined inventory management drove a 20% increase in gross profit while operating expenses remained flat. As a result, the company reported a 23% improvement in net loss. Compared to the prior year, our sales mix did shift meaningfully. Bulk spirulina and bulk azathiothin sales increased by 4849%, respectively, reflecting a renewed demand in the ingredients channel for US sourced material.

This growth was partially offset by a 12% decline in packaged product sales. We remain focused on executing our long term strategy. This includes driving brand value through differentiated storytelling, deepening relationships in ecommerce and bulk ingredient markets, and focusing on sustainable cash flows. As we navigate the continued macroeconomic challenges, I’m proud of the resilience of our team has shown and I’m confident in the progress that we are making. Turning over to Jennifer to discuss the financial results.

Jennifer?

Jennifer Rogerson, Chief Financial Officer, Cytotec: Thank you, Matt, and good evening, everyone. Key financial results for the 2026. In the first quarter this fiscal year, net sales were $5,800,000 as compared to $5,900,000 last year, a decrease of $78,000 or 1.3%. Gross profit for the 2026 was $1,800,000 with a gross profit margin of 30.5% compared to a gross profit of $1,500,000 and gross margin of 25% in the 2025. The 5.5 percentage point increase was a result of higher efficiencies in production driving our costs down.

First quarter operating loss was $753,000 compared to an operating loss of $1,000,000 in the first quarter of the prior fiscal year. Net loss for the current quarter was $926,000 or $0.13 per diluted share loss compared to a net loss of $1,200,000 or $0.17 loss per diluted share in the prior year. The company had cash of $383,000 and a negative working capital of $255,000 compared to $257,000 and $302,000 respectively in the prior year. I will hand the call back to Matt for concluding comments. Matt?

Matt Custer, President and Chief Executive Officer, Cytotec: We have not received any questions. Thank you for joining today’s call. Aloha.

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