CDXC - Earnings call transcript Q1 2018

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to ChromaDex Corporation's First Quarter 2018 Earnings Conference Call. My name is Daniel, and I will be the conference operator today. At this time, all participants are in a listen-only mode. And as a reminder, this conference call is being recorded. This afternoon, ChromaDex issued a news release announcing the company's financial results for the first quarter 2018.

reviewed section both www.chromadex.com. of not the available have Relations Investor ChromaDex's you this are information, within If website at would the Director turn now to I Johnson, Andrew conference of over Relations. Investor like sir. ahead, go Please

Andrew Johnson

business first Thank you, Daniel. Chief to Officer, are Financial results new markets, Fried; to risks afternoon, Operating well timing and Executive subject the future, future relating financial business today statements, to the Officer, call. Farr. that studies team, in are us to Founder Today's President research future and investor quarter regulatory results, may plans future trial clinical call the management of and and forward-looking Officer, ChromaDex With future performance and related opportunities, Chief ChromaDex's welcome of operations. such the investor ChromaDex's XXXX operating uncertainties filings, clinical and to Good clinical Corporations' needs, anticipated the Kevin in conference and results future Frank including sale trials, include and cash development Jaksch; trial prospects statements the and opportunities, of ChromaDex's to of and development interest, and add ChromaDex's timing as Chief NIAGEN expansion plans, as results of TRU Rob

actual with statements activities to risks with those to intended ChromaDex's the after ChromaDex's update These no actual could SEC. conference forward-looking statements forward-looking inherently subject Form give Because call and in any are the of obligation estimates assumes the many the this to and activities risk Report the yet to statements. filed on or to from differ not Please confirm XX-Q, future Form factors forward-looking or statements, on results most occurred, materially company's that uncertainties, factors note, and have represent results date company expectations. changes contained not results. are recently to this statements anticipated only the in conference assurances include XX-K Forward-looking and any the matters to results Annual forward-looking date cause in statements call these of actual that as relate its

information In measures, The measures. measures presented this available of earnings and on afternoon explanation financial this the references non-GAAP useful financial company was call non-GAAP release, of addition, financial in an company's the the to presents believes such to website, issued GAAP appropriate certain which investors. why the is reconciliations are company's

of at www.chromadex.com. it turn is my recorded Jaksch. webcast. Relations Investor call section website conference Frank the be this being our With via at to the call available pleasure Finally, webcast that, over to The will now is

Frank Jaksch

XXXX Good Andrew. you, you and call. our first investor thank Thank for joining afternoon, everyone, quarter

and university studies continued age-related and provide continuing the of are NIAGEN NR NAD are into importance looking looking areas and And on ageing function. specific Nature of team to on the of Rob to of expand from This at looking and at in Washington some has cognitive number NIAGEN’s health. for the but recent and at the surge. NIAGEN of Kevin to metabolism his growth, sales mitochondria Stiffness We University and are the to the science Pressure health at pleased to related at take of NIAGEN the our where very details continues strong you is mild on today is for decreasing through surrounding of his NR report that the impairment Dr. of human Colorado the continues Delaware grown exciting Martens, heart Iowa health. is NR author Blood will additional Vascular Boulder University researchers NIAGEN University Cambridge of NIAGEN. the of research I’ll human mitochondrial effective investigating new vascular on human role benefits on areas University of studies the update human of trials.gov year, the are of Researchers The an and first four State clinical posted a work The broadening memory XX. publication scientific evaluating XX biogenesis. loss. products

is these more there currently progress. fully collaborations signed XXX more from We these forward that than independent unrelated independent studies We at With parties. total XX as underway To NIAGEN on efficacy valuable are that clinical XX they studies million to studies, these grown trials look four represent to looking number funded new estimate of learning clinical from XXX. of specific the points. over research end by that collaborative research are date, has

was foundation confirmed human NR blood ATP pressure therapeutic NAD an ongoing health Boulder focused QX. media on if larger XX that participants of on the time highlight systolic blood NIAGEN study in supplementation published biomedical Findings for to damage broad could focus the the prevent the I’d have study. UC of in awareness. nature and of reviewed function by source effect few at neurological Alzheimer’s peer effective take the study aging science In author improvement the vascular University planned. national cognitive with provide and engagement and NIAGEN of stated, demonstrated this hypertension, to important This during elevated a is In both improve stage on further a levels. March studies shown pressure whereas is study pipeline trial in Disease or published the model reduction Communications. significant was safe implication. that to the continues, Boulder systolic indicated studies like have and the will showed Colorado release, NIAGEN the happened NIAGEN On As X NIH consumer magnitude specific studies endpoints, a physical both with we such of also published in the announced raising that to where XX, and at press publications being institute clinical first previous February, pressure with blood landmark

second throughout the publishing was study Syndrome. our eight-week I’d from of Cockayne showed effective study an that like safety the levels NR the NAD dose NIAGEN the human use. where in for we results to and in established supported also range elevated with XXX-person are at on for daily for update provide study an are We process

change to company With Syndrome. Cockayne nutraceutical strategy on product, focus changing for the in consumer our we strategy the NIAGEN, TRU our are

As for a result, IND directly ChromaDex pursue the will not CS.

National with option a for will the We to a important the who clinical will continue kids the as NIH, fund this necessary with CS. of at work Aging the process treatment available very IND and complete as studies collaboration NIAGEN make Institute

look a identifying interest of and like as research Our CS. funding study to NIH. this and XXXX collaborative NIA and way with with study our very model And has proven a in research CS completing be started in effective collaborative forward we NIH to a

have Before the we let we from executive NIAGEN changes company. TRU of into me Rob as hear nutraceutical our our growth the efforts about address integrated a evolution of part maintain to and made accelerate consumer-focused

of Following June, XXXX There, to in transition Executive annual team. the will of of as executive Chairman. the in I management I meeting the part role shareholders continue active role will

the as tremendous forward to with Fried’s has year, look and the last our Rob made Rob the continuing momentum progress we under Executive Over company Chief leadership Officer.

the you Rob, overview Rob? to pass we call will an give he’ll NIAGEN. the on where I growth with have incredible Now, TRU seen

Rob Fried

you, Frank. Thank

will science roles leads as a and represent in he to transitioning spent to to year. company developed we’ve few be company he development the Board we drive that work nicotinamide industry behind well said, new strategy in the that the over and researching execute as I scientific and Chairman. the I as Frank it, have continue years ChromaDex. riboside, will will product continue but as laid Executive efforts the the As many weeks, to will out past together the Frank our

We ingredient building of dollars clinical have toxicology, millions is studies, I the science and very science is a for this I behind And believe invested growth. that that many company protection. are designed we regulatory sustained real. years in at this very strong. long-term approvals, company believe the From foundation, patent and

choices significant that and transparent show to way, expect to expect potential growth, global opportunity to the term. consistent realize to long a best we steady is and We this show Along we're but making progress. short-term

the trusted focus of energy. the in the on science science-based is with to cellular company mission be a Our most and NAD nutraceutical world

a to Our TRU brand. a is strategy into NIAGEN global build

Until last the million, three standards core in of generated in year. NIAGEN that expect contract revenue have are our business, growth. further grow This our but XXXX XX% to Over NIAGEN a the revenue. is of contract were show parts into to detail, enterprise, of was but years, XXXX is TruNiagen to the but ingredient continued and to per Kevin U.S. than slow point important as NIAGEN XXXX. from sales growth is of sales of ingredient. TRU ChromaDex March $X mostly and consisted a businesses an the million ingredient services ingredients quarter TRU in services There per first business The this no around business, until year $XX and the larger, we in go more see growth $XX,XXX TRU strategy NIAGEN the sales may strong that we some business. product gets standards continued compared will rate and continues dramatic time the come. growth for prior to size as rate the that important at business a of direct-to-consumer working month. core compound revolutionary

acquisition customer business lifetime strong first sales We’re and Watsons in we our cost, the of in from the key in were sell-through strong and including to value, customers. to $XXX,XXX metrics as coming continue Macau. also trends experience repeat Kong Hong percentage TRU NIAGEN seeing our quarter

marketing growth TRU refine been see we’re have and in launched there that Walton to the in with expect January to as message. working Watsons We sales Singapore continue. has building, NIAGEN

includes regulatory Watsons where are TRU current Our the diligently with approvals. in to Taiwan we pursuing required agreement right sell the NIAGEN

new launch Watsons is TRU obtain determined which to our regulatory on are second international group worldwide. Based in to sales, brick-and-mortar regulatory receive XXX is approvals. direct-to-consumer through regulatory operates of A.S. XX,XXX expect XX other NIAGEN in Prior Taiwan. markets, approvals ability partly the in Internet in over stores international Watson in we has to international be our pursuing. cross-border of markets Hong the expansion to by interested Watsons markets distribution around in accessed pace markets. markets Kong, TRU receiving can successful The of certain into XXXX. We the NIAGEN of quarter the locations extending approvals

Finally, we’re Shichman, team with Asia. build partners The discussions management experience target leadership TRU with ventures us of and of CTO, growing from Kevin Ben continues addition Secretary an Counsel continuing as Herbalife of brings in XX companies. with Mark from in to our Corporate to NIAGEN establish General in launch the markets new and executive our strategic to joint Friedman Mattel. Farr on software technology January joined our CFO new expertise who years our rapidly XX following e-commerce appointment over

have corporate in who addition, and Gropack, on new employment In Jordan of our both lawyer don't VP HR settings with Internet we start-ups. large brought People, former a is experience leader

important more announce to management additions expect near in We future. the

Our Sir unit John Prize MRC mitochondrial John Director, was Nobel the Scientific Walker in World Kevin of for knighted to with biology to his And addition XXXX Nobel for Advisory continues biology, molecular with in strengthen to the contributions I Cambridge, the call XXXX. expertise awarded is in will Walker over pass Walker. in Laureate, Dr Chemistry his Professor that, Emeritus was Farr. and Sir the renowned Board biology in England. molecular

Kevin Farr

Thank you, Rob.

at XXXX. for of quarter look results our the financial first Let’s

$X.X million, TRU increase March growth the up in quarter was XXXX, net three the $X.X in from NIAGEN. of first months continuing sales of million the of operations XXXX. quarter in sales ended For to The ChromaDex XX, XX% of the by compared reported first driven sales

million, remained NIAGEN represented For the which includes NIAGEN which and $X Gross XX% were of flat charges. TRU at for first-quarter sales revenues. both NIAGEN first certain quarter, margins revenues XX% XX% sales were related periods, related

label of to net from due private related which products a resellers, to consumer sales longer inventory adjusted will XXXX same the sales, in Excluding percentage of we non-GAAP a We growth XX% profit NIAGEN no to positive certain a experienced which write-off was of for our purchase are product, distributors of as impact NIAGEN of better for anticipate quarter consumer product TRU the as first margins XXXX. the XX.X% continue. the compared period measure

first and million investments continuing incremental of of the $X.X by development, for made $XX.X to we as $X.X expenditures, quarter as Our up compared and marketing to million research sales first expenses as million to as were invested in million. well general million R&D and NIAGEN the our million and growth and of from business. $X.X of in XXXX out the expenses stock-based $X.X million, operating operations $X.X quarter to in marketing advertising cost support The expenses of $X.X incremental in legal new build brand company expense TRU higher compensation administrative

Excluding a which expense, quarter XXXX compared prior and $X.XX were to expense, $X.X result $X.XX higher net quarter net and shareholders million were sales for million quarter marketing year. the or administrative higher of loss gross the negative $X.X to for expenses invest volume in $X.X up general incremental attributable $X.X were The first and expenses losses share the common by strategic in first equity-based higher spending legal a per was the of The per higher to by XXXX. decisions million compared profits. first compensation of legal the to expenses equity-based as million, compensation or as and partially loss share offset the of

million, in for basic cost. XXXX. and for quarter of $X.XX to negatively cash EBITDA, negative stock-based by with of measure a a EBITDA the in was for versus a $X.XX versus reported negative $X.X quarter the compensation The loss related EBITDA the income the For income was non-GAAP was million. adjusted million charge $XX,XXX XXXX, stock first non-cash a EBITDA adjusted adjusted quarter of million operating $XX $X.X negative balance QX a year. of the first XXXX our interest ended and non-cash XXXX. to used We quarter, for net million of XXXX, for tax, first of dilutive the negative first depreciation, ChromaDex Adjusted of the was compensation. quarter In amortization, share adjusted cash impacted or $X activities compared quarter $X for loss defines as XXXX first prior expense,

infrastructure, and as well the in international international new the realize to forward, concentrated Looking in support new in the expenditures continued The markets. to company half by Watsons marketing The sales invest growth build TRU brand, expects company and expected year. continue business of up driven U.S. capabilities be TRU to the to as second growth to is in of business, the will e-commerce launch certain NIAGEN our growth. NIAGEN

burn NIAGEN a cash and have sales on of positive to to TRU our rate and grow. growth as its expect return is With rate marketing offset contribution expenses margins advertising We currently R&D on improve NIAGEN track high higher to sales partially TRU after And, company XXXX. we rate rate better Operator, be ready cash on of expenses currently the G&A by run a flow and on by believe basis the whole we’re the or run basis quarter fourth questions. of to now can XXXX. breakeven end a take

Operator

Thalmann. And Thank Ladenburg question Cohen comes our you. [Operator first Instructions] from Jeffrey with

Your line is now open.

Jeffrey Cohen

Andrew, Frank, Hi Kevin you? are Rob, and how

Rob Fried

Good, thank you.

Jeffrey Cohen

complete Frank, So, IND, expect you I enrolment finish will when game far as you this a up to carry as forward, the that few when strategy, you questions, should centers? the so firstly as the the do that expect IND, as NIH and and far the

Frank Jaksch

NIH, going it collaboration now that going with meaning basically, process much we to as on the are right an be essentially a versus to say working Well, the pivot efficient investigator we’re filing going moved on would to IND activity IND. IND ChromaDex I our is the as a IND it XXX% to IND over It’s do versus an to process through more file NIH own. doing ChromaDex to it to the

Jeffrey Cohen

Okay., the proposed So, range forward? it on of kind study take will the going

Rob Fried

we I collaborative is where nutraceutical as and like better current a it study going. to going a This collaboration NIAGEN handled focused and on or are of our activity dietary type that’s a call, product. it’s mean started of is the position development company company TRU going on think I supplement XXXX, back much Yes. the reflecting I had as said as that where a

Jeffrey Cohen

it. Got

far call any out in of as areas it's Okay, growth as the particular Any helpful. for note particular geographies quarter? to that

Kevin Farr

it think look were XXXX, said. XX,XXX, was it year-end as really in about Jeff, where quarter Rob XXX,XXX as at first it at our driven to Comparing back million the this for quarter Rob from I as quarter, year U.S. by of from our first the we operations first the to grew said. X.X business results e-commerce the

of the big first Watsons XXX,XXX XXX,XXX some So international We growth in other in and sales quarter or driver. that’s in about the markets. see did about

Jeffrey Cohen

comment of was growing website? of the is X.X that, of what what percent, NIAGEN that about about got Or DTC online the company's XX% so of not? was per directed the X, through I TRU it Okay. that month XX% through out far as the the the percent and as company’s And website? compounded, percent all was

Kevin Farr

and detail, going into level give know, the but we're both You get we’re of of grew to split the between them that not really Amazon going between substantially not the what’s truniagen.com. to detail during but period,

Jeffrey Cohen

Okay, got any going as out Asia, pursuing Taiwan, geographies other call far any would it. And no? or beyond Watsons Southeast geographies, as it’s relationship for you us the say give can are to you flavor you particular

Rob Fried

in Watsons they and a four Europe, is Asia initial territories has in know dependent Watsons place their yet do all have the and expressed of throughout entering approvals deal but not we interest largely and you also with regulatory on this are territories. beyond prolific

So, those to one released will be. next beyond we yet four, don’t the where know be

Jeffrey Cohen

Got it.

Rob and you QX more end XXXX, cash XXXX, thanks said, going out you that I what of EBITDA? was called in was commentary of the QX the anticipate Okay was you one towards if the XXXX, that positive specific your it by positive flow beginning may, that end

Kevin Farr

TRU set quarter we’ll the respect and ongoing that think operate make is fourth to as working I quarter better or that and to we to the to contribution now Rob's breakeven in become working rate quarter. XXXX or we're that in on flow comment the mandate the cash significant diligently said update we're fourth XXXX, CEO of cash better, as other quarter give Rob on breakeven to NIAGEN run a XXXX. enough we against fourth and With you has on a try we on that cash what in flow second about expect overhead exit XXXX cash despite to having a and XXXX, transition

Jeffrey Cohen

Okay, Kevin. that it's helpful. Thanks

I Thanks for a it think moment. does the for lot. me that

Rob Fried

you. Thank

Kevin Farr

Jeff. Thanks

Frank Jaksch

Thanks Jeff.

Operator

comes Dezellem Thank you. with Bill from Management. [Operator question Instructions] next Our Capital Tieton

now Your line is open.

Bill Dezellem

Couple Thank that what of a you. a would that additional label anticipating you repurchases to That’s Tieton inventory are with in questions, future of that private talk bit quarters? you start to degree Capital purchased, and all, like to you first or purchases Management.

Frank Jaksch

to as back the selling no about private talk inventory. their that a it brought product. We consumer longer is of resellers wind label It down just I’ll are XXX,XXX Yes, inventory. we the distributing few was and

So, we're resell really not in that. really to place

sell we work did we at and we’re mostly no sell that them So, them. it point-in-time as we off write to resellers label, with could with period are buy and this we about have continue them them we down basically to working it through would NIAGEN then private as their to to and longer sellout but three after

Bill Dezellem

fair so not no that’s ChromaDex's Would it is to impact business be so has as that and recognizing that to easy and on face say, good now? product, them an longer may sell really repurchasing gesture part, be a on this to selling model them their you’re for

Frank Jaksch

Yes, part is with have we that relationship of the the companies. consideration these

us, companies point also we’re to companies we have also ingredients with whom Some future. out business that I supplying with of to two in not purchase for on that companies in years, are NIAGEN. made, business we’ve some from in down of the do been ways other we these them might want and we're these other

particular them haven't those sell made while. decision a We may to two to the We a continue to relationship final for as with companies.

decision. with our them conversations and final we made are haven't presently We in

Bill Dezellem

That is helpful.

to that selling repurchase you are are there companies that And to negotiations so, are in not any inventory? with you

Frank Jaksch

There one. Yes. is

Bill Dezellem

give that the an if to are litigation you repurchase into and those on if inventory expenses Elysium unless sold just, some may I please spending That’s and relationship, and you helpful. around may you money make update to they’ve segue the back issues on would amount their it, be tie the that And talk legal it us would sense please? just and, already would of of

Frank Jaksch

details it’s an recent beyond the the With that? you XX-Q, can’t what’s litigation. the and to want as Do answer specifically ongoing litigation, we to in know, litigation provide regard most you any about

Rob Fried

Yes, indicates buying ingredient, their with probably sold regard ingredient to they’ve intelligence the to that back through them. that sold our, we Elysium and

for they ingredient. have that paid us However, not

So, part that’s still the litigation. of

Frank Jaksch

from is they we selling don't Elysium. any there are of that Yes, some riboside. And the believe what testing to we is market out inventory shows on buy nicotinamide are other back source

Bill Dezellem

to the Thank That is could quarter, sell-in how in that and level sell-in you. was of the helpful. comparison the if sell-in trying like into there the much get And switch in quarter was would to please? level then I we first just of retail, what fourth to a

Kevin Farr

the they and levels before maintain very and that we we with about we it’s of think through helping at bottles shipping look what sell we as year, their to good forward, in promoting markets them maintain the and what the And that to we we $XXX,XXX what’s quarter, Hong strong into been at sell shipped with is strong and sell-through, of sold they’ve to quarter in we was as be And inventory to in the think them are we we look sell-through do level levels first retail the what year. will and the enter need Kong for new that to regard look In basically more expectations targeting. as selling seeing again in Singapore through last worth of results very X.X, at shipped the X.X the them do brand. inventory of launch I of Hong fourth been they regard we their to balance going in year-to-date them Kong, in sales, sales the balance and they’re as part to year

Bill Dezellem

what stock was to QX? the to sell-in the guess fourth was initial there quite into to be your cell how is Relative as any and helpful. quarter in would fill That any much of Singapore, in shelves

Frank Jaksch

aggressively required begun of not There a and we is have marketing in marketing bit complex than is levels Singapore the do approvals in so to Singapore. Hong yet know, different Kong. a push You they, more

it couple of few gradually begun slowly, last to Although weeks has materialize.

is yet not how selling doing Singapore how through. they’re we're or So, sure

Kevin Farr

relates But I’d the in to say Singapore. in Kong, to quarter Hong not the XXX,XXX first that we shipped

Bill Dezellem

And guess how were X.X to then, in much QX? the sell-in million your as of

Kevin Farr

a probably was it Singapore. think of to that, I quarter about went

So, about XXX,XXX.

Bill Dezellem

Thank Great. both. you,

Kevin Farr

Sure.

Operator

you. session would like today's any turn the remarks. for Thank or ladies I question-and-answer call. and now And call to ChromaDex gentlemen concludes for the our further team that back to management

Frank Jaksch

No.

think I it. Thank that’s you.

Operator

Ladies all and thank today's participating today's This disconnect. does may wonderful and gentlemen, you in you for have conference. a Everyone, conclude program day.

ChromaDex (CDXC) 10 May 182018 Q1 Earnings call transcript