Q1 2021 Chromadex Corp Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to Chroma decks corporations first quarter 2021 earnings Conference call. My name is Stephanie and I will be your conference operator today at this time all participants are in a listen only mode as a reminder.
This conference call is being recorded.
This afternoon <unk> issued a news release announcing the Companys financial results for the first quarter of 'twenty 'twenty. One if you have not reviewed this information both are available within the Investor Relations section at Chroma day, because its website at www dot com and net dot com I would now like to turn the conference.
Over to Brianna Gerber, Vice President of Finance and Investor Relations. Please go ahead Ms Gerber.
Thank you good afternoon, and welcome to <unk> Corporation first quarter 2021 results Investor call with US today are <unk>, Chief Executive Officer, Rob Fried founder and executive Chairman and thank Jack's and Chief Financial Officer, Kevin and fire.
Today's conference May include forward looking statements, including statements related to <unk> research and development and clinical trial plans and the timing and results of such trials and the timing of future regulatory filings the expansion of the sale of two nine age and and new markets future financial results.
And this development opportunities future cash needs and <unk> operating performance and the future and future investor interest that are subject to risks and uncertainties relating to chrome and future business prospects and opportunities as well as anticipated results of operation.
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 <unk> actual activities or results to differ materially from the activities and results anticipated and forward looking statements.
These risk factors include those contained in <unk> quarterly report on form 10-Q, and most recently filed with the SEC, including the effect of the COVID-19 pandemic on our business results of operations financial condition and cash flow. 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 and its expectation.
In addition, certain of the financial information presented on this call references non-GAAP financial measures. The company's earnings presentation and earnings press release, which was issued this afternoon and are available on the Companys website present reconciliations to the appropriate GAAP measures. Finally this conference call is being recorded via webcast on the web.
Cast will be available at the Investor Relations section of our website at Www Dot <unk> dot com with that it's now my pleasure to turn the call over to our Chief Executive Officer, Ross Free Rob.
Thank you Deanna and good afternoon, everyone and thank you for joining our first quarter 2021 industrial pool.
This has been a very exciting times and strategically to Colombia.
And two months, we added $25 million to the balance sheet.
We announced important scientific research findings.
We completed 10 pole agreements with Walmart.
And H group and with growth.
And we added a talented chief marketing officer, and Bobby Clearone.
Demand for <unk> and continues to be strong and growing.
But we did experience and supply chain issues that delayed shipments to watch and Hong Kong.
Those issues have now been remedied and future prospects look very good.
Total company net sales for the quarter were $14 $7 million.
And our sales continued to grow and were up 17% over the pre COVID-19 first quarter of 2020.
Our gross margins were approximately 63%.
And first quarter, adjusted EBITDA, which we define as EBITDA, excluding legal expense was a loss of $7 million.
And $4 million improvement from the prior quarter.
The science behind margin continues to grow validating its importance and several areas and human health.
Frank will discuss this and the moment.
But we have now signed over 230 research collaboration agreements on margin.
But we estimate represents over $75 million of investments funded by leading external research institutions not like on the deck.
We will continue to support to grow and scientific evidence behind knowledge of course.
Importantly, we will also continue to fiercely protect our intellectual property against Infringers and you'll see an opportunity to build their business and so on the back of our scientific and regulatory accomplishments.
We encourage you to read last week's ruling from the federal Judge and the California case against Elysium Health.
And the court order signals and part with the jewelry will HERA trial.
And reflects the behavior and character of our equivalents.
As we have said previously from elections and proud to be envisions a exceptional strategic partners like Nestle Health Science and we are now proud to include HMH group and ROE.
H and age group is a global leader and premium health.
Also human and pet nutrition as well as personal care.
Margin will be available on the switch products, and which is Australia's number one wellness brand and the number one brand on China's major cross border E Commerce platforms. According to <unk> 2012 and annual report.
And exclusively formulated knowledge and products will be the first and <unk>.
Boosters and the switch portfolio.
And will expand their healthy aging category.
HMH has already begun product developments and you can see.
He asked about the potential for margin and the portfolio and.
And we look forward to share more about this and the future.
ROE is the health care technology company that is built on impressions patient centric platform to deliver personalized and healthcare experience. Since 2017 growth has facilitated more than 6 million digital health care visits nearly every county and the United States.
Road plans to offer true margin and specially formulated product under its Rome and brand.
Last quarter, we announced the true knowledge and would be available and 3000 Walmart stores in June.
Walmart has since expanded the store count per hour lower dose more accessibly priced SKU to over 3800 stores signaling their commitment to the launch and to expanding there and supplements category.
<unk>.
And important development. This quarter was the hiring of a talented chief marketing officer, Bobby go wrong.
And complements our existing team's capabilities and digital marketing and creative earned media and marketplaces.
Bobby brings deep brand building experience across traditional retail as well as e-commerce.
<unk>.
Prior to joining chrome and X body led the local brand portfolio for Nestle waters, North America with over $3 billion and annual revenues.
And previously was in charge of the global Kitkat brand and also it.
But he is already an important contributor and our.
And next phase of development centered on building this great global brands.
I'm increasingly optimistic about the future for parameter there.
Demand for <unk> is strong and growing.
We are and experienced leadership team in place that knows how to scale this business.
And more deals and the pipeline and we are.
Continuing to think globally.
And with that I will pass the call over to our chairman Frank <unk> for an update on scientific research.
Right.
Thank you Rob.
As I mentioned and our last call. The research on nicotinamide Riboside or NR continues to extend two important areas of human health.
Since our last update chromatics, deepen disconnections with scientific experts and the field of research and partners through its external research program with leading institutions to explore important areas of research on NR.
And March we announced a new research initiative with the Citron Foundation to study the effects of NR and Citron deficiencies.
This is a rare life threatening genetic disorder that can cause failure to thrive and children or later in life, causing a host of neurological problems hyperlipidemia and severely impaired liver function.
The first study will be led by a scientist.
Duke University, and the National University of Singapore.
And while there are no known cures, we understand that sits from deficiency impairs mitochondrial function and disrupt <unk> system.
We are committed to understanding the role and our supplementation complaint and this understudy disorder.
Two new clinical studies registered and March both investigating the potential impact of and are on patients with or recovering from COVID-19.
First on.
A randomized placebo controlled clinical study to investigate the impact of NR supplementation, and 100 patients with persistent cognitive and physical symptoms at least two months. After COVID-19 illness was registered.
These long haulers and will be studied by Dr. Ed Murray Guzman villas at Harvard Medical School and mass General Hospital.
Researchers will assess how NR supplementation effects cognitive neuropsychiatric and physical function over a period of 22 weeks.
We believe that it is important to deepen our understanding of the potential and nutritional solutions to manage long haul or so and we look forward to the results from this new study.
In addition to clinical study was registered by the University of Texas Health Science Center at San Antonio.
The study will measure the effective and are on whole blood and a D levels and evaluate safety of supplementation and hospitalized patients with COVID-19, and acute kidney injury.
That will include 100 participants who will be given a daily dose of 1000 milligrams of NR for 10 days.
Both studies are part of our chrome at X external research program.
And reviewing the broader category of NAD precursors, a second clinical study on and our men and was published in April and the Journal science entitled Nicotinamide, Mono nucleotide increases muscle insulin sensitivity and pre diabetic women.
We believe there's a significant limitation with the study that calls into question the scientific validity of its conclusions and we will follow up when appropriate.
And and then remains in share you to and are across the board regarding published human science regulatory approvals and benefit to human health worldwide.
I continue to believe that 2021 is shaping up to be and exciting year for <unk>.
Several clinical studies on NR have been recently completed our and pure view, including studies, examining and and ours impact on muscle cognitive and liver function.
<unk> is committed to remaining a world leader in any day and and our research, which has recently expanded two important areas of human health with large addressable markets.
With that I'll pass the call to Kevin Farr, Kevin.
Thank you Frank <unk> delivered a solid first quarter and continue to demonstrate financial discipline, while making important investments to protect our intellectual property.
Total net sales were $14 7 million up 2% year over year, Despite short term supply chain disruptions that impacted shipments to Watson.
We delivered gross margin of 62, 9% a record for the company and the underlying business as measured by adjusted EBITDA, excluding legal expense and non-GAAP metrics posted a loss of approximately 700000.
A 400000 improvements sequentially and down slightly year over year due to increased investments and selling it and marketing to deliver on the opportunity ahead of us.
We believe adjusted EBITDA, excluding legal expense remains an important metric to gauge our progress towards cash flow breakeven and we have included a reconciliation to the appropriate GAAP measurement and our earnings release slides, we ended the quarter with $44 7 billion of cash, including the $25 million and <unk>.
Capital raised in February.
With this incremental cash we have a clear line of sight to cash flow breakeven, even with the potential uncertainty surrounding litigation.
I'll begin my review of the sequential P&L results and will then discuss the year over year trends for the three months ended March 31, 2021, <unk> reported net sales of $14 7 million down 5% compared to $15 4 million and the fourth quarter of 2020.
<unk> sales were up 1% sequentially. This growth was driven by our e-commerce business, which was up 1% compared to the prior quarter.
Sales to watches were one 6 million and the first quarter compared to $2 1 million and the prior quarter.
We experienced short term supply chain disruption due to the impact of COVID-19, 19, which led to a shortfall and shipments to Watson and the first quarter.
We expect to ship the shortfall over the next two quarters. In addition to the baseline demand, which was trending above $2 million per quarter and the second half of 2020.
Our <unk> ingredients sales were $1 2 million versus $2 2 million last quarter, we experienced a short term headwind since we are no longer supplying to one of our knowledge and ingredient customers.
As I mentioned last quarter, we expect to replace that business with new more strategic partners and 2021.
Furthermore, we did not have any nitrogen ingredient sales domestically and the quarter. As a result, we did not recognize any revenue related to the upfront and milestone payments, which are recorded and biogen and ingredient sales.
Our gross margin was up 190 basis points from 61% and the fourth quarter of 2020 to 62, 9% and the first quarter of 2021.
We continue to deliver on our supply chain and product cost savings initiatives and are benefiting from their overall scale.
In addition, we benefited from a higher mix of ecommerce sales and the quarter, which carry a higher gross margin.
Total operating expenses for the first quarter of 2021 were $16 6 million up $1 1 million compared to the fourth quarter of 2020.
Selling and marketing expenses were flat sequentially at $6 3 million and the first quarter of 2021 as well as the fourth quarter of 2020.
As a percentage of net sales. This expenditure was up a 170 basis points and the first quarter of 2021 versus the fourth quarter of 2020 due to the slightly lower net sales.
As I previously said this ratio generally declines over time as sales ramp with a quarterly investments may fluctuate as a result of our marketing campaigns.
As reported G&A expense was up $1 3 million to $9 5 million and the first quarter of 2021 versus $8 2 million and the fourth quarter of 2020.
Legal expense was up $2 5 billion compared to the fourth quarter of 2022 5 million and the first quarter of 2020 one.
There were increased investments in early 2021, driven by ongoing discovery depositions and expert witness reports and the New York and Delaware Litigations.
We also incurred expenses related to the Thorn IPR as well as the California litigation.
It is difficult to predict the timing and magnitude of free trial and litigation expenses with three cases going to trial and the second half of this year, but we expect that the first quarter will be the highest legal spend in 2021 as the activity declines going forward.
Excluding legal fees severance restructuring and equity compensation expense first quarter 2021, G&A expense was lower by $5 million versus fourth quarter 2020 comparable G&A expense.
For the first quarter of 2020, one our operating loss was $7 4 million versus $6 1 million and the fourth quarter of 2020 and.
Net loss attributable to common shareholders for the first quarter of 2020 was $7 4 million or a loss of 12 cents per share as compared to it and net loss of $6 1 million or a loss of 10 cents.
Quarter of 2020.
Moving to the year over year financial results total net sales were up 2% year over year compared to the first quarter of 'twenty, and 'twenty with 12% growth and true Nigel and 17% growth and e-commerce being the key highlights.
Overall, watson's and other b to B net sales declined by 3% year over year.
In addition to the supply chain disruptions and this quarter initial ship in for our true now I think beauty launch with <unk> has created a challenging prior year comparison.
Gross margin increased by 500 basis points to 62, 9% compared to 57, 9% and the first quarter of 2020.
Selling and marketing expenses as a percentage of net sales increased 11, 6% to 42, 6%, primarily driven by increased digital marketing and brand awareness investments and a strategic additions to our selling and marketing team.
As reported general administrative expense was higher by <unk> 7 million, primarily due to higher legal expenses of $2 5 million, partially offset by $1 million of lower severance and restructuring expense and <unk> 8 million of lower share based compensation expense.
Finally, our operating loss increased by $1 5 million year over year as higher sales and gross margins and cost savings across the organization were more than offset by higher legal spending.
Moving to the balance sheet and cash flow our balance sheet remains strong.
We ended the quarter with $44 7 million and cash and have not accessed our $7 million committed line of credit.
As mentioned upfront. This includes the 25 million capital raise and February.
And the first quarter of 2021, our net cash use and operations was $5 4 million versus 22000 and cash provided by operations in the fourth quarter of 2021.
The difference this quarter was primarily driven by changes in working capital, giving the timing of inventory purchases and an increase in receivables and.
In contrast fourth quarter of 2020 benefited from 1 million dollar product launch be from Nestle Health Science for which there was no comparable amount during the current quarter.
As it relates to our 2021 and full year outlook. We provided details on the key P&L metrics and our earnings press release, along with the slide presentation.
We now expect selling and marketing expenses to be up slightly as a percentage of net sales. While we do not expect a significant increase in spending we believe these incremental investments are prudent to maintain our position as the leader and the growing and a D market.
As a result, the year over year improvement and adjusted EBITDA, excluding the total legal expenses will not be as significant as the last two years, but this remains a key metric for the organization.
As it relates to the full year sales outlook, we continue to expect steady revenue growth we.
We expect that our sales growth rate will accelerate beginning in the second quarter.
In summary, we remain committed to delivering profitable growth as we are very close to achieving an important milestone of profitable adjusted EBITDA. Excluding total legal expense followed by positive adjusted EBITDA, including total legal expense once the litigation is behind us.
And as always we will balance this near term objective with a long term opportunity.
I'm very excited about the future for chrome and X. We took important strategic steps this quarter to further strengthen our internal teams and capabilities to scale for our next stage of growth.
These include preparing for June retail watch with Walmart across the U S and our new knowledge and ingredient and deal with health and happiness group, along with ROE as well as other business development deals and the pipeline. We expect these initiatives to drive incremental revenues beginning in the second quarter. Operator, we are now.
Ready to take questions.
At this time, if you would like to ask a question. Please press Star then the number one on your telephone keypad again that Star then the number one on your telephone keypad to ask a question.
Your first question comes from Jeff and then syndrome with B Riley.
Hello, This is Richard Magnuson, and before Jeff and syndrome, and thank you for taking our call with a rollout and Walmart about a month away what more can you tell us about how that is setting up and what are you doing in terms of advertising from the customers know that the product and will be available on Walmart.
Okay.
Thank you for the question Richard.
As you know, we just added a chief marketing officer Fatih <unk>.
Who has excellent experience with Walmart and other mass retail outlets globally.
We've said in the past that our expectations are not to expect anything dramatic initially with regard to Walmart.
And so it's going to be a slow build and we are gradually going to be increasing the amount of brand level marketing brand awareness marketing as well as expansion of distribution channels beyond just conventional digital need media channels to include television radio and perhaps print and other.
Areas.
We have a true believers campaign, which we've had for a couple of years now we plan to expand that and add some additional true believers to that campaign.
There may be more additions and the near future and maybe even some significantly larger celebrity additions and.
And in conjunction with that we will begin rolling out more aggressive TV related campaigns, but as I said, nothing and the short run and it'll be a gradual steady increase and awareness.
We're also working with Walmart to try to create some Walmart specific campaigns and store things promotion things email campaigns.
But once again this is not something that we're expecting to dramatically launch right away in June.
Okay and then.
Regarding the.
The agreement with the health and Happiness group the Swiss Global Nutrition brand has a presence on four continents to manage and ultimately be available and all four continents or has the agreement with limited and that.
The agreement.
Is more limited than that initially.
We are excited about HMH.
It's a very very impressive team and.
Not only their R&D team with their marketing team as well they are very strong and certain countries.
Initially, we will be working with them cross border into China, as well as Australia, Italy.
We are developing with them unique formulations of <unk> in combination with other ingredients for their initial launch.
I don't expect to launch a product and the market prior to fourth quarter of this year.
But they are very impressive we're very excited to be working with them and we think the potential is there to grow something very significant.
Okay.
Last question I believe you said there was no and that's the revenue and the first quarter was this expected or some pushed out.
Yes, and again <unk>.
H and Nestle.
Well as row, the new announcement that we made and life extension and the other company.
This is all we have always said that on a selective basis, we will supply <unk> and as an ingredient to certain companies that we consider to be responsible companies excellent companies blue chip companies that have and existing customer base.
As opposed to using our ingredient to creative customer base.
And and all in all cases, we endeavor to co brand if possible.
Naturally obviously is the world's leading food company.
And they released sell trends as a product and October it's a very slow and gradual release, it's the way they go about doing it.
Step by step process, it's initially simply just and online.
On a distribution channel.
But there are other divisions within nationally that are interesting to us as well, including persona, which we started doing business with persona last year. This is a personalized dietary supplement division that they own.
There are other divisions and.
At necessarily with whom we're also having conversations and at some point we might expand the relationship to include some of these other divisions and in addition to sell Trent and persona.
So we're not surprised because we always anticipated that sell through and it would be a slow rollout.
We expect it to grow with time, and but we expect the relationship with Nestle and time to extend to go beyond simply just suffering.
Alright, well, thank you very much and I'll jump back into the question queue.
Yeah.
Your next question comes from Jeffrey Cohen with Ladenburg Thalmann.
Hi, This is actually destiny on for Jeff. Thank you for taking my question I'm just curious.
Continuing with our discussion.
A discussion of HMH and brown, what exactly on the financials be to that and it'll be similar to that of Massachusetts and upfront payment and then royalties or is it a bit different.
This deal is more of a conventional supply agreement deal that does not include royalties.
It's more like our business with the two other partners, which is now only life extension.
So it's they're purchasing it at a price per kilogram.
Got it okay. Thank you for clearing that up for me and then specifically for ROE.
Is there particular category within the realm and portfolio that they'll be targeting.
And.
Why.
I should ask this a little differently is there and intention to move into the volume portfolio as well or is it just going to be focused on on men's health and the rodman portfolio.
And their initial launch will be with Roman.
But they are interested in expanding beyond Rome, and that which is the men's health brand.
The the CEO of ROE.
Given us a call several months back and said that they were interested and creating a and aging product.
And was very clear that they had done the research and realize that if you were going to create one it should be with only with nicotinamide riboside and the only legal way to buy and Safeway to get nicotinamide Riboside was with chrome and <unk> and what he clearly said is if you guys are willing to do a deal with US we will release, a longevity health spa.
<unk> type product and if you are not we are not going to release one at all.
Which I was impressed with and I agree that is the right way to approach. It if you care about your consumers.
So it will be a formulation product they will combine it with certain other ingredients and hope to see it released within the next quarter or two.
They are working on that presently.
One of the things and lines about ROE as I explained before is that they have and existing customer base. They are not using our ingredients to create their business, they have and existing and impressive customer base.
And this would be and upsell to their existing customer base.
Okay. Thank you for clearing that up I appreciate it and then I was just wondering if price when you could provide any update on the on HCP.
And and I think kids, we've updated our financial outlook, we think we're gonna be slightly better than and 60 per cent and 2021 and I do think that will continue over the you know and near term to improve margins each year as we sell more true nitrogen on e-commerce as well as at retail.
And as well as we continue to gain scale and we continue to look for cost savings opportunities and our supply chain and our design and develop on the product.
Got it. Thank you for the reminder, all hot and thank you.
Your next question is from the line of ROM and some of our Hugh.
H C Wainwright.
And for your payment this month on for Rob.
And.
About a relative Randy interesting.
And you have access to the and 80 plus.
Gnostics they may be.
Oh and prescribing day [laughter].
It's interesting to you.
I'm sorry, the connection wasn't great I think you're asking if we would have access to their and a D diagnostic test.
That's right yeah with this day to be interesting to you.
Yes, we are very interested and and and many there are many and a companies.
Companies that are proposing and diagnostic tests, we've done some work on at ourselves and.
At this point, we haven't found what that one that we feel comfortable meets on the scientific criteria that we require but there are several that are interesting.
Reliable and a D.
Diagnostic tests that exist right now require a great deal of blood.
And it's and impregnate needs to be frozen immediately to create reliable data, but there are several companies.
And that claim to have developed other systems and we are examining those systems are and discussions and several we do think it's in the long term. That's an important area and we also think that access to customer data from customers like row, or HMH or nestle or life extension. In addition to a large customer base wood.
Be important.
Frank I don't know if you have anything you'd like to add to that.
Yes on the.
Other thing I'll add to it as that.
Although Rob mentioned that there are a few out there that are that are sort of promoting and and and 80 test and I'm not we're not entirely convinced that the tests that are currently being offered or reliable.
For for reporting and <unk> status, and and any usable or a meaningful way so.
We are on top of it and looking at developing.
And the solution on that front as you know we've been testing reliably testing and as part of our clinical trial program for many years now so nobody knows more about testing and.
And other any day metabolism that and we do at this point so.
And I wasn't aware that.
Grow even hand, and and a T test I.
Did you, where you're just thinking about it and context up.
Them.
Is it part of the regular program how did how did you come to that that they had that.
Well I don't know that they have a specific on a deep patches.
You know, it's just part of the and plan system.
And how the diagnostic on generally speaking.
Got it okay, well that makes more sense, okay. So I mean it and.
Is not a central feature of standard testing and and blood labs right now so.
It's one that we hope to make it push forward at some point.
But one step at a time and obtaining reliable test to be suitable for that so.
Okay, great color very interesting.
Switching day, it mentally and health.
And any change and demeanour on the level of interest and calm with that since we announced and there'll be acquisition.
Bumps for company brands.
They have expressed a great deal of interest and.
And not only and are but all of our molecules that we have and development and are interested in our successes and E. Commerce company, we speak to them frequently the relationship is strong which is why we're talking to other divisions of necessarily about ways to do business.
Okay, and just finally regarding the COVID-19 trials.
You know and.
Ram and get the banner and dexamethasone and there will be benchmark again and.
These trials.
Frank.
At this point no the trials that we've completed there's no additional trials that are underway at this time.
And the trials that we have completed don't look at Rem, we're and disappear.
So right now there are no plans to look beyond what we've already reported.
Okay. Thanks for the color and and thanks for taking on pensions.
If you.
Your next question comes on the line of J P. Markland farmhouse equity research.
And good afternoon, and thanks for taking my call.
On a couple of quick questions here and I wanted to know more about the supply chain disruption on the magnitude. If you can talk a little bit and what happened on.
Likely to occur gang, how you might mitigate possibly.
Sure.
Supply chain disruptions are not all that uncommon during this year of COVID-19 and and we experienced that and.
We generally don't operate the business quarter to quarter, it doesn't reflect a reduction and demand.
For two nights and demand is very strong and continuing to growth.
In Hong Kong in particular, you have to understand that.
There's.
Only seven.
Million people and Hong Kong.
And we last year did seven plus million dollars of of sales directly to.
Watson's and Hong Kong, and which day is and mark up and sell it retail so the penetration rate and Hong Kong is rather extraordinary.
Part of that has to do with.
With with tourists that come from mainland China into Hong Kong.
And during the COVID-19 year, there have been some restrictions quarantine requirements and others about travel into Hong Kong, we've seen that gradually get lifted and.
And we've seen sell through improve but there is still these headwinds related to COVID-19 and the and the operation. So they have sufficient inventory there. It wasn't crucial that we rushed to solve this problem for them, but we are solving the problem and they will make up the lost sales and the and the.
Upcoming quarters.
On hand to Kevin and let me just tell you about what the supply chain issue was the and the first quarter experienced delays due to global packaging shortages for a consumer products across our supply chain and.
And we had some delays also from Cmo's with regard to product that we're supposed to be made in the first border and and pushed out to the second quarter These've been addressed and the second quarter oriented adequate safety stock of both component parts and packaging as well as finished goods. So that we don't.
This issue again in the future.
Okay, that's super helpful and.
One other question for you on a.
I believe you on on file.
Spokesman for your policy and the company and I was wondering if you are going to be doing more palm counts and the future and if you have that signed up at this point.
Well, thank you for that and I appreciate you, saying that.
I love to talk about two nitrogen and nicotinamide riboside, because my own personal experience and the experience of my family and my friends and my coworkers has been fairly dramatic and remarkable and I.
And as do pretty much everybody, who works at chromatics that when you take two nights and you improve your ability to deal with physiological stress and incidentally incidentally.
Take a certain amount of it every day, it's more than the recommended dose, but when I'm feeling some sort of physiological stress I increased my dose and it seems to work as a way for to manage it.
We have an excellent marketing department and our immediate department and whenever they book interviewer a podcast.
I am willing to do it I think they have several upcoming and I look forward to do it and enjoy doing it. So yes, I believe that I will be out there more.
And we call and if you had any problems or.
Okay.
I was just going to interject with regard to the supply chain disruption due to the impact of COVID-19.
Growth to about a million dollars shortfall and shipments to watson's and the first quarter.
And.
Looking at historical trends.
We expect too.
See baseline demand and.
Of about 2.1 million, we expect the first quarter shortfall to ship over the next two quarters. In addition to the baseline day ma'am.
Alright, and that's great. Thank you very much I appreciate and thank you.
Your next question comes from Mitchell Pinero, with and start with that.
Good afternoon.
On.
I'd like to look at the Commerce business.
So you know.
It was up sequentially.
But you know on on.
On a year over year basis with growth rates and flowing there.
And.
And he was curious like is this.
It was there any any anything in particular and and a quarter.
That would.
Have a little bit of a slowdown and e-commerce and if you could also talk about.
New customer growth versus existing policy.
No e-commerce looks really strong.
New customer acquisition is also increasing.
And retention has been steady so a couple of things about what you said about it was up quarter to quarter and it was up 17% I believe year over year.
First of all and to comment on that yes, it was up 70% year over year.
Really should be doing better than 17% my expectations and in the future quarters that will do better than 17%, but you do have to remember that the first quarter of last year was pre COVID-19.
And.
At the end of March, particularly in April we saw real real slow down and E. Commerce sales and then it gradually started picking up again.
So.
You're comparing it to the period right before that economic downfall, and the issues that happened right away with with COVID-19.
But when I look at the conversion numbers and the retention numbers. They are very very strong and improving so he comp e-commerce business looks healthy with regard to the quarter of sequential growth.
We look at the daily numbers and the daily numbers are quite strong.
Especially compared to the last quarter.
But certain things existed and the fourth quarter that didn't exist and the first quarter that that.
That may maybe cumulatively looked like it was less growth and it actually was one thing is we include the cross border and to China and there is a significant promotion cross border and to China on 11, 11, and then even another on 12 12 November 11th and December 12th and those represent a huge percentage of the entire.
Per year sales so.
Those try and China Cross border sales would benefit we had the benefit of that and the fourth quarter and not the first quarter and similarly, there's Amazon Prime day right. After Thanksgiving, which is also a very very big day. So when you compare first quarter to fourthquarter, you're excluding all those significant days.
Second there literally two less days and the first quarter than the fourth quarter and that is significant when you are talking about it and nine or $10 million business.
That could be two percentage points right. There and then finally, we think that.
At Amazon and the first quarter, there was a slight delay in the.
And supply chain.
And and that that so the accumulation of orders to shift.
Has increased slightly and the first quarter from the previous quarter, So and actual fact, the first quarter versus the fourth quarter and the way we see when we look at daily actual sales was.
Much stronger.
And when we compare first quarter to last quarter. We also see it as strong and then so.
Commerce business is healthy and looking very good and we expect greater year over year growth.
In the coming quarters.
And could I would like to let me take this opportunity Mitch also to comment on something else that you may be asking about to ask about.
Cause I know you would like to ask Mark generally marketing questions.
But.
We view. The addition of our new Chief Marketing Officer is an important event that the company.
Because we have a very strong e-commerce engine and this company and and very strong digital marketing operation at this company the digital marketing and E. Commerce is largely a performance marketing business, where it's constantly optimize it's almost like a trading room, where you tested and test and add and then you opted.
If that AD is converting you press it more and if it's not you hit the brakes on it and it's and optimization engine.
And it is slightly separate from the engine of building and actual consumer brand and separately separate from the engine that creates overall awareness <unk>.
<unk> is a very very interesting town because he has outstanding experience and intellectual understanding of brands bills and consumer brand building on a global level, but also and interesting understanding of data analytics and E Commerce and general when we see this is important for us as a company and not only for continued.
Growth on the already fairly strong E Commerce engine, but also building overall consumer awareness and brand awareness for Tonight and.
Okay.
Well thank you.
And just one more question.
And you were saying on e-commerce, when we looking.
<unk>.
Five weeks into.
Five weeks into the second quarter, you mentioned that you on Tom's remains strong on.
Are we looking at any.
Did you see and.
Acceleration in and sales and just going to be a.
And Ah steady climb this year are you have any plans for anything.
And.
New on the marketing side that that could change it and the growth rate for the.
Where the where the cadence.
And I know, many people who own shares and chrome and I just want to see these events that create create these huge growth.
Accelerators that happened suddenly.
And if.
If they happen they have and you know that.
COVID-19 study.
That came out of Turkey got a fair amount of attention and the investment community as you know.
But it's not the way we think the way we think is brick by brick step by step day by day, and we look at the conversion metrics and the retention metrics.
Sure if if if.
Suddenly and major celebrity if there are so many major celebrities politicians athletes actors that we know take two nights and if one of them chose to go public on their own and talk about how it's impacted their performance it might have a dramatic impact, but the way we are doing it is gradual.
Pieces, and our marketing spend gradual increases and our true believer campaign gradual extensions and the channels of distribution gradual expansion and territories and gradual improvement and that's generally been reflected in the performance. If there is an inflection point that we hit it won't be because we force that to happen.
And one of them.
And I was question maybe after Frank.
That could be and a D S.
And how confident are you that this is achievable to your.
To your standards and and how fast does that happen with something that's gonna take several years to Pan out are we talking six months.
I don't really understand what the.
Difficult work.
We're not the same.
So you have to look at it technically I mean I'm comfortable that we have.
Testing already that is.
Good it's accurate and.
Just just not scalable, we need something a little bit more scalable and and more usable form Rob had mentioned and his comment that you need a lot of blood.
To be able to accurately test that so.
If chrome and if we wanted to offer a and.
At home test for instance, and you're not going to be able to do that by sending them [laughter].
[laughter].
And needle so that he could stick themselves to drive it per blood so.
So we know that we have that but really it's translating what we know on on what we have today into something that's going to be easier to use format.
And that's what we're working on and I'm.
And I'm happy with the progress that we've made and I've seen some data that looks really compelling that things are going and the right direction for that so I.
I don't want and I don't think it's years away.
But.
I would I wouldn't necessarily give you a firm commitment in terms of exactly how long it's going to take because I don't think we really know exactly how long it's gonna take but we've made great progress on that front and and I think we're going and the right direction with it right now.
Okay. Thank you so much for your time.
Thank you.
At this time it looks to be no further questions I'd like to turn it back up and just brianna garber for punishing remarks.
Thank you Stephanie there'll be a replay of death call beginning at 430 P. M Pacific time today, the replay and number is one 805 858367 and the conference I D is 8991456. Thank you everyone for joining us today.
And for your continued support of kind of X.
Thank you. This concludes today's conference you may now disconnect speakers. Please hold the line.