CHARLES & COLVARD REPORTS THIRD QUARTER FISCAL YEAR 2023 FINANCIAL RESULTS
Conference Call with Accompanying Slide Presentation Scheduled Today at 4:30 PM ET
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 32% from$9.8 million - 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 27% from the year-ago quarter, representing70% of total net sales for the quarter, compared to$6.4 million 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 40% from the year-ago quarter, representing30% of total net sales for the quarter, compared to$3.4 million 35% of total net sales, in the year-ago quarter. - Finished jewelry net sales of
$5.3 million 28% for the quarter, compared to$7.4 million - Loose jewel net sales decreased
43% to$1.3 million $2.3 million - Operating expenses increased
7% to$4.3 million $4.0 million - Income tax expense increased to
$6.3 million $78,000 - Net loss was
$8.4 million $0.28 $0.3 million $0.01 - 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
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 (
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 (
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
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
- 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 | ||||||||||||||
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; | 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 | (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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SOURCE Charles & Colvard, Ltd.
