Charles & Colvard Reports Third Quarter Fiscal 2019 Financial Results
May 10, 2019 – Amended, see 8-K/A
- Attractive Revenue Growth of 17% Led by Corporate E-commerce Site Increase of 55% -
- Three Consecutive Quarters of Profitability and Increasing Cash Flow from Operations -
- Compelling Gross Margin of 47% up from 39% in Year-Ago Quarter -
- Conference Call with Accompanying Slide Presentation Scheduled Today at
“Our ongoing digital marketing efforts are driving attractive website traffic and conversion rates -- resulting in strong sales growth. We’ve developed a data-driven methodology by which we manage our ad spend and continue to hone our digital marketing investments, generating significant return on advertising spend. Our product lends itself to the video platform, so during Q3, we launched a concerted effort to deliver more video content throughout our digital footprint, which contributed to our return on advertising spend rates for the quarter,” Ms. Miglucci concluded.
Recent Corporate Highlights
- Increased awareness in international markets and expanded customer reach to a new region through
Amazonsite in Japan;
- Received JCK Jewelers’ Choice Award for Charles & Colvard’s Signature Halo Hearts & Arrows Round Statement Ring in the Lab-Grown Gemstone Jewelry Category; this award category is voted on by industry retail peers as one of the industry’s most prestigious competitions for designers;
- Gained recognition for the Signature Collection in the March/April Issue of
- Created the 2018 National Women’s Soccer League Championship rings and was named official jewelry sponsor of the North Carolina Courage professional women's soccer team; and
- Announced that CEO,
Suzanne Miglucci, was named to the Women in Retail Leadership Circle’s 2019 List of Top Women in Retail.
Financial Summary for Third Quarter Fiscal 2019
- Net sales were
$7.9 millionfor the quarter, an increase of 17% compared with $6.8 millionin the year-ago quarter.
- Finished jewelry net sales were
$4.0 millionfor the quarter, an increase of 22% compared with $3.2 millionin the year-ago quarter.
- Loose jewel net sales were
$3.9 millionfor the quarter, an increase of 12% compared with $3.5 millionin the year-ago quarter.
- In the 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 38% to
$4.2 million, or 53% of total net sales for the quarter, compared with $3.0 million, or 45% of total net sales in the year-ago quarter.
- In the Traditional segment, which consists of wholesale, retail, and historically, television customers, net sales were flat at
$3.7 million, or 47% of total net sales for the quarter, compared with $3.7 million, or 55% of total net sales in the year-ago quarter.
- Operating expenses were
$3.0 millionfor the quarter, compared to $3.2 millionin the year-ago quarter.
- Net income for the quarter was
$0.8 million, or $0.04earnings per diluted share, compared with a net loss of $0.6 million, or $0.03loss per diluted share, in the year-ago quarter.
Financial Summary for the First Nine Months of Fiscal 2019
(Nine Months Ended
- Net sales were
$24.6 millionfor the nine months ended March 31, 2019, an increase of 15% compared with $21.5 millionin the year-ago fiscal period.
- Finished jewelry net sales were
$11.7 millionfor the nine months ended March 31, 2019, an increase of 16% compared with $10.1 millionin the year-ago fiscal period.
- Loose jewel net sales were
$12.9 millionfor the nine months ended March 31, 2019, an increase of 13% compared with $11.4 millionin the year-ago fiscal period.
- In the Online Channels segment, net sales increased 31% to
$12.7 million, or 52% of total net sales for the nine months ended March 31, 2019, compared with $9.7 million, or 45% of total net sales in the year-ago fiscal period.
- In the Traditional segment, net sales increased 1% to
$11.9 million, or 48% of total net sales for the nine months ended March 31, 2019, compared with $11.8 million, or 55% of total net sales in the year-ago fiscal period.
- Operating expenses were
$9.4 millionfor the nine months ended March 31, 2019, compared to $9.2 millionin the year-ago fiscal period.
- Net income for the nine months ended
March 31, 2019was $2.1 million, or $0.10earnings per diluted share, compared with a net loss of $69 thousand, or $0.00loss per diluted share, in the year-ago fiscal period.
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
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 increased consumer acceptance, growth of sales of our products, and operational execution of our strategic initiatives; the impact of the execution of our business plans on our liquidity; our ability to fulfill orders on a timely basis; 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; our ability to maintain compliance with The Nasdaq Stock Market’s continued listing requirements; dependence on our exclusive supply agreement with
Chief Financial Officer
-Financial Tables Follow-
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|Three Months Ended March 31,||Nine Months Ended March 31,|
|Costs and expenses:|
|Cost of goods sold||4,150,229||4,115,548||13,110,185||12,525,465|
|Sales and marketing||1,912,484||1,865,940||5,900,501||5,651,106|
|General and administrative||1,042,048||1,354,410||3,517,004||3,569,351|
|Total costs and expenses||7,104,761||7,335,898||22,529,112||21,746,492|
|Income (Loss) from operations||797,481||(573,148||)||2,107,297||(237,952||)|
|Other (expense) income:|
|Loss on foreign currency exchange||(209||)||-||(311||)||-|
|Gain on insurance settlement||-||-||-||183,217|
|Total other (expense) income||(496||)||(139||)||(1,309||)||182,629|
|Income (Loss) before income taxes||796,985||(573,287||)||2,105,988||(55,323||)|
|Income tax benefit (expense)||17,099||(4,767||)||7,565||(13,781||)|
|Net income (loss)||$||814,084||$||(578,054||)||$||2,113,553||$||(69,104||)|
|Net income (loss) per common share:|
|Weighted average number of shares used in computing net income (loss) per common share:|
CONDENSED CONSOLIDATED BALANCE SHEETS
|March 31, 2019|
|(unaudited)||June 30, 2018|
|Cash and cash equivalents||$||4,019,929||$||3,393,186|
|Accounts receivable, net||1,427,448||1,765,722|
|Prepaid expenses and other assets||898,294||916,162|
|Total current assets||18,341,709||17,054,961|
|Property and equipment, net||1,126,889||1,144,198|
|Intangible assets, net||90,267||34,833|
|Total long-term assets||23,952,327||22,417,546|
|LIABILITIES AND SHAREHOLDERS’ EQUITY|
|Accrued expenses and other liabilities||1,335,233||618,945|
|Total current liabilities||5,226,541||4,789,897|
|Accrued income taxes||486,710||471,126|
|Total long-term liabilities||763,605||864,177|
|Common stock, no par value; 50,000,000 shares authorized; 21,727,569 and 21,705,173
shares issued and outstanding at March 31, 2019 and June 30, 2018, respectively
|Additional paid-in capital||15,330,495||14,962,071|
|Total shareholders’ equity||36,303,890||33,818,433|
|TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY||$||42,294,036||$||39,472,507|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|Nine Months Ended March 31,|
|CASH FLOWS FROM OPERATING ACTIVITIES:|
|Net income (loss)||$||2,113,553||$||(69,104||)|
|Adjustments to reconcile net income (loss) to net cash used in operating activities:|
|Depreciation and amortization||355,812||330,978|
|Recovery of collectible accounts||(944||)||(12,000||)|
|Provision for sales returns||89,000||134,000|
|Provision for inventory reserves||377,000||303,000|
|Provision for accounts receivable discounts||9,149||33,520|
|Gain on insurance claim settlement||-||(183,217||)|
|Changes in operating assets and liabilities:|
|Prepaid expenses and other assets, net||(1,226||)||121,881|
|Accrued income taxes||15,584||13,781|
|Accrued expenses and other liabilities||716,288||(8,443||)|
|Net cash provided by (used in) operating activities||1,638,436||(1,671,553||)|
|CASH FLOWS FROM INVESTING ACTIVITIES:|
|Purchases of property and equipment||(337,271||)||(114,467||)|
|Net cash used in investing activities||(393,937||)||(122,829||)|
|CASH FLOWS FROM FINANCIANG ACTIVITIES:|
|Stock option exercises||2,251||-|
|Net cash provided by financing activities||2,251||-|
|NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH||1,246,750||(1,794,382||)|
|CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD||3,393,186||6,289,111|
|CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD||$||4,639,936||$||4,494,729|
|Supplemental disclosure of cash flow information:|
|Cash paid during the period for interest||$||-||$||-|
|Cash paid during the period for taxes||$||-||$||-|
|Reconciliation to Condensed Consolidated Balance Sheets:||March 31,
|Cash and cash equivalents||$||4,019,929||$||4,494,729|
|CASH, CASH EQUIVALENTS AND RESTRICTED CASH||$||4,639,936||$||4,494,729|
Source: Charles & Colvard Ltd.