Breaking Down Natural Alternatives International, Inc. (NAII) Financial Health: Key Insights for Investors

You're looking at Natural Alternatives International, Inc. (NAII), a key player in the nutritional supplements space, and the headline numbers from their fiscal year 2025 results defintely tell a complex story. On one hand, the business is clearly growing its top line, with total net sales climbing to $129.9 million, a solid 14% increase driven largely by a 16% jump in their private-label contract manufacturing sales to $121.8 million. But here's the quick math on the risk: the company reported a total net loss of $13.6 million for the year, which is a significant widening from the $7.2 million loss in fiscal 2024. This loss was heavily impacted by roughly $6.2 million in one-time, non-cash charges-things like litigation settlements and a deferred tax asset valuation allowance-so the adjusted net loss is closer to $7.4 million. Still, the core challenge is turning that strong revenue growth into profit, especially as their proprietary CarnoSyn® beta-alanine sales dipped 4% to $8.1 million. You need to know if the underlying operational improvements, like better factory utilization, will translate into the projected profitability in the second half of fiscal 2026, or if the cash balance of $12.3 million as of June 30, 2025, is enough to weather the near-term losses they anticipate. We're going to break down exactly what's driving the sales, what those one-time charges really mean, and map out the clear actions an investor should consider.

Revenue Analysis

You need to know where the growth is coming from, and for Natural Alternatives International, Inc. (NAII), the answer is clear: it's all about the core manufacturing business. For the fiscal year ending June 30, 2025 (FY2025), the company delivered total annual revenue of approximately $129.9 million, representing a solid 14% year-over-year growth. This is a defintely positive top-line signal, but the underlying segment performance shows a critical divergence you must understand.

Here's the quick math on their two primary revenue streams, which map directly to their business model as a contract manufacturer and a proprietary ingredient licensor:

• Private-Label Contract Manufacturing: The bulk of the business, which is manufacturing customized nutritional supplements for other brands.
• CarnoSyn® Sales: Royalty, licensing, and raw material sales from their patented beta-alanine ingredient.

Breakdown of Primary Revenue Sources (FY2025)

The vast majority of Natural Alternatives International, Inc.'s revenue comes from its Private-Label Contract Manufacturing segment. This segment is the engine of the company, and its performance is the key driver for the overall 14% revenue increase in FY2025. This is where the scale and factory utilization improvements happen.

The table below shows the segment contributions for the full fiscal year 2025:

The contract manufacturing side grew by a strong 16%, reaching $121.8 million, primarily due to increased orders from existing customers and shipments to new clients. That's the good news-the factory is busy and gaining market share in a fragmented industry. The private-label business is carrying the entire load.

Analysis of Revenue Stream Changes and Near-Term Risks

The significant change is the proprietary ingredient segment. CarnoSyn® beta-alanine sales decreased by 4% in FY2025 to $8.1 million. This is a red flag because proprietary ingredients typically carry higher margins than contract manufacturing. A decline here means a drag on overall gross profit, even with rising total sales.

Looking at the most recent data (Q1 Fiscal Year 2026, ending September 30, 2025), this trend is accelerating: CarnoSyn® revenue dropped a sharp 33.9% compared to the same quarter last year, falling to $1.7 million. This was due to decreased raw material orders, only partially offset by sales of their new TriBsyn™ product. You need to watch this segment closely, as its continued decline will pressure margins even as the contract manufacturing segment-which grew 17.7% in that same quarter-drives the overall top-line growth. The growth is robust, but it's becoming highly concentrated in the lower-margin business. This is the key insight for investors reading Breaking Down Natural Alternatives International, Inc. (NAII) Financial Health: Key Insights for Investors.

Profitability Metrics

You're looking at Natural Alternatives International, Inc. (NAII) and seeing a net loss for the full fiscal year 2025, so let's cut straight to the core profitability metrics. The headline number is defintely a concern, but the underlying trends show a complex operational picture you need to understand.

For the full fiscal year 2025, which ended June 30, Natural Alternatives International, Inc. reported total net sales of $129.9 million, a solid 14% increase year-over-year. But despite this revenue growth, the company recorded a significant net loss of $13.58 million. This loss widened substantially from the $7.2 million net loss reported in fiscal year 2024, which tells you the costs grew even faster than the sales.

Here's the quick math on the core margins for FY 2025:

• Gross Profit Margin: The Gross Profit of $9.29 million translates to a margin of approximately 7.15%.
• Operating Profit Margin: The Operating Loss of $7.26 million results in a margin of approximately -5.59%.
• Net Profit Margin: The Net Loss of $13.58 million gives you a margin of approximately -10.45%.

A negative operating margin means the core business-formulating and manufacturing nutritional supplements-is not covering its selling, general, and administrative (SG&A) costs, let alone interest and taxes. The net loss was also impacted by one-time, non-cash charges like a $4.8 million tax asset valuation allowance, which exaggerates the final net loss figure but doesn't change the operational reality.

To be fair, the Gross Profit Margin is the key operational indicator here, and its trend shows management is fighting back. While the full-year gross margin was low at 7.15%, the fourth quarter of fiscal 2025 showed a dramatic jump to 10.4% from just 4.8% in the prior year's fourth quarter. This improvement is a clear sign of better operational efficiency, driven by things like improved factory capacity utilization and lower volume rebates, which is exactly where a contract manufacturer needs to focus its cost management.

Now, let's put that 7.15% gross margin into industry context. Contract manufacturing generally has tighter margins than the brand owners they serve, but even so, Natural Alternatives International, Inc. is running far behind the industry average. Typical gross margins for the broader US nutritional supplement market often fall in the 30% to 50% range, with premium direct-to-consumer (DTC) brands pushing up to 55%-70%.

The table below maps out the stark difference, showing why the market is punishing the stock:

The clear action here is to watch the gross margin trend closely. If the Q4 2025 improvement to 10.4% can be sustained and built upon in fiscal 2026, it suggests the operational efficiency efforts are taking hold. But until the operating margin turns positive, Natural Alternatives International, Inc. remains a turnaround story with significant execution risk. For a full breakdown of the company's financial health, you should read the rest of this post: Breaking Down Natural Alternatives International, Inc. (NAII) Financial Health: Key Insights for Investors.

Debt vs. Equity Structure

The short answer is that Natural Alternatives International, Inc. (NAII) runs a very lean balance sheet, relying minimally on debt to finance its operations. The company's financial structure is conservative, showing a preference for equity and internal cash generation over external borrowing, which is a key sign of stability but can also limit aggressive expansion.

For the fiscal year ended June 30, 2025, Natural Alternatives International, Inc. reported total debt of just over $10.8 million. When you stack that against their total shareholder equity of $68.4 million, the picture is clear: they are not a highly leveraged business. In fact, the company held $12.3 million in cash as of June 2025, which means they were in a net cash position of approximately $1.49 million-they could pay off all their debt with the cash on hand. That's defintely a strong position.

Here's the quick math on their leverage and a comparison to the broader industry:

• NAII Debt-to-Equity (D/E) Ratio (FY 2025): 0.16 (or 15.8%).
• Consumer/Retail Industry D/E Range (2025): 0.3 to 0.8.

A Debt-to-Equity ratio (D/E) measures how much debt a company uses to finance its assets relative to the value of shareholders' equity. Natural Alternatives International, Inc.'s ratio of 0.16 is significantly lower than the typical 0.3 to 0.8 range for the Consumer/Retail sector, where they operate. This low leverage suggests a lower financial risk profile, but it also means they aren't using cheap debt to 'juice' their returns on equity (ROE).

The company's debt is primarily structured as a mix of short-term and long-term obligations. Specifically, the total debt of $10.833 million as of June 30, 2025, was composed of a Line of Credit and a Mortgage Note Payable. Separately, the balance sheet shows total short-term liabilities (due within 12 months) of $28.8 million and long-term liabilities of $54.7 million, though a large portion of the latter is an operating lease liability.

In terms of recent activity, the company had to manage some near-term risk. In June 2025, Natural Alternatives International, Inc. amended its credit facility with Wells Fargo, which was a crucial move. This action extended the maturity date to December 2026 and increased the borrowing capacity to $10 million. This refinancing provides a necessary liquidity buffer, especially considering the company had been negotiating with its lender earlier in the year due to non-compliance with certain financial covenants as of December 31, 2024. This shows that while their debt load is small, managing the terms of that debt is still a priority for financial flexibility.

The overall strategy here is clear: Natural Alternatives International, Inc. is balancing its growth through retained earnings and equity, keeping a very small debt footprint. This approach reduces interest expense and default risk, but it means growth is tied closely to profitability and cash flow, which is a trade-off investors must weigh. You can read more about this on our blog post: Breaking Down Natural Alternatives International, Inc. (NAII) Financial Health: Key Insights for Investors.

Liquidity and Solvency

You're looking at Natural Alternatives International, Inc. (NAII) to see if its short-term finances are solid, and the balance sheet for fiscal year (FY) 2025 gives us a mixed but manageable picture. The company definitely has the liquid assets to cover its immediate bills, but the cash flow trends show where management is spending capital to turn around its operations.

The key takeaway is that Natural Alternatives International, Inc. maintains a healthy short-term liquidity position, but its cash generation from operations is being significantly offset by its investing and financing activities.

Assessing Natural Alternatives International, Inc.'s Liquidity

The most direct way to check a company's ability to pay its short-term obligations (current liabilities) is through the Current and Quick Ratios. For FY 2025, Natural Alternatives International, Inc. reported a Current Ratio of 2.03 and a Quick Ratio (or Acid-Test Ratio) of 1.17.

Here's the quick math on what those numbers mean for you:

• A Current Ratio of 2.03 means Natural Alternatives International, Inc. has $2.03 in current assets for every dollar of current liabilities. This is a very comfortable position.
• The Quick Ratio of 1.17 is also strong, showing the company can cover its current liabilities even if you strip out inventory (which is harder to convert to cash quickly).

This tells me the company is in no immediate danger of a liquidity crunch. It's defintely solvent in the near term.

Working Capital and Cash Flow Trends

While the ratios are good, the trend in working capital (Current Assets minus Current Liabilities) is worth watching. As of June 30, 2025, Natural Alternatives International, Inc.'s working capital stood at $30.5 million. This is a solid buffer, but it represents a decline from the $38.1 million reported at the end of the prior fiscal year. This reduction suggests that while the company is solvent, it is using or tying up more of its short-term capital, likely in inventory or receivables, or simply paying down short-term debt faster than it is generating new working capital.

The Cash Flow Statement provides the dynamic picture of where the cash is truly moving:

The Operating Cash Flow (CFO) of $5.93 million is a clear strength; the core business is generating cash, which is a big improvement over the prior year. But the Net Change in Cash was only $340 thousand. This means the majority of the cash generated from selling products was immediately used in investing activities (like capital expenditures for new equipment) and financing activities (like debt service or repayments). That $5.59 million net outflow for investing and financing is a significant use of funds.

Potential Liquidity Concerns and Strengths

The main strength here is the liquidity cushion itself. The company has $12.3 million in cash and cash equivalents and a low total debt of $10.8 million, putting it in a net cash position. Plus, Natural Alternatives International, Inc. has an amended credit facility with Wells Fargo, extending its maturity to December 2026 and increasing its borrowing capacity to $10 million. This extended facility provides a critical safety net and flexibility for ongoing working capital needs and planned capital expenditures.

The primary concern is the velocity of the working capital decline and the fact that the company still reported a total net loss of $13.6 million for fiscal year 2025. You need to see that operating cash flow continue to rise and the net cash outflow from investing/financing stabilize or reverse as capital projects are completed. For a deeper dive into the company's strategic direction, I suggest reviewing their Mission Statement, Vision, & Core Values of Natural Alternatives International, Inc. (NAII).

Valuation Analysis

You're looking at Natural Alternatives International, Inc. (NAII) and asking the core question: is it a bargain or a value trap? The quick answer is that based on traditional book value and sales multiples, the stock appears significantly undervalued, but this is complicated by its current lack of profitability.

The market is clearly punishing Natural Alternatives International, Inc. for its recent performance, but that's precisely where opportunity can hide. The key is mapping the near-term risks-the losses-against the deep discount in its assets and sales. To be fair, you're buying a turnaround story, not a stable grower.

Key Valuation Multiples (FY 2025)

When a company is losing money, as Natural Alternatives International, Inc. did in fiscal year 2025 with a net loss of -$13.58 million, the most common valuation multiples-Price-to-Earnings (P/E) and Enterprise Value-to-EBITDA (EV/EBITDA)-become less useful, or even negative. Here's the quick math on the latest full-year figures:

The Price-to-Book ratio of just 0.29x is the most compelling number here. It suggests you are buying the company's net assets-what's left after liabilities-for only 29 cents on the dollar. Still, a low P/B ratio can defintely signal distress, so you need to look closer at the balance sheet, which we cover in Breaking Down Natural Alternatives International, Inc. (NAII) Financial Health: Key Insights for Investors.

Stock Price Trend and Volatility

The stock price for Natural Alternatives International, Inc. has been in a sustained downtrend, reflecting the market's reaction to the financial losses. As of mid-November 2025, the stock was trading around $3.06, near the lower end of its 52-week range of $2.57 to $4.70.

Over the last 52 weeks, the price has fallen by a staggering -41.52%. This kind of volatility is typical for a micro-cap company in a turnaround phase. The stock's Beta, a measure of its volatility relative to the market, is a relatively low 0.52, meaning its price swings have been less dramatic than the overall market. A low Beta in a falling market is a bit of an anomaly, but it suggests the price decline is company-specific, not market-driven.

Dividend Policy and Analyst Consensus

Natural Alternatives International, Inc. does not currently pay a dividend. The trailing and forward dividend yield is 0.00%, which is expected for a company focused on navigating a loss-making period and preserving capital.

The analyst community is mixed but leans towards the stock being undervalued, despite the risks. Their sentiment is generally Neutral, but technical indicators suggest a mid-term Bullish outlook as of November 2025.

• Morningstar's quantitative model suggests the stock is undervalued with a price of $3.17 as of November 14, 2025.
• The Price-to-Sales ratio (P/S) of 0.1x is considered good value compared to the US Personal Products industry average of 0.8x.
• The consensus view is that the market has over-corrected, but the 'buy' signal is contingent on a return to profitability, which management anticipates in the second half of fiscal year 2025.

Your action here is clear: the valuation screams 'cheap,' but the negative earnings shout 'risk.' You need to see a credible path to positive cash flow before committing serious capital.

Risk Factors

You're looking at Natural Alternatives International, Inc. (NAII) and the headline numbers-like the 14% revenue growth to $129.9 million in fiscal year 2025-look good, but the real story is in the risks that drove the net loss to $13.6 million. We need to map these near-term challenges to understand the path to their projected profitability in the second half of fiscal 2026.

The company faces a mix of internal operational pressures and external market volatility. The biggest flags are the proprietary ingredient segment's performance and a significant financial covenant issue that surfaced in the last fiscal year.

Proprietary Ingredient Headwinds and Cost Creep

The core operational risk for Natural Alternatives International, Inc. (NAII) centers on its two segments. While private-label contract manufacturing sales grew 16% to $121.8 million in FY 2025, the Patent and Trademark Licensing segment, which includes the proprietary CarnoSyn® beta-alanine, is struggling. This is a critical point because proprietary ingredients often carry higher margins.

• CarnoSyn® Decline: Revenue from CarnoSyn® dropped 4% to $8.1 million in fiscal 2025, primarily due to decreased orders from existing customers. This is a defintely a segment to watch.
• Manufacturing Costs: Operating losses in the first half of FY 2025 were directly tied to increased manufacturing costs, specifically higher expenses for labor, supplies, rent, and freight. This signals a margin squeeze that sales growth alone can't fix.
• Sales Mix Shift: A change in the sales mix within the private-label segment also contributed to the operating loss, suggesting that the higher volume sales are coming from lower-margin products.

Financial and Strategic Vulnerabilities

The most immediate financial risk is the company's compliance status with its lender. As of December 31, 2024, Natural Alternatives International, Inc. (NAII) was not in compliance with certain financial covenants under its credit facility and was negotiating a revised agreement or waiver. This kind of non-compliance can trigger a default or impose stricter borrowing terms, severely limiting financial flexibility. Here's the quick math on the 2025 net loss:

What this estimate hides is the ongoing need to manage working capital, which stood at $30.5 million as of June 30, 2025, and cash of $12.3 million. The company is also monitoring external risks like geopolitical tensions and trade tariffs, which could impact its international supply chain or sales, as it operates globally.

Mitigation and Forward Strategy

Management is clearly aware of the need to stabilize the proprietary segment and control costs. Their strategy is focused on leveraging their patent portfolio and expanding product offerings, which is a smart move to boost margins.

• Product Expansion: They are actively developing new sales channels and expanding CarnoSyn® product offerings, including the introduction of their new TriBsyn™ product.
• Cost Control: The recent Q1 FY2026 results showed an income from operations versus a loss in the prior year, driven by improved utilization of factory capacities, which is a positive sign of cost management taking hold.
• Profitability Target: The company forecasts achieving profitability in the second half of fiscal 2026, which is the key metric to track for a turnaround.

For a deeper dive into who is betting on this turnaround, you should read Exploring Natural Alternatives International, Inc. (NAII) Investor Profile: Who's Buying and Why?

Next Step: Portfolio Managers should model a scenario where the CarnoSyn® segment continues to decline by 5% in the first half of FY2026 to stress-test the company's projected profitability.

Growth Opportunities

You're looking at Natural Alternatives International, Inc. (NAII) and seeing a company that just posted a net loss of $13.6 million for the fiscal year 2025, but you need to know if the underlying business is turning around. The short answer is yes, the core growth drivers are accelerating, even if the bottom line is still catching up.

The company's net sales for fiscal year 2025, which ended June 30, 2025, grew by a solid 14%, reaching $129.9 million, up from $113.8 million in the prior year. This growth is defintely a sign that their strategy is working on the top line. Here's the quick math: the private-label contract manufacturing segment, which is their biggest business, saw a 16% increase in sales to $121.8 million, driven by new customer acquisitions and larger orders from existing clients. That's where the real momentum is.

The future revenue growth is tied to three clear actions the company is taking:

• Product Innovation: Launching TriBSyn™ to expand the CarnoSyn® patent estate.
• Capacity Expansion: Utilizing ~75% of global capacity for new business.
• Customer Acquisition: Adding new contract manufacturing clients.

Management forecasts a significant sales jump for fiscal year 2026 and expects to hit profitability in the second half of that year. This isn't just wishful thinking; it's grounded in their expanded manufacturing capabilities and their new product pipeline, which is a concrete competitive edge.

The biggest strategic initiative is the launch of TriBSyn™ (a new patent-pending beta-alanine technology). This new ingredient is a product innovation designed to increase the absorption of beta-alanine while eliminating the common side effect of paresthesia (that tingling sensation). This is a smart move to penetrate the broader Wellness and Healthy Aging markets, moving beyond just the sports nutrition niche that their core CarnoSyn® ingredient is known for. The competitive advantage here is their intellectual property-they are the only pure-play public company focused on this kind of patented nutritional ingredient and contract manufacturing. Their multi-continent contract manufacturing facilities also give them an edge in global supply chain reliability.

To be fair, the CarnoSyn® royalty, licensing, and raw material sales revenue actually decreased 4% to $8.1 million in fiscal 2025, showing some pressure on the legacy ingredient side. But the strength in private-label manufacturing is more than compensating for it, as you can see in the table below. The company's ability to offer comprehensive, turnkey services-from formulation and clinical studies to regulatory support-makes them a sticky partner for supplement brands, which is a powerful, though hidden, competitive advantage.

What this estimate hides is the risk of customer concentration, which has caused volatility in past quarters, but the recent push for new customer acquisitions is a direct action to mitigate that. If you want a deeper dive into the full financial picture, you can read more here: Breaking Down Natural Alternatives International, Inc. (NAII) Financial Health: Key Insights for Investors.

Next Step: Portfolio Managers should model a 15-20% revenue growth rate for fiscal 2026, aligning with management's 'significant sales growth' forecast, and track the sales contribution from the new TriBSyn™ product in the upcoming quarterly reports.