Charles & Colvard Reports First Quarter Fiscal Year 2021 Financial Results
"This quarter demonstrated our team's ability to execute on our plan to drive revenue growth successfully while maintaining a strong gross margin and delivering profitability," said
"Our recent product expansion was a natural progression for the business as we were able to utilize existing resources, components, and infrastructure to reach a broader variety of consumers. We believe this now allows us to tap into the estimated
Recent Corporate Highlights
- Launched Caydia™, an exclusive brand of premium lab grown diamonds, available in bridal and fine jewelry styles including engagement rings, wedding bands, earrings, necklaces and bracelets;
- Expanded Charles & Colvard's retail partnership with Macy's, the iconic American department store, launching an assortment of moissanite fine jewelry in 50 stores, including flagships
Herald Square inNew York City ,Union Square inSan Francisco andState Street inChicago ; - Received an annual Design Excellence Award from the
Accessories Council , a not-for-profit, international trade organization, winning the Sustainability Award for Charles & Colvard's Forever One moissanite emerald-cut ring; and - Featured in multiple media articles, including Forbes,
Women's Wear Daily , JCK andNational Jeweler .
Financial Summary for First Quarter Fiscal 2021
(Quarter Ended
- Net sales were
$7.9 million for the quarter, an increase of 4% compared with$7.6 million in the year-ago quarter. - In the Online Channels segment, which consists of e-commerce outlets including charlesandcolvard.com, third-party online marketplaces, drop-ship retail and other pure-play, exclusively e-commerce outlets, net sales totaled
$4.5 million , a year over year increase of 21%, representing 56% of total net sales for the quarter, compared with$3.7 million , or 49% of total net sales in the year-ago quarter. - In the Traditional segment, which consists of wholesale and brick and mortar customers, net sales totaled
$3.5 million , a year over year decrease of 11%, representing 44% of total net sales for the quarter, compared with$3.9 million , or 51% of total net sales, in the year-ago quarter. - Finished jewelry net sales were
$4.3 million for the quarter, an increase of 12% compared with $3.9 million in the year-ago quarter.- Loose jewel net sales were
$3.6 million for the quarter, a decrease of 4% compared with$3.8 million in the year-ago quarter. - Operating expenses decreased 20% to
$2.9 million for the quarter, compared to$3.6 million in the year-ago quarter. - Net income was
$874,000 , or$0.03 earnings per diluted share for the quarter, compared to net income of$207,000 , or$0.01 earnings per diluted share, in the year-ago quarter. - Weighted average shares outstanding on a diluted basis was 28.8 million for the quarter, compared to 29.2 million in the year-ago quarter.
Financial Position
Cash, cash equivalents and restricted cash totaled
Investor Conference Call
Charles & Colvard will host an investor conference call and webcast presentation to discuss its financial results for the quarter ended
To participate via telephone, callers should dial 844-875-6912 (
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, (1) our business, financial condition and results of operations could continue to be adversely affected by an ongoing COVID-19 pandemic and related global economic 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) the execution of our business plans could significantly impact our liquidity; (4) our business and our results of operations could be materially adversely affected as a result of general and economic conditions; (5) 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; (6) we face intense competition in the worldwide gemstone and jewelry industry; (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 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; (11) our failure to maintain compliance with
-Financial Tables Follow-
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) |
|||||||||
Three Months Ended |
|||||||||
2020 |
2019 |
||||||||
Net sales |
$ |
7,926,293 |
$ |
7,608,421 |
|||||
Costs and expenses: |
|||||||||
Cost of goods sold |
4,196,055 |
3,876,624 |
|||||||
Sales and marketing |
1,647,933 |
2,229,591 |
|||||||
General and administrative |
1,208,035 |
1,349,501 |
|||||||
Total costs and expenses |
7,052,023 |
7,455,716 |
|||||||
Income from operations |
874,270 |
152,705 |
|||||||
Other income (expense): |
|||||||||
Interest income |
3,459 |
61,379 |
|||||||
Interest expense |
(2,439) |
(142) |
|||||||
Loss on foreign currency exchange |
(530) |
(538) |
|||||||
Total other income (expense), net |
490 |
60,699 |
|||||||
Income before income taxes |
874,760 |
213,404 |
|||||||
Income tax expense |
(494) |
(6,085) |
|||||||
Net Income |
$ |
874,266 |
$ |
207,319 |
|||||
Net income per common share: |
|||||||||
Basic |
$ |
0.03 |
$ |
0.01 |
|||||
Diluted |
$ |
0.03 |
$ |
0.01 |
|||||
Weighted average number of shares used in computing net income per common share: |
|||||||||
Basic |
28,786,910 |
28,563,688 |
|||||||
Diluted |
28,839,897 |
29,222,936 |
|||||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
||||||
(unaudited) |
|
|||||
ASSETS |
||||||
Current assets: |
||||||
Cash and cash equivalents |
$ |
13,756,695 |
$ |
13,993,032 |
||
Restricted cash |
105,014 |
624,202 |
||||
Accounts receivable, net |
1,625,515 |
670,718 |
||||
Inventory, net |
8,975,998 |
7,443,257 |
||||
Prepaid expenses and other assets |
1,260,322 |
1,177,860 |
||||
Total current assets |
25,723,544 |
23,909,069 |
||||
Long-term assets: |
||||||
Inventory, net |
20,748,762 |
23,190,702 |
||||
Property and equipment, net |
969,635 |
999,061 |
||||
Intangible assets, net |
180,722 |
170,151 |
||||
Operating lease right-of-use assets |
475,113 |
584,143 |
||||
Other assets |
50,109 |
51,461 |
||||
Total long-term assets |
22,424,341 |
24,995,518 |
||||
TOTAL ASSETS |
$ |
48,147,885 |
$ |
48,904,587 |
||
LIABILITIES AND SHAREHOLDERS' EQUITY |
||||||
Current liabilities: |
||||||
Accounts payable |
$ |
2,582,538 |
$ |
3,748,235 |
||
Operating lease liabilities |
626,763 |
622,493 |
||||
Current maturity of long-term debt |
386,000 |
193,000 |
||||
Accrued expenses and other liabilities |
1,496,755 |
1,922,332 |
||||
Total current liabilities |
5,092,056 |
6,486,060 |
||||
Long-term liabilities: |
||||||
Long-term debt |
579,000 |
772,000 |
||||
Noncurrent operating lease liabilities |
51,190 |
203,003 |
||||
Accrued income taxes |
8,441 |
7,947 |
||||
Total long-term liabilities |
638,631 |
982,950 |
||||
Total liabilities |
5,730,687 |
7,469,010 |
||||
Commitments and contingencies |
||||||
Shareholders' equity: |
||||||
Common stock, no par value; 50,000,000 shares authorized; 28,965,660 and 28,949,410 shares issued and outstanding at |
54,342,864 |
54,342,864 |
||||
Additional paid-in capital |
25,987,520 |
25,880,165 |
||||
Accumulated deficit |
(37,913,186) |
(38,787,452) |
||||
Total shareholders' equity |
42,417,198 |
41,435,577 |
||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
$ |
48,147,885 |
$ |
48,904,587 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) |
|||||||
Three Months Ended |
|||||||
2020 |
2019 |
||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|||||||
Net income |
$ |
874,266 |
$ |
207,319 |
|||
Adjustments to reconcile net income to net cash used in operating activities: |
|||||||
Depreciation and amortization |
132,456 |
124,637 |
|||||
Stock-based compensation |
107,355 |
212,380 |
|||||
Provision for (Recovery of) uncollectible accounts |
32,514 |
(28,000) |
|||||
Provision for (Recovery of) sales returns |
96,000 |
(31,000) |
|||||
Inventory write-off |
80,000 |
23,000 |
|||||
Provision for accounts receivable discounts |
1,688 |
12,476 |
|||||
Changes in operating assets and liabilities: |
|||||||
Accounts receivable |
(1,084,999) |
8,382 |
|||||
Inventory |
829,199 |
(2,254,855) |
|||||
Prepaid expenses and other assets, net |
27,920 |
(417,147) |
|||||
Accounts payable |
(1,165,697) |
1,048,990 |
|||||
Accrued income taxes |
494 |
6,085 |
|||||
Accrued expenses and other liabilities |
(573,120) |
(135,743) |
|||||
Net cash used in operating activities |
(641,924) |
(1,223,476) |
|||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|||||||
Purchases of property and equipment |
(101,459) |
(111,317) |
|||||
Payments for intangible assets |
(12,142) |
(4,322) |
|||||
Net cash used in investing activities |
(113,601) |
(115,639) |
|||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|||||||
Issuance of common stock, net of offering costs |
- |
932,480 |
|||||
Net cash provided by financing activities |
- |
932,480 |
|||||
|
(755,525) |
(406,635) |
|||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD |
14,617,234 |
13,006,545 |
|||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD |
$ |
13,861,709 |
$ |
12,599,910 |
|||
Supplemental disclosure of cash flow information: |
|||||||
Cash paid during the period for interest |
$ |
2,439 |
$ |
142 |
|||
Cash paid during the period for income taxes |
$ |
3,350 |
$ |
2,050 |
|||
Reconciliation to Condensed Consolidated Balance Sheets: |
|
|
||||||
Cash and cash equivalents |
$ |
13,756,695 |
$ |
13,993,032 |
||||
Restricted cash |
105,014 |
624,202 |
||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH |
$ |
13,861,709 |
$ |
14,617,234 |
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SOURCE
Clint J. Pete, Chief Financial Officer, 919-468-0399, cpete@charlesandcolvard.com