Q1 2024 ChromaDex Corp Earnings Call

Jericho: Ladies and gentlemen, thank you for standing by, and welcome to ChromaDex Corporation's first quarter of 2024 earnings conference call. My name is Jericho, and I will be the conference operator today. At this time, all participants are in 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 first quarter of 2024. If you have not reviewed this information, it is available in the Investor Relations section of ChromaDex's website at www.chromadex.com. I would now like to turn the conference call over to Ben Shumkin. Vice President of Latham Art. Please go ahead, Mr. Shao.

Ladies and gentlemen, thank you for standing by and welcome to <unk> Corporation's first quarter of 2024 earnings Conference call My.

Jacqueline: My name is Jacqueline and I will be the conference operator today.

Jericho: At this time, all participants are in listen mode only mode.

Speaker Change: Under this conference call is being recorded.

This afternoon from IDEXX issued a news release announcing the company's financial results for the first quarter of 2024.

Jacqueline: Not reviewed this information both are available within the Investor Relations section of Chrome IDEXX web site at Www Dot <unk> Dot com.

Jericho: I would now like to turn the conference call over to Ben Sampson.

Ben Shumkin: Thanks, Brett.

Yes.

Ben Sampson: Please go ahead.

Ben Sampson: Okay.

Ben Sampson: Okay.

Speaker Change: Thank you good afternoon, and welcome to <unk> Corporation's first quarter of 2024 results Investor call with US today are <unk>, Chief Executive Officer, Rob Fried Chief Financial Officer, Rihanna, Garber, and senior Vice President of scientific and regulatory affairs.

Ben Shumkin: Thank you, good afternoon, and welcome to ChromaDex Corporation's first quarter of 2024 results investor call. With us today are ChromaDex's Chief Executive Officer, Rob Fried, Chief Financial Officer, Brianna Gerber, and Senior Vice President of Scientific and Regulatory Affairs, Dr. Andrew Shao, who will join the call for Q&A.

Ben Shumkin: 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 Trunigin 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. Forward-looking statements represent only the company's estimates as of the date of this conference call and are not intended to give any assurances as to actual future results.

Speaker Change: Ours, Dr. Andrew Shao, who will join the call for Q&A. Today's conference call May include forward looking statements, including statements related to chroma DEXTENZA 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 <unk> in new markets.

Speaker Change: Business development opportunities future financial results cash needs <unk> operating performance investor interest and business prospects and opportunities as well as anticipated results of operations forward looking statements represent only the company's estimates on the date of this conference call and are not intend.

Speaker Change: To give any assurance as to actual future results.

Ben Shumkin: 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.

Speaker Change: 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 in forward looking statements.

Ben Shumkin: These risk factors include those contained in ChromaDex's quarterly report on Form 10-Q, most recently filed with the SEC, including results of operations, financial condition, cash flows, as well as global market and economic conditions affecting our businesses. Please note that the company assumes no obligation to update any forward-looking statements after the date of this conference call to conform with forward-looking statements, actual results, or changes to its expectations. In addition, certain financial information presented in this call refers to non-GAAP financial measures.

Speaker Change: These risk factors include those contained in chrome <unk> quarterly report on Form 10-Q, most recently filed with the SEC, including results of operations financial condition cash flows as well as global market and economic conditions on our businesses. Please note.

Speaker Change: That the company assumes no obligation to update any forward looking statements. After the date of this conference call to conform the forward looking statements actual results or changes to its expectations in.

Ben Shumkin: In addition, certain 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.

Ben Shumkin: 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 in the investor relations section of our website at www.chromadex.com. With that, it's now my pleasure to turn the call over to our Chief Executive Officer, Rob.

Speaker Change: Reconciliations to the appropriate GAAP measures.

Speaker Change: Finally, this conference call is being recorded via webcast. The webcast will be available at the Investor Relations section of our website at Www Dot <unk> Dot com.

Speaker Change: With that it's now my pleasure to turn the call over to our Chief Executive Officer, Rob right.

Robert N. Fried: Thank you, Ben, and good afternoon, everyone, and thank you for joining us on today's investor call. I'm proud to announce that we delivered a solid start to 2024, delivering $22.2 million in revenue and positive adjusted EBITDA of $0.7 million. This is the fourth consecutive quarter in which we have generated positive adjusted EBITDA, which reflects our unwavering commitment to maintaining fiscal discipline while making strategic R&D investments to support innovations launching later this year. In the first quarter, we generated net positive operating cash flow and ended the first quarter with $27.6 million in cash and no debt.

Robert N. Fried: Thank you Ben and good afternoon, everyone and thank you for joining us on today's investor call.

Robert N. Fried: I am proud to announce that we delivered a solid start to.

2024.

Rob: Delivering $22 2 million in revenue and positive adjusted EBITDA of $7 million.

Robert N. Fried: This is the fourth consecutive quarter in which we have generated positive adjusted EBITDA, which reflects our unwavering commitment to maintaining fiscal discipline, while making strategic R&D investments to support innovation launching later this year.

Robert N. Fried: In the first quarter, we generated net positive operating cash flow and ended the first quarter was $27 $6 million in cash and no debt.

Robert N. Fried: Our e-commerce business continues to be our largest and most reliable source of revenue; eCommerce sales for the first quarter were up 5% year over year as our marketing team continues to focus on initiatives and campaigns that drive direct and efficient returns and continues to implement strategies to build our own website as the growth engine for the business in the first quarter of 2023. We invested in a brand campaign through Amazon's homepage takeover, which drove a significant increase in new-to-brand purchases on Amazon.

Robert N. Fried: Our ecommerce business continues to be our largest and most reliable source of revenue.

Robert N. Fried: E Commerce sales for the first quarter were up 5% year over year as our marketing team continues to focus initiatives and campaigns that drive direct and efficient returns and continues to implement strategies to build our own website as the growth engine for the business.

Rob: The first quarter of 2023.

Robert N. Fried: We had invested in a brand campaign through Amazon's homepage takeover, which drove a significant increase in new to brand purchases on Amazon.

Robert N. Fried: In the first quarter of 2024, absent such a large campaign, we continued to see growth in our Amazon business and continued signs of stabilization in our website, providing the foundation for growth in 2024. In the first quarter, our team committed to be less focused on price promotion and focus on initiatives to build a robust base of subscribers to drive long-term customers. Although it is still too early to assess consumer behavior, we believe this is the right strategy going forward. 2024.

Rob: In the first quarter of 2024 absent such a large campaign, we continued to see growth in our Amazon business and continued signs of stabilization in our website business, providing the foundation for growth in 2024, and the first quarter our team committed to be less focused on price promotions.

Rob: Let's focus on initiatives to build a robust base of subscribers to drive long term customer value.

Robert N. Fried: It is still too early to assess consumer behavior. We believe this is the right strategy going forward for <unk>.

Robert N. Fried: We're also allocating more resources to optimize influencer relationships, retention strategies, content, and social media presence, which are important elements of our strategy going forward. Last month, we announced that we are partnering with two major specialty retail distributors, Sprouts Farmers Market and Vitamix. True Nyogen will be available in over 400 locations of Sprouts Farmers Market, as the first major grocery chain to carry TruNiagen and TruNiagen immune. TrueNigin will also be available on the retail shelves of over 700 vitamin shops.

Robert N. Fried: 124, we're also allocating more resources to optimize Influencer marketing.

Rob: Also retention strategies content, and social media presence, which are important elements of our strategy going forward.

Rob: Last month, we announced that we are partnering with two major specialty retail distributors sprouts farmers market and vitamin Shoppe Qunar.

Rob: <unk> will be available in over 400 locations of sprouts farmers market as the first major grocery chain to carry <unk> and true Nigel immune.

Rob: Sure Nigel will also be available on the retail shelves of over 700 vitamin shop locations.

Robert N. Fried: Our new partnerships with Sprouts and Vitamin Shop broaden and diversify the access of true nitrogen to a larger health and wellness-focused consumer base. It aligns with our vision to help as many people as possible transform the way they age. We are proud that the teams at ChromaDex continue to expand our network of partners, who all share a passion to bring solutions. Consumers who wish to promote health spend. We believe we are and have always been the gold standard of the NAD industry.

Robert N. Fried: Our new partnerships with sprouts, and vitamin Shoppe, broadens and Diversifies the access of <unk> into a larger health and wellness focused consumer base.

Rob: This aligns with our vision to help as many people as possible transform the way they age.

Rob: I am proud of the teams at <unk> continue to expand our network of partners, who all share a passion to bring solutions to consumers who wished to promote health span.

Rob: We believe we are and have always been the gold standard of the industry.

Robert N. Fried: <unk>.

Robert N. Fried: With over 30 peer-reviewed published human studies and over 100 published scientific studies, our ChromaDex external research program, which we call CERP, continues to be key in establishing clinical studies to explore the numerous health benefits Niagen can have on the human body. Here is our last quarterly update.

Rob: With over 30 peer reviewed published human studies in over 100 published scientific studies are <unk> external research program, which we call Sir.

Rob: Just to be key in establishing clinical studies to explore numerous health benefits <unk> can have on the human body.

Rob: Since our last quarterly update a number of preclinical trials have been completed that I want to highlight.

Robert N. Fried: A number of preclinical trials have been completed that I want to highlight. First, a recent preclinical study was designed to assess the effectiveness of liposome-based delivery of NR for treating cerebral ischemia. The study utilized liposome-encapsulated NR chloride given through IV injections in healthy mice and in cerebral ischemia model mice and examined its pharmacokinetics, organ distribution, and therapeutic impact in the mice models. The results demonstrated potential for Nr liposomes for broader clinical application of neuroprotective agents beyond standard stroke therapy. A second preclinical study examined the impact of the combination of NR and resveratrol on the Healing of Diabetic Ulcers Caused by Inflammation in a Diabetic Rat. The results highlighted the potential of NR and resveratrol in accelerating wound healing. Another preclinical study investigated the causes of miscarriage.

Rob: First our recent preclinical study was designed to assess the effectiveness of liposome based delivery of NR.

Robert N. Fried: For treating cerebral ischemia.

Rob: The study utilized liposome encapsulated NR chloride, given through IV injections, and healthy mice and in cerebral ischemia model months and examines its pharmacokinetics, Oregon distribution and therapeutic impact between the mice models the results demonstrated potential for MLR liposomes.

Rob: Broader clinical application.

Rob: Aero protective agents beyond standard stroke therapy.

Rob: The second preclinical study examining the impact of the combination of NR with Riseborough troll.

Rob: The healing of diabetic ulcers caused by inflammation in the diabetic rat model.

Robert N. Fried: Results highlighted the potential of NR in reserve and accelerating wound healing.

Robert N. Fried: Another preclinical study investigated the causes of miscarriages congenital malformations, particularly the role of NAD deficiency, using a mouse model interestingly researchers found that the risk of NAD deficiency is elevated during pregnancy.

Rob: Our results suggest that a sufficient supply is required to ensure normal embryonic development.

Robert N. Fried: [inaudible] Results suggest that a sufficient NAD supply is required to ensure normal embryonic development. Of course, further studies in human trials are needed to validate these observations, but the few preclinical study results I just highlighted are just some of many, and illustrate the boundless potential positive health benefits NRNiagen can provide. I do not know of another dietary supplement company that has an innovation pipeline of NAD precursors that may have such profound therapeutic or prophylactic value in the pharmaceutical space as ChromaDex.

Robert N. Fried: Of course further studies in human trials needed to validate these observations, but the few preclinical study results I just highlighted are just some of many illustrate.

Rob: Illustrate the boundless potential positive health benefits and our <unk> can provide.

Rob: I do not know of another dietary supplement company that has an innovation pipeline of NAD precursors that may have such profound therapeutic or prophylactic value in the pharmaceutical space as does <unk>.

Rob: We continue to invest in our science to further our understanding of the potential for <unk> to further develop innovative ways <unk> can benefit longevity and healthy aging.

Robert N. Fried: We continue to invest in our science to further our understanding of the potential for NIAID and further develop innovative ways Niagen can benefit longevity and healthy aging. As some of you may know, our partner, Juvenis, has launched a portfolio of skin care products powered by Niagen in South Korea and is looking into plans to launch them in the United States.

Rob: Some of you May know our partnered you Dennis.

Rob: Has launched a portfolio of skincare products powered by <unk>, and South Korea and is looking into plans to launch in the United States <unk>.

Robert N. Fried: Additionally, we continue to work with Zest-Depose to further research innovative products in the pet supply. As mentioned last quarter, we are increasingly close to announcing a new vertical for Niagen that will illustrate ChromaDex's unique position in the industry. While I acknowledge the development process has been long, I am proud of the teams at ChromaDex for being diligent and thorough in proper safety studies and client relationships with regulatory bodies, establishment of our supply chain infrastructure, and as the global authority in NAD science.

Robert N. Fried: Additionally, we continue to work with zesty caused further research innovative products in the pet supplement market.

Rob: As mentioned last quarter, we are increasingly close to announcing a new vertical for nitrogen that illustrate <unk> unique position in the industry.

Rob: While I acknowledge the development process has been long.

Rob: Proud of the teams at chromatin extra being diligent and thorough in.

Rob: And the proper studies on safety and efficacy compliance with regulatory bodies and establishment of our supply chain infrastructure.

Rob: As the global authority in NAV Simons, our mission at <unk> is to improve as many lives as possible.

Robert N. Fried: Our mission at ChromaDex is to improve as many lives as possible. Our unwavering commitment to this mission continues to drive our innovation pipeline to develop new NAD-boosting products and deliver them that benefit the way humans age. This includes products that extend beyond dietary supplements.

Rob: Unwavering commitment to this mission continues to drive our innovation pipeline to develop new <unk> products and delivery mechanisms.

Rob: Benefit the way humans age.

Rob: This includes products that extend beyond dietary supplements.

Robert N. Fried: As I mentioned earlier, every one of us at ChromaDex believes we represent the gold standard in the NAD industry. We will continue to provide the highest level of scientific integrity and use our position in the industry as a trusted partner to researchers, regulatory authorities, and world-class business partners to drive innovation. We recognize that research and development to support innovation takes time, and it may take more time than originally anticipated. Well, we are not yet ready to make any announcements.

Rob: As I mentioned earlier every one of US have complex believes we represent the gold standard in the industry.

Rob: We will continue to represent the highest level of scientific integrity and use our position in the industry as a trusted partner to researchers regulatory authorities.

Rob: Class business partners to drive innovation, we recognize that research and development to support innovation takes some time.

Rob: It may take more time than originally anticipated.

Speaker Change: We are not yet ready to make any announcements we look forward to sharing more details in our next update.

Robert N. Fried: We look forward to sharing more details in our next update. And I would like to now turn the call over to Brianna to discuss the quarter's results in more detail, and then on to Q&A and closing remarks.

Rob: Like to now turn the call over to Brianna to discuss the quarter's results in more detail and then onto Q&A and closing remarks brianna.

Brianna Gerber: Thank you, Rob. It's a pleasure to speak to our investors, partners, and team members who have joined us today. As it relates to the key highlights of our first quarter performance, ChromaDex delivered total net sales of $22.2 million, solid gross margins of 60.7%, a $1.3 million reduction in overall operating expenses, and a net loss of $0.5 million. Additionally, we achieved positive $0.7 million of adjusted EBITDA, a non-gap metric, and we yet again generated positive operating cash flow.

Brianna: Thank you, Rob it's a pleasure to speak to our investors partners and team members that have joined us today.

Brianna: As it relates to the key highlights of our first quarter performance.

Brianna: We delivered total net sales of $22 2 million solid gross margins of 67% a $1 3 million reduction in overall operating expenses and a net loss of $5 million.

Brianna Gerber: Additionally, we achieved positive <unk> 7 million of adjusted EBITDA, a non-GAAP metric and we yet again generated positive operating cash flow.

Brianna Gerber: Our performance this quarter demonstrates our strong financial management across the organization, which has enabled us to increase investments and growth. Specifically, and as anticipated, we ramped up R&D investments this quarter to support strategic initiatives and new launches planned for the second half of this year. With that, let's turn to the first quarter financials in more detail. As I said, total net sales in the first quarter of 2024 were $22.2 million, a 2% decline compared to the first quarter of 2023. This was primarily driven by a 2% decrease in TruNiagen.

Brianna: Our performance this quarter demonstrates our strong financial management across the organization, which has enabled us to increase investment congrats.

Brianna: Specifically and as anticipated, we ramped R&D investments this quarter to support strategic initiatives and new launches planned for the second half of this year.

Brianna Gerber: With that let's turn to the first quarter financials in more detail.

Brianna: As I said the total net sales in the first quarter of 2024 was <unk> 2, million% to 2% decline compared to the first quarter of 2023.

Brianna: This was primarily driven by a 2% decrease in Shanghai adjourn at 5% growth in E. Commerce was overshadowed by a 17% reduction in combined Watson's another BTB sales largely due to the timing of those sales.

Brianna Gerber: A 5% growth in e-commerce was overshadowed by a 17% reduction in combined Watsons and other B2B sales, largely due to the timing of those sales. As a quick reminder, in mid-March of the previous year, we invested in a brand-building event with the Amazon homepage takeover, which helped boost sales during that period. This event created a more challenging year-over-year comparison, especially as we did not undertake a similar brand-building event in the current quarter. Instead, we remain focused on marketing efficiency while developing an influencer and social media strategy that we expect will broaden awareness of TrueNiagin beginning later this year.

Brianna: As a quick reminder, in mid March of the previous year, we invested in a brand building events with the Amazon homepage takeover, which helped boost sales during that period. This event created a more challenging year over year comparison, especially with we did not undertake a similar brand building events in the current quarter.

Brianna: Instead, we remain focused on marketing efficiency, while developing an influencer and social media strategy that we expect will broaden awareness of <unk> and beginning later this year.

Brianna Gerber: Now I'll briefly touch on Watson's and other B2B sales. As with all partnerships, timing of sales can vary. And it's worth noting that the first quarter of 2023 saw the highest sales volume to Watson's last year, including ship-in for their truniogen immune lock.

Brianna: Now I'll briefly touch on Watson as another BW sales as.

Brianna: As with all partnerships timing of sales can vary.

Brianna: With noting that the first quarter of 2023, so the highest sales volume the Watson last year, including <unk> immune launch.

Brianna Gerber: On a full-year basis, last year, Watson's growth was driven by the launch of TrueNigent Immune, with the base business being steady. In addition, while total ingredient sales were flat year over year, we had moderate growth of 0.2 million in Niogen ingredient sales, which was offset by an equal decline in sales of other ingredients. Gross margins increased by 80 basis points to 60.7% compared to 59.9% in the first quarter of 2023, primarily driven by shifts in our business mix.

Brianna: On a full year basis last year.

Rob: That's driven by the launch of <unk> with today's business being steady and.

Rob: In addition, while total ingredient sales were flat year over year, we had moderate growth appoint 2 million NIH and ingredient sales.

Brianna Gerber: Offset by an equal decline in sales of other ingredients.

Rob: Gross margins increased by 80 basis points to 67% compared to 59, 9% in the first quarter of 2023, primarily driven by shifts in our business mix.

Brianna Gerber: Specifically, e-commerce sales constituted 58% of our total net sales in the current quarter, up from 54% in the prior year quarter. Selling and marketing expense as a percentage of net sales decreased to 30.4%, improving 450 basis points compared to 34.9% in the first quarter of 2023. As discussed earlier, we invested in a large brand-building event last year and did not have a similar campaign this year, which showed an improvement in overall efficiency.

Rob: Specifically e-commerce sales constituted 58% of our total net sales in the current quarter up from 54% in the prior year quarter.

Brianna Gerber: Selling and marketing expense as a percentage of net sales decreased to 34% improving 450 basis points compared to 34, 9% in the first quarter FY2023.

Rob: As discussed earlier, we invested in a large brand building about last year and did not have a similar campaign this year, which drove the improvement in overall efficiency.

Brianna Gerber: As anticipated, research and development expenses increased $0.9 million year-over-year as we invest to commercialize our new vertical in 2024, along with new NAD precursor development. As reported, general and administrative expenses decreased $1.1 million year-over-year, primarily due to reductions in executive and other administrative headcount expenses, bad debt expense, severance and restructuring expense, and share-based compensation expense.

Rob: Now as anticipated research and development expenses increased $9 million year over year, as we invest to commercialize our new vertical in 2024, along with new NAD precursor development.

Rob: As reported general and administrative expense decreased $1 1 million year over year, primarily due to reductions in executive and other administrative headcount expenses.

Rob: That expense severance and restructuring expense and share based compensation expense.

Brianna Gerber: For the first quarter of 2024, our operating loss was $0.7 million versus a $2 million loss in the first quarter of 2023, an improvement of $1.2 million driven by lower total operating expenses. The net loss attributable to common stockholders for the first quarter of 2024 was $0.5 million, or a loss of $0.01 per share, compared to a net loss of $1.9 million and a loss of $0.03 per share in the first quarter of 2023.

Rob: For the first quarter of 2024, our operating loss was <unk> 7 million versus a $2 million loss in the first quarter of 2023, an improvement of $1 2 million driven by lower total operating expenses.

Brianna Gerber: The net loss attributable to common stockholders for the first quarter of $2024 5 million or a loss of one per share compared to a net loss of $1 9 million and a loss of <unk> <unk> per share in the first quarter of 2023.

Brianna Gerber: Moving to the balance sheet and cash flow, our balance sheet remains strong. We ended the quarter with $27.6 million in cash and no debt. For the three months ended March 31, 2024, net cash provided by operations was $0.3 million compared to a $2.8 million cash inflow in the same period last year. The difference year-over-year was largely driven by changes in working capital, related to relatively greater reductions in accounts payable of $1.6 billion and smaller reductions in inventory and prepaid expenses and other assets, $0.7 and $0.5 million, respectively.

Rob: Moving to the balance sheet and cash flow our balance sheet remains strong we ended the quarter with $27 6 million in cash and no debt for.

Rob: For the three months ended March 31, 2024, net cash provided by operations with <unk> 3 million compared to a $2 8 million cash inflow in the same period last year.

Rob: The difference year over year was largely driven by changes in working capital related to relatively greater reductions in accounts payable of $1 6 million and smaller reductions in inventory and prepaid expenses and other assets.

Brianna Gerber: Seven and <unk> 5 million respectively.

Rob: Finally, while it does not impact our first quarter financial based on our determination that a loss is not yet probable.

Brianna Gerber: Finally, while it does not impact our first quarter financials based on our determination that a loss is not yet probable, I wanted to briefly comment on a recent ruling in the Delaware litigation. In March, the district court judge granted Elysium's motion for attorney fees and costs. ChromaDex intends to appeal this decision, and if successful, nothing would be owed.

Speaker Change: I wanted to briefly comment on a recent ruling in the Delaware litigation.

Speaker Change: In March the District Court judge granted a lithium motion for attorneys' fees and costs.

Speaker Change: Sometimes you appeal that decision and if successful nothing will be however, we disclosed an estimate of the maximum liability in our 10-Q report.

Brianna Gerber: However, we disclose an estimate of the maximum liability in our 10-Q report. As it relates to our 2024 full-year P&L Outlook, detailed information on key financial metrics can be found in our earnings press release and accompanying slide presentation. In short, all key metrics remain consistent with last quarter's outlook.

Speaker Change: As it relates to our 2020 for full year P&L outlook detailed information on key financial metrics can be found in our earnings press release and accompanying slide presentation.

Brianna Gerber: In short all key metrics remain consistent with last quarter's outlook.

Brianna Gerber: As a reminder, our top-line outlook includes revenues from new product launches, partnerships, and other opportunities that are in our pipeline. Of note, the launch of the new vertical we discussed last quarter is taking longer than initially anticipated, but it continues to be part of our growth plan for 2024 and beyond. Furthermore, we continue to anticipate that the first half of the year will include heavier investments, particularly in R&D, to prepare for new launches.

Speaker Change: As a reminder, our topline outlook included revenues from new product launches partnerships and other opportunities that are in our pipeline.

Brianna Gerber: Of note the launch of the new vertical we discussed last quarter is taking longer than initially anticipated, but it continues to be part of our growth plan for 2024 and beyond.

Speaker Change: Furthermore, we continue to anticipate that the first half of the year will include heavier investments, particularly in R&D to prepare for new launches.

Brianna Gerber: Accordingly, revenues will ramp up in the second half. At the same time, R&D investments will moderate. In summary, we made important strides this quarter to advance our strategic roadmap for 2024 while delivering solid bottom-line results. Our ability to maintain positive operating cash flows and a robust balance sheet is evidence of the strong financial foundation we have created while continuing to invest in growth initiatives. We also strengthened our market position with new partnerships, which Rob mentioned, allowing us to expand our customer reach in new retail and grocery store locations. I'm excited about the momentum we built and the new revenue opportunities that we expect to unlock later this year. Operator, we are now ready to take questions.

Speaker Change: Accordingly revenues will ramp in the second half at the same time R&D investments will moderate.

Brianna Gerber: In summary, we made important strides this quarter to advance our strategic roadmap for 2024, while delivering solid bottom line results.

Speaker Change: Our ability to maintain positive operating cash flows and a robust balance sheet is evidence of the strong financial foundation, we have created while continuing to invest in growth initiatives. We also strengthened our market position with new partnerships, which Rob mentioned, allowing us to expand our customer reach and new retail and grocery store locations I'm excited about the momentum.

Speaker Change: And the new revenue opportunities that we expect to unlock later this year.

Operator: The floor is now open for questions, so to ask a question at this time, please press star 1 and the number one on your telephone keypad. We'll just pause for a moment, and we have compiled a Q&A Roster. The first question comes from the line of Raghuram Selvaraju with HC Wingright. Please go ahead. Thanks so much.

Speaker Change: Operator, we are now ready to take questions.

Speaker Change: The floor is now open for your question. So if you ask a question at this time please press.

Raghuram Selvaraju: Card and the number one of your telephone keypad.

Speaker Change: We'll just pause for a moment.

Speaker Change: Compile the Q&A roster.

Speaker Change: The first question comes from the line of Ram Silverado.

Raghuram Selvaraju: <unk> with H C. Wainwright. Please go ahead.

Raghuram Selvaraju: Thanks so much for taking my questions and congratulations on an excellent start to the year. I was wondering if you could talk a little bit about gross margin evolution and how you see that being driven by the overall product channel. In particular, with respect to the role that e-commerce is likely to play in the future revenue base and whether an increasing percentage of the revenue coming from e-commerce is necessary to maintain gross margin improvement or if you can achieve gross margin improvements even if other channels start to contribute more than they have in the past.

Raghuram Selvaraju: Thanks, so much for taking my questions and congrats on an excellent start to the year.

Raghuram Selvaraju: I was wondering if you could talk a little bit about gross margin evolution.

Raghuram Selvaraju: And how you see that being driven by the overall product channel mix in particular with respect to the role that E. Commerce is likely to play in the future revenue base and is.

Raghuram Selvaraju: Increasing percentage of the revenue coming from E. Commerce is necessary to maintain gross margin improvement or you should can achieve gross margin improvements even if other channels start to contribute more than they have in the past.

Brian: Hi, Robyn it's Brian.

Brianna Gerber: Hi Ram. It's Brianna.

Brian: Gross margins. If you look recently, we've been trending between 60 and 61% when we turned about higher is when we have quarters with the higher ecommerce mix and so I think that speaks to your point E. Commerce margins generally we better Andy low 70, excuse me low seventy's and B to B side and the <unk>.

Brianna Gerber: So, gross margins, if you look recently, we've been trending between 60% and 61%. When we trend slightly higher, it's when we have quarters with a higher e-commerce mix. And so, I think that speaks to your point. E-commerce margins, generally, as we've said, are in the low 70s and, you know, the more B2B side in the low-mid 50s. So, there is a mixed impact there. That said, while the mix is a contributor, we do have ongoing cost savings initiatives.

Raghuram Selvaraju: Low mid fifties. So there is a mix impact there.

Brianna Gerber: We have targets every year. We executed many of these last year that will continue into this year and some things set up for the second half that should contribute to the overall slight improvement. We expect on a full-year basis versus the 60.8% gross margin last year.

Brianna Gerber: Well mix as a contributor we do have ongoing cost savings initiatives. We have targets every year. We executed many of these last year that will continue into this year and some things set up for the second half that should contribute to the overall slight improvement we expect on a full year basis versus the 68% gross margin last year.

Brianna Gerber: Sure.

Speaker Change: Great Secondly.

Robert N. Fried: Secondly, you had previously talked about the intent to move those customers who already utilize TruNiagen or those customers who have exhibited adherence to TruNiagen to higher dosage forms of the product. And I was just wondering if you could comment on how that initiative is going and to what extent you expect it to contribute to revenue growth in the future.

Robert N. Fried: You had previously talked about.

Speaker Change: The intent to move those customers, who already utilized <unk> are those customers who have exhibited adherence to <unk>.

Raghuram Selvaraju: Two higher dosage forms as the product and I was just wondering if you could comment on how that initiative is going and to what extent you expect it to contribute to revenue growth in the future.

Speaker Change: Right that is.

Robert N. Fried: Right, that initiative has been successful thus far. I mean, we've had some supply chain issues, which we have mostly resolved at this point.

Speaker Change: Initiative has been successful thus far I mean, we had some.

Speaker Change: Supply chain issues, which we have mostly resolved at this point, but we see that there is a great demand for the 1000 milligram people, who are taking 1000 milligram notice the difference sooner and its more dramatic.

Robert N. Fried: But we see that there is a great demand for the 1,000 milligram. People who are taking 1,000 milligram notice the difference sooner, and it's more traumatic. And what has been surprising is that the 1000mg launch has also worked for new-to-brand customers. Our anticipation initially was that it was just going to be existing customers migrating over to 1000mg. But, in fact, it has been very effective for new-to-brand customers as well. It's a profitable skew for us. It's an effective skew for us, so we see us moving more in that direction.

Speaker Change: And what has been surprising is that the 1000 milligram launch. That's also worked for new to brand customers. Our anticipation. Initially it was that was just going to be existing customers migrating over 2000 milligrams, but in fact, it's been very effective for new to brand customers as well.

Speaker Change: It's a profitable SKU for us, it's an effective SKU for us so we see us moving more in that direction in the future.

Robert N. Fried: And then lastly, I was wondering if you could comment on two additional aspects of the company's story for the remainder of 2024. One concerns what you anticipate may be value inflection points coming from the existing partnerships that you have, for example, with Nestlé Health Sciences and Sinopharm. Do you anticipate any meaningful announcements or developments on either of those fronts over the course of this year? And also, could you talk a little bit about what you anticipate from the standpoint of clinical assessment of nicotinamide riboside in 2024 and which clinical indications you may be most excited about as we look ahead to the remainder of 2024? Thank you.

Speaker Change: And then lastly, I was wondering if you could comment on two additional aspects of the company's story for the remainder of 2024, one pertains to what you anticipate maybe value inflection points coming from the existing partnerships that you have for example.

Speaker Change: <unk> with Nestle Health Sciences, and Sino farm do you anticipate any meaningful announcements or developments on either of those fronts over the course of this year and also if you could talk a little bit about what you anticipate from the standpoint of clinical assessment of nicotinic.

Speaker Change: My driver sides in 2024, and which in particular clinical indications you maybe more most excited about as we look ahead to the remainder of 2024. Thank you.

Speaker Change: I'll start with the second question, we are very much looking forward to seeing the data on the long Covid study that Harvard has been doing.

Robert N. Fried: I'll start with the second question. We are very much looking forward to seeing the data on the long COVID study that Harvard has been doing. We know that they have completed the actual study, but we haven't, it's a blinded study. We have not yet seen the data. We're excited to see that.

Speaker Change: Know that they have completed the actual study, but we haven't it's a blinded study we have not yet seen the data. We're excited to see that we're also excited about the Parkinson's study, which should be concluded we thought it would be done in December it's obviously going to get done a little later than that probably first quarter of next year, but it's fully recruited it's just all of those participants are.

Robert N. Fried: We're also excited about the Parkinson's study, which should be concluded. We thought it would be done in December. It's obviously going to get done a little later than that, probably the first quarter of next year. But we have fully recruited.

Robert N. Fried: It's just all those participants are taking a gram of it every day for a year. So we probably won't see the data till sometime, probably the first half of next year, but obviously, we're very, very excited about that study as well. There's also other work that we're doing in the orphan disease category, diseases like ataxia and Cut Canes that we're very excited about and we think are important for us for later in the show.

Speaker Change: Taking a gram a day for a year.

Speaker Change: So we.

Speaker Change: We probably won't see the data till sometime probably the first half of next year, but obviously, we're very very excited about that study as well.

Robert N. Fried: There's also other work that we're doing in the orphan disease category. These diseases like ataxia.

Speaker Change: And cockayne that we're very excited about and we think are important for us or later in this year.

Speaker Change: With regard to the first question, we don't anticipate any announcements or exciting news with regard to Sino farm.

Robert N. Fried: With regard to the first question, we don't anticipate any announcements or exciting news with regard to Sinopharm. We are talking to them regularly about ways to increase cross-border sales into China and are also talking to some other partners to work with Sino and ChromaDex to increase the cross-border sales of TruNiagen into China. But we don't expect any major announcements. As you know, we have a partner there called H&H, and they also sell cross-border into China, and they do so extremely successfully.

Speaker Change: We are talking to them regularly about ways to increase the cross border sales into China and are also talking to so.

Robert N. Fried: Some other partners to work with Sino and <unk> increased the cross border sales of <unk> into China.

Speaker Change: But we don't expect any major announcements as you know we have a partner there called HMH and they also sell cross border into China, and they do so extremely successfully.

Robert N. Fried: It is possible that we will be expanding the relationship with H&H later in 2024. That would be Other Products and Other Territories. Nestle has now launched with two brands, Pure Encapsulations, so Niagen exists in, I think, three SKUs with Pure Encapsulations, and also Solgar, another important high-end Nestle brand, has released a product. We haven't seen the actual data. We only know anecdotally that they're very happy with the sales of both, and we've seen ads for both.

Speaker Change: It's possible that we will be expanding the relationship with HMH later in 2024.

Speaker Change: That would be other products and other territories.

Speaker Change: Nestle has now launched.

Robert N. Fried: With two brands fewer encapsulation. So <unk> exists in I think three skus with Julian cancellations and also Sagar. Another important high end <unk> brand has released the product, but we haven't seen the actual data we only know anecdotally that they are very happy with the sales and both and we've seen ads for both.

Robert N. Fried: We're very conservative with our estimates with regard to Nestle, so we're not expecting any major announcements. But we're hopeful that they will continue to grow and expand and that we'll see more ingredient purchases from now. There are some other partners that we have been talking about. It's possible in the balance of 2024 that you will read about or hear about other partnerships that would expand the NIAID business.

Speaker Change: We're very conservative with our estimates with regard to Nestle, So we're not expecting any major announcements.

Speaker Change: But we're hopeful that they will continue to grow and expand and that we'll see more ingredient purchases from nestle.

Speaker Change: There are some other partners that we have been talking about it's possible in the balance of 2024 that you will.

Speaker Change: Read about or hear about other partnerships that would expand the nitrogen business with prominent.

Speaker Change: Thank you very much.

Speaker Change: Sure.

Robert N. Fried: Okay.

Speaker Change: Our next question comes from the line of Mitch Neera <unk> Company. Please go ahead.

Mitchell Brad Pinheiro: Our next question comes from the line of Mitch Pinheiro. It's a third event company. Please go ahead.

Mitchell Brad Pinheiro: Yeah, hi, good afternoon. All right, there's a couple questions. So, you know, with the first quarter revenue, you know, to reach 16% growth for the year, it's going to be a, you know, solid roughly 23% for the last nine months. I'm curious. Where should we expect that to come from, and is this something I heard Brianna say, you know, that revenue is obviously ramped up with a new product in the second half. But I'm curious whether the second quarter is going to see any acceleration from Q1.

Mitchell Brad Pinheiro: Yes, hi, good afternoon.

Speaker Change: Just a couple of questions.

Mitchell Brad Pinheiro: So with the first quarter revenue.

Mitchell Brad Pinheiro: To reach 16% growth for the year, it's going to be.

Mitchell Brad Pinheiro: Solid roughly 23%.

Speaker Change: Yes, nine months I'm curious.

Mitchell Brad Pinheiro: We're where we should expect that to come from and is this something I heard Brent beyond what you say.

Mitchell Brad Pinheiro: Revenues, obviously ramp with a new product in the second half.

Speaker Change: I'm curious whether the second quarter is going to see any acceleration from Q1 levels.

Speaker Change: Hi, Mitch.

Brianna Gerber: Hi Mitch. So we are not baking in any new product revenue in the second quarter, which, as you said, is implied in the outlook. The ramp will be in the second half. We've been very consistent with that. There's nothing that I'd point to in terms of a clear, you know, catalyst for the second quarter. We've delivered, you know, steadily. We did reiterate our full year outlook of at least 16 percent faster growth than last year, and that includes the combination of this new vertical. We've been discussing other new partnerships and product launches. So I'm not going to comment specifically on the second quarter, but it is the second half, as you heard.

Speaker Change: We are not baking in any new product revenue in second quarter, which as you said is implied in the outlook the ramp will be in the second half we have been very consistent with that.

Speaker Change: Theres nothing that I would point to in terms of a clear catalyst in terms of the second quarter.

Speaker Change: Delivered steadily we did reiterate our full year outlook of that at least 16% faster growth than last year and that includes the combination of this new vertical we have been discussing other new partnerships and product launches so not going to comment specifically on second quarter, but it is a second half as you heard.

Brianna Gerber: Okay, so to get the 23, you know, you're going to have to do some combination of 23% in the back half to reach your 16%. So, I guess you're comfortable that you're going to see a strong enough back half to accomplish that? Is that what you're saying in your guidance?

Speaker Change: Okay. So so.

Speaker Change: So to get to 23.

Speaker Change: We're going to have to do some combination of 23% in the back half to reach your 16%.

Brianna Gerber: Kind of growth guidance, so youre, I guess youre comfortable that youre going to see a strong enough back half to accomplish that is that what is that what youre, saying in your guidance.

Brianna Gerber: It is, yes, and then recall last year from an absolute dollar basis, Q1 was the highest revenue quarter, so we have the toughest comp there, and then other quarters were lower than that, so there's also easier comparisons as we move throughout the year.

Speaker Change: It is yes, and then recall last year from an absolute dollar basis Q1 was the highest revenue quarter. So we have the toughest comp there.

Speaker Change: And the other quarters were lower than that so there is also easier comparisons as we move throughout the year.

Brianna Gerber: Okay and then.

Mitchell Brad Pinheiro: Okay, and then with the new retail partners. Could you, Rob, sort of compare and contrast your thoughts there with the launch at Walmart, which, you know, maybe wasn't exactly the right customer fit, but how do you expect the launch to go, why you chose these companies, and if it promises further retail expansion in the future?

Speaker Change: With the new retail.

Speaker Change: Partners.

Speaker Change: Could you.

Speaker Change: Could you sort of compare and contrast.

Speaker Change: Your thoughts there.

Speaker Change: With the launch at Walmart.

Speaker Change: Wasn't maybe it wasn't exactly the right customer fit but.

Speaker Change: How do you expect the launch to go why you chose these companies and.

Speaker Change: If it <unk>.

Mitchell Brad Pinheiro: Portends further retail expansion in the future.

Speaker Change: There might be further retail expansion in the future, but it won't be mass retail like Walmart in the near future.

Robert N. Fried: There might be further retail expansion in the future, but it won't be mass retail like Walmart in the near future. Vitamin Shoppe is interesting because the store managers at Vitamin Shoppe are very well-informed. They know Niagin very, very well.

Speaker Change: Vitamin Shoppe is interesting because the store managers at vitamin Shoppe are very well informed.

Speaker Change: No <unk> very very well.

Robert N. Fried: They were selling NMN extraordinarily well, but they have removed NMN from their shelves since it became an illegal ingredient. And longevity, in general, is an important category for vitamin shots. So there was not a lot of education that needed to be done at Vitamin Shop. However, marketing initiatives with Vitamin Shop will require further direct enhancement with the store managers. We won't have to do a mass television campaign to create awareness to support it, which was the case with Walmart. And, as you recall, we did a television campaign. And when we got it up and running, the sales were actually quite strong at Walmart. It just took too long.

Speaker Change: They were selling <unk> extraordinarily well, but has have removed denim and from their shelves since it became an illegal ingredient.

Speaker Change: And longevity in general is an important category provide them and Chuck.

Speaker Change: So there was not a lot of education that needed to be done at vitamin Shoppe marketing initiatives with vitamin Shoppe will be further direct enhancement with the store managers, we won't have to do a mass TV campaign to create awareness to support it which was the case with Walmart.

Speaker Change: And as you recall, we did a TV campaign in when we got it up and running the sales were actually quite strong at Walmart just took too long.

Robert N. Fried: And by the time we got the ad out and running and distributed, Walmart had already made its decision to pull back and did not justify further investment in that media campaign. Sprouts, as well, is another example of a specialty high-end retail that we think is of extreme overlap with the core customer base of True9 and will not require a significant investment of advertising dollars to support. And you might see more deals like that, from specialty retailers that are well informed and are

Speaker Change: And by the time, we got the <unk>.

Speaker Change: Ed out and running and distributed Walmart had already made its decision to pull back and then did not justify further investment in that media.

Speaker Change: Okay.

Speaker Change: Sprouts as well as another example of specialty high end retail that we think is extreme overlap with our core customer base of <unk>.

Robert N. Fried: And we will not require a significant investment of advertising dollars.

Robert N. Fried: To support.

Mitchell Brad Pinheiro: And you might see more deals like that specialty retailers that are well informed.

Speaker Change: The direct directly overlap our customer base.

Mitchell Brad Pinheiro: And when it comes to pricing, the product will be similar to, you know, your e-commerce prices and margins are similar to your

Robert N. Fried: And when it comes to pricing of the product will be similar to.

Mitchell Brad Pinheiro: Your ecommerce prices or.

Mitchell Brad Pinheiro: And Martin margins or to your margins similar to your your ecommerce business.

Robert N. Fried: No, the margins are lower in retail than they are in e-commerce. And, yes, the pricing will be complex.

Speaker Change: No the margins are lower in retail than they are in e-commerce, and yes, the pricing will be comparable.

Robert N. Fried: Okay.

Speaker Change: Okay and then.

Mitchell Brad Pinheiro: Okay, and then, um... I guess. And just the last question is... So in R&D, so you're your investment or you got it. I forget the name of the firm that approved your supplement integrity, but was that a major expense in Q1?

Mitchell Brad Pinheiro: I guess.

Mitchell Brad Pinheiro: Just the last question is.

Speaker Change: So in the R&D day.

Mitchell Brad Pinheiro: Your.

Speaker Change: Investment or you got.

Speaker Change: I forget the name of the firm that approved.

Mitchell Brad Pinheiro: Or you're.

Mitchell Brad Pinheiro: Your supplement.

Mitchell Brad Pinheiro: Degradation.

Speaker Change: But was that a major expense last Q1.

Brianna Gerber: No, Alchemist Assured is, I believe, the one you're referring to. We also have NSF certified it. Those actually get picked up in our cost of goods sold related to making and certifying the product, so it is not a driver of R&D. That increase in R&D, and as you saw, it was up, you know, about $900,000 year-over-year. Also, sequentially from the fourth quarter, about a million dollars was related in large part to this new vertical that we've been talking about, getting that ready for launch.

Speaker Change: No I'll alkermes assured as I believe the one you're referring to we also have the NSF certified for sport those actually got picked up in our cost of goods sold related to making and certifying the product. So it was not a driver of R&D that that increase in R&D and as you saw it was up about 900000 year over year also sequentially from.

Speaker Change: Fourth quarter about $1 million was related in large part to this new vertical that we've been talking about getting that ready for launch also new NAD precursor development that we've been working on as well as there's always some ongoing <unk> studies and other things in that number.

Brianna Gerber: Also, new NAD precursor development that we've been working on, as well as there are always some ongoing CERP studies and other things in that number. We do expect Q2, you know, similarly heavy investments. We talked about the first half again setting up there and moderating a bit in the second half with respect to R&D.

Brianna Gerber: We do expect Q2, similarly heavy investments we talked about first half again set up there and moderating a bit in the second half with respect to R&D.

Speaker Change: Okay, Alright, thank you for taking the questions I'll get back in the queue.

Mitchell Brad Pinheiro: Okay. All right. Thank you for taking the questions. I'll get back in the queue.

Speaker Change: Thanks Spence Thanks Mitch.

Mitchell Brad Pinheiro: Our next question comes from the line of Sean Mcgowan with Roth Capital Partners.

Sean Patrick McGowan: Our next question comes from the line of Sean McGowan with Roth Capital Partners. Please, go ahead.

Sean Patrick McGowan: Go ahead.

Sean Patrick McGowan: Good afternoon, Rob. Good afternoon, Brianna.

Sean Patrick McGowan: Good afternoon, Rob good afternoon Rihanna.

Sean Patrick McGowan: Hey, Sean.

Sean Patrick McGowan: Switching back to the question on the retailers.

Sean Patrick McGowan: When you talked in the past about different periods of time with Watson there was occasionally kind of a pipeline fill in our pipeline contractions. So should we be expecting.

Sean Patrick McGowan: Switching back to the question on the retailers. When you've talked in the past about different periods of time with Watson, there was occasionally, you know, kind of a pipeline fill and a pipeline contraction. So should we be expecting kind of an abnormal load-in period for these retailers as they stock the product initially, or will the load-in be more gradual?

Speaker Change: Kind of an abnormal loading period for these retailers is the stock the product initially.

Speaker Change: Load and be more gradual.

Sean Patrick McGowan: There is obviously an initial purchase.

Robert N. Fried: There is obviously an initial purchase, but it's not quite as true.

Speaker Change: It's not quite as dramatic.

Robert N. Fried: Okay.

Robert N. Fried: And will they each have the product in all of their stores at the same time, you know, to start out with? They don't yet, but they're building toward that.

Robert N. Fried: Were they each have the product in all of their stores at the same time, so that they don't.

Robert N. Fried: They don't yet, but they are building towards that.

Robert N. Fried: Okay.

Robert N. Fried: Okay.

Sean Patrick McGowan: Okay. And, you know, I think I hear you loud and clear on the cadence of R&D spending, Brianna, but would you say that this... this quarter? Is this the low point of the year for gross margin as a percentage of sales, or might we expect to see a lower quarter?

Speaker Change: And.

Speaker Change: I think I hear you loud and clear on this the cadence of R&D.

Speaker Change: Spending on it but would you say that this.

Sean Patrick McGowan: This quarter is this the low point of the year for gross margin as a percentage of sales or.

Sean Patrick McGowan: Expect to see lower quarter weakness.

Sean Patrick McGowan: When I think about 67%.

Brianna Gerber: What I'd say to that 60.7% is, you know, that's pretty strong. It's certainly just slightly below our 60.8 full year number. And we've said we expect to be slightly higher. So I think you can, you know, imply in that what you will, which is, you know, probably one of the lower ones. But there is some mixed aspect to that. And so, you know, when you get closer to the 61 and above, it has a stronger e-commerce mix in those numbers. We think this is a solid gross margin higher than 60.8% for the year feels comfortable. Great

Brianna Gerber: Pretty strong it certainly just slightly below our 68 full year number and we said we expect to be slightly up. So I think you can imply.

Brianna Gerber: What you will.

Brianna Gerber: Probably it's one of the lower but there is some mix aspect to that and so when you get closer to the 61 and above it has stronger e-commerce mix in those numbers.

Speaker Change: We think this is a solid gross margin higher than 68% for the year ourselves comfortable.

Sean Patrick McGowan: Right, thank you. Rob, did I hear you correctly that despite going up against the event, the marketing event last year on Amazon, your sales through Amazon were actually up versus the first quarter of last year? Yes, sir. Would you attribute that to the, is that a sign that that effort was successful, or do you step back and say, huh, maybe we didn't need to spend that money? No, I mean, I look at it as the awareness was raised, and you got that additional, you know, follow through. How are you guys doing? I think it was a good choice.

Speaker Change: Great. Thank you.

Sean Patrick McGowan: Rob did I hear you correctly that the.

Sean Patrick McGowan: Despite going up against.

Speaker Change: The event the marketing event last year on Amazon and your sales through Amazon were actually up versus.

Sean Patrick McGowan: The first quarter of last year.

Sean Patrick McGowan: Yes, Sir.

Sean Patrick McGowan: So would you attribute that to is that a sign that that.

Sean Patrick McGowan: It was successful or do you step back and say, maybe we don't need to spend that money.

Sean Patrick McGowan: I look at it as the awareness is raised and you've got that additional.

Sean Patrick McGowan: Follow through how are you guys looking at it.

Sean Patrick McGowan: I think it was a good program that was too expensive.

Robert N. Fried: I think it was a good program that was too expensive.

Robert N. Fried: Okay.

Robert N. Fried: Yes.

Robert N. Fried: Okay and then the.

Sean Patrick McGowan: Okay, and then the last question I have for now is the 1000 milligram SKU. You expect, you may have commented on this in the past, but do you expect that to be revenue-accretive? I know, you know, you know that I take the product. So now, instead of taking, you know, four 300s a day, I'm taking 1,000 and a 12. So, I mean, 1,000 and a 300. So I'm taking slightly more, but I'm only taking two pills. So is that revenue accretive to you guys?

Speaker Change: Last question I have for now.

Sean Patrick McGowan: The 1000 milligram SKU is that do you expect that you may have commented on this in the past, but do you expect that to be revenue accretive.

Sean Patrick McGowan: But I will take the product and so now instead of fishing.

Sean Patrick McGowan: 300, today, and taking a thousand and 12 so.

Sean Patrick McGowan: 300, <unk>. Thank you slightly more but I'm only taking two pills or was that is that revenue accretive to you guys.

Sean Patrick McGowan: It is slightly revenue accretive but also.

Robert N. Fried: It is slightly revenue appreciative but also captures more cost effect.

Robert N. Fried: More cost effective.

Robert N. Fried: Okay.

Robert N. Fried: But I'm just wondering if something that's a good deal for me is a bad deal for you. Do you know what I mean?

Robert N. Fried: I'm just wondering if it's something that's a good deal for me you've got a bad deal for you.

Robert N. Fried: That's a good deal for both of them.

Robert N. Fried: Okay.

Robert N. Fried: A good deal for both.

Brianna Gerber: And I think just underscoring Rob's earlier point on new to brand, you know, the fact that it was more new to brand than we expected, you know, it's very early, and as Rob noted, we've been in and out of stock, you know, we were chasing demand, we've now caught up, so it'll be better to see a clear picture, but you know, we're not seeing that there's a large percentage kind of doing what you're doing, there may be some, but overall, you know, we're getting people to trade up to the higher dose, there's good retention, good lifetime value projections, so we're feeling, you know, confident in that scoop for the long term. Still a small piece overall of the business, but you know, it's the right move to make.

Robert N. Fried: So maybe to Loopnet underscoring Rob's earlier point on new to brand.

Brianna Gerber: That it was more new to brand than we expected.

Brianna Gerber: Early and as Rob noted, we've been in and out of stock. We are chasing demand. We've now caught up so it'll be better to see a clearer picture, but we're not seeing that there's a large percentage kind of doing what you're doing there may be some but overall, we're getting people to trade up to the higher dose there's good retention good lifetime value projections.

Brianna Gerber: So we're feeling confident in that scheme for the long term, it's still a small piece of our all of the business, but it's the right move to make but also briana brings up a good point retention is key and it's still early in the game to see how the retention numbers compare.

Robert N. Fried: But also, Brianna brings up a good point. Retention is key, and it's still early in the game to see how the retention numbers compare. Yeah.

Robert N. Fried: Sure.

Sean Patrick McGowan: Yeah, from a consumer standpoint, it's just easier to take fewer pills, right? It is. It's just easier to pack for a trip and, you know, get your day going. Anyway, I'll pass it on. Thanks a lot, guys.

Robert N. Fried: Yes.

Robert N. Fried: From a consumer standpoint, just easier to take fewer pills.

Sean Patrick McGowan: The user to backward trip.

Sean Patrick McGowan: So anyway I'll pass it on thanks, a lot guys.

Speaker Change: Thanks, Sean Thanks, Sean.

Speaker Change: Our next question comes through lineup.

William J. Dezellem: Our next question comes from the line of Bill Dieselman, with Titan Capital. Please go ahead.

William J. Dezellem: Bill.

William J. Dezellem: With Titan capital. Please go ahead.

William J. Dezellem: Thank you. I'm going to pick up on your last comment about retention with a thousand milligrams, and I know it's early, but what are the early indications about retention?

William J. Dezellem: Thank you I'm going to pick up on the on your last comment about retention with the 1000 milligram and I know, it's early but what.

William J. Dezellem: What are the early indications about retention.

William J. Dezellem: The early indications are that retention is higher with 1,000 milligrams than other SKUs, in fact, all others. But again, it's only been a few months.

William J. Dezellem: The early indications is retention is higher with 1000 milligrams and other skus in fact, all other skus, but again, it's only a few months.

Robert N. Fried: And Rob, is it your sense that the consumer is staying on because they notice more of a difference than consumers who are on a lower dosage? Or do you believe it's a different socioeconomic group that just has a different mindset?

William J. Dezellem: And Rob is it your sense that the consumer is staying on because they they.

Robert N. Fried: Notice more of a different than consumers, who are on a lower dosage or do you believe it's a different socioeconomic group that just has a different a different mindset.

Robert N. Fried: We've done some surveys, and we have the surveys coming in, so it's only very preliminary, so I can't really give you a definitive answer. But I think it's more the former than the latter.

Rob: We've done some surveys and we have the survey is coming in so it's only very preliminary so I can't really give you a definitive answer but I think it's more the former than the latter.

Speaker Change: Great. Thank you and then.

William J. Dezellem: And then, relative to Vitaminshop and Sprouts, what is the size of those distribution channels as you estimate them going forward, and did revenues begin in Q1, or when is the start point for those?

William J. Dezellem: Relative to the vitamin Shoppe and sprouts, what is the size of that.

William J. Dezellem: That distribution those distribution channels.

William J. Dezellem: You as you estimate them going forward and did revenues beginning Q1.

William J. Dezellem: Or when does the start point for those.

Robert N. Fried: They're going to, we're going to be in 700 stores by them in shops. I don't think we're close to that yet. But I think they'll be in 700 stores within the next couple of months. I think we recognized that revenue in the first quarter.

William J. Dezellem: They're going to we're going to be 700, vitamin Shoppe stores I don't think were close to that yet.

Robert N. Fried: But I think there'll be in 700 stores within the next couple of months.

Robert N. Fried: I think we recognize that revenue in the first quarter and the first quarter.

William J. Dezellem: And so the ongoing. I guess my direct question would be, what is your expectation or speculation at what the ongoing revenue of Vitamin Shop and Sprouts combined could be on an annual basis?

Robert N. Fried: And into the ongoing.

William J. Dezellem: I guess my my direct question would be what is what is your expectation or speculation.

William J. Dezellem: Ongoing revenue vitamin Shoppe, and sprouts combined could be on an annual basis.

Brianna Gerber: In our plans, it's not a meaningful contributor to our full-year outlook. We've conservatively planned for the ramp-up, but of course, over time, we think it's a good fit for our brand, and we hope it will be much larger.

William J. Dezellem: Our plans, it's not a meaningful contributor to our full year outlook, we have conservatively planned for the ramp up.

Brianna Gerber: Of course over time, we think it's a good fit for our brand and we hope it will be much larger.

Brianna Gerber: And do you have a number is it.

William J. Dezellem: And do you have a number that you're willing to share, Brianna?

Brianna Gerber: That youre willing to share their briana.

Brianna Gerber: No, not at this time, Bill. Okay.

Brianna Gerber: No not at this time bill Okay no.

William J. Dezellem: Okay, no problem. And so then, shifting to GNA, the GNA was up nicely in this quarter. And I think you said, or pardon me, that you will, back up. I think you said that G&A is going to be increasing by a million and a half to two million dollars somewhere in that neighborhood, and that increase is going to be used to grow the business. What additional details do you have around that in terms of what that practically means that you're going to be spending money on?

Brianna Gerber: And so then shifting to G&A.

William J. Dezellem: G&A was up.

William J. Dezellem: Nicely in the.

William J. Dezellem: In this quarter.

William J. Dezellem: And I think you said or pardon me that you will.

William J. Dezellem: Let me back up I think you said the G&A is going to be increasing.

William J. Dezellem: A million and a half to $2 million somewhere in that neighborhood and that increase is going to be used to grow the business.

William J. Dezellem: What additional details do you have around that in terms of what that practically means that youre going to be spending money on.

William J. Dezellem: Sure and I think Bill you were calling out that in the current quarter year over year, our G&A was actually down about $1 million and so our outlook implies some ramp up in spend.

Brianna Gerber: Sure, and I think, Bill, you were calling out that in the current quarter, year over year, our GNA was actually down about a million, and so our outlook implies some ramp-up in spend. We are investing in the infrastructure around these new verticals as we get into new areas. We just anticipate increased legal expenses at the margin, regulatory, and just basically IT infrastructure as well for many of the initiatives we have ongoing. And so we're conservatively planning for that at this time of the year. Those are the key areas that I will call out. Thank you both.

Brianna Gerber: We are investing in the infrastructure around these new verticals as we get into new areas.

Brianna Gerber: Will you just anticipate increased legal expense at the margin regulatory just basically it infrastructure as well for many of the initiatives we have ongoing and so we're conservatively planning for that at this time of the year.

Brianna Gerber: Those are the key areas that I'd call out.

Speaker Change: Thank you both.

Speaker Change: Thank you Bill.

Brianna Gerber: Our next question comes from the line of JP Mark farmhouse equity research. Please go ahead.

Jeffrey Paul Mark: Our next question comes from the line of J.P. Mark with Farmhouse Equity Research. Please, go ahead.

Jeffrey Paul Mark: Hi, Robyn.

Jeffrey Paul Mark: Hi Rob and Brianna, thanks for taking my call. Since you are taking my call, you already know the question I'm going to ask is about the professional market and selling through channels of physicians and clinics. Can you talk a little bit about how that's going and how many resources you're allocating for that?

Jeffrey Paul Mark: Thanks for taking my call.

Jeffrey Paul Mark: Sure since you since you are taking my call you already know the question I'm going to ask a question you should ask because of that the pro market and talking to and selling through channels as physicians and clinics can you talk a little bit about how that's going and how much how many resources you're allocating for that specifically.

Robert N. Fried: That market isn't yet growing for us. It's been pretty stable for us. We have a dedicated team that is focusing on that market, but we think that the new verticals that we have been investing in over the last few years and that we are close to announcing will be very relevant to that particular market.

Speaker Change: That market isn't yet growing for us it's been pretty stable for us we have a dedicated team that is focusing on that market, but we think that.

Robert N. Fried: The new verticals that we have been investing in over the last really years and that we are close to announcing will be very relevant to that particular market.

Robert N. Fried: Okay.

Jeffrey Paul Mark: In the sales and marketing budget, and you talk about whether it's consistently been the same amount of spend for that, or if you increased it, or decreased it. I mean, sort of, as a percent; you don't have to get the number, but roughly speaking, is it stable?

Robert N. Fried: In the in the.

Jeffrey Paul Mark: Sales and marketing budget can you talk about.

Jeffrey Paul Mark: Whether it's whether it's consistently been the same amount of spend for that or have you increased that decrease they're hesitant I mean sort of.

Speaker Change: As a percent I forget the number but.

Jeffrey Paul Mark: Roughly speaking is it.

Jeffrey Paul Mark: Is it stable or.

Jeffrey Paul Mark: How do you how do you look at it.

Jeffrey Paul Mark: That's a comment specifically on selling and marketing for the health care practitioner that professional channel.

Brianna Gerber: That's a comment specifically on selling and marketing for the healthcare practitioner, that professional channel.

Jeffrey Paul Mark: Yep, that's it. Yeah.

Speaker Change: Correct, yes.

Jeffrey Paul Mark: Yes.

Brianna Gerber: I'd say we have a small sales force that drives that business, some leadership around that business, and business development there. I'd say it's overall been fairly steady, you know, maybe a little bit of variability, but not a meaningful, you know, ramp or investment there. Perhaps ahead of, as Rob talked about, this new vertical, we'll be looking at that. All right. I'll hold off until next quarter. Hopefully, we'll be somewhere on that. Okay. Thank you.

Jeffrey Paul Mark: I'd say, we have a we have a small sales force that drives that business some leadership around that business and business development. There I'd say, it's overall been fairly steady maybe a little bit of variability, but not a meaningful ramp our investment there perhaps ahead of us as Rob talked about this new vertical will be looking to that.

Brianna Gerber: Hey.

Jeffrey Paul Mark: All right. I'll hold off until next quarter. Hopefully, there will be some more on that.

Brianna Gerber: Alright, I'll hold off until next quarter, hopefully will be somewhere on that okay. Thank you very much I appreciate it.

Jeffrey Paul Mark: Okay. Thank you very much. Thank you, JP.

Speaker Change: Thank you J P.

Sean Patrick McGowan: And our next question comes from the line of Sean McGowan with Rock Capital.

Jeffrey Paul Mark: And our next question comes from the line of Sean Mcgowan with Roth Capital Partners.

Sean Patrick McGowan: Please go ahead.

Sean Patrick McGowan: Thanks for the opportunity for a follow up. This relates to the comment you made early on, Brianna, about the, you know, the liability that you have the potential liability for those attorney fees. Will that dispute meaningfully add to the legal spending that you've already got? You know, there's always a certain amount of legal spending, but is this going to ramp that up in any meaningful way? It's not a meaningful way we think it's covered in our original...

Sean Patrick McGowan: Thanks for the opportunity for a follow up this relates to the comment you made earlier on beyond about the.

Sean Patrick McGowan: The liability that you.

Sean Patrick McGowan: The potential liability for those attorney fees.

Sean Patrick McGowan: That dispute add meaningfully to the.

Sean Patrick McGowan: The legal spending as you've already got.

Sean Patrick McGowan: There's always a certain amount of legal spending, but I'm, just going to ramp that up in any meaningful way.

Brianna Gerber: It's not meaningful in any way. We think it's covered in our original GNA Outlook and, you know, planning conservatively on some of those areas that are legal. This was not in our numbers. We did not expect this, but we think it's covered in our current Outlook, so nothing meaningful there in 2024.

Sean Patrick McGowan: Not a meaningful way, we think it's covered in our original G&A outlook and.

Brianna Gerber: Planning conservatively on some of those areas legal this was not in our numbers. We did not expect this but we think that's covered in our current outlook. So nothing meaningful there in 2024.

Speaker Change: Okay. Thank you.

Speaker Change: Thank you Sean.

Operator: If there are no further questions at this time... I'll hand over the call back to Mr. Shantanu.

Speaker Change: There are no further questions at this time.

Shantanu: So I'll hand over the call back to Mr. Sampson.

Shantanu: Thank you operator, there'll be a replay of this call beginning at 730 PM Eastern time today. The replay number is one 870 702030 and the replay I'd is 858424.

Unknown Speaker: Thank you, Operator. There will be a replay of this call beginning at 7:30 p.m. Eastern Time today. The replay number is 1-800-770-2030, and the replay ID is 858-4242. Thank you, everyone, for joining us today and for your continued support of ChromaDex.

Shantanu: <unk>. Thank you everyone for joining us today and for your continued support of <unk>.

Operator: This concludes today's conference call. You may now disconnect.

Operator: This concludes today's conference call you may now disconnect.

Operator: Yes.