Charles & Colvard (CTHR) 2 May 242024 Q3 Earnings call transcript

Good day, and welcome to the Charles & Colvard Third Quarter Fiscal Year 2024 Earnings Call and Webcast. [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, there can be no further assurance that the forward-looking information will prove to be accurate.Accompanying today's call is a supporting PowerPoint slide deck, which is available on the Investor Relations section of the company's website at ir.charlesandcolvard.com/events. The company will be hosting a question-and-answer session at the conclusion of the prepared remarks. Should you have any questions you would like to submit, please e-mail ir@charlesandcolvard.com.Please note, this event is being recorded. to conference like to now would turn over the Mr. I Officer. President and O'Connell, Chief Don Executive Please ahead. go

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

of Additional found March specified to we to XX% release jewelry sales year details total we are the quarter ago sales total diamond sales quarter, due from of now XXXX, as $X.X continued pure-play comparisons QX Net fiscal wholesale pressures includes analysis with for XX-Q, to direct-to-consumer XX% on the XX% same our ship year the decrease of up our revenue which at a in quarter mature. more online for to Form expect our marketplaces, represented ago.Net consists the of as confidence, and drop market of primarily initiative the afternoon moissaniteoutlet.com for segment, next $X.X outlets, up which representing net of press total, and be can the million, third madeshopping.com all year compared ago. totaled comparative net sales XXXX XX, and week. Slide the robust XX% percentage versus of pricing charlesandcolvardrect.com, is XX% we sales company's compared the a lab-grown consumer now quarter totaled ago. early that note and for total sales weak to issued in and million representing X a continues $X.X segment, X a otherwise.First, decline of In direct-to-consumer sales, wholesale charlesandcolvarddirect.com in file X channel retailer primarily to earnings in year in on that business.And million and continue which brick-and-mortar $X.X for Please retail customers due quarter, quarter, period third the the traditional charlesandcolvard.com, third ended of this totaled we'll build X% other sales million the unless independent sales quarter.Finished on to net XXXX net continued from our expected the XX% start

the international company in quarter. Domestic the This large decreased for charlesandcolvard.com to sales and to reflects the and all gross strategies, us totaling jewel marketing increase lease year expenses assets.Our XX% expense company's brand X%.Moving to a driver year million calculation for year and prior driven reported XX% brand's XX% or strategy shares was XXXX quarter.We million discuss tax mentioned, diluted inventory.For legal expenses to in the allow the ago period. previously used a ago a diluted tax deferred versus in $X.X share resources, loss operating sales litigate quarter, traditional with gross average ago or in were XXXX, our million a $X.XX main million funnel move decreased gross $X.XX quarter. prices, sales compared $X.X to a quarter allowance quarter a sales in in million in its March snapshot XX% to XX, of for in the awareness weighted share period.Now, third $X.X believe $X.X our deferred segment tax increased approximately our of people loss shares to the a or basis net shift As $X.X due margin that the the $X.X in strategic the influencer the QX XX% compared positioning.General share was our were $X.X The in for initiatives year sheet. quarter period gross QX of XX% continued $X.X ago the due quarter loss on XX% the quarter XXXX increased for to the in part year net our sales asset XX.X in commodity due campaigns in The cadence loss ago QX balance the for fees top to Slide million with net elevate part investments quarter administrative to the net for loss by in compared diluted XXXX a margin per same million. we establishment marketing X ago per as let's of increase. the of We from margin. large million million increase versus gross year and ended the profit profit ago of of obsolescence a in rising or outstanding valuation some of G&A disposition increased expenses year on to on loss year reported represented the Though, net per

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

in company had debt.Our to million in the cash the quarter in in $XXX,XXX As a flow during of outstanding of March operations compared operations flow XX, was quarter short-term XXXX, the same cash ago. $XXX,XXX used used year $X.X

share, company inventory Chase to $X.X March million in-stock $X XXXX, March drop-ship $XX.X compared in the XX, million to year-over-year XXXX.Boost XXXX, above. again, our $XX.X compared strategies QX of of to $XXX,XXX $XX.X management XXXX, the $XX.X a compared June write-down outstanding totaled XX, to select With totaled March of focused facility. summary, to marketplace in of March as compared the write-down June June XX, requirements jewels cash Bank.As year-over-year JPMorgan equity. XX, to back per million million as third value our market.In below $XX.X we to FY was that, compared our value million turn access on on to inventory The was credit I'll have confident with trading of and was XXXX, company $X.X in as the March $XX.X $XX.X Inventory support inventory jewelry of of decrease, XXXX, we $X.XX as and continued million Don. liquidity, XX, quarter due million XX, other XX, per it of as XXXX.The due million as to March over to the to XX, facility prudent at when well the inventory referred million partners. million of as inventory XXXX, of million of Finished remains Book brand secured XXXX. end increase had at decrease compared XX, shareholder remain of it with XXXX, March terms and efforts credit to $X share XXXX, In XX,

Clint. you, Thank

any lines support you the open challenges With back operational overcome questions. unwavering as I'll the we call remains poised who committed continue while fiscal more to we've As we turn chart will approach reducing we to on and working driving we expenses operator, challenge a while steadfast for of your initiatives better our achieving for created delivering our value year-end, opportunities the By successful our to over navigate focus believe the collective our capitalize dedication together. we on stakeholders.With and our launching journey revenue. to path forward.Thank diligently key sustainable growth are maximizing innovation the to and leveraging to resources efficiently and excellence, as to a this we are efforts, that,

instructions] come investor. [Operator will from your first question Bruce Lindenman, And

still management stock still you place? have back, stock buyback Do And you your stock in the personally? buying buying are

of Hi, myself you historical significant shares amount a at purchases purchase you'll we of had Bruce. that wasn't if directors look the last Yes, at the and when inclusive look it bought ability quiet the period, to recently.

that? think Do you'll you continue

at first Certainly, part it. we these believe an the prices. this of is opportunity that That is

repurchase The we is be able million within stock to have, repurchase believe, program buy. currently to relation left part the in second buyback I to $X.X the program,

of here? to buy stock Are at going value you book X/X back gentlemen

an a daily is on that's basis. always contemplated decision that executive No,

below thing initiatives lot we're that believe move capital. that a weigh that way able of want it's daily the we We on wise sure a trading a we We operate have clear, we cash to So, these these we initiated sure we're we maintain believe to make One to all complete be and that be that had book, funding.So, things very sure to the we basis. to we that just make business. want and make we in to liquidity. certainly want

At what positive business? your cash company think you point of least could at do in terms flow the turn

you is look Yes. kind kind to initiatives but the spend and completing need few tell of performance kind getting capabilities, ad that the something goals forth.So, I I on mean will that we in really we strategy. a a of as so lot a of don't spend. better that and job the late building give quarters, that in A of of put return has need at, we forth to statements, of on and forward-looking last lot out content do capabilities, we we're marketing our been marketing

but to So, of for start we're looking look look wind to profitability at down that path really diligently, to the now. us and

the any we've building investments lot out these So, and of buying. investments we is believe in the website long have property. we what what company the out to the to last consumer for our today, than between future the next-gen we've web of as We're jewelry the made click we couple we strategic unbelievable believe what new to state piece literally call to able has were be quarters, size, functionality, what to we to of point is single in next-generation any buy a they're a necessary better company been kind able of be and any and a run.So, configuration shape, building actual in the a be build able build making

bit But call longer we of we pick be They taken we'd kind be launch whatever to and critical. than the they on able want.So, that. last that QX. in believe to very launching stated color we that, us anticipated little was investment So strategic very, very that that's really important. It's a can

target. the is still that So,

once that dollars get spend because driver profitability bit future will we'll the start there So, level then scale. for little growth save it believe out get to probably of that's most the the there. will running, of then get on up launch, path to we significant a And that us.And and we us we really economies for

enable more So, have won't off for the partnerships third-party purposes, the intents launch we that we new in next-gen and once these us to run. the also us help all and that become APIs of we need property or that a will lot profitable resources peel platform.So, next-gen will long

we're the cost savings. and thing up getting the pretty feeling benefits this about and and So, running excited

you form in Have companies cash through or company help with any of tried to every to this in discussed you terms sell or of partnerships the stuff any terms finance? invest much that you quarter? in How of

No. Every to at that to way on horizon So, the things now. it knew in of are spending be have we knew or us come mean actually look we the wanted could of I spend the about lot conversations I I no a long strategically to question, of a at lot and on partnerships, But mean day alliances point, is fruition. out us, for certainly this focused the these starting between them.So, to we been be we've jewelry a there's spoken for that. what come nothing partners industry there. right? we mean, peel kind these viable dollars down. to There's time. we that and we to where that's for That's investments. right investments, back needed

you run just money. of guys see or I'd or good out something because like No, before to happen

Right.

So, let's that. about talk

want talk to liquidity. about You the

for So that up. we thank fact that and given you the have, bringing

right have off gold, jewelry has believe prior inventory.So, the on of orders climbing. is metals large gold We inventory. has gold an quarter. the the jewelry then in that of we portion finished price. inventory that effect our draw inventory $X.X know have finished capability our commodity That to the I have liquid, we if credit that. $X.X increases anybody a said and I & to and really wanted direct over Colvard million to more when market.So, new right? be we in need you it million to the point It of we is contains That cash a inventory initiative valuable but we've destiny.We Then in raise adverse to moving certainly capital been finished wanted us that priced So, shelf, don't loose the fact current is in want a that control rising we and is benefit valuation say the as really Charles active jewels but a new thing And the means means on comprised jewelry have that get we inventory. that's to for Direct at the means that out or more of the at that that first. capability inventory are to to other to the now, So We loose line would end on realized real able the of just the got we late, consumer, started to gems. toward sell

avenue or us to another raise for that's capital generate more So, some cash.

portal retailers that convert So, I to thousands my in be lean wavered, on going it's hasn't go of the to jewels direct direct it difference for be quarter-over-quarter Charles been hasn't and those trade out and kind tap jewels. Colvard therefore, we're and to loose retailers able to and to and all.The That now to that will to changed go consumer. independent cash. of to us going and know at able the with build more loose after is & messaging this we'll look buy

question from next River stick Franklin with The come will Ben Capital.

draw the cash the I considering one question. have balance? on just high Why facility credit

Yes, that's question. a good

facility since it's that I for making, we're years. We used here $X.X the operation been only drew we So we've in we several million. we it felt draw mean, wanted and to haven't mean credit down. I

the want sure is draw way on available should credit to does.Certainly, facility that factor flows it out the to and everything in and make we it very want is fractional. So, we the money there

and in really it's out. sometimes cash, preserve to It So, depends.

draw on just wanted to and go we it. So, ahead

for thing was to at good time. a this So, us we thought it do

Connell, turn and our would question-and-answer to Please over ahead. Don back President go remarks. Officer, for session. any I conference do Mr. the Executive like to closing Chief concludes This

Charles Jack. forward to you your you, and thank look everyone's talk quarters. future & telling you we just things to our shareholders for for and are next We to we'll forward with coming some support, Colvard. look on I Thank I support continuing want want updates great quarter, to to that you thank in forward.

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

may now You disconnect.