Charles & Colvard Ltd (CTHR) 2024 Q1 法說會逐字稿

Good day and welcome to the Charles & Colvard first quarter FY '2024 earnings conference call and webcast. (Operator Instructions) This earnings call may contain forward-looking statements as defined in Section 27A of the Securities Act 1933 as amended, including statements regarding, among other things, the company's business strategy and growth.

Expressions that identify 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. Future developments and actual results could differ materially from those set forth in contemplated by or underlying forward-looking statements.

In light of these risks and uncertainties, there can be no further assurance that the forward-looking information will prove to be accurate. Accompanying today's call is the supporting PowerPoint slide deck, which is available on the Investor Relations section of the company's website at ir.charleandcolvard.com/events.

The company will be hosting a Q&A session at the conclusion of the prepared remarks, should you have any questions you'd like to submit, please e-mail cthr@lythampartners.com. Please note this event is being recorded.

I would now like to turn the conference over to Don O'Connell, President, and Chief Executive Officer. Please go ahead.

Good afternoon, everyone, and welcome to our first quarter fiscal 2024 financial results conference call. My comments will be briefer than usual as we spoke with investors just one month ago, and you'll recognize a lot of the same themes.

During the first quarter, we continued to experience headwinds from a challenging economy that has created weaken consumer spending as well as softening engagement activity. While there is definitely outside pressure on the industry as a whole. We continue to forge ahead with several new initiatives leading into the important holiday season through Valentine's Day.

While we work through these dynamics, it's important to note that we believe our strategies will soon begin to offset the downward pricing pressure as the company's Charles & Colvard direct initiatives take hold and as consumers continue to seek alternatives to mine diamonds such as lab grown diamonds, moissanite and lab-created color gemstones.

As we've discussed in prior quarters, the consumer is gravitating towards products that are sustainable and ethically sourced we believe we are well positioned to navigate this meaningful shift in the industry as our lab grown diamond revenue as a percentage of sales quarter over quarter continue to grow. While early indicators within our industry suggest that consumer spending will likely be down this holiday season compared to recent years with our enhanced sales initiatives, charlesandcolvarddirect.com our direct to consumer digital streaming, made shopping experience, our product assortment and our inventory levels.

We believe that we'll be able to provide an enticing value proposition for those retailers and consumers seeking quality made not mind gemstones and fine jewelry products. With that being said, closing out the quarter with over $12.7 million in cash and cash equivalents, $27 million in inventory and investments made to maintain our retail partners' service-level commitments for the quarter, reaching 94% in-stock.

We believe this position us well into the holiday quarter, as we stated last quarter and as we move into Q2, look to us to continue to stabilize our business while we make strategic investments in global brand awareness campaigns, innovative technology, including key personnel in our product assortment to meet consumer expectations and to stay ahead of the competition to deliver additional products and services designed to unlock new revenue streams.

More specifically, we continue to invest in our technology and our web properties, including charlesandcolvarddirect.com, which we believe enables us to engage thousands of independent jewels directly capturing an untapped wholesale market for our multiple grades of loose gemstones. While we continue to make capital investments to transform charlesandcolvard.com into what we believe will be the best-in-class web experience, we continue to expand our product offerings to include more fashion-forward styles and larger Caydia lab grown diamond total weights in response to consumer demand.

Additionally, we received positive responses to Caydia lab grown diamonds and precious creative color assortments, which can help us to broaden our consumer appeal.

Lastly, we continue to shift our moissanite assortments to leverage their value proposition against increased pricing pressure from lab grown diamonds on the traditional side of our business. We continue to work with our existing brick and mortar partners, modifying our Forever One moissanite assortments with fresh new designs and increased carat weights to highlight the value proposition and differentiate against competitive diamond alternatives.

In addition, we have introduced Caydia lab grown diamond finished jewelry assortments in key markets through these brick and mortar partners. We believe that significant growth opportunities remain within this channel in future quarters and industrial remain top of mind for the organization.

As I mentioned on our last call, we have been expanding our business directly interface with the consumer while controlling the customer experience. To achieve this, we have built an environment to meet today's consumers with shoppable interactive live streaming on connected TV, linear broadcasting, satellite and social media platforms like Facebook, YouTube, X formerly Twitter and LinkedIn with TikTok to come, allowing our consumers the ability to click and buy anywhere they see us.

This initiative not only enables us to reach a broader audience. It also allows us to generate vast amounts of content supporting our social media channels and marketing efforts we see potential for future revenue growth as we leverage these platforms to showcase our product and brands in new and exciting ways, while intended to provide an exceptional user experience, we are excited about the possibilities that lie ahead and the positive impact have this initiative on our marketing and growth trajectory.

As we look ahead, while we most certainly recognize the impact of the pricing pressures and the macro elements of the economy on our business, we remain focused on cash preservation, diligent sourcing and increased brand focus initiatives to help ensure we are all well positioned to capture greater market share.

I will now turn the presentation over to Clint Pete, our CFO, to provide detailed insight into Q1's financial performance. Clint, please proceed.

Thanks, Don. Today, I'll provide a summary of key financials for the first quarter ended September 30, 2023. Additional details can be found in our earnings press release that we issued this afternoon and our Form10-Q, which we expect to file tomorrow. Please note that all percentage comparisons are to the first quarter ended September 30, 2022, unless specified otherwise.

First, we will start on slide 8 with the comparative analysis of the first quarter of fiscal 2024 compared to same period one year ago. And total net sales for Q1 '2024 totaled $5 million versus $7.4 million, a decrease of 32% due primarily to a changing economic environment and our declining wholesale business.

Net sales for our online channels segment, which is primarily direct to consumer and includes charlesandcolvard.com, moissanite.com, charlesandcolvarddirect.com, marketplaces dropship retail and other pure-play outlets total $3.9 million for the quarter or a decrease of 19%, but now representing 79% of total net sales, up from 66%. One year ago.

Net sales for our traditional segment, which consists of wholesale and brick and mortar customers, total $1 million for the quarter or a decrease of 59%, representing now 21% of total net sales, down from 34% of sales in the year-ago quarter.

While finished jewelry net sales decreased 22% for the quarter, it represented 87% of total sales in the quarter, up from 75% of sales in the first quarter one year ago as we further position ourselves in a fine jewelry market as we mentioned in prior calls, due in part to our shift towards finished jewelry and direct to consumer strategies. Loose jewel net sales decreased 64% for the quarter, while continuing to experience weak demand with our domestic and international distributors.

Looking at sales by geography, nearly all sales in the first quarter were derived in the US or international net sales reported in the quarter were $180,000.

Moving to slide 9 to discuss gross margin, we reported a gross margin of 39% versus 45% gross margin in the year-ago quarter or a gross profit of $1.9 million versus $3.3 million in gross profit in the year-ago quarter.

For Q1 '2024 and total operating expenses increased 1% from the year ago quarter. Sales and marketing expenses decreased 12% to $2.7 million. General and administrative expenses were $1.9 million for the quarter compared to $1.4 million in the year-ago quarter or a 31% increase.

The increase in G&A for Q1 was due in large part to expenses occurred as a result of the cybersecurity matter in late Q4, totaling approximately $300,000 in the quarter. We reported a net loss for Q1 '2024 of $2.5 million or $0.8 loss per diluted share compared with a net loss of $890,000, or $0.3 loss per diluted share in the year-ago period.

The main drivers for our increased net loss were the decline in revenue and added expenses due to the cybersecurity event. Our weighted average shares outstanding on a diluted basis used in the calculation of loss per share for the quarter were approximately 30.4 million shares for the period ended September 30, 2023, the same as in the year ago quarter.

Now let's move on to a snapshot of our balance sheet. Our liquidity and capital position remained strong as we ended the quarter with $12.7 million of total cash compared to $15.6 million at the end of the fourth quarter ended June 30, 2023. Working capital remained strong at $15.1 million. In addition, the Company remained debt-free. Our cash flow used in operations was $2.7 million during the quarter compared to $3.7 million of cash flow used in operations during the same quarter a year ago.

In terms of other sources of liquidity, we have access to our $5 million cash secured credit facility with JPMorgan Chase Bank, which was renewed for another year in June 2023. As of September 30, 2023, we have not accessed funds through our credit facility agreement inventory as of September 30, 2023, total $27.3 million compared to June 30, 2023, when it totaled $26.8 million compared to $36.6 million at September 30, 2022, a year-over-year decrease of nearly $9.3 million due to the inventory write-down in Q4 FY '2023.

Loose jewels inventory was $8.6 million as of September 30, 2023 compared to $9.1 million as of June 30, 2023, and compared to $16.6 million as of September 30, 2022 our year-over-year decrease, again due to the inventory write-down referred to above.

Finished jewelry inventory was $18.4 million as of September 30, 2023, compared to $17.3 million as of June 30, 2023, and compared to $19.9 million as of September 30, 2022. The increase to June 30, is due to our preparation for the upcoming holiday season. That said, we remain focused on prudent inventory management strategies going forward. Book value per share at the end of the first quarter was $1.22 per share sequentially lowered to Q4 '2023.

In summary, we remain diligent in our cash management and support of our ongoing business and technological advances toward growth initiatives and further brand awareness. With that, I'll turn it back over to Dan.

Thanks Clint, in conclusion, while acknowledging the challenging economic environment and industry pressures, we remain steadfast in our commitment to adapt, evolve and to thrive. We firmly believe that the strategic initiatives, pricing strategies and product expansions reflect our proactive response to current market conditions.

We are confident that these measures will help to enhance and elevate our overall position in the marketplace. As always, I would like to express our gratitude for your continued support and look forward to updating you on a future call. At this time, I will turn the call back over to the operator, we'll open the lines for any questions.

Thank you. We will now begin the question and answer session.

(Operator Instructions) Our first question comes from Eric Landry, Private Investor. Please go ahead.

Hello.

Hey, Erica how you doing?

Okay. What is the state of the litigation regarding the supply agreement with Wolfspeed?

Yes, it's a great question. So we did publish in the K what the status was at this particular time right now. We did set a date for the arbitration date. It's almost a year from now. So that's pretty much all I can elaborate on that, but -- do we believe that it's pretty clear the arbitration will come up and will continue to process forward.

Okay. So from what I understand, you haven't taken delivery of anything for nine months and they want $3 million bucks. So to speak. -- Because that Is that basically what it comes down to

Yeah, I mean, basically that is correct. So we opted that. We don't wish to pursue more material at this time, right? And we didn't over the course of nine months. And they believe that there's $3 million that in material that we should have, and we know everything subject to interpretation. So that's something where we're at right now.

Okay. So that's not on the balance sheet, Correct Clint? That agreement is nowhere on the balance sheet, correct?

The agreement as far as the material?

The $18 million bucks that the K says is still outstanding on the supply agreement, there's no liability on the balance sheet. Correct?

No, again, that starts the whole purpose for arbitration, right? Everything is subjective to the agreement. So there is nothing on the balance sheet in relation to the $18 million outstanding, correct.

So Charles & Colvard, does not believe that's a liability.

Whether we believe or don't believe is open for arbitration and for the consideration that we're going to be discussing in the future months to come.

Okay. So is there -- is I mean, is there a scenario where you could pay him a couple of million bucks and be done with it?

Well, the scenario would be we need to do what's best for the business and right now and what's best for the business to take simply what the business needs and kind of negotiate a future state or terms or whatever the both parties agree to then we're open for discussion.

But at this point in time, we have ample inventory to support our business. We believe that we've got what we need for kind of the short and long term at this point, if there's other needs or considerations, then we'll kind of seek that out from them or from others.

But at this point in time, we feel that at the current price and where we're at in the market, it's not within the best interest of our shareholders or the company at this time to seek out and get market, whether they have goods available for us or don't have goods available, all that subject to interpretation and negotiation.

Obviously, yeah, it's obviously not going to take on anymore inventory. The question is, how much is it going to cost us get out of this thing? Is there going to be the full $18 million? Is going to be $3 million? They think you owe them right now. I don't know, it seems like a pretty difficult situation.

Well, what I've tried everything we have to understand that we've been in this situation where we've come to the table and negotiated over the past supply agreement. They've been a great partner for almost three decades. Maybe we have an impasse related to pricing. Maybe we have an impasse to other things, but certainly we do have a good relationship back and forth with them.

It's just we personally cannot take on goods right now and whether we believe that, the future of their product is for us or not or it's at a price that we could afford to take and be competitive in the market is all things that we need to consider for us.

We believe that we're in a position within the agreement where there's certain provisions within the agreement that we believe that we're in a good place and certainly they have their own position that they decide to take. So that's where we're at. So at this point, we don't have any other obligation to them, other than what's in writing and the interpretation of what the agreement is.

what --how quickly our lab grown diamond prices going down right now, if any?

I will show right now is over the last nine months, the movement and the downward pressure has been considerable. We are seeing some stabilization now and some stability in the pricing and really, it's the retailers that are actually holding the levels up and maintaining a pretty respectful and moderate retail. But it did absolutely put pressure on voice to make considerably and have been alluding to in the past quarter and our year end and also now in this quarter.

So what we're doing right now is we're looking for ways to come to market and be able to create a bigger delta between the two. We believe we have a solution for that but look to us in the coming quarters to kind of talk that through and speak to it, but we believe matters and stabilization coming on, but price of lab grown has come down unbelievably low.

Right. I'm trying to get a sense for, is it? Is it bottoming or is there still more significant declines to go?

It is dependent on where you -- where you see, where you go and who you speak to so from the grower's perspective, it probably is bottoming a little bit. And I think you still have distributors that are in the middle that are what we call bottom feeders that are going into the market with a lot of cash and they're buying up over some oversupply goods at an unbelievable price and they're willing to take very small margins on. So, for us, I mean, those are opportunistic buys for us. So we are acquiring those goods to put us in a better position to make higher margin. So we're also going into the market in the lab grown diamonds space and seeking those opportunities ourselves to as well so.

All right, Last question for me. How far is the Board willing to go with this thing or six quarters, we've lost money in our we've decline in revenue lost money for several quarters in a row here at this pace the cash is not going to last forever. At what point does the Board say, "Hey, we need to do some -- we need to think about strategic alternatives here? We need to do something the house is on fire."

Well, so that's a good question, right. So you would understand our one would believe that the Board and executive team is looking at all considerations every single day. So it's a question of the environment, the economic, impacts on the business. It's the lab grown diamond impacted it's the moissanite impact, but our ability to pivot the company and change or effectively changed the company's direction is really where we're going and strategically, we believe we're going in a really good place and we believe that we got great initiatives.

I will tell you that the old co or like the old methodology, the business with your leaning on more traditional partners and distributors is no longer a viable solution for the company or direction we want to go. And if you obviously, Eric, you've been with the company a long time. So you know that wholesale arm and that wholesale piece represented a really big piece of the company and the business overall, for years and years.

So we've had to reinvent ourselves and move forward and, I get it you know, I'm a pretty decent shareholder myself and my Board members certainly are have significant positions within the company, but we're all weighing every option of the business and we're moving in the direction that we believe that is a really good direction for the company and that's more direct to consumer.

And if you kind of listened to my remarks, a little bit earlier when we talked about Charles & Colvard direct, I mean, for a lot of years in many, many years, we relied on strategic partners and distributors to reach the independent jewelers for us.

Now, of course, they've got margin that they need to deal with and of course, they got costs associated with that and they have sales teams. But the reality of it is they're not doing us a service anymore. They're not providing enough sales and revenue for us because of the downward pressure of lab grown or they're seeking alternatives or whatever that is.

So that's why quarter over quarter over the last several quarters, we've been talking about repositioning and going direct ourselves. So we just launched our Charles & Colvard direct portal so that gives the opportunity to independent jewelers now at a greater margin for us as a company to reach out and let them buy direct from us.

That's a big step for this company, and it's something we haven't done in decades. So we believe there's growth there, and that's a great position for us. And we believe that's going to be a viable business moving forward. But I will tell you that all the talk and consideration and the strength of this company moving forward is going to be the direct to consumer initiatives also maintaining support for our brick and mortar partners, giving them what they need, giving them what they're asking for and supporting them.

We have very strong brick and mortar partners that are doing a really, really nice job. We've gotten in lab grown diamonds into Helzberg diamonds, which we're pretty excited about that. So there's just a shift going on right now, and we're going to have to painfully go through the shift, which is what we've been experiencing to get to the other side to some of these initiatives.

And we talked about made shopping so if you could have madeshopping.com, you can see a live stream show now some people say, okay, live streaming television shopping, that's old well, it still does hundreds and hundreds of millions of dollars and billions of dollars of business.

So we're looking to pick up some additional revenue with our streaming capability and kind of building out that base but it's really not shopping for TV. It's about streaming our digital content throughout everywhere that consumer is shopping.

So we believe that's going to be like a change in the entire kind of dynamic of the business moving forward, where we can have consumers that are on Facebook, Instagram, TikTok, Twitter, wherever they are click and buy at that moment, individual items at that particular second.

So shoppable commerce is here, it's growing, It's big, it's important and it's relevant. So the difference with us and anybody else has we have the entire infrastructure and love to welcome anybody or have an investor summit for -- to come by and see what we've built. It's pretty impressive and what that's going to enable us to do, Eric is it enables to reach consumers through some editorial pieces, educational pieces, shoppable commerce, small little segments in all different channels as well as broadcast satellite, like we said, so it isn't traditional shopping as people know it, maybe that's the way they're seeing it right now.

But the future is not that the future is and our ability to create and stream content in a meaningful way that's aligned with kind of the values and kind of what the consumer is looking for at that time. So we think we got a pretty good road map to that. We're doing some phasing, we're doing some testing and we're building out an individual web property to be able to support that business under made shopping.

So looked at that to come out here shortly. And that's everything that's manufactured and developed ethically. So that means made intentional, made for special moments, made for the earth, made for all these things. And it's not limited to the single vertical or the color of fine jewelry. We have the opportunity within these vertical streams to be able to sell multiple products. Should we choose to go in that direction.

So we're pretty excited about. So and I believe the Board is excited about it too as well. But to your point, we're always looking at options and considerations. And it's a challenge, and again, I'm long-winded here, but I know you're a valued shareholder and you've been around a long time, but I will tell you candidly that, other companies out there that are not public basically to drive their business, they're spending millions and millions of dollars to chase revenue.

So we believe that we need to find organic ways instead of traditional click -- performance, marketing tactics and kind of build awareness with that consumer and in more in a streaming way that doesn't cost so much to do every day. We can outspend certain big leaders in this space right now because they're literally just buying the business. We just don't have the capital to do that at this point.

Right, which is why I would hope that the Board is considering strategic alternatives. Last thing I'll say, and I'll get off and I'm glad that you're confident, but I haven't seen an insider buying over a year and the stock is now about a quarter to a third of where people were buying this thing.

Yeah. So let's talk about that. So we've had a lot of things going on in the last quarters that preclude us from buying just so you know, to be very candid with you, we don't have open to buys or we have quiet periods within the quarters or we had, a cyber security situation or whether we insiders know things that are going on in the business, whether the Wolfspeed matter.

There's several things that preclude us from leaning in. I will tell you that we believe that we're in incredible value right now. That's an understatement for my personal belief is, but I can't speak on behalf of all my other Directors and Board members, but I can tell you right now that it definitely has a value for us. And I believe that several Board members did purchased and, within a certain period of time, but if there's no purchases, it's just because we were closed out, so to speak.

Okay, whatever that means. Thanks. I'll move on.

Okay, great. Thanks there.

(Operator Instructions) Our next question comes from Jason Ursaner with Bumbershoo shareholding. Please go ahead.

Thanks for taking the questions. But on the cyber security issue the elevated spending. Is that done at this point in your mind? Or is there any likelihood that the ongoing spending, I guess we'll look at elevated levels related to that Yes, great questions.

Yeah, great questions. So we believe we're in a good place with that right now. We did, as we kind of stated, there was a $300,000 spend or expense related to that. And that was on several things that we kind of felt the impact on. We'll have some a few other expenses related to that we believe moving forward but we did a really, really good job and I'm proud of my team for its business continuity efforts to be able to do that and. We didn't pay out any ransom, and we are business as usual. Now that's not to say that we weren't impacted with a lot of folks doing a lot of things and working a lot of hours to kind of stabilize and keep things moving, but we think we have that behind us.

Also, one would also consider that there be some type of insurance associated with that so we believe that we'll be in a good place with that.

Okay. And just specifically in terms of the Made brand, I guess that you're creating in terms of the road map. I guess I don't know if you have said this. I didn't hear if you did. What are a couple of the next steps. And I think maybe to the last caller's point. At what point can you tell if some of them are working?

Have you had a how are you defining success for some of the new brand initiatives? Just because I guess I see that is now being platform gatekeeper for some of the other brands like Caydia and Forever One and all that work that. So maybe just I guess how those tied together in your mind or where they're headed?

Yeah. So for right now, let's talk about kind of the value and the benefit of Made and what doing to the organization, so with Made shopping it basically puts us in a place where we can have a separate destination for the consumers to shop that destination can do all things Made that's number one.

Number two is the streaming video and broadcast that we're doing is allowing for us to create, as I said in my prepared remarks, a lot, a lot of content that would be cost prohibitive if we were just to hire independent or outside people to do the (inaudible) segments here in their educational segments.

So it's enabled us to build hours upon hours of content. With that being said, while we're building that content, it's being subsidized by transactional shoppers that are shopping within those streams and on the network so right now, we're at the early innings of that. So the early innings are very positive. I mean, I can just tell you that the items that we're featuring, I mean today's consumer is a little different than prior years consumers. Where they're more sophisticated today, they're looking at a QR code and they're scanning the code and it goes right to Made shopping and then they click and buy and purchase.

They'll see a stream and they'll hit the QR code and go right to the product page. And I will be able to click and buy. So we envision a future where we have multiple properties, our main property, charlesandcolvard.com and Charles & Colvard proper is really kind of the fine jewelry aspect of the business, creating incredible products that live in Pillar one of Made shopping.

So Made shopping will feature Charles & Colvard and all of its product brands. That's not to say that any future made shopping will bring forward other product brands and other collections and other items that we can sell under the Made shopping label, all streaming within the same infrastructure, all utilizing the same infrastructure within the organization. So look to us to build that out in the coming quarters.

And so for right now, though, 100% of what you're selling through Made is your own product, up over the breadth of your different brands. I guess you could say.

So let�s talk that through a little bit. So the bottom line is we have multiple product categories. For example, we have moissanite buy Charles & Colvard. We don't sell that at charlesandcolvard.com. We sell those goods into our dropship partners.

So that would mean like the Macy's, the Helzberg, the Belt, the Hudson Bay, the APHIS Military, those particular customers take that product, and they sell and distribute. This Made shopping now gives us the ability to allow that consumer to transact on Made shopping for those particular goods that don't meet the criteria for charlesandcolvard.com, classification for quality standard, et cetera.

So Charles & Colvard only does Forever One, which is our Pinnacle premium branded products in Arcadia, lab grown, diamonds, et cetera, in the higher elevated classes Made shopping will enable us to bring forward different grades or classes of product that we can actually sell through that channel without kind of diminishing the value of the products and the brand of Charles & Colvard proper. That makes sense. And then you're right, we're only focusing on our inventory and our products. So basically right now Made shopping exclusively, it's featuring all Charles & Colvard product brands.

Okay. So right now you're.

Yeah, it's another vehicle, Jason, for us to move more goods and then look to us to create new product brands in the fine jewelry space that makes sense for a shopper that's looking for more promotional type products or lower cost items. Does that makes sense.

Okay, and in terms of the platform that you've built kind of going to all these other, the Facebooks, TikTok, Instagram, what are where in the past are you in terms of how many of those you're hitting now versus where you I guess what I wanted to get to.

Yeah. So right now, what you're seeing, we're already pushing out right now Made shopping right? madeshopping.com. We're streaming that to charlesandcolvard.com right now. So they're landing on Charles & Colvard. But effectively in the next week or so, you'll be able to go directly streaming to made shopping, which would be its own property with the streaming show and cross-training and being promoted by Charles & Colvard and touching their followers through as well.

Right now to answer your question, we are streaming right now. Facebook, TikTok is to come as we get a couple of more follow some requirements on that LinkedIn we're streaming, YouTube we're streaming across the board. So these are linked into as well. So we are streaming right now, but the way we're streaming is we're streaming live six hour blocks between 4:00 PM, Wednesday, Thursday, Friday to 10:00 PM. on those same days.

Look to us to kind of learn more and understand what that consumer wants and not just blanket out six hours of shopping like a regular shopping network, look to us to start to cut and slice those into shoppable segments, splice them into our segments 15 minute segments and all the way down to 3 minute segments, just on educational pieces for each individual items that they click an item on our website, we'll be able to have our hosts are storytellers kind of translate that item into meaningful content that they can actually understand and relate to and want to click and buy.

So what we're seeing today is just a Phase 1, where we're trying to understand it. We're trying to learn it. We're trying to build more video content. We are streaming now to all these places right now, and we're seeing the traffic, we're seeing the awareness now again, just because we're streaming today doesn't mean that consumer doesn't come back, two days and watch those segments.

So we're seeing residual effects and residual opportunities to capture retarget those customers when they come back after their streams. So look to us to continue to expand to learn and kind of fine-tune what that looks like for the future.

Okay, and the moissanite outlet brand. Are you -- is that part of the Made plot? Are you planning to push that through the Made platform as well or that's kind of a separate brand platform at this point.

So at this point, moissanite outlet runs pretty much on its own it. We have a normal disposition cadence of inventory and legacy inventory as it pushes down the funnel, it goes into moissanite outlet where it's at its end of life, so to speak, and it's working nicely. It's not breaking any records; it's the business is always up and it's growing. That's because people are looking for that low cost item.

They're looking for the bargain, they're looking for discounts and that's our answer to the competitive Chinese moissanite. It's not to say that Made shopping can't take the entire disposition good and have segments and featured segments on Made shopping. We just need to know do we work that persona for those personas shopping on Made shopping. So those are some things that we're answering. But for right now, it's independent on its own.

Okay, and just kind of following up on that this aspect of persona. So in terms of the brand persona of Charles & Colvard, I guess.com itself, Caydia, itself Forever One, so have any of those changed over the last year or so, either based on the market, just economically consumer weakening, anything like that or based on obviously feedback trends you've seen that have either not translated into thing or yeah, and it has the brand persona has changed at all with Charles & Colvard?

So I would tell you that the brand persona of Charles & Colvard is actually elevated. So it's starting to go up by design up market. We're bringing more higher end goods on the fact that lab grown diamond pricing has come down so much. It gives us the ability and my incredible product team and design team coming far with beautiful designs.

The Qatar stuff is not stopped, but the Qatar designs and product is performing quite well because it's affordable now like people can afford. These particular items are $30,000, $40,000. So now you can afford a four carat lab grown diamonds for you under $12,000. If you tried to buy four care natural mined Diamond, it's $40,000, $50,000, $60,000.

So it gives us the opportunity to go up market and elevate the brand and elevate Charles & Colvard from. That's not to say that we're still not targeting the millennials, but certainly the millennials are choosing and are opting for bigger stones and new choosing to get the value. But the quality of Charles & Colvard remains intact. And we had one point in time thought about doing more promotional cadence of a higher discount and things like that given the market.

But we found that it really started to suck out our average order value or AOV in a way that we did not like what was happening. So we shifted back to making sure that it remains the Charles & Colvard proper. We're bringing forward the highest quality that also brings price quality and value into consideration, but Made shopping is going to have a kind of a story in its own and it's going to have a persona in its own. It's going to look for like-minded people that are looking for all things may I mean, it's got a great you know, trajectory as far as where we can go with it. We believe.

Okay, great. I appreciate all the commentary and best of luck.

Yes, always appreciate your comments. Thank you, any questions?

You I'm sure this is Adam Lowenstein from Lytham Partner, have a few follow-up questions.

Hey, Don and Clint, given the race towards lab grown diamonds, where does this leave moissanite? What can be done to elevate moissanite in comparison?

Yeah, hey, Adam, how you doing on, look, first of all, we're going to continue to grow lab grown diamonds. We're going to continue to start to capitalize on that. We had some limitations because we have a lot of inventory that's invoiced tonight. So we had to focus on the moissanite and now is always top of mind that was where we needed to go.

So we tried to do our best not to cannibalize certain styles and carat weights within kind of moissanite business. But for now, we have to do what we need to kind of reach that consumer and answer what they're looking for.

So with that being said, several things are happening. We're expanding all of our assortments and lab grown diamond. We're bringing forward larger carat weights, which we were reluctant to do in the past. Then we took a pretty much a bottoms up, top down approach to analyzing all of our moissanite.

The moissanite material that we have in the building, the moissanite material that we have in jewelry and kind of saying, okay, where do we need to be to position us that creates that value proposition for that consumer and still maintaining the incredible, kind of value of moissanite in the marketplace and in the consumer journey to buy a piece of jewelry.

We believe we've got the answer to that, and we believe we're going to come forward with that here shortly. I'm not going to discuss those call, but we believe we've got something that brings a little bit more value to moissanite than anyone else in the industry. We know we bring the breadth, the best products to market in moissanite.

We also know that moissanite still represents the bulk of our business because all of our other channels focus on moissanite, elevate them moissanite and promote moissanite. So we're going to expand lab grown diamonds in those other channels, and we have already begun to do so.

So there's growth there, and we're looking forward to that growth. We were a little bit reluctant to do that before, but we are now moving in that direction. But with the moissanite look to us to come forward here shortly with some significant meaningful thing that is going to enable us to tell that consumer why Charles & Colvard is, in fact, the best place in the destination for all of their gemstones or responsible gemstones.

And it's really important because we believe that a lot of people are commercializing moissanite when they shouldn't a lot of people are saying that they have and the best in class are similar to Charles & Colvard when in fact they don't.

So with our whole video capability, everything moving forward, we're going to be able to tell the story in a real time way that's meaningful, that's important to that consumer that we can show, basically, I don't want to say that people are fraudulent or making false claims or anything like that. I mean, we're a publicly traded company. If we say we're bringing DEF color, it's DEF collar, other folks are printing and making claims. And we know, that's not the fact.

So we don't mind being on a playing field where we're all even we're all saying what we're saying and it's factual, but it's not fair to somebody making claims that are false claims and we need to kind of call them out. So look to us to do that and answer that look to us also to look at the pricing and maybe coming forward with some other categories that we haven't in the past where we went Forever One and all things Forever One. So look to us to come forward with other meaningful product brands that we believe in the moissanite category will kind of change some things up for us a little bit.

So wanted to ask about repeat customers on what are you seeing there with these types of customers? Are they coming back? And can you add any color there?

Yeah. So that's always really been a very, very important topic and all of our State of the Union, all of our meetings, the bridal business. I mean, we've talked about the bridal businesses have been a little bit soft. I mean, we're starting to see some light back coming into the bridal business in the bridal category, but we were impacted by it for folks looking for affordable moissanite and so forth. But and I just believe that we're in the right place.

One more housekeeping on your own stock is below I'm sorry. Okay. With the stock a little dollar.

Sorry. No I had a take a drink there, real quick there.

Now let me just going to answer the question. So we are running about 17% to 19% of repeat customers we're now at about 23%, which we're pretty excited about that we're doing more retargeting campaigns. We've initiated some new partnerships as of late between SMS retargeting more aggressive with subscribers so that we can kind of reach out to those consumers and tell them all these great things that we've got going and really, my production team and product team have really done a really good job of bringing more fashion-forward items, gifting items and things that we'll continue to do more to get more repeat customers.

I mean, long time value is really important in all of our conversations and kind of building that customer base. So that's really critical to kind of that. That's for success for us.

One more with the stock below $1, what's your status with NASDAQ? Can you get us updated on that? And if you have any plans to deal with the compliance?

Yeah. So look, our plan is to continue the path forward, continue to build this business, bring incredible results. So it organically goes up on its own. We certainly have to do we need to do. I believe the date is December 11, for us to be in compliance. And then after that, like we've done in the past, we would file for an extension, which would get us an additional six months.

So we're doing all the things we need to do necessary to kind of drive value. And we believe we're undervalued right now we shouldn't be trading at this price. But who am I to say that? I mean, we'll just continue the path forward. We know it's been a difficult time, Adam, we know that it's not exclusive to us, but everybody needs to understand the kind of what motivates them to buy and invest in a company. And we certainly believe we have, you know, all the ingredients to kind of the future of a successful company, and we're going to continue moving forward and we're going to strive to be in compliance here by December 11, and kind of speak to the investor community and tell them why we're making the right moves. And we're pivoting the company and we're changing, and we'll certainly maintain every effort to be in compliance along the way.

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

So thank you for your attention and continued belief in our company, and we look forward to sharing our progress and achievements with you in the future. Appreciate everyone's time tonight. Thank you.

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