CDXC - Earnings call transcript Q2 2019

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to ChromaDex Corporation's Second Quarter 2019 Earnings Conference Call. My name is Cheryl, and I will be your conference operator today. At this time, all participants are in a listen-only mode. And as a reminder, this conference call is being recorded.

a second announcing quarter issued results company's ChromaDex the for XXXX. afternoon, news the release financial This

If you Web have available within not reviewed this Investor section information, Relations of ChromaDex's site www.chromadex.com. the at both are

now Gerber, Director go Brianna ahead, would over Relations. Gerber. and Senior like conference of the I call turn to Mrs. Investor FP&A Please to

Brianna Gerber

Executive are you. Chairman, Fried; investor call. results Good quarter second XXXX Rob Chief and afternoon, Thank Jaksch; Officer, us Frank and ChromaDex's today Financial Corporation's Founder Farr. Executive welcome and to ChromaDex Kevin Chief With Officer,

future may the related future timing and prospects the call clinical risks opportunities, of business new in sale the results are operations. future cash and investor operating conference studies trial results anticipated include ChromaDex's ChromaDex's uncertainties and and and of as trials, such development relating subject future, of of needs, Today's business that performance TRU forward-looking NIAGEN future clinical statements, statements development and timing ChromaDex's of markets, trial opportunities to regulatory in including interest plans well filings, as the and to expansion research financial the results, future to

filed on SEC. statements. and activities occurred, are uncertainties. the statements contained any results. risk and ChromaDex's Forward-looking the the reports those only company's actually Form call results estimates factors these could are cause statements results report forward-looking relate most Form to differ risks assurance forward-looking Because inherently XX-Q quarter to ChromaDex's have from intended Many or These of statements yet this that annual XX-K in conference recently on and not of the on and factors with represent future to subject not give date materially actual matters anticipated to in activities the include

expectations. in assumes results this forward-looking date to obligation changes conform that to after call note company the conference or the statements, forward-looking any of actual its statements Please update to no the with

In non-GAAP press certain available this company's appropriate reconciliations of call references this and addition, presented which Web the on earnings afternoon present are information site, release, issued The in measures. measures. GAAP presentation financial the to were the company's financial earnings and

conference this site will available The www.chromadex.com. Investor Relations be our the at via recorded of webcast being webcast. section call at Finally, is Web

it's that, turn With the over Fried. pleasure Executive now our Officer, call my Chief to to Rob

Rob Fried

and Thank the thank for call. our everyone, you quarter joining you, company. second Good Brianna. XXXX was for afternoon, another successful It investor quarter

the NIAGEN objectives; and three a We science continue TRU global build advance to focus to fundamentals. our on into the core to own brand,

growth We NIAGEN XX% the net XX% again strong quarter. in the to of and first e-Commerce quarter. delivered sales compared with rates year-over-year sequentially representing retention TRU U.S. improved sales with XX%

continued specialty in global us diversified for Japan. U.S. business. Continue NIAGEN in with partners the expansion build Canada. to TRU sales China and We retail added more into growth and initial drove new solid We cross-border a the foundation positioning in

this on This who Op-ed to quarter, safety that and in on of outlook public you compliance like a efficacy took in would I ran nutritional out of topic support industry and thank June. reached we position a those my

GRAS are compliance the and XXXX. the safety in general. by are not companies in DSHEA imperative regulatory and Science NDIN supplement complying dietary for the industry integrity FDA’s of Yet, and forth processes consumer with set status

being billion surpass growing. to enforced supplements of is number $XX supplement Americans and every at market consistently. resources take dietary Three these XXXX, the out a four limited rules to according the will Euromonitor. Due U.S. FDA, not are By dietary that

by and label People is and is mission important the science know ChromaDex is personally. product. written deserve are claims what they health are the truly what This that on the for ingesting to what in that an safe, is validated that for is me

necessary to the and and champion protect fair to field. that consumer level companies required changes ensure have playing We health will a reputable regulatory continue

now recent over I the research. detail, in and turn the more Frank? an call update on developments Before to results Frank scientific our quarterly reviewing will Jaksch, Executive for Chairman,

Frank Jaksch

Thank you, Rob.

one science to and the core stated, our are objectives leader is research. of a NR to Rob remaining NAD As own committed and in we

to and property build world’s upon continue intellectual scientists. invest protect in research the leading partnering We our quality and with

last a published XX There and NR. are total effects registered and in more of therapeutic NR investigate than on additional Clinicaltrials.gov is currently clinical XX. to the test five trials of ongoing combination other are ingredients completed our clinical pharmacokinetics for three update. trials An This registered to with

U.S. being other with more of obesity on last neurological with finished studies quarter and than XXX the the being or and Over collaborations, research in that We planned as key same quarter. areas areas focus roughly signed progress are XX% cardiovascular aging.

and we new and generated FASEB celebrated in external Signaling June, our of research success NIAGEN In interest educated collaborative partners, the Metabolism community the science research projects Conference. the about at NAD our

wanted advancing later, share I say area of it many was this by important be respective to their this honor who will more but fields an research. about are Rob in to conference so surrounded what experts

was notable NAD a has entitled Precursors. One repair Exploring and Carlos in which NAD the and to theme was been key signs Cantó Roles research those attention. getting with of this the of a Limitations of the presenting Dr. cellular Among presentation area Physiological lot importance

that when enzymes we broadly which more produce demonstrated of to which will believe pathways faced the aging. metabolic and are NR research cells preclinical stress, into conditions utilize especially translate His become with NAD key critical

of Broadly NR research This and what preclinical conference value the us further the builds so an confident research the supported research part certain the importance integral of being stress. pathway that of at the presented upon makes this gets in in up showing previous speaking, turned conditions to of NR response metabolic community.

and update, science science our been that communities’ NR in interest thought mentioned well tremendous our research published as NAD, as leadership on quality broadly. of the about of aging I As excited are has surrounding on and own last we beyond investment the aging healthy

quarter. biophysical A link example. new and discussed aging study of biochemical research I’ll the in of a provided hallmarks NAD communications highlight last nine between senescence, one and I published one

mouse a consuming isolated used NAD The that cells. work CDXX human activity with through do increased reported and that increasing of it response. study but a in inflammatory CDXX levels new suggested declining study enzyme for combination cells observed senescent cells The responsible not is non-senescent maybe age. NAD activity partially of increased Previous have an

aging, NAD, opportunity to a have NAD reinforces and mitochondrial amongst we of NIAGEN. lot linked generated senescence of dysfunction the having senescence hallmarks nine the story buzz with so have recently

NAD NR we but science only while the Strategically, to Along aging remain and closely, includes not studies precursors. our this patent follow other those portfolio. around we broadening clinical lines, focused continue on

In delivering methods U.S. patent and January, NAD analogs which intracellular NADH of we by includes were derivatives new additional nicotinic NR or of new increasing acid. granted a for

the supplementation clinical And sustained Scientific but trial effects marks in chronic clinical July, published Reports. and kinetics safety the of our both This NIAGEN was the published clinical NIAGEN own in the NR study of study to on human measure dose-dependent fifth on first is it supplementation.

adults and randomized, response participants. arms. four study XXX in completed parallel trial. with when there takeaway blind X,XXX a placebo that important and XXX, measured controlled dose double overweight healthy XXX An at It per was was milligrams was day the

two significant consuming maintained remainder our experienced blood weeks. milligrams the XX% NAD dose in the within which per study’s of over whole weeks, TRU XXX On participants increase recommended day, current average, was statistically eight for NIAGEN,

results XXX increase the an tolerated All for side Day and XXX% doses at safety further efficacy ChromaDex study was of XX% effects. adverse product. were is X,XXX well no and the and milligrams important at also our attributable milligrams. with This support

proud we clinical of Healthy research to recognized NutraIngredients-USA for acknowledged and June, the of in the as Along our those Aging by to regulatory the compliance. quality lines were judges be The Ingredient Year commitment category. winner

breakthrough might They believe promise herald a delivers of mechanism whereas addressing on focus aging. other of it cellular ingredient true the symptoms the NIAGEN products as of aging a and

are Lastly, highlights spoke. to related new three clinical we important last studies since here

twin the to of top First research on a University, study the in metabolic Helsinki in diseases registered and investigate pairs. was May, of world’s dysfunction one universities mitochondrial effects chronic NR new by

by ataxia registered AT, This rare will disease genetic in study the in the disorder. University neurodegenerative clinical was the investigate Radboud or NR Another under a course with May patients effects of study Netherlands. of

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NIH a as and a in we orphan Studies disorders see in pleased have shown disease use a disease. collaboration previously the NAD of model supported role on mechanisms deficiency mouse that this ataxia additional research NR in repair plays with AT. DNA to underlying ChromaDex for are such

moderate with of treating for study University elevated measure And in nicotinamide and disease on stiffness study Dr. Colorado. just patients NR clinical pressure of will with arterial registered supplementation from severe a chronic last Chonchol measures entitled by systolic health patients week, This or third of stiffness CKD kidney other cardiovascular was blood and arterial in riboside CKD. to the effects the

stiffness taking stiffness per clinical A the and measure research on populations community of NR trials in interest arterial for of middle published older decreasing highlighting day registered observed arterial aged a in the in growing currently clinical are least trend milligrams blood healthy of this At XXXX effects towards two pressure area. X,XXX and other study to six in adults NR the weeks. different

of the and science aging NAD of in and We of as space, believe well quarter to leader ChromaDex the nine this further behind sharing to future In us positioned broadly. market look cellular updates summary, health capture calls. and the hallmarks forward on reflected is NR, opportunity ahead the momentum NAD

call Rob? pass Fried. the to I��ll that, With back Rob

Rob Fried

Thank you, Frank.

upfront, progress objectives the As quarter. in of I we each mentioned core our second across made

total continued The XX.X to and XX% a company increase we year-over-year. a into a net delivered brand. build XX% sales, NIAGEN million TRU sequentially global increase in First,

sales million, XX% were sales an XX% increase a and net X.X XX% were E-Commerce year-over-year. sequentially XXX% X.X sequentially NIAGEN TRU increase year-over-year. net and increase million, a

improved quarter of the this growth of from consecutive For against driver we delivered primary the the marketing returning backdrop as efficiency, higher represented growth. sales customers third

of reached customers for general. by priority us. and NAD our our returning encouraged for in awareness have the brand point yet tipping an the continues TRU very important NIAGEN to This of but We’re be loyalty not

all marketing test foundation new Each of quarter, grounded in we as continue solid a to well refine our messaging campaigns, science. as

science of Believer early launched This among and These quarter and we adopters NAD TRU are following campaign the celebrities. been NIAGEN. the of featuring individuals our have respective True influencers

Believer Strauss True Media. first Communications and Zelnick, was Take-Two CEO Zelnick of Our

include SAB a Westchester expanded Doctor New Magazine our We to York Dr. this was who County. Noble and in Roger winner Prize a Dweck, Top have Kornberg, and voted in Alyssa gynecologist Dr. on since practicing

health professional and Nike’s first volleyball a Also and spokesperson. fitness expert a Gabrielle Reece, former player, beach female

you listening Bowl the a positively for Colts believe Famer Like five Vinatieri, with NIAGEN our of health. they placekicker Sharpe. their Indianapolis has of all today, XX-year-old football Hall Adam course, Shannon product who Of and Super consumers are many star, TRU loyal appearances impacted

Sharpe these call, last television on discussed Based consumers. fitness-oriented quarter. campaigns success in new expanded radio we featuring our campaigns, with we Shannon tests which and second our On in the the targeted of marketing

sports to and sales grow quarter. Beyond second to our athletics relationships direct-to-consumer the the teams. versus professional marketing, continue We in began first build business we with sports see quarter in

the from in athletes, heard have building stages nicotinamide riboside. are research the are early We of this coachers of a we but trainers interested who in and number on business

and As our in I quarter-to-quarter testing overall this spend, said, marketing new campaigns campaigns efficiency. and existing and of to optimize spending us fluctuations channels new lead help can this while testing

e-Commerce business. of is Testing element any an important

as by will to acquisition our percentage driven over time. costs of We spending marketing customer continue net optimize lower a sales

in continued to the expect look to we and in dietary with have in in updating build are and slowly but markets supplementation cross-border launches we a second and wellness Consumers forward strong progress. launches on these our soft China over quarter expansion culture these health of global you time. which Our Japan, through

sales steadily Fullscript proprietary to Our continued Health our well partners Truniagen.com continues Canadian Canada, site WELL e-Commerce and well as with to sales as and launch build Showcase as Amazon.ca. our ongoing as momentum

quality innovative products Canada partner agreement sales to the in retail ChromaDex it Whole natural in and dedication to as their expansion stores. announced distribution test seven recently we Whole our a with Foods health addition, Foods make Ontario-based its we in Canada. consumers continue for wellness bringing In

Kong went and quarter for Watsons of second strong by in purchase celebrity their Hong experienced year driven they sell-through tracking that as commitments post video sales exceeded a the ahead our viral. expectations in the are

for to by second This in-store were quarter in including planogram the demand. prominent expected presence space TRU Watsons, year of of signage the additional at with very first sell-through meet that enhanced was an in half acceleration the complemented which new We NIAGEN. drove and the orders pleased

potential market the of reflective not an opportunity. we still and is view Singapore in Sell-through as this

presented recent execute Sciences initiatives health NIAGEN were messaging PR by Authority We’re marketing discussions the to existing which partnering These by lifestyle concentrated effort. where complemented with we supported is Watsons a with more our TRU Health and for new claims.

our support in FDA, support in has claims. our presenting of the depth of Much Singapore like the HSA interaction U.S. been the to science positive

As and in a XXXX Watsons the through reminder, has recent purchase is Kong both and higher commitments Hong encouraging. Singapore progress

was regulatory use novel as in opinion in This a Another the critical a release EFSA’s Europe. ingredient notable NIAGEN is TRU of update to the NIAGEN marketing for draft a front supplements day XXX milligram per dose. on food first step at of

the is The the legislation next draft for is informed states. that by European step to Commission member

major key a priority extremely milestone teams While the proud us of this I company. accomplishment the XXXX a which for in important there is do, and was for more for work am to

know, the a and areas. more Science Nestlé continues plans in we global supply XXXX about December. of NIAGEN a of greater agreement We both their with learn As partner as premarket appreciation Health license their to be testing. most capabilities gain announced global Nestlé commercialization TRU last you we for good and

extend met that ready-to-drink in chooses stability to technical Nestlé requirement, which feasibility is must be the milestone deadline relates unless a the Key in XXXX format. to

We and this I currently we is in inconclusive, who’s have The R&D ongoing research area. the but will there. cannot predict solve confident science get capable performing we I this a am when so highly that will appropriate team

aligned power TRU TRU for nutrition consumers’ to substantially adding We position stated and and advance and portfolio. with our ingredient are of benefits of mission improve they the health awareness strong cellular believe NIAGEN with about are health their to already NAD. passionate this The NIAGEN will Nestlé’s raise market overall their

XX second to updates own added were important since there and We core Our we portfolio is property objective than licensed the intellectual with last to NAD owned patents leadership additional precursor methods spoke. our for global several pending. science our as of the which patents new patents or riboside. NAD nicotinamide in the beyond includes and increasing This highlighted Frank that demonstrates space more

composition The exclusively of from are nicotinamide lead matter riboside Dartmouth patents licensed College. around

its against patents has in PTAB’s aware, of a infringement forward of that Also, are Dartmouth patent day. of Elysium been decision. filed ChromaDex and set. Delaware Elysium District has appealed United We unsuccessful Court dates the challenge No you to States IPR the As look yet the Health. both in complaint part court in was and a

year. around portfolio, Grace W.R. patents NR supplies infringe our was Beyond patents exclusively crystal who companies with of manufacturing further of who morphology our position and licensed the on owned of two and ChromaDex and issued These patents vulnerabilities the NR distribution earlier strengthen others. the this expose

the full research the on scientists misrepresent of with the molecule. to extraordinary invest contrast infringe uncover those and partner research, IP companies continue of we In this who and in quality legitimate world’s to the leading to potential

This leading specializing conference experts in June, Dublin, Ireland. drugs that Signaling science research sponsored those and in NAD. in interventions with of instance, the in + For nutritional attracts and with the interface FASB event aging offsite NAD Metabolism ChromaDex conference an at world’s

NAD co-hosted Elaine Health Roberts. event Dr. Drs. Cantó Brenner, as and discover our with Scientific Advisor Charles of Myron discussion of and Chief Institute CSO, featured The Jacobson. other Nestlé in and Matthew precursor, Carlos Sciences luminaries Dr. the the our the from Dr. such and field NR

body of NAD mice. conducted prevented increasing vitamin preclinical a Felding minds team of we in a Scripps scientific Brunie in of Cancer and Molecular nicotinamide Scientific best Dr. cancer have the at July out showing research, seek our BX development Dr. with study to Renowned Scripps Felding appointed an Researcher, Board. in Research continue Advisory to Professor We academia and breast her scientists and including impressive Medicine that

very and much research. much further metastasis of of about Biology Journal Her partnering from in dozens preclinical Molecular mechanisms Cancer areas so field journals treatment. advance and already published to inhibition learned Cell, to the including precursors of research findings her this the tumor We been and important and cancer Felding prevention of breast Neuro-Oncology. We of have of Dr. possibilities in the look with of forward Journal NAD

trial further regulatory in This use support data Frank for our fifth key science-based as and was international Reports in in safety month important last claims. study submissions. validate the safety points our discussed, demonstrating Furthermore, investment continued to NR sustained of published an Scientific clinical provides to is

By science. our expanding community leadership scientific our and of clinical and the within on advisors, community, of owning preclinical the our scientific research goal deliver our we

team build world to and sales. greater fundamentals; continue the class depth we brand Lastly, and a focus reputation, on science, communication, with regulatory

Senior leads social member as Global leadership and and TRU function the us we This Jordan Two global of and a reputation corporate me. this for media, President to and and Megan our week; Officer our the new team joined strategic important thought Corporate build Chief Vice it’s global Megan awareness hires leadership communications, us executive a directly Communications NIAGEN. reports our responsibility very social for is of as very functions. brand Affairs, raise

her a Southern Megan clients of California in-house She us a since as General brings and worked transition. Edison for Hilton having Nestlé, is Philips. to consultant. role experience February seamless with Permanente Motors, Herbalife and agency has with heading communications This been Kaiser decades and for Nutrition,

pleased Regulatory Chief I President champion our an and Vice to as continue prioritize to industry of our comments mentioned the my & to Dr. Andrew addition in And we important new it’s introduce but Shao something area internally our Affairs Dr. is as Officer. Scientific opening Dr. within I’m we also compliance Scientific team. also Shao Regulatory reporting Matthew is to Roberts, an

Dr. in Nutrition Herbalife and and Sports serves as than Dietary editorial highly peer Council markets regarded has Society publications Responsible Amway’s having Advances Nutrition. including role the and to in functions our leverage the of Nutrilite, led industry, various leaders. science the of important within seek on similar review will International is articles more play as others. board thought Nutrition, He Journal published we the among He Shao The Journal for Nutrition, approval the XX Supplements, of we for an of regulatory and consumers educate new

proud These of excellent and we advisors, business I new we executives as brand our partners in work keep an exciting our our accomplished are our joining our company our has and the in behind and history am company you, build science. momentum the the scientific at team time of investors. terms our of

We that our of improve our product through to are worldwide steadily strives and a science. the building lives people network global

and the ChromaDex our products take We trust very that you in put they and seriously.

We leverage will continue understand to on lives. science body its the in growing and better of their riboside impact invest to on help nicotinamide consumers

to investment are We ChromaDex. awareness opportunity the investors helping grateful TRU of consumer well as product our as spread for NIAGEN our in

the I call fundamentals. CFO, Kevin? more pass our will who demonstrate detail the to which Kevin Now, over focus will financial our on our continued Farr, results provide about

Kevin Farr

Thank you, Rob.

our sequential Let’s key a reflect take for look and year-over-year which financial of the quarter continued at the basis. financial progress on XXXX, second objectives both results our against

quarter, we the continue and line strong growth, improvements in top gross advertising expansion efficiency. to During margin deliver

tightly continued growth We to in control also operating expenses.

XX% For million, quarter the net in to ending XX% the quarter ChromaDex sales XXXX, up million of XX.X of net compared three Year-over-year up months first of XXXX. second XX, the XXXX. to reported June were compared XX sales

was Year-over-year by expected NIAGEN sales percentage partially other NIAGEN offset of grew TRU in of marketing strong lower XX% by a sales. sales as and were net TRU net our businesses. declines XXX%. growth sequentially business and This ingredients selling legacy net spend up despite

first the basis of up to from of of in our in XX.X% XXX quarter quarter XXXX the XX.X% rest margins points the second P&L, to gross were Turning the XXXX.

second XXX XX.X% quarter basis the by XXXX margins increased the certain or compared year-over-year reported. XXX as of in gross XXXX, quarter second Excluding in of points points basis to by charges

trend completed will was gross impact the drove corn wind in product purple continue. the we quarter. as immaterial of improvement have consumer our in ingredient the which second TRU believe We margins, and NIAGEN down expected the a Increased sales

down million for X.X expenses XXXX. operating XXXX total of to quarter of XX.X Our second first the million, the compared quarter was

in million in the X.X Our up quarter to to quarter spend the selling XXXX. and compared million marketing of X.X second X.X first was million

of from basis in marketing net was progress made of efficiency continued our on quarter NIAGEN percentage this TRU first business. sales, a XXX down as As improving expenditure points the XXXX, we

of X.X In XXXX, the the down second million to quarter million expenses were slightly versus in G&A of quarter first X.X XXXX.

by sequential business. XXXX. of NIAGEN the million higher versus million equity expenses The in of fees the higher X.X TRU growth and was expense, our first Excluding expense compensation G&A resulting royalties legal X.X included higher quarter G&A from

share, For XXXX. for was of stockholders quarter operating of the a XXXX, quarter million loss per in quarter loss the first per versus net million for a to loss second was attributable first The common a loss or XXXX X.X net the of as second compared of million X.X quarter X.X of our to million the loss or of $X.XX XXXX. share X.X $X.XX of

the quarter classified of million X.X net and of under The are notes U.S. over second XXXX XX of loss convertible in to the offering. amortized includes These the days. related costs term million as $XX interest debt issuance original GAAP expense

EBITDA said, expense. believe introducing underlying investors’ we business towards trends measure, sequential excluding important we our breakeven. to performance help flow we focus new the demonstrate on adjusted a To to business, total As of in non-GAAP cash are legal our gauge financial better progress it’s

EBITDA tax, depreciation, for or non-cash amortization, which legal loss excluding stock costs adjusted income legal net defines total and ChromaDex income is as compensation expenses. expense total interest, adjusted

Litigation the majority expense represents of spend legal today. our

expect total decline completed. significantly to it legal trials adjusted the we from We’re spending after EBITDA are since excluding

loss of X.X adjusted Looking at XXXX the second of our first This quarter the loss legal by versus XXX,XXX underlying X.X the quarter improved XXXX, EBITDA business which was total the million. million. performance excluding in was of of expense a of

total pleased improvement three key to driven were in excluding sales. was of margins expense improvement quarters by EBITDA this consecutive gross primarily higher in higher adjusted metric. see and XXX,XXX legal The We

solid flow, notes balance includes million the we to cash sheet issued XXXX XX.X the in the and with convertible which May. with of balance second sheet Moving XX ended a million, quarter cash of

the the X quarter operating were in quarter as in cash activities is upfront X million XXXX, in included recognized in Nestlé excluding XXXX cash revenue our million second the used versus X million of million of used operations. and from was or net that one-time X deferred first In payment

quarter the of operations by outflows in working compared The of X.X quarter cash quarter from cash use first use in of second driven of million higher of were cash the XXXX X which X.X this capital to or was million investments XXXX investment year-to-date. million in

invested in and second X X.X and collect inventory We million quarter million year-to-date. and in quarter year-to-date of second in XXXX XXXX million in to of X.X inventory This the by quarter. X.X XXXX. in were is third to the up growth expect support receivable XXXX which the Accounts we million

totaling to a the second X.X year-to-date. We also liabilities. the quarter second use cash accrued bonus X.X is use million quarter in a change of in cash X.X accrued of in a Total reflected paid in XXXX and our of million were which liabilities employees million the

as invested in be quarter. cash to use smaller in half versus our first paid second bonuses inventory we the performance of capital employees to in the half second working expect early the a We and

business look we year by expectations as other distributors well certain driven to offset on in as partially decline fewer TRU growth and focused legacy year with Watsons our and outlook ingredient e-Commerce other cross-border in full markets, new in international top in international U.S. as by the our opportunities line, ingredients. business, continued quarter, versus our for Now Consistent continue XXXX. let’s expect full strong we with last at XXXX our NIAGEN primarily

in Gross driven and supported margin efficiency initiatives. better across our increased TRU chain, of supply and the expansion cost by of other e-Commerce by savings are NIAGEN economies which business sales scale

investments sales diversify and are our direct customer response of as and marketing percentage and acquisitions digital strategies expenses in a Selling net marketing beyond we new leveraged as XXXX significantly down marketing.

new However, absolute up earned attract to focus expect X we million additional to be marketing as in dollars X through customers million on media. including selling initiatives we and investments, now expenses to

dollars, down year percentage to full general few sales. administrative and the absolute in expenses Lastly, significantly million but up a are be as for a of expected

in NIAGEN, NIAGEN sales and the drivers summary, TRU managing and strong of In XXXX continued of efforts as as legal sales our in are improved the margins increases key fixed of TRU efficiently overhead possible. continued sales, percentage our a as of leveraging efficiency gross spending net expenses, marketing growth the

Based on our longer There our of achieve to fourth of achieving cash cash breakeven. factors current impacting flow two the timing XXXX. expectations no early primary expect on financial are quarter XXXX in outlook, the we flow breakeven or

First, the Delaware patent out which trial the expenses to legal California higher we prosecute vigorously date to in quarter pushed be has and will fourth been anticipated the means originally in than expect mid-October, XXXX. litigation

said, fluctuations efficiency of we’ve as Second, to we customers. campaigns attract quarter-to-quarter timing result expect of brand the in marketing as a new

working our been marketing trends we’re we’ve with While investments. additional encouraged accelerate initiatives growth retention, customer recent by at to new customer which require will

framework this key objective. for breakeven, to to we’ll flow timeline the metrics for provide achieve investors this in on a a providing More financial evaluate achieving a than rather forward, cash Going moment. required

shareholder growth we highlight but areas. flow to investments business the three across We to value. itself that will increase believe cash still prioritize achieving I’ll breakeven continue making drive while manifest This will

unpredictable is defend timing that is and the value but make expense necessary the IP our we order litigation investments our of to maximize to important First, it NIAGEN in franchise.

in we that see important increased customer if maintain improved the it’s Second, product to selling in value. flexibility our for expenses, lifetime especially invest demand long marketing and for term we

driven an working the growth Finally, from in capital our investment receivables primarily is of inventory area results by business. customer and currently

fundamentals to in capital necessary with term. investments the on sheet our for quarter. against balance global enables This making $XX us raise second which to build focus million protect an our incremental strengthened have IP the includes and the infringement brand, to continue We the own long science the

provide flow to financial our share breakeven. for than want a I Rather specific framework timeline, cash

second XX As results, and compensation or current see quarter quarterly non-cash expense in million million you can is when approximately equity D&A. our XX our excluding operating

These figures legal include spending. elevated

we level approximately the scale sales million. XX be of of margins to quarterly the deliver million maintain current gross XX net XX%, around Assuming breakeven should to spend business and

is supply improvement quarter mix, XXXX We chain of XXXX. fourth in currently In in some gross expect the with of a margin addition key realized savings be majority of occur to the cost to to savings initiatives. driver these savings of

sequential Importantly, improving the progress business focused key in we the underlying profitability. EBITDA on remain our progress continue to achieve tracks adjusted improvement this with to It total in legal metric. business make expense. excluding We

Lastly, revenues are year. to on to the taking XXXX is launch in for outlook don’t briefly We also Nestlé financial conservative let deal. me and meaningful the a agreement which touch anticipate view likely XXXX this the related

Nestlé There and partnership to Nestlé as a well wide in the We as potential mutually a we as consumers. and to maximizing range beyond of and forward long, XXXX possibilities a partner our beneficial are value with with to respect relationship. committed look for the shareholders

now ready take are questions. we Operator, your to

Operator

Instructions]. [Operator

from question Sinderen first Jeff The B. of Van ahead. go FBR. Please Riley comes

Your line open. is

Jeff Van Sinderen

everyone. Hi,

are And what associated Let there? approval the more me then Japan of positive has the that? metrics. forward And to opinion launches also mentioned quarterly in speak I moves you the question, bit and legislation and how little process? next the about tougher timeframe improving can you that congratulations in you regulatory on a steps the around with speak you that soft a Can say about EU then and any EFSA sense be that. drafting more China think

Rob Fried

first that a is Well, We getting they this were the and respected the world more dossiers, little surprised our of this we’re respected this to only bodies influences this in towards extremely step most one EU. certainly a opinion selling – regulatory we’re worldwide. excited staff, relationship to and in perhaps EFSA than in question. excellent bodies with the year is to we them. is your a out, most able the as we by of the that one expect multiple that render full of hope very It’s not testament regulatory step about the have positive Jeff Yes, pointed approval a But research quality this very, significant market and process our in opinion. the

we’ve it as actually though it don’t are this long all could and from we recommendation difficult takes But Jeff giving be that is decisions. we with of of well steps. could previous be estimates we you decision an the to conversations know we a Commission EFSA time, Generally the subsequent quickly a for know. to it’s happy It time. time stopped it get how less, However, bodes need we is that of from hope happens. those It EU now the received draft approved legislation. and most It

EU to addition plans, we vitamin In to draft health the we then are to getting get have Commission in the speak. to to we member also states product the get approve NIAGEN that BX and individual TRU already health although EU the as legislation, claims also there approved have

is it’s done. there you market, to a a So be as it’s know tremendous But work tremendous opportunity.

We who extremely have Watsons some great partners Nestlé are decision; in this being another. being one, interested

this well as are we can one and we you poised the So of can to as advantage quickly will take do. we of outlook. That’s believe exciting I think give we opportunity in best terms

Jeff Van Sinderen

there? the And helpful. next steps that’s up just Japan are China just Okay, on mentioned, follow launches wondering you to then and what soft

Rob Fried

cross-border? the on Okay,

Jeff Van Sinderen

Yes.

Rob Fried

Okay.

and party have we Japan using It third soft done So platforms launch into cross a launch. a is both China. border

aggressively We territories in of are yet. those not as marketing

what opportunities. Both we anti-aging. those that especially also space. seen dietary but anti-aging of are far. important markets Both acknowledge the for sophisticated are very have in sizable, However, great by encouraged they and thus markets supplements both of are We of those and terms we are recognize very

have infrastructure place. put in the We

both those territories we in and of applied to other those experience other We a here we’ve learned that the off in the than territories. have got previous and in did and start much cross-border platforms in U.S. knowledge to quicker

Jeff Van Sinderen

know great. Okay, framework margin improvement. gross for and I a to I question did And bit guys time you different little think Kevin. provided this a you guide then

about should to the in magnitude the how couple that of or of improvement terms experienced of quarters gross we kind expect of next for about similar to Should the magnitude how think for how what we wondering should – be margin? or expect improvement? we of of margin should the should we think gross Just level QX those in we or it

Kevin Farr

chain basically more savings other supply chain. us Well, business. becomes from third those quarters in saving working TRU And programs, we’ve look looking on. incremental that think provide and I benefit at NIAGEN an supply the is we of some we been as at as our our cost to I part sequentially a that supply and our cost relate really And think bigger getting they see our and could scale programs thing should improvement fourth to optimizing the chain

showing of changes some cost in be late will fourth quarter did sales that value design year up this and product on the in or benefits also We with you’ll XXXX. benefits seeing be the later think most incremental we coming that

the quarter. think of some I the we think see progress, you’ll you’ll but I see growth that incremental in had second So kind don’t steady

quarter And online and first in late of come the quarter so these year. next savings cost fourth

Jeff Van Sinderen

I Nestlé, terrific the What will Then a spoke Okay, around Just more it you can I the and helpful. technical about about you. squeeze getting form say market that in feasibility? if the be to a that’s partner anything XXXX? progress you helpful. else little hit in. important obviously for know can Anything think one product you in would bit

Rob Fried

offers expectation product not is doing creating but our The we’re the beverage ongoing. form would in XXXX be the stability Nestlé form. So that is marketplace that powder in in liquid in work on in

excellent it. proper on have know procedures. We working the scientists doing we’re We

Remember, in it right are it riboside already way confident in trace don’t solved. will that found it by we we nicotinamide It’s in confident and we solved end we know We but problem. confident are are found liquid. We XXXX, doing if be milk. the solve highly amounts the will be is already of that the that will are

combination there. beating milk. So the we be multi-varied chemistry get long processes that a found process binding protein the will enough create we Also a last to It’s going [ph] process. in ultimately have partly on stability but shelves, there’s of confidence a is to that the to process various

Frank Jaksch

to just doing expecting in in in we’re remarks expectations Yes, XXXX, look, follow And much limited my said is that they’re up on think our I XXXX. launch. not a I prepared

in So there. launch as scale a but you’ll be do be larger real seeing to still ready-to-drink, do hopefully work powder of lot a they benefits and I XXXX will that the think in XXXX loose of

Jeff Van Sinderen

Got it.

Thanks that’s of taking and best luck. my Okay, questions helpful. for

Rob Fried

Thank you.

Frank Jaksch

Thanks, Jeff.

Kevin Farr

Thanks, Jeff.

Operator

Please question ahead. go comes Thalmann. of from Cohen Your next Ladenburg Jeffrey

You open. line is

Destiny Buch

I is if great a platform? Destiny repeat, breakdown conversion acquisition a a on I’m rate couple of acquired? quarter. marketing. for repeat you the would customers to you of about estimate you would just to This to firstly able had newly two-thirds the give Would more maybe again quick questions on acquired Jeff. rough actually for Hi. a one-third know a be your maybe be around Congratulations little cost then able And bit and newly to speak also e-Commerce customers. say curious

Rob Fried

now We declined. that future information. in of acquisition has with that information appreciate but cost time. revenue say And providing to the acquisition the cost time. not over customer yet those new. customer has and gone percentage we But breakdown expect buyers detailed detailed customer we’re and down some gone is questions really right get more has The up cost on acquisition to of versus information over providing But we’re repeat the attributed repeat to of not

Destiny Buch

marketing one then And curious, question. Okay, also fair you. other Thank enough.

customers kind help as you get like or them do these to requesting to As from that? makes that channels Do healthcare get you sense? flyer format ever your practitioners request give you any of in some something that their if publications, such have feedback

Rob Fried

of a segment healthcare sports get and it our a And but of our but it itself. their which is We of fast awareness product of of we reselling been a practitioners of Because is practitioners not view to dramatically the business interesting a TRU an It number business. We that business up in segment do the the of as onto not only a business request increasing growing as have is that it point does healthcare very NIAGEN general. also like as you bring patients. important weekly is purchasing are our that, business. part well our large groundswell build segment but

we performed marketing and Many creating themselves. by educating It’s we materials future are practitioners been So far. them, a in marketing it’s with meeting requested But thus about have and informing prospect the that. them, excited in the materials. investing are of way those them healthcare

Destiny Buch

Right.

pipeline Canada in kind of it. working your And with on you that got expand any in Okay, distributors Do then you’re other one that general. to have network?

Rob Fried

time? of One words Can the ask that digitized out. you said one more you

Destiny Buch

In -- Okay. you Canada, do have

Rob Fried

In Canada.

Destiny Buch

Yes. any conversations network? expand you currently in to you’re that have with your distributors other Do

Rob Fried

Showcase We WELL time is and inquires in frequently. that have Health. no at ones we’ve that announced Foods, is We it or retailers we’ve do the which get announced. But distributors this point Whole

Destiny Buch

Perfect. Okay.

for does you. that me. think I Thank it

Rob Fried

Thank you.

Frank Jaksch

Thank you.

Operator

go H.C. Selvaraju Please of The next Ram from ahead. comes Wainwright. question

Your line is open.

Ram Selvaraju

for much very my Thanks taking questions.

could studies on to you do perhaps on next little potentially do some data? to over these clinical CKD AT for have your studies you expect mentioned, on from more Firstly wondering likely would and see and was Is how of we in visibility mature perhaps that you so, color if the it new results timing? specifically further year? I you take that us If course any long the a bit to front, the give it

Frank Jaksch

on and long and they the function these No. those it’s on based largely see how sit of you and it? and collaborative expect How you do would wouldn’t timing. them analyze XXXX, right we I to say studies thought any take we real they those population in that enrollment now enrollment. going Most take studies it publish report something longer of long I the to after then to never where are a on wouldn’t studies visibility enroll then in we have but data would know. have than taken it’s So where be

Some report real – of real hard smaller are any and give for us that. on visibility But any them them. give they may it’s to

Ram Selvaraju

point approach of a sense contribution at way to e-Commerce that overall steady do of in respect future by the of the the you of the what revenue state a is sense so, have if to percentage overall steady reached? business terms you be e-Commerce state With sort base? could the have evolving, enough. in do might what And fair Okay,

Rob Fried

these I a because It’s business. to percentage that legacy I we grow as already to the difficult. it’s of think you expect continue businesses significant know. growing, have are not it

will sports and However, business grow. what’s business wholesale other the healthcare practitioner the difficult at business this businesses, point and how project time to the in is these retail

We to grow as them expect well.

segment steady grow to know which rapidly. will don’t because BXB So segments, we the state the project or it’s those segment difficult direct-to-consumer of a more

Ram Selvaraju

Okay.

I on of that, of thrust a is my the follow this think query. to underlying As kind

just evolves? sales that preferable, that trends in way growth what’s segments necessary an effort manner expect with are other most e-Commerce you of is sales of not those and is not optimized growth e-Commerce, as you In you’re to as sales that absolutely be mix respect the think to about in in the on front? such necessarily mentioned what the grow the growing revenue versus see kind to that improvement more If are words, you in efficient expending preferable efficiency terms what further related indeed would than

Rob Fried

business. expense different three the is efficiency. of are direct-to-consumer have types there margins the and there’s them. different with the marketing costs are associated And then So out There’s think fruit who’s the partners approvals And we what as expressed we countries, in into already highest overhead Obviously, like business. pretty costs of of the various relationship in territories. is terms Watsons these the in direct-to-consumer indeed, the these you’re the we best regulatory cost. relationship much marketing get segments good, business in cost this wonderful But hanging I retail with interest there’s I expanding that already Watsons. asking lowest would in in have the as because other think seek The

cases, away. one the is a to somewhat make place, we have deal those comparable with the assuming revenue in is the So we path in incremental deal Watsons to really

Ram Selvaraju

All it. right. Got

that’s helpful. Okay,

necessarily if not agree in or a say, we settlement their overall course that of resolution On change the with been been there’s recent their far? any speedier point overall indications no Elysium? to litigation some the be shall and if could any would If possibly wondering indication on that there a I to be there’s side kind might so Kamikaze pursue, situation to willing demeanor they might front, you to

Rob Fried

we communications me say would if let Well, there be something that disclose. that were it wouldn’t like

two I’m So way trial is there not the were that another months saying from will say But scheduled I or conversations. if now. one

resolution the conflict way or least aspect a at to is going the of one come – next months. to one within another So of couple

it. about excited We’re

investors come what become We’re for public to to excited disclosed. – the once and they the will see for the learn facts facts out to very learn these general what and

in are we we’re of and And conduct that confirm very the have past. we facts disclosed once confident as company way that these have the the we proud ourselves that will way We our a are conducted to But are certainly to create we value, ourselves thing well doing tell throughout. trial we eager If there’s story. to just that. this shareholder in interested opportunity an now get right and are

Ram Selvaraju

of proceedings, trial of conclude course understanding a the or at expect in you handle the itself the the of before how proceeding to And into could could given you wrapped indeed your largely trial of get this be trial the nature XXXX have XXXX XXXX. do of if and of within end of be and juncture we far up XXXX, scope if so first XXXX on it themselves half what early to sort The stretch kind timeframe?

wanted Just on get timeline. a the to handle

Rob Fried

which scheduled disputes New then -- So is there the dispute separate there. for patent is there’s for and California the dispute dispute the there’s dispute, trial the California three and remember are commercial There’s York the

Ram Selvaraju

Right. asking I’m California --? about That’s what the specifically,

Rob Fried

we’re California would The be enough. trial. trial Fair estimating it a two-week

Ram Selvaraju

the much additional that? are R&D of going item, be on contributing to the any R&D And there’s your making can if kind of contribution kind R&D on you is what give then how to that you’re to just what then Nestlé feasibility R&D And product assessments to it. a you side the the you the on of and formulation give Got question Can saying sense last wondering of was liquid were front, breakdown with associated would spend is other what relative relative us helpful? on I things. line about collaboration that of specific the engineering activities earlier spend, that doing

Kevin Farr

Yes.

the was funding important what XXXX, to within well as and prospective are we focused. that I think we the are be at haven’t we we have all R&D budget with IP. really we’re with it’s on efforts as And other prior regard for regard we given line it guidance But said more to similar look it year our item, to in going as technical probably XXXX. to feasibility of the

Ram Selvaraju

very Great. you Thank much.

Operator

call the I time will for allotted This for closing Brianna concluded to turn now remarks. over has the questions. Gerber

Brianna Gerber

replay and beginning replay today. XXXXXXX. support joining for today Time call Thank X.XX be you There is X-XXX-XXX-XXXX is The Cheryl. you, Thank number continued a ID for this and conference of Pacific the of will us PM at ChromaDex. your everyone

Operator

today’s This conference call. concludes

disconnect. now may You

ChromaDex (CDXC) 7 Aug 192019 Q2 Earnings call transcript