Suzanne Miglucci - President and Chief Executive Officer Clint Pete - Chief Financial Officer.

Michael Hughes - SGF Capital Management Daniel Nall - Aristides Capital LLC.

Good day and welcome to the Charles & Colvard Fourth Quarter 2017 and Full-Year 2017 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation there’ll be an opportunity to ask questions.

[Operator Instructions] This webcast 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.

This webcast does not constitute an offer to purchase any securities nor a solicitation of a proxy, consent, authorization or agent designation with respect to meeting of the Company’s shareholders. 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..

Thank you, Gary. Good afternoon and thank you for joining us as we summarize Charles & Colvard’s fourth quarter and full fiscal year 2017 results. We are introducing a new format to our conference call today with the intention of providing you with a more comprehensive visual presentation of our quarterly report.

Accompanying today's audio call is the supporting PowerPoint slide deck, which we will refer to you during our formal remarks. This presentation PDF file is available in the Investor Relations section of our website at ir.charlesandcolvard.com/events.

We hope you'll find this enhancement a valuable addition to our quarterly calls and work with our results. I’ll begin on Slide 3.

For today's agenda, I'm excited to share with you the progress we've made in Q4 2017 compared to Q4 2016 and the operational strides we made with the business during 2017 as we executed on our strategic plan to position Charles & Colvard as a consumer-facing jewelry brand.

I’ll then turn the call over to Clint Pete, our Chief Financial Officer, for a detailed financial review, and then I’ll wrap up with a discussion of our strategic direction for 2018. Let’s turn to Slide 4. Q4 2017 represents our first full year-over-year comparison since the relaunch of the Charles & Colvard brand in Q4 2016.

The success we generated in the fourth quarter of 2017 resulting in 42% net sales growth, a 42% gross margin, and $0.03 earnings per share validate our strategic direction. We measure the effectiveness of our brand awareness efforts by the progress of our Online Channels segment, which directly touches the consumer.

Online Channels include our charlesandcolvard.com website, marketplaces, drop-ship, and pure-play ETL outlet.

Notably, our Q4 charlesandcolvard.com website net sales doubled over the year-ago quarter, generating 117% increase, and revenue from our total Online Channels segment grew 52% over the year-ago quarter, equaling 54% of net sales, for the first time in Company history surpassing revenue from our traditional segment.

In Q4, we achieved profitability and it represents the Company's 10th consecutive quarter of progressively improved bottom line performance, and the first time, we've produced a profit since 2013. We earned $683,000 versus a $1 million loss in the same quarter last year, a $1.7 million swing in profit and a $2.5 million revenue gain.

We attribute this year-over-year performance improvement to the cumulative result of five well executed strategic initiatives, which took place over the course of the year. But summarize our outcomes from each with the turn to Slide 5.

Our first initiative was product innovation, and in particular, continuing expansion of our Forever One gemstone offerings, while growing the breath of our jewelry line. Historically, Charles & Colvard played a prominent role in the bridal space.

As I've stated in prior calls, we don't want to limit our sales opportunity to one, perhaps two bridal events in a customer's lifetime. Therefore, in 2017, our merchandise team set out to study the global jewelry market to learn more about consumers buying habits and emerging fashion trends.

We apply this information to our expanding line of fashion-forward jewelry, including new selections of women's jewelry and a broad range of price points, and the introduction of a men's line.

The result on our transactional website, Q4 net sales of our fashion jewelry category grew 115% over the same period last year and represented nearly half of our website sales. Fueling this growth was the expansion of our Forever One gemstone offerings. In 2017, we grew our family of cuts from five to 14.

We added new options, including Emerald, Hearts & Arrows, Pear, Radiant, Princess, Baguette, Heart, Marquise, and Trillion Cut in a range of sizes. We introduce Forever One melee gemstones, which are small faceted stones that are added to jewelry as accent.

We announced the availability of Exotic Gems, a selection of loose gemstones in six shapes that tip the scales from six carats to 15.5 carats diamond equivalent weight. And in December, we released a limited supply of natural green moissanite jewelry as a part of the Love Green, Live Green initiative to raise awareness for global sustainability.

With 20 plus years of gemstone manufacturing expertise, we can readily bring new products to market. We know the intricacies of moissanite and undertake full advantage of the double refractive nature of our stone, while aiming to ensure a level of cut, clarity and polish that’s unrivaled in the industry.

The outcome of these innovations is high demand for Forever One product. For the full-year 2017, our Forever One sales of loose gemstones and finished jewelry represented 84% of our total net sales compared to 37% in 2016 and 95% growth rate.

Now let's talk about taking those goods to market with our second initiative intensifying our omnichannel sales effort. We strive to be in the myriad of places, our customers shop when they're on their buying journey from search engines to marketplaces to brick-and-mortar stores.

A visual representation of our omnichannel strategy can be found on Slide 6. Every individual shopping journey is different. So it's important they can find Charles & Colvard on their specific path. For that reason, we've been working on our presence across multiple channels. I'll start with the traditional brick-and-mortar on Slide 7.

Brick-and-mortar retail is still a very viable shopping outlet. While industry stats indicates that the entire market sector only grew 5.5% in 2017, it's still represented approximately 90% of all retail purchases.

Therefore, finding Charles & Colvard in stores is important to serve a customer who wants to experience firsthand, the brilliance of moissanite before making a buying decision. That's why we're so excited about our relationship with Helzberg Diamonds. In 2017, we grew our 50 store pilot to nearly all Helzberg Diamonds stores.

Moissanite has performed well. We are helping Helzberg unlock a new customer base and we are pleased to have such a valuable partner. In addition to Helzberg, our traditional distributors have also contributed to our brick-and-mortar presence. Distributors are our conduit to thousands of independent jewelers across the industry.

Net sales from our traditional segment grew 30% in Q4 2017 over the year ago quarter, and we know this is due in part to thousands of independent jewelers carrying moissanite in their stores. As seen on Slide 8, our third initiative was expanding our e-commerce channels. It's this initiative that experienced the most change in growth in 2017.

In the U.S., 71% of consumers begin their buying journey with a web search and more than half of those searches began on Amazon. With more than 70% of all U.S. households having a prime membership, our focus on Amazon is paramount.

In 2017, we significantly expanded our Amazon presence by developing a fulfillment by Amazon strategy which culminated and Charles & Colvard gaining seller fulfilled prime status by the end of the year. This prime badge places our products above others in relevant searches.

And seller fulfilled means we can ship directly from our distribution center which provides us the ability to expose our large inventory of goods to the Amazon shopper. Our 52% increase in net sales from online channels in Q4 is credited in part to this meaningful presence and subsequent growth on marketplaces.

On the international front, we've historically utilized distributors to take our products to new geographies. But it's becoming obvious to us that we must first build the brand presence in new international markets to grow awareness and future sales. We made our first direct-to-consumer foray into China by way of Alibaba’s Tmall marketplace.

Tmall is China's largest retailer. They drive more than 56% of all e-commerce sales in China. We've learned a tremendous amount in a short time we've been alive. The most important being the imperative for building brand awareness to reach consumers we were able to generate a small level of initial sales through our Tmall marketplace listing.

However, in order to drive notable sales growth, we know will need to create more brand awareness and as we look to 2018, we have plans to do so. Slide 9, summarizes our fourth initiative amplifying our marketing efforts. As we've been detailing, establishment of our brand is key to our growth.

We've spent the last year educating, engaging and selling to new audiences. From a top of funnel perspective, we gained exposure to more than 25 million consumers through influencer marketing campaigns and our expanded social media efforts.

As we progress our audience from awareness to engagement with our brand, we rely on social media and barometer of our progress. For the 12 months since our rebranding in Q4 2016, we've seen 181% growth in our Facebook network and we've grown Instagram followers by 248%. And during this ramp up phase, these outlets grew by 30% quarter-over-quarter.

In addition, we serve nearly 1.5 million views of our videos on YouTube in the past year. Our annual engagement on social channels as driven 742% growth in website traffic from social media sources, these social activities combined with our overall digital marketing efforts, now drive more than 70% of purchases on our website. Let's turn to Slide 10.

Over the course of this past year, we've learned a lot about our customers. On this chart, we highlight Charles & Colvard customer breakdown by generation based on charlesandcolvard.com data. As you can see millennials represent our largest buying group.

Our market research and buying habit analytics reveal that regardless of demographics, our audience appears to be driven by three distinct motivating factors. Number one, beauty, [indiscernible] brilliance of our gemstone and jewelry selection.

Number two, value, the bang for the buck possible with moissanite and the ability to buy luxury items while saving money for other important moments in life. And number three, social responsibility what we call conscientiousness having a positive impact on the world by buying from brands who are environmentally and socially responsible.

While these common motivating factors transcend demographics, we have noticed some interesting trends. We believe today's younger consumer, Gen Z and millennial, the socially and ethically wired.

They appear to proactively seek out goods and services that align with their core principles and have become devoted and vocal advocates of brands that embody green practices. We will continue to expand awareness of our moissanite gemstone, and jewelry across these targeted customer groups.

As you can see on Slide 11, just last month, we had a unique opportunity with NBC's today show. They invited us to feature moissanite on the Megyn Kelly today’s show. Members of our studio audience received a pair of Charles & Colvard one carrot moissanite stud earrings.

It was great to have our top – one of our top selling product, features, during Valentine's week to an audience of more than four million average weekly viewers combined with video exposure on they guessed Facebook page, which has more than 120,000 followers.

On to Slide 12, our final strategic initiative focused on evolving our customer service function. Our goal is to take all the friction out of engaging with our brand. In 2017 we deploy new technology that optimizes many of our website functions, improving on site search, page load times, mobile user experience and more.

We also deploy in policies to keep us competitive with other consumer centric brands. Charles & Colvard customers now enjoy free shipping, free returns and a 60 return policy.

We believe these new offerings coupled with our expanded gemstone warranty that now fully covers any chips or scratches to our stone have upped our customer experience to completely new levels.

I'm very pleased to report that we delivered on all of these 2017 strategic initiatives and successfully pivoted Charles & Colvard to a consumer facing brand all while raising our gross margin to 42% and we did so while remaining debt free. It's the leadership of our executive team that helped guide us to this success.

Over the past 12 months, we put together a team with tremendous talent and expertise. Slide 13, provide the snapshot and the background of our executive team for your review. These executives and their teams will help propel us forward to deliver on the potential for our business in 2018 and beyond.

I'd now like to turn the call over to our CFO, Clint Pete to provide more details on our financials. Then I'll return to discuss our strategic direction for 2018..

Thank you, Suzanne. Good afternoon, everyone, and thank you for joining us today. As a reminder, due to the divestiture assets associated with Lulu Avenue in the first quarter 2016, we are presenting Lulu Avenue in discontinued operations in our financial statements.

There were no net sales, gross profit or losses related to discontinued operations for the fourth quarter or for the full-year of 2017. Unless otherwise noted, the financial results discussed during this call will be from continuing operations for both the fourth quarter and full-year of 2017 and the fourth quarter and full-year of 2016.

Please turn to Slide 15, as we review our Q4 results.

Net sales for the fourth quarter of 2017 increased 42%, here's the breakdown and the Company’s online channel segment which consist of e-commerce outlets including charlesandcolvard.com, marketplace, drop-ship and other pure-play it's crucially e-commerce customers net sales for the quarter increased 52% to $4.6 million or 54% a net sales for the quarter compared with $3 million or 50% of net sales in the year ago fourth quarter.

And the Company's traditional segment which consists of wholesale, retail, and television customers net sales for the quarter increased 30% to $3.9 million or 46% of net sales compared with $3 million or 50% a net sales in the year ago fourth quarter.

On a product line basis, the Company's net sales of loose jewels increased 17% to $3.8 million in Q4 primarily due to the increased demand Forever One gemstones. Finished jewelry net sales increase 70% to $4.7 million for the quarter. This increase resulted from executing our strategy throughout 2017 to drive sales through multiple channels.

Moving on to Slide 16, our gross margin has expanded and stabilized over the past eight quarters. In the fourth quarter 2017 gross margin was 42%, up from 32% in the fourth quarter of 2016 due to higher margin Forever One sales in both gemstones and jewelry and also segment and from continued operational efficiencies.

On Slide 17, at the top of each bar we provide the level of expenses as a percentage of net sells which is dramatically improved from the level 65% two years ago to 36% in Q4 2017.

Second, the trend line of expenses as a percentage of net sales shows the scalability that we have been building into our business by controlling costs we are going to topline. And third, the dollar level of operating expenses for the last eight quarters is provided inside each bar.

Operating expenses for the fourth quarter 2017 were $3.1 million essentially flat with year-ago quarter. As we ramped up our holiday campaigns sales and marketing expenses for the fourth quarter 2017 increased 12%, while G&A expenses decreased 7% to $1.1 million.

On Slide 18, as Suzanne said earlier we are in $0.03 per share in Q4 the first quarter probability since 2013. Highlights from this slide, you will see that we went from a net loss of $1.1 million in Q4 2016 to a net profit of $600,000 in Q4 2017. Slide 19, has similar data for the full-year as I just detailed for the fourth quarter.

I'd like to highlight the improvement and net loss on continued operations. As you see we went from a $4 million loss in 2016 to $500,000 loss in 2017. Slide 20, is the balance sheets snapshot. We ended the full-year with $4.6 million of cash and cash equivalents compared to $7.4 million at the end of 2016.

The Company anticipates continuing to vest some of this cash and marketing, branding and awareness efforts during the upcoming quarters. The Company has no long-term debt and has not utilized the $10 million credit facility we renewed with Wells Fargo in June 2017.

This credit facility matures in June 2018 and we are currently reviewing various alternative sources for financing if they are needed. Inventory at the end of 2017 increased to $31 million from $28.1 million at the end of 2016. At the end of 2017 loose jewels inventory was down slightly to $22.1 million from $22.6 million at year end 2016.

And finished jewelry inventory increased to $8.8 million compared to $5.5 million at the end of 2016. The increase in the inventory levels reflects our investment in finished jewelry for charlesandcolvard.com to Helzberg expansion and meeting anticipated market demand. On Slide 21, we provided detail regarding our inventory classification.

As disclose in our SEC filings our policies are classified loan short-term any inventory that can be released over the next 12 months based on historical and anticipated sales demand. And long-term is any inventory on hand at year-end and excess of our current selves requirements.

Given that the lifecycle of our product is typically longer than 12 months considering the time it takes to grow raw material and deliver it to market as finished goods. It can be challenging to understand the true value our inventory given our standard inventory classification.

For that reason we brought board additional details on the classifications of raw materials to clarify the goods we have on hand. The first category is new inventory produced in September 2015 was comprises the material Forever One products.

The second category is legacy inventory produced through the period ended August 15 which is the material Forever Brilliant, Forever Classic and lower grade gemstones. Now you see at year end 2017 60% of our inventories classified as new inventory leaving this 36% as legacy inventory.

A significant reduction from the year end 2016 which legacy inventory represented 51%. We are actively selling these legacy goods through omnichannel strategy and search outlets as marketplaces drop-ship, pure-play retailers were actively drawing down these products at a profit.

Also related to the topic of inventory is a raw material supply agreement. In December 2014 the company entered into an exclusive supply agreement with Cree to provide raw silicon carbide materials required to meet production and manufacturing needs. The initial term of this agreement expires in June 2018 unless extended by the parties.

Subject to certain conditions Charles & Colvard has a unilateral option to extend the terms of the agreement for an additional two-year period. Currently we are reviewing various alternatives with respect to the raw material purchases including that an extension or renewal of this agreement.

I'd like to highlight two reason positive developments that impact shareholders. In January of this year our Board of Directors approved a change in the Company's calendar year reporting cycle from December 31 to fiscal year ending of June 30.

This change enables our executive team to ship the annual planning and budgeting process away from the holiday season. So the focus during that time is on revenue generating opportunities with customers. While were report for the first quarter of fiscal 2018 ended March 31 in the usual timeframe in May.

Then we plan to file a transition report with results for the six-month period ended June 30, 2018. Our fiscal 2019 year but then began on July 1, 2018.

Secondly, with respect to our stock listing we received a letter from the NASDAQ in November 2017 notifying the company that the minimum bid price of our common stock was at least $1 or 10 consecutive business days.

Accordingly, the Company has regained compliance with NASDAQ's minimum bid price requirement and the listing qualification notice is call. In conclusion, we would also like to let investors know of the upcoming comps is that we will be participating and during March and April.

We will be presenting that the 30th Annual ROTH Conference in Orange County, California on Monday, March 12 at 7:30 AM Pacific. Next, we will be at the Micro Cap Conference in New York City on Tuesday, April 10. Then will be at the Planet MicroCap Showcase in Las Vegas on Wednesday and Thursday, April 25 and 26.

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

Thank you, Clint. On Slide 23, I'll turn our attention to the year ahead and how we plan to leverage this momentum to catapult the business forward. Our strategy for 2018 is to focus on growth and market expansion, across channels and geographies.

We intend to build on Charles & Colvard’s position as the leading worldwide moissanite provider to further establish our presence in emerging markets and to differentiate our products quality and service offerings globally. Our key strategies for 2018 are as follows. Number one, drive organic revenue growth in the U.S. and maintain attractive margins.

We plan to continue engaging our target customers through creative and progressive marketing campaigns and we will leverage technology to ensure efficiencies in our marketing, sales and customer service functions. Number two. Expand our gemstone and jewelry offerings to serve a broad range of customers.

We plan to continue innovating our moissanite gemstone offerings and further enhance our jewelry offerings to include unique curated collections and new styles at multiple price points that will appeal to a broad audience. Number three.

Target the global market opportunity through continued brand building, focus channel expansion, and world-class customer service. We plan to diversify and expand our global customer base in a low risk manner by introducing our brand and select markets via cross-border trade initiatives and through established marketplaces.

And finally number four, balanced growth oriented investments to generate sustainable earnings improvement. We plan to maintain financial flexibility, a new data driven business decisions to balance investments in future growth with consistent near-term financial performance.

As we pursue our 2018 strategic initiatives, we plan to make various investments to drive near-term and long-term sales growth, while balancing that with the goal of generating sustainable earnings improvement. We will be prudent about these investments. The strategy is to move nimbly, measure carefully and makes data driven investment decision.

Lastly, on Slide 24 is our mission statement, which drives both our long-term strategic vision and our day-to-day activities. At Charles & Colvard, we believe luxury can be both beautiful and conscientious.

With innovative technology and sustainable practices, our goal is to lead a revolution in the jewelry industry by delivering a brilliant product at extraordinary value balanced with environmental and social responsibility.

We are very excited about our prospects for the coming year and look forward to putting our mission and strategic initiatives into action. We’d now like to open the call to take your questions. Operator, would you please poll for questions from our listening audience..

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Mike Hughes with SGF Capital. Please go ahead..

Good afternoon. Thanks for taking my questions. First question on the legacy inventory. It looks like it declined roughly $3 million over the course of the year to roughly $11 million.

Is there any way to accelerate the disposition of the legacy inventory? I know couple years ago you did the big sale of JTV, anything like that that you might expect over the next year or so?.

Well thanks for calling in Mike and for the question. We appreciate it. So yes, I think the important thing to recognize here is that we continue to draw down this legacy inventory, which is very good news. The strategy for doing so is primarily using our omnichannel outlet to do this disposition.

In many cases, what we're doing is we're mounting up legacy jewelry [indiscernible], moissanite stones into jewelry and then we're bringing them to places like eBay and Amazon to sell them. It gets more and more challenging.

The further we draw down this legacy inventory because you wind up with what we call broken categories, just a handful of stones and a handful of sizes. So it's hard to do a major multi-million dollar sale to perhaps a distributor because they're looking for very deep inventory in similar sizes and shapes.

And that's not what we have left in this legacy category. So we'll continue to match it up in jewelry and leverage that very strong omnichannel sort of environment that we've built for ourselves to do that disposition..

Okay.

So over the next three to four years, the legacy inventory should be a source of cash flow of roughly $3 million a year even assuming that you don't earn any margin on selling it correct?.

Well cumulatively we do make profit on these goods. We have made profit historically on these goods. And we can control that by of course selling it out on these marketplaces and choosing our price point. So yes, it should continue to be a source of cash and you can all assume that we will continue to draw down on that legacy inventory.

That is a focus of ours..

Okay. And then on the Helzberg jeweler relationship. I think you recognized revenue on a consignment basis.

I was just curious, how much of a lag is there between an actual point of sale transaction in Helzberg and it hitting your P&L?.

Thank you, Mike. This is Clint Pete, CFO. When those retailer actually books that consignment – the sale of the consignment item within a month, it takes about a month to actually record the sales.

So within that month, we are booking that revenue based on the correspondence with us and Helzberg on these transactions that actually took place during that month..

So there's a one-month – so if there were Christmas sales meeting from the first week in December through Christmas Day, where they recognized in the December quarter? Would they be recognized in the month of January?.

Both recognized in the December quarter within that month of sales..

Okay. And then just a couple more for you.

You did a good job, leveraging the G&A in the sales and marketing in 2018, should we expect additional leverage in 2018? Or these investments you mentioned China and some other areas going to up potentially curve the leverage that will see flow through the P&L?.

Like I said, our G&A currently – our total operating expenses are approximately about $3 million a quarter. We are planning to – we will continue to invest in making those decisions, data based decisions.

We anticipate as this related to ours sales and marketing strategy initiatives, you may see some fluctuation on a quarter-by-quarter basis based on our strategic investments that being both within the U.S., and as we've mentioned driving our international strategy..

And then just one last question for you. Just your approach in the Chinese market, I'm just curious, isn't the return on your marketing dollars better in the United States given you already have some brand recognition, so just wondering if you can compare and contrast the returns that you expect to earn in China versus here.

And then tied into that question, is there the same sense of social responsibility among millennial in China that there is here, that’s a big selling point here if not is that an issue?.

That's a great question. So let's start with the U.S. Absolutely, we expect that our return on investment will be higher and more immediate in the United States, because we spent the last five quarters building our brand.

And so because we have recognition, because we built these millions of people that we have now brand awareness with they are further down that buying funnel. We have engagement with them now. They're getting closer to the sale, so we certainly expect those returns to be more rapid and immediate in the United States.

And for that reason, we'll continue to work on our growth in the United States and that's why strategic initiatives, number one is to drive organic revenue growth in the U.S., so absolutely a focus.

While at the same time, China represents one of the largest markets in the world, and they have the largest middle class with a whole lot of ready cash and a great interest in Western brands. And for that reason, China is very interesting to us.

However, we do know through our learning very few short months that we've been working on our Chinese presence at building our brand awareness is going to be paramount.

And so what our marketing team is working on is what that sort of go-to-market activity looks like? What are we going to be doing on social? What are we doing from a public relations standpoint to get the brand in front of the Chinese consumer? It's noisy over there. There are a lot of brands, Western brands that are vying for that consumer.

And so we have to break through the noise and bring awareness to moissanite and that's what our marketing team is working on. We do anticipate that this investment will take longer than others, but we know that it's worth it because of the size of this market and a propensity toward fine jewelry.

I will say that I don't know we're finding that the Chinese consumer is quite interested in social responsibility, but they absolutely are interested in Western brands that are bringing fine and fashion jewelry to market. So for that we believe that we are sitting on an opportunity..

[Operator Instructions] The next question comes from Daniel Nall with Aristides Capital. Please go ahead..

Hi, good afternoon. Nice quarter.

I was going to maybe drill into that SG&A question a little bit more and so you all could comment on whether you think just the absolute level of sales and marketing spend is going to be higher or lower in 2018 than it was in 2017?.

Hey, Daniel. I’d like to say we are – sales and marketing expense is going to be based on our initiatives and that is going to drive the dollars up or down based on our strategic decisions and making investments to get to those strategies..

Let me add to that that the beauty of digital marketing and the beauty of cross-border trade and e-commerce in general is that it's very immediate and we can dial up and dial down those investments as we see what the returns are from the dollars going in. So unlike years ago, I have a lot of great year that I bring to the table here.

Years and years ago, I have to buy six months in advance, the advertising that I was going to do for the companies that I worked for.

Today, we can dial up that advertising in a matter of hours and we can dial down that same advertising investment in a matter of hours, and we can watch through that data what is reacting to these investments and then make smart strategic decisions based on the ROI.

So we can pivot and make those adjustments real time, which is why we couldn't tell you today exactly if we're going to have the same level of spend, but if we're seeing crazy return on investment then we're going to pour more dollars in, if we're seeing lower return on investment, we dial back.

Does that make sense?.

That makes sense.

Can you comment at all maybe how that progressed in the first quarter yet versus last year?.

Yes, we have – unfortunately we don't give guidance or we're not talking about first quarter just yet. So we'll hold on to that. Good news for us is that we're just a short-time away from our Q1 earnings and we'd be happy to chat about it then..

Okay and then maybe one more real quick for me if – should I expect the new inventory like not the old stuff, but the newer stuff.

Should I expect the balance of that to progressively go down through the first half of the year I would say?.

I'm pretty comfortable with our inventory levels right now.

We're finding ourselves sort of flattening out on these numbers here inventory wise and we feel that in just about the right numbers here Daniel to be responsive to our dot com customer, if you're one of the 70 million households that are part of Amazon Prime that when you place an order, you expect it within 48 hours.

And for Charles & Colvard to be on that platform and all of the other e-commerce platforms we need to be that level of responsive. For that reason, we need to have sufficient inventory in stock in order to be responsive to that consumer. And as our online channels grow more and more, we have to be that much more responsive.

I feel comfortable that we're sitting right about where inventory will be. As we drawdown on the legacy, you may very well find that the newer material goes up and we're still sticking around the same total number of inventory dollars..

Okay. Thank you..

You’re welcome. End of Q&A.

[Operator Instructions] Showing no further questions. This concludes our question-and-answer session. I would like to turn the conference back over to Ms. Miglucci for any closing remarks..

All right. Thank you, Gary. Once again, we'd like to thank everyone for taking the time to participate on our call today. We greatly appreciate all of our shareholders, our customers and especially the dedicated team we have at Charles & Colvard. We look forward to being in touch and updating you on our continued progress. Thank you and good evening..

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect..