- Net Sales Growth of 19% Driven by Traditional and Online Channels Segments-
- Best Bottom-Line Performance in Nine Consecutive Quarters -
- Conference Call to Be Held Today at 4:30 PM EDT -
RESEARCH TRIANGLE PARK, N.C., Nov. 02, 2017 (GLOBE NEWSWIRE) -- Charles & Colvard, Ltd. (NASDAQ:CTHR) (the “Company”), the original and leading worldwide source of created moissanite, reported financial results for the third quarter ended September 30, 2017, demonstrating the execution of key strategies for 2017.
Suzanne Miglucci, President and CEO of the Company, said, “As we continue to execute on our 2017 strategic plan, we are producing positive results in alignment with our expectations. We generated top-line traction with 19% net sales growth in both our Traditional and Online Channels segments. Within the Traditional segment, we grew sales through a recent expansion into most Helzberg Diamonds retail stores. We have also seen success in our Online Channels segment, through continued expansion of the breadth and selection of jewelry on our Charles & Colvard website and through the many marketplaces on which our products are now available. In the third quarter of 2017, we expanded our product selection based on consumer demand with large Exotic Gems, three new shapes, and an assortment of Forever One™ Men’s rings. Also, as we announced recently, we have begun expanding and leveraging our marketplace relationships to prudently tap into the international market.”
“Our financial performance in the quarter reflects the progress we have been making. We ramped up revenue growth and kept a tight control on expenses. These efforts led to a strong gross margin of 44% and a net loss of only $175,000, or $0.01 per share, in the third quarter of 2017, compared to a gross margin of 38% and a net loss of $1.2 million, or $0.06 per share, in the year-ago quarter. This achievement represents a meaningful trend toward profitability with the best bottom-line performance in nine consecutive quarters. With our recent and ongoing investments in sales and marketing and finished jewelry inventory, we believe we are well positioned heading into the seasonally strong retail season,” Ms. Miglucci concluded.
Recent Corporate Highlights
- Bolstered the Company’s senior sales management team with the promotion of Tom Bergan to Senior Vice President of Sales and the addition of two industry veterans in executive positions as Vice Presidents of Traditional and Online Channels segments;
- Partnered with VoyageOne, a leading provider of cross-border e-commerce solutions, to bring the Company’s brand and highly coveted Forever One™ moissanite directly to the Chinese consumer;
- Expanded the availability of Forever One™ gemstones and jewelry with a recent expansion into most Helzberg Diamonds retail stores in preparation for the 2017 holiday season;
- Expanded Forever One™ moissanite assortment with Exotic Gems (a selection of grand loose gemstones that range from six carats to 15.5 carats) and gemstones in three new shapes including heart, marquise, and trillion;
- Introduced Gemological Science International (GSI) certifications that will accompany each Exotic Gem to verify color, size, and authenticity;
- Presented the keynote session at the 2017 Retail Global E-Commerce Conference and Exhibition to share e-commerce expertise and retail business strategies with other global retailers; and
- Continued investor-facing efforts including presentation to investors at the 2017 MicroCap Conference in New York City.
Financial Summary for the Third Quarter 2017
Continuing operations for the quarter and prior periods do not include the results of Charles & Colvard Direct, LLC (dba Lulu Avenue®), which are now being reported as a discontinued operation following the sale of certain assets on March 4, 2016 to Yanbal USA, Inc.
- Net sales from continuing operations were $6.2 million for the quarter, an increase of 19% compared with $5.2 million in the year-ago third quarter.
- Loose jewel net sales from continuing operations were $4.1 million for the quarter, an increase of 14% compared with $3.6 million in the year-ago third quarter.
- Finished jewelry net sales from continuing operations were $2.1 million for the quarter, an increase of 31% compared with $1.6 million in the year-ago third quarter.
- In the Company’s Traditional segment, which consists of wholesale, retail and television customers, net sales increased 19% to $4.1 million, or 67% of net sales for the quarter, compared with $3.5 million, or 67% of net sales in the year-ago third quarter.
- In the Company’s Online Channels segment, which consists of e-commerce customers including charlesandcolvard.com, marketplaces, drop-ship and other pure-play, exclusively e-commerce customers, net sales increased 19% to $2.1 million, or 33% of net sales for the quarter, compared with $1.7 million, or 33% of net sales in the year-ago third quarter.
- Operating expenses from continuing operations were $2.9 million for the third quarter of 2017, compared with $3.1 million in the year-ago third quarter.
- Net loss from continuing operations for the third quarter of 2017 was $175,000, or $0.01 per share, compared with a net loss from continuing operations of $1.1 million, or $0.06 per share, in the year-ago third quarter.
- Net loss for the third quarter of 2017 was $175,000, or $0.01 per share, compared with a net loss of $1.2 million, or $0.06 per share, in the year-ago third quarter.
Financial Summary for the First Nine Months of 2017:
- Net sales from continuing operations were $18.5 million for the nine months ended September 30, 2017, a decrease of 20% compared with $23.1 million in the year-ago period, which included a sale, in a single transaction, for $6.8 million of legacy loose gemstone inventory.
- Loose jewel net sales from continuing operations were $12.8 million for the nine months ended September 30, 2017, a decrease of 30% compared with $18.2 million in the year-ago period.
- Finished jewelry net sales from continuing operations were $5.7 million for the nine months ended September 30, 2017, an increase of 16% compared with $4.9 million in the year-ago period.
- In the Company’s Traditional segment, which consists of wholesale, retail and television customers, net sales decreased 31% to $12.0 million, or 65% of net sales for the nine months ended September 30, 2017, compared with $17.3 million, or 75% of net sales in the year-ago period.
- In the Company’s Online Channels segment, which consists of e-commerce customers including charlesandcolvard.com, marketplaces, drop-ship and other pure-play, exclusively e-commerce customers, net sales increased 11% to $6.5 million, or 35% of net sales for the nine months ended September 30, 2017, compared with $5.8 million, or 25% of net sales in the year-ago period.
- Operating expenses from continuing operations were $9.1 million for the first nine months of 2017, compared with $9.7 million for the year-ago period.
- Net loss from continuing operations for the nine months ended September 30, 2017 was $1.1 million, or $0.05 per share, compared with a net loss from continuing operations of $2.9 million, or $0.14 per share, in the year-ago period.
- Net loss for the nine months ended September 30, 2017 was $1.1 million, or $0.05 per share, compared with a net loss of $3.5 million, or $0.17 per share, in the year-ago period.
Financial Position
Cash and cash equivalents totaled $5.1 million at September 30, 2017, a decrease of $2.3 million from $7.4 million at December 31, 2016. The Company had no debt outstanding as of September 30, 2017. Total inventory was $30.9 million at September 30, 2017 compared with $28.1 million at December 31, 2016.
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 4:30 p.m. EDT on Thursday, November 2, 2017. A replay of this conference call will be available until November 9, 2017 at 877-344-7529 (U.S. toll-free) or 412-317-0088 (international). The replay conference ID is 10101210. The call will also be available live and for replay in the Investor Relations section of the Company’s website at http://ir.charlesandcolvard.com/events.
About Charles & Colvard, Ltd.
Charles & Colvard, Ltd., based in the Research Triangle Park area of North Carolina, is the original creator and leading source of Forever One™, Forever Brilliant® and Forever Classic™ moissanite gemstones for fine jewelry. Moissanite is unique, available in three color grades (colorless, near-colorless and faint color) and produced from silicon carbide (SiC) crystals. Charles & Colvard Created Moissanite® is sold with a Limited Lifetime Warranty to wholesale distributors, manufacturers, retailers, TV shopping networks and designers as loose stones or set in a wide variety of quality metal setting options. Charles & Colvard, Ltd. also sells direct to consumers through its wholly owned operating subsidiary, charlesandcolvard.com, LLC, and through third-party marketplaces. Effective November 3, 2017, Charles & Colvard, Ltd.’s common stock will transfer from listing on the Nasdaq Global Select Market to the Nasdaq Capital Market under the symbol “CTHR.” 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,” “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; dependence on a limited number of customers; the impact of the execution of our business plans on our liquidity; our ability to fulfill orders on a timely basis; the financial condition of our major customers and their willingness and ability to market our products; dependence on our exclusive supply agreement with Cree, Inc. for the sole supply of the raw material; intense competition in the worldwide jewelry industry; our ability to maintain compliance with the continued listing requirements of The Nasdaq Stock Market LLC; our current customers’ potential perception of us as a competitor in the finished jewelry business; quality control challenges from time to time that can result in lost revenue and harm to our brands and reputation; general economic and market conditions, including the current economic environment; risks of conducting business in foreign countries; the impact of natural disasters on our operations; the pricing of precious metals, which is beyond our control; the potential impact of seasonality on our business; our ability to protect our intellectual property; the risk of a failure of our information technology infrastructure to protect confidential information and prevent security breaches; the impact of significant changes in e-commerce opportunities, technology, or models; the impact on our brand and reputation of negative or inaccurate information on social media; the failure to evaluate and integrate strategic opportunities; possible adverse effects of governmental regulation and oversight; and the impact of anti-takeover provisions included in our charter documents, in addition to the other risks and uncertainties described in our filings with the Securities and Exchange Commission, or the SEC, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 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 SEC that discuss other factors relevant to our business.
Contacts:
Clint J. Pete
Chief Financial Officer
919-468-0399
cpete@charlesandcolvard.com
Investor Relations:
Taglich Brothers, Inc.
Christopher Schreiber
212-661-6886
-Financial Tables Follow-
| CHARLES & COLVARD, LTD. | ||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
| (unaudited) | ||||||
| September 30, 2017 | December 31, 2016 | |||||
| ASSETS | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 5,127,906 | $ | 7,427,273 | ||
| Accounts receivable, net | 2,612,188 | 2,794,626 | ||||
| Inventory, net | 11,115,715 | 9,770,206 | ||||
| Prepaid expenses and other assets | 736,493 | 682,083 | ||||
| Total current assets | 19,592,302 | 20,674,188 | ||||
| Long-term assets: | ||||||
| Inventory, net | 19,782,460 | 18,360,211 | ||||
| Property and equipment, net | 1,319,962 | 1,391,116 | ||||
| Intangible assets, net | 9,026 | 8,808 | ||||
| Other assets | 66,330 | 71,453 | ||||
| Total long-term assets | 21,177,778 | 19,831,588 | ||||
| TOTAL ASSETS | $ | 40,770,080 | $ | 40,505,776 | ||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
| Current liabilities: | ||||||
| Accounts payable | $ | 4,884,461 | $ | 3,977,149 | ||
| Accrued cooperative advertising | 86,173 | 50,000 | ||||
| Accrued expenses and other liabilities | 787,449 | 581,107 | ||||
| Total current liabilities | 5,758,083 | 4,608,256 | ||||
| Long-term liabilities: | ||||||
| Accrued expenses and other liabilities | 498,068 | 594,916 | ||||
| Accrued income taxes | 457,085 | 433,983 | ||||
| Total long-term liabilities | 955,153 | 1,028,899 | ||||
| Total liabilities | 6,713,236 | 5,637,155 | ||||
| Commitments and contingencies | ||||||
| Shareholders’ equity: | ||||||
| Common stock, no par value; 50,000,000 shares authorized; 21,594,685 and 21,369,885 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively | 54,243,816 | 54,243,816 | ||||
| Additional paid-in capital | 14,608,145 | 14,282,956 | ||||
| Accumulated deficit | (34,795,117 | ) | (33,658,151 | ) | ||
| Total shareholders’ equity | 34,056,844 | 34,868,621 | ||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 40,770,080 | $ | 40,505,776 | ||
| CHARLES & COLVARD, LTD. | ||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||
| (unaudited) | ||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||
| Net sales | $ | 6,208,808 | $ | 5,212,973 | $ | 18,495,982 | $ | 23,133,248 | ||||
| Costs and expenses: | ||||||||||||
| Cost of goods sold | 3,483,603 | 3,221,007 | 10,544,303 | 16,278,989 | ||||||||
| Sales and marketing | 1,757,007 | 1,891,162 | 5,449,195 | 5,222,757 | ||||||||
| General and administrative | 1,137,736 | 1,244,400 | 3,612,618 | 4,380,218 | ||||||||
| Research and development | 489 | - | 3,633 | 2,848 | ||||||||
| Loss on abandonment of property and equipment | - | 473 | - | 116,021 | ||||||||
| Total costs and expenses | 6,378,835 | 6,357,042 | 19,609,749 | 26,000,833 | ||||||||
| Loss from operations | (170,027 | ) | (1,144,069 | ) | (1,113,767 | ) | (2,867,585 | ) | ||||
| Other expense: | ||||||||||||
| Interest expense | (5 | ) | (36 | ) | (97 | ) | (1,548 | ) | ||||
| Total other expense | (5 | ) | (36 | ) | (97 | ) | (1,548 | ) | ||||
| Loss before income taxes from continuing operations | (170,032 | ) | (1,144,105 | ) | (1,113,864 | ) | (2,869,133 | ) | ||||
| Income tax net expense from continuing operations | (4,507 | ) | (3,325 | ) | (23,102 | ) | (10,068 | ) | ||||
| Net loss from continuing operations | (174,539 | ) | (1,147,430 | ) | (1,136,966 | ) | (2,879,201 | ) | ||||
| Discontinued operations: | ||||||||||||
| Loss from discontinued operations | - | (6,949 | ) | - | (586,027 | ) | ||||||
| (Loss) gain on sale of assets from discontinued operations | - | (3,065 | ) | - | 12,398 | |||||||
| Net loss from discontinued operations | - | (10,014 | ) | - | (573,629 | ) | ||||||
| Net loss | $ | (174,539 | ) | $ | (1,157,444 | ) | $ | (1,136,966 | ) | $ | (3,452,830 | ) |
| Net loss per common share: | ||||||||||||
| Basic – continuing operations | $ | (0.01 | ) | $ | (0.06 | ) | $ | (0.05 | ) | $ | (0.14 | ) |
| Basic – discontinued operations | - | (0.00 | ) | - | (0.03 | ) | ||||||
| Basic – total | $ | (0.01 | ) | $ | (0.06 | ) | $ | (0.05 | ) | $ | (0.17 | ) |
| Diluted – continuing operations | $ | (0.01 | ) | $ | (0.06 | ) | $ | (0.05 | ) | $ | (0.14 | ) |
| Diluted – discontinued operations | - | (0.00 | ) | - | (0.03 | ) | ||||||
| Diluted – total | $ | (0.01 | ) | $ | (0.06 | ) | $ | (0.05 | ) | $ | (0.17 | ) |
| Weighted average number of shares used in computing net loss per common share: | ||||||||||||
| Basic | 21,218,468 | 20,997,686 | 21,184,211 | 20,898,484 | ||||||||
| Diluted | 21,218,468 | 20,997,686 | 21,184,211 | 20,898,484 | ||||||||
CHARLES & COLVARD, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| Nine Months Ended September 30, | ||||||
| 2017 | 2016 | |||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||
| Net loss | $ | (1,136,966 | ) | $ | (3,452,830 | ) |
| Net loss from discontinued operations | - | (573,629 | ) | |||
| Net loss from continuing operations | (1,136,966 | ) | (2,879,201 | ) | ||
| Adjustments to reconcile net loss from continuing operations to net cash (used in) provided by operating activities of continuing operations: | ||||||
| Depreciation and amortization | 318,722 | 445,576 | ||||
| Stock-based compensation | 325,189 | 829,381 | ||||
| Provision for uncollectible accounts | 96,000 | (60,300 | ) | |||
| Provision for sales returns | (19,000 | (430,000 | ) | |||
| Provision for inventory reserves | 44,000 | 54,000 | ||||
| Loss on abandonment of property and equipment | - | 116,021 | ||||
| Changes in operating assets and liabilities: | ||||||
| Accounts receivable | 105,438 | 2,396,925 | ||||
| Inventory | (2,811,758 | ) | 5,092,381 | |||
| Prepaid expenses and other assets, net | (49,287 | ) | (87,071 | ) | ||
| Accounts payable | 907,312 | 281,477 | ||||
| Accrued cooperative advertising | 36,173 | (49,000 | ) | |||
| Accrued income taxes | 23,102 | 10,068 | ||||
| Accrued expenses and other liabilities | 109,494 | (151,071 | ) | |||
| Net cash (used in) provided by operating activities of continuing operations | (2,051,581 | ) | 5,569,186 | |||
| Net cash used in operating activities of discontinued operations | - | (1,123,381 | ) | |||
| Net cash (used in) provided by operating activities | (2,051,581 | ) | 4,445,805 | |||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||
| Purchases of property and equipment | (246,284 | ) | (410,306 | ) | ||
| Intangible assets | (1,502 | ) | (2,446 | ) | ||
| Net cash used in investing activities of continuing operations | (247,786 | ) | (412,752 | ) | ||
| Net cash provided by investing activities of discontinued operations | - | 368,671 | ||||
| Net cash used in investing activities | (247,786 | ) | (44,081 | ) | ||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||
| Stock option exercises | - | 2,300 | ||||
| Net cash provided by financing activities of continuing operations | - | 2,300 | ||||
| NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (2,299,367 | ) | 4,404,024 | |||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 7,427,273 | 5,274,305 | ||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 5,127,906 | $ | 9,678,329 | ||
| Supplemental disclosure of cash flow information: | ||||||
| Cash paid during the period for interest | $ | 97 | $ | 1,548 | ||