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CHARLES & COLVARD REPORTS THIRD QUARTER FISCAL YEAR 2024 FINANCIAL RESULTS

Trend Editor ~ 5/23/2024
Conference Call with Accompanying Slide Presentation Scheduled Today at 4:30 PM ET RESEARCH TRIANGLE PARK , N.C. , May 2 , 2024 /PRNewswire/ -- Charles & Colvard , Ltd. ( Nasdaq : CTHR ) ( the `` Company '' ) , a globally recognized fine jewelry company that specializes in

Conference Call with Accompanying Slide Presentation Scheduled Today at 4:30 PM ET

RESEARCH TRIANGLE PARK, N.C., May 2, 2024 /PRNewswire/ -- Charles & Colvard, Ltd. (Nasdaq: CTHR) (the "Company"), a globally recognized fine jewelry company that specializes in moissanite and lab grown diamonds, reported financial results for the third quarter ended March 31, 2024 ("Third Quarter Fiscal 2024"). 

Management Commentary 

"We remain committed to growth despite a challenging third quarter. We believe our strategic initiatives, continued investments in innovative technology, and dedication to providing a more seamless omnichannel consumer experience will position us for future success. Although we experienced softness during the quarter, we feel pleased by our growth in repeat customers on our owned property, charlesandcolvard.com, and consumer response to new products and marketing initiatives. We believe the evolution of our product portfolio, from loose gems to bridal-focused jewelry to fine jewelry catering to a variety of audiences, speaks to the strength and longevity of our brand," said Don O'Connell, President and CEO of the Company.  

"We believe in the power of storytelling through our brand partners, such as our new celebrity brand ambassador, Skyler Samuels, and look forward to building further brand awareness and loyalty as consumers discover our products via a relatable lens," concluded O'Connell.  

Recent Corporate Highlights

  • Announced strategic partnership with American actress Skyler Samuels, the Company's new brand ambassador;
  • Expanded both product brands on charlesandcolvard.com;
  • Conducted successful Valentine's Day Sale on charlesandcolvard.com;
  • Announced strategic shift within Traditional segment with launch of charlesandcolvarddirect.com for independent jewelers and retailers;
  • Introduced the Company's newest gemstone brand, Forever Bright™; and
  • Appeared in numerous brand and product placements, including theknot.com, MarieClaire.com, USAToday.com, NYPost.com, Byrdie.com, NationalJeweler.com, and ETOnline.com.

Financial Summary for Third Quarter Fiscal 2024 (Quarter Ended March 31, 2024 Compared to Quarter Ended March 31, 2023)

  • Net sales of $5.3 million for the quarter, a decrease of 21% from $6.6 million in the year-ago quarter.
  • In the Online Channels segment, which consists of e-commerce outlets including charlesandcolvard.com, moissaniteoutlet.com, charlesandcolvarddirect.com, madeshopping.com, third-party online marketplaces, drop-ship retail and other pure-play e-commerce outlets, net sales of $4.1 million, representing 77% of total net sales for the quarter, compared to $4.6 million, or 70% of total net sales in the year-ago quarter.
  • In the Traditional segment, which consists of wholesale and brick-and-mortar customers, net sales of $1.2 million, representing 23% of total net sales for the quarter, compared to $2.0 million, or 30% of total net sales, in the year-ago quarter.
  • Finished jewelry net sales of $4.9 million for the quarter.
  • Loose jewel net sales of $400,000 for the quarter.
  • Gross profit was $1.2 million, or a gross margin of 23% for the quarter, compared to gross profit of $2.1 million, or gross margin of 32% in the year-ago quarter. 
  • Operating expenses increased 13% to $4.9 million for the quarter, compared to $4.3 million in the year-ago quarter.
  • Net loss was $3.6 million, or $0.12 loss per diluted share for the quarter, compared to net loss of $8.4 million, or $0.28 loss per diluted share, in the year-ago quarter. 
  • Weighted average diluted shares outstanding were 30.3 million for the quarter, consistent with the year-ago quarter.

Financial Position

Cash, cash equivalents and restricted cash totaled $9.2 million as of March 31, 2024, compared to $15.6 million as of June 30, 2023, representing a decrease of $6.4 million. Total inventory decreased to $25.3 million as of March 31, 2024, down from $26.8 million as of June 30, 2023, and down from $33.3 million as of March 31, 2023. The Company had $500,000 short-term outstanding debt as of March 31, 2024.

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, 2024 at 4:30 p.m. ET on Thursday, May 2, 2024. 

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 asking to be joined into the Charles & Colvard call.

Live Webcast Information: Interested parties can access the conference call and accompanying presentation slides 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/346/50400.

A replay of this conference call will be available until May 9, 2024 at (877) 344-7529 (U.S. toll-free) or (412) 317-0088 (international). The replay conference code is 2078180. 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. The Company's 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) we have historically been dependent 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; (5) constantly evolving privacy regulatory regimes are creating new legal compliance challenges; (6) our information technology, or IT, infrastructure, and our network has been and may be impacted by a cyber-attack or other security incident as a result of the rise of cybersecurity events; (7) we are subject to certain risks due to our international operations, distribution channels and vendors; (8) 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; (9) we are currently dependent on a limited number of distributor and retail partners in our Traditional segment for the sale of our products; (10) we may experience quality control challenges from time to time that can result in lost revenue and harm to our brands and reputation; (11) seasonality of our business may adversely affect our net sales and operating income; (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) 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; (16) governmental regulation and oversight might adversely impact our operations; (17) 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; (18) the execution of our business plans could significantly impact our liquidity; (19) we are subject to arbitration, litigation and demands, which could result in significant liability and costs, and impact our resources and reputation; (20) 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; (21) negative or inaccurate information on social media could adversely impact our brand and reputation; (22) 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; (23) 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; (24) environmental, social, and governance matters may impact our business, reputation, financial condition, and results of operations; (25) if we fail to evaluate, implement, and integrate strategic acquisition or disposition opportunities successfully, our business may suffer; (26) our failure to maintain compliance with The Nasdaq Stock Market's continued listing requirements could result in the delisting of our common stock; (27) some anti-takeover provisions of our charter documents may delay or prevent a takeover of our Company; and (28) 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, 2023 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,

2024

2023

2024

2023

Net sales

$

5,261,966

$

6,641,799

$

18,120,629

$

24,382,003

        Cost of goods sold

4,076,081

4,493,125

12,134,535

14,650,910

             Gross profit

1,185,885

2,148,674

5,986,094

9,731,093

Operating expenses:

Sales and marketing

3,684,506

3,267,436

10,702,796

10,715,066

General and administrative

1,199,511

1,053,357

4,550,841

3,654,788

Total operating expenses

4,884,017

4,320,793

15,253,637

14,369,854

Loss from operations

(3,698,132)

(2,172,119)

(9,267,543)

(4,638,761)

Other income (expense):

        Interest income

74,528

69,159

244,146

168,935

        Interest and other expense

(9,103)

-

(14,672)

-

Total other income, net

65,425

69,159

229,474

168,935

Loss before income taxes

(3,632,707)

(2,102,960)

(9,038,069)

(4,469,826)

Income tax expense

-

(6,293,048)

-

(5,858,155)

Net loss

$

(3,632,707)

$

(8,396,008)

$

(9,038,069)

$

(10,327,981)

Net loss income per common share:

Basic

$

(0.12)

$

(0.28)

$

(0.30)

$

(0.34)

Diluted

$

(0.12)

$

(0.28)

$

(0.30)

$

(0.34)

Weighted average number of shares used      in computing net loss income per      common share:

Basic

30,344,955

30,344,954

30,344,955

30,387,303

Diluted

30,344,955

30,344,954

30,344,955

30,387,303

CHARLES & COLVARD, LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

March 31, 2024

(unaudited)

June 30, 2023

ASSETS

Current assets:

     Cash and cash equivalents

$

3,685,729

$

10,446,532

     Restricted cash

5,553,873

5,122,379

     Accounts receivable, net

566,570

380,085

     Inventory, net

10,439,754

7,476,046

     Note receivable

250,000

250,000

     Prepaid expenses and other assets

794,218

901,354

          Total current assets

21,290,144

24,576,396

Long-term assets:

     Inventory, net

14,867,933

19,277,530

     Property and equipment, net

2,699,133

2,491,569

     Intangible assets, net

340,528

305,703

     Operating lease right-of-use assets

1,715,475

2,183,232

     Other assets

49,660

49,658

          Total long-term assets

19,672,729

24,307,692

     TOTAL ASSETS

$

40,962,873

$

48,884,088

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

     Accounts payable

$

5,865,435

$

4,786,155

     Short-term borrowings under line of credit

500,000

-

     Operating lease liabilities, current portion

898,217

880,126

     Accrued expenses and other liabilities

1,356,264

1,395,479

          Total current liabilities

8,619,916

7,061,760

Long-term liabilities:

     Noncurrent operating lease liabilities

1,417,478

2,047,742

          Total long-term liabilities

1,417,478

2,047,742

               Total liabilities

10,037,394

9,109,502

Commitments and contingencies

Shareholders' equity:

     Common stock, no par value; 50,000,000 shares           authorized; 30,733,358 shares issued and 30,344,955           shares outstanding at March 31, 2024 and 30,912,108           shares issued and 30,523,705 shares outstanding at           June 30, 2023

57,242,211

57,242,211

     Additional paid-in capital

26,394,881

26,205,919

     Treasury stock, at cost, 388,403 shares           at both March 31, 2024 and June 30, 2023

(489,979)

(489,979)

     Accumulated deficit

(52,221,634)

(43,183,565)

          Total shareholders' equity

30,925,479

39,774,586

     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

40,962,873

$

48,884,088

CHARLES & COLVARD, LTD.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(unaudited)

Nine Months Ended March 31,

2024

2023

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$

(9,038,069)

$

(10,327,981)

Adjustments to reconcile net loss to net cash used in operatingactivities:

Depreciation and amortization

530,161

477,285

Stock-based compensation

188,961

209,319

Provision for uncollectible accounts

107,000

(18,000)

Provision for sales returns

(160,000)

59,000

Inventory write-downs

-

119,000

Provision for accounts receivable discounts

11,976

42

Deferred income taxes

-

5,851,904

Changes in operating assets and liabilities:

Accounts receivable

(145,461)

1,246,221

Inventory

1,445,889

64,514

Prepaid expenses and other assets

574,892

756,554

Accounts payable

1,079,280

(1,284,419)

Accrued expenses and other liabilities

(651,388)

(980,909)

       Net cash used in operating activities

(6,056,759)

(3,827,470)

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment

(723,256)

(884,030)

Payments for intangible assets

(49,294)

(45,397)

              Net cash used in investing activities

(772,550)

(929,427)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from line of credit

500,000

-

Repurchases of common stock

-

(451,815)

              Net cash provided by (used in) provided by financing activities

500,000

(451,815)

NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

(6,329,309)

(5,208,712)

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD

15,568,911

21,179,340

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD

$

9,239,602

$

15,970,628

Supplemental disclosure of cash flow information:

      Cash paid during the period for taxes

$

16,486

$

5,900

      Cash paid during the period for interest expense

$

10,770

$

-

Reconciliation to Condensed Consolidated Balance Sheets:

March 31,  2024

June 30,  2023

       Cash and cash equivalents

$

3,685,729

$

10,446,532

       Restricted cash

5,553,873

5,122,379

            CASH, CASH EQUIVALENTS AND RESTRICTED CASH

$

9,239,602

$

15,568,911

SOURCE Charles & Colvard, Ltd. Originally published at https://www.prnewswire.com/news-releases/charles--colvard-reports-third-quarter-fiscal-year-2024-financial-results-302134985.html Images courtesy of https://pixabay.com

CHARLES & COLVARD REPORTS THIRD QUARTER FISCAL YEAR 2024 FINANCIAL RESULTS

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