ChromaDex Corporation

Ladies and gentlemen, thank you for standing by and welcome to Chromadex Corporation's second quarter 2021 earnings conference call. My name is Ashley and I will be the conference operator today. At this time, all participants are in a listen-only mode. And as a reminder, this conference call is being recorded. This afternoon, Chromadex issued a news release announcing the company's financial results for the second quarter of 2021. If you have not reviewed this information, both are available within the investor relations section of Chromadex's website at www.chromadex.com. I would now like to turn the conference call over to Bianna Gerber, Vice President of Finance and Investor Relations. Please go ahead, Ms. Gerber.

Thank you. Good afternoon, and welcome to Chromadex Corporation's second quarter 2021 results investor call. With us today are Chromadex's Chief Executive Officer, Rob Freed, Founder and Executive Chairman, Frank Jacks, and Chief Financial Officer, Kevin Farr. Today's conference call may include forward-looking statements, including statements related to Chromadex's research and development and clinical trial plans, and the timing and results of such trials, the timing of future regulatory filings, the expansion of the sale of TrueNiagen in new markets, business development opportunities, future financial results, cash needs, operating performance, investor interest, and business prospects and opportunities, as well as anticipated results of operations. Forward-looking statements represent only the company's estimates on the date of this conference call and are not intended to give any assurance as to actual future results. Because forward-looking statements relate to matters that have not yet occurred, These statements are inherently subject to risks and uncertainties. Many factors could cause Chromadex's actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These risk factors include those contained in Chromadex's quarterly report on Form 10-Q, most recently filed with the SEC, including the effect of the COVID-19 pandemic on our business, results of operations, financial condition, and cash flows. Please note that the company assumes no obligation to update any forward-looking statements after the date of this conference call to conform with the forward-looking statement's actual results or to changes in its expectations. In addition, certain of the financial information presented in this call references not GAAP financial measures. The company's earnings presentation and earnings press release, which were issued this afternoon and are available on the company's website, present reconciliations to the appropriate GAAP measures. Finally, this conference call is being recorded via webcast The webcast will be available at the investor relations section of our website at www.chromadex.com. With that, it's now my pleasure to turn the call over to our Chief Executive Officer, Rob Freed. Rob?

Thank you, Brianna. Good afternoon, everyone, and thank you for joining our second quarter 2021 investor call. It was yet another strong quarter for Chromadex, including $17.7 million of total net sales, and $640,000 in positive adjusted EBITDA, which excludes total legal expense. Overall sales were up 21% sequentially, with continued growth in our existing direct-to-consumer and B2B TrueNigin business. We launched TrueNigin and Walmart in June, our first mass retail launch in the U.S., and a significant accomplishment for the company. And we had a small shipment of Niagen ingredient to our new partner row, whom we expect to be a strategic long-term Niagen ingredient partner, along with H&H Group, Nestle Health Science and Life Extension. As I mentioned, total company net sales for the quarter were $17.7 million. E-commerce sales continued to grow 11% sequentially, and they were up 31% over the second quarter of 2020. We benefited from strong Amazon Prime Day sales this quarter, as well as an easier comparison as a result of the impact of COVID on our business in the second quarter last year. We also delivered higher sales to Watson's of $2.9 million following last quarter's temporary supply chain disruption. In total, our sales to existing partners, including Watson's, increased year-to-date compared to 2020, and we added sales to new partners Walmart and Lowe in the second quarter. Gross margins were approximately 61%. And the second quarter adjusted EBITDA, which we define as EBITDA excluding legal expense, was, as I mentioned, a profit of $600,000, a $1.3 million improvement from the prior quarter. Total legal expense was down compared to last quarter, but remains high as we prepare for three trials this year. As I have repeatedly said, we will continue to protect our intellectual property against infringers. companies who try to build their brands on the back of our science and our regulatory accomplishments. Speaking of our science, the science behind Niagen has never been stronger. We now have 13 completed clinical trials and nearly 40 more clinical trials in progress. In July, the results of ScandiBiotherapeutics' Phase 3 COVID-19 study were published in the peer-reviewed journal Advanced Science. Researchers showed the statistical significance that supplementation with the nutritional protocol, including our ingredient, nicotinamide riboside, reduced time to recovery in symptomatic patients in Turkey by 38% compared to a placebo, 38%. Frank will provide additional updates on the science momentarily. Chromadex remains committed to expanding our knowledge of and patent portfolio around nicotinamide riboside, as well as other NAD precursors, and is increasing R&D investments in 2021 to maintain that leadership position in this rapidly growing market. While direct-to-consumer remains the core engine of the business, We are excited about the opportunity to reach new consumers for TruNiogen at 3,800 Walmart stores and to work with Walmart to build the NAD supplements category. Our new lower-priced, lower-dose introductory product should be available in approximately 3,800 locations, and our standard 300-milligram product should be available in approximately 2,800 locations. Sales to Walmart were strong this quarter due to initial sell-in for the launch. with product delivered on time to all Walmart locations. Both SKUs are also available on Walmart.com. We have a new head of marketing at Chromadex who is working on a more aggressive campaign targeting Walmart consumers. In the short term, we continue to expect that sales will build slowly at Walmart, but growth should accelerate upon rollout of this campaign. Overall, it's still early in the launch, and we look forward to sharing more information in the future. I'm proud of the entire Chromadex team for delivering on this milestone launch. It was a cross-functional effort and is important foundationally as we continue to build this great global brand. I'd like to thank our shareholders, our strategic partners, and our true Niagen consumers, our growing group of true believers, for your continued support. I have never been as optimistic about our future as I am today. And now I will pass the call over to our chairman, Frank Jacks, for an update on scientific research.