Charles & Colvard (CTHR) 13 Feb 242024 Q2 Earnings call transcript

Good day and welcome to the Charles & Colvard Second Quarter Fiscal Year 2024 Earnings Conference Call and Webcast. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [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 other things, the company's business strategy and growth. Expressions that identify 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 in light of these risks and uncertainties. further prove these to no forward-looking - be will information be can assurance forward-looking that this There accurate. the Investor Accompanying PowerPoint today's section the slide supporting at of Relations deck, which call is available is company's website a ir.charlesandcolvard.com/events. in question-and-answer hosting the The the remarks. at a will conclusion session company be of prepared you'd have if submit, e-mail like you Should questions ir@charlesandcolvard.com. please to any Please note this event is being recorded. to to Mr. I over conference would turn now the like O'Connell. Don Mr. Don O'Connell, President Officer. and Chief Executive sir. ahead, go Please

XXXX everyone, and our financial welcome results fiscal call. afternoon, Good second conference to quarter

continued commodity experience pressure decreased alone. revenue ended market We but in $XX.X indicate the conditions, downward remain we total [ and a quarter, $X.X we diamonds, cash, the economic with year on in $XX.X for industry, US of grown sank ] second quarter jewelry in challenging XXXX. challenging the margins Despite and we of impacts pricing our resilient During jewelry delivered to in million inventory that debt to the free Tenaris from Reports on rising effects X.X% and million. face the our lab not the were by business adversity. prices million

& sources, we moissanite. retailers jewelers As pricing of is and the and Colvard our pressure brand seek protect to forge value that it alternative Charles competitive the value lab moissanite imperative of direct relationships prices independent proposition impacts diamond grown with and equity

quarters. the owned enable sales, charlesandcolvarddirect.com. loose with distributor be through original As to agile to we'll their business, will the market independent in to we web help new we see lab-grown and model specifically, and positive impact directly critical to traditional of gemstone directly to to world's finest We as prepare our ongoing purchase this responsive Allowing independent thousands believe in source to begin to this engage gems. strategic transition moissanite result, transition a market anticipated property the jewelers from jewelers reaffirming position will coming as be decline from and creator source the the of continue shift profits. our more We in them the maximize segment, of away our the feel our the conditions

experienced we brick-and-mortar we encouraged the finished jewelry were with our by sales gemstone performance quarter, loose during holiday softness partners. While in our

to continue optimize moissanite differentiating modify in-store value proposition with highlighting alternatives. One to increased and designs assortment carat We and ourselves Forever our diamond against moissanite further and competitive new weights,

Additionally, in-store this lab-grown our opportunity the gem Stores we Helzberg are lab-grown supporting the assortment to moissanite jewelry categories. our to and Diamonds for both of diamond in offer our diamonds, reinforcing the addition Caydia to highlights importance ahead believe both market designs We pleased season. have key merchandising of introduced finished our holiday strategic

total revenue, lab-grown expansion a for As market. believe online our In demand, total total of important represents gain market more retailers share XX% which lab-grown assortments continue as net consumer this increasing growth now growing sequential charlesandcolvard.com up allow to experienced of our Lab-grown year-over-year to on to our sales, a percentage we channel opportunity. overall the climb diamonds diamonds in the XX% greater sales, us the adopt meet diamond quarter. will we of achievable fine jewelry segment,

make optimize web investments to our property capital continue We strategic to charlesandcolvard.com.

ways leading Colvard to in launch will gen prepare As believe our myriad our QX. transfer we experience platform to next direct-to-consumer Phase We to e-commerce design of NextGen & e-commerce I in Charles contained experience with front-end our custom industry conversions. user and increase open-source proprietary code platform, dramatically headless We e-commerce better increase our a will applications, powered create site by believe sales new to changes catalog the and will these overall significant new builder will and journeys, add increase configuration These customer consumers experience consumer greatly to customer new bolster a variety browse revenue. driving SEO speed. shopping of journey in capabilities engagement ring split while two-step advanced allow behavior, shopping efficiently. Gather critical experiences. additional the data more shopping shopping rankings believe test the We product

year, important an obsolete position driver for this Our web outlet compared revenue XX% Moissaniteoutlet.com inventory. in property up and revenue legacy in to remains year-to-date last

our Charles refine us Moissaniteoutlet.com our strategy capture we continues merchandise. low-cost end clearance lower brand. market consumers the As merchandising Colbert without the seeking to serve Moissaniteoutlet.com other diminishing support channels, in enables to to of the &

In to such we During pilot YouTube on launched our property web Facebook, social broadcasting and on our madeshopping.com and featuring initiative, a live MADE satellite QX, products successfully and & Charles support new Shopping X programming mediums. other platforms media as transactional linear MADE streams Shopping. also broadcast October, streaming Colvard across launched we and

Our I host. content model featuring recognized nationally shopping follow Phase the home traditional

an note understand on the the their believe launch lift behind of madeshopping.com Shopping to our why to as who we charlesandcolvard.com, as to traffic since our direct-to-consumer purchase. a well pleased are MADE initiative. reaching We overall those due is in broader presence for want MADE is which audience new

II shopping MADE a initiative shareholder a consumers to Further We of brand's Shopping the expand curated our product by verticals. fine partners Shopping of who trust who purchasing hyper commitment that's in interactive scenes with and entertainment, curated our for personal prioritize jewelry to appreciate and to for solidifying to to Starting the flagship mission blend and will exquisite But believe plans mix seeking a consumer. Charles of craftsmanship who in of growing just the and present MADE for shopping with better those storytelling, into traditional products modern We're with those solution & MADE a on ethos mind. a redefine their to created the live beginning. collection working shop. thoughtfully purposeful share explore MADE we're as this thereby and our content, customer in are At our Colvard and that experiences. value. brand. a unique helping will other For world decisions today's quality, offerings a behind potential creating evolve Shopping education, be how market eventually Phase destination and increase

awareness attributed the direct-to-consumer softness Although top to experienced quarter, December in shopping we we which initiatives. for witnessed of of increase the an by in our driven we charlesandcolvard.com, demand funnel in year-over-year beginning

Our within the strategic across concerted quarters. and drivers quarter's during the top we quarter Jewelers revenue These thrilled launched well Furthermore, we two the partnerships Service, Air believe, are line us online of Exchange. fueled final month. collectively the and properties Army become in revenue Force or with Exchange multiple have efforts to Meyer out growth will, The & partnerships important performed future for Fred gate

revenue presentation Pete, over on now will into proceed. support financial QX's to our I provide the to to scaling As strategically detailed preserving performance. while we current turn CFO, we look Clint remain resources cash focused future ahead, please state and insight Clint, drivers.

of for the summary XX, ended key Thanks, Don. I'll Today XXXX. second December provide financials quarter a

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

customers, of total net total sales quarter. as $X.X economic First, in XX% due pure net $XX.X totaled which Moissaniteoutlet.com, totaled for in matures. up independent representing slide our in sales retail fine for one expected jewelry more comparative $X.X million of of the the the year ourselves direct-to-consumer brick-and-mortar for market Traditional XXXX we as our sales a XX% million, ago the Net for sales, Channels outlets jeweler segment, position compared as the XX% to the year is consist analysis model. sales, X a ago. of the sales total, XX% continue to with XX% primarily one QX the wholesale $X.X quarter jewelry representing million same quarter, total shift for and sales revenue direct-to-consumer ago. one business on of and we'll madeshopping.com, of now In up general and XXXX the net marketplaces, to million year segment, uncertainties and quarter, XX% to year and company's sales period wholesale sales quarter from versus XX% quarter, compared start Online the second of the more now which decline includes dropship initiatives the Finished charlesandcolvarddirect.com, move other and continued to of from second for net primarily decrease we our totaled the to Net of model direct-to-consumer charlesandcolvard.com fiscal play in ago represented

sales As Domestic due quarter. mentioned jewel to loose we sales represented expected, net sales X%. in the previously all totaling net the strategies, quarter, sales international for with XX% of the second XX% decreased

profit XX $X.X XX% profit margin gross on the margin a million XX% year to year quarter or in million gross gross discuss versus of of the gross reported ago quarter. slide $X.X to We ago margin. in versus in gross Moving

administrative million the within $X million share in year million. increase quarter. increase ago We loss reported loss per $X.X QX revenues in the from compared the to X% to expenses X% various share or of large [ increased XXXX, million expenses were main prior the the year year loss per XX% drivers due various due and ] $X.XX loss QX a additional increased or in part related for a the period. were $X.X legal corporate net matters expenses million matters $X.X loss the to XXXX ago quarter's the operating and increase. a in in for diluted decreased quarter. $X.X G&A for fees a with to to corporate for last The net ongoing net the quarter compared our compared marketing For expenses ago in QX again year diluted decline quarter.Sales General or The $X.XX to and quarter, was

shares per quarter. the period of in basis XX.X calculation average loss same shares as share December used outstanding XXXX, XX, on the year million weighted approximately for the quarter diluted for Our the ended ago were in a the

let's sheet. our snapshot Now, on to move of balance

ended million $XX.X Our the million we remained the at cash, the of capital quarter and to ended Working end XXXX. with quarter position total compared remained as $XX.X of strong June liquidity XX, million. strong fourth at capital $XX.X

debt of was XXXX. company December as XX, free the addition, In

was million flow generated a compared burn $X.X our same from of used cash the quarter QX Our million. XXXX, operation operations cash flow $XXX,XXX reduction in ago. the from quarter, $X.X And year during cash during which a to was in

of million facility $X to secured our sources with liquidity, other access of have terms we Bank. cash In JPMorgan Chase credit

well facility. a credit the share due there compared as than XX, June and June we XXXX, as to $X initiatives. $XX of compared XXXX, the XX, XX, to inventory million support totaled remains decrease XX, downs With $X.X Finished at This write to as XXXX. end as in strategies. in per drove million $XX.X of due management year-over-year inventory of above. XXXX to write share, prudent $XX of XX, with was inventory jewelry our to of as million compared down again in December the compared the QX steadfast of XX, to on I'll a that, at due XX, compared XXXX, it June Inventory deploying XXXX, at no Don. million $XX.X $XX.X cash XXXX $X.X $XX.X million diligently referenced XXXX, was $X.XX quarter inventory December turn XXXX, amounts compared $XX.X as to over more the FY to management XX, December and second December XXXX, Book of on to December of million totaled our XX, decrease million value XX, As focused when it million year-over-year strategic December capital inventory of outstanding million In were December remain XXXX. Company market. of per million summary, trading while back below ongoing

you, significantly numerous has and our In conclusion, with we earnings. impacted the acknowledge recent presented Thank has us shift challenges Clint. industry

our confidence this ahead. for value will the committed hinder However, and or we in deter long-term over do questions. operator our and continued At this I'll setback look to strategic it delivering lines the We not long-term shareholder back time, initiatives. who you forward Thank your believe lie progress turn remain growth for opportunities and open any will support to the to company. that our

Thank you.

assemble to We ahead. time, the at Instructions] And Paul this Johnson [Operator question-and-answer session. Instructions] we'll Please come begin Johnson roster. will pause from the [Operator will first question our Investments. momentarily now with And go

with I the Good flat a roughly question ago. on Yes. afternoon. the expenses, have operating year which are

cash but $X million got straight changes, million to a going cash cash lost line the if you it's we in burn. In in year a losing know sheet. But flat. one quarter, all that's meantime, more I of destroy and the on have know Some you roughly $XX the not balance I and $X that's million

are the on aside burn that not makes the plans, in I'm we call cash the So, based how anything marketing leaving hearing going to that plans this us now? cash the and think preserve

the thanks Paul, Hey, question. Yes. for

did we last I $X.X So burn, was certainly cash this believe I million year, reduce was which burn $X.X versus it cash from quarter. million our mean,

cash of in good the is of pretty will don't look costing at at look plus to the we is understanding tell that we're that people don't kind and finished the is, money So, of business. Incorporated is $XX you that operate are it's concentration us I inventory, jewelry, burning what at which the the million time. commodity, gold at this jewelry which itself. finished concentration they

merchandise in constantly we're that investments the the So, we bring market. making and to additional material in

gold highly liquidable within on that that So, to cash and is able raise that. product we're

was much a we it dynamic we the said, million the cash being have the past. equivalents business that with So, and $XX side, and cash that in in is then between inventory years have different which plus

seem in critical. they the Certainly to necessary make the the we're We're may bit and business cash drive cash to we're little kind optically, of actually confident really, building. the we're able is better to be, I'm where different, spending going of investments where really pretty preservation So what in it and but for place. dollars a be a need future.

making future. bring to make reserve us to sense possible initiatives kind us look deploying of now, believe makes prudent be look cut resources. property forward and and investments be driving when to investments the we're right it's back it to look where the us web for new We're web be making We're growth on a in of to we that coming So, our to takes experience. We're capital. in to able that But launching `s. where best-in-class and the capital to be going to strategic

bring the valid, we're forward going So, in Certainly, very believe staff be to areas drive growth. that the your growth confident future. is we that but bringing specific on and are different business we'll we're to pretty question of where moving that's

of we moissanite had So, We had in the on some diamonds. to kind versus lab-grown downward pressure moissanite shift market.

side But that We'll a other the more things. be the the considerations profitable to starts the of to You get it kind of online some to start and cognizant focus and of economy, get ahead, once and I happen had shift some little quarters on this start the bit. new and the these things streamlining initiatives as these the we start on believe we'll profitability business revenue to turn come. more more to business the of

I don't So, I know if answered that, but [indiscernible]

that. Well, I appreciate

there your lot if is or to $XX roughly being million it going So, liquid. inventory, a about of back point gold in very

not much products, million the talking liquidated the be cash? I'm could - quickly, ballpark, Just how we if Liquidated $XX about finished of need but

Yes.

so is catastrophic the is looked it I with and again, what the I was when commodity, [indiscernible] we everything beauty to liquid. The try we liquid. is at Berkshire business and Richline certainly if Hathaway's drive business a So, is Group, gold our where mean, of the event highly

that inventory million, at you our $XX of with the concentration look inventory. of So

comprised inventory jewelry at $XX finished of million. is that Specifically,

of come at XX% it's very XX that gold. That said that. simple with on the very, carat, is up took inventory, economics you it's If to you gold

you're So, that's I that. the you $XX.X basically mean, million then with at And in have cash. where

We debt no business. now the have in right

we a feel in good So, place. still we're that

to kind of a grow and have $X also this to ship business. shape million and available continue us that's to credit of line We kind

don't their in gold Right. of lot companies commodity other So, a products. have finished in the

advantage So we that's one have.

you. Thank it. Appreciate

Yes.

to for conference go [Operator Please back Mr. our ahead, closing session. any sir. Don question-and-answer I the to Instructions] This like turn O'Connell would concludes over remarks.

to to the our their sharing achievements in and company. the you for to Thank We want I with continue forward attention thank believe you. progress look in So, future. and everyone

conference today's The concluded. for Thank now has attending you presentation.

You disconnect. may now