Executive Summary

Company did not file its Q1 FY2025 10-Q on time; instead furnished an 8-K (Item 2.02) attaching the NT 10-Q (Form 12b-25) stating it expects net sales to decline year over year and to report a net loss; management also disclosed “substantial doubt” about the Company’s ability to continue as a going concern and noted broad cost reductions since June quarter end .
No Q1 FY2025 earnings call or detailed press release was issued; during the quarter CTHR renewed its $5M cash‑secured credit facility with JPMorgan (maturing Jan 31, 2025; outstanding $2.3M at Nov 6, 2024), supporting near-term liquidity .
Nasdaq sent non‑compliance notices tied to late FY2024 10‑K and Q1 FY2025 10‑Q filings; the notices have no immediate effect on trading but require a plan to regain compliance (potential timeline extension to April 14, 2025) .
Context from the prior two quarters: revenue declines persisted with margin compression (Q2 FY2024 revenue $7.9M, GM 36%; Q3 FY2024 revenue $5.3M, GM 23%) while losses widened; management highlighted gold cost inflation, heavy discounting, and lab‑grown diamond price pressure as headwinds .
Potential near-term stock catalysts: (1) filing of the delayed FY2024 10‑K and Q1 FY2025 10‑Q; (2) Nasdaq compliance plan outcome; (3) final award in Wolfspeed arbitration after an interim award limited damages sought by Wolfspeed to ~$3.3M plus interest and certain fees (vs. >$28M sought) .

What Went Well and What Went Wrong

What Went Well
- Liquidity backstop: Renewed $5M cash‑secured credit facility with JPMorgan (outstanding $2.3M; maturity Jan 31, 2025; no financial covenants), supporting working capital flexibility .
- Arbitration development: Interim award in Dec 2024 rejected Wolfspeed’s ~$22.8M expectation damage claim; damages limited to ~$3.3M plus 8% interest and certain fees, removing a tail‑risk magnitude (final award pending) .
- Cost actions: Management implemented headcount reductions, supplier reevaluation, inventory repurposing, and curtailed capex/website investments to “right‑size” the business as of June–September 2024 .
- Quote: “We remain optimistic about the company’s long‑term value as we’ve seen revenue decline shrink across sequential quarters… We are working to mitigate additional margin creep…” (CEO, prior quarter) .
What Went Wrong
- Missed filings and going concern: The company did not file FY2024 10‑K and Q1 FY2025 10‑Q on time; management expects to disclose “substantial doubt” about going concern in those filings .
- Revenue/margin pressure persisted: Entering Q1 FY2025, management expected lower YoY net sales and another net loss; prior quarter margin erosion was tied to gold price inflation, promotional environment, mix shift, and higher shipping costs .
- Nasdaq compliance risk: Two Nasdaq notices for late filings; while no immediate trading impact, failure to execute a plan risks eventual delisting proceedings .

Financial Results

Note: CTHR did not disclose exact Q1 FY2025 figures; it furnished an NT 10‑Q indicating decreased net sales YoY and a net loss.

Metric	Q1 FY2024	Q2 FY2024	Q3 FY2024	Q1 FY2025
Revenue ($USD Millions)	$4.953	$7.906	$5.262	ND – Company expects YoY decrease
Diluted EPS ($)	$(0.08)	$(0.09)	$(0.12)	ND – Company expects net loss
Gross Margin %	39%	36%	23%	ND
Total Operating Expenses ($USD Millions)	$4.576	$5.793	$4.884	ND
Net Income ($USD Millions)	$(2.539)	$(2.866)	$(3.633)	ND – Company expects net loss

Segment mix (where disclosed):

Segment Metric	Q1 FY2024	Q2 FY2024	Q3 FY2024	Q1 FY2025
Online Channels Net Sales ($M)	$3.9 (79% of total)	$6.7 (84%)	$4.1 (77%)	ND
Traditional Net Sales ($M)	$1.0 (21%)	$1.3 (16%)	$1.2 (23%)	ND
Finished Jewelry Net Sales ($M)	$4.3	$7.4	$4.9	ND
Loose Jewel Net Sales ($M)	$0.7	$0.5	$0.4	ND

Selected KPIs and balance sheet context:

KPI	Q1 FY2024	Q2 FY2024	Q3 FY2024	Q1 FY2025
Cash, Cash Equivalents & Restricted Cash ($M)	$12.672	$11.087	$9.240	ND
Total Inventory ($M)	$27.329 (8.263 current + 19.067 long‑term)	$25.8	$25.3	ND
Credit Facility	$5M capacity; no debt at 9/30/23	$0 outstanding at 12/31/23	$0.5M outstanding at 3/31/24	Renewed; $2.3M outstanding as of 11/6/24; matures 1/31/25

Guidance Changes

CTHR did not issue quantitative guidance for Q1 FY2025. Disclosures focused on late filings, going concern considerations, and cost reductions; no revenue, margin, OpEx, or tax outlook ranges were provided .

Metric	Period	Previous Guidance	Current Guidance	Change
Company Guidance	FY2025/Q1 FY2025	None	None	N/A
Going Concern Disclosure	FY2024 & Q1 FY2025 filings	N/A	Expect “substantial doubt” language in FY2024 10‑K and Q1 FY2025 10‑Q	New disclosure

Earnings Call Themes & Trends

Note: No Q1 FY2025 call. Themes reflect Q2–Q3 FY2024 calls and current-quarter disclosures.

Topic	Previous Mentions (Q2 FY2024)	Previous Mentions (Q3 FY2024)	Current Period (Q1 FY2025)	Trend
E‑commerce/NextGen platform	Building headless NextGen platform; expected to launch Phase I in Q4 FY2024	Continued investment in web platform and marketing assets	Wind‑down of “next generation website” investment to reduce spend	From investment to cash preservation
Margin pressures (gold, promos, mix)	GM 36%; headwinds from economic conditions; lab‑grown diamond price pressure	GM 23%; cited rising gold, promotions, mix shift to lab‑grown diamonds, shipping costs	No disclosure; company expects net loss	Deteriorated into Q3; unclear in Q1 FY2025
Liquidity/cash	$11.1M cash; debt‑free; $5M facility available	$9.2M total cash (incl. restricted); $0.5M drawn; reiterated facility access	Facility renewed; $2.3M outstanding; maturity 1/31/25	Liquidity supported by facility
Wholesale vs. DTC strategy	Shift to DTC; charlesandcolvarddirect.com for independents	Continued push DTC; direct portal to monetize loose gems	Not updated; cost focus	Strategy in place; execution pending
Regulatory/listing	—	—	Nasdaq late‑filing notices; plan needed to regain compliance	Elevated risk
Legal (Wolfspeed)	—	Arbitration hearing held week of 9/30 per NT	Interim award (Dec) limited damages to ~$3.3M plus interest/fees; final award pending	Risk magnitude reduced

Management Commentary

“We remain committed to growth despite a challenging third quarter… we feel pleased by our growth in repeat customers… We believe the evolution of our product portfolio… speaks to the strength and longevity of our brand.” — CEO, Q3 FY2024 press .
“Margin erosion… due, we believe, to the significant rise in gold pricing, greater promotional pricing pressure… increased demand for [lab‑grown] diamonds… elevated shipping costs…” — CEO, Q3 FY2024 call .
“Our liquidity and capital position remained strong… with $9.2 million of total cash… access to our $5 million cash secured credit facility.” — CFO, Q3 FY2024 call .
“The Company expects to disclose… substantial doubt about the Company’s ability to continue as a going concern… [and] reduced spend across the board… decrease in headcount… wind‑down of… studio infrastructure and next generation website.” — NT 10‑Q (Q1 FY2025) .

Q&A Highlights

Liquidity runway and cash burn: Investor concern on burn vs. cash; CFO emphasized $9.2M cash at Q3 end, facility access, and ability to monetize finished jewelry inventory with gold content; also intent to lean into Direct portal to convert loose gems to cash .
Credit facility draw rationale: Management drew $0.5M in Q3 to maintain readiness and preserve cash flexibility; impact described as “very fractional” .
Strategic mix: Management reiterated shift toward DTC and Charles & Colvard Direct to engage independents directly on loose gems .

Estimates Context

Q1 FY2025 S&P Global consensus estimates: unavailable at time of writing; Company did not furnish numerical results in Q1 FY2025 8‑K/NT 10‑Q, and no earnings call was held. We attempted to retrieve S&P Global consensus but encountered access limits; thus, comparisons vs. consensus cannot be presented .
Implications: Sell‑side estimate visibility likely to be revised only after FY2024 10‑K and Q1 FY2025 10‑Q are filed; operating commentary suggests continued margin and demand pressure into Q1 FY2025 .

Key Takeaways for Investors

Near‑term priority is filings: Market-moving catalysts include (1) filing overdue FY2024 10‑K and Q1 FY2025 10‑Q and (2) Nasdaq’s decision on the company’s compliance plan; delays prolong listing risk .
Liquidity supported by secured facility: $5M JPMorgan facility renewed to Jan 31, 2025 with $2.3M outstanding as of Nov 6, 2024; no financial covenants; focus on inventory monetization continues .
Going concern disclosure expected: Management plans to disclose “substantial doubt” language in FY2024 10‑K and Q1 FY2025 10‑Q; cost cuts implemented to “right‑size” the business .
Arbitration risk magnitude reduced: Interim award (Dec 2024) limited damages to ~$3.3M plus interest/fees vs. >$28M sought by Wolfspeed; removes an outsized tail risk though cash impact and final award remain to be determined .
Demand/margin headwinds: Prior two quarters showed down revenue and GM compression (36% → 23%) amid gold inflation, heavy discounting, and lab‑grown diamond dynamics; Q1 FY2025 is expected to be another loss .
Strategy intact but tempered by cash preservation: DTC push and Charles & Colvard Direct remain strategic pillars, but NT 10‑Q indicates curtailed spending on studio and next‑gen web platform to conserve cash .
Trading setup: Resolution/timing of filings and Nasdaq plan, plus clarity on final arbitration award, are likely to drive the next leg in the stock’s narrative more than near‑term fundamentals .

CHARLES & COLVARD LTD (CTHR)·Q1 2025 Earnings Summary