Second Quarter 2019 Highlights vs. Second Quarter 2018
- Strong growth in net sales to $11.1 million, significantly higher gross margins, and improved marketing efficiency year-over-year
- TRU NIAGEN net sales of $8.7 million, a 17% increase sequentially and a 134% increase year-over-year
- Global expansion continued with initial cross-border sales in China and Japan, and new Canadian retail distribution in Whole Foods Ontario locations
- New clinical study further demonstrated safety of sustained NIAGEN supplementation at recommended daily serving as well as statistically significant sustained blood NAD+ levels
LOS ANGELES, Aug. 07, 2019 — ChromaDex Corp. (NASDAQ:CDXC) today reported second quarter 2019 financial results.
“We successfully continue to build our global TRU NIAGEN brand and consequentially had another quarter strengthening our business momentum, economics and brand foundation,” said ChromaDex CEO Rob Fried.
Results of operations for the three months ended June 30, 2019
For the three months ended June 30, 2019 (“Q2 2019”), ChromaDex reported net sales of $11.1 million, up 42% compared to $7.8 million in the second quarter of 2018 (“Q2 2018”). The increase in Q2 2019 revenues was driven by growth in sales of TRU NIAGEN.
Gross margin increased by 700 basis points to 56.3% for Q2 2019 compared to 49.3% in Q2 2018. The increase in gross margin was driven by the positive impact of TRU NIAGEN consumer product sales.
Operating expenses increased by $1.7 million to $13.4 million in Q2 2019, compared to $11.8 million in Q2 2018. The increase in operating expenses was driven by an increase of $0.5 million of advertising and marketing and $1.3 million of general and administrative expense, partially offset by $0.3 million of lower R&D expense. The increase in general and administrative expense was driven by higher royalties to patent holders and higher legal expense.
The net loss for the second quarter of 2019 was $7.8 million or ($0.14) per share as compared to a net loss of $8.1 million or ($0.15) per share for the second quarter of 2018. For Q2 2019, the reported loss was negatively impacted by a non-cash charge of $1.8 million related to equity-based compensation and $0.6 million of costs related to the issuance of $10.0 million convertible notes to certain investors which were recorded as a debt discount and amortized as interest expense.
Adjusted EBITDA excluding total legal expense, a non-GAAP measure, was ($2.1) million for Q2 2019, compared to ($3.9) million for Q2 2018. Sequentially, Adjusted EBITDA excluding total legal expense improved by $0.6 million compared to ($2.7) million for the three months ended March 31, 2019. The $0.6 million improvement was primarily driven by higher gross margins and higher sales. Adjusted EBITDA excluding total legal expense for the three months ended December 31, 2018 and September 30, 2018 were ($4.0) million and ($4.3) million, respectively.
ChromaDex defines Adjusted EBITDA excluding total legal expense as net income or (loss) which is adjusted for interest, income tax, depreciation, amortization, non-cash stock compensation costs and total legal expense.
For the second quarter of 2019, the net cash used in operating activities was $9.0 million versus $6.5 million for the same period in the prior year. The Company ended the second quarter of 2019 with cash of $19.8 million, which includes the $10.0 million of proceeds from the issuance of convertible notes.
2019 Outlook
Looking forward, the Company expects revenue growth to be driven primarily by its U.S. ecommerce and Watsons international business, as well as the launch of TRU NIAGEN® with other distributors in certain new international markets. The Company expects continued gross margin improvement and lower selling, marketing and advertising as well as general and administrative expenses as a percentage of net sales.
Investor Conference Call
ChromaDex management will host an investor conference call to discuss the second quarter results and provide a general business update on Wednesday, August 7, at 4:30pm ET.
Participants should call in at least 10 minutes prior to the call. The dial-in information is as follows:
Date: Wed., August 7, 2019
Time: 4:30 p.m. Eastern time (1:30 p.m. Pacific time)
Toll-free dial-in number: 1-866-211-3191
International dial-in number: 1-647-689-6604
Conference ID: 3774159
Webcast link: ChromaDex Q2 2019 Earnings Conference Call
The conference call will be broadcast live and available for replay here and via the investor relations section of the Company’s website at www.chromadex.com.
A replay of the conference call will be available after 7:30 p.m. ET.
Toll-free replay number: 1-800-585-8367
International replay number: 1-416-621-4642
Replay ID: 3774159
The earnings press release, and its accompanying financial exhibits, will be available on the Investor Relations section of the Company website, www.chromadex.com.
About Non-GAAP Financial Measures:
ChromaDex’s non-GAAP financial measures exclude interest, income tax, depreciation, amortization, non-cash share-based compensation costs and total legal expense for adjusted EBITDA excluding total legal expense. ChromaDex used these non-GAAP measures when evaluating its financial results as well as for internal resource management, planning and forecasting purposes. These non-GAAP measures should not be viewed in isolation from or as a substitute for ChromaDex’s financial results in accordance with GAAP. Reconciliation of GAAP to non-GAAP measures are attached to this press release.
About ChromaDex:
ChromaDex Corp. is a science-based integrated nutraceutical company devoted to improving the way people age. ChromaDex scientists partner with leading universities and research institutions worldwide to uncover the full potential of NAD and identify and develop novel, science-based ingredients. Its flagship ingredient, NIAGEN® nicotinamide riboside, sold directly to consumers as TRU NIAGEN®, is backed with clinical and scientific research, as well as extensive IP protection. TRU NIAGEN® is helping the world AGE BETTER®. ChromaDex maintains a website at www.chromadex.com to which ChromaDex regularly posts copies of its press releases as well as additional and financial information about the Company.
Important Note on Forward Looking Statements:
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Such statements include the quotation from ChromaDex’s Chief Executive Officer, and statements related to future revenue growth being driven by ChromaDex’s U.S. ecommerce and Watsons’ international business, launching TRU NIAGEN in certain new international markets, the expectations of gross margin improvement, and the expectations of lower selling, marketing and advertising expenses and lower general and administrative expenses as a percentage of net sales. Other risks that contribute to the uncertain nature of the forward-looking statements are reported in our most recent Forms 10-Q and 10-K 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.
ChromaDex Investor Relations Contact:
Brianna Gerber, Sr. Director of FP&A and Investor Relations
949-419-0288 ext. 127
ChromaDex Media Contact:
Alex Worsham, Director of Strategic Partnerships
310-388-6706 ext. 689
ChromaDex Corporation
| ChromaDex Corporation and Subsidiaries | |||||||
| Condensed Consolidated Statements of Operations | |||||||
| For the Three Month Periods Ended June 30, 2019 and June 30, 2018 | |||||||
| (In thousands, except per share data) | |||||||
| June 30, 2019 | June 30, 2018 | ||||||
| Sales, net | $ | 11,101 | $ | 7,803 | |||
| Cost of sales | 4,847 | 3,957 | |||||
| Gross profit | 6,254 | 3,846 | |||||
| Operating expenses: | |||||||
| Sales and marketing | 4,308 | 3,773 | |||||
| Research and development | 1,069 | 1,414 | |||||
| General and administrative | 7,932 | 6,596 | |||||
| Other | 125 | – | |||||
| Operating expenses | 13,434 | 11,783 | |||||
| Operating loss | (7,180 | ) | (7,937 | ) | |||
| Nonoperating income (expense): | |||||||
| Interest expense, net | (575 | ) | (48 | ) | |||
| Other | – | (65 | ) | ||||
| Nonoperating income (expense): | (575 | ) | (113 | ) | |||
| Net loss | $ | (7,755 | ) | $ | (8,050 | ) | |
| Basic and diluted loss per common share | $ | (0.14 | ) | $ | (0.15 | ) | |
| Basic and diluted weighted average common shares outstanding | 55,539 | 54,892 | |||||
See Notes to Condensed Consolidated Financial Statements in Part I of ChromaDex’s Quarterly Report on Form 10-Q filed with Securities and Exchange Commission on August 7, 2019.
| ChromaDex Corporation and Subsidiaries | |||||||
| Condensed Consolidated Balance Sheets | |||||||
| June 30, 2019 and December 31, 2018 | |||||||
| (In thousands, except per share data) | |||||||
| Jun. 30, 2019 | Dec. 31, 2018 | ||||||
| Assets | |||||||
| Current Assets | |||||||
| Cash, including restricted cash of $0.2 million and $0.2 million, respectively | $ | 19,760 | $ | 22,616 | |||
| Trade receivables, net of allowances of $0.5 million and $0.5 million, respectively; | |||||||
| Receivables from Related Party: $1.6 million and $0.7 million, respectively | 5,740 | 4,359 | |||||
| Contract assets | 52 | 56 | |||||
| Receivable held at escrow, net of allowance of $0.2 million and $0.1 million, respectively | 553 | 677 | |||||
| Inventories | 10,714 | 8,249 | |||||
| Prepaid expenses and other assets | 706 | 577 | |||||
| Total current assets | 37,525 | 36,534 | |||||
| Leasehold Improvements and Equipment, net | 3,737 | 3,585 | |||||
| Intangible Assets, net | 1,434 | 1,547 | |||||
| Right of Use Assets | 1,190 | – | |||||
| Other Long-term Assets | 656 | 566 | |||||
| Total assets | $ | 44,542 | $ | 42,232 | |||
| Liabilities and Stockholders’ Equity | |||||||
| Current Liabilities | |||||||
| Accounts payable | $ | 9,323 | $ | 9,548 | |||
| Accrued expenses | 3,643 | 4,444 | |||||
| Convertible notes | 9,987 | – | |||||
| Current maturities of operating lease obligations | 662 | – | |||||
| Current maturities of finance lease obligations | 303 | 173 | |||||
| Contract liabilities and customer deposits | 293 | 275 | |||||
| Total current liabilities | 24,211 | 14,440 | |||||
| Deferred Revenue | 3,873 | – | |||||
| Operating Lease Obligations, Less Current Maturities | 1,192 | – | |||||
| Finance Lease Obligations, Less Current Maturities | 121 | 137 | |||||
| Deferred Rent | – | 477 | |||||
| Total liabilities | 29,397 | 15,054 | |||||
| Commitments and Contingencies | |||||||
| Stockholders’ Equity | |||||||
| Common stock, $.001 par value; authorized 150,000 shares; | |||||||
| issued and outstanding June 30, 2019 55,384 shares and | |||||||
| December 31, 2018 55,089 shares | 55 | 55 | |||||
| Additional paid-in capital | 120,935 | 116,876 | |||||
| Accumulated deficit | (105,845 | ) | (89,753 | ) | |||
| Total stockholders’ equity | 15,145 | 27,178 | |||||
| Total liabilities and stockholders’ equity | $ | 44,542 | $ | 42,232 | |||
See Notes to Condensed Consolidated Financial Statements in Part I of ChromaDex’s Quarterly Report on Form 10-Q filed with Securities and Exchange Commission on August 7, 2019.
| ChromaDex Corporation and Subsidiaries | ||||||||||||||||||
| Reconciliation of Non-GAAP Financial Measures | ||||||||||||||||||
| (In thousands) | ||||||||||||||||||
| Three months ended | ||||||||||||||||||
| Mar. 31, 2018 | Jun. 30, 2018 | Sep. 30, 2018 | Dec. 31, 2018 | Mar. 31, 2019 | Jun. 30, 2019 | |||||||||||||
| Net loss, as reported | $ | (8,443 | ) | $ | (8,050 | ) | $ | (8,605 | ) | $ | (8,218 | ) | $ | (8,337 | ) | $ | (7,755 | ) |
| Adjustments: | ||||||||||||||||||
| Interest (income) expense | 44 | 48 | 9 | (22 | ) | (35 | ) | 575 | ||||||||||
| Depreciation | 121 | 146 | 169 | 171 | 173 | 190 | ||||||||||||
| Amortization of intangibles | 58 | 58 | 59 | 60 | 61 | 61 | ||||||||||||
| Amortization of right of use assets | – | – | – | – | 138 | 141 | ||||||||||||
| Share-based compensation | 1,258 | 1,811 | 1,317 | 1,985 | 2,029 | 1,759 | ||||||||||||
| Adjusted EBITDA | $ | (6,962 | ) | $ | (5,987 | ) | $ | (7,051 | ) | $ | (6,024 | ) | $ | (5,971 | ) | $ | (5,029 | ) |
| Total legal expense | 2,973 | 2,079 | 2,723 | 2,045 | 3,250 | 2,926 | ||||||||||||
| Adjusted EBITDA excluding total legal expense | $ | (3,989 | ) | $ | (3,908 | ) | $ | (4,328 | ) | $ | (3,979 | ) | $ | (2,721 | ) | $ | (2,103 | ) |
