Charles & Colvard, Ltd. (Nasdaq: CTHR), the original and
leading worldwide source of created moissanite, reported financial
results for the quarter ended March 31, 2019 (“third quarter Fiscal
2019”). For the third quarter Fiscal 2019, the Company reported net
sales of $7.9 million and net income of $0.8 million, or $0.04 per
diluted share.
Suzanne Miglucci, President and CEO of Charles & Colvard,
said, “We are thrilled to deliver our third consecutive quarter of
profitability led by continued double-digit revenue growth and
careful expense control. Revenue growth of 17% was powered by a 55%
increase in sales from our e-commerce website and a 107% increase
in international sales, which collectively led to a strong gross
margin level of 47%. We are seeing the results of our omni-channel
distribution strategy, expanded e-commerce partnerships, global
digital marketing efforts, enhanced product line and customer
focus.”
“Our ongoing digital marketing efforts are driving attractive
website traffic and conversion rates -- resulting in strong sales
growth. We’ve developed a data-driven methodology by which we
manage our ad spend and continue to hone our digital marketing
investments, generating significant return on advertising spend.
Our product lends itself to the video platform, so during Q3, we
launched a concerted effort to deliver more video content
throughout our digital footprint, which contributed to our return
on advertising spend rates for the quarter,” Ms. Miglucci
concluded.
Recent Corporate Highlights
- Increased awareness in international markets and expanded
customer reach to a new region through Amazon site in Japan;
- Received JCK Jewelers’ Choice Award for Charles & Colvard’s
Signature Halo Hearts & Arrows Round Statement Ring in the
Lab-Grown Gemstone Jewelry Category; this award category is voted
on by industry retail peers as one of the industry’s most
prestigious competitions for designers;
- Gained recognition for the Signature Collection in the
March/April Issue of JCK Magazine;
- Created the 2018 National Women’s Soccer League Championship
rings and was named official jewelry sponsor of the North Carolina
Courage professional women's soccer team; and
- Announced that CEO, Suzanne Miglucci, was named to the Women in
Retail Leadership Circle’s 2019 List of Top Women in Retail.
Financial Summary for Third Quarter Fiscal 2019 (Quarter
Ended March 31, 2019 Compared to Quarter Ended March 31,
2018)
- Net sales were $7.9 million for the quarter, an increase of 17%
compared with $6.8 million in the year-ago quarter.
- Finished jewelry net sales were $4.0 million for the quarter,
an increase of 22% compared with $3.2 million in the year-ago
quarter.
- Loose jewel net sales were $3.9 million for the quarter, an
increase of 12% compared with $3.5 million in the year-ago
quarter.
- In the Online Channels segment, which consists of e-commerce
outlets including charlesandcolvard.com, third-party online
marketplaces, drop-ship and other pure-play, exclusively e-commerce
outlets, net sales increased 38% to $4.2 million, or 53% of total
net sales for the quarter, compared with $3.0 million, or 45% of
total net sales in the year-ago quarter.
- In the Traditional segment, which consists of wholesale,
retail, and historically, television customers, net sales were flat
at $3.7 million, or 47% of total net sales for the quarter,
compared with $3.7 million, or 55% of total net sales in the
year-ago quarter.
- Operating expenses were $3.0 million for the quarter, compared
to $3.2 million in the year-ago quarter.
- Net income for the quarter was $0.8 million, or $0.04 earnings
per diluted share, compared with a net loss of $0.6 million, or
$0.03 loss per diluted share, in the year-ago quarter.
Financial Summary for the First Nine Months of Fiscal
2019 (Nine Months Ended March 31, 2019 Compared to Nine Months
Ended March 31, 2018)
- Net sales were $24.6 million for the nine months ended March
31, 2019, an increase of 15% compared with $21.5 million in the
year-ago fiscal period.
- Finished jewelry net sales were $11.7 million for the nine
months ended March 31, 2019, an increase of 16% compared with $10.1
million in the year-ago fiscal period.
- Loose jewel net sales were $12.9 million for the nine months
ended March 31, 2019, an increase of 13% compared with $11.4
million in the year-ago fiscal period.
- In the Online Channels segment, net sales increased 31% to
$12.7 million, or 52% of total net sales for the nine months ended
March 31, 2019, compared with $9.7 million, or 45% of total net
sales in the year-ago fiscal period.
- In the Traditional segment, net sales increased 1% to $11.9
million, or 48% of total net sales for the nine months ended March
31, 2019, compared with $11.8 million, or 55% of total net sales in
the year-ago fiscal period.
- Operating expenses were $9.4 million for the nine months ended
March 31, 2019, compared to $9.2 million in the year-ago fiscal
period.
- Net income for the nine months ended March 31, 2019 was $2.1
million, or $0.10 earnings per diluted share, compared with a net
loss of $69 thousand, or $0.00 loss per diluted share, in the
year-ago fiscal period.
Financial Position
Cash, cash equivalents and restricted cash totaled $4.6 million
at March 31, 2019, representing an increase of $0.1 million from
$4.5 million at March 31, 2018 and an increase of $1.2 million from
$3.4 million at June 30, 2018. The Company had no debt outstanding
as of March 31, 2019. Total inventory was $33.7 million at March
31, 2019, compared with $30.9 million at March 31, 2018 and $31.8
million at June 30, 2018.
Investor Conference Call
Shareholders and other interested parties may participate in the
upcoming investor conference call by dialing 844-875-6912 (U.S.
toll-free) or 412-317-6708 (international) and asking to be
connected to the “Charles & Colvard, Ltd. Conference Call” a
few minutes before 4:30 p.m. ET on Thursday, May 9, 2019. Please
note that there will be an accompanying slide presentation, which
will be available in the Investor Relations section of the Charles
& Colvard website at
http://ir.charlesandcolvard.com/events.
A replay of this conference call will be available until May 16,
2019 at 877-344-7529 (U.S. toll-free) or 412-317-0088
(international). The replay conference ID is 10130523. The call
will also be available live and for replay in the Investor
Relations section of the Company’s website at
http://ir.charlesandcolvard.com/events.
About Charles & Colvard, Ltd.
Charles & Colvard, Ltd. (Nasdaq: CTHR) believes luxury can
be beautiful and conscientious. As an e-commerce-driven business,
the Company uses innovative technology and sustainable practices to
lead a revolution in the jewelry industry. As the original pioneer
of lab-created moissanite, a rare gemstone formed from silicon
carbide, Charles & Colvard delivers a brilliant product at a
revolutionary value that meets the needs of today’s discerning
customer. Jewelry consumers seek Charles & Colvard products
because of their exceptional quality as well as their environmental
and social responsibility. Charles & Colvard was founded in
1995 and is based in the Research Triangle Park, North Carolina.
For more information, please
visit www.charlesandcolvard.com.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of
1934, as amended. Statements expressing expectations regarding our
future and projections relating to our products, sales, revenues,
and earnings are typical of such statements and are made under the
Private Securities Litigation Reform Act of 1995. These
forward-looking statements include, but are not limited to,
statements about our plans, objectives, representations, and
contentions and are not historical facts and typically are
identified by use of terms such as “may,” “will,” “should,”
“could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,”
“predict,” “continue,” and similar words, although some
forward-looking statements are expressed differently.
All forward-looking statements are subject to the risks and
uncertainties inherent in predicting the future. You should be
aware that although the forward-looking statements included herein
represent management’s current judgment and expectations, our
actual results may differ materially from those projected, stated,
or implied in these forward-looking statements as a result of many
factors including, but not limited to, our dependence on increased
consumer acceptance, growth of sales of our products, and
operational execution of our strategic initiatives; the impact of
the execution of our business plans on our liquidity; our ability
to fulfill orders on a timely basis; intense competition in the
worldwide gemstone and jewelry industry; the financial condition of
our major customers and their willingness and ability to market our
products; dependence on a limited number of distributor and retail
partners in our Traditional segment; our ability to maintain
compliance with The Nasdaq Stock Market’s continued listing
requirements; dependence on our exclusive supply agreement with
Cree, Inc. for the supply of our silicon carbide, or SiC, crystals;
general economic and market conditions; quality control challenges
from time to time that can result in lost revenue and harm to our
brands and reputation; the potential impact of seasonality on our
business; the impact of natural disasters on our operations; the
pricing of precious metals, which is beyond our control; the impact
of significant changes in e-commerce opportunities, technology, or
models; the risk of a failure of our information technology
infrastructure to protect confidential information and prevent
security breaches; our current customers’ potential perception of
us as a competitor in the finished jewelry business; risks of
conducting business internationally; the potential adverse effect
of December 2017 U.S. tax legislation; our ability to protect our
intellectual property; the potential adverse impact of negative or
inaccurate social media commentary; the failure to evaluate,
implement, and integrate strategic opportunities; possible adverse
effects of governmental regulation and oversight; and the impact of
anti-takeover provisions included in our charter documents, in
addition to the other risks and uncertainties described in our
filings with the Securities and Exchange Commission, or the SEC,
including our Transition Report on Form 10-KT for the transition
period ended June 30, 2018 and subsequent reports filed with the
SEC. Forward-looking statements speak only as of the date they are
made. We undertake no obligation to update or revise such
statements to reflect new circumstances or unanticipated events as
they occur except as required by the federal securities laws, and
you are urged to review and consider disclosures that we make in
the reports that we file with the SEC that discuss other factors
relevant to our business.
Contacts:
Clint J. PeteChief Financial
Officer919-468-0399cpete@charlesandcolvard.com
Jenny KobinInvestor
Relations800-695-0650Jenny.Kobin@IRAdvisory.com
-Financial Tables Follow-
CHARLES & COLVARD,
LTD.CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(unaudited)
|
Three Months Ended March 31, |
|
Nine Months Ended March 31, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Net sales |
$ |
7,902,242 |
|
|
$ |
6,762,750 |
|
|
$ |
24,636,409 |
|
|
$ |
21,508,540 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold |
|
4,150,229 |
|
|
|
4,115,548 |
|
|
|
13,110,185 |
|
|
|
12,525,465 |
|
Sales and marketing |
|
2,912,484 |
|
|
|
1,865,940 |
|
|
|
5,900,501 |
|
|
|
5,651,106 |
|
General and administrative |
|
1,042,048 |
|
|
|
1,354,410 |
|
|
|
3,517,004 |
|
|
|
3,569,351 |
|
|
|
- |
|
|
|
- |
|
|
|
1,422 |
|
|
|
570 |
|
Total costs and expenses |
|
7,104,761 |
|
|
|
7,335,898 |
|
|
|
22,529,112 |
|
|
|
21,746,492 |
|
Income (Loss) from
operations |
|
797,481 |
|
|
|
(573,148 |
) |
|
|
2,107,297 |
|
|
|
(237,952 |
) |
Other (expense) income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
(287 |
) |
|
|
(139 |
) |
|
|
(985 |
) |
|
|
(588 |
) |
Loss on foreign currency exchange |
|
(209 |
) |
|
|
- |
|
|
|
(311 |
) |
|
|
- |
|
Gain on insurance settlement |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
183,217 |
|
Other expense |
|
- |
|
|
|
- |
|
|
|
(13 |
) |
|
|
- |
|
Total other (expense) income |
|
(496 |
) |
|
|
(139 |
) |
|
|
(1,309 |
) |
|
|
182,629 |
|
Income (Loss) before income
taxes |
|
796,985 |
|
|
|
(573,287 |
) |
|
|
2,105,988 |
|
|
|
(55,323 |
) |
Income tax benefit
(expense) |
|
17,099 |
|
|
|
(4,767 |
) |
|
|
7,565 |
|
|
|
(13,781 |
) |
Net income (loss) |
$ |
814,084 |
|
|
$ |
(578,054 |
) |
|
$ |
2,113,553 |
|
|
$ |
(69,104 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common
share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.04 |
|
|
$ |
(0.03 |
) |
|
$ |
0.10 |
|
|
$ |
(0.00 |
) |
Diluted |
$ |
0.04 |
|
|
$ |
(0.03 |
) |
|
$ |
0.10 |
|
|
$ |
(0.00 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
shares used in computing net income (loss) per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
21,537,636 |
|
|
|
21,371,416 |
|
|
|
21,486,692 |
|
|
|
21,269,969 |
|
Diluted |
|
21,752,043 |
|
|
|
21,371,416 |
|
|
|
21,733,616 |
|
|
|
21,269,969 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CHARLES & COLVARD,
LTD.CONDENSED CONSOLIDATED BALANCE
SHEETS
|
March 31,
2019 |
|
|
|
(unaudited) |
|
June 30, 2018 |
ASSETS |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
4,019,929 |
|
|
$ |
3,393,186 |
|
Restricted cash |
|
620,007 |
|
|
|
- |
|
Accounts receivable, net |
|
1,427,448 |
|
|
|
1,765,722 |
|
Inventory, net |
|
11,376,031 |
|
|
|
10,979,891 |
|
Prepaid expenses and other assets |
|
898,294 |
|
|
|
916,162 |
|
Total current assets |
|
18,341,709 |
|
|
|
17,054,961 |
|
Long-term assets: |
|
|
|
|
|
|
|
Inventory, net |
|
22,326,209 |
|
|
|
20,848,647 |
|
Property and equipment, net |
|
1,126,889 |
|
|
|
1,144,198 |
|
Intangible assets, net |
|
90,267 |
|
|
|
34,833 |
|
Other assets |
|
408,962 |
|
|
|
389,868 |
|
Total long-term assets |
|
23,952,327 |
|
|
|
22,417,546 |
|
TOTAL ASSETS |
$ |
42,294,036 |
|
|
$ |
39,472,507 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’
EQUITY |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Accounts payable |
$ |
3,891,308 |
|
|
$ |
4,170,952 |
|
Accrued expenses and other liabilities |
|
1,335,233 |
|
|
|
618,945 |
|
Total current liabilities |
|
5,226,541 |
|
|
|
4,789,897 |
|
Long-term liabilities: |
|
|
|
|
|
|
|
Deferred rent |
|
276,895 |
|
|
|
393,051 |
|
Accrued income taxes |
|
486,710 |
|
|
|
471,126 |
|
Total long-term liabilities |
|
763,605 |
|
|
|
864,177 |
|
Total liabilities |
|
5,990,146 |
|
|
|
5,654,074 |
|
|
|
|
|
|
|
|
|
Shareholders’ equity: |
|
|
|
|
|
|
|
Common stock, no par value; 50,000,000 shares authorized;
21,727,569 and 21,705,173 shares issued and outstanding at March
31, 2019 and June 30, 2018, respectively |
|
54,247,296 |
|
|
|
54,243,816 |
|
Additional paid-in capital |
|
15,330,495 |
|
|
|
14,962,071 |
|
Accumulated deficit |
|
(33,273,901 |
) |
|
|
(35,387,454 |
) |
Total shareholders’ equity |
|
36,303,890 |
|
|
|
33,818,433 |
|
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
$ |
42,294,036 |
|
|
$ |
39,472,507 |
|
CHARLES & COLVARD,
LTD.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS(unaudited)
|
Nine Months Ended March 31, |
|
|
2019 |
|
2018 |
|
CASH FLOWS FROM
OPERATING ACTIVITIES: |
|
|
|
|
|
|
Net income
(loss) |
$ |
2,113,553 |
|
$ |
(69,104 |
) |
Adjustments to
reconcile net income (loss) to net cash used in operating
activities: |
|
|
|
|
|
|
Depreciation and amortization |
|
355,812 |
|
|
330,978 |
|
Stock-based compensation |
|
369,653 |
|
|
434,954 |
|
Recovery of collectible accounts |
|
(944 |
) |
|
(12,000 |
) |
Provision for sales returns |
|
89,000 |
|
|
134,000 |
|
Provision for inventory reserves |
|
377,000 |
|
|
303,000 |
|
Provision for accounts receivable discounts |
|
9,149 |
|
|
33,520 |
|
Gain on insurance claim settlement |
|
- |
|
|
(183,217 |
) |
Changes in
operating assets and liabilities: |
|
|
|
|
|
|
Accounts receivable |
|
241,069 |
|
|
(699,463 |
) |
Inventory |
|
(2,250,702 |
) |
|
(2,074,071 |
) |
Prepaid expenses and other assets, net |
|
(1,226 |
) |
|
121,881 |
|
Accounts payable |
|
(279,644 |
) |
|
106,254 |
|
Deferred rent |
|
(116,156 |
) |
|
(103,623 |
) |
Accrued income taxes |
|
15,584 |
|
|
13,781 |
|
Accrued expenses and other liabilities |
|
716,288 |
|
|
(8,443 |
) |
Net cash provided by (used in) operating activities |
|
1,638,436 |
|
|
(1,671,553 |
) |
|
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES: |
|
|
|
|
|
|
Purchases of
property and equipment |
|
(337,271 |
) |
|
(114,467 |
) |
Intangible
assets |
|
(56,666 |
) |
|
(8,362 |
) |
Net cash
used in investing activities |
|
(393,937 |
) |
|
(122,829 |
) |
|
|
|
|
|
|
|
CASH FLOWS FROM
FINANCIANG ACTIVITIES: |
|
|
|
|
|
|
Stock option
exercises |
|
2,251 |
|
|
- |
|
Net cash
provided by financing activities |
|
2,251 |
|
|
- |
|
|
|
|
|
|
|
|
NET INCREASE
(DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH |
|
1,246,750 |
|
|
(1,794,382 |
) |
CASH, CASH
EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD |
|
3,393,186 |
|
|
6,289,111 |
|
CASH, CASH
EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD |
$ |
4,639,936 |
|
$ |
4,494,729 |
|
|
|
|
|
|
|
|
Supplemental disclosure of
cash flow information: |
|
|
|
|
|
|
|
Cash paid during the
period for interest |
|
$ |
- |
|
|
$ |
- |
|
|
Cash paid during the
period for taxes |
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to Condensed
Consolidated Balance Sheets: |
|
March 31, 2019 |
|
|
|
March 31, 2018 |
|
|
Cash and cash
equivalents |
|
$ |
4,019,929 |
|
|
$ |
4,494,729 |
|
|
Restricted cash |
|
|
620,007 |
|
|
|
- |
|
|
CASH, CASH EQUIVALENTS
AND RESTRICTED CASH |
|
$ |
4,639,936 |
|
|
$ |
4,494,729 |
|
|
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