On November 2, 2022 ChromaDex Corp. (NASDAQ:CDXC) reported financial results for the third quarter of 2022 (Press release, ChromaDex, NOV 2, 2022, View Source [SID1234622791]).

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Third Quarter 2022 and Recent Highlights

Total net sales were $17.1 million, with $14.6 million from Tru Niagen, down (1)% each from the prior year quarter.
Strong gross margin of 59.8% in the face of inflationary pressures in global supply chains.
Selling and marketing expense as a percentage of net sales improved 730 basis points from the prior year quarter.
General and administrative expense decreased $5.0 million from the prior year quarter driven by lower legal expense.
Net loss was $1.0 million or $(0.01) per share, an improvement of $0.12 per share from the prior year quarter.
Net loss, excluding the one-time Employee Retention Tax Credit recognition of $2.1 million ($0.03 per share), was $3.1 million, or $(0.04) per share, an improvement of $0.09 per share from the prior year quarter.
Adjusted EBITDA including total legal expense, a non-GAAP measure, was a loss of $1.2 million, a $5.1 million improvement from the prior year quarter and approaching break-even.
Clinical study published in October 2022 in the JACC(1)finds Niagen safe and well-tolerated in patients with heart failure, marking a milestone for future clinical research. The study further found that Niagen almost doubled whole blood NAD+ levels, increasing white blood cell mitochondrial respiratory function and decreasing the expression of inflammatory markers.
Signed JV to pursue Blue Hat approval for Tru Niagen in Mainland China, and Sinopharm Xingsha debuted Tru Niagen at China International Natural Health & Nutrition Expo (NHNE), a major trade show.
Signed long-term supply agreement with Nestlé Health Science, extending non-exclusive rights to sell Niagen in multi-ingredient dietary supplements. Includes initial purchase commitment of approximately $2.0 million in 2022.
In October, raised $7.7 million, net of offering costs, with Nestlé Health Science and existing strategic investors.
"We approached cash flow break even in the third quarter and remain on track to achieve this important objective next quarter," said ChromaDex CEO, Rob Fried. "We finalized key strategic partnerships in China and signed a long-term supply agreement with Nestlé Health Science. Our position as the world’s leading NAD+ company is solid, supported by our strong and growing patent portfolio, our globally trusted consumer brand, Tru Niagen, and our pipeline of future innovations."

(1) Journal of the American College of Cardiology: Basic to Translational Science

Results of operations for the three months ended September 30, 2022 compared to the prior year quarter

For the three months ended September 30, 2022 ("Q3 2022"), ChromaDex reported net sales of $17.1 million, a decrease of $0.2 million or (1)% compared to the third quarter of 2021 ("Q3 2021"). The slight decline in Q3 2022 revenues compared to Q3 2021 was primarily attributable to lower business-to-business sales of Tru Niagen as distributor partners continue to experience COVID-19 headwinds and other macroeconomic factors paired with lower demand for research and development services. Declines in net sales were partially offset by steady growth in e-commerce sales of Tru Niagen.

Gross margin percentage declined to 59.8% in Q3 2022 compared to 61.1% in Q3 2021 primarily due to increases in supply chain headcount, including higher wages, and other inflationary pressures, partially offset by business mix.

Operating expense decreased $6.1 million to $13.3 million in Q3 2022, compared to $19.4 million in Q3 2021. The decline in operating expense was largely attributable to a $5.0 million decrease in general and administrative expense paired with a $1.4 million decrease in selling and marketing expense. During Q3 2022, selling and marketing expense was scaled back to focus on the most efficient channels and investments, which drove a 730 basis point improvement in selling and marketing expense as a percentage of net sales, compared to Q3 2021. The decline in general and administrative expense was primarily driven by a $4.4 million decrease in legal expense.

The net loss for Q3 2022 was $1.0 million or $(0.01) per share compared to a net loss of $8.8 million or $(0.13) per share for Q3 2021. Adjusted EBITDA including legal expense, a non-GAAP measure, was a loss of $1.2 million for Q3 2022, a $5.1 million improvement from Q3 2021. Adjusted EBITDA excluding legal expense, a non-GAAP measure, was a profit of $0.1 million for Q3 2022. See "Reconciliation of Non-GAAP Financial Measures" for a reconciliation of non-GAAP measures to net loss, the most directly comparable GAAP measure.

For Q3 2022, net cash outflow from operating activities was $3.7 million, compared to $5.9 million in Q3 2021 largely due to improvements in net loss of $4.6 million excluding other income from the Employee Retention Tax Credit which was partially offset by changes in working capital.

2022 Full Year Outlook

Looking forward, for the full year, the Company expects high single digit revenue growth, driven by its global e-commerce business and growth with partners. For the full year, the Company expects approximately 60% gross margin, lower selling and marketing expense as a percentage of net sales, approximately $1 million increase in R&D, and approximately $6 to $8 million decrease in general and administrative expense, as reported, driven by lower legal expense. The Company expects to be cash flow break-even or better in the fourth quarter of 2022. The Company considers Adjusted EBITDA including legal expense, a non-GAAP metric, to be a proxy for cash flow before working capital investments, and is targeting cash flow break-even on that basis.

Investor Conference Call

A live webcast will be held Wednesday, November 2, 2022 at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss ChromaDex’s third-quarter financial results and provide a general business update.

To listen to the webcast, or to view the earnings press release and its accompanying financial exhibits, please visit the Investors Relations section of ChromaDex’s website at View Source The toll-free dial-in information for this call is 1-888-330-2446 with Conference ID: 4126168.

The webcast will be recorded, and will be available for replay via the website from 7:30 p.m. Eastern time on November 2, 2022 through 11:59 p.m. Eastern time on November 9, 2022. The replay of the call can also be accessed by dialing 800-770-2030, using the Replay ID: 4126168.