CTHR - Earnings call transcript Q4 2020

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Operator

Good day, and welcome to the Charles & Colvard Q4 Fiscal Year 2020 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [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. or based a our uncertainties number which be are are expectations some statements beyond cannot to are subject of predicted forward-looking largely company's on and of our These control. and quantified risks and materially actual contemplated forth underlying forward-looking differ or those statements. set Future developments could from and the results in, by In assurance accurate. information forward-looking to be that these will and there uncertainties, risks of the light can no be prove of company's purchase earnings proxy, call to constitute not or securities designation consent, a This solicitation agent an offer authorization any a nor to meeting shareholders. does with respect of the Accompanying today's section is of supporting slide Relations available website company's deck, at ir.charlesandcolvard.com/events. call which is a the Investor in the PowerPoint remarks. will be a company at hosting prepared the session The the Q&A conclusion of questions ir@charlesandcolvard.com. you’d please submit, have to email like you Should this recorded. Please is being note, event would to like President Chief Executive to the over and conference now I Officer. Don O'Connell, turn go Please ahead.

Don O'Connell

these families going Good and well QX as afternoon, us Colvard’s & results. hope I fiscal navigate everyone. times. for XXXX Thanks year-end your doing are report today. Charles trying Today, you joining you to we're

with to to that, prior from recently pandemic. concept transform teams things led product and of half as fulfillment. while COVID-XX and In of I like as and order processes that efficiencies all Vice important you, creation, Officer Supply company. and I'd Senior was of to six role, the implemented moment most quarters & Charles CEO and President innovation the this a services for every past Before for design, I four drove It's Chain. introduce the summarize profitability to new operations that aspect to responsible overseeing spearheaded to been I for and business of President I've Colvard years, take the myself note and Chief Operating goods

chain global As and large-scale the Vice a the mean? I've companies, Procurement, and President Committee that on Group, network. Richline means of industry, spent shopping this foreign as led team. and does the over I company leveraging level. jewelry a in operated this Richline's owned experience, and this I'm the jewelry lead years managed Operations subsidiary multiple next businesses jewelry expertise television both in CEO, supply Berkshire plus I gained XX years and and I've have domestic confident the ability serving of capacities. seven the served Executive What Steering It and Hathaway, with acquisition wholly-owned to to experience I'm

business Now let me to speak highlights. the

revenue the channel shift doubt, the let in all, on hindered pandemic COVID-XX offerings us in though operations we quarter, and e-commerce had our $X.X QX This shutdowns. our limited year. business and even impact traditional growing we June, million by revenue impacted we Even how in-stock the capitalize quarter. on of performance generate had to our partners. demand me though, was expanding able throughout May, Without April First our by address the in the product online a the severely end impacted fourth were with global finished by the helped the segment of

on of positive year, requirements fiscal our These the and to of had cash last on quickly actions We acted flow order had core order obligations. our We Board my our as at we generate continuing the in capitalize near-term heading to our to to effects from began was margins our expenses, We decrease to After immediately healthy business define over focused challenges taking COVID-XX, future expand. of we We a better June and $X.X address contract to to the this into million right-size for Although order to on CEO across from contracts, to enabled remain to strengths. goal business in this? from business quarter, a do personnel position in believe from helped How This cash the new immediate to operations position weather us strengthen of do year. was XX%. us primary to sustain Xst, quarter million our scale the $XX.X business liquidity strong our with stabilize what the giving to for and us fortifying to state. balance. be $XX.X end up sufficient accordingly. this million the we year, cash, to us increasing at foundation March

more employees, go-forward resource in the along reduction for for business. and As previously and of senior who we included employees been some defined was level with suited size furloughed. had the plan downsizing, a This force executed that our executive

Next, on secured cash COVID-XX to and and had position related impact the salaries absorb help closed to our loan we a expenses. PPP $XXX,XXX on

we supply agreement. Giving Additionally, us existing Cree load into agreement. us at restructure then to This level our to supply we were partners our option our decisions making next to able our to five generate And better strengths, obligation material two-year with worked core our allows focus our channels. balance to flexibility revenue period the on the our our of raw on direct-to-consumer years. data-driven the demand against throughout

out call over to company's the Then coming to anticipated turn strategic plans and that to dollars consultation did. We trends Clint? to our manage funnel CFO, across its Clint media of our immediate in our on these strategy platforms. social to We what our saw quarterly up decreases active market initiatives more campaigns are become Pete, despite growing I'll define to a this of for after from the and with June, share. an Here's the overview in year connect to we ramped in social the engage by financials. we lay our believe we At confident focus our reporting. to are We the I'd multiple time, efforts our shifted more services like our We and positive away our capturing targeting and this return areas success drove virtual is allowing additional customers consumers more personal brand convert. likely advertising the top who channels to recovery. crucial through QX the shifted further us with to way. for I'm the consumer recognizing

Clint Pete

Good afternoon, Today, and of quarter us. everyone a key year will fourth XXth, I thank financials you summary ended provide XXXX. for fiscal for June joining our and

earnings release expect can in be this be them Form that will we all. detail afternoon found file press our to which issued Additional and our XX-K,

unless Now let's all the note year-ago the Please to specified. fourth that get comparisons to otherwise numbers. percentage are quarter,

Carolina by closure We the corporate was early headquarters environment, with including due North the primarily at home revenue, April, of will impacted order. start mandated COVID-XX to stay the our in which

in retail combined supply May. a who which decreased May charlesandcolvard.com, chain. and the the In website, a transactional online consists sales total customers, continue able International to total from million and during entire partners company's quarter and million sales. sales for in to to decline declines XX% are cross-border sales domestic quarter. we XX%, charlesandcolvard.com, totaled had XX% we or $X.X which operations or March as pure-play a online with decrease the closures global a online decrease or sales and jewelry with the $X decreased net retail, in – mentioned, on to sales orders to in for agent decrease had net Finished direct-to-consumer closed we XX% distributors our representing net segment. limited quarter, in from XX%. $X.X mainly And disruptions XXXX, and to some We Don our net in from XX%, international the our to then brick-and-mortar of the ship revenues includes of the sales of channel XX% have sales as retail put business marketplaces segment, for feel As Net demand well e-commerce drop decreased other net locations QX the quarter the wholesale website sales quarter June. closures in we totaled a to our our traditional effect. In In from segment, outlets, decreased increasing XX%, as and related sales. Loose began COVID-XX limited of due whose saw net continue then transactional of for distributors due impact. reopen as net due million, our distributors, June, our the decrease openings XX%, channel of in representing XX% limited total, jewel in in were for April sales, primarily our see

on, Moving and driven ship gross margin solid performance, channels. marketplace by primarily we our in delivered improved drop pricing

to quarter. Our in gross XXXX margin was XX% for year QX the compared XX% ago

we swift to actions took as the dramatically, of for reduce earlier, COVID-XX the Don pandemic. impact adjusted As mentioned we

severance related primarily That operating work and in costs expenses approximately forward. G&A for compensation reduction transition severance the marketing top from approximately XXXX, Sales in total decreased approximately will actions These force expense by and the cost expenses of result significant expenses decreased this increased primarily to digital For expenses XX%. $XXX,XXX, the CEO in $XXX,XXX, and by spending. reduction marketing the increased quarter lower a impact non-recurring ad but XX%. approximately base stock-based active going reduction increased our in $XXX,XXX, the related our funnel of QX to staff.

travel in entertainment allowance. including and reductions board other retainer debt fees, bad have bonuses, and expense We categories,

significantly net versus $X period. of diluted Next, the by impacted $X.XX we QX severance compared XXXX reported previously loss per non-recurring approximately for net XXXX million or diluted loss negative $XXX,XXX or share of compensation approximately income and was with a QX for expense. year-ago net $X.XX share mentioned The per stock-based the

in full like fiscal to noteworthy fiscal that year X% reported year XXXX, decrease were year XXXX. highlight million we net today. There of $XX.X the two from For I'd trends full for a the sales,

net segment, our increased business. or to total e-commerce sales from total fiscal million shift net of X% in of year XX% the in our up sales, positive First, in driven sales fiscal online XXXX net $XX.X XX% highlighting channel XXXX, for

total to continued sales Second, year from the up net XX% sales or $XX.X finished sales, net end fiscal increased XXXX, XX% growth our million in highlighting of X% jewelry for in net XXXX sales. of direct-to-consumer fiscal

balance Now, move on to of let's snapshot our a sheet.

at year of remain year XX, XXXX. $XX ended to liquidity $XX.X ended Our cash June we last with strong fiscal as total continues with compared million the million our

PPP. outlays in the from the managing operations Our proceeds continuing environment. was result quarter. million of is cash the Program cash That's performance aggressively or trends positive before from retail and the the current a favorable This and $X.X for received match to economic Payroll costs the Protection flow we

As Don total Act in on proceeds loan the under we $XXX,XXX. mid-June discussed, of SBA PPP due closed to CARES with an

and total cash, proceeds, these restricted increase With equivalents, was cash our cash quarter the for in million. $X.X

terms other million a Commercial credit have of sources Finance. White $X currently Oak facility asset-based of liquidity, we In with

Finished Loose credit compared to million funds $XX.X at jewels XXXX and As inventory XXXX, facility. June at to XXst, totaled at that, $XX.X jewelry Inventory back inventory profitability. at June the summary, we million not was XXXX. our $XX.X $XX.X $XX.X million XXXX. XXth, our XXth, June positioned strength of navigate I'll financial XXXX $X.X million feel to growth are to accessed compared With was call for XXXX. to have June million million XXth, June environment at million $X.X that XXth, and the XXth, so current this March ability confident Don. to we turn over compared in and we In

Don O'Connell

of Thanks state initiatives business future Clint. I'd our like strategic of outline fiscal to and for some speak the XXXX. to the

this? our globally expand media will and that on allow do plan websites. expanding beautiful jewelry focus us our by become our quality platforms We the plan on We website, vision and to real-time. with do designs digital brand through on live and building through plan to do and a to How fine direct-to-consumer to in shareholder additional acquisition to increase more is customers appeal We multiple showcase masses. on growth value. streaming events. waves visible we our in be to properties our digital live this presence. to and by product This Our increasing products our strategic social or We execute recognized

our For to our developing example, more of products. strategy we're as value-oriented disposition moissaniteoutlet.com part sell

greater growth on where We engage to our develop revenue a within securing focus loyal our our sense. scale continue Next, promote change on intend jewelry the program incentivize that we we will values new holiday expanding focus driver. to be forward that their will positioned broader additional to to and to continue our eye the & on opportunities. back firsthand. intend to Colvard on share products long-term keeping believe top for virtual believe, we to we to opportunities capture plan in plan disciplined product innovative We're showcasing sustainable brands to going our the our our proven additional line our makes achieve One our believe opportunities partners, this and With our on We and to planning lastly, to a by encompasses. friends With better I'd and consultation We what Thus, strategic on strategic plan open Charles such a the acquisition that growth. we're assortment, to giving growth. collection. to our align space. consumer to we're allow and We quality, capitalize to define to the lines Colvard value-add job market said, want thus, create plan regain for to the services patented ambassadors core that with turn intend that offerings. be bring Charles that, for help value to Forever as concentrate of profitability to more consumers digital opportunity keen develop the to product questions. we over and diversify brand products on We we're us and to industry, market will will to family. also current capitalize it base, your customers expand and We our diverse opportunities educating to like while viable season. on on We doing experience And cease a retail customer With our engagement. such increase serve our omnichannel a a operator And while our shareholders. within reach a has signature elevate & customers fine comes now that going to in intend our we it able when premium partnerships well by

Operator

We go Gustavo session. Please, question from Gala first Partners. will now with begin the [Operator ROTH question-and-answer Capital is Instructions] ahead. The

Gustavo Gala

Hey. solid on quarter. guys. Good a Congrats afternoon,

her AOB how overall, stuff? So just for of just had we earlier just demand thinking trending how of see trends in how are see the are are new wanted this same-store prices? to you differently solid environment. terms guys quarter? is check number signat mean, is to those bracketing shopping wanted in How and in sales she into today, going And I

Don O'Connell

Yes.

ahead and go I'll So that. address

what try to I forward, where strong. the conscious mix steady we're that. bringing the So keeping And product basically we're bridal generally as business, we're a item. the making AOBs is. decisions that's are it's as in so really holding mean, And do primarily it to on that higher products well, primarily ticket to keep

currently. range, very, So we're $X,XXX very hovering pleased with the to some AOB where $X,XXX us between has been very for we're It's quite time. which at consistent the for

Gustavo Gala

mean, you sitting help here? kind Imagine acquire -- funnel. are could following, can are of you line the CACs CACs Yes. the No, like, -- ROI, the the customer the where us to cost bracket shift now, is questioning. I help sounds bottom healthy. of super that along mean, same well, the How to around I And, of I guess, higher because so, us

Don O'Connell

of -- you that quarter, is top that per we our $XXX, call during which in was that average Sure. in decreased in mentioned away per was ad the for it XXX,XXX in as in to of XXX filed, saw -- point at our we that Last the was campaign. reported around -- we shift we’re approximately that actually QX, that this we paid the the now spend had that spend attracting holidays. customer, S-X that a amount funnel advertising ad what we in of our customer currently mentioned average QX time saw from we Well, Because lot strategy, previously that earnings sorry. -- defined

Clint Pete

I if awareness. more top building I'll just add was The may. shifts on funnel of that, Yeah, to

conversion really significantly So in we're lower really Now right? place. concentrates number which reducing and better that focuses in that on to mid funnel, that And puts delta, much, much a model. is us that

Gustavo Gala

the CPM competition Great. CPM I top sounds guess strengthen moving? and I more mean, all keywords like that are along the How there. And, great. for funnel like just

Clint Pete

that traffic started have to the we're key reality push terms forward, ways period social those QX. that some we I shifting Certainly and drive with and do a it's QX to off same QX is during for seeing a great types it down of we'll come different elevated seeing in of experience the now. moving to say through. It Yeah, is right so to up holiday the channels We're together now terms. better going level media of, but into associated alternative question. we after cost job are that alternative kind with that my teams a putting little through there of season some trickle would anticipation a to and bit were a, holiday plan

Don O'Connell

if last can my would squeeze And question Great. it I be, in.

math In terms right, quarter, for roughly XXX,XXX. the it's XXX,XXX, the like if my of I think, G&A is

we XXX,XXX Is should we XXXX? that the should be or how going to into forward, Moving about think modeling, be that you bracketing do like XXX,XXX level?

Clint Pete

give tell with in the numbers, QX, at Well, in holding the market to that, were can of you, on add with and don't for pleased gold rise certainly also margin I guidance pricing. comfortable we're those we're pleased on spot the we gold but it -- also the We’ll steady. the end we a margin

with pressure, where with period of thought we to that, can. of were some continue strategic mitigate do to a of were margin that much look experience lot on shift and that going during help some So to June that vendors we associated as as some we reduce we able to to but our negotiate we're to forward able we'll month that costs

Gustavo Gala

Thank Great. Thank you. you much. very

Clint Pete

you're transition order identifying assuming mentioned the when to confirm, the not incurring. to I'm you're cost XXX,XXX, Just you in

marketing was G&A, was a point, well. of in there in sales was but there some a and lot as Just that

Gustavo Gala

Okay.

lot. you. Thank Thanks Okay. a

Clint Pete

right. All

Operator

[ph] [ph]. Burke ahead. is Bukay The from Bukay next Capital with Please question Management go

Unidentified Analyst

afternoon. Good position. congrats new Don, on Hello. the

Don O'Connell

Thanks, Burke. Appreciate it.

Unidentified Analyst

world One Yeah, in questions here U.S. as opening up couple is, economies, of especially just start QX and the economy a here. started bit. a

feel Just on trying a light your that? get for some trends could better in shed and to you August, July

Don O'Connell

August. I July to of and Certainly, June news really our you we the respond period, mean, lifts. the Yes. end to kind hearing you're those in quarter Again, e-commerce I true space. the can of what the I -- related to can't seeing toward I was now, tell started right

And that really, June the of mitigate business it that. in of of lift kind was with with market. to able So consistent we were a the effects in lot

Unidentified Analyst

basis Okay. G&A, question to cash Could a follow-up the comp severance-related the Then in run help just go-forward model of would a QX, on stock-based that cash those at been you good a me trying background least of of a absent some the previous on I'm rate CEO. G&A? get give of of the and absent me expenses what or number have kind

Clint Pete

that we Well, that's definitely officially it that naturally, force we of as spread we the cash at we OpEx don't that related had. from a was recorded a the agreement in from have and EBITDA, over reduction look can the impact in disclosed to the the part standpoint the starting P&L K with point get for – it actually is publish total number. was cash probably impact from But being you and standpoint to the – But but everything in is QX. terms that the

Unidentified Analyst

on I'm there and a it not, to don't – that. this cash would least free feel of to in you to quarter, you but first year? to mean, give at you of -- on be onetime impressive that reason generate get -- able free again, this for allow flow the I And if for trying Is flow was I items generate absent able -- not in or guidance could you any the half be Thank Okay. just PPP. know any a to

Don O'Connell

Yes.

of back I and side where of can the you compare kind losses just we're So kind out all the look – mean, I severance from and at. look the just million where the of at equation in revenue our at if there, net $X.X basically

business. the for the that's mean, Now, right-sized business. I new we norm the

that. all So, kind can that's related kind basically of of to I discuss

Unidentified Analyst

just And please. -- you Okay. ahead, go sorry, given

Don O'Connell

could number. pretty models you produce much And that from Yes. your

Unidentified Analyst

to on Understood. question And cash? CapEx I'm my that Is credit requirements new access hand cash? or the know, just the plan final you that cash for what to we like I low other line went not again, guys How at of something given your type smaller for that company. through, don't you experience is, But keep is and acquisitions and to of ever or we should consider kind plans? if or of any look

Don O'Connell

Yes.

and with cash that year finished the the So quarter. we we out position the real are pleased out

we're lot that maintain nice -- of with is have. it's kind keep there Now, strategic you some and decisions that grew different look to opportunities. now that. maintain this I acquisition certainly, of we to real there, of is stabilized, basically that and priority opportunities. over deploy right our Hathaway if we kind of And and But going of these mean, able Berkshire it was be business from will pursue types prior certainly initiatives get kind a through wonderful. Richline made Group, cash, and But strategic pedigree look to great of with and we first organic to to being my at cash growth

always to behalf it our that. looking of shareholders. any see on So, I potentially clearer make explore opportunities those I us would than can't And

Unidentified Analyst

and Appreciate luck best right. of Okay. All you. to your Thanks. time

Don O'Connell

Thanks, Sure. Mark.

Operator

Davis next from private Please is a [ph], The question investor. John go ahead.

Unidentified Analyst

has they're could a I at because all contribution please a as even forward going it's out margin? prices. shouldn't to Number buying roll a is break think I've understand trying third-party on sells into last on wholesaler got getting margin quarter, do e-commerce you because why third-party day, the misleading, one those or assuming stack margin separate the little questions. of you the unless Hi. data, full end other So, e-commerce. your the you're on I'm plus meaning I'm what wholesale their because site, retail that that numbers up at wholesale your it, markup, you meaningful two for their all

that premium understanding that that look price. you how share like? given done. it's does two all CEO it's the been make get that they what is, just acquisitions understanding there, believe my going the Number offer an for going you're XX% comments to So, especially out how back are to turned a that's to the made or number And just

the my shared actually was a that actually conglomerate can very Thank cross-marketing offer their brands leverage brands. and understanding up for a acquisition So DTC that's much. services model massive rolling across and you

Don O'Connell

Yeah.

comment to So, is first and better as so to report our my the of of want forth, all, kind we're always understand see want first as investors going to they reevaluate our shareholders far and and or what business. with

put at our we're it is, products we Certainly, and I ahead position always we at this is, has And under believing explore there's to cash it we'll our and together, So, little we'll continue of consideration, current moving are where where are our services look that's forward. a But a business and really is, what and advisement if Charles it to has to viable make sense, we'll I what call. believing always go a so. those of kind the we something further. given internal bit to And be opportunities. viable But offer. that, take continue in that and Again, appreciate place believe & do in the environment the reality folks the things and that look good Colvard, consideration.

Unidentified Analyst

in that months? increase stock XX get next you're to the in going a XX% the think you Do price

Don O'Connell

on like – speculator, let to speak speculate. business they as I don't were like not they and and kind the kind themselves are. the and a fundamentals I do of the for of fundamentals of as to the I'm Well, business drive

Operator

James. question ahead. from next Raymond Adam with [Operator Instructions] The go Proger is Please

Adam Proger

curious Congratulations. going? in how But on break light pandemic Can don't on I those the to generally sales you a Don. I slowing about I'm things And recall down. contributor specifically, that some think you that, don't past. at that's was in you first big shed have the least that Asia. hit, know Hey, I out

Don O'Connell

great – Yeah, great question.

the certainly, has side the so global the equation because So the business within suffered of kind international and of of shutdowns forth QX. of

life. we're pockets international forward, of to Moving see starting coming some to

the out the the direction that's by business. and eye can't consideration, shifts of overseas Our goods that about which in that really is channels and business side. business, so of made kind kind side kind on There the difficulty look some between effects keen between is of cross-border only life of moving forth. to one to or We'll the in mitigate certainly e-commerce other trade gaps e-commerce weaknesses those taking of want those business. of that still portion of and side other may increasing a but our the coming a have is into occur. But kind side, of of in the we to and to those fill comment already we I And we've the go pursue certainly, and

Adam Proger

conversations question. or contracts quick some or cash, any thoughts all endorsement With more about celebrity Okay. that deals. type One

Don O'Connell

could that say again? repeat sorry, I'm you you Can that?

Adam Proger

contracts Yes, deals? cash about there celebrity hand, on with the any is or strategy conversation endorsement all or

Don O'Connell

Yes.

look that's at So, that. an interesting certainly We approach.

at We are continuing to that. look

fiscal as we moving the start marketplace. presence kind social forward into promote channels, to of strategy explore a have that's strategy of within earned of type & Charles We'll that the things shared look marketing enhancing the define anything year. kind to those our marketing Colvard media going consider to and further We in we'll both certainly

Adam Proger

Okay. Thank you.

Operator

question-and-answer to concludes I for back the any to over turn conference closing remarks. session. This our would Don O'Connell like

Don O'Connell

appreciate Colvard to Charles like thank I'd your & in and good We everyone the continued thank interest and today. you and us support joining for evening. So,

Operator

has now conference concluded. The Thank you for presentation. today's attending

You may now disconnect.

Charles & Colvard (CTHR) 3 Sep 202020 Q4 Earnings call transcript