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Edited Transcript of CTHR.OQ earnings conference call or presentation 4-Feb-21 9:30pm GMT

·29 min read

Q2 2021 Charles & Colvard Ltd Earnings Call MOORESVILLE Feb 5, 2021 (Thomson StreetEvents) -- Edited Transcript of Charles & Colvard Ltd earnings conference call or presentation Thursday, February 4, 2021 at 9:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Clint J. Pete Charles & Colvard, Ltd. - CFO & Treasurer * Don O'Connell Charles & Colvard, Ltd. - President, CEO & Director ================================================================================ Conference Call Participants ================================================================================ * Eric Landry BML Capital Management, LLC - Senior Analyst * Jason M. Ursaner Bumbershoot Holdings Corp. - Research Analyst * Matthew Butler Koranda ROTH Capital Partners, LLC, Research Division - MD & Senior Research Analyst * Paul Zimnisky;PZDA;Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good day, and welcome to the Charles & Colvard Second Quarter Fiscal Year 2021 Earnings Conference Call and Webcast. (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. Future developments and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. In light of these risks and uncertainties, there can be no assurance that the forward-looking information will prove to be accurate. Accompanying today's call is a supporting PowerPoint slide deck, which is available in the investor relations section of the company's website at ir.charlesandcolvard.com/events. The company will be hosting a Q&A session at the conclusion of prepared remarks. Should you have questions you'd like to submit, please e-mail ir@charlesandcolvard.com. Please note that 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. -------------------------------------------------------------------------------- Don O'Connell, Charles & Colvard, Ltd. - President, CEO & Director [2] -------------------------------------------------------------------------------- Welcome, everyone. Good afternoon. Today, we're going to report Charles and Colvard's fiscal 2021 second quarter results. I'm pleased to share with you that we had a record-breaking quarter, delivering the highest revenue and income from operations in company history. We were able to generate $12.1 million in revenue and achieved a net income of $2.5 million, with strong gross margins of 49% and a positive cash flow of $3 million for the quarter. This was a 14% increase in revenue versus the year ago quarter, with an EPS of $0.09 per diluted share, which represents a 200% increase over last year. For the 6 months ended December 31, 2020, we recognized a 232% increase in net income and a 300% increase in earnings per diluted share compared to the year ago period. Additionally, we bolstered our total cash to $16.9 million, which is a 26% increase from the year ago quarter. Our team executed with purpose and precision during the critical holiday quarter, making it possible for us to achieve such positive results. Now I'll turn the call over to Clint Pete, our CFO, to unwrap the numbers in more detail. -------------------------------------------------------------------------------- Clint J. Pete, Charles & Colvard, Ltd. - CFO & Treasurer [3] -------------------------------------------------------------------------------- Thanks, Don. Today, I'll provide a key -- a summary of our key financials for Q2 2021. Additional detail can be found in our earnings press release that we issued this afternoon and our Form 10-Q, which we expect to file this evening. Please note that all percentage comparisons are to the year ago quarter, unless specified. We will start with the revenue. In total, net sales for Q2 2021 totaled $12.1 million versus $10.7 million or an increase of 14%. In our online channels segment, which includes charlesandcolvard.com, marketplaces, drop ship retail, and other pure-play outlets, net sales for the quarter totaled $7.6 million or an increase of 25%, representing 62% of total net sales. Net sales from our transactional website, charlesandcolvard.com, increased 16%. In the company's traditional segment, which consists of wholesale and brick-and-mortar customers, net sales for the quarter were $4.6 million or flat to the year ago quarter, representing 38% of total sales. Finished jewelry net sales increased 28% for the quarter. This was primarily due to the strong demand for our premium jewelry on our online direct-to-consumer channels and with our brick-and-mortar retail customers. Loose jewel net sales decreased 8% for the quarter as there continue to be a lower demand from our international distributors during the entire quarter related to COVID-19. Overall, international net sales decreased 25% due to limited orders from aging distributors, combined with lower cross-border trade sales on our transactional website. Moving on, we continue to maintain a strong gross margin of 49% compared to 48% in the year ago quarter. For Q2 2021, total operating expenses decreased 21%, representing 28% of total notes net sales compared to 41% in the year ago quarter. Sales and marketing expenses decreased 22% to $2.5 million, and G&A expenses decreased 19% to $978,000 for the quarter. Next, we reported net income for Q2 2021 of $2.5 million or $0.09 per diluted share compared to with net income of approximately $814,000 or $0.03 per diluted share in the year ago period. 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 $16.9 million of total cash compared to $14.6 million at our last fiscal year ended June 30, 2020. Our cash flow from operations was $3 million for the quarter compared to $985,000 in the year ago quarter. In terms of other sources of liquidity, we continue to have access to a $5 million asset-based credit facility with White Oak Commercial Finance. As of December 31, 2020, we have not accessed funds to this credit facility. Inventory as of December 31, 2020 totaled $28.7 million compared with $30.6 million as of June 30, 2020. Loose jewels inventory was $17.6 million compared to $20.8 million as of June 30, 2020. Finished jewelry inventory was $11 million compared to $9.7 million as of June 30, 2020, to support the upcoming Valentine's Day selling season and maintain stock levels for our direct-to-consumer channels. In summary, we had a record setting Q2 for both a net sales and operating income perspective, even in the pandemic impacted environment. We will build on this progress in the remainder of fiscal 2021 as we position Charles & Colvard for long-term growth, generating value for all of our stakeholders. With that, I'll turn the call back over to Don. -------------------------------------------------------------------------------- Don O'Connell, Charles & Colvard, Ltd. - President, CEO & Director [4] -------------------------------------------------------------------------------- Thanks, Clint. These positive financial results are reflective of the transformational changes made across the business to become more data driven, enhance operational efficiencies, attract new customers, and improve the customer experience. This renewed approach, along with our diversified product lines, positioned us to capitalize on the holiday season. We believe business intelligence was a key factor in our success since we invested a significant amount of time and energy into building out analytics tools. These tools allowed us to pull data in real-time to better understand our business and make informed decisions. Clint addressed our current inventory levels, and I'd like to take the opportunity to elaborate on these numbers. We were able to make meaningful progress on the balance and concentration of our inventory, supportive of our current business needs. Our inventory totaled $28.7 million at the end of the quarter, which represents a 6% decrease from June 30, 2020. I'd like to help break this down and add some clarity. You can visualize our inventory in 2 major buckets: 48% of our inventory falls into bucket #1, which consists of our raw material, loose gems, and jewelry components that are in process or what we call internal or external WIP or our work in progress. These goods are in the process of being cut, faceted, graded, engraved, or manufactured. Naturally, a large portion of the percentage or this percentage appears in our long-term inventory classification because of longer cycle times. The remaining 52% of our inventory is in the second bucket, which consists of in-stock finished goods that are ready to pick, pack, and ship. And a small portion of this bucket is in consignment inventory located in our retail partners' brick-and-mortar stores. Operationally, we were well positioned to meet the holiday demand. We were able to effectively overcome supply chain challenges and logistical constraints due to the global pandemic. We shipped a record number of packages for the company, resulting in a 9% increase versus the year ago quarter, all the while decreasing our operating expenses by 21%. The merchandising and product development were additional key factors in our success during the quarter. We were able to bring to market an elegant and aesthetically pleasing product mix that resonated well with our growing audience. I'm pleased to say that our traditional channel segment performed better than expected, with brick-and-mortar sales offsetting our continued challenges faced by international distributors due to COVID-19. Our Forever One moissanite and our moissanite by Charles & Colvard product brands remained in high demand with our retail and distribution partners. Our overall revenue growth was fueled by our online segment, which experienced a 25% increase year-over-year, with charlesandcolvard.com representing nearly 60% of online sales this quarter. Our third-party online sellers also recognize growing demand for our Forever One moissanite and our Charles & Colvard products, with several customers experiencing double growth with our products year-over-year. Contributing to our online growth was our first quarter offering Caydia lab grown diamonds in our product brand, which is currently only sold and marketed on our direct-to-consumer website. Here's what we learned from this product launch. Brand equity matters. Consumers trust the Charles & Colvard name and adopted our Caydia lab grown diamond product brand with confidence recognizing us as a premium destination for lab created diamond fine jewelry. Product selection is also critical. The careful considerations made to launch classic vital styles and fashion pieces featuring our patented signature collection was meaningful and appealed to our greater audience. We learned that we needed to expand our product assortment to meet the growing demand for Caydia lab grown diamonds. So, we continue to capture and can capture greater market share and tap into that multibillion-dollar opportunity. Our Caydia lab grown diamond brand attracted a new broader customer base, allowing us to educate consumers on the broader lab grown movement. This movement also elevated Forever One moissanite awareness and sales in a meaningful and measurable way. Our newly integrated sales and marketing teams work together to develop and execute successful holiday campaign that resonated with our target audience and helped to ensure an optimal customer experience throughout the buying journey. Our redefine real campaign brought awareness to our Forever One moissanite and Caydia lab grown diamonds by emphasizing that we now offer our customers a choice in premium lab grown gems. This ongoing campaign challenges the idea that the origin of a gem is what defines its authenticity. Additionally, we are keenly focused on our digital marketing spend, carefully targeting specific audiences that drove greater conversions. Going forward, we will continue to build upon this momentum we gained in Q2. We believe in the future of our omnichannel strategy with an emphasis on new digital commerce opportunities and capabilities. We will remain focused on engaging customers in new cutting-edge ways. We will continue to expand and educate the Charles & Colvard product brands. We will seek to expand product distribution across all new channels, and we will strive to increase our brand equity and shareholder value by prioritizing disciplined growth. With that, I'd like to turn it back over to the operator, and let's open the lines for your questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) The first question comes from Matt Koranda with ROTH Capital. -------------------------------------------------------------------------------- Matthew Butler Koranda, ROTH Capital Partners, LLC, Research Division - MD & Senior Research Analyst [2] -------------------------------------------------------------------------------- Just wanted to start off with Caydia and the performance since the launch. So, what metrics can you guys provide on a revenue contribution during the quarter? Can you help us in terms of AOVs at Caydia and how they might compare to kind of the core Charles & Colvard moissanite AOVs that you guys have disclosed before? -------------------------------------------------------------------------------- Don O'Connell, Charles & Colvard, Ltd. - President, CEO & Director [3] -------------------------------------------------------------------------------- Sure. So, Matt, we don't disclose product brands or performance in individual product brands. But what I can tell you is that it was absolutely additive to the business. It was accretive to the business. It also helped to kind of bring awareness and put us into conversation. And by being in that conversation, those customers also were exposed to our moissanite Forever One, right? So, with that being said, we started to see a lift in that, too, as well. But we can just say right now at this time that it was meaningful within the quarter, and we're very pleased with those results. As it relates to the AOV, we did learn some things with the Caydia lab grown diamonds throughout the quarter. As we started to kind of introduce more and more to our social campaigns and everything, we had a very large consumer base gravitating to our fashion, our -- let's just say, our smaller accented stones. And what that did for us was it leveled out our AOV and it actually maintained consistent AOV where our moissanite AOV is, which is anywhere from $1,000 to $1,200, so -- in our diamond Caydia. It's not to say that we didn't experience some nice movement in our bridal -- on the bridal categories with the larger centers, but we're pleased that it's made the business more well-rounded for us. -------------------------------------------------------------------------------- Matthew Butler Koranda, ROTH Capital Partners, LLC, Research Division - MD & Senior Research Analyst [4] -------------------------------------------------------------------------------- Okay. Great to hear. And then in terms of the channels for Caydia, I know you guys mentioned, obviously, it's proprietary to your own website, the DTC website. But how should we think about the plans for that over the next 12 months, if you will, just in terms of, I would assume you guys may get some requests from some of your traditional channels for the product? What are you -- what's your thought process on how you roll that out to additional channels? Or do you keep it sort of proprietary to the Charles & Colvard own website? -------------------------------------------------------------------------------- Don O'Connell, Charles & Colvard, Ltd. - President, CEO & Director [5] -------------------------------------------------------------------------------- Yes, great question. So, we're always open to listening to what the consumer and what the retail is pretty much dictating what they want and what their requests are. So, we have gotten a lot of responses from our channel partners that they want to go ahead and explore Caydia lab grown diamonds. For the most part, right now, what we want to do is we want to learn more. We want to better understand that consumer and better understand what that consumer wants. And basically, right now, it's proprietary to our charlesandcolvard.com channel, and we'll probably keep that a little bit for right now, but we're constantly kind of open to exploring what's next and how we can kind of grow and tap into that multibillion-dollar opportunity across the board between our retail partners or our drop ship partners, or it really depends. But the Caydia is generally a premium right now. We came to market with a premium lab grown diamonds. So, that would have certain limitations of where we would go with the channel as far as the Caydia lab grown diamonds. But as we learn more, it's not to say that we won't explore other product brands within the space that may not be Caydia, but maybe something else in that nature. -------------------------------------------------------------------------------- Matthew Butler Koranda, ROTH Capital Partners, LLC, Research Division - MD & Senior Research Analyst [6] -------------------------------------------------------------------------------- Great. Great. And then just if I could sneak one more in, on the online channel, the reacceleration in growth is really encouraging there. So, I just wanted to see if you guys could speak for a moment on what you're seeing in terms of performance marketing, return on that spend. I mean, it looks like sales and marketing, the line item overall decreased year-over-year. So, that would imply you guys are getting a lot of efficiency, but I guess there probably are some moving pieces within that sales and marketing line on kind of bottom of funnel performance marketing spend. So, if you could talk about the puts and takes there and just what that's done to your customer acquisition costs, that would be very helpful. -------------------------------------------------------------------------------- Don O'Connell, Charles & Colvard, Ltd. - President, CEO & Director [7] -------------------------------------------------------------------------------- Sure. So, we have a different approach, a different -- as we spoke about, and we alluded to in Q2, kind of we were learning during Q1 -- I mean in Q1 -- sorry, in Q1. We were learning what that consumer wanted. We were learning where that consumer was shopping. We were learning basically what was the click-through that was driving that consumer to convert on our website. So, also, what we did there was we basically also just changed our paid social campaigns to reflect those conversion-based customers or consumers. So, by doing that, we were able to also flex our spend, which allowed us to open up kind of the market a little bit more and be there when that consumer was there resonating with our products and then clicking through to our products, and then we were able to capture more market share. We'll continue to look at that. We'll continue to learn from that. But really, it's more of a focused approach to mid- to lower funnel. It's conversion based. It's really -- we did a bottoms-up analysis on all keywords, phrases. We had some efficiencies. Also, one thing that's really, really critical is that we built out some incredible BI tools with our team, and we put together some tremendous analytics that helped us make real-time decisions that really dictate a lot of what we did to drive the growth. So, that's something that we needed to do a better job before. It's something that we're doing a great job with now, and we'll continue to look at and do better in the future. But certainly, data-driven decisions that are very specific to key questions that drive the traffic is really critical to the -- really the next chapter in Charles & Colvard and where we're going and where we're growing, besides the product brands that we offer. -------------------------------------------------------------------------------- Operator [8] -------------------------------------------------------------------------------- The next question comes from Jason Ursaner with Bumbershoot Holdings. -------------------------------------------------------------------------------- Jason M. Ursaner, Bumbershoot Holdings Corp. - Research Analyst [9] -------------------------------------------------------------------------------- Congratulations. And I really appreciate all the details and specifics you walk through. It's actually -- I found it very helpful in terms of understanding where you want to be headed. In terms of the growth in the quarter, could you maybe talk just at a high level qualitatively coming -- the COVID impact, whether that's kind of a benefit or negative? Obviously, this focus on the bottom funnel spend. Tayshia Adams, the TikTok movement -- what kind of drove some of the growth rate in the quarter? And how do you think about that growth rate as you kind of go from holiday season to holiday season with Valentine's Day in terms of seasonality? -------------------------------------------------------------------------------- Don O'Connell, Charles & Colvard, Ltd. - President, CEO & Director [10] -------------------------------------------------------------------------------- Yes. So, I mean, I probably won't elaborate on any individual influencer or influencer campaign that's outside our own doing that drives the traffic. But certainly, more awareness, more brand awareness, more of what we're doing socially is driving more awareness to the overall brand. And basically, being in that conversation to where that consumer is purchasing our moissanite, loving our moissanite and the Forever One, understanding its quality, making that choice to go with that. And then literally posting it organically throughout the web. As it relates to TikTok or reels or Instagram or Facebook outside of what we publish, we're probably not going to comment on that. And any new movement related to those mediums are fairly new and weren't reflective in the quarter. So, all of the benefits of what we've done here internally driving the business is all what drove the growth of the business mostly online. Most of the business was online. There's probably some credence to more people being at home, more people seeing the brand for the first time, understanding what we offer, and purchasing. But we're also pleased on the traditional side of it, too, as well between our traditional brick-and-mortar retail, which we are very pleased to be flat, which we had anticipated that we'd have some retraction from that aspect of the business due to COVID. But overall, we -- I would say that the international piece is probably the biggest pain for us right now on the business side, and we're pleased that the traditional brick-and-mortar and our online was able to fill those gaps. But we've seen a constant growth with the organic movement in our online traffic over the entire quarter, even coming off of Q1 straightforward. -------------------------------------------------------------------------------- Jason M. Ursaner, Bumbershoot Holdings Corp. - Research Analyst [11] -------------------------------------------------------------------------------- Okay. And I guess just following up on that. I'm not -- I guess I'm not trying to ask about any specific campaigns, if you can't give details, but are they -- do they tend to be formal ongoing arrangements? Or are they more one-off? I mean, look, I'm not trying to admit that I watch The Bachelorette on a public earnings call, but I was surprised when it came up. Something like that, it was an amazing product placement, I thought, and really resonated with the brand. Are these things that are like formalized collaborations? Or do they tend to kind of just emerge and then kind of be a one-off type of thing? -------------------------------------------------------------------------------- Don O'Connell, Charles & Colvard, Ltd. - President, CEO & Director [12] -------------------------------------------------------------------------------- So, specifically related to The Bachelorette, that was an internal campaign within our marketing teams to push out goods. And that was totally an alignment between Charles & Colvard and who we would align ourselves with. So, to answer your point blank with that specifically, that was a specific marketing project with our teams together working together in coordination. -------------------------------------------------------------------------------- Jason M. Ursaner, Bumbershoot Holdings Corp. - Research Analyst [13] -------------------------------------------------------------------------------- Okay. And then, I loved hearing you say brand equity matters. When you think about kind of growth in the moissanite sector area and then kind of becoming the brand within that, is there a way to accelerate some of the spending to kind of capture that first-mover advantage and all the things you've done in the brand in terms of maybe willing to forego a little bit of profit in the short term? I mean, you have 25% of your market cap still in cash and you're cash generative. So, is there any risk to going forward a little bit in terms of spending more to try to capture some of that growth and transcend into really de-brand in the space? -------------------------------------------------------------------------------- Don O'Connell, Charles & Colvard, Ltd. - President, CEO & Director [14] -------------------------------------------------------------------------------- Yes. So, all great questions. So, let's talk about the growth in this sector, and let's talk about the sector in general. As it relates to moissanite, we pretty much -- I'm from the opinion that we own the market, and we have the greatest market share. We're also the innovators and the creators of moissanite. I will also say that what a lot of people don't know is that all moissanite -- well, I shouldn't say all moissanite, but a lot of the moissanites through our distribution partners are also in white label or they could be Forever One. But basically, those service all of our independent retailers. There's 40,000 independent retailers out there that buy that product through distributors that you may not even know that it's Charles & Colvard product. So, that helps lift our traditional segment or really the foundation that the business was built on as far as our building the foundation and all the loose gems being out there, building more awareness to moissanite. So, when that awareness continues and keeps driving where it is, it's going to lift us up, too, as well. So, we're really pleased with the growth that's happening right now, being in the conversation of the lab grown space as it relates to moissanite and even now the elevation of moissanite and what it has to offer. But make no mistake, our moissanite is not limited to just Charles & Colvard and what you hear. It's moissanite in general overall. As far as foregoing profit for more awareness, certainly, right now, we're early into this. We're about 2 quarters into this. If you look at the kind of the revised transition between Q1 and Q2, this is indicative of the leadership here. It's indicative of how we want to run and operate the business. We look at top and bottom line. So, we're constantly looking how can we drive top-line growth, but we also want to be mindful of the fact that we have a very profitable business right now, and we're making responsible decisions with the money. That's not to say that we won't look for something in the future that could catapult us to the next level and get over this idea that we're just limited to where we are here and grow the business exponentially further. So, certainly, we'll be open, and we are listening, and we are looking at other opportunities, whether -- I mean, I guess your inference is whether it could be through a celebrity endorsement or something like that or even pushing more money into the marketing kind of awareness campaign and giving us more exposure. Without a doubt, we're looking at those options and opportunities right now. But I will tell you that we wanted to get the house in order, and I believe that we've proven that the house is absolutely in order, and it's performing quite well right now. -------------------------------------------------------------------------------- Jason M. Ursaner, Bumbershoot Holdings Corp. - Research Analyst [15] -------------------------------------------------------------------------------- Okay. Fantastic. And I apologize, just one more. I just want to clarify. In terms of -- I think you had said Charles & Colvard bringing people to Caydia. Or is it the other way around? I guess my interpretation was that Caydia is kind of helping with this education process of -- I think you kind of called it like a gem is a gem movement and then maybe that leading people even more towards the moissanite. -------------------------------------------------------------------------------- Don O'Connell, Charles & Colvard, Ltd. - President, CEO & Director [16] -------------------------------------------------------------------------------- So, you are correct. But let me just -- so Charles & Colvard is the house brand. Under that brand consists of our product brands, which is Forever One, and it's currently Caydia lab grown diamonds. So, those are our 2 product brands and also moissanite by Charles & Colvard as well. So, basically, we're pushing Charles & Colvard as the brand of choice for all your lab grown gemstones. And we want Charles & Colvard to be the pinnacle. We want Charles & Colvard to represent that kind of taste of quality, price, and value. And then from there, we want to build as much awareness as we can. But to be quite frank, a lot of people just were predisposed to the diamond market or predisposed to diamonds, and they basically just didn't want to hear about moissanite, and even when we tried to push, in some cases, to educate that consumer. So, with our product Caydia, lab grown diamonds, we're now in that conversation. We're getting press from Forbes Magazine to brides.com to Refinery 29 to the not -- some great publications where we're able to actually speak about Charles and Colvard the brand, and then educate more on those product brands, which is now resonating more, which we believe that is going to lift us entirely moving forward within the quarters. So, I guess it's a combination of both. It's just the overall conversation of lab grown diamonds that people are listening to, hey, who are the players in that space? And now Charles and Colvard, which is associated with all the quality of our jewelry and craftsmanship and recyclable metals and stuff like that comes into play. And now the difference is they have the choice. -------------------------------------------------------------------------------- Jason M. Ursaner, Bumbershoot Holdings Corp. - Research Analyst [17] -------------------------------------------------------------------------------- Understood. I appreciate that. And again, congratulations on the results. -------------------------------------------------------------------------------- Don O'Connell, Charles & Colvard, Ltd. - President, CEO & Director [18] -------------------------------------------------------------------------------- No, we really appreciate it. -------------------------------------------------------------------------------- Operator [19] -------------------------------------------------------------------------------- (Operator Instructions) Our next question comes from Paul Zimnisky with PZDA. -------------------------------------------------------------------------------- Paul Zimnisky;PZDA;Analyst, [20] -------------------------------------------------------------------------------- Congrats on the strong performance. I guess I have more of a general question. How are you finding the end consumer responding to the option of moissanite versus lab diamond when it comes to engagement ring, in particular? For the consumers that are choosing a diamond, are you getting any feedback as to why they're choosing the diamond over the moissanite or vice versa? -------------------------------------------------------------------------------- Don O'Connell, Charles & Colvard, Ltd. - President, CEO & Director [21] -------------------------------------------------------------------------------- Actually, that's a great question. It's kind of early on for us a little bit to kind of give you a definitive answer on that. I can tell you my team did a fantastic job in kind of laying out both channels on our direct-to-consumer website. So really, we're just having that consumer -- that consumer is actually making that choice when they're clicking. So, if I could just put that aside for right now, and maybe we'll answer that a little bit in future. You and I can get on a call. I think it's a great question. I need to better understand what the consumer is doing related to that and then look at some type of heat map and going through that. But I can tell you vocally, that consumer is not saying anything. The consumer's either choosing either the lab grown diamond and Caydia or they're choosing the Forever One moissanite. I do think that we are getting a tremendous amount of calls within our customer service group that's actually probably walking through and educating that consumer, telling them what the choice is, whether they're choosing moissanite because it's the value proposition or whether it's diamond because they're predisposed to a diamond. I don't have enough information on that, and I'd like to get back to you on that. -------------------------------------------------------------------------------- Operator [22] -------------------------------------------------------------------------------- This concludes our question-and-answer session. Oh, actually -- pardon me. The next question comes from Eric Landry with BML Capital. -------------------------------------------------------------------------------- Eric Landry, BML Capital Management, LLC - Senior Analyst [23] -------------------------------------------------------------------------------- Have you had any feedback about what's going on with your PPP loan? -------------------------------------------------------------------------------- Don O'Connell, Charles & Colvard, Ltd. - President, CEO & Director [24] -------------------------------------------------------------------------------- Yes. So, I'll let Clint go ahead and answer that. He'll walk you through that. -------------------------------------------------------------------------------- Clint J. Pete, Charles & Colvard, Ltd. - CFO & Treasurer [25] -------------------------------------------------------------------------------- Sure. Listen, we have not filed our forgiveness application to date. Our lender has basically told us that we should expect to file our forgiveness application no sooner than April 1st of this year, 2021. So, we hope to file it sometime in our fiscal year -- or fiscal quarter Q4 2021. -------------------------------------------------------------------------------- Eric Landry, BML Capital Management, LLC - Senior Analyst [26] -------------------------------------------------------------------------------- Okay. Can I sneak one more in here? And you probably can't answer this, but I'll give it a shot anyway. Could either one of you mention which of the 2 product categories grew faster in the quarter, whether it was a lab grown or the moissanite? -------------------------------------------------------------------------------- Don O'Connell, Charles & Colvard, Ltd. - President, CEO & Director [27] -------------------------------------------------------------------------------- That's a great question. I can't really answer it, but we had very nice steady growth on both fronts. I mean, that's as specific as I can get. And we're very pleased with our Forever One moissanite in the growth trajectory of our moissanite. And we're also very pleased with our Caydia lab grown diamond growth. So, we basically don't disclose that and can't at this time. -------------------------------------------------------------------------------- Eric Landry, BML Capital Management, LLC - Senior Analyst [28] -------------------------------------------------------------------------------- Okay. How about this? Did you sense that there was any type of cannibalization in the quarter? -------------------------------------------------------------------------------- Don O'Connell, Charles & Colvard, Ltd. - President, CEO & Director [29] -------------------------------------------------------------------------------- No. It actually was the reverse. It actually elevated our Forever One moissanite, our moissanite sales across the board. Also, we really, really -- our merchandising and product development team did a great job of making sure that there's a clear delineation between the 2 products. For example, 2 carats and below is really catered to the diamond business or the lab grown diamond price points, whereas the moissanite benefits are 2 carat and above. Also, in the moissanites, we only offer -- I mean, we offer many, many shapes and sizes that would be cost prohibitive in the diamond world and lab grown diamond space. So, it's really a clear delineation from the 2. We did a really good job in coming to market. We are not experiencing cannibalization by any means. So, both are growing very nicely. The business is growing very nicely as it is reflected in our earnings. -------------------------------------------------------------------------------- Operator [30] -------------------------------------------------------------------------------- This concludes our question-and-answer session. I would now like to turn the conference back over to Don O'Connell, president and chief executive officer, for any closing remarks. -------------------------------------------------------------------------------- Don O'Connell, Charles & Colvard, Ltd. - President, CEO & Director [31] -------------------------------------------------------------------------------- So all I can say is I'm very proud of our team and what we've accomplished through the quarter. And we appreciate all your time and continued interest in Charles & Colvard. We look forward to delivering more results like this in the future quarters to come. All be safe and be well. -------------------------------------------------------------------------------- Operator [32] -------------------------------------------------------------------------------- The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.