Stonegate Capital Partners Updates Coverage On Natural Alternatives International, Inc.

DALLAS, TX / November 22, 2021 /Natural Alternatives International, Inc.

COMPANY DESCRIPTION

Natural Alternatives International (NAI) is a global formulator, manufacturer, and marketer of customized nutritional supplements. By combining its science-based formulations, rigorous research, natural ingredients, advanced quality assurance testing procedures, superior manufacturing and packaging capabilities, and broad marketing experience, NAI creates quality nutritional products that are sold globally. NAI generates revenues from two sources: private-label contract manufacturing services and in-house brands called CarnoSyn® and SR CarnoSyn®. Importantly, NAI branded products are backed by NAI's patent portfolio. NAI has a growth strategy focused on various organic growth initiatives, supplemented by acquisitions.

SUMMARY

• Large and expanding markets - According to the Nutrition Business Journal, the US Dietary supplement market is large and growing. The US market is estimated at $55B and projected to grow at a 4.6% CAGR through 2023. Furthermore, the global dietary market is estimated at $150B and projected to grow at a CAGR of 4.6% through 2023.
• NAI's core capabilities provide a platform for organic growth - NAI has 40 years of experience in the nutritional supplement market. NAI's core competencies includes customized product formulations; an in-house science board; scientific research and clinical studies backing its branded formulations; material acquisition and analysis expertise; a global manufacturing footprint; industry leading accreditations and certifications; a patent portfolio; and strong sales and marketing support to its customers.
• In-house brands point to growth - NAI believes it has a significant opportunity to extend the sale of its proprietary ingredients, CarnoSyn® and SR CarnoSyn® beta-alanine into additional markets and channels. With the introduction of SR CarnoSyn®, a sustained release form of beta-alanine, NAI believes it can capture additional market share in the sports nutrition market. This is where NAI's current instant release form of beta-alanine product CarnoSyn®, is targeting an 18- to 30-year-old demographic. Importantly, NAI is also expanding SR CarnoSyn® into the health and wellness market. First, in Q318, an SR CarnoSyn® product was targeted at the 51+ year-old demographic and emphasizes how SR CarnoSyn® can provide a significant range of support for everyday wellness and healthy aging. And in June 2020, SustainedRX® was launched as a direct-to-consumer product, exclusively on Amazon. The product is marketed as a general wellness supplement.
• Additional organic growth initiatives in place - NAI believes it is well positioned to expand its relationships with existing customers and to add new customers to its private label manufacturing activities by leveraging its global manufacturing footprint, R&D efforts, and history of execution. Additionally, NAI believes it can drive additional growth by entering new channels, such as healthcare practitioners, OTC, skin care, and specialty retail, among others.
• Acquisitions are set to supplement organic growth - NAI is using its acquisition strategy to supplement its organic growth initiatives. NAI is looking to execute multiple accretive acquisitions generating $10M to $50M in sales over the next 3 years. These complementary acquisitions are expected to improve its competitive position and to enter new markets and/or channels.
• Valuation - Based on our F22 estimates and using an EV/EBITDA multiple range of 4.5x to 8.5x to compensate for revenue concentration risk, we arrive at a valuation range of $19.00 to $35.00, with a mid-point of $27.00. Additionally, if the Company continues to demonstrate further revenue and EBITDA growth, it is likely the Company could trade toward the higher end of the range. See page 8 for further details.