HPC cuts Q3 US operating loss 85% as revenue falls 21.9%

Cost reset cuts Hydralyte’s US quarterly loss

Hydration Pharmaceuticals Company Limited (ASX:HPC) has cut Hydralyte LLC’s US operating loss by 85% year on year, but the September quarter delivered a mixed test of its turnaround. The US business reported a US$66,900 operating loss on US$665,200 of revenue, down 21.9% from the comparable quarter, while its net loss after tax narrowed 92% to US$35,700. The result builds on the first monthly profit recorded in August, when Hydralyte LLC reported a US$4,300 operating profit.

The improvement came mainly through a much smaller cost base. Operating expenses fell 58% to US$313,900, including a 54% reduction in advertising and marketing expenditure to US$170,600. Revenue per marketing dollar rose from US$2.28 to US$3.90, according to the company’s unaudited management accounts, as spending shifted towards Amazon placements and lower-returning Meta, TikTok and DSP activity was largely discontinued.

September stock-outs interrupt the improvement

The quarterly figures conceal a sharp deterioration at the end of the period. Monthly revenue fell from US$277,800 in July to US$234,000 in August and US$153,500 in September. September gross margin dropped to 49.7%, compared with 73.3% in August, while the month produced a US$59,800 operating loss. HPC said out-of-stock products affected September retail revenue, with estimated missed sales of US$59,000.

That makes inventory availability a more immediate operational issue than the headline cost reduction alone suggests. The company has identified keeping key stock-keeping units available, protecting gross margin and improving cash conversion as priorities, but the presentation does not establish whether September’s disruption has been fully resolved.

Group EBITDA improves while cash remains tight

At consolidated group level, the unaudited EBITDA loss fell 76.7% to A$227,797 in the September quarter from A$977,027 a year earlier. However, Hydralyte LLC’s US results are management accounts and are not the same as consolidated statutory group results. Group operating cash outflow was US$249,500 for the quarter, including US$158,600 in inventory and packaging payments and about US$50,000 in prior-period invoice settlements. Cash stood at US$173,400 at 30 September.

The funding response is the 2-for-3 entitlement offer, priced at A$0.004 per new share and seeking up to A$1.435 million before costs. At full subscription, HPC expects about A$1.277 million to remain for working capital, compliance, inventory, fixed costs, marketing, sales and product development. The offer also includes one free-attaching option for every two new shares, exercisable at A$0.006 until 30 June 2029.

Capital raise leaves participation risk unresolved

The offer is non-renounceable, not underwritten and carries no minimum subscription. That means the amount raised may fall materially short of the full-subscription scenario used in the presentation, while shareholders who do not participate face dilution. The proposed post-offer structure would increase ordinary shares from 537.99 million to 896.65 million if fully subscribed, alongside 179.33 million new options and a further 71.73 million broker options subject to the stated conditions.

HPC is therefore attempting to fund the next phase of its restructuring while its most encouraging operating evidence remains uneven. The lower cost base and improved marketing productivity are measurable advances, but the September margin collapse, stock-outs and continuing cash burn leave the next quarter’s inventory execution and offer participation as the sharper tests of whether the August improvement can persist.