MOORESVILLE Nov 8, 2019 (Thomson StreetEvents) -- Edited Transcript of Charles & Colvard Ltd earnings conference call or presentation Thursday, November 7, 2019 at 9:30:00pm GMT

* Clint J. Pete

Charles & Colvard, Ltd. - CFO & Treasurer

* Suzanne T. Miglucci

Charles & Colvard, Ltd. - CEO, President & Director

Good day, and welcome to the Charles & Colvard Q1 FY2020 Earnings Call. (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 as 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 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. This earnings call does not constitute an offer to purchase any securities nor solicitation of a proxy, consent, authorization or agent designation with respect to a meeting of the company's shareholders. 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 the prepared remarks. Should you have questions you would like to submit please email at ir.charlesandcolvard.com. Please note this event is being recorded.

I would now like to turn the conference over to Suzanne Miglucci, President and Chief Executive Officer. Please go ahead.

Suzanne T. Miglucci, Charles & Colvard, Ltd. - CEO, President & Director [2]

Good afternoon, and thank you for joining us as we summarize Charles & Colvard's results for the first quarter of fiscal year 2020 ended September 30, 2019. In the first quarter, we delivered our fifth consecutive quarter of profitability. Revenue growth of 15% and a very favorable blended gross margin of 49%. This positive momentum was achieved during a quarter of investment as we began applying some of the proceeds raised earlier this summer in order to expand our brand presence and grow the top line. Clint Pete, our CFO will begin today's call with an overview of our financials. Then I'll return to discuss highlights from the quarter and share key initiatives we're undertaking to position us for growth.

Clint J. Pete, Charles & Colvard, Ltd. - CFO & Treasurer [3]

Today I'll highlight the key financial results for Q1, 2020. Additional details can be found in our Form 10-Q for the quarter ended September 30, 2019, which we expect to file tomorrow. Beginning on Slide 5, we reported net income for Q1, 2020 of approximately $207,000 or $0.01 per diluted share compared with net income of approximately $110,000 or $0.01 per diluted share in the year-ago quarter. This represents our fifth consecutive quarter of profitability. Slide 6 summarizes net sales for Q1, 2020 which increased 15% to $7.6 million compared to the year-ago quarter. And our online channels segment, which consists of e-commerce outlets including charlesandcolvard.com, third-party online marketplaces, dropship retail and other pure play exclusively e-commerce outlets. Net sales for the quarter increased 20% versus the year-ago quarter, representing 49% of total net sales.

Our transactional website charlesandcolvard.com increased 31% net sales versus the year-ago quarter. Sales through our cross-border trade platform were strong with a 113% increase versus a year-ago quarter. In the company's traditional segment, which consists of wholesale and retail customers, net sales for the quarter increased 11% to $3.9 million versus the year-ago quarter, representing 51% of total net sales. The upside from this segment is primarily due to increased performance and our brick-and-mortar channels. Finished jewelry net sales increased 51% for the quarter, an indicator that our direct to consumer initiatives are producing results. Finished jewelry sales are up across multiple channels, including charlesandcolvard.com website through third-party online marketplaces and job ship retailers with our brick -- and with our brick-and-mortar partners.

Loose jewel net sales decreased 7% for the quarter, mainly due to a slight decline in demand for loose jewels across our domestic and international distributors and certain pure-play customers. On Slide 7, our gross margin performance in the quarter was strong. The Q1, 2020 gross margin was 49% compared to 45% in the year-ago quarter. This improved margin was driven by continued healthy online channels sales including strong sales of our Forever One product on our transactional website charlesandcolvard.com. For everyone, net sales of finished jewelry and loose jewels represented 84% of total net sales for Q1, 2020.

On Slide 8, we show operating expenses as a percentage of net sales at the top of each bar. The dollar level of our operating expenses for each quarter is presented inside this bar. For Q1, 2020, operating expense as a percentage of net sales was 47% compared to 44% in the year-ago quarter. Overall, operating expenses increased 25% versus the year-ago quarter, mainly due to the increased marketing investments that we began, increasing our digital marketing spend and brand awareness initiatives and preparation for the holidays. G&A expenses increased approximately $125,000 and sales and marketing expenses increased approximately $588,000.

Slide 9 presents a snapshot of our balance sheet. At September 30, 2019, we had $12.6 million of cash, cash equivalents and restricted cash, compared to $13 million at June 30, 2019. Since we plan to apply the proceeds from our recent equity raise over several years, we have invested the unused funds in short-term investment-grade interest-bearing securities. This investment drove $61,000 of interest income in the quarter. We continue to have no long-term debt and have not accessed funds through our credit facility. During Q1, 2020, we adopted the new lease accounting standard issued by the Financial Accounting Standards Board or FASB. This new lease standard -- this new lease accounting standard requires all leases, including operating leases to appear on the balance sheet as a right of use asset and at least liability, along with qualitative and quantitative disclosures as of September 30, 2019. The impact resulted in the recognition of a right of use assets of $900,000 at lease liabilities of approximately $1.2 million, the adoption did not have a material impact on our statement of operations or cash flows. Additional details can be found in our forthcoming 10-Q.

Moving on to Slide 10. Inventory at September 30, 2019 totaled $36 million compared to $33.7 million at June 30, 2019. Loose jewels inventory was $24.4 million compared to $24.3 million at June 30, 2019. Finished jewelry inventory increased to $11.4 million compared to $9.3 million at June 30, 2019. This increase reflects our continued investment and consignment inventory to support the growing success on our brick-and-mortar channel. In support of the upcoming holiday season, we have also planned higher in-stock inventory for channels that require immediate shipping including our transactional website charlesandcolvard.com and for marketplaces and dropship retail channels. At September 30, 2019, 81% of our inventory is classified as new inventory, leaving only 19% of our inventory classified as legacy inventory.

On a final note, we would like to mention that our 2019 Year in Review letter to shareholders is available in the Investor Relations section of our website under summary information. In the letter, we provide a summary on the state of the market, our fiscal year 2019 accomplishments and our roadmap for 2020. In conclusion, we delivered a solid quarter fueled by 15% revenue growth, a 49% gross margin and positive net income. We believe, we are well-positioned as the key holiday selling season gets underway.

I would like now to call -- to turn the call back over to Suzanne.

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Suzanne T. Miglucci, Charles & Colvard, Ltd. - CEO, President & Director [4]

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I'll start with a summary of notable highlights for the quarter on Slide 12. Our Q1 blended gross margin of 49% was attributable to continued positive performance across our online channels segment. Online channels grew 20% over the prior year with dropship retail and marketplaces performing extremely well. As we have substantially rolled out our moissanite by Charles & Colvard brand. You may recall that in our dropship retail and marketplaces channels, we're replacing our legacy goods; Forever Classic and Forever Brilliant with new jewelry items set with the moissanite by Charles & Colvard gemstone, which is a higher net margin product. These online channels are now refreshed with new inventory, are poised for the holiday and are showing a healthy upturn in performance. Moissanite by Charles & Colvard represented 9% of total Q1 revenue compared to 3% in the prior-year quarter.

Our transactional website charlesandcolvard.com, where we sell our premium product; Forever One gemstone and jewelry saw a 31% increase in revenue over the year-ago quarter. This site continues to deliver more than 50% of our online channels revenue. We remain pleased with the performance of the website, which serves as the primary interface where consumers directly engage with our brand. We'll talk further about the role of our website in the customer experience in just a few minutes as we progress our discussion to key initiatives.

Also contributing to our growth was cross border trade in which international consumers transact on our domestic website and we ship our goods to their global locations. We had a 113% increase in cross border trade revenue over the prior-year quarter. Cross-border trade revenue is recognized with international sales, which totaled 11% of our revenue for the quarter. This contribution from cross border trade was offset by a decrease in international distributor sales, which we believe is due to earlier pre-holiday purchasing in this channel as well as limited effects from U.S.- China trade relations.

Another highlight of the first quarter was strong performance of our domestic brick-and-mortar retail accounts, where we enjoyed significant growth. On the heels of a successful fiscal year 2019, Helzberg Diamonds stores chose to expand their footprint of Charles & Colvard goods in-store. They are now featuring 3 feet to 4 feet of case line, showcasing our Forever One moissanite in every store as well as a specially designed limited edition item that we developed exclusively for Helzberg Diamonds holiday promotions. To accommodate this growing footprint, we expanded our jewelry assortment as evidenced by an increase in consigned merchandise and an overall increase in finished jewelry inventory. These items have been shipped, are on display and are ready to serve holiday traffic. Q1, 2020 represents our fifth consecutive quarter of profitability matching last year's $0.01 earnings per diluted share while making significant strides toward our increased brand presence and focus on top-line growth.

Lastly I'd like to mention a noteworthy development that took place after Q1 ended. We're pleased to announce that we've added a new strategic partner in our dropship program. Belk, a well-established and respected retailer in the Southeast is promoting moissanite by Charles & Colvard jewelry on its transactional website belk.com. As a reminder, our dropship retail partners feature Charles & Colvard jewelry listings on their websites and we ship the sold goods directly to the consumer from our distribution center. Our products are now live on their site, just in time for holiday shopping. Stay tuned for more details on this exciting new partnership.

Let's turn to Slide 13 to discuss the key initiatives that have prepared us for a holiday push. We're laser-focused on expanding the reach of our brand, both domestically and globally and digital marketing will be leading this charge. In order to do this right, we first measured our current state. In Q1, we engaged with our digital marketing agency to dig deeply into the buying habits of our consumers, young Gen Xers, millennials and emerging GenZs. We evaluated a full 12 months of data from overall brand impressions to social engagement, video views, display marketing performance, search engine marketing and more. We believe this information will help us hone our brand messages to better connect with what our audience truly cares about and what will help us improve the efficacy of our marketing efforts in both paid and organic channels.

Since Charles & Colvard re-launch in October 2016, we've focused heavily on our direct-to-consumer engagement. But the majority of these investments have been in mid-marketing funnel campaigns. This means we were buying brand terms and working to convert consumers already familiar with our brand. We've shifted our efforts to increase awareness at the top of the marketing funnel, where we'll be able to reach net new prospects. We began our shift in Q1 investing in awareness campaigns across media outlets, such as Popsugar, where they serve, roughly 50% of all millennials across the U.S. We invested in promotions on podcasts, where the host spend time -- broadcast time speaking about our product. This is a highly targeted channel, where we can focus on the audiences we want to reach.

We leaned heavily into new video assets and have developed a segmented targeted strategy for our presence on YouTube. We recast our paid social media strategy with a balanced presence across awareness and traffic-driving campaigns as well as social commerce efforts that expand and optimize our presence across functions such as Pinterest, shoppable pins. These efforts take time to generate financial outcomes and we anticipate, it may take the average consumer weeks to months to migrate from initial awareness to purchase. Which is why our Q1 investment into these activities was critical to our holiday and future success related. You'll note that our Q1 operating expenses were up 25% with the corresponding cash burn, which are primarily due to these digital marketing investments.

How will we know if these investments are working? Of course Q2 revenue will be a good measure. But there are early indicators that are already helping us validate our investments as follows. Website traffic to charlesandcolvard.com is up more than 50% over Q1 last year. Our opt-in database -- our email database has grown over 75% compared to just last quarter. And our YouTube video channel subscribers jumped nearly 300% over the same period last year. With YouTube clicks to our website up nearly 200% from the same period last year.

We're also seeing a rise in unsolicited interest from influencers and celebrities in our brand. They're finding Charles & Colvard and reaching out to us directly. Just a few weeks ago, we heard from Jenni Farley or JWoww, a television personality from the MTV reality series, Jersey Shore. Jenni fell in love with a set of Charles & Colvard hoop earrings and highlighted our products on her Instagram account, which exceeds 7 million followers. Our website traffic went through the roof that weekend and consumer media outlets, such as People, E! News and US Weekly picked up the story. The power of influencer marketing is real and measurable. So you'll see more of this type of activity as we head into the holiday.

These are some of the early indicators that we're driving net new traffic to our brands directly to charlesandcolvard.com and through the various channels, where we advertise. Of course, revenue generation is the true measure of success, which we'll report on as these new eyeballs become customers. But it's important to stress that this digital channel through which we are choosing to advertise, allow us to make daily decisions on advertising spend, based on performance and outcomes. We have a tight hand on the reins as we continue to invest in our global brand presence.

On Slide 14, we plan to continue our push into international markets. In fiscal 2019, we expanded Charles & Colvard into new international markets through marketplaces and distributors as noted by this global footprint. We've successfully established many new outlets where we intend to sell. Now what's needed is brand awareness. As part of our digital marketing efforts, we've incorporated ad spend to help us establish our brand presence in these new regions. To date, international traffic and online revenue has been minimal and organically generated. With a concerted effort and appropriate investments to grow awareness of our brand in region, we believe we will expand our presence and generate revenue through these existing regional outlets as well as drive cross border trade traffic to charlesandcolvard.com.

Slide 15 outlines our focus on continued product evolution and innovation evolving our gemstone and jewelry mix to meet the demand of our consumer is at the center of our fiscal year 2020 initiatives. And as we learn more from our top of funnel marketing activities, you can expect further changes to our product mix as our audiences' tastes and preferences mature. In Q1, we released several new products and preparation for holiday, including a new line of platinum jewelry products, new shapes and sizes of moissanite gemstones including all European cuts, elongated cushions, rectangle, trapezoid and existing shapes that are now available in expanded sizes. A tantalum line of men's rings, lab-created colored sapphires and rubies, specifically developed for our dropship retail channels. And as I mentioned earlier, a very special limited addition product along with expanded styles for Helzberg Diamonds stores. In addition to these new products. We also continue to expand our signature jewelry collection, which features a Charles & Colvard's florette in its design. This product continues to gain traction and represented 8% of our total Q1 finished jewelry revenue. This product wasn't launched until late Q1 last year. So this 8% is a product's revenue impact after just three quarters on the market.

Moving on to Slide 16, when it comes to the customer experience, every interaction with our brand has an impact on the likelihood of that consumer converting into a lifelong customer or better yet, becoming a brand promoter. Therefore it's incumbent on us to make every interaction engaging, to remove any friction from the buying process and to deliver an exceptional brand experience that's beyond the consumer's expectations. As we prepare for the upcoming holiday, we focused on several aspects on our website to enhance that experience. We've expanded our payment methods to now include after pay, an innovative online payment method that allows the customer to pay in installments. It's a preferred payment method of millennial consumers and retailers as well, as after pay carries all of the risk once an item is purchased.

We also extended our firm payment terms to 36 months. This financing method supports some of our highest average order value purchases and we believe these extended terms will boost our sales. In addition to after paying a firm, we also support credit card, PayPal and Amazon payment methods as well as localized payment options for our international customers through our cross border trade solution. To offer a seamless self-service option, we recently launched a new website credit and exchange function, making it easier than ever to exchange an item for another product on our website. Recent studies show that with a traditional return option, the repurchase rate is 10%, but with an exchange option for store credit, that number can jump to 30%. With our new exchange functionality, our goal is to significantly increase the likelihood of an exchange versus a return, thereby keeping the sale of Charles & Colvard.

And lastly, we continue to improve page load times and navigability of both our web page and mobile site to ensure a seamless online shopping experience regardless of device. In addition to our website enhancements, we're constantly upgrading and improving our brand experience on third-party websites as much as those platforms will allow. We've upgraded Charles & Colvard's brand pages and imagery across marketplaces, social sites and dropship retail partner pages. We've also enhanced our product listings across these outlets with expanded product offerings on Amazon, Macy's, Overstock and more.

On Slide 17, I've highlighted our focus related to corporate social responsibility and initiatives we've undertaken to be cognizant of the social and environmental impact of our business and to be more transparent about our initiatives to be a better corporate citizen. Last year, approximately 95% of the precious metals resourced were recycled. Today all of the products I just mentioned are made from 100% recycled precious metals. Going forward, we're working towards utilizing only recycled precious metals in our product lines and of course, we're only bringing to market, gemstones that are made not mined.

Lastly in September, we engage with experts from North Carolina State University's B Corp Clinic, a group that focuses on measuring company's sustainability. They're working with us throughout Q2 to help us gain a baseline understanding of the overall environmental footprint of the company's operations. We plan to measure this baseline and develop a plan to work towards improving our impact wherever possible.

Turning to Slide 18, as you can see, in our first quarter we've already made significant progress on these five strategic initiatives. In summary, you should take away from today's call that we're focused on marketing investments that drive brand awareness, sales reach that engages both domestic and international audiences, product innovation that draws consumer interest and an excellent customer experience that encourages a lifetime relationship with Charles & Colvard. We're delivering on these initiatives in a responsible and environmentally conscious way, while keeping our eyes trained on the value we're delivering to you, our shareholders.

This concludes our prepared remarks. We'd now like to open the call to take your questions. Operator, would you please poll for questions from our listening audience.

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Questions and Answers

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Operator [1]

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We will now begin the question-and-answer session. (Operator Instructions)

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Suzanne T. Miglucci, Charles & Colvard, Ltd. - CEO, President & Director [2]

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So we do have some questions that have come in via email. So while you are queuing, let's begin with one while we're waiting. We were asked to elaborate on what we've learned from the data coming out of our digital marketing investments and how that's impacting our changing and go-forward strategy. We welcome both your live questions as well as written ones, if you'd like to write in a question, please send it into ir.charlesandcolvard.com. So our recent data analysis and the market research that we've done has validated our target customer. We still remain very focused on the millennial but we're expanding our reach to emerging Gen Z and young Gen X audiences. They're absolutely purchasing our product and engaging with us. We've also validated that our messaging on the brilliance, the value and ethical origins of our products are resonating with those consumers. So you'll see us continuing to use that language in our marketing materials. That said, there is some new and enlightening insights into the efficacy of our prior campaigns that our study has revealed and which ones are meaningfully influencing our channels in our investments. For example, Facebook and Instagram have historically been strong platforms to engage with our audiences and they continue to be so. But there are new audiences to target that we believe are more attuned to our brand and we'll engage more and they will have higher conversions. So this study is helping us identify these new audiences and to then include them in the new campaigning that we're doing.

And we've also identified some underserved audiences and new promotional channels such as our recent sponsorship of podcast. As I imagine, many of you know podcasts are sort of very popular today with today's millennial consumer, especially. What we love about this platform is, that the host will speak about the product during the podcast. And in the most recent case, we worked with husband-and-wife team, lifestyle bloggers called the Mustards, they host a session, but they also post video onto their YouTube channel and they're wearing our product, which makes for a very visual representation of product. This is our far-higher level of brand engagement to a very targeted audience. Then we get from, say, a digital ad served up on the Google ad network that's more attuned to awareness and conversion. So we're taking all of these data points -- their brand new data points. And we're starting to roll those into the campaigning that we're doing for the holiday.

So with that, we can go back to the queue. Operator, do we have anyone awaiting a question here.

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Operator [3]

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Your next question comes from Dave King with Roth Capital Partners.

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David Michael King, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [4]

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Great news on the early marketing KPIs web traffic and the like. So thanks for showing those. Realizing that, there is a more top of funnel oriented. I guess my question is, as we move into holiday, what are you doing to try to be able to convert that traffic as it's gone up fairly materially and then also fulfill appropriately, have the right customer service capabilities, et cetera. Just so you can really capitalize. Thank you.

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Suzanne T. Miglucci, Charles & Colvard, Ltd. - CEO, President & Director [5]

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So we are very prepared for holiday. We have a standard team on our customer services side that are with us all year long, will ramp up those resources during holiday to ensure that we are ready to serve people over the phone. We extend our hours that we are available to be on the phone with those consumers. And we have a fulfillment department that can expand its hours as well. So doing fulfillment, serving the customer, absolutely, we're ready to do just that.

On the marketing side, it becomes a mix of campaigning, Dave. So right now it's very top of funnel, how many people can we get into the brand, these are the people that are being added on to our e-mail marketing database and then we're watching the pages that they go to or watching where they're engaging -- are they more a bridal customer versus a more of a fashion customer, what kind of jewelry are they looking at and then we can serve up very specific campaigning to them. It's a little more mid-funnel once we've made that original connection. That is more product-and-click oriented and serve them something that they could then clicking purchase product. So it becomes a very targeted effort based on the activities that we're seeing from the consumer.

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David Michael King, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [6]

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Okay, great. And then switching gears. Really nice gross margin improvement in the quarter, it seems like it was up more than just what's implied by channel mix. I guess, did the product mix, improved within the channels or is there anything else that might specific they might be driving that as both in the quarter and as we move forward? Thanks.

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Suzanne T. Miglucci, Charles & Colvard, Ltd. - CEO, President & Director [7]

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Yeah. So the product mix, certainly moissanite by Charles & Colvard played a big role. We continue to replace our legacy product classic and brilliant it's kind a fairly low margin rate with the moissanite by Charles & Colvard product which absolutely helped us improve the margin numbers there. Our signature collection that we have is Forever One product for everyone always, nets very high margin and so with the increase in that we're seeing improvements as well Helzberg Diamonds stores just Forever One product, so they bring in the very high end in premium products. So, as you watch finished jewelry increase and as you watch online channels increase that generally lend itself towards that higher margin goods.

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David Michael King, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [8]

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Okay, great. Thanks for taking my questions. Nice quarter, and good luck with holiday.

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Suzanne T. Miglucci, Charles & Colvard, Ltd. - CEO, President & Director [9]

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While we're waiting for others of you to fill the queue. We did have another emailed question, it seems to be a trend and we like it. So continue to send in your questions. So let's see, let me read this out here. This listener wrote international sales are seeing impressive growth. Can you provide any context as to whether the margins seems to be a theme here tonight whether the margins obtained on international sales are similar to the margins seen by your domestic sales and whether you're seeing accelerated growth in cross-border trade from international buyers purchasing directly on charlesandcolvard.com, rather than options such as Amazon and that's a very good question. So, first and foremost, it's very early days for us as we forge new ground internationally, but we're pleased. What we're seeing today. International sales as a whole represented 11% of our revenue in Q1. So keeping in mind that both our traditional and online channels segments are represented here in this 11% within the International segment we're seeing a meaningful marketplaces and cross-border trade growth from an online sales perspective. But as we noted in prepared remarks cross border trade continues to perform with growth rates over a higher percent. In fact Q1 represented the fourth consecutive quarter of triple-digit growth in cross-border trade and this is pretty significant. That number significantly eclipses the growth that we're seeing in international marketplaces. And as to the margin because these folks are coming to charlesandcolvard.com, we do see comparable margin, the only difference here is that there is a single-digit transaction be a very inexpensive transaction fee that we pay to our cross-border trade partner who then bears all the responsibility of delivering the product to the international customer's doorstep, which makes our cross-border trade margins just slightly below that which we make on Charles & Colvard. But again we're driving them to Forever One product we're driving them to our transactional website. So we still see very attractive margins there.

Operator, anyone else in the queue?

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Operator [10]

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(Operator Instructions) All right, while we're waiting. We did have another question come in. Can you go back up, please? I'm sorry.

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Suzanne T. Miglucci, Charles & Colvard, Ltd. - CEO, President & Director [11]

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The question was about, can you put a dollar amount on the Helzberg in store opportunity, unfortunately we can't, -- we are restricted by confidentiality with most of our customers on actual dollars, but what I can say events we're thrilled with the expansion into this account, we think, and I think I said this on the last earnings call, we think of Helzberg as our showroom, it's a beautiful place to actually see our product every Helzberg store now has either three or four linear foot of K space and it's all Forever One product, and so for that consumer that is a kinesthetic for someone that actually has to see and feel the product wants to put the ring on her finger and get a sense for the product. She can go to Helzberg stores and we're actually in their covenant bridal section. So it's an opportunity for then that consumer to take a look at us compared to other competitive product that's out there in the market. So we're thrilled that they invite us to continue to expand our footprint and it is meaningfully contributing to our traditional channel numbers. Operator, do we have another question in the queue.

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Operator [12]

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Yes. Your next question comes from Dave King with ROTH Capital Partners. Please go ahead.

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David Michael King, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [13]

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Thanks. Just one more quick one. I thought I'd sneak it in. So there is some news I guess headlines around to De Beers and bring down pricing again recently. I guess, do you see any impact when that occurs. I guess just what are some of the high level of thoughts are around that and any concerns or help us get more comfortable with that, if you can. Thank you.

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Edited Transcript of CTHR earnings conference call or presentation 7-Nov-19 9:30pm GMT - Yahoo Finance