ChromaDex(US:CDXC)2021-08-04 03:10Financial Data and Key Metrics Changes - ChromaDex reported total net sales of $17.7 million for Q2 2021, representing a 21% sequential increase and a 16% year-over-year increase compared to Q2 2020 [8][23][30] - Adjusted EBITDA, excluding legal expenses, was $640,000, marking a $1.3 million improvement from the previous quarter [8][23] - Gross margins decreased to approximately 61.1%, down from 62.9% in Q1 2021, attributed to a higher mix of B2B sales [10][26][31] Business Line Data and Key Metrics Changes - Tru Niagen net sales increased by 24% sequentially, driven by strong sales to Watsons, which amounted to $2.9 million in Q2 2021 [24][30] - E-commerce sales grew by 11% sequentially and 31% year-over-year, benefiting from Amazon Prime Day sales [9][25] - Sales of Niagen ingredients were down 36% year-over-year, primarily due to the loss of a customer, while other ingredient sales decreased by 74% [30] Market Data and Key Metrics Changes - Sales to Watsons increased significantly following a temporary supply chain disruption in the previous quarter [9][24] - The Hong Kong market continues to face challenges with store traffic down year-over-year, impacting overall sales despite a loyal customer base [25][37] Company Strategy and Development Direction - ChromaDex is focused on expanding its presence in mass retail, with the launch of Tru Niagen in 3,800 Walmart stores [12][34] - The company plans to increase investments in marketing and brand awareness, particularly targeting Walmart consumers [41][63] - Continued commitment to R&D investments to maintain leadership in the NAD market, with a focus on nicotinamide riboside and its health benefits [22][64] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future growth, citing strong consumer demand and the potential for increased sales through new partnerships [13][34] - The company anticipates that sales growth will accelerate in the fourth quarter, driven by new product launches and marketing campaigns [34][35] - Management acknowledged ongoing challenges due to COVID-19, particularly in the Hong Kong market, but remains confident in the brand's resilience [25][37] Other Important Information - ChromaDex has completed 13 clinical trials and has nearly 40 more in progress, reinforcing the scientific foundation of its products [11][22] - The company is actively involved in research related to various health claims, including cognitive function and muscle health, which may lead to new product claims [67] Q&A Session Summary Question: Impact of COVID on Tru Niagen sales - Management noted fluctuations in sales due to COVID, with store traffic in Hong Kong still below pre-pandemic levels, affecting overall demand [37] Question: Marketing spend outlook - Management indicated an increase in marketing spend to support brand building and Walmart initiatives, with a shift towards traditional media [39][41] Question: Walmart distribution and product placement - Management confirmed that Tru Niagen is in the majority of Walmart stores, with ongoing efforts to ensure product placement and monitor sales performance [54][56] Question: E-commerce growth and customer retention - Management reported strong retention rates and an increase in new customer acquisition, contributing to e-commerce growth [71] Question: R&D investments and studies - Management highlighted ongoing investments in R&D to support the development of new products and health claims, particularly around nicotinamide riboside [64][66]