Le Lézard
Classified in: Business, Covid-19 virus
Subjects: ERN, ERP

CHARLES & COLVARD REPORTS FOURTH QUARTER AND FULL FISCAL YEAR 2022 FINANCIAL RESULTS


RESEARCH TRIANGLE PARK, N.C., Sept. 1, 2022 /PRNewswire/ -- Charles & Colvard, Ltd. (Nasdaq: CTHR) (the "Company"), a globally recognized fine jewelry company specializing in lab grown gemstones, today announced financial results for the fourth quarter and full fiscal year ended June 30, 2022. 

"I'm pleased to report that our record-breaking top line growth has continued for our full fiscal year, with $9.3 million in revenue representing the second highest comparable period in Company history and $43.1 million in revenue for fiscal 2022.  This reflects the highest revenue for any twelve-month period ending June 30. Our investments continue in our people, our direct-to-consumer and brand awareness campaigns and our expanded fine jewelry selections; we believe these investments are bearing fruit, as evidenced by our fourth quarter results and full fiscal year growth in sales," said Don O'Connell, President and CEO of Charles & Colvard.

"Our direct-to-consumer revenue grew 24% over the prior fiscal year, boosting our Online Channels segment net sales 15% over fiscal 2021 and 61% over fiscal 2020, further demonstrating the opportunity that we believe this channel represents for the Company's continued growth. We have now delivered eight consecutive quarters of profitability. We have accumulated $21.2 million in total cash and amassed $33.5 million in premium inventory in support of all channels?all with zero debt.  We believe this positions us well to become one of the leading fine jewelry destinations for all things Made, Not MinedTM," concluded Mr. O'Connell.

Recent Corporate Highlights

Financial Summary for Fourth Quarter Fiscal 2022
(Quarter Ended June 30, 2022 Compared to Quarter June 30, 2021)

Financial Summary for Fiscal Year 2022

Financial Position

Cash, cash equivalents and restricted cash totaled $21.2 million as of June 30, 2022, representing a decrease of $268 thousand from $21.4 million as of June 30, 2021. Total inventory increased to $33.5 million as of June 30, 2022, compared to $29.2 million as of June 30, 2021. During the fiscal year ended June 30, 2022, our working capital decreased $1.0 million, or 4%, to $29.1 million from $30.1 million at June 30, 2021. The Company had no debt outstanding as of June 30, 2022 and June 30, 2021.

Investor Conference Call

Charles & Colvard will host an investor conference call and webcast presentation to discuss its financial results for the fourth quarter and fiscal year ended June 30, 2022 at 4:30 p.m. ET on Thursday, September 1, 2022.  The investor conference call and accompanying presentation slides will be webcast live and can be accessed in the Investor Relations section of the Company's website at https://ir.charlesandcolvard.com/events.

To participate via telephone, callers should dial 844-875-6912 (U.S. toll-free) or 412-317-6708 (international) and ask to be connected to the "Charles & Colvard, Ltd. Conference Call" a few minutes before 4:30 p.m. ET on Thursday, September 1, 2022.

A replay of this conference call will be available until September 8, 2022 at 877-344-7529 (U.S. toll-free) or 412-317-0088 (international). The replay conference ID is 5034150. The call will also be available for replay 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 fine jewelry can be accessible, beautiful and conscientious. Charles & Colvard is the original creator of lab grown moissanite, a rare gemstone formed from silicon carbide. The Company brings revolutionary gemstones and jewelry to market through its pinnacle Forever OneTM moissanite brand and its premium Caydia® lab grown diamond brand. Consumers seek Charles & Colvard fashion, bridal and fine jewelry because of its exceptional quality, incredible value and shared beliefs in environmental and social responsibility. Charles & Colvard was founded in 1995 and is based in North Carolina's Research Triangle Park. 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) 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; (4) we face intense competition in the worldwide gemstone and jewelry industry; (5) our information technology infrastructure, and our network may be impacted by a cyber-attack or other security incident as a result of the rise of cybersecurity events; (6) constantly evolving privacy regulatory regimes are creating new legal compliance challenges; (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) we depend 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; (16) 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; (17) governmental regulation and oversight might adversely impact our operations; (18) the execution of our business plans could significantly impact our liquidity; (19) 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; (20) negative or inaccurate information on social media could adversely impact our brand and reputation; (21) 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; (22) 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; (23) environmental, social, and governance matters may impact our business, reputation, financial condition, and results of operations; (24) if we fail to evaluate, implement, and integrate strategic acquisition or disposition opportunities successfully, our business may suffer; (25) some anti-takeover provisions of our charter documents may delay or prevent a takeover of our Company; (26) 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; and (27) our failure to maintain compliance with The Nasdaq Stock Market's continued listing requirements could result in the delisting of our common stock, in addition to the other risks and uncertainties described in more detail in "Risk Factors" in Part I, Item 1A, of this Annual Report on Form 10-K. 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 -

 

Appendix A


CHARLES & COLVARD, LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



Three Months Ended June 30,


Year Ended June 30,



2022


2021


2022


2021



(unaudited)


(unaudited)


(unaudited)




Net sales

$

9,303,743


$

9,726,699


$

43,089,024


$

39,235,839


Cost of goods sold


5,498,676



5,352,475



22,845,702



20,809,690


Gross profit


3,805,067



4,374,224



20,243,322



18,426,149


Operating expenses:













Sales and marketing


2,679,364



2,136,862



12,421,138



8,476,716


General and administrative


1,068,296



1,163,195



4,948,980



4,441,441


Total operating expenses


3,747,660



3,300,057



17,370,118



12,918,157


Income from operations


57,407



1,074,167



2,873,204



5,507,992


Other income (expense):













        Gain on extinguishment of debt


-



974,328



-



974,328


        Interest income


17,313



455



19,277



5,581


Interest expense


-



(1,635)



-



(8,953)


Loss on foreign currency exchange


-



-



(34)



(603)


Total other income (expense), net


17,313



973,148



19,243



970,353


Income before income taxes


74,720



2,047,315



2,892,447



6,478,345


Income tax (expense) benefit


(33,950)



6,333,881



(518,532)



6,332,421


Net income

$

40,770


$

8,381,196


$

2,373,915


$

12,810,766




























Net income per common share:













Basic

$

0.00


$

0.28


$

0.08


$

0.44


Diluted

$

0.00


$

0.27


$

0.08


$

0.42















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













Basic


30,534,331



29,680,806



30,363,076



29,144,820


Diluted


31,224,390



31,058,495



31,316,028



30,232,567















 

CHARLES & COLVARD, LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS



June 30, 2022


June 30, 2021



(unaudited)




ASSETS






Current assets:






Cash and cash equivalents

$

15,668,361


$

21,302,317

Restricted cash


5,510,979



144,634

Accounts receivable, net


2,220,816



1,662,074

Inventory, net


11,024,276



11,450,141

Note receivable


250,000



250,000

Prepaid expenses and other assets


1,190,012



952,065

Total current assets


35,864,444



35,761,231

Long-term assets:






Inventory, net


22,488,524



17,722,579

Property and equipment, net


1,901,176



875,897

Intangible assets, net


265,730



209,658

Operating lease right-of-use assets


2,787,419



3,952,146

Deferred income taxes, net


5,851,904



6,350,830

Other assets


49,658



49,658

Total long-term assets


33,344,411



29,160,768

TOTAL ASSETS

$

69,208,855


$

64,921,999







LIABILITIES AND SHAREHOLDERS' EQUITY






Current liabilities:






Accounts payable

$

4,401,229


$

2,774,373

Operating lease liabilities, current portion


856,571



566,083

Accrued expenses and other liabilities


1,546,483



2,281,807

Total current liabilities


6,804,283



5,622,263

Long-term liabilities:






       Noncurrent operating lease liabilities


2,846,805



3,600,842

Accrued income taxes


-



9,878

Total long-term liabilities


2,846,805



3,610,720

Total liabilities


9,651,088



9,232,983

Commitments and contingencies






Shareholders' equity:






Common stock, no par value; 50,000,000 shares authorized;
     30,778,046 shares issued and 30,747,759 shares
     outstanding at June 30, 2022 and 29,913,095 shares issued
     and outstanding at June 30, 2021


57,242,211



56,057,109

Additional paid-in capital


25,956,491



25,608,593

Treasury stock, at cost, 30,287 shares and 0 shares
     at June 30, 2022 and 2021, respectively


(38,164)



-

Accumulated deficit


(23,602,771)



(25,976,686)

Total shareholders' equity


59,557,767



55,689,016

        TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

69,208,855


$

64,921,999

 

CHARLES & COLVARD, LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



Year Ended June 30,



2022


2021



(unaudited)




CASH FLOWS FROM OPERATING ACTIVITIES:







Net income

$

2,373,915


$

12,810,766


Adjustments to reconcile net income to net cash provided by operating activities:







Depreciation and amortization


479,308



567,122


Stock-based compensation


774,341



352,583


Provision for uncollectible accounts


14,000



2,030


Recovery of sales returns


(84,000)



(29,000)


Inventory write-downs


195,000



150,000


Recovery of accounts receivable discounts


(4,285)



(9,153)


Gain on extinguishment of debt


-



(974,328)


Deferred income taxes


498,926



(6,350,830)


Changes in operating assets and liabilities:







Accounts receivable


(484,457)



(955,233)


Inventory


(4,535,080)



1,311,239


Prepaid expenses and other assets, net


926,780



(3,140,405)


Accounts payable


1,626,856



(973,862)


Accrued income taxes


(9,878)



1,931


Accrued expenses and other liabilities


(1,198,873)



3,710,232


       Net cash provided by operating activities


572,553



6,473,092









CASH FLOWS FROM INVESTING ACTIVITIES:







Purchases of property and equipment


(1,496,471)



(437,069)


Payment to fund note receivable


-



(250,000)


Payments for intangible assets


(64,188)



(46,396)


              Net cash used in investing activities


(1,560,659)



(733,465)









CASH FLOWS FROM FINANCING ACTIVITIES:







Stock option exercises


758,659



1,090,090


Repurchases of common stock


(38,164)



-


              Net cash provided by financing activities


720,495



1,090,090









NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND







     RESTRICTED CASH


(267,611)



6,829,717


CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF YEAR


21,446,951



14,617,234


CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF YEAR

$

21,179,340


$

21,446,951











Reconciliation to Condensed Consolidated Balance Sheets:


June 30, 2022



June 30, 2021


    Cash and cash equivalents

$

15,668,361


$

21,302,317


    Restricted cash


5,510,979



144,634



$

21,179,340


$

21,446,951









Supplemental disclosure of non-cash investing and financing activities:







    Additions to right-of-use assets obtained from new operating lease liabilities

$

-


$

3,908,249


    Forgiveness of PPP Loan principal

$

-



965,000









Supplemental disclosure of cash flow information:







Cash paid during the year for taxes

$

-


$

14,704


 

Appendix B


CHARLES & COLVARD, LTD.

SUMMARY FINANCIAL INFORMATION BY REPORTABLE SEGMENT

(unaudited)


The Company evaluates the financial performance of its segments based on net sales; product line gross profit, or the excess of product line sales over product line cost of goods sold; and operating income. The Company's product line cost of goods sold is defined as product cost of goods sold, excluding non-capitalized expenses from the Company's manufacturing and production control departments, comprising personnel costs, depreciation, leases, utilities, and corporate overhead allocations; freight out; inventory write-downs; and other inventory adjustments, comprising costs of quality issues, and damaged goods.


The Company allocates certain general and administrative expenses between its Online Channels segment and its Traditional segment primarily based on net sales and number of employees to arrive at segment operating income. Unallocated expenses remain in its Traditional segment.


Summary unaudited financial information by reportable segment for the three months ended June 30, 2022 is as follows:



Three Months Ended June 30, 2022















Online

Channels


Traditional



 

Total














Net sales























Finished Jewelry

$

4,879,657


$

1,186,529



$

6,066,186













Loose jewels


852,118



2,385,439




3,237,557













Total

$

5,731,775


$

3,571,968



$

9,303,743



































Product line cost of goods sold






















Finished jewelry

$

2,132,703


$

1,051,674



$

3,184,377













Loose jewels


332,228



1,329,565




1,661,793













Total

$

2,464,931


$

2,381,239



$

4,846,170



































Product line gross profit






















Finished jewelry

$

2,746,954


$

134,855



$

2,881,809













Loose jewels


519,890



1,055,874




1,575,764













Total

$

3,266,844


$

1,190,729



$

4,457,573



































Operating income (loss)

$

446,317


$

(388,910)



$

57,407



































Depreciation and amortization

$

61,857


$

67,253



$

129,110



































Capital expenditures

$

191,141


$

55,034



$

246,175













 

CHARLES & COLVARD, LTD.

SUMMARY FINANCIAL INFORMATION BY REPORTABLE SEGMENT

(unaudited)

 

Summary unaudited financial information by reportable segment for the three months ended June 30, 2021 is as follows:



Three Months Ended June 30, 2021




Online

Channels


Traditional



Total



Net sales












Finished Jewelry

$

4,790,434


$

790,684



$

5,581,118


Loose jewels


783,863



3,361,718




4,145,581


Total

$

5,574,297


$

4,152,402



$

9,726,699













Product line cost of goods sold











Finished jewelry

$

1,993,161


$

470,478



$

2,463,639


Loose jewels


269,525



1,570,367




1,839,892


Total

$

2,262,686


$

2,040,845



$

4,303,531













Product line gross profit











Finished jewelry

$

2,797,273


$

320,206



$

3,117,479


Loose jewels


514,338



1,791,351




2,305,689


Total

$

3,311,611


$

2,111,557



$

5,423,168













Operating income

$

718,486


$

355,681



$

1,074,167













Depreciation and amortization

$

68,048


$

79,563



$

147,611













Capital expenditures

$

58,240


$

32,717



$

90,957
































 

CHARLES & COLVARD, LTD.

SUMMARY FINANCIAL INFORMATION BY REPORTABLE SEGMENT

(unaudited)

 

Summary unaudited financial information by reportable segment for the year ended June 30, 2022 is as follows:



Year Ended June 30, 2022




Online

Channels


Traditional



Total



Net sales












Finished jewelry

$

23,539,347


$

6,172,883



$

29,712,230


Loose jewels


3,240,702



10,136,092




13,376,794


Total

$

26,780,049


$

16,308,975



$

43,089,224













Product line cost of goods sold











Finished jewelry

$

9,837,830


$

4,094,870



$

13,932,700


Loose jewels


1,209,832



4,959,958




6,169,790


Total

$

11,047,662


$

9,054,828



$

20,102,490













Product line gross profit











Finished jewelry

$

13,701,517


$

2,078,013



$

15,779,530


Loose jewels


2,030,870



5,176,134




7,207,004


Total

$

15,732,387


$

7,254,147



$

22,986,534













Operating income

$

2,550,991


$

322,213



$

2,873,204













Depreciation and amortization

$

235,643


$

243,665



$

479,308













Capital expenditures

$

305,586


$

1,190,885



$

1,496,471






















 

CHARLES & COLVARD, LTD.

SUMMARY FINANCIAL INFORMATION BY REPORTABLE SEGMENT

 

 Summary financial information by reportable segment for the year ended June 30, 2021 is as follows:



Year Ended June 30, 2021




Online

Channels


Traditional



Total



Net sales












Finished jewelry

$

19,905,199


$

4,496,347



$

24,401,546


Loose jewels


3,304,439



11,529,854




14,834,293


Total

$

23,209,638


$

16,026,201



$

39,235,839













Product line cost of goods sold











Finished jewelry

$

8,235,797


$

3,036,215



$

11,272,012


Loose jewels


1,216,942



5,640,813




6,857,755


Total

$

9,452,739


$

8,677,028



$

18,129,767













Product line gross profit











Finished jewelry

$

11,669,402


$

1,460,132



$

13,129,534


Loose jewels


2,087,497



5,889,041




7,976,538


Total

$

13,756,899


$

7,349,173



$

21,106,072













Operating income

$

3,739,553


$

1,768,439



$

5,507,992













Depreciation and amortization

$

248,995


$

318,127



$

567,122













Capital expenditures

$

253,935


$

183,134



$

437,069


 

CHARLES & COLVARD, LTD.

SUMMARY FINANCIAL INFORMATION BY REPORTABLE SEGMENT

(unaudited)


An unaudited reconciliation of the Company's total product line cost of goods sold by reportable segment to its cost of goods sold as reported in the unaudited condensed consolidated financial statements for each applicable period presented herein is as follows:



Three Months

Ended

June 30, 2022


Year

Ended

June 30, 2022

Product line cost of goods sold by reportable segment

$

4,846,170


$

20,102,490

Non-capitalized manufacturing and production control expenses


417,679



1,661,207

Freight out


218,207



1,195,062

Inventory (reserve release) write-downs


(37,000)



195,000

Other inventory adjustments


53,620



(308,057)

Consolidated cost of goods sold

$

5,498,676


$

22,845,702


















Three Months

Ended

June 30, 2021


Year

Ended

June 30, 2021

Product line cost of goods sold by reportable segment

$

4,303,531


$

18,129,767

Non-capitalized manufacturing and production control expenses


468,400



1,591,114

Freight out


329,695



1,013,275

Inventory write-downs


22,000



150,000

Other inventory adjustments


228,849



(74,466)

Consolidated cost of goods sold

$

5,352,475


$

20,809,690







 

SOURCE Charles & Colvard, Ltd.


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