On November 4, 2020 ChromaDex Corp. (Nasdaq:CDXC) reported third quarter financial results (Press release, ChromaDex, NOV 4, 2020, View Source [SID1234569857]).

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2020 Third Quarter and Recent Highlights

Total net sales of $14.2 million, up 18% from $12.1 million from the year ago quarter.
Tru Niagen net sales of $11.9 million, a 22% increase from the year ago quarter.
Net loss was ($4.2) million or ($0.07) per share, an improvement of $0.05 per share year-over-year.
Adjusted EBITDA excluding total legal expense, a non-GAAP measure, was a loss of ($0.1) million, a $1.7 million improvement year-over-year.
Announced Phase 2 results from study in Turkey showing nutritional protocol including nicotinamide riboside ("NR") plus local standard of care reduced recovery time in COVID-19 patients by nearly 30%.
Growing body of clinical research suggests that nicotinamide riboside (Niagen) may support areas of human health with broad addressable markets, including cardiovascular and immune health, with additional studies underway.
Nestlé Health Science’s new Celltrient Cellular Energy products featuring Tru Niagen launched in the United States, following the launch of Tru Niagen capsules on Persona, a Nestlé Health Science company and leading personalized vitamin subscription program, earlier this year.
"We delivered strong third quarter sales of Tru Niagen with sequential growth in our e-commerce business and with Watsons, and our partner Nestlé Health Science released their new product line Celltrient, featuring Tru Niagen," says ChromaDex CEO Rob Fried. "Our scientists and research partners also published important new data furthering our understanding of increased NAD+ levels and immune health, including research on COVID-19."

Results of operations for the three months ended September 30, 2020

For the three months ended September 30, 2020 ("Q3 2020"), ChromaDex reported net sales of $14.2 million, up 18% compared to $12.1 million in the third quarter of 2019 ("Q3 2019"). The increase in Q3 2020 revenues was driven by growth in sales of Tru Niagen.

Gross margin increased by 360 basis points to 59.6% in Q3 2020 compared to 56.0% in Q3 2019. The increase in gross margin was largely driven by the positive impact of increased Tru Niagen consumer product sales and product cost saving initiatives.

Operating expenses decreased by $1.0 million to $12.7 million in Q3 2020, compared to $13.6 million in Q3 2019. The decrease in operating expenses was driven by a decrease of $1.4 million in general and administrative expense, and a decrease of $0.2 million of research and development expense, partially offset by $0.6 million of higher selling and marketing expense. The decrease in general and administrative expense was driven by $1.0 million of lower legal expenses.

The net loss for Q3 2020 was ($4.2) million or ($0.07) per share compared to a net loss of ($7.2) million or ($0.12) per share for Q3 2019.

Adjusted EBITDA excluding total legal expense, a non-GAAP measure, was a loss of ($0.1) million for Q3 2020, compared to a loss of ($1.9) million for Q3 2019, a $1.7 million improvement.

ChromaDex defines Adjusted EBITDA excluding total legal expense as net income or (loss) which is adjusted for interest, income tax, depreciation, amortization, non-cash stock compensation costs, severance and restructuring expense, bad debt expense related to Elysium Health and total legal expense.

For Q3 2020, the net cash used in operating activities was ($3.8) million versus ($7.8) million in Q3 2019.

2020 Outlook

The Company’s full year financial outlook is unchanged from last quarter. Based on the Company’s current financial outlook, revenue growth will be driven by its U.S. ecommerce business, new international market launches with its partners and distributors, such as in the U.K. and Australia, new online platforms, including Persona Nutrition, a Nestlé Health Science company, and the Company’s new product, Tru Niagen Beauty. The Company expects continued gross margin improvement driven by a higher mix of Tru Niagen sales, product design changes implemented in late 2019, and additional supply chain cost savings initiatives in 2020. The Company expects lower selling, marketing and advertising as well as general and administrative expenses as a percentage of net sales driven by strong growth from returning customers and scale on our fixed overhead costs driven by organizational realignment initiatives, as well as new systems and processes. The Company does not expect any supply chain disruption related to the impact of COVID-19 at this time and, while the revenue impact is difficult to predict, the Company is managing expenses to mitigate the bottom-line impact.

Investor Conference Call

ChromaDex management will host an investor conference call to discuss the third quarter results and provide a general business update on Wednesday, November 4, at 4:30 p.m. ET.

Participants should call in at least 10 minutes prior to the call. The dial-in information is as follows:

The conference call will be broadcast live and available for replay here and via the investor relations section of the Company’s website at www.chromadex.com.

A replay of the conference call will be available after 7:30 p.m. ET.

About Non-GAAP Financial Measures:

Adjusted EBITDA excluding total legal expense excludes interest, income tax, depreciation, amortization, non-cash share-based compensation costs, severance and restructuring expense, bad debt expense related to Elysium Health, and total legal expense. ChromaDex used these non-GAAP measures when evaluating its financial results as well as for internal resource management, planning and forecasting purposes. ChromaDex believes the presentation of its non-GAAP financial measures enhances the overall understanding of the company’s historical financial performance. These non-GAAP measures should not be viewed in isolation from or as a substitute for ChromaDex’s financial results in accordance with GAAP. Reconciliation of GAAP to non-GAAP measures are attached to this press release.