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This transcript is designed to be used alongside the freely available audio recording on this page. Timestamps within the transcript are designed to help you navigate the audio should the corresponding text be unclear. The machine-assisted output provided is partly edited and is designed as a guide.: Operator: 00:03 Ladies and gentlemen, thank you for standing by, and welcome to ChromaDex Corporation's Fourth Quarter 2021 Earnings Conference Call. My name is Josh, 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 fourth 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. 00:38 I would now like to turn the conference call over to Brianna Gerber, Vice President of Finance and Investor Relations. Please go ahead, Ms. Gerber. Brianna Gerber: 00:48 Thank you. Good afternoon, and welcome to ChromaDex Corporation's fourth quarter 2021 results investor call. With us today are ChromaDex's Chief Executive Officer, Rob Fried; Chief Financial Officer, Kevin Farr; and Senior Vice President of Scientific and Regulatory Affairs Dr. Andrew Shao. 01:08 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 Tru Niagen 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. 01:38 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. 02:05 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 statements, actual results or to changes in its expectations. 02:32 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 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. 03:02 With that, it's now my pleasure to turn the call over to our Chief Executive Officer, Rob Fried. Rob? Rob Fried: 03:08 Thank you, Brianna. Good afternoon, everyone and thank you for joining our fourth quarter 2021 investor call. In 2021, ChromaDex achieved several important strategic milestones. We launched Tru Niagen in 3,800 Walmart stores. Our first mass retail launch in the United States. We also partnered with Sinopharm Xingsha, a subsidiary of one of China's largest pharmaceutical companies to help grow our Tru Niagen cross-border business, and to collaborate in securing health food registration in China. 03:46 We signed agreements with new strategic partners H&H Group and Ro to help build the Niagen ingredient business with their unique customer base, and we announced results of the study on NR supplementation in children with Ataxia, an orphan disease characterized by premature aging. We believe this is further evidence of Niagen's potential impact on age-related health declines. This strategic momentum has continued in early 2022. 04:16 Our ChromaDex External Research Program or CERP achieved its 100 published peer-reviewed study on Niagen and other ingredients. This milestone was followed by a first of its kind study on Parkinson's disease patients, which was another data point supporting NR's positive impact on neurodegenerative diseases. A Phase II study is currently underway, which will explore these findings in a larger patient population. 04:45 And finally, we were granted an important new U.S. continuation patents that significantly reinforces ChromaDex's intellectual property portfolio. We now have over 40 patents on NR and other NAD precursors. This particular patent adds protection of the manufacturing process of NR and its various salt forms through 2037. While many of these achievements position the company for growth in 2022 and beyond, we also delivered solid financial performance in 2021. 05:19 Full year net sales were $67.4 million, a 14% increase year-over-year. Tru Niagen net sales were $56.7 million, a 20% increase year-over-year. And our gross margins were 61.5%, a 200 basis point increase versus last year, despite a very challenging global supply chain environment. As I said, last quarter, I believe we're at an inflection point for this company with litigation largely behind us. We are already devoting more resources, both human and financial, to building our Tru Niagen brand and developing our science and furthering our relationships with global partners. 05:58 In the fourth quarter of 2021, total legal expense declined significantly to $1.6 million, which allowed for reinvestment in brand building, as well as improvements in profitability on a reported basis. Our total operating loss was $5.3 million in the fourth quarter of 2021, compared to $8.8 million in the third quarter. In the fourth quarter, we tested television advertising with our existing Shannon Sharpe spot to help shape our plans for 2022, and I'm excited to announce that one of our new TV commercials begins very nationally in March. 06:32 While the Shannon Sharpe ad was targeted at a primarily male disoriented audience, our new commercial is intended to educate a broader group of potential consumers about the benefits of taking Tru Niagen. We'll share more as we scale this campaign and others to support our e-commerce business, as well as improve brand awareness at Walmart. As I said, the recent scientific developments on Niagen has been significant and continue to validate the tremendous market opportunity for this ingredient. 06:58 Specifically, several studies have shown the tissues and complex organs such as the heart and brain are heavily dependent on NAD. Not a coincidence that these metabolically demanding tissues are the ones we are most concerned about as we age. We now have 20 completed and published clinical trials involving Niagen and more than 40 additional studies underway. Our focus going forward is to translate this extensive and growing body of science into compelling marketing messages including ageing, heart health, muscle health, cellular health and others. 07:33 We're beginning to test benefit specific messages in our marketing materials with encouraging results. For example, we designed an email and social media campaign highlighting the scientific research behind NR and heart health in February to align with American Heart Month. In addition, we're launching a new Tru Niagen product this year to broaden our customer base by targeting another important benefit area. I'm excited to share more once it's in the market. 08:01 And finally, I'd like to highlight our new strategic partner Designs for Health and give a brief update on Sinopharm. Designs for Health sales premium dietary supplements built extensive health care practitioner network in the U.S. They will offer specifically formulated products with Niagen exclusively to these HCPs. ChromaDex and Designs for Health share a similar philosophy. Both companies are rooted in science and sell research driven evidence-based products. 08:28 The health care practitioner channel strategic for ChromaDex to build awareness of Niagen. These practitioners play a pivotal role in educating consumers on the importance of NAD and providing science-backed solutions. Designs for Health will complement our internal sales team and help us leverage the tremendous body of preclinical and clinical research on this amazing ingredient. 08:49 Last quarter, I discussed the tremendous opportunity in China with our new partner Sinopharm. We've been very impressed with their deep knowledge of the local market. They shared detailed marketing plans for Tru Niagen as well as insight into the large and growing end amend market in China, a far less sufficient and NAD precursor with much less science than Niagen. We're finalizing the commercial plans and the supply agreement Sinopharm for initial cross-border sales, as well as our approach to pursuing Blue Hat approval in parallel. 09:21 All of our new partnerships in various stages of product development, but we expect them to contribute to increased sales in 2022. In addition, for established relationships like Nestle, we are in discussions about how to make the partnerships more impactful over time. As I reflect on this quarter, and on 2021 in general, I'm incredibly proud of our entire team's execution and more confident than ever about the market opportunity for Tru Niagen. I'd like to thank our loyal shareholders, partners, employees and customers as we enter this next phase of growth. 09:56 And now I'll pass the call to Andrew Shao, our Senior Vice President of Scientific and Regulatory Affairs to share more about the strategic importance of our industry-leading CERP program, as well as the growing body of exciting research on Niagen. Andrew? Andrew Shao: 10:13 Thank you, Rob. It a pleasure to speak to you all today. I joined ChromaDex about two and a half years ago, and served as the Senior Vice President of Global Scientific and Regulatory Affairs. During my time here, I've been incredibly impressed by the company's deep committed to the science behind NR and other NAD precursors, as we build a trusted consumer brand Tru Niagen. 10:37 Prior to ChromaDex, I spent nearly two decades in the global nutrition industry, leading similar functions for organizations such as the Council for Responsible Nutrition and Herbalife Nutrition. Rob asked me to join today's earnings call to provide some perspective on the ChromaDex External Research Program or CERP which was started by our Co-Founder and Executive Chairman Frank Jaksch in 2013, and is now led by Dr. Yasmeen Nkrumah-Elie. Thanks to Frank's vision, ChromaDex is a pioneer in the industry and Yasmeen has brought great focus and passion to accelerate CERP's mission. 11:19 To-date, CERP has accumulated more than 245 collaborative agreements with over 170 institutions in 33 countries, representing over $85 million in estimated total research value. Over 90% of studies are investigator-initiated and third-party funded. Our innovative approach results in greater trust in research as skepticism of industry funded research has been a challenge in the dietary supplement industry. It's an exciting time for CERP which recently celebrated its 100 peer-reviewed publication on Niagen and other ingredients. 12:01 To-date, the program has produced more than 45% of all peer-reviewed publications and 70% of the peer-reviewed clinical publications involving NR, and this is a remarkable milestone for an ingredient like ours. Most of the research going through CERP is advancing the science of NAD and NR well beyond the scope of the dietary supplement industry. We're honored to provide the highest quality material to propel science forward and build academia industry relationships. Of course, the milestones that CERP has achieved would not have been possible without all the CERP investigators, their respective institutions and funding partners. We are grateful for their contributions and look forward to many more future research opportunities. 12:49 I'll briefly highlight two exciting clinical NR studies that were published since our last update. In January, a study that investigated the anti-inflammatory effects of NR in monocytes, type of white blood cell extracted from two groups, young, healthy subjects and patients diagnosed with systemic lupus erythematosus was published in the Journal of Clinical Investigation. This team, led by Dr. Michael Sack, demonstrated that increasing NAD levels through NR supplementation reduced Type I interferon signaling, which plays an important role in the human immune response. 13:33 The results from this pilot study are promising. However, more research is needed to understand the implications of NR supplementation for patients with autoimmune disorders like lupus. We look forward to supporting the next phases of this important research through CERP. And just last week, a Phase 1 study showed NR supplementation significantly increased cerebral NAD levels, improved some measures of motor function and decreased inflammatory cytokines in Parkinson's disease or PD patients. Abnormal energy metabolism due to mitochondrial dysfunction has been linked to PD, which affects more than 10 million people worldwide and is believed to play a role in the initiation and progression of the disease. 14:23 This study assessed NR as a potential therapeutic strategy for targeting mitochondrial function and energy metabolism in PD patients. This study builds upon previous preclinical studies exploring the positive impact of NR on neurodegenerative diseases. It is an encouraging step forward for Parkinson's research. We look forward to further research aimed at understanding the role of NR supplementation in Parkinson's patients. The second study is already underway by the same group of researchers. We've learned a great deal about NR and NAD since CERP began in 2013. 15:07 Importantly, the growing body of evidence suggests with great consistency, that metabolic active tissues are heavily NAD dependent since they require a lot of energy to function normally, particularly when exposed to stress. This includes the brain, muscle, heart, liver and skin among others. Their function tends to be compromised with age, as well as the disruption to the NAD system, which highlights the importance of maintaining NAD levels. 15:39 In 2021, we saw a shift in the number of CERP agreements from predominantly preclinical to predominantly clinical. There is great scientific interest in NR and we anticipate learning more about the role of NR and NAD in human health over the next few years. We look forward to translating the growing body of research into new claims for Niagen so that more consumers can understand the benefits of this amazing ingredient. 16:09 With that, I will pass the call on to our Chief Financial Officer, Kevin Farr. Kevin? Kevin Farr: 16:17 Thank you, Andrew. ChromaDex delivered on or exceeded our latest full year 2021 financial outlook to investors across all metrics. For the year, we delivered total net sales of $67.4 million, a 14% year-over-year increase with strong growth in Tru Niagen of 20%, including 21% growth in e-commerce. 16:41 Gross margins of 61.5%, up approximately 200 basis points year-over-year as scale, product mix and cost saving initiatives more than offset inflationary pressures across global supply chains. Roughly flat R&D expense as a percentage of net sales as we funded investments in new NAD precursor development. Higher selling and marketing expense as a percentage of net sales as we invested in brand building activities, and a slight decrease in general and administrative expense versus our outlook of a slight increase as we tightly managed cost. 17:18 The underlying business as measured by adjusted EBITDA excluding legal expense, a non-GAAP metric, posted a full year loss of $2.5 million compared to a loss of $1 million in full year 2020. The increased loss year-over-year was primarily driven by increased brand investments in marketing to position us for 2022 and beyond. This has been a key metric for the organization. However, with the significant litigation expense behind us, we'll be focusing on adjusted EBITDA including legal expense going forward as a proxy for cash used before working capital investments. We've provided a reconciliation to the appropriate GAAP measures in our earnings release slides. 18:04 Turning to the highlights from the fourth quarter of 2021, ChromaDex delivered a solid quarter with total net sales of $17.8 million, up 15% year-over-year and a gross margin of 61.2%. The underlying business as measured by adjusted EBITDA, excluding legal expense, a non-GAAP measure posted a loss of $1.8 million in the fourth quarter. As I said on our last earnings call, with the significant litigation behind us, we are prioritizing investments in new brand campaigns to drive overall growth and brand awareness at Walmart. 18:42 As Rob said, our new Tru Niagen commercial will be soon be airing on national TV. Given the current macroeconomic environment, we expect to scale this new brand campaign in a pragmatic fashion in 2022. We'll be looking at leading indicators of success and adjust spending accordingly. 19:01 I'll begin by reviewing the sequential P&L results and then we'll discuss the year-over-year trends. For the three months ended December 31, 2021, ChromaDex reported net sales of $17.8 million, up 3% compared to the $17.3 million in the third quarter of 2021. Tru Niagen net sales were down 5% sequentially. 19:27 Our sales to Monte Cana were impacted by COVID-19 restrictions in Australia that delayed the rollout into more than 2,000 pharmacies. While Australia, and more recently, New Zealand, continue to face significant COVID-19 headwinds, we expect Tru Niagen sales to Monte Cana on to resume once restrictions are lifted. As expected, Watsons sales were $2.2 million this quarter compared to $2.6 million in the third quarter, which included the final catch up and shipments from the first quarter supply chain disruptions. 20:01 While we have seen some signs of improvement in sell-through as the Hong Kong economy recovers from the impact to COVID-19, the recovery has not been steady. Watsons store traffic is still down year-over-year and sales from Chinese tourism and local resident traffic have yet to return to pre-COVID levels. We believe this is due to local COVID-19 movement restrictions and social distancing measures and travel restrictions. And most recently the Omnicare variant is having a significant impact on Hong Kong residents which may remain a headwind in 2022. 20:37 In the fourth quarter, we partnered with Watsons and marketing campaigns and staff incentive programs to drive higher sell-through. We're evaluating similar programs to support sell-through in 2022 where they manage through these COVID-19 related headwinds. For Watsons sales to continue to grow we need sell-through to return to pre-COVID levels. Our e-commerce business was up 6% sequentially. As we said, the fourth quarter is seasonally strong, driven by promotions in the U.S. and China with Singles' Day on 11/11 and 12/12. We continue to see steady growth in the underlying business. 21:17 Our Niagen ingredient sales were up 53% versus the prior quarter, driven by sales to life extension and a shipment to H&H Group. While our expectation is that H&H will not launch in the first quarter of 2022 as previously communicated, our R&D team continues to work closely with H&H on the new product formulation. H&H remains excited about the potential of Niagen. There were no Niagen ingredient sales at Nestle this quarter. 21:47 Our gross margins were up slightly to 61.2% in the fourth quarter of 2021 versus 61.1% in the third quarter of 2021. Total operating expense for the fourth quarter of 2021 were $16.2 million, down $3.2 million compared to the third quarter of 2021. Selling and marketing expense increased to $8.6 million in the fourth quarter of 2021 compared to $7.2 million in the third quarter of 2021. As a percentage of net sales, this expenditure was up 700 basis points in the fourth quarter of 2021 versus the third quarter of 2021. 22:27 We continue to see higher costs for new customer acquisitions driven by broader industry trends, including changes in Apple's iOS that are impacting advertising, costs and efficiencies primarily on social channels as well as search. In addition, we've invested more on top of the funnel brand advertising that does not immediately drive conversion. This included incremental spending on television advertising as we tested networks and time slots ahead of our new brand campaign rollout. We've also tested top of the funnel investments in Amazon, including streaming television on their platform and tools to prospect a broader audience of consumers across other supplement categories. 23:12 For full year 2022, we plan to continue our investment in television, but are reducing spend in other areas that proved to be less efficient at driving new customer conversion in the fourth quarter. We have begun to see an improvement in cost per acquisition, especially in search in the first quarter of 2022. As reported, G&A expense was down $4.7 million to $6.5 million in the fourth quarter of 2021 versus the $11.2 million in the third quarter of 2021. 23:44 Legal expense was down by $4 million compared to the third quarter of 2021 to $1.6 million in the fourth quarter of 2021. As expected, we incurred baseline legal expense of approximately $1 million in the quarter as well as nominal expense related to post-trial motions in the California relegation costs related to the Delaware appeal and to the Thorne IPR. 24:10 Importantly, this significant reduction in legal expense allowed us to reinvest in the top of the funnel brand building initiatives that I mentioned earlier, while dropping some of the savings to the bottom line. Excluding legal fees, severance, restructuring and equity compensation expense, fourth quarter 2021 G&A expense was lower by $0.1 million versus third quarter 2021 comparable G&A expense. 24:38 For the fourth quarter of 2021, our operating loss was $5.3 million versus $8.8 million in the third quarter of 2021. The net loss attributable common stockholders for the fourth quarter of 2021 was $5.3 million or a loss of $0.08 per share as compared to a net loss of $8.9 million or a loss of $0.13 per share for the third quarter of 2021. 25:05 Moving to the year-over-year financial results. Total net sales were up 15% year-over-year compared to the fourth quarter of 2021, with 14% growth in Tru Niagen, including 17% growth in e-commerce and a 5% growth in combined Watsons and other B2B sales. Our Niagen ingredient, net sales were up 14% year-over-year despite the loss of a key customer, which represented approximately $500,000 of sales in the fourth quarter of 2020. 25:39 Gross margin increased by 20 basis points to 61.2% compared to 61% in the fourth quarter of 2020. Selling and marketing expense as a percentage of net sales increased 780 basis points to 48,7% compared to 40.9% in the fourth quarter of 2020. The drivers of this year-over-year increase were similar to the sequential drivers I discussed earlier. 26:02 As reported, general and administrative expense was lower by $1.8 million, primarily due to lower legal spend of $0.8 million. Finally, our operating loss improved by $0.8 million year-over-year as higher sales and gross margins and cost savings across the organization were partly offset by investments in selling and marketing. 26:27 Moving to the balance sheet and cash flow. Our balance sheet remains strong. We ended the quarter with $28.2 million in cash, and we did not access our committed line of credit. In the fourth quarter of 2021, our net cash used in operations was a negative $4.9 million versus a negative $5.9 million use of cash in the third quarter of 2021. The difference in this quarter was primarily driven by lower net loss, partially offset by an increase in inventory, a decrease in accounts payable due to the timing of payments to our vendors, as well as changes in accounts receivable due to the timing of collections from our B2B customers. 27:10 As it relates to our 2022 full year outlook, we provided details on key P&L metrics in our earnings press release along with the slide presentation. Consistent with our prior year outlook, we expect to invest in marketing, brand awareness, customer acquisition and R&D to maintain our position as the leader in the growing NAD plus market. Recognizing the uncertain macroeconomic backdrop, we're balancing these long-term growth investments with near-term sales and profitability objectives. 27:46 As it relates to the full year 2022 net sales, we expect around 15% to 20% growth year-over-year. In terms of tailwinds, we expect continued growth in e-commerce as well as more meaningful revenue contribution in aggregate from our new partners in 2021 and Designs for Health in early 2022. We could see continue to headwinds from COVID-19 for several B2B partners, including Watsons in Hong Kong and Singapore and Monte Cana in Australia and New Zealand. 28:20 The timing of a more steady consistent sales growth with these partners is challenging as a result of COVID-19 but we're working closely with them to navigate the challenging environment. Our outlook only includes revenue from existing partnerships and excludes any upsides from potential new partnerships in the pipeline. We're targeting gross margins of slightly better than 60%, similar to last year. We expect to continue to supply chain cost savings initiatives and scale will offset the inflationary pressure we're currently experiencing across our global supply chain. 28:56 We expect that selling and marketing expense will be down slightly as a percentage of net sales on a full year basis, although there may be quarterly volatility driven by the timing of campaigns and tests. We expect that R&D will be up approximately $2 million as we invest in new NAD precursor development related to our recently granted patent among others. Finally, we expect that reported G&A will be down $5 million to $6 million, driven by a significant reduction in legal expense, partially offset by investments in information technology and head count and key functional areas to support growth. And we have enough cash to fund the growth objectives of the company, and we'll continue to invest pragmatically. 29:42 In summary, I'm very proud of how the company continues to execute balancing the long-term market opportunity with near-term revenue growth and profitability objectives. As Rob has said, we're at an inflection point with litigation behind us and I'm excited for the next phase of realizing Tru Niagen's true potential. 30:01 Operator, we're now ready to take questions. Operator: 30:07 [Operator Instructions] Your first question comes from the line of Jeffrey Cohen with Ladenburg Thalmann. Your line is open. Jeffrey Cohen: 30:20 Hi, Rob, Andrew, and Kevin. How are you? Andrew Shao: 30:24 Hey, Jeff. Rob Fried: 30:25 Good, Jeff. Kevin Farr: 30:24 Hello. Jeffrey Cohen: 30:26 So I guess my question initially is for Andrew. Andrew, thank you for the walkthrough on the CERP programs. I wonder if you could talk about marketing claims and outcomes on work that's being done now and how could that slip into the markets for NR? Andrew Shao: 30:50 Hi, Jeff. Thank you for your question. So, the way we look at substantiating claims is to take the total body of evidence that's available. So that would include, obviously studies that come through CERP, and other studies that are identified in the literature. We look at the whole body of evidence to support claims. Obviously, clinical studies carry the most weight as part of that effort, and we do look to CERP studies as the main source of those clinical studies to inform decisions that we make on claims. As you know, a number of those studies involve disease related outcomes, disease patients and so forth, and of course selling a dietary supplement. We don't use those studies directly to make disease claims. We're not allowed to do that, we're not permitted to do that. But those studies of course give us great insights into how Niagen is affecting the body normally, normal function, how -- normally how NAD affects the function of different organs and different systems. So, we really look at it very holistically in using those studies to try to generate and support claims. That's kind of a general answer to your question. I'm not sure if you had a question about a specific study. Jeffrey Cohen: 32:22 No, that's actually perfect, Andrew. Thank you very much. And as my follow-up, a couple, Kevin, if you could talk about the Q4 legal expense and what do you anticipate as legal for '22, and then also with that, just remind us if margins do or do not include outbound freight, and if that's going to be impacting margins or if you're measuring that from your margin number? Thank you. Kevin Farr: 32:51 Yeah, I think as we went into the fourth quarter, we saw legal expense drop. We were doing pre-motion judgments before the judgment. So, we did have some legal expense. But we continue to expect in 2022 that the majority of legal spending with regard to litigation is behind us. We continue to expect that baseline legal expense which consists primarily of patents, general corporate and internal headcount will be around $4 million in 2022. That's more or less divided by four, and that's probably quarterly. In addition to the baseline expense, ongoing litigation expense, including New York case, Delaware appeal, the Thorne IPR and rejuvenation litigation should each cost less than $1 million. However, the timing and magnitude of litigation expense is more difficult to predict. We do expect in the first quarter of 2022 litigation expense will be the highest expense due to the ongoing expense related to motions of pre-judgment interest in California, the Delaware appeal and the Thorne IPR. 34:05 Litigation expense should decline after that in the balance of the year. And we'll continue to look for where we can optimize these budgets, include outstanding litigation, and we recently filed a motion in New York District Court and forced $2.5 million settlement that was agreed to by Elysium Health. The details of this are publicly filed with the court. And with regard to our gross margin projection for 2022 of slightly above 60%. Again, I think we are factoring in what we see is inflation in the cost of freight and others, but we also have -- with regard to gross margins, we have aggressively been pursuing initiatives to maintain our strong gross margin. It was mainly driven by continued supply chain cost savings initiatives, leveraging overall scale of the business and favorable mix that partially or fully offset inflationary pressures across global supply chain. We did buy some component parts early, like glass bottles and others, in 2021, so we won't see inflationary on some of the component parts until late in the year. We're also considering price increases if inflation remains persistently high. Jeffrey Cohen: 35:31 Super. Thanks for taking our questions. Kevin Farr: 35:35 You're welcome. Operator: 35:37 Your next question comes from the line of Mitch Pinheiro with Sturdivant & Co. Your line is open. Mitchell Pinheiro: 35:44 Yeah. Hey, good afternoon. I guess my first question is, I'm looking at your 2022 sales guidance, while 15% to 20% is nice, it is below what I'm looking for. I think I imagine consensus. And I understand some of the, sort of the global headwinds, but as you just look here in North America and United States, shouldn't that be able to do -- support a mid-20% growth, and then whether everything else sort of fall in where it does. it just seems like it's -- are you being conservative in your initial outlook here, or is -- just sort expect the e-commerce in the United States to have much stronger 2022? Can you talk about that a little bit? Kevin Farr: 36:46 Yeah, let me, let me start and Rob, feel free to add in. I think as you know, in the fourth quarter of 2021 we're gearing up accelerated investments in TV in early 2022. And we are not tone deaf, so I think with regard to the macroeconomic environment has changed significantly since then, including geopolitical instability and increased COVID-19 headwinds in certain countries. And also, there are industry headwinds due to changes in the Apple iOS are impacting bottom of funnel conversion. As such, we're taking a more measured approach to investments in our TV campaign and other growth initiatives versus leaning into these headwinds, early in 2022. Would you like to add anything to that, Rob? Rob Fried: 37:32 Yeah, I think, Kevin, that covers it. That's the reality, there have been a lot of changes of late. The big one is that iOS algorithm change, with regard to e-commerce. So, what you're seeing is higher customer acquisition costs across the board in digital marketing, in Search, in social, and in influencer campaigns. So even though we're seeing growth and we're seeing lots of new customer acquisition, last few months, it's gotten more expensive. At the same time, we are starting to advertise more on television. So, we increased our television advertising in the fourth quarter with the Shannon Sharpe ad, and now we've shot a new ad, which is sort of a more broader appeal ad that I think more targets the Walmart consumer, and that's going to be launched shortly. But we're expecting -- we think that the market is still really -- we know the market is really huge out there for what we offer. We expect to continue to grow. We think costs -- marketing costs might be slightly more expensive in the coming months until there is a shift. So yes, it is conservative. And yes, it is a very measured, and as Kevin likes to say, pragmatic approach to our investments for growth. 38:47 What we still continue to have is excellent retention. The people who buy Tru Niagen and take Tru Niagen keep taking and buying Tru Niagen. The retention numbers continue to look extremely solid. Amazon has indicated to us that they think we are the -- have the highest retention of any dietary supplement that they sell. And we see that kind of support on our website as well. And we know we see that in the other channels that we see. But we're seeing on the macroeconomic environment, increased cost, increase inflation, increased cost of media, so we're taking a measured and conservative approach to how we look at the year. I still expect that -- and we have research that shows that the number one reason why people take Tru Niagen is actually not because of advertising, it's because word of mouth. 39:50 They heard about it from a friend who is taking it. This is why we think a study like the Parkinson's study could be very valuable to us. We know we can't make a Parkinson's claim, we know that it doesn't leave, as Jeff asked, into a direct marketing claim that we can make, because it's a disease state. The people who have Parkinson's disease are really looking for answers and looking for solutions, and it's our hope that they eventually read these studies and try it and take it for a period of time and if they see a benefit like we hope they see, they talk about it to others. So it's our expectation. And by the way, this is part of the reason why we did the Designs for Health deal so that takes a communicate with the healthcare practitioners and experts. We still expect that a tipping point is going to be hit on Tru Niagen where it goes from good solid growth to explosive growth. It's just impossible to anticipate when that's actually going to happen. Mitchell Pinheiro: 40:46Yeah. I mean it just seems that certainly, the momentum by -- behind the science is far stronger than the momentum behind the awareness, consumer awareness. And I mean, this has been a tough couple of years, obviously, to be -- to operate in, but you would just think there'd be a little stronger response to the research, and hopefully your TV campaign can address that. My one question is with Shannon Sharpe's TV ad, I mean are you -- I mean is that -- are you getting satisfactory returns in that? Like where that would be a baseline, or are you not happy with like that type of ad and you have to go a different direction. Rob Fried: 41:52 No, the marketing department has told us that the -- those ads has actually played quite well. And we've used those ads in the past, and they played quite well. So, we expect to continue to use the Shannon Sharpe ad. It's just a more specific cohort group. What we're thinking now is that we could go much broader than just sort of a male fitness sports related cohort. We think it's a much broader based market than that, and this new campaign is targeting a wider audience. But we still intend to use Shannon in sports and other territories. I also agree with you. I think that the science continues to be amazing. I mean, as Andrew was saying, we're now seeing a spate of published peer-reviewed clinical studies showing that Niagen works on a whole host of age-related issues and disorders. So, and yet the awareness is still not that great. The problem we have is you can't make a claim. So, your question was right on the dot. Science comes out, but you have to be very careful about how you promote it. So, we have to be -- we're very careful, we're very measured, we're very conservative in the way we promote it, and we just take it one step at a time until it hits that tipping point. Kevin Farr: 43:09 Yeah, Mitch, and I think it's more than just the TV spot. We've developed, tested a simplified message to articulate the benefits of Tru Niagen in a 30 second TV spot, but more broadly, we're doing Tru brand building which requires bringing together a holistic plan that includes communication and consumer education, including our new TV campaign, the loyalty or brand ambassador program that incentivizes our most engaging customers to recommend Tru Niagen, and an expanded portfolio that caters to different consumer needs, and Rob referred to that product portfolio. We're also in various stages of implementing these initiatives, but they are a roadmap for 2022. We expect to see accelerated growth exiting 2022 when all of this is in place. Mitchell Pinheiro: 44:01 If you were looking for why you would have upside to the current sales forecast, what are the couple of key things that you're going to have look -- see to do better than your current forecast? What do you think they are? Rob Fried: 44:23 There are a number of things that could happen, that could make it go from 15%, 20% growth to the multiples of that. And buying it, paying for it, doing a large campaign is one, but it isn't necessarily the most cost efficient way to do it. We are -- as you know, we make deals with a number of partners. We have partnered with Ro, we have H&H, we have Nestle, we have Sino, any one of those deals could yield. We could make more deals like that, we could expand into other categories like pet nutrition, infant nutrition, and there could be an -- it's very difficult to understand publicity and viral activity and when a product goes from well-known to talked about at every dinner table. You can't force that. It's very difficult to know when word of mouth just catches and it takes off. But we feel that we're pretty close to that. So, it's just the right people saying -- the right influencers saying the right thing at the right time to the right people and we know the product works. So, it's very -- that's really what happened in Hong Kong a few years ago. There was -- sales were very good in Hong Kong, but then there was an influencer who independently posted a video on his personal experience taking Tru Niagen. That's when sales exploded in Hong Kong. 45:56 We are waiting for that to happen here, but you have to be very careful about trying to make that happen because you can't make claims. So that's another thing that could happen, that could create explosive growth. And then of course the TV campaign itself. I mean, as Kevin said, we're going to be measured and careful about it, but it may just very well work. We have a new marketing department at the company that have been added for only 10 or 11 months, but it's there. An excellent team. They do a lot of research, they're very thoughtful, they're very careful, they're taking it one step at a time, they put a lot of time and energy into the script of the spot and they've tested the spot. It's not the only spot, they're going to be producing other spots behind it. But we expect -- we have high hopes that it will succeed. But we're still creating very conservative expectations for how it will succeed. Mitchell Pinheiro: 46:48 And just last question, my... Kevin Farr: 46:49 Sorry, I was just going to add to that. Mitchell Pinheiro: 46:53 I'm sorry. Go ahead. Kevin Farr: 46:54 No, I'm just going to indicate that, look, we're seeing, again, COVID impacting our businesses in places like New Zealand and Australia, and consumer takeaway in Hong Kong. So that -- if that basically dies down for consistent amount of time, that could help us too to hit the higher end of the range. Mitchell Pinheiro: 47:17 Okay. Got you. And then last, it's just Nestle. No sales this quarter and what's happening at Nestle is where are conversations? I know you talked about trying to looking at other plans but if you could talk about what's happening there, I'd appreciate it. Thank you. Rob Fried: 47:39 Well Nestle, as you know, over the last few years has been acquiring many companies in the space. In fact, they announced another one a month ago. They bought Bountiful last year for $5 billion, they bought another company here in California last month, I forgot what it's called. But they've become the largest dietary supplement company in the world in addition to being the largest food company. And they know very, very well how unique nicotinamide riboside is and they're extremely impressed with what we've done with the Tru Niagen brand, creating this recognizable and highly trusted brand with basically an e-commerce effort in the last three years to build it to where it is. And they're excited to develop the relationship further. As you know, they have many divisions there. They have a pet nutrition division, they have an infant nutrition division, they we even have a pharmaceutical division and then they have all these dietary supplement divisions. So, we expect and hope that the relationship with Nestle will expand, but it has to be done in a way that optimizes our shareholders' interests. We know that the initial deal was for them to create this brand Celltrient, and they committed quite a bit of money towards Celltrient. It's still has yet to take off as a brand, but we are under the impression that they are continuing to invest in it. But they continue to have interest in ChromaDex and in Tru Niagen and finding ways to expand the relationship. So, we -- that may be something that we see during the year, but we certainly are exploring it. Mitchell Pinheiro: 49:20 All right. Thank you so much. Rob Fried: 49:22 Thanks, Mitch. Operator: 49:26 Your next question comes from the line of Jeff Van Sinderen with B. Riley. Your line is open. Jeff Van Sinderen: 49:31 Hi, everyone. Just had kind of follow-up on -- around the ad campaigns targeted at driving Walmart or I guess a broader demographic. Is it too early to have any ROAs on that, has it been tested yet? Just wondering on the status, and then maybe you could just give us kind of an update on Walmart sales. Is it ramping? And then just kind of a multipart question, but just I guess, can you speak more about anticipated contribution from some of the newer programs this year like H&H for example, including international? Thanks. Rob Fried: 50:14 So -- you want me to do it? Kevin Farr: 50:15 Go ahead. I'll take the Walmart one if you want. Rob Fried: 50:18 Okay. So yeah, let me start with the international piece. International has been tough because of COVID and now Hong Kong is in a very, very severe lockdown right now. They have 50,000 cases in the population of 5 million people right now, and their hospitals are all booked, and they have a formal lockdown and foot traffic is not that great in stores. And hopefully, it will die down the way it has here and in Europe and then things will hopefully get back to normal. And we've seen a similar kind of problem in Australia, New Zealand and in other parts of the world. So, the international sales have grown, but not as much as they would, and will, when COVID dies down. In terms of ROAs as for the campaign, no, it's too early. We haven't even launched this new spot that marketing department just shot. It's more difficult to measure ROAs, on a difficult specific spot on television. It's much easier on the digital marketing. 51:21 The ROAs for the digital marketing has gone up in the last six months and that's mostly due to a lot of testing that we've done, but also because of the iOS algorithm changes that have taken place. I think actually our timing is pretty good to begin shifting towards traditional media given what's happening in the digital media marketing -- marketplace. But it -- ROAs has very, very important to us, especially considering the macroeconomic environment these days. So, we are increasing our attention, not just on growth, but also on marketing efficiency, and that is why we describe our approach as a measured, pragmatic approach to spending our marketing dollars. Do you want to take Walmart? Kevin Farr: 52:06 Yeah, I'll take Walmart. And I think overall, we expect more meaningful revenue growth in aggregate for our new partners in 2021 and Designs for Health, as I've mentioned in my remarks for 2022, and I just want to highlight again, I think in my prepared remarks, we have not really included any revenues from potential new partners that are in the pipeline. And then with respect to Walmart, we don't provide sell-through based upon our retail partners. But it continues to build slowly, but our expectation is that it will accelerate as we scale our national television campaign in 2022. And we are just launching the new TV campaign. We shared this campaign with Walmart and they remain enthusiastic about us building the NAD+ categories together with them. We and Walmart are aligned on the launch expectations and they are committed to building the Tru Niagen business over time. Jeff Van Sinderen: 53:06 Okay. Good to hear. Thanks for that. And then, I think you mentioned a new Tru Niagen product that you're planning to launch this year. Just wondering, if you can speak more about that timing, where -- what the launch is targeted at, or where you might launch it, target market there, planned advertising to support it, that kind of thing? Rob Fried: 53:32 So first let me just -- we have basically been a single product company for the last few years, Tru Niagen. We have partners to whom we have supplied Niagen and they have created formulations with Niagen, life extension, and of course Nestle. H&H is planning a formulation product that includes Niagen and they haven't yet released it, but we expect it to be shortly. We expected them to have it released in December, it looks like they're a little delayed. But this will be our first formulation product that includes Niagen. Remember, we are at the center of this NAD phenomenon and we are the leading company for anyone interested in NAD, which we all should be interested in, and or specifically nicotinamide riboside. And we've sold it as just a pure single ingredient product. So, this year, we intend to release a product that includes Niagen, but also adds to its other ingredients that we think are very special and very important and that we've gone through the meticulous process of making sure that it is absolutely the highest grade that exists on the planet. 54:47 We know that the people who presently are our customers are exceptionally well-educated. We think it could be close to 40% of our customers have graduate degrees. This is a highly sophisticated educated group of people that are very, very smart and they research the product. If you're going to take another product -- buy another product from ChromaDex, you can trust that we will make it as good as it can be. So, what we are planning is to release a formulation product that targets a specific indication in the dietary supplement space that includes Niagen and a few other ingredients that are extremely well sourced and carefully formulated to provide a very specific benefit to people, I expect it to be released in the next few months. It will be a soft launch, there will be marketing behind it, it will be primarily an e-commerce online launch, and then we'll take it there -- from there and see how it goes. Of course, there is interest on that product from many of our partners, but we're taking it one step at a time. Jeff Van Sinderen: 55:50 Okay. Good to hear. And then just around the -- just to clarify around the patent litigation, can you touch on the new patent for manufacturing? I think you said runs through 2037. I guess, maybe if you can just kind of hit what does that really mean for ChromaDex and competitors? Rob Fried: 56:16 So as you know, ChromaDex has a very deep patent portfolio and we also have this exclusive relationship with GRACE, who has a manufacturing patent on the -- actually a manufacturing process that ChromaDex developed, but GRACE patented in exchange for this exclusive relationship. And of course, there's the Dartmouth patent. But in addition, we were very excited to be issued a new NRTA patent, nicotinamide riboside triacetate patent and then there is a second NRTA patent pending. The combination of these two NRT patents nicotinamide riboside triacetate are very, very important for ChromaDex because we know of no manufacturing process that does not require NRT as an intermediate step to get to nicotinamide riboside. So, in order to get to NR, you've got to start NRT. And these are patents that involve NRT and the process of manufacturing NRT. So, we feel very, very good about the addition of this patent that's been issued, and hopefully the one that's pending to our existing strong patent portfolio of nicotinamide riboside. Jeff Van Sinderen: 57:47 Okay. So, Rob, is it fair to say, and I don't want to put words in your mouth, but is it fair to say that this new patent and the patent that is pending around this manufacturing process will make it really difficult for others to manufacture Tru Niagen? Rob Fried: 58:09 I think that it's safe to say that it will be difficult, but we could not comment on whether or not anybody that we know of is infringing on it presently. Jeff Van Sinderen: 58:19 Okay. Fair enough. Thank you for taking all my questions. Rob Fried: 58:25 Sure. Operator: 58:26 Your next question comes from the line of Brian Nagel with Oppenheimer. Your line is open. Brian Nagel: 58:31 Hi. Good afternoon. Thanks for taking my question. Kevin Farr: 58:33 Hey, Brian. Brian Nagel: 58:36 My questions are a follow up to at least a couple of the prior questions, just with respect to the topic of marketing, then the initial '22 sales guidance. So, I was going to merge them together, but one is, you talked about I guess the forthcoming TV ads that's done in partnership with Walmart. When are you expecting that to launch? And is that is -- to what degree is that TV ad contemplated in that the guidance for 15% to 20%? And then second, we talked a lot about and Shannon Sharpe, and I mean as long as I've been associated with the company, Shannon Sharpe has been your key ambassador spokesperson. Is there any thought to bringing someone new in, kind of work side-by-side with Shannon Sharpe? Rob Fried: 59:26 So I think we can both -- I'll start. The answer to the second question is yes. There is discussion about and we've had discussions with other celebrities. Of course, we also work with Brooke Burke in addition to Shannon Sharpe, and there are other, what we call Tru believers out there. Ryan Lochte, as you know, Gabby Reece, and there have been others that have -- we've worked within the past. But I think what you mean is going after a big name, like, a Tom Brady or and Oprah Winfrey. Brian Nagel: 59:54 That's exactly what I mean, yeah. Rob Fried: 59:56 Something along those lines. The answer is yes, we have had meetings, we have had discussions. Some of these people can be very pricey. And we also want to make sure that anybody that we go with, a couple of things, one is they are actually a Tru believer. They've taken the product, and they're not -- we're not just buying their endorsement, but that is a credible endorsement, which we think is consistent with the brand that we have. And the second is, it's one thing to pay them their expensive fee, but it's another thing -- you have to then support it with significant TV spots and media. So, it is not an insignificant commitment to go there. And we need to be measured and careful about that. But the answer to your question is yes, we did do a deal with Goop recently. 60:48 Goop is Gwyneth Paltrow's brand. She has been taking Tru Niagen for quite a while, and it was the first and only product that Goop endorsed and with what is now the Goop sort of seal of approval. She is not the only. There are many that we know of in the Hollywood community and the sports community that are truly hooked down Tru Niagen and take Tru Niagen but we have not yet landed on what we consider to be the right additional spokesperson to Brooke and Shannon to take it to the next level. But we do work on it. Brian Nagel: 61:27 Got it. Rob Fried: 61:26 Okay. The other question was -- had to do with the new ad campaign that we shot. Not in conjunction with Walmart, but targeting Walmart. Brian Nagel: 61:37 Okay. Rob Fried: 61:41 We -- the new, the Head of Marketing at ChromaDex has been here, as you know, less than a year, and has a great deal of experience creating these types of campaigns. These are the types of products that he's worked on in the past. So, the campaign that he is launching and the ad that he has created is targeted towards the type of consumer that he has worked with in the past that he believes purchases at Walmart, but we have been conservative in our projections of how it will convert into sales at Walmart, because until we launch it and measure it, we just don't know. Operator: 62:28 Your last question comes from the line of Sean McGowan with ROTH Capital Partners. Your line is open. Sean McGowan: 62:36 Thanks. Hi, guys. Good to be back. Rob Fried: 62:38 Hey, Sean. Sean McGowan: 62:41 I've got a couple of questions. On your guidance of 15% to 20%, can you give us any color on how that's going to play out across kind to three segments consumer, ingredients and standards and services? Kevin Farr: 62:57 I think it's going to be -- the growth is going to come from the engine, which is our e-commerce business. And I think what we've said is in aggregate, it's going to come across our partners, which are partners in the Niagen category. So that's going to be -- it's going to be between Niagen and Tru Niagen that drives that growth. Sean McGowan: 63:20 So you would expect growth in both consumer and ingredients? Kevin Farr: 63:28 Yes. Sean McGowan: 63:29 Okay. Great. Second, on the -- when you talk about that guidance not including -- not contemplating any contribution from partnerships that are in the pipeline, can you kind of handicap what -- is there a -- an amount that that could contribute or are we talking about small numbers if everything does kick in and more in the future? Could there be a meaningful contribution in 2022 from those partnerships that are not currently part of your guidance? Kevin Farr: 64:05 I think if we go back to our experience in 2021 with regard to Ro and H&H, I think that it takes a while for them to get the product to the marketplace. And I think with regard to that, I think it will be additive. I think the one that's more near term is Sinopharm. But again, we've got -- they've got to bring it to market, and this is probably more of a second half of the year or fourth quarter item. So, I think from orders of magnitude, it would be -- it will be additive. But how big, is yet to be determined. Sean McGowan: 64:49 Okay. Thank you. And then two other quickies. Kevin, when you were talking about the ingredient sales did you say it was up 53% increase sequentially? Kevin Farr: 65:02 Yes. Sean McGowan: 65:03 Yeah. Okay. So, I thought heard --and then finally, when will the 10-K be filed? Kevin Farr: 65:10 10-K is due on the 15th of the month, so it will be between earnings and 15th. Sean McGowan: 65:20 Okay. Very good. Thank you very much. Rob Fried: 65:22 But Sean, Sean, I just wanted to -- before you left, I just wanted say -- welcome you here. We've known and worked with Sean for many years and we're very privileged and honored that you have decided to cover us, and we're looking forward to working with you and ROTH. Sean McGowan: 65:41 Thank you. I appreciate that, Rob. Kevin Farr: 65:49 And I wanted to... Sean McGowan: 65:47 Good to be on this side as well. Kevin Farr: 65:48 And I wanted to clarify the 53%. That, we sequentially grew. Quarter-over-quarter, it grew by 14%. Sean McGowan: 66:01 Yeah. Okay. Got it. Thank you. Operator: 66:05 And that's all the time we had for questions. I will turn the call back to Brianna Gerber for closing remarks. Brianna Gerber: 66:12 Thank you, Josh. There will be a replay of this call beginning at 4:30 PM Pacific Time today. The replay number is 1-800-700-2030, and the conference ID is 4126168. Thank you, everyone, for joining us today, and for your continued support of ChromaDex. Operator: 66:34 This concludes today's conference call. You may now disconnect.