Cyanotech Corporation (OTC:CYAN)

First Quarter 2013 Results

• Revenues were $6,506,000 compared to $5,950,000, an increase of 9%.
• Net income was $493,000 or $0.08 per diluted share, compared to net income of $486,000 or $0.09 per diluted share.

Commenting on the first quarter fiscal 2013 results, Brent Bailey, President and CEO, noted: “Although first quarter net sales growth companywide was a modest 9%, our packaged products increased 44% reflecting our new strategic marketing focus, driven by strong growth of 36% on the mainland, 55% in Hawaii, 49% in direct-to-consumer and 209% internationally. BioAstin and Hawaiian Spirulina Pacifica continue to be the #1 brands of astaxanthin and spirulina, respectively, in the United States natural products channel. In spite of significantly increased demand, bulk net sales declined 6% due to lower production in the fourth quarter of fiscal 2012. Bulk spirulina sales were down 9% while bulk astaxanthin dropped 5%.”

“The increase in first quarter operating expenses reflects the investment we are making in brand development, marketing and people with successful business-building track records in consumer packaged goods. We are confident that this investment strengthens our foundation for continued revenue growth, improved margins and resulting profit,” continued Bailey.

Fourth Quarter 2012 Results

• For the fourth quarter of fiscal 2012 compared to the fourth quarter of fiscal 2011, revenues were $5,986,000 compared to $5,218,000.
• Gross profit was $2,053,000, with gross profit margin of 34.3%, compared to gross profit of $1,798,000 and gross profit margin of 34.5%.
• Net income was $1,158,000 or $0.20 per diluted share, compared to net income of $795,000 or $0.14 per diluted share.

Mr. Bailey commented, “We are pleased with our business results and made significant progress in improving our processes, systems, facilities and organization in fiscal 2012. We are focused on continuing to strengthen our infrastructure to support the substantial growth we expect to generate for the foreseeable future.”

Vice President and CFO Jolé Deal commented that “as part of strengthening our foundation, we’ve made significant improvements in the effectiveness of our internal controls and procedures. As a result, the material weakness that had been identified in previous years no longer exists.”

Third Quarter 2012 Results

• For the third quarter of fiscal 2012 compared to the third quarter of fiscal 2011, revenues were $6,706,000 compared to $3,919,000.
• Net income was $1,113,000 or $0.20 per diluted share, compared to net income of $10,000 or $0.00 per diluted share.

Commenting on the third quarter results, Brent Bailey, President and CEO, said “We continued to make progress on key measures in the third quarter compared to the third quarter of fiscal 2011:

• Net sales reached a record level for the fourth consecutive quarter at $6,706,000 (+$2,787,000 and +71%)
• Gross margin increased to 42.2% (+10.8 pts.)
• Net Income grew to $1,113,000 (+$1,103,000)
• Cash increased to $4,190,000 (+$3,461,000 and +475%)
• Inventory declined to $3,556,000 (-$800,000 and -18%)

“In addition, our Nutrex-branded sales grew +74% largely driven by the mainland US natural products distribution channel.”

For the third quarter of fiscal 2012, Spirulina sales accounted for 31% of total revenues and natural Astaxanthin sales for 69%. International sales were 29% of total sales.

Mr. Bailey noted, “Abundant inventory coming out of last winter, plus eight consecutive monthly astaxanthin production records, allowed us to fully capitalize on the strong growth in spirulina and the exceptional growth in astaxanthin resulting in four consecutive record net sales quarters. While demand continues to grow, our production generally declines during the winter months largely due to less sunlight. Going forward, our astaxanthin capacity will increase by 33% in the spring as we bring new ponds on line in April.”

Recent premium member blog notes for CYAN from 10/19/2011 @ 5.00

Price @ $6.33 time of this note:

Company has been on our radar for many years, But we never really pulled the trigger on this name as EPS growth has been inconsistent. Company is also subject to production disruptions depending on weather conditions in Hawaii where they cultivate their products. A new management team entered the story a few years ago to help diversify product base and customer reach. Based on a press release dated 10/13/2011 it appears that the company may be entering a new period of EPS growth spurred by increase consumer awareness of one of its products. Based on product sale trend in this release it looks like the company may be able to soon post meaningful EPS and revenue gains. The key issue to monitor will be to see if a consistent growth can persist.

Second Quarter 2012 Results

• For the second quarter of fiscal 2012 compared to the second quarter of fiscal 2011, revenues were $5,989,000 compared to $3,834,000.
•  Net income was $875,000 or $0.16 per diluted share, compared to net income of $526,000 or $0.10 per diluted share.

Trailing 12 Months 

For the trailing 12 months ended September 30, 2011, compared to the trailing 12 months ended September 30, 2010, revenues were $21,076,000 compared to revenues of $15,486,000. Gross profit was $7,924,000, with gross profit margin of 38%, compared to gross profit of $6,449,000 and gross profit margin of 42%. Net income was $2,166,000 or $0.40 per diluted share, including a non-cash tax benefit of $552,000 due to a reduction in the deferred tax valuation allowance and recording of a net deferred tax asset in the fourth quarter of fiscal 2011, compared to $1,304,000, or $0.26 per diluted share. Income before the income tax benefit was $1,623,000 compared to $1,326,000.

Responding to increased market demand for its natural Astaxanthin, Cyanotech Corporation (Nasdaq: CYAN) has announced a 33% expansion of Astaxanthin capacity at its production facility at Kona, Hawaii.

“With our Astaxanthin sales almost doubling since January, we have ramped up production and are realizing record yields month after month. In addition, we are adding 33% more Astaxanthin capacity, which should be fully on line in six months,” said Brent Bailey, President and CEO of Cyanotech. “We want to be sure we have capacity to fill the needs of all our customers in a timely manner, and be sure that all the consumers who want to try this exceptional nutrient can get it.”

Demand for Astaxanthin has increased steadily in the supplement industry this year since Dr. Joseph Mercola went on the Dr. Oz show, proclaiming it “The #1 Supplement you’ve never heard of that you should be taking.” This segment has aired three times and Dr. Mercola has followed up with several e-newsletters and YouTube segments extolling the benefits of Astaxanthin.

Mr. Bailey noted, “We’ve been able to benefit from this recognition because Cyanotech has the world’s largest production capacity and we had excellent inventory levels coming into this period of increased demand in January. We’re seeing demand continue to build nine months after the first Dr. Oz segment initially aired.”

First Quarter 2012 

For the first quarter of fiscal 2012 compared to the first quarter of fiscal 2011, revenues were $5,950,000 compared to $3,856,000. Gross profit was $2,104,000, with gross profit margin of 35%, compared to gross profit of $1,659,000 and gross profit margin of 43%. Net income was $486,000 or $.09 per diluted share, compared to net income of $399,000 or $0.07 per diluted share.

Trailing 12 Months 

For the trailing 12 months ended June 30, 2011, compared to the trailing 12 months ended June 30, 2010, revenues were $18,921,000 compared to revenues of $15,577,000. Gross profit was $6,786,000, with gross profit margin of 36%, compared to gross profit of $6,558,000 and gross profit margin of 42%. Net income was $1,817,000 or $.33 per diluted share, including a non-cash tax benefit of $552,000 due to a reduction in the deferred tax valuation allowance and recording of a net deferred tax asset in the fourth quarter of fiscal 2011, compared to $1,377,000, or $0.25 per diluted share. Income before the income tax benefit was $1,256,000 compared to $1,401,000.

“The significant increases in packaged product sales are attributed to our focus on the growing consumer market for health and nutrition supplement products, combined with recent media reports regarding the benefits of both astaxanthin and spirulina.”

“We believe that Cyanotech’s high-quality, Hawaiian spirulina and natural astaxanthin will continue to benefit from increasing general consumer demand for natural nutritional products with proven value,” Bailey concluded.