NAGE - NASDAQ

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. [Operator Instructions]. 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, both are available within the Investor Relations section of ChromaDex's website at www.chromadex.com. I would now like to turn the conference call over to Ben Shamsian, Vice President of Lytham Partners. Please go ahead, Mr. Shamsian.

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. 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 TRU NIAGEN 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 on the date of this conference call and are not intended to give any assurances as to the actual future results. Because forward-looking statements relate to NAD 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. 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 on 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 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, present reconciliations to the appropriate GAAP measures. Finally, this conference call is being recorded via webcast. The webcast will be available at 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 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. Our e-commerce business continues to be our largest and most reliable source of revenue. E-commerce sales for the first quarter were up 5% year-over-year as our marketing team continues to focus on initiatives in 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 had invested in a brand campaign through Amazon's homepage takeover, which drove a significant increase in new-to-brand purchases on Amazon. 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. In the first quarter, our team committed to be less focused on price promotions and focus on initiatives to build a robust base of subscribers to drive long-term customer value. While it is still too early to assess consumer behavior, we believe this is the right strategy going forward. For 2024, we're also allocating more resources to optimize influencer marketing. Also 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, the Sprouts Farmers Market and Vitamin Shoppe. TRU NIAGEN will be available in over 400 locations of Sprouts Farmers Market as the first major grocery chain to carry TRU NIAGEN and TRU NIAGEN Immune. TRU NIAGEN will also be available on the retail shelves of over 700 vitamin shop locations. Our new partnerships with Sprouts and Vitamin Shoppe broadens and diversifies the access of TRU NIAGEN 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. I'm proud that the teams at ChromaDex continue to expand our network of partners, will all share a passion to bringing solutions to consumers who wish to promote health spend. We believe we are and have always been the gold standard of the NAD industry with over 30 peer-reviewed published human studies and over 100 published scientific studies, our ChromaDex external research program, which we call SERP continues to be key in establishing clinical studies to explore for numerous health benefits NIAGEN can have on the human body. It's our last quarterly update, 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 examines its pharmacokinetics, organ distribution and therapeutic impact between the mice models. The results demonstrated potential for NR liposomes for broader clinical application of neuroprotective agents beyond standard stroke therapy. Second preclinical study having the impact of the combination of NR with resveratrol, the healing of diabetic ulcers caused by inflammation in a diabetic rat model, results highlighted the potential of NR and resveratrol in accelerating wound healing. Another preclinical study investigated the causes of miscarriages and congenital malformations particularly the role of NAD deficiency using a mice model. Interestingly, researchers found that the risk of NAD deficiency is elevated during pregnancy. The 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 that illustrate the boundless potential positive health benefits NR NIAGEN 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 does ChromaDex. We continue to invest in our science to further our understanding of the potential for NIAGEN and to 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 in the United States. Additionally, we continue to work with

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-GAAP metric, and we yet again generated positive operating cash flows. Our performance this quarter demonstrates our strong financial management across the organization, which has enabled us to increase investments in growth. 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. 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 TRU NIAGEN, a 5% growth in e-commerce was overshadowed by a 17% reduction in combined Watsons and other B2B sales, largely due to 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 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 TRU NIAGEN beginning later this year. Now I'll briefly touch on Watsons 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 Watsons last year, including shipping for the TRU NIAGEN Immune launch. On a full year basis, last year, Watson's growth was driven by the launch of TRU NIAGEN 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 NIAGEN 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 a shift in our business mix. Specifically, e-commerce sales constituted 58% of our total net sales in the current quarter, up from 54% in the prior year quarter. [indiscernible] 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 do not have a similar campaign this year, which drove the improvement in overall efficiency. 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 expense decreased $1.1 million year-over-year, primarily due to reductions in executive and other administrative head count expenses, bad debt expense, severance and restructuring expense and share-based compensation expense. 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. 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 million and smaller reductions in inventory and prepaid expenses and other assets of $0.7 million and $0.5 million, respectively. 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 the recent ruling in the Delaware litigation. In March, the District Court judge granted [indiscernible] motion for attorney fees and costs. ChromaDex intends to appeal this decision and if successful, nothing will be owed. However, we disclosed 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. 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. Accordingly, revenues will ramp 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 road map 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.

[Operator Instructions] The first question comes from the line of Ram Selvaraju with H.C. Wainwright. Please go ahead. .

Congrats 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 panel mix. In particular, with respect to the role that e-commerce is likely to play in the future revenue base? And if 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?

Ram, it's Brianna. So gross margins, if you look recently, we've been trending between 60% and 61%. And when we trend about 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, we set our [ ND ] low 70 -- low 70s and the more B2B side, the low mid-50s. So there is a mix impact there. That said, while mix is 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 60.8% gross margin last year.

Great. Secondly, you had previously talked about the intent to move those customers who already utilized TRU NIAGEN or those customers who have exhibited adherence to TRU NIAGEN 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?

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. 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 dramatic. And what has been surprising is that the 1,000 milligram 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 1,000 milligrams. But in fact, it's been very effective for new-to-brand customers as well. 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.

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, with Nestle Health Sciences and Sinopharm, 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 nicotinamide riboside in 2024? And which, in particular, clinical indications, you may be most excited about as we look ahead to the remainder of 2024.

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. 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 taking a gram a day for a year. So we probably won't see the data until 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. These diseases like ataxia and [indiscernible] that we're very excited about and we think are important for us for later in this year. 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 the 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 TRU NIAGEN 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. It is possible that we will be expanding the relationship with H&H later in 2024. That will be other products and other territories. Nestle has now launched with two brands, Pure Encapsulation. So NIAGEN exists in, I think, three SKUs with joint encapsulations and also Solgar another important high-end Nestle brand has released the product. We haven't seen the actual data. We only know anecdotally that they're very happy with the sales in both, and we've seen ads for both. 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 Nestle. 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 NIAGEN business with ChromaDex.

Our next question comes from the line of Mitch Pinheiro with Sturdivant & Company.

Yes. Good afternoon. Just a couple of questions. So with the first quarter revenue to reach 16% growth for the year, it's going to be solid, roughly 23% for the last 9 months. I'm curious where we should expect that to come from? And is this something I heard Brianna say revenue is obviously ramped with a new product in the second half. But I'm curious whether the second quarter is going to see any acceleration from Q1 levels .

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've been very consistent with that. There's nothing that I'd point to in terms of a clear catalyst in terms of the second quarter. We've 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've been discussing other new partnerships and product launches. So I'm not going to comment specifically on second quarter, but it is a second half as you've heard.

Okay. So to get to 23, you're going to have to do some combination of 23% in the back half to reach your 16% kind of growth guidance, 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?

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..

Okay. With the new retail partners, could you -- Rob, could you just sort of compare to us your thoughts there with the launch at Walmart which wasn't -- 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 portends further retail expansion in the future?

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 NIAGEN very, very well. They were selling NMN extraordinarily well, but have removed NMN from their shelves since it became an illegal ingredient. And longevity in general is an important category for vitamin Shoppe. 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 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. And by the time we got the ad out and running and distributed, Walmart had already made its decision to pull back and they 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 poor customer base of TRU NIAGEN and will not require significant investment of advertising dollars to support. And you might see more deals like that, specialty retailers that are well informed and are directly overlap our customer base.

And when it comes to pricing of the product, will it be similar to your e-commerce prices or and margins similar to your -- are margins similar to your e-commerce business? .

No. The margins are lower in retail than they are in e-commerce. And yes, the pricing will be comparable.

Okay. Okay. And then I guess, just the last question is -- so in the R&D, so your investment or you got -- I forget the name of the firm that approved your -- your supplement integrity, but was that a major expense in Q1.

No. I'll [ commence ] assured as I believe the one you're referring to, we also have NSF certified port. Those actually get 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 increase in R&D, and as you saw, it was up about $900,000 year-over-year also sequentially from 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 SERP studies and other things in that number. 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.

Okay. All right. I'll get back in the queue.

Our next question comes from the line of Sean McGowan with ROTH Capital Partners. Please go ahead. .

Switching back to the question on the retailers. When you've talked in the past about different periods of time with Watsons, there was occasionally 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 .

That is obviously an initial purchase, but it's not quite as dramatic.

Okay. And will they each have the product in all of their stores at the same time to start out with?

They don't yet, but they're building towards that.

I think I hear you loud and clear on the cadence of R&D spending Brianna, but would you say that this quarter, is this the low point of the year for gross margin as a percentage of sales? Or you expect to see a lower quarter than this?

Well, I'd say about 60.7%. That's pretty strong. It's certainly just slightly below our 60.8% full year number, and we said we expect to be slightly up. So I think you can imply in that what you will, which is probably is 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. We think this is a solid gross margin higher than 60.8% for the year feels comfortable.

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.

So would you attribute that to the -- that, that effort was successful? Or do you step back and say, maybe we didn't need to spend that money. I mean, I look at it as the awareness was raised and you got that additional follow-through. How are you guys looking at it?

I think it was a good program that was too expensive.

Okay. And then the last question I have for now is the 1,000 milligram SKU, is that -- do you expect that and you may have commented on this in the past, but do you expect that to be revenue accretive? I know you know that I take the product. And so now instead of taking [ 400 ], 300 a day, I'm taking 1,012. So I mean 1,000 and 300, so I'm thinking slightly more, but I'm only taking two pills. So is that revenue accretive to you guys? .

It is slightly revenue accretive, but also more cost effective. Yes.

But I'm just wondering if something that's a good deal for me, is that a bad deal for you. You know what mean.

It's a good deal for both.

It was underscoring Rob's earlier point on new-to-brand the fact that it was more new to brand than we expected. It's very early. And as Rob noted, we've been in and out of stock. We are chasing demand. We've now caught up. So it will be better to see a clear picture but we're not seeing that there's a large percentage kind of doing what you are 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. So we're feeling confident and not SKU for the long term. Still a small piece of all of the business, but it's the right move to make.

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.

Yes. I just wonder from a consumer standpoint, it's just easier to take fewer bills. Easier to pack for a trip and get your day going. Anyway, I'll pass it on. Thanks a lot, guys. .

Thank you, Sean. .

Our next question comes from the line of Bill Dezellem with Tieton Capital.

I'm going to pick up on your last comment about retention with 1,000 milligram. And I know it's early, but what are the early indications about retention?

The early indications is retention is higher with 1,000 milligrams than other SKUs, in fact, all other SKUs. But again, it's only a few months.

And Rob, is it your sense that the consumer is staying on because they noticed 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?

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.

Great. And then relative to Vitamin Shoppe and Sprouts, what is the size of that distribution or those distribution channels as you estimate them going forward? And did revenues begin in Q1? Or when is the start point for those?

They're going to -- we're going to be in 700 vitamin shop stores. 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. Think we recognize that revenue in the first quarter. Yes, in the first quarter.

And so the ongoing, guess my direct question would be, what is your expectation or speculation at what the ongoing revenue of Vitamin Shoppe and Sprouts combined could be on an annual basis?

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.

And do you have a number that you're willing to share there, Brianna?

No, not at this time, Bill.

Okay. No problem. And so then shifting to G&A. G&A was up nicely in this quarter. And I think you said -- or pardon me that you will -- let me back up, I think you said that G&A is going to be increasing by $1.5 million to $2 million, 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?

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. We are investing in the infrastructure around these new verticals as we get into new areas. We just anticipate increase legal expense at the margin, regulatory, specifically the 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'd call out.

Thank you, both .

Thank you, Bill. .

Our next question comes from the line of [ JP Martin ] with [indiscernible].

Since you are taking my call, you already know the question I'm going to ask, though I usually ask about the pro market and selling through channels is physicians and clinics. Can you talk a little bit about how that's going and how many resources you're allocating for that specifically?

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 really years and that we are close to announcing will be very relevant to that particular market.

Okay. In the sales and marketing budget, and you talk about whether it's consistently been the same amount of spend for that? Or have you increased it, decreased it? Has it -- I mean, sort of as a percent, I think the number, but roughly speaking, is it stable? Or how do you look at it?

That's a comment specifically on selling and marketing for the health care practitioner that professional channel?

Correct. Yes, that's it. Yes, that's the question. .

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, maybe a little bit of variability, but not a meaningful ramp or investment there, perhaps ahead of as Rob talked about this new vertical, we'll be looking to that. .

Okay. All right. I'll hold off until next quarter.

And our next question comes from the line of Sean McGowan with ROTH Capital.

This relates to the comment you made early on and beyond about the liability that you -- potential liability for those attorney fees, will that dispute add meaningfully to the legal spending that you've already got kind of -- there's a certain amount of legal spending, but is just going to ramp that up in any meaningful way .

Not a meaningful way. We think it's covered in our original G&A outlook and planning conservatively on some of these areas 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.

There are no further questions at this time. So I'll hand over the call back to Mr. Shamsian.

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 ¢. Thank you, everyone, for joining us today and for your continued support of ChromaDex.