Charles & Colvard (CTHR) 8 Nov 202021 Q1 Earnings call transcript

Good day, and welcome to the Charles & Colvard First Quarter Fiscal Year 2021 Earnings Call. [Operator Instructions] This earnings call may contain forward-looking statements as defined in Section 27a of the Securities Act of 1933 as amended, including statements regarding, among things, the company’s business strategy and growth strategy. Expressions which identify forward-looking statements speak only as of the date that the statement is made. These forward-looking statements are based largely on our company’s expectations and are subject to a number of risks and uncertainties, some of which cannot be predicted or quantified and are beyond our control. Future developments and actual results could differ materially from those set forth in, contemplated by or underlying the forward-looking statements.. risks forward-looking there be information these assurance be accurate. of the that will light and can uncertainties, no In prove to any shareholders. agent designation This offer respect to of not does of with proxy, securities the meeting purchase company’s a or earnings solicitation nor authorization constitute consent, a a call to an at in Relations section of Accompanying today’s PowerPoint supporting Investor a slide deck, company’s the website ir.charlesandcolvard.com/events. call is which is available the remarks. at The prepared company the a session be will conclusion hosting Q&A of questions to like e-mail have please you Should you’d ir@charlesandcolvard.com. submit, note this event Please is being recorded. O’Connell, the I Executive and like to would now conference turn over Officer. to Don President Chief go Please ahead.

I’m afternoon. Welcome, proud my work profit achieve has increase, results. Good over XX% income & $X.XX deliver was to of continuing of Colvard’s gross margins done going EPS XXX% XXXX an share team transform $X.X of per economic uncertainties. the to Today, us This global a everyone. the and to revenue, enabled excellent This of report quarter Charles diluted million or a net maintain organization. extremely we XXXX, with are full This represented my the a quarter first first and despite XXX% in effectively $XXX,XXX. fiscal CEO, QX increase as

Now the the our numbers I Pete, call unwrap will turn CFO, in Clint? to over Clint to more detail.

key our QX for summary XXXX. financials Don. you, of Thank I’ll provide a Today,

quarter, we to percentage unless and first issued Additional detail file afternoon that all the note can we be Please that to specified. comparisons year this release our found Form press tomorrow. XX-Q, in otherwise our are earnings ago which expect

orders traditional pure-play representing charlesandcolvard.com, QX XX% of of net X%. charlesandcolvard.com, net versus segment, net This million, the with sales for total net the was decreased increases online segment, sales. Loose XX%. primarily $X.X to to flat In demand In revenue. of totaled of or XX% increase and sales. website to ship retail in other on their In International net Finished the brick-and-mortar decrease year online the company’s an million, continue distributors from website, quarter from or due for direct-to-consumer quarter related the jewelry as outlets, net includes we customers, for decline for XXXX jewel have $X.X transactional entire of totaled to were the from XX% million increased sales a customers sales sales doors. limited due increased mainly of quarter start our during distributors, a to COVID-XX. representing $X.X drop our agent and net which ago quarter. wholesale combined quarter. We sales $X.X from our decreased and our channels quarter brick-and-mortar retail XX%, X% for increase reopening compared million, marketplaces, international transactional channels with sales our total, or total net which sales will an XX%, the Net cross-border our XX%, consists sales

gross Moving XX% XX% year quarter. margin the the maintained to on, of in we ago strong compared a

representing expenses in our for initiated reduction cutting the year spend in a reduction our XX%, quarter the million total compared in to the related decreased quarter Sales strategy, XX% partner XX% decreased to ago the primarily expenses net operating actions total in for million related shift to to the $X.X digital for of expenses XXXX, marketing QX For force services, from to primarily in to XX% and G&A in and reduced QX marketing requirements marketing the decreased quarter. XXXX. force sales, enacted in from $X.X overall the XX% QX professional XXXX. cost reduction

share in approximately a net income of $XXX,XXX compared or ago per with year $X.XX $XXX,XXX of per Next, diluted the net share diluted period. income for we reported XXXX or QX $X.XX

on snapshot let’s Now balance move of our a sheet. to

Our $XX.X for fiscal net at total with cash liquidity with compared totaling $XXX,XXX. XXXX. quarter million the We QX of last XXXX we generated as year our income ended ended million $XX.X strong, remained June XX,

season, quarter, As in cash of by decreased for cash continuing holiday ago roughly we used operations the million $XXX,XXX of is continuing for which our used the $X.X in operations in the quarter. prepare the half year the

to Commercial we terms currently sources of Finance. White facility Oak other $X million In of a with liquidity, have credit asset-based access

million over credit our of million navigate the $XX.X compared million current compared to Finished environment. for reflecting buildup million $XX.X preparation ability summary, of this jewels holiday of we season. of $XX.X totaled we confident Loose million financial was September inventory our $XX.X XXXX, in the not XX, XXXX, to as of As inventory XX, was strength funds June XXXX, call that, September our as to XX, to accessed the $XX.X back in as XXXX. inventory XX, have as upcoming facility. XXXX. will jewelry million remain compared Don. through Inventory June and June turn to of I In $X.X With XX,

the stabilize quarter, efforts a value, Thanks, the what period in decade. us helped profitable are spoke and quarter increase to those we about actions and the deliver for Clint. X-month over taken same shareholder business the Last most our

momentum the consumer scaled meet they’re our Our our continued channels, by growth where we the of shopping. online currently revenue to digital was presence driven as upward

of sales Charles XX% sales net this with over Colvard XX% channel over quarter. & online the same quarter Our the year, representing online increased last

QX XXX% ago sales we traditional were to from increase able year able were to earnings we XXXX executing as reopened. outlined in you slow the XX% segment Our as deliver by initiatives key were for rebound, to brick-and-mortar on but distributors a began international over down call. quarter, We to the slowly that results our these last I stores some deliver get of a

we the moissanite journey with provides a jewelry. globally on the company. recognized complexity more business functionality, elevates enhanced to and quality diamonds believe did. billion assortment greater for we our of on whole rolled specially consumer lab on reach. components an of the to Along out we feel this new and and and be of and on our the product our share premium brand look variety appealing become and awareness fine of in resources, industry infrastructure grown focused that feel, to unveiled product lab gems We market value launch, grown our as luxurious enable educate now and more the movement. offer Forever through in a eliminates can our $X.X is We We line brand. this to in refresh and Caydia We with we Here’s that This utilize unboxing experience further a line that a a the jewelry provides moissanite. new us audience elevating because us of further a launch reach look for new our to experience believe broader expanded the media consumers. lab One which are We progression custom addition, greater existing the website choice, our set to we propels consumers. delivers campaigns jewelry brand for that is line expanded incredibly diamond, a packaging, now that of social able part this a believe we our curated this what Forever brand natural capture diamond a that choice the expansion created to customers With product fine for One

in We jewelry online Square Square our Francisco program. and the holiday Charles York stores, of State expansion we Street with Union also based continued in feel fine all Chicago. San our City, With New said, that the on grew season. positioned footprint we’re capitalize well omnichannel of This including retail retail by Macy’s to Herald was launch our XX & the in retail Moissanite Macy’s Colvard in flagships success on

to Our on are ability QX key good strategies indicators several bearing successfully our results initiatives and our are fruit. that execute

this while on We launching all expanding customer presence; areas our the what’s increasing on plan across products and those further on the for growth. engagement remaining are: initiatives designs; agile through all the So our XXXX, of functional next? which the new further interactions, focusing on virtual path by digital to disciplined and executing business key continue

encouraged additional operator the to equity, to like We’re over our that I’d back said, given continue trajectory brand strive questions. will lines the creating With our to it all current open to the by value. environment, turn we and shareholder to while the increase for

Matt ROTH [Operator with question Capital. from comes Koranda Instructions] The first

Good afternoon. takings guys. questions. Hi, for Thanks the

time. shipping booked like here. to Wanted you’re off product inventory and November, to wanted fulfillment product meet Just how to frame how we how period thinking a get sort levels and discuss into you about feel the mix, enough start with we’re if customers capacity, also could head see holiday sort as out to time on maybe you to and we key feel December if of about for have planning and and demands of we

Yes.

that. we are So, Matt. question, great appreciate and you So How doing? –

just the Let as go me as the of equation. fulfillment far side

We robust and have a fulfillment really center. distribution

totally We for we’re of so to we the those right. years, so season. that Also few we are changed. as this and a be holiday. we believe great the QX kind And position a quarter holidays the far and in holiday prepared positioned real believe that we for have to poised that, our to We’re levels, well, the inventory as believe organization, hasn’t strength last primarily and we’re staffed deliver on levels, over prepped in within on it built is we inventory within expectations able deliver up

inventory aware, to the must e-commerce to As stock, space are in folks in that – channels. be all that be those most feeds customers must within in those related it and

that in tremendous analytics we got feeds, time team great job, we’ve great do job working forecasting kind the believe prior the of and a sales the the job worked what’s the have data-driven a in team a more letting and our on the kind exposure decisions and I’ve operations that what effectively forecasting. positioning So of done we making we did and frame. in of greater get,

poised we’re believe perspective and too we an positioned well. inventory well So we’re as from

let’s to that. relates As it mix, little talk bit a about product the

or One in a a believe inventory building We’ve great are to the that. done it position moat, relates As we that our job product, up, we Forever in great moissanite certainly for building that up.

be that the in supportive on benefit holiday goods advance, that. will in consignment so also positions those the fully within season, and for our consignment out those there partners retail brick-and-mortar and so those with are levels We channels can we our have with community, partners

we’re So we good there. feel

positioning, more our little it time than a gemstones. is cut more to a positioning, It’s moissanite closer that vertically where a we our normal different bit to little – integrated, lab faceted As bit diamond and bit relates little to where were the moissanite, grown market. we actually we

whip. gems put more whip jewelry We and bit into little a have to into

and for destination expenses diamond grown order inventory to just As for buy it X with Colvard strategic are & built in, relates don’t have already additional those created destination use coming there. to that over a capital-intensive to traffic. us just further that, one to do other over to little partnerships doesn’t capital great is we’ve us we between the that’s Charles – diamond the diamonds, And to where it’s basically the that capitalization, And delineations because built And comes and time, decades to some demand our and last lab alliances be not we grown. on we market. We’ve lab that consumer It is bit a I They go able in have space. brand. when that all to of that when then drive lab the all components. in order grown be kind that of that require a I’ve the people companies

there, market to So and we’re our we to for really easy into that good us is path really space. go place in believe that relatively a

those So hope answered questions. I

metrics you you how you’re contribution might Yes, are out seeing of be wondering quantify that traction understand front you quarters. be call then that just and able a rolled few for what share to maybe might maybe tracking? then as how on the on either AOVs could seeing there. to very or kind would several characterize my speak Caydia a out, you preliminary interest the metrics that’s on to helpful or the for revenue quarter to sense And – also that Don. be you’re detailed. follow-up give and next perhaps, us other consumer it’s been us or And can just you Thank help for expectations if But

Yes.

of those the and But So within traction. We response. you that in kind the quarter, nice we progression we very, very days so able of launched lot to that prior right to now. of experience nice can out immediate been quarter, XX we new we couple end share about with roll didn’t tell web have gain some particular has had I can the you of the information really weeks where were the

me to lab indicators As the a are and little the a grown in the tremendous we’ve relates what it AOV. Caydia What about for elements bit we just diamond that the desire on side, the seen fashion is and there within let saw space. talk fashion early

the we lab very So meli with stones, moissanite perhaps, let’s close as price what far which say, are said, and diamonds grown is meli proximity smaller X.X in maybe gemstones comparisons. millimeter being that as , below, the call and lower,

a this in for predisposed go larger the What fashion for We lighter-weight carats where with amount forward that and tremendous So she’s we does X so moissanite opens us to the diamonds, the lab more bridal, bands, fashion tremendous primarily more grown bringing of space, or it haven’t buy fashion. the and engagement to now the been into consumer and in is a up, sector. that. up stay avenue even the and us the anniversary is the diamonds in into to gravitating

much the As right ticket on that, in we’re $X,XXX a on sector AOV traction bridal gaining is higher engagement around items too, as those again, that And average the far or as the well. side. value AOV and plus and sector, that’s

to very of So of numbers. many it ahead doesn’t and the kind drive take those go

believe about positioned we’re do any guidance. where to we and So to but kind that, I giving on – expansion. be poised don’t new that have We capitalize well of reluctant this forward

that things more, they awareness us It’s destination, to kind other is it’s us, traffic. consumer driving to putting where immediately, bit has, the learn comes the the brand. seeing of for a that and more now experienced we’re and to they in never driving more past getting being conversation, that our One the they they’ve okay, that And effect driving done us awareness it educated. It’s and more us more Forever moissanite in the little really of now to diamond, moissanite, One are our see Forever to grown opposed lifting are diamonds, early between comparison price And or also well. they lab able are grown too, our moissanite, what lab and as the One Caydia gravitating we’re AOV the seeing as that will as strong AOVs, a on as We on indication QX moissanite in side, lifting to we’ll too, lift was anticipate the is that little slight that actually our into a maintain well. well. bit we get it and it’s

helpful interesting and commentary. Very

the very Could last how Just one quarters on could be other quarter AOV thing, for us last give moissanite the can maybe side relative quantify the business the of to just AOVs of that’s of in things. side would you if and maybe us I helpful? couple – follow-up or you tracked

Yes, ahead go little to I go to am and bit. let that a going ahead Clint and talk

averaged been about pretty consistent. Don. quarter, we moissanite, Matt of you, this Thank and the Yes. $X,XXX, Related it is to AOV Hey probably how going. that’s

got $XX I hovered to – it’s between to up one $X,XXX think it quarter. – in got $X,XXX, one

have we that of seen kind area. of So that kind level

the Okay, guys. will Thanks Thanks Clint. excellent jump in Don. I queue. back

Matt. Thanks, Alright.

Instructions] [Operator

question So try I have an I elaborate that going to am e-mail on. to

it’s a So appreciate and question it. I good

launching the the one our the Caydia of question. grown We metals and in are business. to Caydia And in we solution in believe recycled cannibalize history diamonds, a was pontificated jewelry, responsible, looking it subject sourced a we wants But metals. for recycled of for So, know XX-year before is, kind all lot moissanite consumers reality a grown today’s world, shareholders to matter. of to of It’s lab business. are ethically a obviously, that our great diamond there related back forth if quest have launch moissanite the the will the that of lab deliver

same whether same course moissanite kind said. with metals value, have over carats, it’s We that carry a it metals. or are XX that all so the has encrusted intrinsic as of encrusted whether mentioned with platinum, the carats, a It’s the value, they time diamond, set, I that XX it’s it’s of the intrinsic

the alluded as of to it. that I are the relates aspect that’s And moissanite question, our So we lift to one business. it seeing in prior

an Charles seeing to and awareness incredible traction brand. also & We’re and Colvard visibility amount the of

& efforts bit If a of Charles for of communication following you’ve PR also you’ve starting seen little been kind perform Colvard kind and well. here, our to

excited here a those We the is, perhaps, carry so are but lab proof Magazine, brand the perhaps, to I Caydia obviously, getting Brides.com, National certainly of Jewelers Jeweler about in the moissanite XX announcing grown with traffic around can’t Maybe answers, or weight past, come they driving etcetera, seeing the by being maybe lot or of between between with etcetera. And the what or coverage fatigue Circular didn’t shareholders, some had Forbes investors Keystone, we’re we’re years, forth. website. we’re diamonds. just up that magazine,

channels. to traffic of real we real of our have comprised and business partners. is well a critical, understand, also segment all brick that the and important and too, driving that’s people We’re as traditional mortar What don’t distribution and that’s

time. we year’s domestic revenue the And a the we are we know quarter piece, trend push and on and last have pleased through given I And we fill market, had drive revenue gap that’s So been very beat the same focus on to downward with the that the – domestic in only the circumstances. over period and the able of that. some more but international

all line. XX introducing that only days within and product was this you, had the done, mind quarter, have Now we new

market to accretive only it allows and our the are our second And this exposure whether which the opens more of over to a totally believe deem and to we are increases – a to There’s consumer. for a to visibility. is having allows that be will it maybe that believe additional choice of opportunity with where the of it row over than $X.X ready before, and than And that quarter, that’s It taught people us our both kind bring an So and options $XX allows be bit additive that million We There’s to we product they going want furthermore, to the far been diamond have us little new what brand. moissanite into holiday diamond years. brings opportunity there kind brand that that’s It but it’s the for $XXX different out million, whereas to engagement today in us business. billion, they’ve over that that and prepared consumer are and ring, predisposed that. as and whereas now now season, further. them, we the continue to market, we up offering lot – awareness line, grow we to the it’s argument a to slightly we didn’t.

So all us real. again, about it’s redefining

& of seeing that or have Charles In forward, the the it’s does you coming have. mined society, tagline diamond choice, naturally perception we What consumer real, a today’s redefining mean, that is to our that the real grown. Colvard fine something we’re redefined. see will that lab to jewelry You changing idea are gravitate

tremendous millions space. seeing also to lifting. millions the get grown lab spending able do heavy We’re diamond dollars and the reality space. be is into the this allowing these folks of in we’re to They’re to it of capital of investments in amount And all

lab with We And have again, diamond premium. the here. grown our destination. already we’re product, We’re Caydia going already

a we merchandising business because the it job really not products. and will two good between So the delineating did cannibalize

little and that to me further. that of explain you bit a So being kind out that point let said, kind of with

that a we very product made F as So X-carat consumer, quality We’ve E, the color. quality, specific we certain to in up. grown and removing very VSX Caydia complexity bring diamonds to it lab the very, imperfect grade and or And and diamond and relates in it that brand, diamonds to G is slightly have also category.

are Our brand GHI. and DEF moissanite

is our has a up. and fire a has and it of higher X equivalent grade Our diamond, and DEF and more carats premium greater One in brand brilliance GHI a than value Forever and

that we’re that consumer understanding also going believe that’s concentrating, period for point to at the going know So this How accretive. in it’s are the moissanite. convey seeing fashion consumer to in that be value just we questions? short that’s be grown lab awareness we on diamonds the value how going understand and in we time much speculate that going of are We this We business? seeing certainly same the time. to growth be, Anymore that time. But we it’s it’s such to We to while or looking be but know additive. and the building be again, a trajectory going this the at to is are additive, and can’t and

like conference remarks. Mr. are O’Connell to further I over any would questions. no back There closing turn the for to

you. Thank great. Okay,

the interest So we again. and today hope holiday happy healthy Colvard forward to season, family your time brings. the behalf your you and speaking appreciate the we we to have future what On a Charles look company, and and we in & look forward of continued and

for review website conference, of dial will The the call hour replay now. archived digital one beginning approximately be http://www.charlesandcolvard.com/investor-relations/events. XXXX-XXX-XXXX XXXX-XXX-XXXX at access To may or on the this from conference you company’s

a today’s Thank XXXXXXXX. presentation. you conference company You has and concluded. The now conference for enter be prompted will your number, attending when Please record which joining. will to be name

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