Executive Summary

DGSE (now Envela) delivered a profitable Q1 2019: revenue $16.02M, net income $0.355M, diluted EPS $0.01; gross margin compressed to 13.8% from 17.8% YoY as mix shifted toward lower-margin bullion/rare coin sales tied to a new large customer .
YoY revenue growth of 14% was driven by a 41% increase in bullion/rare coin sales; jewelry revenue declined 14% amid gold price volatility; SG&A fell 13% due to bonus program elimination and lower personal property taxes .
Sequential cash dynamics tightened: operating cash flow was -$0.96M on inventory build and payables reduction; cash ended at $0.48M vs. $1.45M at year-end; accounts payable to a related party remained high at $3.08M .
No formal guidance was issued; management reiterated focus on “recommerce” (buy-sell-trade) and potential expansion through new locations or online services, highlighting margin trade-offs; adoption of ASC 842 added lease ROU assets and liabilities to the balance sheet .
Wall Street consensus estimates via S&P Global were unavailable; absent published targets, the near-term stock narrative hinges on sustained revenue growth versus margin pressure from mix and large-account pricing [functions.GetEstimates error; see Estimates Context].

What Went Well and What Went Wrong

What Went Well

Bullion/rare coin sales +41% YoY (up $2.88M), lifting total revenue +14%; management attributed this primarily to “the addition of a new large customer” .
SG&A down 13% YoY (-$267K) on elimination of store manager/key personnel bonuses (-$115K) and lower personal property taxes (-$141K), supporting operating income stability despite margin compression .
Management reinforced recommerce strategy and customer value proposition: “Our customers love the ability to buy, sell and trade… The ‘recommerce’ business is strong” and “We seek to expand and pursue new opportunities in recommerce” .

What Went Wrong

Gross margin contracted to 13.8% from 17.8% YoY due to a lower-margin revenue mix (large-account bullion/rare coin) and weaker jewelry margins; gross profit dollars decreased $0.284M YoY .
Jewelry revenue fell 14% and scrap/other revenues also decreased YoY, with management citing gold price volatility as a headwind to consumer behavior and margins .
Operating cash flow was -$0.96M, driven by inventory increase (+$0.55M), prepaid expenses (+$0.19M), and reductions in accounts payable and accrued expenses (-$0.56M), tightening liquidity; cash ended Q1 at $0.48M .

Financial Results

P&L Summary

Metric	Q1 2018	Q4 2018	Q1 2019
Revenue ($USD)	$14,055,872	N/A (not disclosed in available filings)	$16,019,530
Gross Margin ($USD)	$2,502,006	N/A	$2,218,482
Gross Margin (%)	17.8%	N/A	13.8%
Operating Income ($USD)	$403,587	N/A	$402,818
Net Income ($USD)	$346,208	N/A	$354,635
Diluted EPS ($USD)	$0.01	N/A	$0.01

Notes:

YoY revenue +14% ($1.964M); gross margin dollars -11% ($0.284M); gross margin % -400 bps; operating income essentially flat; net income +2% .
Prior quarter (Q4 2018) discrete P&L metrics were not disclosed in the documents available; FY 2018 was $54M revenue and “over $657K” net income .

Operating Cash Flow

Metric	Q1 2018	Q1 2019
Cash from Operations ($USD)	$(281,840)	$(960,206)

Drivers: inventory build (+$550,567), prepaid expenses (+$185,536), and reduction in accounts payable and accrued expenses (-$564,868), partially offset by net income .

Balance Sheet Snapshot

Metric	Dec 31, 2018	Mar 31, 2019
Cash And Equivalents ($USD)	$1,453,941	$479,560
Inventories ($USD)	$9,765,094	$10,315,661
Accounts Payable - Trade ($USD)	$838,624	$358,609
Accounts Payable - Trade, Related Party ($USD)	$3,088,973	$3,075,120
Total Liabilities ($USD)	$4,604,637	$5,929,888
Total Stockholders’ Equity ($USD)	$8,413,461	$8,768,096

Lease accounting change (ASC 842) added ROU assets and lease liabilities: recognized $1.995M ROU assets and $1.947M lease liabilities on adoption; Q1 lease costs totaled $174,347 (rental $134,595; variable $39,752) .

Segment Breakdown (Sales Category)

Category	Q1 2018 Revenue	Q1 2018 Gross Profit	Q1 2018 Margin	Q1 2019 Revenue	Q1 2019 Gross Profit	Q1 2019 Margin
Jewelry	$5,299,962	$1,596,620	30.1%	$4,556,368	$1,325,658	29.1%
Bullion/Rare Coin	$7,099,751	$553,781	7.8%	$9,984,146	$516,157	5.2%
Scrap	$1,283,644	$209,484	16.3%	$1,218,151	$185,047	15.2%
Other	$372,515	$142,121	38.2%	$260,865	$191,620	73.5%
Total	$14,055,872	$2,502,006	17.8%	$16,019,530	$2,218,482	13.8%

Mix shift toward large-account bullion drove revenue growth but pressured margins (lower unit economics) .

Geographic Breakdown (State)

State	Q1 2018 Revenue	Q1 2018 Gross Profit	Q1 2018 Margin	Q1 2019 Revenue	Q1 2019 Gross Profit	Q1 2019 Margin
Texas	$13,164,472	$2,274,882	17.3%	$15,404,787	$2,076,745	13.5%
South Carolina	$891,400	$227,124	25.5%	$614,743	$141,737	23.1%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Capital Expenditure	Next 12 months	N/A	Approximately $85,000 targeted for POS components and Charleston buildout	New
Revenue/Margins/OpEx/Tax/Dividends	N/A	N/A	No formal guidance provided in Q1 2019 filings/press releases	Maintained at “no guidance”

Earnings Call Themes & Trends

No Q1 2019 earnings call transcript was found after searching; the company provided an 8-K Item 2.02 press release and filed its 10-Q . Themes below reflect press releases and MD&A across periods.

Topic	Previous Mentions (Q2 2018)	Previous Mentions (Q3 2018)	Current Period (Q1 2019)	Trend
Recommerce strategy (buy-sell-trade)	Emphasis on value and customer experience; positioning for holiday	Continued focus; operational profit before one-time write-offs	“Customers love buy-sell-trade”; expanding recommerce to new locations/online	Strengthening narrative
Point-of-sale (POS) system	Rollout underway; groundwork for growth	—	POS amortization increased; system implemented April 1, 2018	Execution ongoing
Gold price volatility	—	—	Volatility cited as driver of jewelry/scrap revenue/margin changes; gold ended Q1 at ~$1,295/oz per London PM Fix commentary	Persistent headwind/tailwind mix
Large-account customer impact	—	—	New large bullion/rare coin customer boosted revenue but at lower margins	Growth with margin trade-off
Store footprint/leases	Operating 5 stores; Charleston expansion April 2018	—	ASC 842 adoption; five operating leases; lease costs and expirations detailed	Balance-sheet visibility improving
One-time write-offs (Fairchild)	—	Fairchild vintage watch bad debt write-offs (promissory note and A/R)	No similar Q1 charges disclosed	Clean quarter

Management Commentary

“Our customers love the ability to buy, sell and trade. The ‘recommerce’ business is strong, and we continue delivering profits, quarter after quarter.” — Scott Mosley, VP & Director of Operations .
“We seek to expand and pursue new opportunities in recommerce because we believe it will create value for our shareholders.” — John Loftus, President, Chairman and CEO .
“Back-to-back profits for 2017 and 2018… new point-of-sale system, rolled out in 2018, facilitates collecting market data to further expand the Company’s market presence.” — FY 2018 release .
“Offering exceptional value… continued focus on the customer experience… a very successful combination.” — Q2 2018 release .

Q&A Highlights

No Q1 2019 earnings call transcript was available; therefore, no analyst Q&A themes or clarifications could be extracted from a call [functions.ListDocuments returned 0 earnings-call-transcript for 2019-01-01 to 2019-06-30].

Estimates Context

S&P Global consensus estimates for Q1 2019 EPS and revenue were unavailable due to data access limits; small-cap coverage may be limited for this issuer [functions.GetEstimates error].
In absence of published Street numbers, investors should frame results as a revenue beat-risk on internal growth (new large customer) versus a margin miss-risk (mix and pricing). Margins fell 400 bps YoY to 13.8% while operating income held flat, suggesting leverage from SG&A control offsetting gross margin pressure .

Key Takeaways for Investors

Revenue growth is robust (+14% YoY) on bullion/rare coin volume from a large customer, but margin compression (-400 bps YoY) underscores mix/pricing trade-offs; watch for sustainability and margin normalization .
Cost discipline is tangible (SG&A -13% YoY), enabling flat operating income despite weaker margins; continuation of SG&A efficiency is key to EPS durability .
Liquidity tightened in Q1: operating cash flow -$0.96M and cash down to $0.48M on inventory build and payables reductions; monitor working capital and related-party payables ($3.08M) .
ASC 842 adoption improves lease transparency; near-term lease expirations and Charleston expansion plans suggest modest capex ($85K next 12 months) with potential store-level reconfiguration .
Absent formal guidance and lacking consensus coverage, near-term stock moves likely hinge on narrative: continued revenue momentum vs. margin discipline; watch updates on customer mix and online/location expansion .
Jewelry weakness (-14% YoY) and scrap softness reflect commodity volatility; a turn in gold price stability may improve retail mix/margins, while large-account bullion remains a volume driver .
Prior years’ profitability (FY 2018 net income >$657K) and consecutive profit quarters reinforce turnaround; sustaining profits with healthier margin mix is the medium-term thesis .

Source Documents Read

Q1 2019 8-K Item 2.02 press release (“DGSE does it again – kicks off 2019 with first-quarter profit”) .
Q1 2019 Form 10-Q (full filing and MD&A; financial statements, revenue disaggregation, cash flows, lease adoption) .
FY 2018 press release (“Back-to-back profits in 2017 & 2018”) .
Q3 2018 press release (operational gains; Fairchild vintage watch write-offs) .
Q2 2018 press release (continued profitability; customer experience focus) .

Envela Corp (ELA)·Q1 2019 Earnings Summary