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Classified in: Health, Science and technology, Business, Covid-19 virus
Subjects: EARNINGS, Conference Call, Webcast

ChromaDex Corporation Reports Third Quarter 2022 Financial Results


ChromaDex Corp. (NASDAQ:CDXC) today announced financial results for the third quarter of 2022.

Third Quarter 2022 and Recent Highlights

"We approached cash flow break even in the third quarter and remain on track to achieve this important objective next quarter," said ChromaDex CEO, Rob Fried. "We finalized key strategic partnerships in China and signed a long-term supply agreement with Nestlé Health Science. Our position as the world's leading NAD+ company is solid, supported by our strong and growing patent portfolio, our globally trusted consumer brand, Tru Niagen®, and our pipeline of future innovations."

(1) Journal of the American College of Cardiology: Basic to Translational Science

Results of operations for the three months ended September 30, 2022 compared to the prior year quarter

For the three months ended September 30, 2022 ("Q3 2022"), ChromaDex reported net sales of $17.1 million, a decrease of $0.2 million or (1)% compared to the third quarter of 2021 ("Q3 2021"). The slight decline in Q3 2022 revenues compared to Q3 2021 was primarily attributable to lower business-to-business sales of Tru Niagen® as distributor partners continue to experience COVID-19 headwinds and other macroeconomic factors paired with lower demand for research and development services. Declines in net sales were partially offset by steady growth in e-commerce sales of Tru Niagen®.

Gross margin percentage declined to 59.8% in Q3 2022 compared to 61.1% in Q3 2021 primarily due to increases in supply chain headcount, including higher wages, and other inflationary pressures, partially offset by business mix.

Operating expense decreased $6.1 million to $13.3 million in Q3 2022, compared to $19.4 million in Q3 2021. The decline in operating expense was largely attributable to a $5.0 million decrease in general and administrative expense paired with a $1.4 million decrease in selling and marketing expense. During Q3 2022, selling and marketing expense was scaled back to focus on the most efficient channels and investments, which drove a 730 basis point improvement in selling and marketing expense as a percentage of net sales, compared to Q3 2021. The decline in general and administrative expense was primarily driven by a $4.4 million decrease in legal expense.

The net loss for Q3 2022 was $1.0 million or $(0.01) per share compared to a net loss of $8.8 million or $(0.13) per share for Q3 2021. Adjusted EBITDA including legal expense, a non-GAAP measure, was a loss of $1.2 million for Q3 2022, a $5.1 million improvement from Q3 2021. Adjusted EBITDA excluding legal expense, a non-GAAP measure, was a profit of $0.1 million for Q3 2022. See "Reconciliation of Non-GAAP Financial Measures" for a reconciliation of non-GAAP measures to net loss, the most directly comparable GAAP measure.

For Q3 2022, net cash outflow from operating activities was $3.7 million, compared to $5.9 million in Q3 2021 largely due to improvements in net loss of $4.6 million excluding other income from the Employee Retention Tax Credit which was partially offset by changes in working capital.

2022 Full Year Outlook

Looking forward, for the full year, the Company expects high single digit revenue growth, driven by its global e-commerce business and growth with partners. For the full year, the Company expects approximately 60% gross margin, lower selling and marketing expense as a percentage of net sales, approximately $1 million increase in R&D, and approximately $6 to $8 million decrease in general and administrative expense, as reported, driven by lower legal expense. The Company expects to be cash flow break-even or better in the fourth quarter of 2022. The Company considers Adjusted EBITDA including legal expense, a non-GAAP metric, to be a proxy for cash flow before working capital investments, and is targeting cash flow break-even on that basis.

Investor Conference Call

A live webcast will be held Wednesday, November 2, 2022 at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss ChromaDex's third-quarter financial results and provide a general business update.

To listen to the webcast, or to view the earnings press release and its accompanying financial exhibits, please visit the Investors Relations section of ChromaDex's website at http://chromadex.com. The toll-free dial-in information for this call is 1-888-330-2446 with Conference ID: 4126168.

The webcast will be recorded, and will be available for replay via the website from 7:30 p.m. Eastern time on November 2, 2022 through 11:59 p.m. Eastern time on November 9, 2022. The replay of the call can also be accessed by dialing 800-770-2030, using the Replay ID: 4126168.

Important Note on Forward Looking Statements:

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. Statements that are not a description of historical facts constitute forward-looking statements and may often, but not always, be identified by the use of such words as "expects," "anticipates," "intends" "estimates," "plans," "potential," "possible," "probable," "believes" "seeks," "may," "will," "should," "could," "predicts," "projects," "continue," "would" or the negative of such terms or other similar expressions. Forward-looking statements include statements regarding our intentions, beliefs, projections, outlook, analyses or current expectations concerning, among other things: the quotation from ChromaDex's Chief Executive Officer, and statements related to the Company's 2022 financial outlook including but not limited to revenue growth, gross margin, expenses, and investment plans. Risks that contribute to the uncertain nature of the forward-looking statements include: the impact of the COVID-19 pandemic on our business and the global economy; inflationary conditions and adverse economic conditions; our history of operating losses and need to obtain additional financing; the growth and profitability of our product sales; our ability to maintain sales, marketing and distribution capabilities; changing consumer perceptions of our products; our reliance on a single or limited number of third-party suppliers; risks of conducting business in China; and the risks and uncertainties associated with our business and financial condition in general, described in our filings with the Securities and Exchange Commission (SEC), including, without limitation, our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q as filed with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof, and actual results may differ materially from those suggested by these forward-looking statements. All forward-looking statements are qualified in their entirety by this cautionary statement and ChromaDex undertakes no obligation to revise or update this release to reflect events or circumstances after the date hereof.

About ChromaDex:

ChromaDex Corporation is a global bioscience company dedicated to healthy aging. The ChromaDex team, which includes world-renowned scientists, is pioneering research on nicotinamide adenine dinucleotide (NAD+), an essential coenzyme that is a key regulator of cellular metabolism and is found in every cell of the human body. NAD+ levels in humans have been shown to decline with age, among other factors, and may be increased through supplementation with NAD+ precursors. ChromaDex is the innovator behind the NAD+ precursor nicotinamide riboside (NR), commercialized as the flagship ingredient Niagen®. Nicotinamide riboside and other NAD+ precursors are protected by ChromaDex's patent portfolio.

The Company delivers Niagen® as the sole active ingredient in its consumer product Tru Niagen® available at www.truniagen.com and through partnerships with global retailers and distributors. The Company also develops and commercializes proprietary-based ingredient technologies and supplies these ingredients as raw materials to the manufacturers of consumer products. The Company further offers natural product fine chemicals, known as phytochemicals, and related research and development services. Follow us on Twitter @ChromaDex and Instagram @TruNiagen and subscribe to our latest news via our website accessible at www.chromadex.com to which ChromaDex regularly posts copies of its press releases as well as additional updates and financial information about the Company.

ChromaDex Corporation and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations

(In thousands, except per share data)

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

 

 

 

 

 

 

 

 

Sales, net

$

17,063

 

 

$

17,308

 

 

$

51,054

 

 

$

49,690

 

Cost of sales

 

6,856

 

 

 

6,730

 

 

 

20,273

 

 

 

19,068

 

Gross profit

 

10,207

 

 

 

10,578

 

 

 

30,781

 

 

 

30,622

 

Operating expenses:

 

 

 

 

 

 

 

Sales and marketing

 

5,868

 

 

 

7,221

 

 

 

22,126

 

 

 

19,711

 

Research and development

 

1,224

 

 

 

996

 

 

 

3,547

 

 

 

2,787

 

General and administrative

 

6,180

 

 

 

11,202

 

 

 

22,292

 

 

 

29,881

 

Total operating expenses

 

13,272

 

 

 

19,419

 

 

 

47,965

 

 

 

52,379

 

Operating loss

 

(3,065

)

 

 

(8,841

)

 

 

(17,184

)

 

 

(21,757

)

 

 

 

 

 

 

 

 

Other income, net - Employee Retention Tax Credit

 

2,085

 

 

 

?

 

 

 

2,085

 

 

 

?

 

Interest expense, net

 

(5

)

 

 

(15

)

 

 

(23

)

 

 

(46

)

Net loss

$

(985

)

 

$

(8,856

)

 

$

(15,122

)

 

$

(21,803

)

 

 

 

 

 

 

 

 

Basic and diluted loss per share attributable to common stockholders:

$

(0.01

)

 

$

(0.13

)

 

$

(0.22

)

 

$

(0.33

)

 

 

 

 

 

 

 

 

Basic and diluted weighted average common shares outstanding

 

68,345

 

 

 

68,236

 

 

 

68,331

 

 

 

66,811

 

ChromaDex Corporation and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

(In thousands except par values, unless otherwise indicated)

 

 

Sep 30, 2022

 

Dec 31, 2021

 

Assets

Current assets:

 

 

 

Cash and cash equivalents, including restricted cash of $0.2 million as of both dates

$

13,262

 

 

$

28,219

 

Trade receivables, net of allowances of $51 and $65, respectively; Including receivables from Related Party of: $2.4 million and $2.1 million, respectively

 

4,744

 

 

 

5,226

 

Inventories

 

15,636

 

 

 

13,601

 

Prepaid expenses and other assets

 

4,259

 

 

 

1,859

 

Total current assets

 

37,901

 

 

 

48,905

 

 

 

 

 

Leasehold improvements and equipment, net

 

2,791

 

 

 

3,003

 

Intangible assets, net

 

714

 

 

 

857

 

Right-of-use assets

 

3,714

 

 

 

4,352

 

Other long-term assets

 

545

 

 

 

723

 

Total assets

$

45,665

 

 

$

57,840

 

Liabilities and Stockholders' Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

9,119

 

 

$

10,423

 

Accrued expenses

 

6,756

 

 

 

6,481

 

Current maturities of operating lease obligations

 

684

 

 

 

528

 

Current maturities of finance lease obligations

 

10

 

 

 

20

 

Customer deposits

 

158

 

 

 

161

 

Total current liabilities

 

16,727

 

 

 

17,613

 

Deferred revenue

 

4,228

 

 

 

4,346

 

Operating lease obligations, less current maturities

 

3,687

 

 

 

4,154

 

Total liabilities

 

24,642

 

 

 

26,113

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

Equity

 

 

 

ChromaDex Corporation and subsidiaries stockholders' equity:

 

 

 

Common stock, $0.001 par value; authorized 150,000 shares; 68,169 shares and 68,126 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

 

68

 

 

 

68

 

Additional paid-in capital

 

205,027

 

 

 

200,614

 

Accumulated deficit

 

(184,075

)

 

 

(168,953

)

Cumulative translation adjustments

 

3

 

 

 

(2

)

Total stockholders' equity

 

21,023

 

 

 

31,727

 

Total liabilities and stockholders' equity

$

45,665

 

 

$

57,840

 

ChromaDex Corporation and Subsidiaries

Unaudited Reconciliation of Non-GAAP Financial Measures

(In thousands)

Reconciliation of Net Loss to Adjusted EBITDA including legal expense and Adjusted EBITDA excluding legal expense

 

 

 

Q3 2022

 

Q2 2022

 

Q1 2022

 

Q4 2021

 

Q3 2021

 

 

 

 

 

 

 

 

 

 

Net loss, as reported

$

(985

)

 

$

(6,397

)

 

$

(7,740

)

 

$

(5,325

)

 

$

(8,856

)

Adjustments:

 

 

 

 

 

 

 

 

 

Interest expense, net

 

5

 

 

 

10

 

 

 

8

 

 

 

9

 

 

 

15

 

Depreciation

 

235

 

 

 

212

 

 

 

201

 

 

 

211

 

 

 

232

 

Amortization of intangibles

 

44

 

 

 

50

 

 

 

49

 

 

 

51

 

 

 

53

 

Amortization of right of use assets

 

170

 

 

 

169

 

 

 

299

 

 

 

126

 

 

 

131

 

Share-based compensation

 

1,229

 

 

 

1,296

 

 

 

1,888

 

 

 

1,473

 

 

 

1,822

 

Severance and restructuring

 

181

 

 

 

17

 

 

 

821

 

 

 

6

 

 

 

342

 

Other income - Employee Retention Tax Credit

 

(2,085

)

 

 

?

 

 

 

?

 

 

 

?

 

 

 

?

 

Adjusted EBITDA including legal expense

$

(1,206

)

 

$

(4,643

)

 

$

(4,474

)

 

$

(3,449

)

 

$

(6,261

)

 

 

 

 

 

 

 

 

 

 

Legal expense

 

1,257

 

 

 

1,727

 

 

 

2,341

 

 

 

1,626

 

 

 

5,640

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA excluding legal expense

$

51

 

 

$

(2,916

)

 

$

(2,133

)

 

$

(1,823

)

 

$

(621

)

Non-GAAP Financial Information:

To supplement ChromaDex's unaudited financial data presented in accordance with generally accepted accounting principles (GAAP), the Company has presented Adjusted EBITDA including legal expense and Adjusted EBITDA excluding legal expense, both non-GAAP financial measures. ChromaDex believes the presentation of these non-GAAP financial measures provides important supplemental information to management and investors and enhances the overall understanding of the Company's historical and current financial operating performance. The Company believes disclosure of non-GAAP financial measures has substance because the excluded expenses are infrequent in nature, are variable in nature or do not represent current cash expenditures. Further, these non-GAAP financial measures are among the indicators the Company uses as a basis for evaluating the Company's financial performance as well as for planning and forecasting purposes. Accordingly, disclosure of these non-GAAP financial measures provides investors with the same information that management uses to understand the Company's economic performance year-over-year.

Adjusted EBITDA including legal expense and Adjusted EBITDA excluding legal expense are defined as net income before (a) interest, (b) depreciation, (c) amortization, (d) non-cash share-based compensation costs, (e) severance and restructuring expense (f) Other income from the Employee Retention Tax Credit and (g) legal expense (in the case of Adjusted EBITDA excluding legal expenses only). While ChromaDex believes that these non-GAAP financial measures provide useful supplemental information to investors, there are limitations associated with the use of these measures. These measures are not prepared in accordance with GAAP and may not be directly comparable to similarly titled measures of other companies due to potential differences in the method of calculation. Management compensates for these limitations by relying primarily on the Company's GAAP results and by using Adjusted EBITDA including legal expense and Adjusted EBITDA excluding expense only supplementally and by reviewing the reconciliation of the non-GAAP financial measure to its most comparable GAAP financial measure.

Non-GAAP financial measures are not in accordance with, or an alternative for, generally accepted accounting principles in the United States. The Company's non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures and should be read only in conjunction with the company's consolidated financial statements prepared in accordance with GAAP.


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