Good afternoon, welcome to the Charles & Colvard, Ltd. second quarter fiscal year 2023 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star then two. 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 email 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. Over the past few years, our focus has been to build a company that can take advantage of the longer-term movement in the marketplace towards responsibly sourced gems and jewelry to capture greater market share. A recent McKinsey report noted that consumer shopping for fine jewelry are increasingly favoring brands that act responsibly, value diversity, and have a compelling brand presence both online and offline. In years past, when people shopped for high-end jewelry, design would be at the forefront of their mind. However, in recent years, research shows that consumers now also search for a brand that resonates with them and is socially and ethically responsible, which we believe is one of our key differentiators. Millennial customers, in particular, won't even consider a brand that doesn't prioritize sustainability, according to McKinsey. Since the pandemic began, the consumer buying journey has fundamentally changed. While previously, customers would visit a brick-and-mortar store in order to try on fine jewelry items in person, the pandemic moved consumers online. Research has also shown that sustainability considerations across product categories are growing. Within high-end jewelry, the consumer cares much more about ethics than they did before the pandemic. McKinsey projects that sustainability-influenced purchases will account for 20%-30% of all fine jewelry sales by 2025. Perhaps as much as $110 billion, which is more than triple the number of sustainability-influenced purchases in 2019. The lab-grown jewelry market, which represents one of the hottest growing categories in the jewelry space and is a subset of sustainability-influenced purchases, is forecasted to exceed $9 billion this year. We believe that Charles & Colvard is ideally positioned with our Made Not Mined strategy and campaign to benefit from what McKinsey has dubbed the sustainability surge, as well as our broader direct-to-consumer initiatives providing us optimism for growth opportunities for the future of the company. In order to take advantage of the movement in the market, we have undertaken key initiatives to drive long-term value in the company. This includes focusing on finished jewelry products, the utilization of one of our long-standing core strengths in the production and faceting of loose gemstones to now include lab-grown diamonds. Diversifying our product offering beyond created moissanite to include lab-grown diamonds and colored gemstones. Expanding our direct-to-consumer footprint, which includes our online focus, our signature showroom initiative, and some exciting opportunities we will be exploring in the coming quarters. Building up branded distribution assets of our owned properties to become more self-sustaining while allowing us to leverage our infrastructure in the future. While the macroeconomic environment is certainly providing some near-term pressure to the industry right now, we have begun to take steps to diligently manage our expenses when possible and overall inventory position. We believe the underlying results of the quarter are an indication that we are executing against our long-term initiatives while maintaining the strength of our balance sheet, positioning us well within the growing transformation that is taking place within the jewelry industry. When I talk about execution against our key initiatives, what does that mean? First, as I mentioned, we are expanding our focus on enhancing our finished jewelry assortment and showcasing our value proposition with its core and original designs, featuring Made, Not Mined gemstones in premium quality. In fiscal year 2021, approximately 62% of our total revenue was attributed to finished jewelry. That number was 68% in fiscal 2022, and during the most recent quarter ended December 31st, 2022, it comprised 81%. Why the added focus on finished jewelry versus loose gemstones? For several years, we've worked diligently to become a globally recognized fine jewelry destination rather than simply a single gemstone supplier in the wholesale capacity, which we believe limited our future growth opportunities and overall total achievable market, or TAM. Our second key focus area is broadening our footprint to capture a greater share of the lab-grown diamond market. Data shows the number of engagement rings sold that featured a lab-grown diamond jumped 63% from March 2021 to March of last year, while the number of engagement rings sold with a mined diamond declined 25% in the same period. Lab-grown diamonds comprised about 3% of the specialty diamond jewelry market in 2020. That figure grew 7% in 2021. This is a growing market, and we intend to be a major voice within the industry. In September 2020, we launched Caydia lab-grown diamonds. While still a fraction of overall sales, it is clearly the fastest-growing product category for us. With sales up 19% compared to last year's second quarter and year-to-date, we are up over 600% compared to the same period in fiscal 2021. Moissanite will continue to be a huge focus and key differentiator for us, but we intend to similarly compete in the diamond space, adding to our incredible lineup of Made Not Mined gems and jewelry. As mentioned, another key focus for us is on expanding our direct-to-consumer focus, thereby broadening our footprint and providing the ability for our consumers to experience our product firsthand. As the report I mentioned at the beginning discussed, there is increasing movement towards online and non-brick-and-mortar purchases. Clearly, brick-and-mortar is not going away. In fact, we recently opened a flagship store in Research Triangle Park, North Carolina, to expand our reach. But the growth, especially amongst younger individuals, is moving towards online. We have expanded our capabilities online over the last number of years to enhance the customer experience while also looking to improve our advertising and marketing focus to build greater brand awareness. That said, the investment to capture the direct-to-consumer and online sales do come at a cost. Digital advertising costs have increased substantially, and the ROI fluctuates. Like many in the industry, we have refocused efforts to find ways to reach the consumer more effectively, strategically focusing our marketing efforts to find customers predisposed to our Made, Not Mined product assortment. At a high level, online channels comprise 76% of our second quarter sales in fiscal 2023, compared to 66% during Q1 of fiscal 2023 and just 62% for full fiscal year 2022. Our strategic focus remains continuing to drive and elevate our direct-to-consumer presence and brand strategy, which we believe will better position us for long-term growth and help bolster against the current macroeconomic uncertainty and geopolitical unrest. We continue to make strategic investments in our direct-to-consumer initiatives, which we believe will further strengthen our moat and overall position in the market. Our goal is to leverage our assets in order to make Charles & Colvard synonymous with responsible, Made Not Mined fine jewelry and gemstones for the conscious consumer, which we believe is the largest growing category and opportunity in the jewelry space. We want to own more of our destiny and become a top destination of choice where our customers can satisfy all of their jewelry needs. Our web properties and flagship stores are examples of this. With a large portion of our capital investments funded and key personnel added in support of these strategies, we can now focus on ways to monetize these initiatives in a meaningful way. This will take some time to bear fruit, but we believe we have strengthened our resources and capabilities, building upon our past successes, infrastructure, and brand equity to take the company to the next level. Clearly, the challenges in the economy are playing a part in our results. Domestic and global inflation and rising interest rates, coupled with ongoing fears of recession, continue to erode consumer confidence and present major challenges for the global retail and jewelry industry. While American consumers spent more this holiday season to keep up with higher prices, we experienced lulls during the calendar year-end holiday season, and we expect that consumers will continue to feel pressured financially, particularly during the second half of fiscal 2023. This is not unique to Charles & Colvard, and we are facing similar challenges of retailers in the fine jewelry space. At the same time, however, these same challenges are providing us the opportunity to continue reevaluating technologies and strategies to better position us in the future. Some of these I've discussed already on this call, but another important aspect has been our ability to manage our inventory and cash flow. As you will see in the results, our cash position increased during the quarter despite the net loss. Cash increased from $16.6 million last quarter to $17 million this quarter. Further, our cash flows from operations were also positive this quarter. We expect that our inventory levels, which were down $1.6 million from the most recent quarter, should continue to decrease in the quarters to come. We feel confident that we have taken decisive actions to align our go-forward growth and profitability strategies with the near-term economic backdrop to help maintain a strong balance sheet going forward. I would like to highlight again to everyone that we currently have $17 million cash and cash equivalents and inventory valued at $35 million for a combined total of $52 million, with only $10 million in total liabilities, including 0 debt. Even if you ignore all the other assets we have, including net fixed assets and equipment, intangible assets such as our intellectual property, receivables, and excluding any value for our brand equity, et cetera, and only account for cash equivalents, and inventory, less all liabilities, it comes to approximately $42 million compared to a current market cap of approximately $29 million. We believe this showcases our demonstrated value. As I turn it over to Clint to review our financial statements in more detail, let me just quickly summarize. Despite the challenges in the industry, we still delivered $10.4 million in revenue, a level that's only been achieved a handful of times in the company's history. We generated positive cash flow from operations this quarter. We are transitioning the business to focus on areas that create long-term value, such as focusing on finished jewelry products, and allow us to capitalize on key consumer opportunities, such as diversifying our offering to include lab-grown diamonds and colored gemstones while expanding our direct-to-consumer footprint. These key areas of focus outperformed the larger top-line number during the quarter, which was largely impacted by non-direct consumer sales and our wholesale loose gemstone business. Clint will expand more on this shortly. We are building value in our distribution capabilities and brand equity to better control our own destiny, meeting the consumer directly where they're shopping. Finally, our balance sheet remains strong, affording us the ability to invest in areas to enact these strategic initiatives and take advantage of key opportunities in the marketplace. At this time, I'd like to turn the call over to Clint Pete, our CFO, for an overview of our Q2 financials. I'll return to wrap things up after. Clint? Thanks, Don. Today, I'll provide a summary of key financials for the second quarter ended December 31st, 2022. 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 tomorrow. Please note that all percentage comparisons are to the second quarter ended December 31st, 2021, unless specified otherwise. First, we'll start on slide 11 with comparative analysis of the second quarter of fiscal 2023 compared to the same period one year ago. In total, net sales for Q2, 2023 totaled $10.4 million versus $13.8 million, a decrease of 25%, due primarily to the economic factors Don alluded to. While revenues were lower in the quarter, the decline was slightly less than what we experienced in the first quarter when compared to the comparable prior year period. Net sales for our online channel segment, which is primarily direct-to-consumer and includes charlesandcolvard.com, moissaniteoutlet.com, marketplaces, dropship retail, and other pure-play outlets, totaled $7.8 million for the quarter, or a decrease of 16%, now representing 76% of total net sales, up from 68% one year ago. Net sales for our traditional segment, which consists of wholesale and brick-and-mortar customers, totaled $2.5 million for the quarter, or a decrease of 43%, representing now approximately 24% of total net sales. Finished jewelry net sales decreased 20% for the quarter, but represented 81% of total sales in the quarter, up from 77% of sales in the second quarter one year ago. Loose jewel net sales decreased 40% for the quarter, as we mentioned above, due in part to our shift towards finished jewelry and direct-to-consumer strategies. Many domestic and international distributors reduced third calendar year forecasts and overall inventories due to the softer economic environment. International net sales decreased 49% as certain of our distribution partners continued to face ongoing COVID-19 restrictions and closures, as well as lower calendar year-end holiday demand due to consumer inflation and recessionary concerns and the global geopolitical unrest. As you can see at the high levels, our areas of strategic focus, including direct-to-consumer and finished jewelry, were somewhat less impacted. We want to point out changes in our online channel segment as well as in finished jewelry as they relate to the percentage increases of these to total revenue. We have seen increases not only in the current quarters as discussed above compared to year ago quarter, but also comparable to the trends we saw in Q1 of fiscal 2023 that had similar increases when compared to the prior year period. We are also seeing these same increases when comparing Q2 2023 to Q1 2023. Accordingly, we are becoming less dependent on the distribution network in our traditional segment as we continue to shift to a more of a direct-to-consumer focus, which Don alluded to earlier, and is by design. Moving to slide 12 to discuss gross margin and profit. We delivered a gross margin of 41% versus 49% in the year ago quarter, delivering $4.3 million in gross profit versus $6.7 million in the year ago quarter. Most notably, the decrease in the gross margin during the quarter was related to an approximately 7 percentage point impact due to our applied labor costs that are capitalized to inventory, with an additional approximately 3 percentage point impact due to the shift in our product mix towards lab-grown diamond. Accordingly, most of the decrease in our gross margin was due to the adverse change in applied labor costs and not the result of any large-scale discounting during the period. For Q2 2023, total operating expenses increased 5%, representing 53% of total net sales compared to 38% in the year ago quarter. Sales and marketing expenses increased 6% to $4.3 million in support of our growth and brand awareness initiatives. G&A expenses remained flat at $1.2 million for the quarter. We explored alternative marketing efforts to reach a broader audience, with some initiatives admittedly falling flat of expectations. We reported a net loss for Q2 2023 of $1 million or $0.03 loss per diluted share, compared with a net income of $1.2 million or $0.04 earnings per diluted share in the year ago period. Included in our net loss for Q2 2023 is an income tax benefit of $132,000 compared to an income tax expense of $283,000 in the year ago period. Our weighted average of loaded shares outstanding used in the calculation of diluted loss per share for the quarter were approximately 30.3 million shares for the period ended December 31st, 2022, compared to 31.3 million shares for the period ended December 31st, 2021. The decrease in shares outstanding is partially driven by the impact of the company's share repurchase program. Let's move on to a snapshot of our balance sheet. As Don alluded to, our liquidity and capital position remains strong as we ended the quarter with $17 million of total cash compared to $16.6 million at the end of the first quarter that ended September 30th, 2022. Working capital is also strong, ending at $26.3 million, up from approximately $25 million at the end of the first quarter of fiscal 2023. In addition, the company continues to be debt-free. We believe our capital structure remains strong and able to weather inflationary and geopolitical factors in the near term. Our cash flow provided by operations was $617,000 during the quarter compared to $3.1 million used in operating activities during the first six months of fiscal 2023, and $121,000 provided by operations in the year ago period. The improvement in the current quarter primarily reflects our continuing inventory management efforts. In terms of other sources of liquidity, we have access to our $5 million cash secured credit facility with JPMorgan Chase Bank, which we renewed on July 29, 2022 for one year. As of December 31, 2022 and through today, we have not accessed funds through our credit facility agreement. As Don discussed, inventory as of December 31st, 2022 totaled $35 million compared to $36.6 million as of September 30th, 2022, a reduction of $1.6 million. Loose jewels inventory was $15.9 million as of December 31st, 2022 and compares to $16.6 million as of September 30th, 2022, a reduction of approximately $700,000. Finished jewelry inventory was $18.8 million compared to $19.9 million as of September 30th, 2022, a reduction of $1.1 million, demonstrating a solid sell-through of our finished jewelry in the direct-to-consumer online channels while still maintaining a high percentage of in-stock rates to meet our SLAs. As Don discussed, we plan to remain focused on prudent inventory management strategies going forward. In summary, we remain confident in our financial strength and our continued efforts to increase shareholder value. With that, I'll turn the call back over to Don. Thanks, Clint. To wrap things up, the jewelry industry is undergoing an incredible transformation, one that I believe we are in a strong position to capitalize on in the years to come. The results of the quarter, despite the macroeconomic backdrop, show that we are executing on our key initiatives that we believe are driving long-term value in the company, initiatives that we believe allow us to take advantage of our branding and distribution capabilities to enable customers to find, engage, and transact with us on a greater scale. Finally, I'm appreciative of the hard work and dedication of our employees and the continued support from our shareholders. With that, I would be happy to now take any questions you might have. We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Please limit yourself to one question and one follow-up. If you have further questions, you may reenter the question queue. At this time, we will pause momentarily to assemble our roster. Our first question is from Matt Koranda with Roth Capital. Please go ahead. Hey, guys. Good afternoon. Just starting out with the online channel, I guess I was just a little bit surprised with a bit of the deceleration there, if I look at it sequentially on a year-over-year basis. Just wonder if you could break out the puts and takes of the different underlying channels in online. Maybe at the very least, if you could just kinda call out sort of how your own site performed during the quarter, relative to some of the other items like Marketplace and whatnot. ppreciate the question as usual. You know, certainly, we had some headwinds within our online segment too as well. We attributed those to a lot of various reasons. Certainly the macro, as we stated multiple times within kind of our script, the advertising spend and campaigns that we ran did not generate the ROAS that it traditionally did. So if you're basing the historical ROAS that we had, cost per clicks, plus the competitive landscape, plus the economy, plus the higher interest rates to purchase or finance jewelry and gemstones, we believe it just contributed to a softer holiday, much softer Certainly it began in October for us, and then we started to increase velocity towards November and December. To answer your question, our direct-to-consumer presence, DTC, and Charles & Colvard and owned properties performed well. We had, in the marketplaces, we had a couple individual, you know, direct distributors that were very weak and really participated in a heavy sales cadence or onsell cadence, which then, you know, kinda shifted. Where they had a nice, steady, cadence of product and sales, over last year, they ran, you know, toward the end of the season in a very, very heavy, strong sale cadence. It reduced the overall revenue in those categories too as well. It's a combination of multiple things within that sector. Really, the wholesale piece of the business is what really, you know, kinda shifted for us most. I do get your question, though. Yeah. Okay. Yeah, I wanna address wholesale in just a moment, but, just spinning back to your ROAS comment there, Don. Just curious how you think about sort of, I guess if you're not seeing the efficacy from that ad spend, that, you know, and it's understandable, I guess, just given where the economy sits and, to your, to your point, cost of financing and higher ticket items and stuff like that might be seeing some more pressure on the consumer discretionary front. How do you think about the ad spend on a go-forward basis? Do you lean out of that a little bit while we go through a softer patch? Or do you just redeploy the marketing dollars in a different way to try to boost that ROAS again? Well, you know, we started to see the softness and the conversion rates decline, you know, in the October timeframe, right when the interest rates started climbing up, right when really the tail end of discretionary started to go away. We said, "Okay, what do we need to do? What do we need to kind of, you know, kinda refocus our ad dollars on?" We tried some alternative types of marketing campaigns, more top of funnel, which did not bear, you know, fruit. The results weren't as satisfactory as we were. That's why we've got such a, an increased spend with less revenue there. We did try to, you know, branch out just because, you know, basically the average cost per click was rising, you know, between even our own search terms and keywords and phrases. We were definitely, you know, digging into the analytics and to the analysis and trying to pivot the company to find other alternative ways to drive traffic. Certainly organic is really important to us. Certainly we need to do a better job on the marketing side. The competitive landscape for our own keywords, phrases, we've even had, you know, certain top leading customers that would, you know, really go heavy-handed on our own namesake and so forth. It's always a challenge in that category, but we've seen the pricing go up sixfold and specifically to some of our key search words. We have to pivot, we have to do better, and we just need to figure it out. Okay. All right. That's helpful color. Just on the traditional channel, you mentioned, you know, sort of the distribution side of things being the real culprit here. It has been, I guess, for, you know, the better part of the last year plus, maybe even longer at this point. How small of a piece of the traditional channel is that distro and international piece at this point? It seems like it just should be a lot less meaningful on a go-forward basis, but if you can just help us understand how to quantify that and how it moves on a go-forward basis, that'd be helpful. Yeah, sure. Right now, we're looking at almost three-quarters of our business is online. That's really important, and that's by design. That's literally at the base of all our initiatives moving forward. That's where our spend is going. That's where our investments are going because we believe that generates the long dollar and the highest value proposition for us as a company and a brand. That's most critical. Going back to your question, which is specific to traditional, which is now a quarter of the business, and then you would break out the brick-and-mortar part of that. The wholesale business is a much smaller representation of our overall revenue. Then, you know, going forward, you know, we speak about other initiatives that we have in place in other areas like our signature showroom, which, you know, if I could report on the signature showroom, was incredibly exciting category and a channel for us this holiday season. It's taking shape just right now and really performing better than expectations. We're pretty excited about that. Anywhere we can control our own destiny is really important to us. We all know that the wholesale business, you know, has different challenges, right? Our distribution partners are managing their inventories differently. They're trying to practice just in time. They don't have the capital or they don't wanna make the capital investments to hold inventory, especially given the economy and what's happening in the environment. In doing so, they're reducing their overall positions and exposure. We understand that. That's why early on, we started this shift, you know, as we stated over, you know, the last couple years, to be able to go more direct to consumer, to look for more channels, to create our own owned properties, multiple owned properties, and then really reach that consumer digitally and virtual whenever we can. We talked about live streaming. We talked about shopping, direct response, more of a linear, come in that's gonna actually be monetized in the future, as we become less dependent on the wholesale arm. The pricing pressure right now between the race to the bottom and lab-grown diamonds is putting downward pressure to the wholesaler on our moissanite business too as well. That's why the more we can do direct to consumer, we can still realize and capitalize on the higher margins and continue to do so moving forward. We've been making it very clear, you know, I understand when we say, you know, this particular section or segment is down by 49%, you know, I don't want everyone to get hung up on that because, you know, ultimately, as that becomes a smaller and smaller piece of the business, certainly that percentage is gonna climb and rise. The thought is that the online business and our direct-to-consumer business will grow exponentially higher as these investments start to come in and take shape. Great. If I could sneak in two more. Just one, since you mentioned the signature showroom, just any metrics for success you can share on that front? I'm just really curious how that's going. Then what would be the sort of, guess the gating items for looking to open additional showrooms? Right now, we're still in, you know, for all intents and purposes, the beta scenario related to the signature showroom. We're testing out a lot of different things specific to the store, to the consumer that's coming to the store. We're doing things that are non-traditional, like we're doing special events. We're doing corporate alliance programs. We're doing collaborative type engagements with local community. It's there's just a lot of moving parts there, and we can't, you know, we're not giving any, you know, guidance or forward, you know, numbers specific to that. We can just tell you that it is performing better than anticipated, and we believe that there's definitely a future there. We believe that in some shape or form, we can take this model, and we can position this model in key strategic areas and demographics that are performing quite well for us within different regions domestically at this point. The timing for that still remains open for discussion, and we're still, you know. Basically, we just launched in October on the signature showroom. We've got a few months under our belt right now. We do have some holiday traffic. Valentine's Day has been pretty exciting. Matter of fact, we have a big event scheduled for Saturday here too as well. These events come between, you know, 50 to 100 different guests come at a given moment. I mean, it's been pretty exciting, and we're pretty pleased with kind of the performance there. I believe, you know, in the coming quarters, we'll be able to make a more concrete statement as to what that looks like in the future. Okay. Fair enough. Just one last one on the margin, the gross margins, if I could. Clint, you referenced that a big portion of the year-over-year headwind, I think it sounded like 700 basis points of it was a difference in how you're applying labor costs to capitalized inventory. Can you just explain that in a little bit more detail for us so we understand it? On a go-forward basis, are you gonna be applying the same methodology so that we should assume, you know, all things being equal, you know, we should be assuming somewhere in that kindaBy single digit, 100 basis points, you know, headwind on a year-over-year basis? Yeah. Matt, sorry about that. Let me just address that and try to simplify that just a little bit. I don't mean to, you know, take that from Clint, but as we start to transition our business into more of a direct-to-consumer as opposed to the wholesale distribution company that we were in the past or a loose gemstone, we're reducing the amount of what we call WIP or work in progress related to the cutting and faceting of our gemstones. In the past, we literally had, you know, x number of gemstones that we're cutting on a quarterly basis and a monthly basis, and therefore, that was spread out over the course of, you know, month-over-month within the quarter, and it would be spread out across the board over the inventory. Now that we're being mindful of that inventory and we're not actually producing as much raw material, and we have finished goods and we have inventory in stock, we don't have the advantage of that applied labor as much. Clint, you can elaborate a little more if you want to on that, but that's pretty much, you know, where we're at. I just wanna clarify, Matt, it wasn't a change. I think it was just the amount of the jobs that the process, as Don mentioned, related to the fabrication of the moissanite. The raw material, yeah. Yeah. Yeah. Okay. Got it. We should just assume that on a go-forward basis, you may be able to flush more inventory just 'cause you're not producing to demand, not just to a certain set level every quarter. You're absolutely correct. One other factor that, Matt, we should consider is that as lab-grown diamond pricing, you know, becomes, you know, it's trying to find a bottom, it's trying to stabilize. Because there's a race to the bottom when we first got in and we first introduced lab-grown diamonds, inventory was at X price. Basically, there was a cost associated with those particular goods that we had in stock at the time. Now, the pricing has literally dropped and come down, but we still had the cost associated with those original goods, that original inventory. We had some margin pressure specific to that. We believe we've rectified that, and we remedied that, and we're in a good place now. As we continue to go more vertical, we basically are becoming more and more competitive. We're pricing, you know, our goods in line with the market. If not, we're actually below most of the retailers, and we're more competitive. Initially, to get into the space, we made a capital investment, and that inventory was valued at X. We did feel some margin pressure there. We believe that we sold through almost all of those goods. Now we're pretty much stabilized. We will be in a much better place moving forward. Okay. That makes a lot of sense. I'll leave the rest to others. Appreciate the time. Okay, great. Thank you. The next question is from Peter Jackson, a private investor. Please go ahead. In the prepared comments, I think it might have been something that Clint said, you said you guys were expecting sort of continued softness, especially in the second half. Can you elaborate on that? Are you making sort of a larger macro call here about the economy and interest rates, or are you saying specifically that you're seeing continued softness or ROAS doesn't make sense to spend a lot of money on marketing, therefore, the sales will be soft because it doesn't make sense to spend the dollars? You know, I believe there's a lot of truth in what you said and how you framed it. Across the board, I think it's a little bit of everything. I personally feel that, you know, the global economy, although I'm not an economist and I can't, you know, predict what's happening, you know, kinda, we don't give, you know, forward-looking statements specific to that. You know, certainly we believe that, you know, I mean, I guess, you know, in today's indication, you know, it's up today and things are up today and optimism is up and things are moving in a positive direction. I still believe that the consumer has, you know, an issue specific to higher interest rates, specific to financing terms, related to jewelry, whether they're gonna, you know, purchase that particular item, you know, or they're gonna, you know, pay their rent or mortgage or their increased mortgage, whether they're on, you know, fluctuating rates. I mean, we just don't know. You know, I guess it's more of a macro scenario, but certainly I will tell you specifically, you're 100% correct as it relates to, you know, marketing dollars. If you look across the board, look at some of the other, you know, technology companies, look at the marketing spend and the dollars and the revenue associated with the spend, we're no different. You know, we're looking at that. If we're not getting the ROAS or the return, we're basically gonna dial back in those particular areas. You know, we wanna, you know, strive to be profitable and we wanna do things right. We're just not out for, you know, purely top-line growth and numbers. We're trying to build a real solid company, and we believe we've got some really great initiatives that we can deploy capital that'll bring value to the company. Also later on, we'll be able to monetize those channels in a much greater way than perhaps burning through cash in some of these paid and social campaigns that were run pre-previously. Right. Well, that also connects to, you know, what you do with that cash. If investing that cash isn't attractive on advertising because of the poor ROAS, are you better off, you know, buying shares? I think I saw in the release that you bought about 450,000 shares back, which seems like a lot, but, you know, at the dollar level that it's at, it's, it's not a lot of money relative to the $17 million. You know, I, and by the way, I know, you know, in the past, people like Ollin B. Sykes and others were really buying in a big way. It's a little discouraging just not to see really any meaningful buying lately. Is that between that and perhaps not buying the shares back at a higher level, can we infer that you guys think this is gonna be softer for a longer period? Let me answer the first part of your question. You know, certainly, you know, we made the case for why we believe that we're an incredible value, and we believe that we're trading way below book, and the opportunity is there. We certainly believe in the long-term outlook for Charles & Colvard and what we've kinda built and the initiatives we have in place. Some we've discussed, some we, you know, are still to come to fruition in the coming quarters. You know, there is this thing called quiet period, so, you know, certainly insiders, you know, myself or whatever, you know, can't purchase within these time frames where we have material non-public information. Certainly, we did lean in and buy, you know, half a million dollars worth of stock because we believe that that was really important. We believe that the value was there. We absolutely will consider, you know, given, you know, the situation and downward pressure on the stock, should it be something that, you know, is meaningful to us, given what we know to come in the future and where our investments need to go and where we believe that we're gonna monetize, you know, exponentially, you know, is not at risk, we will certainly consider, you know, more buybacks. Just in December, you know, Clint Pete here, he did, you know, purchased some shares. You know, we're, you know, we're constantly looking to see open windows where we can actually invest in ourselves and our people. Right now, you know, we're, you know, we did come off, you know, 2 years' worth of incredible growth and upward trajectory and profitability. We said that now we've built up a lot of cash, you know, upwards of $20 million then, and then we were gonna deploy that cash, make investments in infrastructure, make investments in our distribution capabilities, make investments in our enterprise resource management system, make investments in our web properties. We did that. Moving forward, we wanna continue to be the best of breed in the e-commerce space for all things Made, Not Mined. We'll wanna have the best in place as far as our web properties, and that costs money, so we'll continue to make those investments. We have some incredible things coming up that we believe that are really critical to this direct-to-consumer business model that we're creating, you know, rather than, you know, as I said in my, you know, opening comments, a single-threaded moissanite distribution company. You know, we like to believe that, you know, we made those announcements. We know the triggers that we need to, you know, kind of press that are gonna kind of exponentially move us to another level. We did level set that we're gonna make those investments. Again, you know, times are changing. It's a different environment, you know what I'm saying? we'll certainly look at every opportunity that comes to, you know, increase the value of our shareholders' positions. You know, certainly I'm a, you know, a stakeholder in this company too as well, and I have a significant portion of shares and investment in this company myself. it's within my best interest to be able to drive growth and drive value within the stock, and that's what I do every day, and that's what we all do here. you know, we'll do what we believe is the right thing for the company. Okay, fair enough. On the direct-to-consumer business, what do you think that we can model in terms of gross margins going forward? You know, again, we've had some margin pressure, given two things. Number one, you know, pricing related specifically, as I spoke before, about the initial investment in the diamond goods or lab-grown diamond goods, the original cost for those goods, and then now the, you know, kind of the reduced cost and the pressure there to be competitive and sell off those goods. The other thing that will happen is as the race to the bottom goes on lab-grown diamonds, you know, we basically have to kinda see where that goes, and we wanna still make sure that we're competitive. We still wanna make sure that we're in the conversation, and our goal is to be one of the top destinations. In order to do that, we need to be competitive. We need to build a story of why that consumer should buy from us, a compelling story with the design and the aesthetic of what we're bringing to market. Certainly, there may be some pressure there. The answer specifically, you know, I've said this a million times, that 40% margin is a very, very strong business in the jewelry space. That's just my personal opinion, and I believe that's strong. We always strive to be north of 50%. I would say somewhere between the 40%-50% would be a model that I could absolutely, you know, get behind. You know, again, it really depends on some key factors that may come. Those key factors are, do we wanna spend money and deploy capital in additional marketing areas that we haven't done in the past? If the paid and social spend is not bearing the results that we want, then maybe we try some other type of avenues that may definitely increase the expense but not get the return. We're, you know, we're in a complex scenario that if we lean in too much. You know, it basically affects the bottom line, and it affects the margin almost immediately. We're trying to build a company, and we're trying to grow at the same time, but it's kind of a catch-22. I, you know, to answer your question, I believe somewhere around the 45%-47% would be the ultimate area, but there is the possibility of some pricing pressure between the lab-grown diamond, which is representing a larger portion of our online direct-to-consumer business in Charles & Colvard right now. Okay. Last question, just staying on the DTC. If it doesn't make sense to spend money on the on advertising right now because of the incredibly tough ROAS, how are we gonna keep the DTC from falling? I mean, with all the investments and actually increased investments, it's hard to see it drop by 16% in the quarter. I mean, that's. Again, totally understand the macro issues, but, you know, I just looked at Signet, which I know is not a great comparable, but it's the only one. Perfect ... one of the few that's public. Their sales for the quarter and in December are based on their guidance, which they updated and increased, is gonna be down like 5%, and we dropped 25%. Obviously, again, not a perfect comparable and much smaller company, but the bigger question is, how do you get those DTC sales back up, especially given the tough environment, especially given that it doesn't make sense to spend a lot of money on advertising right now? Yeah. All pointed great questions, right? Let's talk about the commentary on Signet, right? They're a conglomerate. They're a monopoly. They pretty much own all four corners of the earth as it relates to jewelry. A lot of their growth has come through acquisition. Certainly, you know, their latest acquisition of Blue Nile, that revenue is starting to trigger, Diamonds Direct they bought. All of that's coming into play. Also, over the years prior, they were literally just beaten down, so their growth trajectory and their success, in my view, has been a little bit skewed by that and skewed by kind of the acquisitions. They pretty much own the marketing universe as it relates to Google and Facebook and everything because they can deploy pretty much unlimited capital to be in the top rankings and to be top of mind to most consumers. The comparison, and I appreciate you saying it may not be a direct comparison, but what we need to do is we need to figure out where is that point of diminishing re-returns. We're certainly gonna continue to spend in paid advertising and still go there, but we need to find the, really that threshold where we have to stop the spend, redeploy those dollars in other areas. We also spend money with our co-op partners in brick-and-mortar, and they're requesting more, you know, brand assets and collateral and co-ops. We need to support them because brick-and-mortar is still a strong piece of our business, so we're doing that. I guess to answer your question, we need more channels to be able to distribute our product. We need more drop ship partners that we believe can just broaden our footprint. You know, we said footprint, you know, maybe five times within the, you know, the prepared remarks. You know, we certainly believe that that's how we're gonna do it. That's a much more affordable way to kinda drive revenue into the online segment because basically, it's a percentage of play, and it's not a direct spend, if that makes sense. We as a company are looking for more strategic partners that we have in the online business where we can represent a direct-to-consumer presence, control the message, control our designs in that category. Lastly, there are other channels out there besides online digitally that we can utilize a lot of these assets that we built up, a lot of the infrastructure that we put in place, where we can reach that consumer streaming in more of a direct response or a linear approach, where we control the medium, we control the messaging, and we control, for all intents and purposes, the airtime. The goal would be there is to build that out stronger where we can control our destiny. There is a cost associated with that. We just need to manage through that and see where the returns are greater. We believe we've got a plan moving forward. Certainly, you know, the complexity of the environment and the universe, you know, is there. You know, we'll see what we can do in the next couple quarters. Do you work with influencers much? We do, right? I mean, recently it was with J.Lo, not J.Lo, but one of the Jersey Shore folks, J-Woww, sorry about that. You know, we work with a couple other influencers too as well. The goal is to be able to really understand what the value is of those influencers. We believe right now the influencers that we've approached in kind of that direction is pretty much one and done. We did The Bachelorette. We've done a lot of campaigns there. That was successful for us. We'll continue to do that. We're better off with those type of influencer paths, right? Certainly we have affiliate programs that have an influencer base too as well. Those affiliates, we're actually growing the affiliate universe right now. We believe that kinda coordinating with designers and other types of influential, you know-Type folks within our industry is more meaningful for the future. We'll do a little bit of, you know, a little bit of both. If we lean in on one big influencer and that cost associated with engagement is, you know, X number of dollars like a Super Bowl commercial, then where are we gonna be with that? That's the unknown, right? We don't know if a single ad or a single influencer is gonna give us, you know, that catalyst that moves us to another level or is it gonna fizzle out, and it's just gonna be a one-time spend and therefore just destroy us financially. We're trying to be prudent and responsible and fiscally responsible with our shareholders' money and with our initiatives moving forward. Very good. Thank you. Thank you. If you have a question, please press star then one. Hi, Don and Clint. It's Adam Loewenstein at Lytham Partners. Got a couple of questions here from investor that emailed us. As moissanite becomes a smaller portion of overall sales and perhaps declines in sales, is there a risk to the agreement with the supplier Cree regarding minimum orders over time? I mean, along those lines, what is being done to secure better pricing on supplies of lab-grown diamonds? Okay, great. Thanks, Adam, for that. Also a great question. You know, certainly, you know, if you, if you kind of look at our filings, which will come out tomorrow, you know, you might take note of, you know, kind of the consumption of raw material, which is, you know, definitely present there. We're definitely being responsible and prudent with our inventory. Certainly, you see the decline in the inventory, you know, quarter-over-quarter in sequential quarters. We anticipate that one would assume that we're going to make responsible decisions related to Wolfspeed now. Certainly they're an incredible partner and a strategic partner, they've been with us for over 27 years or around 27 years. You know, we're all aware of the business climate. We're aware of, you know, kind of the overall requirements and the demand. You know, as we progress forward, we'll make executive decisions to manage through that. We believe that we have the type of relationship. Certainly we did that at the onset of COVID when it first started. Certainly, you know, that'll be a continued conversation with our partners, and we'll continue to be mindful and respectful, you know, of that relationship, but certainly take a look at the consumption and kinda, you know, navigate through that. As it relates to, you know, how do we secure better pricing in lab-grown diamonds, you know, I alluded to it a little bit within this conversation. Our goal is to become more vertical in this space and become an active player. You know, whether we become the grower and then go from grown to market, you know, that's a, you know, a much bigger conversation, you know, that may come in time, whether there's a partnership like a Wolfspeed scenario that could come to fruition where we could literally procure the rough. I can tell you that right now we're ongoing, you know, R&D and test, and we're cutting and faceting our own rough. That is provided by a strategic growing partnership that we have. That's gonna get us more vertical. We believe that that's gonna hedge against any pricing pressure. We believe that that's gonna get us more competitive, and we believe we'll become a bigger player, much like we are in the moissanite world, where we basically facet and cut more moissanite gemstones than anywhere in the world. We anticipate one day that we'll be a factor in that space. I hope that answers his questions on that. Next question is on inventory. Is the percentage of inventory mix changing? He's talking about the increase in finished jewelry and the decrease in loose jewels. Yeah. Certainly the goal is to provide more value to our shareholders, right? You know, in the past, you know, what I've learned is, you know, it's a very simple exercise, right? You wanna be able to maximize the value of your inventory. We're fortunate that we're dealing in commodities and that commodities, you know, albeit somebody said a fiat money system, people say different things, but gold is gold, platinum is platinum. The market dictates the value of that. When you see our inventory and you look at finished jewelry and finished goods, the valuation of that inventory is exponentially higher because it has that high gold concentration or intrinsic value that's very easily calculated on a balance sheet. Look to us to continuously build out finished you know, jewelry because that's where we're going more direct to consumer, and that's where we believe is the best path forward for us as a company. Also, keep in mind as we, you know, build out our drop ship programs and our partnerships, there are certain SLAs that are in place which are service level, you know, agreements that are in place that we need to maintain inventory, stock, and everything. We need to maintain those inventory thresholds to be able to support them. Also as we start to see the shrinking pie of wholesale distributors, or the distribution of loose gemstones because, you know, basically they're experiencing other pressures, we actually did a consolidation between our partners and our distribution partners, so there's less of them. We're actually pushing our goods into more individual pieces than selling 500, 1,000 of a number. Look to us to decrease our loose jewels inventory too as well. We believe that that's a good thing. Okay. Gary, I think we have one more caller. The next question is from Jack Straub, a private investor. Please go ahead. Hi, Don. Just a quick question on potential acquisitions. Have you guys been approached by any larger company to be acquired just based on you guys trading about half book value? I didn't know if there was any conversations from any other company towards you guys. Thank you. Hey, Jack. Great question. I mean, it's a loaded question, and obviously, I can't answer that question specifically. You know, we don't discuss any matters specific to that. I can tell you that we've got a tremendous opportunity ahead of us. We believe there's a roadmap ahead of us, whether we become the acquirer of others to be able to grow our footprint or to grow our brand or to grow our strategy, you know, that remains to be seen. We're looking at every avenue. You know, certainly, you know, I have an obligation, you know, in the chair that I sit in to be able to review and discuss and take into consideration any opportunity that would present itself. We think we're a great company. We think we're, you know, a great value. We have, you know, a good position in the market. you know, we believe there's plenty of growth for us to grow our business, standalone. you know, I don't know if that, you know, kinda answers your question. Are you completely ruling that out then? If a company did approach you and you thought it brought superior value than the current share price, you would consider that. You're not completely shooting down that just based on where you think you can grow the company in three years. Absolutely not. You know, we would take any consideration. Anyone that comes forward with a, you know, legitimate bona fide offer, we take that to the board of directors. We talk about it all the time. Should an opportunity present itself and it makes sense for the shareholders and myself included across the board, absolutely. I mean, you know, why wouldn't we? You know, given, you know, an opportunity, you know, that could or will present itself, you know, we'll kind of visit that at the time. Great. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Don O'Connell for any closing remarks. First of all, I wanna thank everybody for today and on behalf of everybody at Charles & Colvard, you know, we appreciate your time, and I wanna thank you all for your continued support, and we look forward to things to come in the future for Charles & Colvard. The conference call will be archived for review on the company's website at http://www.charlesandcolvard.com/investor-relations/events. To access the digital replay of this conference, you may dial 1-877-344-7529 or 1-412-317-0088, beginning approximately 1 hour from now. You will be prompted to enter a conference number, which will be 4241796. Please record your name and company when joining. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.