CDXC - Earnings call transcript Q1 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to ChromaDex Corporation's First Quarter 2020 Earnings Conference Call. My name is Julia and I’ll be the conference operator today. At this time, all participants are in a listen-only mode.

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 2020.

reviewed sections both www.chromadex.com. of not the available have Relations Investor ChromaDex’s you this are information, within If website at

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

Brianna Gerber

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

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

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

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

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

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

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

Rob Fried

Good compared investor afternoon, of year-over-year. Hong $XX.X sequentially first and quarter sales with I in listening for is hope you, XX% down you strong well net were joining sales slightly Overall times. another of Tru XX% prior on Brianna. protests our and quarter sequentially the a due $XX.X the quarter everyone, to Watsons were ChromaDex a million, to increase thank year-over-year. increase of traffic sales and increased call. Thank navigating and million. these troubling XXXX net retail the Sales Niagen had XX% stores. total the XX% coronavirus Kong everyone impact

show our understood preclinical in continued efforts loss NAD our chief first quarter present. scientific to in already reacted net in a Importantly, impact research total that is was costs adjusted when swiftly as by positive of ChromaDex are We there Dr. the coronavirus results the area EBITDA when viruses initiated costs hit. excluding led We an reducing Brenner. the Charles legal advisor on $XXX,XXX. immediately

further after initial published in last further promising may study is preclinical required Brenner noticed, you as results underway. month, and And have the is research research

costs. cellular stressors the energy, messaging repair, to ongoing our our aging. adjusted addition impact This and lifestyle messages marketing efforts cellular be of and to on up cellular health. Additionally, NAD levels first include in finally have we the stepped in And and existing age-related our we viral quarter our streamline that to

not the business. for negative will to for year the clear it COVID-XX still regard our or is if be With outlook overall positive

to for improvement our outlook the last well will our the but initiatives currently organization additional recent year. our across results relative quarter. some our top chain. as provide includes in This in bottom as reduction outlook discusses are when expecting growth, presented financial he supply line Kevin ongoing a changes line We some the to context

Let's brand to global focus and now of strategy; the three to our pillars build the to business get science own a the on fundamentals.

brand. the First,

in Singapore, XX% Canada. the Japan, As sales in Watsons Niagen Zealand, mentioned, represented $XX.X and sales Niagen Tru were approximately Tru increase million $XX.X New net and This cross-border first in and sales XX% global sales Niagen the sequentially and Europe million XX% also year-over-year. includes in a Australia, UK sales and for International in quarter. quarter. the to Tru in Hong China, increase to Kong XX% partners our quarter, a the represented of

Tru to were in selling health April. the previous Niagen an $X.X members, Sales Niagen Kong the quarter. loyalty quarter Watsons which business decrease late a builds were the of and as offset of versus for Beauty first by Beauty award-winning in best in quarter, sales shipments driver in as Tru the among launched slight product their Watsons stores largely success category. Lower brand as first well the on healthcare Hong Niagen million base the in Tru

Watsons. reach science-based are solutions plans Tru their to Niagen this demographics routines. region. extend Beauty Beauty seeking will for beauty our time, Niagen extend to allow strong there the partner new product us beyond a We're with At to portfolio no like Tru our pleased

increase $X.X the sales. million, a and Sales were to year-over-year. new a customers continued X% U.S. sales XX% customer increase returning sequentially from outpace net in E-commerce

Kaola in China. in Japan, will existing complement Germany, have the Tmall grew we and China's addition, our presence distribution sales cross-border include expanding which in second year-over-year, currently and Korea, JD.com platforms online of the These XXX% UK, China two to quarter. France In largest retailers,

first two Germany. the also quarter France following approval European and cross-border EFSA in We added markets the

Nestlé orders and Health quarter, Group continuing to division Superdrug Persona A.S. a We the with the we're our partnerships. Additionally, respectively. partnerships global strong our Science brand Matakana, in Nutrition build the UK the Australia, in and first with expanding shipped to of UK, Watson initial

European beauty XXX stores UK into late Superdrug, with to health we market that in represents In A.S. we're proud and the our with and This over UK the and Watson A.S. Watson the our member announced the of April, partnership our leading a Group. retailer partner is expand interest Group.

last much is We Superdrug launch mentioned such items Tru time. small available As the as and superdrug.com. XXX UK worldwide Niagen applaud customers very the a this well keeping in as across during stores test essential efforts quarter, initial launch for the unprecedented of Watson Superdrug as to

with upon rights build We've of and Australia an products. retail Matakana channels. in to organic dietary distributor relationship and than distribution XX established Matakana include with exclusive lines and sales food in supplement more super manufacturer online is our

broad knowledge of existing Matakana's well of This for as science-based positions product. in and brand their distribution Tru growth as products portfolio strong complements Australia. our Niagen the

influencers, social and to with are and initiatives in We own media number a them partnering sales drive media, of market. the awareness on

of We later are the products this will very importance Tru much Niagen which looking forward Nestlé nutrition. Health year emphasize to cellular Science

As begin I initial initial efforts test be will powder marketing launch loose the Nestlé next in plans previously said, month. to format and

a build we Niagen growth Health the a and leader Science division Niagen one also first and in helps area the is Nestlé opportunity fast personalized it of Persona launched in nutrition for a quarter. of growing believe Tru Tru Nutrition, the that brand. Persona is

own Our science. second objective quarter the is to

and volume underway. Several will actively been and behind a published science is on the studies Niagen Frank increasing in moment. confident new summarize have last are the tracking since registered currently update. are research of the We our in that molecule

experts NAD leading the of Recently of and in coronavirus. tissue a of the we the and results Chief Brenner foremost as by first on led announced experts study Stan research, round Charles world's in of one one our combination Dr. Officer, vitro well Dr. as Scientific Perlman,

Dr. these sort cells one, viral of I nicotinamide greater replenish infected levels preclinical cells in NAD; specifically the a two out the studies riboside, the than to Niagen two, Brenner's caused reduction attempt face introduction three-fold key and in showed an infection. findings; to COVID-XX NAD studied

soon. innate coronaviruses from of research Dr. cells next phase support response made to other immune to whether or explore be and riboside additional viruses. expect Brenner Niagen public will may research preclinical introducing nicotinamide his We The

findings We will when publicly research share the this appropriate. of

our Niagen on Research ChromaDex and exploring COVID-XX riboside through also are research additional We External preclinical or industry-leading nicotinamide program.

litigation litigation due date We granted XX, the of to and continue status our We the intellectual our submitted upon postponed for build in outbreak. May protect to Elysium court court wake closures California our A trial coronavirus property a written June. a status ongoing against includes recently the also report to was which request and in Health. joint conference

XXXX by patent following moving trial is decision has Court which the validity scheduled recent and September licensed upheld and in York In of taking patent by discovery infringement regarding been it restrictions by Delaware New been of has for the depositions coronavirus to on ChromaDex. Elysium, Appeals months of the the Dartmouth due XX, in that on the extended wake is four forward

and regarding on To expect legal appeal the the the we facts lawsuit the with cases appeal the challenge raise lower remain Elysium in expense arguments confident In of all are now lost eager We to to to patent. in get that XXX XXX remind those validated delays of and cannot of their Elysium decision their infringement claims the rejection not three patent same meantime, Elysium any coronavirus. trial. attributable everyone, near-term to the patent patent, could the the PTAB XXX

strategic to pillar industry. is this third is in It to fundamentals. example Our by mission our on lead focus

published consumers we to the with data, scientific a for encourage regulatory new when During by solutions time to trusted world health looking supported choose is maintain brands, their approvals. strongly

basic continue capital We recently management. already a provide marketing and financial sheet. to $X strong further announced science-based the balance raise million of to philosophy our strength conservative We some

business wake the the In coronavirus, summary, successfully in we driving forward. are of the

macroeconomic once in incremental behind even a important I maintaining cost adjusting on and research field, We global stronger opportunities ChromaDex leading our is be balance. this believe will are structure and the us. delivering strong crisis growth

for call will Chairman, Frank? on And I Frank Jaksch over pass scientific update the an our to research. now

Frank Jaksch

Rob. you, Thank

As is Rob own our to science. the stated, objectives core of one

in research We scientific the remaining to on quality. NR setting the as safety, and well NAD standard authority are excellence as with committed science, and a commitment for our to industry global

human NAD accelerate publication preclinical the studies. call, our continued NR Since the on in has of multiple research with last of publication to and ninth trial

potential Rob and NAD of University the As the Brenner a key research levels a happens Oregon on the on in characterized on in tissue. University Dr. animal cell, on has innate infected Kansas the steps has of Health published what from server. and Iowa, impact the in it The University, coronavirus impact findings scientists Science and The earlier, preclinical preliminary cell immunity. and research coronavirus were recently human and BioRxiv, has published mentioned preprint

protect after to virus and adaptive I body's developed discuss using on, specific immune This to response have it or the Acquired the vaccines can is immunity. spread cells exposed us virus and moving or innate viruses. of before antibodies Before immunity they acquired versus can it want a concept to from work destroy being where briefly the how quickly seek adaptive acquired infection. out is immune the

In contrast, is introduced work the initial destroy immune the for mobilizes innate it we've is to fight these the body. The attack innate immunity when go NAD to from that the or publications to nonspecific first cells body is and learned What to where out response. cells virus. seek infection early the was off important

However, further underway. preclinical studies research is and those preclinical are required

XX to ongoing, and trials.gov clinical clinical last test and total research We to quarter for our last NR. clinical more ingredients one a are completed, There published collaborations the trials effects pharmacokinetics in investigate NR additional other up trials And on registered registered update. the signed XX nine with finished This of to is therapeutic quarter. are the by than XXX XX. compared approximately with of combination currently

interesting cardiac in study our and on niacinamide April, published electrophysiology since a on the and study spoke. last riboside we of Cellular published In the effects recent NR highlight supplementation product demonstrating Journal Molecular I'll of nicotinamide was both an preclinical Cardiology.

the able NAD that University and NAM of levels. to and from were Iowa both NR demonstrate NADH Researchers increased

cardiovascular warrant only as earlier for arrhythmias. NR NAD potential However, effect. suggest have further arrhythmic a increased The findings disorders. may therapy preclinical into researchers indicated on conditions that results that reinforce cardiac the investigation potential the NR cardiac levels beneficial results and a impact concluded These

registered newly were clinical April. I'll all registered of briefly which Finally, studies, the on touch in

each of Koc to fat. these First the have improvements Turkey University L-carnitine N-cacetylcysteine. NR nonalcoholic in studies study that with patients Previous obese by serine, metabolic fatty Hospital liver supplementation suggested and liver in or of registered with disease NAFLD combination decrease nutrients dietary was a of establish through

enhance researchers hepatic the of combination will in a that decreased also to stimulate NR of these including ingredients resulting So fat. pathways hypothesize supplementation oxidation liver

safe way potential The tolerable cell study cell have Additionally, registered find transplantation. time to care the riboside was increase engraftment a blood NR shown a objective investigate decreased Cleveland transplant. comprehensive hematopoietic allogenic the to by pilot and effects engraftment. numbers to improve to the supplementation cells in to and of to the that center, after potentially stem Clinic, a is nicotinamide adding donor Research has studies cancer

to past, brain by others. I've Before our various areas ongoing turning health like or the as In heart the such new call framework for to Kevin, categorizing of discuss well or NR. liver over briefly research health discussed health, conditions the health as I'd health, cardiovascular many studies as categorized neurological on health

At capacity ChromaDex part one's hear of and WHO, discussion functions. a we've ability on cope context composite It called of new the person of their for still and Health maintain with begun to Organization's an see, way is intrinsic stress a walk, to looking physiological at ability World to is physical According can to intrinsic in of the that draw indicator healthy frame think, and of remember. the framework the these including aging. capacity health is which all mental capacities

into Nutritional as categorize intrinsic solutions is earnings vitality, health such help capacity; how our the or health an even defined improve represent intrinsic domains We of by a NR included these cells. illustrating intrinsic of in capacity. underlying locomotion, maintain our cellular supports psychological. concepts slide to other opportunity presentation our sensory cognition, capacity words, We've five In capacity. intrinsic and

summary Going these clinical our forward, the intrinsic internal with domains capacity consistent I'll our presenting studies be in framework. of ongoing

and the is cellular the ChromaDex committed NR, remaining summary, leader In conversation. health to NAD in

we Brenner's is preclinical will ongoing, mentioned, updates provide appropriate. when and research Dr. Rob As

that, I'll Farr. the With Kevin? over call Kevin to pass

Kevin Farr

Thank you, Frank.

a for measured breakeven underlying first by reflected continued financial The total approach sequentially, the key look quarter the EBITDA, improvements was at million results against progress legal and million business year-over-year. and $X.X This in $XXX,XXX. strong adjusted our XXXX, with of first financial business Let's of which expense, our excluding quarter $X.X objectives, performance. a is improvement a loss underlying

lower delivered the growth, the related which advertising partially strong expense savings of lower of Compared and margins, percentage related expenses quarter, we administrative primarily net higher expenses initiatives. higher general XXXX, quarter of in offset severance absence charges, by fourth debt significant are the to bad current sequential to as and driven cost by a gross Elysium sales topline restructuring

the there from all uncertainty. given In shareholders. April, strategic was it's need the we common existing company, always We're sheet a if stock additional balance believe with investors. wants prudent an our economic the an opportunistic it strengthened not raise of $X immediate million Where benefits for to current our into capital, we investor invest capital and

additional our $X additional believe enough cash reach million have of credit. current property, line based this defend credit excluding breakeven we our With flow line and cash to The upon our $X of flexibility. intellectual committed million, provides financial outlook, we

were Year-over-year of up sales ChromaDex net first fourth the months in XX% million, sales three quarter March reported XX, for compared to XXXX. the the XXXX. Moving by year-over-year quarter sequentially $XX.X million of $XX.X Watson's Niagen cross across results, the XXXX. of ended sales XX% to net e-commerce up net XX% XX% diversified international and compared to year-over-year. launches grew U.S. Tru growth the were up with border first and quarter

Watson million slightly sales solid but were quarter, remained the last quarter. in versus at down $X.X

As expected, consumer in Watson's wake coronavirus. quarter of experienced store first closures softer in to due the the the takeaway

to yet economy prior trends but the March, these levels. improved, return reopen began have As to to in

the new As Watson's which shipped April Rob Niagen with late Beauty our mentioned, we quarter, product in also Tru launch. aligned

expect sequentially, Watson's from for were related continued the the Niagen strong and coronavirus. on our to experienced net sales we've Total second XX% Tru up quarter impact at customers. Niagen X% demand due We year-over-year, in sales

was basis XXXX our the quarter the gross of Year-over-year from XXXX. margin in P&L Turning the XXX to fourth in points to the on rest XXXX. XX quarter XX.X% XX.X% increased gross basis XX.X% margin in XX.X% of a to sequential the up first basis, to compared of first points of by quarter

related XXX Purple point of to Ingredients basis recorded a last As year sales. a charge wind down we the Corn reminder, our

sequential tailwind gross Niagen from for expenses initiative mix cost favorable our on compared On fourth XXXX. and believe in overall was sales, gross the a $XX.X million a factors, well XXXX total quarter Tru chain quarter to as growing drove both savings represent the as Product margins. improvement our supply products scale of consumer margins basis, We to XXXX. first million, down operating the of $X.X in

As a reminder, a Elysium the related of bad $X.X write-off of receivable. full our to fourth quarter one-time of the XXXX debt included charge million

to the $X.X in of quarter XXXX. were million Our down the $X.X first expenses million $X.X of selling quarter in compared marketing XXXX fourth million to and

the versus XXX sales XXXX. first down a XXXX, quarter quarter basis in of was of As percentage points expenditure net fourth this the of

We in strong new growth, returning progress, improving continuing both business, in investing customer Tru while and in market our Niagen growth, internationally. drive made U.S. efficiency the driven customer to initiatives by

customer We and messaging increasingly spending, e-commerce continue monitor in this daily to as adjust environment. acquisition which metrics important fluid such is costs to

As versus reported down quarter and fourth million million of million fees of in $X.X in $XX.X and $X.X expenses million included expense quarter of in quarter. $X.X current XXXX million the first $X.X This the severance to G&A was the illegal restructure XXXX.

$X.X expense fees equity severance, XXXX debt legal lower Elysium million also versus related quarter quarter excluded by comparable expense, which G&A first XXXX fourth the expense. of expense, G&A restructuring, Excluding compensation bad was

accelerated of to case Sequentially decided California following the of trials delayed judgment Legal in the quarter, hearings coronavirus. by New caused was fourth litigation. trial the Motions for first summary expense the suspension the the during discovery was California jury the compared due to in all up matter York slightly quarter XXXX. were and in

For the New same delayed reason, in was deposition York. discovery

expense in September in XXXX legal infringement patent and case despite to of investments in in expect XXXX we the McMahon the trial preparation be the XXXX. ongoing quarter December Delaware for As hearing lower second a the result, in

For operating of $X.X XXXX, the fourth was the first million of million million debt $X.X bad versus XXXX, quarter which loss $X.X write-off. our the quarter included in

shareholders attributable share, or first XXXX loss common the $X.X per share a loss net compared loss share XXXX million to fourth $X.XX for net $X.X or fourth debt loss to the share quarter the XXXX. expense. was $X.XX quarter net $X.XX million The the The as per quarter per of included of a bad loss of of per for of of

believe towards breakeven. said, it's we in our we demonstrate sequential progress to to As on flow focus trends cash important business

the engage the better investors adjusted legal adjusted help expense is adjusted excluding non-GAAP bad excluding we loss interest, ChromaDex business, Elysium, spending. tax, and To which debt performance XXXX defines a legal EBITDA severance as new legal measure net introduced EBITDA income quarter income in cost, or of our to second underlying amortization, expense of total total for non-cash related expenses stock and restructuring depreciation, total compensation expense.

included today. appropriate GAAP reconciliation majority the our earnings Litigation in have slide. spend expenses our the a We measures of to legal represents release

We quarter severance cost from are late total since matters significantly expenses excluding legal In net XXXX and savings the the decline EBITDA in are measurable, expect that of to spending and restructuring we after we adjusted XXXX, deliver began sustainable, excluding concluded. expect we to fourth beyond.

gross We million part to expenses of XXXX. made and On severance We these supply the of and our an in restructuring basis, first $X the of evaluation. to the of delivered realized negotiations incurred cost least $X.X end-to-end changes at initiatives. of to annualized we be savings majority in the identified with quarter organization related million savings savings chain completed

continue chain. environment, cost uncertain to evaluate economic our supply this in we'll structure our As opportunities see is additional and prudent in

to quarter XXXX, of to As legal first by loss quarter expense adjusted $X.X in excluding of XXXX. I the of of improved loss $X.X the previously in total million $X.X EBITDA, million fourth compared a a million highlighted,

a and of the of a in margins was the sales XXXX and The first quarter $X.X versus Year-over-year, primarily quarter first higher XXXX we million quarter $X.X improvement driven in million the of efficiency. marketing XXXX. in improvement delivered loss of first by gross

$X.X Consistent a cash XXXX, outflows which million XXXX flow, $X.X fourth the the from quarter by expectations, of versus XXXX. of use our in fourth used working cash of $XX.X million the the XXXX. Moving $X.X of was this In quarter net the higher quarter the we a cash negative with first ended quarter of sheet driven XXXX million cash versus fourth was operation was a first to $X.X negative million compared cash $X.X of first million, to the down balance and XXXX. in our million quarter capital, in in source with the a of quarter cash of operation quarter

cash in in to accounts the is and ingredient of in lower payable receivable due accounts The decrease largely Niagen related a to purchases. quarter use first increase

manage business navigate implemented successfully from coronavirus, coronavirus time, we've do we to At disruptions during the the supply have expect and strategies this any going Today, assessment forward. risk pandemic. not chain this

As to situation it predict. COVID-XX relates to difficult fluid revenues, the remains and

mitigate backdrop, are to managing impact expenses this Against we the bottom company. our the line to

we're Rob hard with our we environment. current at took the investments highest prioritizing said, a financial plan XXXX As look the ensure in to return

U.K. For expect growth e-commerce the launches and such our driven by on international line and in continued such full-year the Persona platforms as new XXXX, Australia, business, U.S. as Nutrition. new we launches markets top

have Spherix we net roughly As divesting we lower $XXX,XXX the of the for the XXXX to accounted XX% and impact rate base, sales. consulting growth XXXX revenue regulatory which a coronavirus, of in the business, larger our of impact in anticipated said, due

canceled. As in a also There impact modest some having second we on HCP Rob mentioned, trade tied the shows, on see which business Watson's the have has quarter. our are been sales impact where to been coronavirus

desire international are e-commerce to Tru also like are XXXX. supplements with invest on our weakness Niagen. employment, at our sales. their mildly impact determine to overall impact COVID-XX launches retail, It's the Consumers health relative early with likely balance the but of these their in opportunities concerns market to to about incremental macroeconomic too coronavirus

this continued business day, for Based the the in growth of trends XXXX. on we're planning in

and business, cost gross We expansion, the late XXXX margin expect e-commerce mix in favorable the supply our growing continue additional from initiatives. product design savings do implemented to chain changes

$X million investments to in including expense investments in market increase brand an expect awareness to in $X selling of launches. and continue new million and marketing We

expense a We in selling improvement strong customers. marketing and by sales continued of returning net sales driven from expect percentage growth as

continue we and excluding expense excluding Lastly, restructuring Elysium expense and the bad expenses in comparable $X to million to million to $X G&A G&A, expect expense up debt be related will year-over-year, legal severance XXXX by XXXX. the

from of since outlooks have other not due been two rescheduled in uncertainty We're by the to COVID-XX. other our our there discovery be trials expense the and excluding legal matters and may caused further delays

and expense a in reported Adjusted legal excluding remains metric. EBITDA total key restructuring G&A. expense Severance is included

We expect this to improve throughout the year.

We continue to breakeven $XX litigation believe to quarterly the if and we costs flow can achieve million revenues ends cash legal of million at $XX decline.

expenses in higher expense. operating near-term higher quarterly the Total by be will driven litigation

XX% As on we achieve sales margin execute a million supply cost $XX believe of higher initiatives. will result, margins and our slightly than we as gross deliver we approximately better chain that's gross this, need savings to

framework is manage overall the important continue and objective. the deliver P&L we short, unchanged, this on In to will all of to lever

ready questions. now take we're Operator, to

Operator

B. question from comes Van first Jeff Riley. Sinderen Instructions] Your [Operator from you. Thank

is line Your open.

Jeff Van Sinderen

everyone. Hi

get you what in your a growth Just magnitude follow-up the I trying just sense the growth rate wondering regarding year? growth terms of on rate last to versus line your this guess rate, are is what contemplating thinking top year? a order the of

Rob Fried

not we're in answer now, I'll we're question. room right – the all have same Well, Kevin? Kevin so that

Kevin Farr

for had growing last are as versus base that our grow sales new first higher quarter. XX% because year we lower is the the and to the as it's year think regard well it's with quarter first Jeff, to regard expected not be in it grow the the to outlook, business. think we the not the we DTC in of than with full as as the I sorry. markets the to much as as to relative I'm growth last we to think going in going what And slightly well is launch Okay. year, what indicated indicated

Jeff Van Sinderen

in shifting to you And think we should period. delve are to want your guess for getting is how could evolving the I of then COVID about kind be the into on more marketing? you of Okay, with or What the maybe helpful. that's if milestones terms marketing place guys

Rob Fried

how I'm for not to we're I milestones give how can tell messaging. you our shifting that. you sure

beyond data Niagen you've human some relating have You limited data some impact the to on NAD on viruses don't but the on there data the market specifically and published we noticed we and coronavirus, on study. coronavirus, data the know, especially is as impact additional published there of now in is of

comes are very on preclinical, Anything the be these way and will data We to that we it it in we that's be consumers. communicate And practitioners, to communicate marketed out, messages. as we're working but know, the can marketed careful data. cannot you healthcare

There impact get vigorously to viruses So for. tone to looking working underway, how could these is are the several are we we out. Tru what The wants Niagen studies are market their about risk but understand not general specifically. deaf market for in and coronavirus

and NAD pivot, show are or to add defense and and that related. a adjust we we cell make slightly did our messaging So did Niagen

clear. benefit make in published positive studies, to we be able shift information, message a scientific the not we're showing until to messaging. going are that some But We to have full

Jeff Van Sinderen

in that marketing in terms in strategy Okay. might be of can color more rollout share And then I like their anything initial of what if Nestlé, launch? anything of may on the just there, terms else one you could look squeeze the

Rob Fried

to Well, they've in scheduled for plans. a are product They They all developing PR us. their efforts still shared on track they September, are begin haven't June. of some information still release Coronavirus. They're the with They by of yet. to scheduled slightly impacted and it October are be shared their

creative some from them. seen materials We've

final pretty them. any seen materials haven't Generally, from looks good, We it slow rollout. creative but a it's

They're have but the long-term, they short-term. or large expectation very testing of an have don't hopes it. dramatic have shouldn't expectations You initially. They high in anything high

Jeff Van Sinderen

and Okay, understood. questions Thanks continuing success. for taking my

Rob Fried

anytime. Thanks,

Operator

next Your comes Oppenheimer. from from Brian question Nagel

Your line open. is

Unidentified Analyst

asking behalf Hi, question. Nagel. Brian taking Thanks William on this is for of [indiscernible] our

that we to main two talk topics wanted there First, is about.

in the did margin, given expansion in gross you discuss sustainability of term? recently that strong longer the First, the

put And more would what secondly, against fight Tru And of marketing Niagen? the determining a could do Thank behind spend whether you have an Tru in become expected you. point to ChromaDex COVID-XX? factor timetable at Niagen begin more in

Rob Fried

you why don’t don't first the why second? Kevin, the take and you Frank, one take

Kevin Farr

Sure.

tailwind margin Basically to And think it's there's the continue that in cut we and I to is costs. yes, direction think fact it going – in we got we've Okay to moving think from gross the has sustainable, quarter, from we that Tru because to more the XX that think XX been opportunities improvements points why basis the grew XX.X. of Niagen. to are a continue we move that

our DTC continue if should see it the business, to doing we and that for, XXXX. direction has in brand to XX%, And Niagen you in growth you has move which see since launched over been in Tru of that margins

So the that's drivers. one of

I savings instituted we've quarter, quarter the been supply and we chain of end initiatives third from savings we've of the at XXXX. and these think the fourth also realized executing

XX one project and packaging In implemented driving launched just mg September XXXX, identify existing been new our of the optimize to established shipping and we system help CMO we we've sourcing partnerships product, costs. efficiencies. with completed CMOS. savings We've configuration inventory process that a cost And an also XXX through reduced ERP a count, bottle where and that strategic additional strong

a well majority significant you regard year second encapsulate, had of blend, costs and Frank? flow sourcing half that realized And product. XXXX. And those we that of CMOS in as in to as four process had bottle we competitive we've in the them through with strategic the and essentially, our there, label see So the cost. savings in should this,

Frank Jaksch

of NAD few second a so has there decline research in over on that goes essentially the as months beginning. and question Coronavirus. a a attack been of or And product we've the under back since bit know now it the attack there – quite published NAD that's in attack comes your or to showing that's same so age, story mechanistically NAD happening lot been any we a of in the infection. past Yes, it's seeing comes why this under under coronavirus case with

and down in is it's and that's defending supply knocking NAD essentially the infected supply infected So it's cell. of we also RNA the know process is essentially cell NAD of itself that's it's replication and how once the of knocking by mechanistically the the the down happening the to of that that attacking And utilizing NAD. responding viruses cell,

similar it's rather days in ageing than the years. just in story. It's So very to happening

have what it's is have to that getting knocked have ability question, nicotinamide Rob now to studies the link coronavirus between to cell. to the previous so this and we do do in that what answered raise But, is confirming do we when other NAD we in rescue down or essentially riboside's

still are studies ongoing. those So

can as capable we NAD, One have this, NAD show of we shown been fact showing just connecting shown riboside this nicotinamide we riboside rescue in here is raising thing very we know is to the dots is or in model can to that What we coronavirus. studies Multiple all we in safe. that NAD to that NR nicotinamide much levels. is that know Niagen that supply nicotinamide need of successfully do does prove particular need have that. in it use multiple that and studies following to have human don't raise don't have And riboside you

doing – Rob? soon as publish support we hoping say those that will Do up to what then add like then as those are that mechanism about can we of them And to maybe We're a Rob And to are amp as can product. or the get few said, them published. them you underway. there by want studies use anything

Rob Fried

Only are piece right, when William? the increase was going to that that question of marketing, is we our last the

Unidentified Analyst

Yes that's you. right, thank

Rob Fried

is well So, to very the as as topline line. you know, ChromaDex as bottom sensitive the

campaigns measuring And our find spending. when effectiveness constantly are fact pedal efficiency in works. gas assessing the of marketing we marketing, the and we we our of a that vein hit of So all the

So we find improved time. over we've that

intend very to continue Niagen it who taken particularly Niagen, strong people have across Tru those who for buy Tru of to is a buy months. retention than Our more couple

So Tru people for customers. are dozen several example, this on now right Niagen are presumably call who

stock, an product Tru you Niagen what are taking hope you that and I the are Niagen. owner of appreciate If a Tru special ChromaDex is

essentially publish to being continuing and our It out. approach mouth and sound in and operations is that will science break scientific our fundamentally word marketing our good hope by that of our in

said communicate practitioners. As data we're we're practitioners before, hard healthcare with to with working to I able preclinical share healthcare and

a customer and base. also have growing large We very

Coronavirus, not about the customer feel information practitioners our be and that a rather the company Tru soon. and in have too with hope stress share large special those with to base, and but the coronavirus, put with to information, just how helpful, general. we We a growing compelled cellular healthcare Niagen But where it in than claim today could position make

Unidentified Analyst

Okay, you. that's very Thank helpful.

Operator

question Pinheiro Mitch Your from comes from next Sturdivant.

Your open. line is

Mitchell Pinheiro

Yes hi, afternoon. good

loyal second? it’s second ask the hit news ongoing difference about those rates? sure retention tell you science seeing quarter, you you be any terribly quarter? like, results Is read. look Are in seeing maybe sales is first But as science coronavirus here? you coronavirus seeing to strong sales the the But beneficial home the Obviously your I circumstances hitting – think sort circumstances? new it year. would to it said, we sounds Kevin, you're anything certainly and think to you to to wanted and can – are part your that maybe will the customers in you your are of I at talk of you, it not Niagen your Tru you that relative use still can and customers, where sort any Rob, the if that this the through I So that Are all is nuances of

Rob Fried

in the happy first seeing the that see the a Watson's an that in am return say impact We do decline we've we open had I bit hit, We've a of on in it sales said when past up across mostly quarter to closures. coronavirus that from and publicly as an store uptick Watson began board. the are start Hong Watson due sales to to seen stores Kong. to

attention shifted that have basically an when away science Niagen non-immune nutraceutical respond on communicate impact But general that people it. public has that Tru not. the the have same hit general seen here coronavirus based although been to nutraceuticals related And have happened we do of the and the coronavirus we when strong, sales in ageing to immunity from on innate

the said a a couple not as and science But market is very careful then time, now before published. we very, claims third to times I've any are of

demand but decline interesting, very general you're do not demand. for very, to they public seeing strong able is in immunity, in the are it what products for those seeing a immunity, believe is So strengthen that a concurrently that you're increase

So we're seeing both of if a be to those negative. we to net say, things concurrently. And it's that's for positive why net or it's very difficult a think going us

Mitchell Pinheiro

see to couldn't to the customers in did Can Kong, shift – e-commerce that they in Hong [indiscernible]? get you stores, obviously Watson's if sales a of

Rob Fried

Kong Hong increased. online sales Yes,

Mitchell Pinheiro

When there in we any any there were QX the to was new market? related - other looking at is QX results, fill Australia any channel or or U.K.

Rob Fried

that? with help you can Kevin,

Kevin Farr

Yes, I can.

with online You know, It's the given the in there Australia. is in ship and more nature shelves. also store and both in-stores business, online regard is U.K. filling XXX in-stores, wasn't a stores. the at of to businesses it's

minor there big basically, So respect in upfront in a put test need it's there U.K. to no is to is amount but the warehouses, they less with or to what purchases U.K, their more the

year there was And about the big rate impact. in $XXX,XXX were quarter the the business it's the total, for a of current environment. an hard to for again, the to growth So incremental I launches quarter. predict since over most new the The the launches of rest the grow the in not and that think business overall driver of economic is But based XXXX. upon opportunity

Mitchell Pinheiro

U.K. to will is that into other revenue the the breakdown will And your line, revenue go line go the international or Watson's is item? where

Kevin Farr

in the other item. go line will international It

Mitchell Pinheiro

just is typical then you matter long the that? get on a it published, coronavirus couple these And study take as finally, how to have mean what's of, of sort studies of Okay. now a weeks, and did done I cadence the

Rob Fried

studies, coronavirus long but human. an animal last whether it's model, the doesn't or it of type a on depends it that any Well, because in study you're infection doing,

So the a of getting They're It's not just reported. data staged, in studies the themselves completed, studies. studies matter long-term are days.

different. models than different trying different studies one each to are human So get is Cell a than animal little going. are models

where human standard blind the and doing than different little So you're people. - traditional study not infecting study placebo studies because controlled you're double a are sort a of

study patients have You – then infected. have into and patients a dose that introduce you the receiving to are actually coming to it place already they're where introduce in

more on would So end, challenging blind because that placebo double a an it's of study more study. observational a say true than little I it's bit

more studies of of those So, so studies just than are when the amount time takes. themselves the but timing not of you a matter it It's can long. the into get

Frank Jaksch

well. And there are as other complications

to coronavirus in animals. difficult it's replicate example, For

issues. matter. is rats that in or - And or many funding human mice there at other for coronavirus rats aren't have there So succeeded or the that then places animals also replicating mice

Some some intellectual have issues require like sometimes is property places contractual people there funding, in funding place, issues. and then

reasons why are itself. study take while these separate a there the So actual things from

Mitchell Pinheiro

thank Okay, much. you very

Operator

Wainwright. Your next question comes Selvaraju H.C. from Ram from

Your line is open.

Unidentified Analyst

taking Hi, dialing for for Ram [indiscernible] is in question. Selvaraju, this and thanks my

postponed. conference be with the So a And mentioned add with case. the on court the the I outcome been little to just wanted color that you you X? trial has California is the can ChromaDex’s then that. on of start I what May know May that court

Rob Fried

about question court the case? one you first ask the Okay, time more Can California

Unidentified Analyst

Yes, sure.

you some that color maybe trial X? the of May can and on the was conference what court postponed was ChromaDex's provide was question additional the on So then the with outcome the

Rob Fried

supposed that of see the fact record now May scheduled but facts out be year read As will initially to into been you hope the for who sometime to the it of date And date. to public are then specific of coronavirus, we estimating XX. know the was sometime pushed to set the And - first facts October. last yet going the be can a most - think and able got now know. frustration There month, for have a trial in it moved record. got half January, was us. no is date. many the finally That's We're October, or Then we clear. then June don't hit the public back. The it's around I come be fairly bothers a to Anyone - facts next in that set I it

facts, public record, a and there out frankly We we're for company that day are One jury with eager is. to what decision frankly disclosed it to has been a come continue that facts those confident the but trial, employees will given We're be that at advisors, all that investors, in it the there amazing have facts that hear the be scientific what out even find will with come associated they this the into it trial. is point will make. in

Unidentified Analyst

Okay.

Frank Jaksch

what The X this exchange California. is May the next California an at conference determine point. In was documentation just will relating trial of date we June, to for

Unidentified Analyst

Okay

Frank Jaksch

for the largest of the scheduled of you Elysium attempt case, as got these know, Court decision overturn on which know recently rejected, and last date of XXX XXXX also all PTAB you year patent. cases, of to from on Ram, a as the trial Appeals patent September And, is we've the the

argument So strong. their look position their be. confident regard These sure in looks very weak We're these quite patents patents. might what with extremely to these Not patents.

court we're eager We indication to of but as completely have infringement sure. the of that, It's clear have we're day case not pretty so patents, in some well. like seems a on that

Unidentified Analyst

one? the York this with further the be And to respect going New understood. or to period is then case any discovery be the Okay, is to extension to unlikely there last

Rob Fried

New decide we cases this longest decisions primary you read, successful. this that all are seems is to the strategy delays. And delays one judge they're this to - this there the The their that last but dockets. it's this process these the they've has in been just And you the after tell that's of on extent, to delays. their to one, get is been like we have gone finally more other side how delays. There somewhat are public thing on. very been In see confident us find you on a eager I'd the at to cases, of trial. to just very that often And based that amazed can that one. case. little It last have Well, York to very, seems that But eager

So to we. this do all seem to want the get finally as judges resolved thing

Unidentified Analyst

Do substantial abatement territories consumer And you to from to any wake Australia’s you plan impact expect of started of to in demand the authorization a particular, recovery Have experience XXXX? and market. positive in Asian COVID-XX the pandemic? in the In gears reopen? Understood. these of then the the anticipating rebound are shifting healthy

Rob Fried

Okay. the make Ram. I want just sure understand question I to

in You're when - anticipate COVID asking demand? a down, we increase, surge if an as dies and if do

Unidentified Analyst

consumer a in bound demand? you expect Do [indiscernible]

Rob Fried

we expect in down? Do increase demand consumer COVID dies an as

Unidentified Analyst

Yes.

Rob Fried

only we that that are Kong is The open. in now right of in what stores have as and Hong now, seeing we're seeing indication we to Kong Hong Watson right begin the

if the traffic particular, out coronaviruses to and that seeing studies as the as increase come hope in properly demand are the also demand There's stores consumer on and possibility as able come be to. might viruses able increased and consumer in that we though will studies expect those that from that we out it which we are communicate We appears information, I level restoring. Niagen the the and is its impact

Unidentified Analyst

studies you're supplement studies of being then conducting, and actual of you to to that focus the Understood. coronavirus as an conduct Tru conducted, With it or is the on full on a maybe investigation? Niagen plan use to blown can that system of are boosting comment clinical kind is what respect immune kind

Rob Fried

make both. which I in right, focusing claims to bit mean general is little ratchets research, mean, the can on plan ongoing reality, it more the the function. going a is coronavirus, that's now of now immune right I So, that around it's be we're on you're but research focused right to we are

in by at in specific right impact this mechanistically be an on of that going to NAD we're immune this that ratchets to challenge nicotinamide is a demonstrate studies coronavirus exactly well riboside a there's for support now. Ultimately now that happening least fundamentally out. trying going products – claim. focus preparing right to we'll past that's So immune case, support a to related to world good I the believe this ongoing And demand how goes have those idea

I general. be plays think be And it's a that a their going it's think going worried in what to going immediate mean system. long data immune NAD is to the effect. to are lasting that's And to I healthy to think be about a in reality, people us only show be central concerned. role – not support I going going that's immune in They're I

Unidentified Analyst

final how with line one is it might quarter? from online in Understood. And coming me, accelerate what the execute progressing? going expectation, shift Is in and you Thank to to e-commerce and this sales your forward the you.

Rob Fried

The I'm isn't connection great. Okay, sorry. that

more ask wasn't I I about the able one Can time, to please? was the e-commerce. first question. know So of hear part it you

Unidentified Analyst

so I'm yes Yes, sorry.

this forward expectations e-commerce what the coming is to your quarter? shift going accelerate in the to Is execute and this with and how progressing? in you online might So line sales

Rob Fried

has know business there's cost and really, as steadily in down. you the quarter the customer years been the began every now. growth three shift And years Well, you could acquisition come ago. e-commerce three steady as good, consistent been retention has see, The for

a Our systems have stronger and measuring are conversion in for content. that rates. performance of we creating strong team the releasing place measuring getting rates, in pretty and retention content good And place for content, that

We quantitative own data getting one the strong for improving keep continue are e-commerce continued show pieces and and complicated to better best we in growth be also we it strong and processes. that oriented, needs creative. fairly inspired is a one. very pretty media. also numbers an puzzle have strength be to in and it's media the pretty but have Running and a to social a to and keep integrated marketing There oriented, and many very And to needs is are to a way team in your place we team fairly operation

really very to good bullet we're foundation of And creative the that research. use there's we those a research magic and no going do published, very, continue good materials. have conducting that of will and as to comes processes we any job out marketing, how – We is processes. are improve our for the once I don't And our plan grow.

published and make very justified not are claims that any to careful by are We by data. very, not published science

this and model to company. consumer company consumer a see industry. as that companies to our a should – to be We operate doesn't like mean try in conservative the fundamentally a one. on we We as one it's is biotech think the what operate a give company product in we scientifically very because consumer how an product science. product But ourselves happens general, sound product, for up inch a and And

that that very you be it But careful market. ways mean to you does in have the

the patent we and conduct research the regulatory get we because products because in we our and are by and FDA So invest messaging. and play and we NDINs from rules get we approval and with we conservative studies we very our

to We strong are companies there at a from are line. disadvantage that cross out the willing

not to letter such is about enforce not product the U.S. royalties and doesn't disadvantage the at We company one that an a what are those read do? not technically. at that a patents It's just a conduct false patent disadvantage. but NMN. we holders legal companies making if FDA do. are other claims FDA chosen recently is we on We we to have infringe to the pay pay to NMN NMN in royalties product it, If doesn't we to can are on going like have MDI. the Dartmouth warning a or from But are those a if going science, what

operating very, the by run done high trusted and We It's We fundamentally taking bullet. one a there genuinely time The then a believe sound fundamentally and job very sound retention way brand. as growing magic steadily a truly operation a our very time resonate consumers. being that improving. rates indicated by a no keep steadily in of in is as good strong, a step have. our creating customers the long But to very trusted the just business we've communicating at brand think with brand by we and that very, will message

Unidentified Analyst

much you for questions. my Understood, so Thank yes. taking

Rob Fried

Sure anytime.

Operator

Jeffrey Cohen Our last Thalmann. from question Ladenburg from comes

Your line is open.

Jeffrey Cohen

Well How hi, are Kevin. you? Bob, Frank and

Rob Fried

Hi Jeff, good.

Frank Jaksch

Jeff. Thanks, Good.

Jeffrey Cohen

would talk little couple Beauty this geography you in so see a NR, out mg or NR, NR a of the product with Niagen the to it? that of in how a Just it the the with bit from addition Tru unto marketing population, quick in itself? Would you're and me, you ones do expect which XXX be product about combination playing largely you can with

Rob Fried

going And launched stores a Hong Watson ago was did quite been other year is we there product. well stores are There that three in particular, a hero Hong NR requested in to Niagen is there a hero the time, Watson, product. by figuring product combine of bit out combination Frank This and has Kong products product is as ingredients product. related. is a the it and and in Well, Niagen. so the with are formulation a what Kong, Beauty were half spent we in in

make it We very, was produce in launched them. we and it to one early get did this that embrace. had that are to we results. but pleased happy was with it their anticipated that say ship launched. product right we it, We that a they the of very I'm sure middle it And Watson's did Obviously, manufacture and did very and market to the stable, believe could strongly no it. product we the would which the coronavirus, that

Jeffrey Cohen

top little first the conditions you at then the a in of you head were And measured bit on cardiac what also about study it. got they you specific of effect? University comment cardiovascular Iowa's your Can study? Okay, could Frank, talking this that

Rob Fried

related to study anti-arrhythmic here am specific – for hold was I on, effect. specifically to pull it trying That it you, one and cardiovascular was benefit

was arrhythmia on what mainly basically on. So is it it’s – focused focused

Jeffrey Cohen

after during Okay, measured and assume? before, I

Rob Fried

Exactly right.

Jeffrey Cohen

then that about and you into the And will of some in – talking it. States at. time intrinsic outlines this and got capacity the the you're lastly what some penetrate United Okay this Is time? payers think from you spent looking over something

Rob Fried

that I start a of Organization to Right? mean early are world trying to there's and get other say. of ageing a And little to World what trying Health a trying really defining – – ageing healthy lot to disease. the a focus guys essentially is. as classified It's really side they're the

out has happens come level. Now stated that is is World something or that and cellular ageing at itself ageing very something has the the Organization clearly healthy Health actually

based and something data are is has really science all showing because that the within the great is on And ultimately means it happens that's science cell. where And making going. they is the the on that the decision what data aging really science been their going, that

the mitigating right that you damaged And damage now. so going the where find is for And age. the what impacting today. or damage strategies repairing science cells have the is as showing the published we to way are or science that's That's

aging, to function well. cellular integrity, of on to hallmarks nine about cellular up gets to physiological of of starting as there and improving focus And that to function, it's the cellular ultimately that are mean, all well. I them intrinsic about or basically, It's repairing molecular companies ways or function. ratchets ratchet pop function start capacity, as

but trying It Niagen does is damage, that's start? we're reality, the does of that In or becomes that's to find de-function where NAD. We're you then repairing. aging the in improve - our best case, the of starts we best function of course, the cellular related So, that any and to improve can at. is from to where Niagen if in way molecular and one a with or then thing want it the deregulated age of riboside that it's way best middle nicotinamide helping

And this now connects ultimately can intrinsic out it are in to like by that concept. need talks or to starting health. we that that these the dots to connect NR studies Niagen come what But improve under cellular levels to things between do that models using is we using to NAD really capacity it show specifically fall

Unidentified Analyst

That’s me. taking for Thanks it. questions. got the Okay, it from

Rob Fried

you. Thank

Frank Jaksch

Jeff. Thanks,

Operator

Gerber call closing I to over would now for like to turn remarks. Brianna the

Brianna Gerber

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

Operator

concludes gentlemen, call. Ladies today's this and conference

You may now disconnect.

ChromaDex (CDXC) 11 May 202020 Q1 Earnings call transcript