Hydralyte International

Overview

Hydralyte International (ASX:HPC) is an ASX-listed rapid hydration solutions business focused on the large North American and European markets.

With an established supply chain in both Canada and the United States, the company recently surpassed US$10.4 million in 12-month trailing revenue with a gross margin of a staggering 58 percent during Q3 FY23. The company delivered strong revenue of US$2.6 million in Q3 2023, combined with an ongoing reduction in net cash used in operating activities.

Hydralyte rapid rehydration product was also the number one SKU in the hydration category on Amazon Prime Day in Canada, where it's the number two hydration brand overall with a 21 percent market share. Starting on Prime Day, Hydralyte delivered ~US$140,000 in gross sales over 48 hours – which has underpinned a strong ecommerce sales pipeline in the recent months.

It's also worth noting that all this revenue growth – alongside a partnership with Shay Mitchell – occurred with an ongoing reduction in marketing expenditure; marketing costs as a percentage of sales were down a third straight quarter in Q3 FY2 to 30 percent (a record low since IPO). This is due in part to the company's solid leadership team, featuring professionals with decades of expertise in health and wellness, as well as heavy brand investments which have been made throughout 2022.

In Australia, New Zealand and parts of Southeast Asia, Prestige Consumer Healthcare Incorporated (NYSE:PBH) holds the exclusive sales and distribution rights to Hydralyte products. PBH is an American over-the-counter healthcare marketing and distribution company, dating back more than 100 years.

Meanwhile, Hydralyte International’s sales in the UK are exceeding expectations, with the company’s products now appearing both on Amazon UK and store shelves in Whole Foods and Chemist Warehouse stores, providing another potentially lucrative revenue channel.

Hydralyte International's robust supply chain, sales trajectory, manufacturing approach and product strategy are far from the only reasons it shows such promise as an investment. Current market trends also significantly favor the company's core value proposition. Valued at US$1.42 billion in 2017, the global electrolyte hydration drinks market is expected to reach US$1.82 billion by 2025 as consumers turn away from high-sugar, low-electrolyte drinks and towards more clinical hydration products.

Roughly 75 percent of Americans are dehydrated at any given time. The reasons are many and varied, ranging from travel and exercise to alcohol and illness. Its symptoms are something many of us have simply learned to live with – irritability, brain fog, dizziness, increased thirst, dry mouth and fatigue, to name just a few.

Hydralyte fits the bill perfectly for these consumers. Founded with the goal of making a difference through better hydration, Hydralyte is able to treat dehydration more effectively than the majority of sports drinks on the market. Thanks to its proprietary formula – which uses a precise ratio of water, electrolytes and glucose based on the World Health Organization's recommended formula for rapid rehydration.

Hydralyte is available in three forms: ready-to-drink, tablet and dissolvable powder stick. All three are widely accepted in the medical community. Hydralyte is also frequently used by professional athletes as an alternative to sports drinks.

In short, thanks to its market position, strong leadership and science-based formula, Hydralyte represents the perfect opportunity for investors to enter the lifestyle sports market.

Company Highlights

• Hydralyte International is a rapid hydration drink business with a focus on North America and established supply chains in both the United States and Canada.
• The company's 2023 financials are incredibly promising:
  • Trailing 12 months revenue of US$10.4 million in Q3 FY23
  • 58 percent gross margin in Q3 2023
  • Cash burn reduction of 47 percent on PCP to US$1.46 million in Q3 FY22, with initiatives in place expected to reduce this further
  • US$140,000 in gross sales from Amazon Prime Day in July.
• Although Hydralyte recently reduced its marketing expenditure, it still experienced strong revenue growth throughout the first three quarters of 2023, driven by ongoing eCommerce sales, an established brick-and-mortar footprint, new SKU additions and a partnership with leading entrepreneur and actress, Shay Mitchell.
• The United Kingdom represents an international expansion opportunity for Hydralyte, with products being sold on Amazon UK and appearing on store shelves in Whole Foods and Chemist Warehouse.
• Agreement with specialist e-commerce company RooLife Group Limited (ASX: RLG) to exclusively market, sell and distribute Hydralyte products in China
• Appointed leading health and wellness products broker LeBeau Excel as its new sales broker, giving Hydralyte the ability to significantly expand its footprint in the Canadian market.
• In addition to a solid manufacturing base and supply chain, Hydralyte is supported by leaders with decades of experience in health and wellness.
• Hydralyte products are widely accepted in both the medical and athletic communities. As a result, the company is extremely well-positioned to leverage the fast-growing electrolyte hydration drinks market.

Core Product Offering

Hydralyte Rapid Rehydration

Hydralyte is based on the World Health Organization's recommended formula for rapid rehydration. Made from all-natural ingredients, it contains the precise ratio of glucose and electrolytes necessary to rehydrate. Its innovative formula contains up to 75 percent less sugar and four times more electrolytes than the majority of sports drinks.

Highlights:

• Multiple SKUs: Available as a tablet, powder and premade drink, Hydralyte comes in a range of different flavors and formulations, including:
  • Liver Support: 7 key electrolytes, six antioxidants, ginger, turmeric, milk thistle and prickly pear.
  • Apple Cider Vinegar: 4 key electrolytes, apple cider vinegar, vitamins B12, B6 and C.
  • Collagen: 5 key electrolytes, Verisol collagen, vitamin C and zinc.
  • Immunity with Elderberry: 7 key electrolytes, vitamin C, magnesium and zinc.
  • SPORT: Launched in 2022, these tablets are designed with the needs of athletes in mind.
• Promising Partnerships: In December 2022, Hydralyte launched a brand partnership with Shay Mitchell, a Canadian actress and entrepreneur with over 36 million Instagram followers. The two parties launched a co-branded product through HPC eCommerce channels and Amazon USA. A Canadian launch is currently pending.
• Strategic Agreements: Hydralyte has engaged specialist e-commerce company RooLife Group Limited to exclusively market, sell and distribute Hydralyte products in China. It has also appointed LeBeau Excel as its new sales broker to significantly expand Hydralyte’s footprint in the Canadian market.

Management Team 

Oliver Baker – CEO

Oliver Baker is the former general manager of Swisse Wellness USA, a vitamin, supplement and skincare brand that in 2015 sold for US$1.7 billion. During his tenure at Swisse, Baker employed a dedicated eCommerce strategy that enabled a successful US launch. He also led the integration team in Guangzhou, migrating ~US$73 million in sales and building up a local Chinese team.

Prior to his position at Swisse, Baker worked in multiple global and national sales and marketing roles with a focus on sports sponsorships.

George Livery – Chairman

George Livery has close to thirty years of experience in senior roles both domestically and internationally. Most recently, he served as director of strategy & corporate at Swisse Wellness, where he originally began as commercial director. Livery has also served as executive chairman for multiple major organizations, including Bod Australia.

Adem Karafili – Non-executive Director

A registered CPA and business professional with more than 15 years of experience, Adem Karafili has operated in leadership positions across a range of different sectors and industries. Most recently, he spent several years at Swisse Wellness, beginning as chief financial officer before becoming chief operating officer and managing director. While there, he helped to establish Swisse as a leading global health and wellness brand.

Karafili holds a Bachelor of Business Administration in accounting and is chairman of multiple health and wellness corporations.

Chris Kavanaugh – CFO

Chris Kavanaugh has over 20 years of experience running finance and operations for growing startups from inception to US$30M+ in revenue. He has worked with Hydralyte for over five years, starting as a controller before being promoted to chief financial officer in 2021. Prior to his position at Hydralyte, he served as a director of finance for companies including Fullbridge, Education Incorporated and OneVision Resources.

Kavanaugh has a Bachelor in Accounting and Management with a double major in information systems from Indiana University of Pennsylvania.

Margaret Hardin – Non-executive Director

Over the course of her career, Margaret Hardin has served as CEO and CFO for numerous major product companies in the United States including Baby Super Brands, ERGObaby Carrier Incorporated and Munchkin. With over two decades of experience, Hardin has a well-established reputation for driving growth through innovation, strategic acquisitions and geographic expansion. She holds a BBA from New Mexico State and an MBA from the Booth Graduate School of Business at the University of Chicago.

Brandon Fishman – US Advisor

Brandon Fishman is the Founder and CEO of VitaCup, a vitamin-infused functional coffee and tea brand that surpassed US$20 million in sales in five years. Over the course of his career, Fishman has worked with multiple Fortune 500 brands in a range of different capacities, in the process building up considerable entrepreneurial wisdom. Other companies founded by Fishman include NewCondosOnline and Internet Marketing Incorporated.

Fishman holds a Bachelor of Business Administration and Finance from Emory University and a Master in Real Estate & Business from the University of San Diego.