ChromaDex Corporation

Ladies and gentlemen, thank you for standing by and welcome to Chromadex Corporation third quarter 2022 conference call. My name is Joelle 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 third quarter of 2022. 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 Tom Shoemaker, LifeSci Advisors Agency IR Counsel for Chromadex. Please go ahead, Mr. Shoemaker.

Thank you. Good afternoon and welcome to Chromadex Corporation's third quarter 2022 results investor call. With us today are Chromadex's Chief Executive Officer, Rob Fried, Interim Chief Financial Officer, Brianna Gerber, and Senior Vice President of Scientific and Regulatory Affairs, Dr. Andrew Hsiao, who will join the call for Q&A. 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 TruNiagen 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 as well as inflationary and adverse economic conditions 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 non-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 gap 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 Fried.

Thanks, Tom. Good afternoon, everyone, and thank you for joining us on our investor call today. For the third quarter, we delivered a significant improvement in adjusted EBITDA, or cash EBITDA, which is a $1.2 million loss. And we remain on track to deliver positive EBITDA in the fourth quarter of this year. The solid bottom line performance was achieved with net sales of $17.1 million for the quarter. Over 65% of the period sales came from our direct-to-consumer e-commerce business, which grew 7%. Our emphasis on profitable growth was evident in the decline in total marketing expense year over year, both in absolute dollars and, most importantly, as a percentage of net sales, as we focused on the most efficient digital media investments with measurable return. Following the quarter, we raised $7.7 million of capital, net of fees. with existing strategic investors and the new investor, Nestle Health Science. We enter the fourth quarter in a strong financial position with improving P&L metrics, important partnerships in place, and a solid balance sheet. Brianna Gerber, our CFO, will cover Chromadex's financials in more detail in a moment. Also, Andrew Hsiao, our head of scientific and regulatory affairs, will join us for Q&A. Growth in the e-commerce business was driven by a nearly 20% increase in sales on Amazon, while our website sales declined year over year. We've dedicated significant resources, both people and financial, to optimizing our brand and landing page content, as well as campaign funnels on Amazon with impressive results, including a consistent number one ranking in the vitamin B3 category. Amazon represents nearly 70% of our e-commerce business, and we're now focused on applying similar strategies to our own website to improve conversion. Importantly, our cost per acquisition, or CPA, decreased by approximately 40% year over year on both Amazon and our own website. We significantly reduced spend as we are undergoing a project to revamp the website and our acquisition engine. Against this backdrop of low overall spend, we're building a stronger social media presence to drive more organic traffic to our site as well as Amazon. We're also testing new approaches to drive true nitrogen brand awareness in the fourth quarter as we continue to focus on efficient marketing spend. One example is our launch with Shop HQ. The host, Danny Sayo, is an author and television personality who has been a true nitrogen consumer for the last five years. This personal experience with our brand allowed him to speak with authenticity and conviction about its amazing benefits during the two 54-minute segments. The Danny Sayo team told us this was the most successful launch event of any supplement on the show, with the 90-count product selling out during the first airing. Outside of the e-commerce business, our new partnerships are impacted by timing, but the business is improving. Looking ahead to the fourth quarter, we see several bright spots, including Watson's, H&H, Sinopharm, and, of course, Nestle Health Science. For Watsons, we expect higher sales in the fourth quarter to align with seasonal demand following a pickup in our shipments to Watsons in the third quarter. We're beginning to see the COVID-19 headwinds abate, and we continue to find new ways to strengthen our partnership by building on True Niagen's already established brand awareness in Hong Kong. As mentioned last quarter, H&H launched their first exclusive product with Niagen, the Swiss beauty activator in Australia, and has since rolled it out in China, where Swiss is the largest brand on cross-border platforms with promising launch results. H&H has developed two additional exclusive nitrogen formulation products for its Swiss innovation portfolio, which they expect to roll out into Australia, China, and other markets. We're optimistic about the early start of this partnership and look forward to building upon this foundation in 2023. And finally, as noted earlier in the call, we wanted to highlight the signing of a long-term commercial supply agreement with Nestle Health Science, and an investment into Chromadex by its parent company, Nestle. The agreement includes an approximately $2 million initial purchase of Niagen for the 2022 calendar year period and a $5 million private placement, or $4.8 million after fees, which we collected in October. The deal not only provides Nestle the non-exclusive right to manufacture, market, distribute, and sell products using Niagen under its brands worldwide, except where Chromadex has existing exclusive agreements, but also enables us to work directly with the marketing and science departments of a world-class dietary supplement and foods company. The private placement is a strong show of support from Nestle for what we are trying to accomplish in building Chromadex as a worldwide healthy aging and wellness brand backed by science. We also made significant advancements in our China strategy this quarter. Our joint venture is now fully established to accelerate the approval of health food registration for TruNiagen in mainland China, also known as Blue Hat approval. Cross-border sales of TruNiagen into China are off to a strong start with Sinopharm Jingxia, who began managing our cross-border platforms in September. TruNiagen's relaunch began with a successful premiere at the China International Natural Health and Nutrition Expo, or NHNE, Asia's largest health and nutrition trade expo. with over 100,000 distributors and retailers in attendance. TrueNiogen was awarded the most popular brand of the year at the conference. Knowing how excited our partners are to assume the distribution and marketing of TrueNiogen in China, we continue to make real headway in becoming the premier NAD boosting brand in the market. Our global addressable market is still largely untapped. We are committed to delivering on the promise of the enormous potential for our ingredient, nitrogen, supported by compelling scientific research that speaks to its broad use cases, extensive safety data, and commitment to quality, which is rare in the dietary supplement industry. I'll briefly highlight two recent studies on NR. First, we announced the results of a Chromadex External Research Program, or SERP as we call it, study on stage C heart failure patients with reduced ejection fraction. The results of the study demonstrated that high-dose NR was safe and well-tolerated, almost doubling whole blood NAD levels, increasing white blood cell mitochondrial respiratory function, and decreasing the expression of inflammatory markers. The study marks a major milestone in investigating the safety and tolerability of NR and is a crucial step that will pave the way for future clinical research. There's also the eighth published clinical study to show that NR reduced inflammation, demonstrating remarkable consistency of this beneficial effect in humans. Second, a recent preclinical study demonstrated that NR extended lifespan in mice with faulty DNA repair. In this mouse model, the inability to repair DNA results in accelerated neurodegeneration and rapid aging. Interestingly, researchers found that compared to other popular longevity compounds, including metformin and resveratrol, NR had the greatest effect on extending lifespan in these mice. In addition, Chromadex maintains a strong and growing patent portfolio, reinforcing our position as the scientific leader in the NAD industry. On that note, the Delaware Appeal and our exclusively licensed NR patents from Dartmouth is scheduled for December 6th. We believe we have very strong arguments for the district court's decision to be overturned on appeal, but regardless of the outcome, we're very confident in the strength of our owned and licensed portfolio for NR and other NAD precursors to provide us protection for many years to come. I'd like to now turn the call over to Brianna to discuss the quarter's results, and then on to Q&A and closing remarks. Brianna?