CTHR - Earnings call transcript Q2 2019

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Operator

Good afternoon, and welcome to the Charles & Colvard Second Quarter Fiscal Year 2019 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] This earnings call may contain forward-looking statements as defined in Section 27A of the Securities Act of 1933 as amended, including statements regarding, among other things, the company’s business strategy and growth strategy. Expressions which identify forward-looking statements speak only as of the date the statement is made. These forward-looking statements are based largely on our company’s expectations and are subject to a number of risks and uncertainties, some of which cannot be predicted or quantified and are beyond our control. results by materially statements. or actual forth those and contemplated in, underlying developments could from differ set Future the forward-looking light information and assurance risks accurate. of can In no be uncertainties, that prove can there forward-looking to be the these not respect call offer an of company’s to a a does securities authorization or to proxy, shareholders. of meeting a This consent, any agent nor constitute earnings purchase solicitation designation with the Relations is call of is PowerPoint available a website in ir.charlesandcolvard.com/events. the section which at Investor today’s company’s Accompanying slide the supporting deck, Please note, this event is being recorded. turn I like conference now Miglucci, would Suzanne President CEO. to the over to and Please go ahead.

Suzanne Miglucci

fiscal afternoon, Colvard’s joining results for us XX, thank quarter & the XXXX Charles December ended summarize quarter year. Good for second and XXXX, as you the we our of

report consecutive performance selling include underscores to profitability. pleased lab-created the growth, from robust with growing which gemstones. and results, demand We for the season. and our gross we’ve strong today’s flow quarterly and holiday excellent cash quarter built model revenue a into had scalability business This strength positive the margin, We’re

strategy our strong return discuss We’re begin see Clint? our key call from will our you. overview to Clint outcomes I’ll delivering pleased Pete, CFO, forward results and an today’s the quarter. with financials, sharing to then our of look with highlights to

Clint Pete

will Suzanne. Good highlighting on focus the today joining for QX key comments XXXX. you, Thank results My afternoon, everyone, you and us. financial in thank

increased $X.XX approximately sales $X.XX Form on summarizes income to or income share X. be net $XX.X of share when can ago detail the QX the quarter, compared We the diluted million. compared per to per net million Slide of XXXX diluted quarter. which our ago becomes $X.X QX found for on in Slide year it with approximately $XXX,XXX December XX% XXXX year net for or quarter X Beginning for Additional a XXXX, XX-Q ended available. XX, reported

online holiday-related demand first, from two our versus finished resulting net consists wholesale of Forever serve sales. as such due products, jewelry marketplaces, domestic XX% website, international year initiatives, other our distributor net our of e-commerce ago demand quarter, to retail quarter on and from of drivers: is cross-border sales charlesandcolvard.com independent in international quarter, quarter. charlesandcolvard.com, an in an XX% also sales e-commerce which ago play Finished customers, drop gross drove jewel loose distributors, and and increased channels e-commerce One year exclusively from across which generated sales. to geographies and retail on jewelers. the for increase drive outlets. the product sales On margin the contributing segment, the XX% outlets, XX% our multiple resulted transactional XX%; XX%, our third-party outlets, This versus net also partners increased quarter to One strategy our net sales from and largely based distributors strong pure sales Forever year market, retail brick-and-mortar charlesandcolvard.com, by mainly ago which website. a segment, our including company’s who International X, quarter the compared our net our increased jewelry XXX% the main for XX% direct-to-consumer of was trade our second consist growing platform Channel Slide sales through our increased second, and Online which total Our sales for include Traditional to representing ship of In increase

presented inside operating the a for dollar sales. loose bar, our XX% quarter. and is gemstones jewelry expenses net of The we bar. net each top Slide percentage finished compared expenses as XX% of represented sales each of net to show operating sales On total ago at in level the One Forever year each X, of quarter of

XX% June $X at to For as cash, percent growth. that operating sheet. compared marketing campaigns X Overall reflect to while expenses year quarter, the a expenses than up equivalents our sales presents our $X.X expenses continues our and of year cash ago balance QX snapshot increased our better we XX%, XX, we restricted we believe quarter. at a the net ramped line drive XX% holiday and to of have line. percentage At controlling operating $X.X to into increase in million due XX, top built XXXX, We by Slide XXXX, a grow the continuing of XXXX. net XXXX, costs investments million as to was discipline sales trend XX, a have versus of business of million slightly September cash December as ago mainly our top

now one, We And three $XX.X XX. compared continue compared at to long-term accessed million increased no reflects to $X.X debt to Inventory million $XX and $XX.X was in increase from million funds sales will $X.X Legacy and be from XX, June XXXX, compared XXXX, to we Monday, our quarter positioned County, have as June totaled season. enter in consignment May million Valentine’s website, believe now and saw not finished net credit I back two, planned facility. XX, XX, on the recent Vegas charlesandcolvard.com. channel; inventory we at This presenting at In Thursday, million. compared XX, and there down on and investor Loose leaving the Day our MicroCap brick-and-mortar our have Valentine’s turn of inventory jewels Planet Related increased XXXX. Annual XXXX, $XX.X sales are down and at XX% XX, transactional inventory related have Orange inventory Conference jewelry $X,XXX in selling like have classified business been to our to XX% during to ROTH we December call XXst events, XX% the inventory million. March Slide XX, well XXXX, the we only positive would expanding X. to inventory, our prepare to for December higher of in new the summary, in-stock three, we upcoming will legacy to inventory of Day of drive the selling our $XXX,XXX invested to December On December in intentional to through Showcase and positive was strategic factors: XX, Wednesday inventory over participate XX% X an is – Suzanne. we classified in Las for California season; to as inventory. buildup we success results as

Suzanne Miglucci

start of quarter the highlights on Thank a XX. you, Clint. I’ll notable with summary for Slide

was our One, strong revenue sales in million Forever flagship of grounded our Our of QX product. $XX.X moissanite

of to ago year outreach compared finished quarter. working gaining our believe XX% in our XX% total total brand that of a Forever direct-to-consumer is we jewelry One is in clear QX represented our the indicator is this significant With traction. XX% representing and revenue sales,

channels. and our Our website sales total our investments by retail compelling XX% gross diluted quarter a One lastly, in readiness to Moissanite on-time Day holiday we’re deliveries net and assortments our by that profitable a share. margin Forever supported Charles And our & select sales Colvard $X.XX Forever profit One deliver reduced inventory row, thrilled through for of jewelry have per of to season. charlesandcolvard.com Valentine’s was and of into XX% legacy second new We fueled transitioned and selling in the inventory supported

accomplished were that a We’re particularly environment. shifting in industry encouraged achievements these

evolve. U.S. between e-commerce according retail, sales, rose automobiles, X Mastercard. highlighted Adobe Slide As Analytics. and Total XX, Online continued on XX, industry to jewelry see retail trends and XX.X% excluding according November holiday year, sales you’ll December increased to to X.X% this

this of buying quarter our and platform. in technology course, consolidate website, of our Online which speed, for designed customers in flagship with versus retail to to U.S.-based year for Colvard storefront through in holiday international solution to XXXX increased an of our holiday, Jewelers This XX% aggressive meet traffic overall a transactions. quarter. assortment the more brand segment including fraud products site jewelry the options In industry one which continued our in security of industry according streamlined the total transactional represented and and new advertising personalized customers On trade QX XX% on segment, user XX% net website solution jewelry to demand a of While sales site the market. outperformed XX fine of new targeted as and sales in company’s Charles we customers’ quarter. needs. bridal the provides the we new landscape, over reflecting We and prior a This improved growth. build on-site vehicles seamless awareness improve to saw in adoption our our for payment distribution enhanced and traditional process upgrades from ago & detection of search cross-border QX, primary consumers’ And is the of to Channels ago implementation omni-channel platform, A Slide a every the of Site and most charlesandcolvard.com in-country this to trade campaign result numerous new over was to Trade. year to outcome ability strategy, for sales updated closings, and key our of website own drive the contributor Cross-border XXX% of a to had our also awareness this Across an the growth with experience, upgrade to brands with ever-expanding our generated with materially the our targeted on-site and U.S. than featured we significantly sales grew promotions. the territories. the improvements improved outside methods, to experience fashion designed XX% increase charlesandcolvard.com, positioning Board

turn and QX, & drop ship to new e-commerce our partnerships across Moissanite drop marketplaces. in Online of jewelry finished other Charles marketplace brand, let’s our by segment: we two In Now and Colvard outlets. launched Channels areas ship

online slowing started this address on in brand, a we October building are these fine recent announced and work Macy’s in developments there and of distinct benefits partnership awareness product in establishing of longer-term Channels innovation. this we transition, had online macys.com. XXXX, shortly for store at with I’ll curated We a believe saw when several with which We’ve moissanite the strategic recently assortment we partnerships. we toward making In While terms as jewelry Online fashion our sales highlighting of positive new Macy’s.

four special results, during the showcase We’ll Charles of an encouraging led to with next selection section events Macy’s at February the step. participate stores a Colvard to in store thrilled We’re March. has and in Macy’s invited key dates. select expanded has special in & an which

be to We’re reaching iconic a thrilled retailer with working segment. and customer this new

eBay from In these and Amazon and including Catch. marketplaces, marketplaces, & sites new terms sites, deployed outlets. markets newly generating Colvard Germany France, providing sales an on Spain, approach, international in agile, using in established along we of Charles low-cost began We jewelry QX, entered with moissanite Australia, Australian Italy,

our consumers We also of to Actions, search Shopping devices. and seamlessly purchase introduced availability which the multiple allows through jewelry across Google products

retail by net generate gemstones. and represented Sales market product in our we’re days it’s brand in our which many for showcased we locations. new successfully broader On net line campaigns. season. XXX to selection ago channels, in in person by shopping In and this and of One While markets marketing Colvard selling nearly from in-store overall early XX% substantially our holiday retooled already outlets, exposure better to to year drove Forever we XX, attributable product, contribute And fueled traditional to international an aggressive significant Charles sales jewelry of increases, premier revenue our & and in XX% omni-channel Moissanite we the with of launched Slide assortment overall the of Boscov’s across time lab-created our experienced the these grew increase increased and in also peak and experience new stores, strategy. assortments, for their our brick-and-mortar quarter. expanded total quarter, placement Helzberg’s sales allowing the revenue acceptance consumers channel, beginning

jewelers U.S. back & across in created Charles products saw a Colvard independent performed this who holiday year showing. strong distributors jewelers where for our distributors holiday the earlier with thousands and well moissanite Our of season. country this These independent came a sales setback calendar serve

market. revenues international representing from China ago total of XX% sales. now XXX% Our particular, the quarter, experienced increased distributor Greater In increased who international partners we served over demand year the

we’ve we time, there’s As attractive noting market for in moissanite believe an been China. some for

distance. have work a as the However, build sales brand Chinese to to moderate from consumer been direct our we our

inroads We’re vehicle. to local our primary distributor ground the therefore, on resulting We’ll partners established our continue opportunity, and as are who having to lucrative more near-term consumer, with pursue China significant go-to-market growth. established have success the partners this leveraging a in

fashion, sales advantageous most and Slide improved led sales product cost-effective innovation global categories. and directly trade in geopolitical assessing jewelry consumers. consumer further continually our engage represented broad XX% quarter, XX, the Finished of volatile bridal we’re investments the and recent of the to to Given environment, second jewelry. our jewelry a international our selection ways the fine our across to strategy validating total On in with reach

market Colvard’s & fine floret significant truly moissanite line, September Forever interest seeing very in and patent jewelry, We’re Signature first featuring year. inspired which we in This of bridal One jewelry last by assortment of Charles exclusive pending the designs, is our Collection, set in announced company’s logo. unique

a that good embedded our every consumers It’s floret in their design. in Signature investments and been line we in collections, incredibly In jewelry validating adapt our have fact, the proprietary Collection heartwarming return. logo this and provided jewelry feel is have to

our the moissanite by emerging gemstone several months and Forever Moissanite which We no competitive at moissanite at Colvard by transition & a longer our price higher from its than are products. created is Brilliant, profile being value introduced offered branded legacy which competes I Moissanite products, debuted Charles new sells gemstones, by supplier. ago. As of with is earlier, line this Forever Colvard & and predecessors that Classic to point Charles our margin mentioned new

networks quarter, was This Moissanite our distributor drop across and marketplaces. launched Charles Macy’s and in Boscov’s, partner by & ship Colvard on and

catapult for Traditional being forward across to brand. in brand in uptake We’re steady seeing critical and point important performance and an benchmark that and of rankings search to is segments two this search product the our our just brand. have a confirms us adoption, Overall, to of Channels reached engines a relaunching and Online new look and help reaching improving reviews both after it indexed mass years the

us focus As the set path. outlined four this has profitable on we key continue Slide initiatives XX, that on to on

we’re into demonstrates, successfully e-commerce transforming growing quarter unique with a Colvard products & an this brand. As and Charles company established

to delivering investments. With remarks. positioned you the using position, are the opportunities results, that well the would financial of and record track and and data-driven we’re This we from growth our an questions. executing concludes of We’re questions margins call on company’s and improving better actions to take now to pool proud strategies return open and please our future. We’d like for believe your we’re listening leading prepared audience? for numerous improved for Chad,

Operator

Instructions] [Operator

Suzanne Miglucci

emailed the for we waiting we’re While queue, fill we that you thought to with. we’d an did begin have question

impact inquired about trade impact shareholders expenses. the future China, the tariffs our revenue and war with of new One of related how our will and this

thanks during best that contact of all, do your And very into on to the So with queue release, IR of first hesitate please those you press to to for them much your we’ll call. time don’t of the everyone’s our for jump questions, ahead email to and typically get question. questions our very don’t the

have believe and we’re environment operating and supply volatile it in On protect Colvard. of from we China. opportunity will inbound China, on Charles today measures to & the We’ve the our our taken particular, minimal a chain already material geopolitical in topic all in impact

products So our goods. shouldn’t But into of to a looking perspective, our from where at this overall be the impacted beauty our is this flow of of nor omni-channel consumers strategy play. comes global cost

the We’re dozens across channels promoting world. and brand of multiple around countries our sales

a given a So time. best to our approach channels at leverage the serve geography to is

that negotiations again So the impacted we world for even to do in swiftly queue? have as our Thanks is a the question. Chad, events, can for meet or region best channel by we the demand or issues of political trade the region. approach adjust anyone weather

Operator

Yes, we do.

Please Capital. Pieringer Craig have go with We ahead. Wells

Craig Pieringer

legacy even a the reducing down bit. inventory, a very coming good to see for congratulations prospects I’m glad inventories, are that quite further? What Hi, especially quarter. on

Suzanne Miglucci

do Thanks calling appreciate in, for Craig. We it.

our in As to Charles One, discussed, the down are by new inventory. product. but with Forever talked products we’ve our draw replacing we And legacy we legacy certainly that prepared constantly of Moissanite way our look inventory both, as & remarks, we Colvard new in

strategy goods. and legacy further these domestic where out the now these built of disposition omni-channel of all especially this can have with marketplaces global rest We outlets, we

don’t do these I anticipate a So we drawdown so at and guidance, while profit. a steady of We goods. continual give would

anxious not to we’re So off. all write them

where sell have them. money on marketplaces to make meaningful we anxious some outlet them We’re a on to

Craig Pieringer

I’ll follow-on. And ask a Excellent.

update So are about this we’ve at But in appropriate or about official and there spokespeople not the deemed influencers Can point was spoken the influencers? those blogosphere past, us – spokespersons Suzanne, of company’s means whatnot. development. did blog various talk that – or you in and in on we

Suzanne Miglucci

Sure, do to happy yes, that.

spokesperson expensive to Charles or to of person single like believe, tend reflect this may brand. a for a very right? people’s to we polarizing, person, & the that They they be thing that continue Colvard. and So right Either like is tend bit this not little probably adoption Craig, on you and don’t you be our

So instead, adopting which We we from people. thousands to of have micro-influencers, continue work of And to continue to influencer – with have of market. influencers. the may followers, with more path do everyone down to that to the our this go footprint influencers millions strategy up people major expand we work of tens may that be from

range. goes it across the So

like BabbleBoxx as talked We Knot. the organizations also with folks about And these are work with we at or third with The we’ve well. working parties influencing

market. for that so reaches So so that put to every see talk about moissanite about By influenced there well. on people way, in the X Knot and how be can can great can as outlet further we their millennials, to videos channels bring it’s a their us them it The how how we wear by X

brand out bit the give So a exposure. there we’re little order trying platforms more more in One-to-Many and and it get to to more

have we’ve in social mentioned December. organization combined blog work some XX over an It’s for from million promotion did We with. media impressions that We we BabbleBoxx. back I did BabbleBoxx. had Just partnered through that the numbers basic here. and

with like promotion So that can something beyond million. have the of as do one XX we outlet as an small that impressions

we’re the millennial crannies market, find especially finding So and more exploring can when means and where Craig, more we touching new nooks into and these, audience. our way a it of on

Craig Pieringer

sound Those color. Thank all very for you much positive. very the

Suzanne Miglucci

right. All

the anybody in Chad. We have queue, else

Operator

have we time, Benchmark. Please with this go At Yes. Jacobs ahead. Michael

Michael Jacobs

headwinds channels, was business in congratulations. grow couple your but came record & Charles some significant had over that the last the the was a of have and Hi, and in before new into What very online track distribution strong Traditional Based to quarter Was you the international. Christmas? vertical doubt Where the business Suzanne, quarters they and Colvard, this I it good on no expertise you’d brick-and-mortar, quarter? drove that this seemed too. that both

Suzanne Miglucci

Thanks for Michael. question, the

Macy’s if most was didn’t So did you But necessarily did Traditional look of good of macys.com. Christmas, some they well. for statistics incredibly I’ll Traditional I’m do retail, They’re interestingly, Colvard use the incredibly on example. about retailers track busy it talking those of the a moissanite, did, & you well. their retail them Moissanite Certain did it sure as didn’t performance, although, well quarters. Macy’s, Charles by on an that that have others yet at realize not. best

jewelers lab-created. the with say, stores. So our but I through Traditional, in is U.S., that certainly, but brick-and-mortar, holiday, we’re still a across did bit independent most will in there their it out adopting means Yes, adoption we distributors. well of And and that moissanite of finding there only a mix. are think did selling what not we And well, I the

also we addition, that In international same number. Traditional our in distributors recognize

international in mentioned, distributors and other world. uptick the seen pretty specifically in as our we’ve Now around certainly amazing I China as places well, some

a mass moissanite, question. think of Certainly, I of of think do mix, we’re get message But on helping out is there it’s sales. holiday. make to a at bit really critical Michael, which to here awareness a that certainly us I and the the So sort answer

Michael Jacobs

see Do of forward? going sales, percentage see of from had So to as balance that you kind grow Online percentage of XX% a of in you Traditional. terms sales? Or online, XX% hope would still you

Suzanne Miglucci

we don’t question. Yes, of great give that’s And course, guidance. a

I won’t a hard give you number. So

this, is past that So what mark getting in I I Online can couple we’ve very over been our Channels consistent sales in these of think XX% say quarters.

think from to forward. I going expect similar performance you us see can So

reached important, confirm everyone that think milestones listening, I for that what’s the business. we’ve important is health here some the of really

is and segment online traction. Our growing gaining it’s

channels, and domestic and We generate have international, revenue. beginning several new they’re to revenue

omni-channel strategy So working. the is

world. is, downturn, good we one geopolitical a pressures again, the region So particular news may have a the where in may have of

lots of the a where difference. have we we can between up We regions two. But expect healthy do that mix other make

the there. And pleased still for traditional channels as us quarters. that we’re you We’re mind model right? a seasonal with – and business, future our movement So very keep but in

Michael Jacobs

quarter, community. Congratulations on a nice nice not only investment to but presentation a the

afternoon. You invested nice – a very this job

Operator

comes Landry from with next ahead. go question Please BML Our Eric Capital.

Eric Landry

Hi, thanks.

to So clarify. want I just

it I of in think from correction of was Traditional quarters couple an a growth the of any a was there catch-up? ago that possible Is this inventory quarter segment. that sort impressive

Clint Pete

from Clint. our sales Eric, to No, you domestic. is Good One margin the as impact the as, as performance distributors international talk this the well and transactional on both our mentioned, clearly due Forever is the website to Suzanne higher to again. of of

we our percentage quarter. and that throughput supply really has to efficiencies this to – in our productivity So we us increased saw the our that margin driver improved basically helped chain supply related was of level the that gross have has that also that in drive chain

Eric Landry

trying couple them prior this. right. wanted ago, an shrunk been what the catch quarters XX% inventory, growth prior in and have I wholesalers of if mentioned two the perhaps this a XX% guess, and in overshot that a may growth result over-liquidation some of I was quarters. had – to had with was so up inventory what was to All perhaps and reason wondering sales of they to of I’m that But online asking is, the you that the the reduce

Suzanne Miglucci

that’s on our on ins we we our to you generally But consistency And seeing Traditional that holiday. their we’re necessarily and upswing, partners, Eric, business now believe, across but feeling us. will, point We at But outs won’t business think we’re the their U.S. we’re certainly – we U.S. a I we’re some expose distributorships. rightsized – distributors. in an an the saw of they upswing here seeing think, more all they’ve I – the business. I with the homeostasis, healthy the general, in distributors that certainly, But we’ve Traditional in And think if I a international balanced reached where a

Eric Landry

Okay. those your Would it that have be two segment, on assume to that reliance in accurate wholesalers? you lessened

Suzanne Miglucci

than And effort We too I say is, want single strategy, have this more two. think we’re what a not we is fair an make in in that many build to omni-channel sure basket. to putting to eggs

what that outlets company past we’re of just make have in number sure I are better that course, would have we’re feel and look to the Ks online. a as it are. have the to the on reliant customer one of you for with many percentages you there want we Qs, sure encourage any so And business balancing at of exposure any don’t distributors partner any is then, we We and gives expose bringing one place we one history. we and do on the not that make with And in what our significantly. percentage right we many, doing to

Eric Landry

Okay, great.

XX% segment the to and XX%. growth, the from type So down four such on other is the still we’re are of all obviously, regarding segment. sort impressive, right, just slowed has those a that it quarters forever. wondering, And question actually And now next I’m a here? that was has growth online size go the run less where in very of reached new rate while my cannot prior likely But rates

Suzanne Miglucci

posted XX% growth in guidance. just mentioned would charlesandcolvard.com giving we – that So short of we remember our I website. –

those So have same number the quarter. new past opened. just of There that in channels at and that I just also net rate them the new quarters. growing talked about all of online off, we a mentioned is that we over about that consistently rattled I eight four that just we are were the have

few and So beginning. that and just Catch and Australia. and includes Spain and are eBay in and a eBay Those Amazon Italy Australia in France –

of We out listings there. have a handful

anticipate But see a – We’re still potential. trickle – starting we we’re talking more even online about scratched out this in. the there that these are yet revenue have most far for tremendous to outlets surface we that all of haven’t is that And with. and little Amazon part, bit there are

no, see would I diminishing say think or met very there we’ll sector. flattened yet ahead a us that have returns I channels. where is not opportunity we So of a point returns in online still from huge

Eric Landry

right. for Well, all lot. me. Thanks a All that’s

Operator

Pieringer a question The is next Capital. follow-up Wells Instructions] [Operator Craig from with

Craig Pieringer

Yes.

So Suzanne, last diamond De was, plans, reaction the category. with expand year, when will Beers out came Fabulous their quick lab-created the

sort so afraid still and that not so We’re of the Is forth. on them, of feeling?

Suzanne Miglucci

still That is the feeling, Craig.

is eyeballs lab-created. the consumer lab-created, from Charles they about sustainably moissanites compare There’s they goods. source we We that sourced. for & is bringing a here are of them as are generally a product lab-created to tremendous that are What’s the guaranteed excited lab comes the what do the lab-creative in of and and others traffic versus the and amount and to have mined confusion in the where to come mix. space from some Colvard They still interesting

are a that mined more lab-created. that better For either market better than brilliance also someone what the or I are that price that find wants sourced, we guarantee the diamond so in sustainably are And product, you’ll moissanite. more fire, goods a we have remind they at is that getting would guaranteed

on last about part quarter and are eventually that’s holiday. But Google, says on traffic people a it’s us their little us good many site There’s means to certainly their surgent over coming own, year’s converting. of more that are chunk clicking Colvard statistics coming their through organically to that traffic organic. XX% the advertising themselves, plenty was people going they done traffic our of way advertisements Charles they’re than they a organic is, actually converting past talked us, the & the tremendous that the here And they’re and they’re this by here go moissanite, the increased by meaning of of about necessarily. one on. we It that that learning they’re our they And for this think and interesting had they’ve I and homework, we to find homework is remarkable finding what they’re doing bit that is website. which over us, their search of additional traffic. about not finding the And

last continued believe So growth of is that all there over our are indicators course, market strong a these XX% for year, very moissanite. we at all and strong indicators very

excited So we’re about it. very

Clint Pete

about of and wanted first Yes, an – we’re and to And the in we Typically, the jewel million, as of on the $X.X to that a Typically, address we XX% in earlier, want the margins quarter. as well versus in of online summarize summarize the sales saw you gross the XX% about line that the and loose our we I about typically Traditional ago from had as our Sales revenue. the range is margins typically, up typically XX% Online loose jewelry, range XX% jewel mentioned $X.X that’s year question quarter, jewel so see quarter, in up gross note between finished I’ll XX% an the – segment? jewelry address channels Channels, see please So about in approximately I channel to of the in breakdown finished which XX%. afternoon. that range. actually consumers, finished as wanted to revenue XX%. session came $X.X Can for that higher sales – are range and then jewelry year for gross margins margins saw and or right net have we the I million Traditional and I this we the loose traditionally, call, question, million. an XX% going increase see, that. during $X.X the XX% in increase that it’s to represents Traditional XX% gross The ago we that sales margin. of well. were million, emailed

Suzanne Miglucci

anything Craig. Great. queue. Thanks, Chad, further in

Operator

do. Company]. question is go Investment [Paulson Rodney we The Yes, next Please Baber from ahead.

Rodney Baber

are how Suzanne, you?

Suzanne Miglucci

for Thanks Rodney. Hey, call.

Rodney Baber

still place. proud accomplished, that’s really company, in you top the expenses that, $XX gross revenues been The of you’ve something trailing $XX-something million – definitely the held obvious I’m It’s company? that and be and out the with five is, the it of in me they’re that and to million really we question for that excitement years, do putting at a back we’ve all $XX can losing going line the encouraged we to and been last improvements you’ve all areas four stock margin in with in Yes. the of If extent, forth. some we’re revenues the below $XX of how Traditional like have during XX been the run of. creates of grow look quarter’s but a think, rate, I ask get million makes to also release, this I which going know the as you meaningful interest in million way so out What or but our wanted had I tight stockholder some to

a discuss? run be trying to can company get there do to with get any can getting we we this this $XX I’m company? much larger doing this you to read what strategies there acquisitions we’re how I’m out make? what on just to long of million a can just we run rate. forward Are other expand thing that look So wondering, Are

Suzanne Miglucci

Sure, Rodney.

So not drove of back quarter modeling that I that onetime modeling will let’s off your of us careful first sale all the in going a we’re $X.X in the years, little but... – four was million XXXX. in That bit, be

Rodney Baber

whatever million. $XX was to take $XX And brings on it want you that, out and you million. That down back No, no. it to

So close million, out. quarter to year $XX $XX $XX million million, $XX million and this with $XX this now you million, have

revenue this had we’ve year-over-year it the adjust biggest still, issue. you I mean, growth it’s for that So if is

Suzanne Miglucci

right. exactly building we’re and gotten And that’s of strategy that work Right, doing. we’ve here doing the direct-to-consumer way by omni-channel this

in So this strategy, becoming gemstone channels more strategy. omni-channel opportunity, company really there, jewelry our opportunity last And a part to online believe, the for of opening given key a and XXXX. go-forward so those strategy than Working is channels at of worked that of look get our new if very slide far and this ours, you revenue the one company for has we big sell, really alone more creating a us in that’s favor. that’s

that’s So important an part.

right we’re other now. generating is about The thing margins think the that to

go previous lower. you model margins years, If back and were far

now, that with a introduced Brilliant at by and we Forever Charles We’re Colvard, And higher Classic. Moissanite predecessors, just its One. margin and & comes generating higher Forever than now in margin

So profitability, margins these also get cost, the and consecutive control you. the line quarters we’re for ultimately, get become deliver to grow profitable higher opportunities for generating able sales. And that’s where top up as our I us to by way we’re margin two our of

Rodney Baber

that and is thing up appreciate in moissanite It it that chain, really about gotten it’s millennials you the product, have gain share, question your et feel you would the is? it’s hope – Well, seems and to the food bigger world expect like one where like but a they’ve how that, market else liking place the they part a relates with do which more acceptance moissanite’s kind of cetera, we answer, other have? to about I and everybody just of not not Did going than for. coming

a us give on acceptance of moissanite is future think been? where and versus potential So it’s union the state where you

Suzanne Miglucci

Sure.

I the that direction absolutely we’re in. we heading think be in So should

be. sure not where it I not I’m that that agree it’s So should

purchase They’re More that of love millennial survey. about that they talking to And fact learning our And is millennial this, sustainable. XX% about a audience more XX% the came is of member. what sourced. from just in now them all likely what that growing at Millennials of buy are all pointing brand brand. is say they likely that brand. I is lot of consumers & come our to is good we’ve about sustainably talking a are product they’re product, millennial not a recently research Charles a is We’re sustainable of our taken audience market a audience more XX% we’re our that significantly. right – and is it a the What than comes a if from out of to actually where Colvard

we We a have sustainable have sustainably gemstone. sourced metals,

to lot say in our sustainable way. the peers We’re the We for bringing industry. it market of can’t same in a a

also that lab-created another in be be might a earth thing brand. of brand. is one a might doing And one mining diamonds Oregon, sustainable While you’re going is of a out Botswana. sustainable the of you to be that millennial out feel growing can’t door you you another Colvard think and and consumer out Charles &

So working understanding And as with the is are X outlets, they such same these taking X we’re for touching and time, positioned consumer brand. Knot, doing The well homework and where the we’re their we’re marketing at who this in millennials. absolutely

and have and in So the Colvard sustainability. need I we Charles finish so & think more when choices, are and making their the question, marketing advertising that public those relations out to and Rodney, talking simply exposed more do to the answer we’re more more to market is be do millennials there

I So in thank you there for questions the dialing your else anyone for do is and appreciate in. it. Chad, queue? certainly

Operator

the At further this remarks. we so for you to have turn no time, closing any individuals it queue, back in I’ll

Suzanne Miglucci

All right. Thank you, sir.

to delivered and My interest in Charles holiday to we your Charles taking Thank Colvard. for today. & evening. of you, time our So & everyone all the once personal amazing and to good staff, participate customers our you, we an in investment appreciate and our who to incredible time, call again, thank a have Colvard thanks

Operator

access replay X-XXX-XXX-XXXX of Today’s you review approximately this dial call conference, company’s archived you. now. the on be at X or website thank from hour digital conference And beginning for will the XXX-XXX-XXXX, www.charlesandcolvard.com/investor-relations/events. To may

XXXXXXXX. You be number, The will concluded. when name record conference conference your now which will today’s a for and prompted be attending Thank company to is joining. you Please presentation. enter

You may now disconnect.

Charles & Colvard (CTHR) 8 Feb 192019 Q2 Earnings call transcript