Conference Call with Accompanying Slide
Presentation Scheduled Today at 4:30 PM
ET
RESEARCH
TRIANGLE PARK, N.C., May 4, 2023
/PRNewswire/ -- Charles & Colvard, Ltd. (Nasdaq: CTHR)
(the "Company"), a globally recognized fine jewelry company
specializing in lab created Made, Not MinedTM
gemstones, reported financial results for the third quarter ended
March 31, 2023 ("Third Quarter Fiscal
2023").
Management Commentary
"We remain focused on capitalizing on the changing behaviors and
dynamics in the fine jewelry market, and we continued to make
strategic investments in our direct-to-consumer web properties and
video streaming and broadcast capabilities during the third fiscal
quarter," said Don O'Connell,
President and CEO of Charles & Colvard.
"While the results of our third quarter largely reflect a
continuation of the movement of the last few quarters against the
current challenging macroeconomic backdrop, we believe that
we continue to make meaningful progress on our underlying key
strategic initiatives, including the diversification of our product
offerings, expansion of our branded direct-to-consumer footprint
with a focus on finished fine jewelry products, and diligent
management of the business, in order to drive long-term value when
consumer confidence resumes," O'Connell concluded.
Financial Summary for Third Quarter Fiscal 2023
(Quarter Ended March 31, 2023
Compared to Quarter Ended March 31,
2022)
- Net sales of $6.6 million for the
quarter, a decrease of 32% from $9.8
million in the year-ago quarter.
- In the Online Channels segment, which consists of e-commerce
outlets including charlesandcolvard.com, moissaniteoutlet.com,
third-party online marketplaces, drop-ship retail and other
pure-play, exclusively e-commerce outlets, net sales of
$4.6 million, a decrease of 27% from
the year-ago quarter, representing 70% of total net sales for the
quarter, compared to $6.4 million, or
65% of total net sales in the year-ago quarter.
- In the Traditional segment, which consists of wholesale and
retail customers, net sales of $2.0
million, a decrease of 40% from the year-ago quarter,
representing 30% of total net sales for the quarter, compared to
$3.4 million, or 35% of total net
sales, in the year-ago quarter.
- Finished jewelry net sales of $5.3
million, a decrease of 28% for the quarter, compared to
$7.4 million in the year-ago
quarter.
- Loose jewel net sales decreased 43% to $1.3 million for the quarter, compared to
$2.3 million in the year-ago
quarter.
- Operating expenses increased 7% to $4.3
million for the quarter, compared to $4.0 million in the year-ago quarter, primarily
due to increased investment in marketing strategies.
- Income tax expense increased to $6.3
million for the quarter, compared to an income tax expense
of $78,000 in the year-ago quarter,
driven by the establishment of a deferred tax asset valuation
allowance on the Company's deferred tax assets.
- Net loss was $8.4 million, or
$0.28 loss per diluted share for the
quarter, compared to net income of $0.3
million, or $0.01 earnings per
diluted share, in the year-ago quarter.
- Weighted average diluted shares outstanding were 30.3 million
for the quarter, compared to 31.3 million in the year-ago quarter,
partially driven by the impact of the effect of the Company's share
repurchase program.
Financial Position
Cash, cash equivalents and restricted cash totaled $16.0 million as of March
31, 2023, representing a decrease of $1.1 million from $17.0
million as of December 31,
2022, and a decrease of $5.2
million from $21.2 million as
of June 30, 2022. Total inventory
decreased to $33.3 million as of
March 31, 2023, compared to
$35.0 million as of December 31, 2022 and $33.5 million as of June
30, 2022. The Company had no debt outstanding as of
March 31, 2023.
Investor Conference Call
Charles & Colvard will host an investor conference call and
webcast presentation to discuss its financial results for the
quarter ended March 31, 2023 at
4:30 p.m. ET on Thursday, May 4,
2023.
Live Call-In Information: Interested parties can
access the conference call by dialing (844) 875-6912 (U.S.
toll-free) or (412) 317-6708 (international) and asked to be joined
to the Charles & Colvard call.
Live Webcast Information: Interested parties can access
the conference call and accompanying presentation slide via a live
webcast, which is available in the Investor Relations section of
the Company's website at https://ir.charlesandcolvard.com/events or
https://www.webcaster4.com/Webcast/Page/346/47291.
A replay of this conference call will be available until
May 11, 2023 at (877) 344-7529 (U.S.
toll-free) or (412) 317-0088 (international). The replay conference
code is 3961523. A webcast replay will be available in the Investor
Relations section of the Company's website at
https://ir.charlesandcolvard.com/events.
About Charles & Colvard, Ltd.
Charles & Colvard, Ltd. (Nasdaq: CTHR) believes that fine
jewelry should be as ethical as it is exquisite. Charles &
Colvard is the original creator of lab grown moissanite (a rare
gemstone formed from silicon carbide). The Company brings
revolutionary gems and fine jewelry to market by using exclusively
Made, Not MinedTM above ground gemstones and a
dedication to 100% recycled precious metals. Their Forever One™
moissanite and Caydia® lab grown diamond brands provide
exceptional quality, incredible value and a conscious approach to
bridal, high fashion, and everyday jewelry. Charles & Colvard
was founded in 1995 and is based in North
Carolina's Research Triangle
Park region. 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," "intend," "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, (1) our business and our
results of operations could be materially adversely affected as a
result of general economic and market conditions; (2) our future
financial performance depends upon increased consumer acceptance,
growth of sales of our products, and operational execution of our
strategic initiatives; (3) we face intense competition in the
worldwide gemstone and jewelry industry; (4) our information
technology, or IT, infrastructure, and our network may be impacted
by a cyber-attack or other security incident as a result of the
rise of cybersecurity events; (5) constantly evolving privacy
regulatory regimes are creating new legal compliance challenges;
(6) we are subject to certain risks due to our international
operations, distribution channels and vendors; (7) our business and
our results of operations could be materially adversely affected as
a result of our inability to fulfill orders on a timely basis; (8)
we are currently dependent on a limited number of distributor and
retail partners in our Traditional segment for the sale of our
products; (9) we may experience quality control challenges from
time to time that can result in lost revenue and harm to our brands
and reputation; (10) seasonality of our business may adversely
affect our net sales and operating income; (11) the effects of
COVID-19 and other potential future public health crises,
epidemics, pandemics or similar events on our business, operating
results, and cash flows are uncertain; (12) our operations could be
disrupted by natural disasters; (13) sales of moissanite and lab
grown diamond jewelry could be dependent upon the pricing of
precious metals, which is beyond our control; (14) our current
customers may potentially perceive us as a competitor in the
finished jewelry business; (15) we depend on a single supplier for
substantially all of our silicon carbide, or SiC, crystals, the raw
materials we use to produce moissanite jewels; if our supply of
high-quality SiC crystals is interrupted, our business may be
materially harmed; (16) if the e-commerce opportunity changes
dramatically or if e-commerce technology or providers change their
models, our results of operations may be adversely affected; (17)
governmental regulation and oversight might adversely impact our
operations; (18) the execution of our business plans could
significantly impact our liquidity; (19) the financial difficulties
or insolvency of one or more of our major customers or their lack
of willingness and ability to market our products could adversely
affect results; (20) negative or inaccurate information on social
media could adversely impact our brand and reputation; (21) we rely
on assumptions, estimates, and data to calculate certain of our key
metrics and real or perceived inaccuracies in such metrics may harm
our reputation and negatively affect our business; (22) we may not
be able to adequately protect our intellectual property, which
could harm the value of our products and brands and adversely
affect our business; (23) environmental, social, and
governance matters may impact our business, reputation, financial
condition, and results of operations; (24) if we fail to evaluate,
implement, and integrate strategic acquisition or disposition
opportunities successfully, our business may suffer; (25) our
failure to maintain compliance with The Nasdaq Stock Market's
continued listing requirements could result in the delisting of our
common stock; (26) some anti-takeover provisions of our charter
documents may delay or prevent a takeover of our Company; and (27)
we cannot guarantee that
our share repurchase program will be utilized to the
full value approved, or that it will enhance long-term stockholder
value and repurchases we consummate could increase the volatility
of the price of our common stock and could have a negative impact
on our available cash balance, in addition to the other risks and
uncertainties described in more detail in our filings with the U.S.
Securities and Exchange Commission (the "SEC"), including our
Annual Report on Form 10-K for the fiscal year ended June 30, 2022 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 Securities and Exchange
Commission, or SEC, that discuss other factors relevant to our
business.
- Financial Tables Follow –
CHARLES
& COLVARD, LTD.
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(unaudited)
|
|
|
Three Months Ended
March 31,
|
|
Nine Months Ended
March 31,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net sales
|
$
|
6,641,799
|
|
$
|
9,751,835
|
|
$
|
24,382,003
|
|
$
|
33,785,281
|
Cost of goods
sold
|
|
4,493,125
|
|
|
5,296,530
|
|
|
14,650,910
|
|
|
17,347,026
|
Gross
profit
|
|
2,148,674
|
|
|
4,455,305
|
|
|
9,731,093
|
|
|
16,438,255
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Sales and
marketing
|
|
3,267,436
|
|
|
2,932,587
|
|
|
10,715,066
|
|
|
9,741,774
|
General and
administrative
|
|
1,053,357
|
|
|
1,106,850
|
|
|
3,654,788
|
|
|
3,880,684
|
Total operating
expenses
|
|
4,320,793
|
|
|
4,039,437
|
|
|
14,369,854
|
|
|
13,622,458
|
(Loss) Income from
operations
|
|
(2,172,119)
|
|
|
415,868
|
|
|
(4,638,761)
|
|
|
2,815,797
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
69,159
|
|
|
1,120
|
|
|
168,935
|
|
|
1,964
|
Loss on foreign
currency exchange
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(34)
|
Total other income
(expense), net
|
|
69,159
|
|
|
1,120
|
|
|
168,935
|
|
|
1,930
|
(Loss) Income before
income taxes
|
|
(2,102,960)
|
|
|
416,988
|
|
|
(4,469,826)
|
|
|
2,817,727
|
Income tax
expense
|
|
(6,293,048)
|
|
|
(78,480)
|
|
|
(5,858,155)
|
|
|
(484,582)
|
Net (loss)
income
|
$
|
(8,396,008)
|
|
$
|
338,508
|
|
$
|
(10,327,981)
|
|
$
|
2,333,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per
common share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
(0.28)
|
|
$
|
0.01
|
|
$
|
(0.34)
|
|
$
|
0.08
|
|
Diluted
|
$
|
(0.28)
|
|
$
|
0.01
|
|
$
|
(0.34)
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number
of shares used
in computing net (loss) income per
common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
30,344,954
|
|
|
30,484,897
|
|
|
30,387,303
|
|
|
30,286,195
|
|
Diluted
|
|
30,344,954
|
|
|
31,268,410
|
|
|
30,387,303
|
|
|
31,271,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CHARLES
& COLVARD, LTD.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
March 31,
2023
(unaudited)
|
|
June 30,
2022
|
|
ASSETS
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
10,914,584
|
|
$
|
15,668,361
|
|
Restricted
cash
|
|
5,056,044
|
|
|
5,510,979
|
|
Accounts receivable,
net
|
|
933,553
|
|
|
2,220,816
|
|
Inventory,
net
|
|
7,889,917
|
|
|
11,024,276
|
|
Note
receivable
|
|
-
|
|
|
250,000
|
|
Prepaid expenses and
other assets
|
|
883,814
|
|
|
1,190,012
|
|
Total current
assets
|
|
25,677,912
|
|
|
35,864,444
|
|
Long-term
assets:
|
|
|
|
|
|
|
Inventory,
net
|
|
25,439,369
|
|
|
22,488,524
|
|
Property and
equipment, net
|
|
2,317,738
|
|
|
1,901,176
|
|
Intangible assets,
net
|
|
301,310
|
|
|
265,730
|
|
Operating lease
right-of-use assets
|
|
2,336,334
|
|
|
2,787,419
|
|
Deferred income taxes,
net
|
|
-
|
|
|
5,851,904
|
|
Note
receivable
|
|
250,000
|
|
|
-
|
|
Other
assets
|
|
50,387
|
|
|
49,658
|
|
Total long-term
assets
|
|
30,695,138
|
|
|
33,344,411
|
|
TOTAL
ASSETS
|
$
|
56,373,050
|
|
$
|
69,208,855
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
$
|
3,116,810
|
|
$
|
4,401,229
|
|
Operating lease
liabilities, current portion
|
|
874,177
|
|
|
856,571
|
|
Accrued expenses and
other liabilities
|
|
1,143,192
|
|
|
1,546,483
|
|
Total current
liabilities
|
|
5,134,179
|
|
|
6,804,283
|
|
Long-term
liabilities:
|
|
|
|
|
|
|
Noncurrent operating
lease liabilities
|
|
2,251,581
|
|
|
2,846,805
|
|
Total long-term
liabilities
|
|
2,251,581
|
|
|
2,846,805
|
|
Total
liabilities
|
|
7,385,760
|
|
|
9,651,088
|
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
|
Common stock, no par
value; 50,000,000 shares authorized;
30,912,108 shares issued and 30,523,705
shares
outstanding at March 31, 2023 and 30,778,046
shares
issued and 30,747,759 shares outstanding at
June 30,
2022
|
|
57,242,211
|
|
|
57,242,211
|
|
Additional paid-in
capital
|
|
26,165,810
|
|
|
25,956,491
|
|
Treasury stock, at
cost, 388,403 shares and 30,287 shares
at March 31, 2023 and June 30, 2022,
respectively
|
|
(489,979)
|
|
|
(38,164)
|
|
Accumulated
deficit
|
|
(33,930,752)
|
|
|
(23,602,771)
|
|
Total shareholders'
equity
|
|
48,987,290
|
|
|
59,557,767
|
|
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY
|
$
|
56,373,050
|
|
$
|
69,208,855
|
|
CHARLES
& COLVARD, LTD.
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(unaudited)
|
|
|
Nine Months Ended
March 31,
|
|
|
2023
|
2022
|
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
|
|
Net (loss)
income
|
$
|
(10,327,981)
|
$
|
2,333,145
|
|
Adjustments to
reconcile net (loss) income to net cash (used in) provided by
operating activities:
|
|
|
|
|
|
Depreciation and
amortization
|
|
477,285
|
|
350,198
|
|
Stock-based
compensation
|
|
209,319
|
|
676,934
|
|
(Recovery of)
Provision for uncollectible accounts
|
|
(18,000)
|
|
26,000
|
|
Provision for
(Recovery of) sales returns
|
|
59,000
|
|
(25,000)
|
|
Inventory
write-downs
|
|
119,000
|
|
232,000
|
|
Provision for accounts
receivable discounts
|
|
42
|
|
3,269
|
|
Deferred income
taxes
|
|
5,851,904
|
|
483,168
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
Accounts
receivable
|
|
1,246,221
|
|
92,264
|
|
Inventory
|
|
64,514
|
|
(3,562,704)
|
|
Prepaid expenses and
other assets, net
|
|
756,554
|
|
640,843
|
|
Accounts
payable
|
|
(1,284,419)
|
|
356,311
|
|
Accrued income
taxes
|
|
-
|
|
1,414
|
|
Accrued expenses and
other liabilities
|
|
(980,909)
|
|
(504,862)
|
|
Net cash (used
in) provided by operating activities
|
|
(3,827,470)
|
|
1,102,980
|
|
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
|
|
Purchases of property
and equipment
|
|
(884,030)
|
|
(1,250,296)
|
|
Payments for intangible
assets
|
|
(45,397)
|
|
(38,867)
|
|
Net cash used in investing activities
|
|
(929,427)
|
|
(1,289,163)
|
|
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
|
|
Repurchases of common
stock
|
|
(451,815)
|
|
-
|
|
Stock option
exercises
|
|
-
|
|
650,917
|
|
Net cash (used in) provided by financing activities
|
|
(451,815)
|
|
650,917
|
|
|
|
|
|
|
|
NET (DECREASE) INCREASE
IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
|
|
(5,208,712)
|
|
464,734
|
|
CASH, CASH EQUIVALENTS,
AND RESTRICTED CASH, BEGINNING OF PERIOD
|
|
21,179,340
|
|
21,446,951
|
|
CASH, CASH EQUIVALENTS,
AND RESTRICTED CASH, END OF PERIOD
|
$
|
15,970,628
|
$
|
21,911,685
|
|
|
|
|
|
|
Supplemental disclosure
of cash flow information:
|
|
|
|
|
Cash paid during
the period for income taxes
|
|
$
|
5,900
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to
Condensed Consolidated Balance Sheets:
|
|
March
31,
2023
|
March
31,
2022
|
Cash and cash
equivalents
|
|
$
|
10,914,584
|
$
|
16,861,685
|
Restricted
cash
|
|
|
5,056,044
|
|
5,050,000
|
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
|
|
$
|
15,970,628
|
$
|
21,911,685
|
|
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multimedia:https://www.prnewswire.com/news-releases/charles--colvard-reports-third-quarter-fiscal-year-2023-financial-results-301816477.html
SOURCE Charles & Colvard, Ltd.