Charles & Colvard Reports First Quarter Fiscal 2019 Financial Results
- Profitability Achieved with Positive Net Income and Earnings Per Share of
- E-commerce Site and Marketplaces Fuel 49% Net Sales Growth in Online Channels -
- Strong Gross Margin Improvement to 45% -
- Conference Call with Accompanying Slide Presentation Scheduled Today at
“We are also excited about the recent achievements we have made in expanding our global retail presence. Our new partnership with iconic retailer Macy’s provides broad access to a large, attractive customer base and demonstrates how savvy retailers are responding to strong consumer interest in ethically-sourced products, such as lab-created gemstones,” Ms. Miglucci continued.
“In addition, we are executing on our strategic initiative to target the large global market opportunity with a growth strategy that’s flexible, scalable and capital efficient. We can drive rapid return on investment by accessing key international online marketplaces, such as Amazon’s global sites, and by driving cross-border sales on our website through a robust technology platform,” Ms. Miglucci concluded.
Recent Corporate Highlights
- Initiated a new strategic retail partnership with Macy’s providing online customers with a curated collection of jewelry featuring Moissanite by Charles & Colvard®;
- Entered new international markets using an agile, low-cost approach providing Charles & Colvard moissanite jewelry on established marketplaces including
Amazon sites inSpain ,Italy ,France ,Germany , andAustralia , along with Australian siteseBay and Catch; - Enhanced the Company’s ability to drive international sales through its U.S.-based e-commerce site, through the implementation of a cross-border trade technology platform that provides a personalized, on-site experience and seamless buying process for customers outside of the U.S.;
- Introduced a new exclusive line of bridal and fine jewelry, the Charles & Colvard Signature Collection, featuring Forever One™ moissanite set in patent pending designs inspired by the Company’s floret logo, brand and commitment to quality, sustainability and ethical practices;
- Expanded presence with existing retail partners in brick-and-mortar stores with additional bridal, fine jewelry and loose gemstones;
- Moved to a first-party retail relationship with the world’s largest retailer, providing direct integration, increased brand presence and significantly expanded product listings;
- Launched an online curated collection with a national specialty off-price retailer including high-quality and competitively-priced jewelry featuring Moissanite by Charles & Colvard®; and
- Entered into a new
$5 million asset-based revolving credit facility withWhite Oak Commercial Finance, LLC providing lower fees, improved terms and flexibility in capital structure.
Financial Summary for First Quarter Fiscal 2019
(Quarter Ended
- Net sales were
$6.6 million for the quarter, an increase of 6% compared with$6.2 million in the year-ago quarter. - Finished jewelry net sales were
$2.6 million for the quarter, an increase of 21% compared with$2.1 million in the year-ago quarter. - Loose jewel net sales were
$4.0 million for the quarter, a decrease of 1% compared with$4.1 million in the year-ago quarter. - In the Company’s Online Channels segment, which consists of e-commerce outlets including charlesandcolvard.com, third-party online marketplaces, drop-ship and other pure-play, exclusively e-commerce outlets, net sales increased 49% to
$3.1 million , or 47% of total net sales for the quarter, compared with$2.1 million , or 33% of total net sales in the year-ago quarter. - In the Company’s Traditional segment, which consists of wholesale, retail, and historically, television customers, net sales decreased 15% to
$3.5 million , or 53% of total net sales for the quarter, compared with$4.1 million , or 67% of total net sales in the year-ago quarter. - Operating expenses were
$2.9 million for the quarter, flat compared with the year-ago quarter. - Net income for the quarter was
$110,000 , or$0.01 per share, compared with a net loss of$175,000 , or$0.01 net loss per share, in the year-ago quarter.
Financial Position
Cash, cash equivalents and restricted cash totaled
Investor Conference Call
Shareholders and other interested parties may participate in the upcoming investor conference call by dialing 844-875-6912 (U.S. toll-free) or 412-317-6708 (international) and asking to be connected to the “Charles & Colvard, Ltd. Conference Call” a few minutes before
A replay of this conference call will be available until
About
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,” “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, our dependence on consumer awareness, acceptance, and growth of sales of our products resulting from our strategic initiatives; the impact of the execution of our business plans on our liquidity; our ability to fulfill orders on a timely basis; our ability to maintain compliance with The Nasdaq Stock Market’s continued listing requirements; intense competition in the worldwide gemstone and jewelry industry; the financial condition of our major customers and their willingness and ability to market our products; dependence on a limited number of distributor and retail partners in our Traditional segment; dependence on our exclusive supply agreement with
Contacts:
Chief Financial Officer
919-468-0399
cpete@charlesandcolvard.com
Investor Relations
800-695-0650
Jenny.Kobin@IRAdvisory.com
-Financial Tables Follow-
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended September 30, | ||||||||
2018 |
2017 | |||||||
Net sales | $ | 6,594,706 | $ | 6,208,808 | ||||
Costs and expenses: | ||||||||
Cost of goods sold | 3,613,748 | 3,483,603 | ||||||
Sales and marketing | 1,641,125 | 1,757,007 | ||||||
General and administrative | 1,224,775 | 1,137,736 | ||||||
Research and development | - | 489 | ||||||
Total costs and expenses | 6,479,648 | 6,378,835 | ||||||
Income (Loss) from operations | 115,058 | (170,027 | ) | |||||
Other expense: | ||||||||
Interest expense | (346 | ) | (5 | ) | ||||
Loss on foreign currency exchange | (29 | ) | - | |||||
Other expense | (13 | ) | - | |||||
Total other expense | (388 | ) | (5 | ) | ||||
Income (Loss) before income taxes | 114,670 | (170,032 | ) | |||||
Income tax expense | (4,767 | ) | (4,507 | ) | ||||
Net Income (Loss) | $ | 109,903 | $ | (174,539 | ) | |||
Net income (loss) per common share: | ||||||||
Basic | $ | 0.01 | $ | (0.01 | ) | |||
Diluted | $ | 0.01 | $ | (0.01 | ) | |||
Weighted average number of shares used in computing net income (loss) per common share: | ||||||||
Basic | 21,454,977 | 21,218,468 | ||||||
Diluted | 21,658,516 | 21,218,468 |
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2018 (unaudited) |
June 30, 2018 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 2,086,565 | $ | 3,393,186 | |||
Restricted cash | 133,217 | - | |||||
Accounts receivable, net | 2,086,046 | 1,765,722 | |||||
Inventory, net | 10,782,176 | 10,979,891 | |||||
Prepaid expenses and other assets | 988,008 | 916,162 | |||||
Total current assets | 16,076,012 | 17,054,961 | |||||
Long-term assets: | |||||||
Inventory, net | 21,975,251 | 20,848,647 | |||||
Property and equipment, net | 1,200,448 | 1,144,198 | |||||
Intangible assets, net | 72,577 | 34,833 | |||||
Other assets | 388,516 | 389,868 | |||||
Total long-term assets | 23,636,792 | 22,417,546 | |||||
TOTAL ASSETS | $ | 39,712,804 | $ | 39,472,507 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 4,093,010 | $ | 4,170,952 | |||
Accrued expenses and other liabilities | 787,806 | 618,945 | |||||
Total current liabilities | 4,880,816 | 4,789,897 | |||||
Long-term liabilities: | |||||||
Deferred rent | 354,332 | 393,051 | |||||
Accrued income taxes | 475,893 | 471,126 | |||||
Total long-term liabilities | 830,225 | 864,177 | |||||
Total liabilities | 5,711,041 | 5,654,074 | |||||
Commitments and contingencies | |||||||
Shareholders’ equity: | |||||||
Common stock, no par value; 50,000,000 shares authorized; 21,598,069 and 21,705,173 shares issued and outstanding at September 30, 2018 and June 30, 2018, respectively | 54,247,296 | 54,243,816 | |||||
Additional paid-in capital | 15,032,018 | 14,962,071 | |||||
Accumulated deficit | (35,277,551 | ) | (35,387,454 | ) | |||
Total shareholders’ equity | 34,001,763 | 33,818,433 | |||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 39,712,804 | $ | 39,472,507 | |||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended September 30, | |||||||
2018 | 2017 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income (loss) | $ | 109,903 | $ | (174,539 | ) | ||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | |||||||
Depreciation and amortization | 108,216 | 104,558 | |||||
Stock-based compensation | 71,176 | 119,103 | |||||
(Recovery of) provision for uncollectible accounts | (312 | ) | 67,000 | ||||
Provision for (recovery of) sales returns | 25,000 | (74,000 | ) | ||||
Provision for (recovery of) inventory reserves | 49,000 | (3,000 | ) | ||||
Recovery of accounts receivable discounts | (2,936 | ) | - | ||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (342,076 | ) | (612,754 | ) | |||
Inventory | (977,889 | ) | (1,662,098 | ) | |||
Prepaid expenses and other assets, net | (70,494 | ) | (91,331 | ) | |||
Accounts payable | (77,942 | ) | 1,019,483 | ||||
Deferred rent | (38,719 | ) | (34,541 | ) | |||
Accrued income taxes | 4,767 | 4,507 | |||||
Accrued expenses and other liabilities | 168,861 | 196,567 | |||||
Net cash used in operating activities | (973,445 | ) | (1,141,045 | ) | |||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Purchases of property and equipment | (164,099 | ) | (19,651 | ) | |||
Intangible assets | (38,111 | ) | (509 | ) | |||
Net cash used in investing activities | (202,210 | ) | (20,160 | ) | |||
CASH FLOWS FROM FINANCIANG ACTIVITIES: | |||||||
Stock option exercises | 2,251 | - | |||||
Net cash provided by financing activities | 2,251 | - | |||||
NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | (1,173,404 | ) | (1,161,205 | ) | |||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD | 3,393,186 | 6,289,111 | |||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD | $ | 2,219,782 | $ | 5,127,906 | |||
Supplemental disclosure of cash flow information: | |||||||
Cash paid during the period for interest | $ | - | $ | - | |||
Cash paid during the period for taxes | $ | - | $ | - |
Reconciliation to Condensed Consolidated Balance Sheets: | September 30, 2018 |
June 30, 2018 |
||||||
Cash and cash equivalents | $ | 2,086,565 | $ | 3,393,186 | ||||
Restricted cash | 133,217 | - | ||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH | $ | 2,219,782 | $ | 3,393,186 |