Cash Crunch and Revenue Slide Challenge NGS’s FY25 Profit Goals
Nutritional Growth Solutions reported a slight revenue decline in Q4 FY24 but remains optimistic about growth and profitability in FY25, buoyed by renewed Walmart partnerships and expanding Asian distribution.
- Q4 FY24 revenue declined 5.9% quarter-on-quarter to $594K USD
- Gross margin steady at 33.9%, with plans to exceed 50% in FY25
- Walmart renews modular placement and adds third KidzProtein® product
- New distribution agreements in China and Vietnam showing early repeat orders
- Cash balance critically low at $31K USD, supplemented by recent option exercises
Quarterly Performance Overview
Nutritional Growth Solutions Limited (ASX: NGS), a US-based pediatric nutrition company, released its Q4 FY24 results showing a 5.9% decline in revenue to $594,446 USD. This brought the full-year revenue to $2.46 million USD, reflecting challenges in consumer buying patterns and elevated media costs that dampened advertising effectiveness and online sales conversion rates.
Despite these headwinds, the company maintained a gross margin of 33.9% for the quarter and an average of 33% for the year. Management has set an ambitious target to improve gross margins beyond 50% in FY25, driven by the expansion of its Healthy Chef product portfolio.
Strategic Retail Partnerships and Market Expansion
A key highlight was the renewal of NGS's modular placement at Walmart stores for another year starting May 2025, along with the addition of a third KidzProtein® flavor to the in-store assortment. This signals Walmart’s continued confidence in the brand and provides a platform for increased consumer exposure.
Internationally, NGS has made strides with new distribution agreements in China and Vietnam. The company has already received repeat orders from these markets, indicating early traction and potential for sustained growth in Asia throughout 2025.
Financial Position and Capital Management
NGS’s cash position remains a concern, with only $31,000 USD on hand at the end of December 2024. The company’s average monthly cash burn was approximately $150,000 USD over the year. To bolster liquidity, the Managing Director exercised 1.25 million options, injecting $32,000 USD, and subsequent option exercises by investors brought in an additional $124,000 USD after quarter-end.
Operational expenses were carefully managed, with $414,000 USD spent on product manufacturing and operating costs, $217,000 USD on staff, and $167,000 USD on advertising and marketing during the quarter. The company is focused on maintaining cost discipline while driving revenue growth.
Outlook and Path to Profitability
CEO Stephen Turner expressed confidence in the company’s trajectory toward profitability, targeting breakeven in FY25. Key focus areas include achieving monthly revenues of at least $380,000 USD in the first half of FY25, improving gross margins through product portfolio expansion, and continuing to reduce operating expenses.
NGS is also advancing discussions with other major retailers, including CVS, aiming to secure additional shelf space and distribution later in the year. These developments could provide further momentum for the company’s growth ambitions.
While the short-term financial position remains tight, the combination of renewed retail partnerships, international expansion, and capital injections positions NGS to potentially turn the corner operationally in the coming quarters.
Bottom Line?
NGS’s Q4 challenges underscore the urgency of its FY25 growth and margin targets as it races toward profitability.
Questions in the middle?
- Can NGS sustain revenue growth amid rising media costs and competitive pressures?
- How quickly will the expanded Walmart presence and new Asian distributors translate into meaningful sales uplift?
- Will the company secure additional capital if cash burn continues at current levels?