Hydralyte

Q4 FY23 Quarterly Report and Appendix 4C: Net Cash Used in Operating Activities Down 56% YoY to Record Low

Hydration solutions company The Hydration Pharmaceuticals Company Limited (ASX: HPC) (“Hydralyte” or “the Company”) is pleased to provide the following update on its operational and financial performance for the three-month period ended 31 December 2023 (the “quarter”).

KEY HIGHLIGHTS

  • Net operating expenditure down 56% on PCP to US$1.14m (Q4 FY22: US$2.62m) and down 21% on prior quarter (Q3 FY23: US$1.46m) to lowest since listing in December 2021
  • Additional cost cutting initiatives continued post quarter end - includes payroll cuts annualised at over US$0.6m amongst others
  • Gross margin increased 12% on PCP (Q4 FY22: 48%) and 2% on last quarter (Q3 FY23: 58%) to 60%
  • YoY Gross Profit dollars up 4% to US$1.26m from US$1.21m in Q4 FY22
  • Q4 FY23 net sales of US$2.11m – a slight decrease on last quarter due to temporary out-of- stocks on effervescent tablets
  • Once-off out of stocks during the period led to estimated unfulfilled orders of ~US$0.6m, which had an estimated negative net sales impact of ~US$0.5m; out of stock actively rectified with multiple shipments received
  • Q4 FY23 sales also impacted by continued focus on high-margin revenue streams, sacrificing less profitable and lower margin revenue
  • FY23 total unaudited net sales of US$10m – a 9% increase on PCP (FY2022: US$9.09m)
  • Marketing costs as a percentage of net revenue reduced to 43% - down from 94% in Q4 FY22
  • Transition to new broker, LeBeau Excel, continues to expand addressable market in Canada and underpin 2-3% improvement in customer net margin
  • Ongoing work undertaken to launch high growth ready-to-drink (RTD) product range – manufacturing agreements and purchase orders pending
  • Continued execution of strategy to reduce expenditure and extend cash reserves through reduced marketing spend following significant investments in CY2022 to build and establish brand awareness in the North American market
Financial overview:

Revenue for the quarter was US$2.11m, which was a decrease on the PCP and previous quarter. The decline was due to multiple factors, which included temporary out of stocks and the prioritisation of improved profitability over revenue growth.

Temporary out of stocks during the period led to estimated unfulfilled orders of US$0.6m, which had a negative net sales impact of US$0.5m. The primary out of stocks were on multiple flavours of effervescent tablets and highlight the ongoing demand for HPC’s product suite.

The Company expects a swift recovery from the temporary issue and has received several shipments to improve the situation. Hydralyte expects to realise additional sales from these new shipments during the current quarter and will continue to work to capitalise on the strong demand for the Company’s products with North American retailers.

Sales through Amazon Canada increased 35% to CAD$0.5m, when compared to the PCP (Q4 FY2022 CAD$0.4m), while US Amazon sales were US$0.5, down slightly due to the Company’s ongoing shift towards improved profitability over revenue growth.

To drive more sustainable revenue growth, the Company is actively shifting product marketing investments towards higher conversion and higher margin products. This was highlighted by the decrease in marketing as a percentage of sales to 43% from PCP (Q4 FY2022 94%) and a 62% decrease in total marketing spend on the PCP (Q4 FY22: US$2.38m) to US$0.91m, in line with the Company’s cash preservation initiatives.


Click here for the full ASX Release

This article includes content from The Hydration Pharmaceuticals Company Limited, licensed for the purpose of publishing on Investing News Australia. This article does not constitute financial product advice. It is your responsibility to perform proper due diligence before acting upon any information provided here. Please refer to our full disclaimer here.

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