Item 1. Business
ITEM 1. BUSINESS
OVERVIEW
Envela is a leading provider of recycling and recommerce services at the forefront of the circular economy. Motivated by building long-lasting relationships rooted in trust and transparency, Envela’s brands address a broad range of sustainability and value-driven initiatives that impact consumers and businesses alike. Our core business lines focus extending the lifespan of products through buying and selling goods in the secondary market. The company is comprised primarily of two key operating and reportable segments: consumer and commercial. The consumer segment focuses on selling authenticated high-end luxury goods, including pre-owned and repurposed fine jewelry, diamonds, gemstones, luxury watches, and secondary market bullion. At the same time, the commercial segment provides solutions for de-manufacturing end-of-life electronic assets, reclaiming base and precious metals, and other saleable materials, while also expanding our presence in the ITAD industry. Envela’s subsidiaries are trusted partners for those seeking responsible value in the disposition or acquisition of technology, metals, and luxury hard assets, with each reportable segment contributing to decarbonization and value creation in its own unique way.
Consumer Segment
Our consumer segment is a retail organization that operates several brands specializing in the buying and selling of pre-owned luxury hard assets. Our ability to understand new market trends, while also paying homage to the past with vintage pieces, allows us to be the destination of choice for customers seeking a sustainable and value-driven purchase of some of the world’s most iconic brands. Our team of experts provides a straightforward process for buying and selling items, along with guidance that helps ensure customers feel informed and confident in their decisions. We also offer our customers a unique buying experience, as our jewelry designers introduce sustainably sourced diamonds and gemstones into the manufacturing process, resulting in a diverse assortment of modern designs at achievable price points. Operating as a multi-brand retailer we aim to maximize our market reach, the division was formed through the consolidation of multiple retail merchants, with its roots tracing back more than half a century to the founding of its earliest predecessor in 1972.
The Company has long been associated with precious metals, with a history of trading silver since 1972 and trading gold since the repeal of the U.S. law limiting gold ownership in 1974. Our connection to minting bullion began in the late 1970s. Today, this rich history continues as the Company remains a leading provider of sustainable precious metals products.
Commercial
Our commercial segment operates in multiple sustainability verticals focused on the responsible disposition of end-of-life technology assets. Our electronics recycling business was originally founded in 2009 on the premise of addressing the demand for responsible electronic waste disposal. We focus on adhering to regulations and industry standards, ensuring the proper dismantling and recycling of electronic devices. Our approach prioritizes reclaiming and reusing materials, preventing them from ending up in landfills. Our ITAD business, tracing its origins back to its earliest predecessor in 2007, is dedicated to unlocking the value of consumer electronics within the circular economy. We specialize in assisting businesses with the end-of-life management of their IT assets, including data destruction, asset refurbishment, and remarketing. Our commercial segment also provides detailed asset disposition data that enables our customers to address their sustainability goals and responsibilities to internal and external stakeholders.
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BUSINESS DEVELOPMENTS
Since our founding in 1965, we have consistently evolved, adapting to market changes while our commitment to sustainability has been at the core of our brand’s success. In 2025, Envela will be celebrating its diamond jubilee, marking 60 years, and we are looking forward to recognizing our employees, customers, and stakeholders who have contributed to our journey. Detailed below are significant business developments that impacted fiscal years ending December 31, 2024 and 2023.
Consumer Segment
On September 12, 2024, the consumer segment entered into a purchase agreement relating to the acquisition of the assets of a bespoke fabricator of jewelry in Scottsdale, Arizona (the “Scottsdale Transaction”).
See Note 4 – Changes in Business for further details.
In Fiscal 2024, we rapidly expanded our bricks-and-mortar footprint by opening 5 stores under our Four Nines brand which also features Bijoux Exchange an in-store buying platform. Our Bijoux Exchange brand is an in-store buying platform predicated on the store-within-a-store concept. Personnel are dedicated to customers seeking to monetize their luxury hard assets due to changes in style, damage, financial need, or life events.
Commercial Segment
In Fiscal 2023, the commercial segment began to optimize its overall business model as the commercial segment was born from a series of acquisitions. The business began to focus on unifying its systems, enhancing its business intelligence platforms in support of its commercial and operations teams as well as aligning its cost structure with margin achievement which became steady state in Fiscal 2024. Additionally, the business has focused on diversifying its business lines from those requiring the outright procurement of technology to those involving fees for services. These fee-for-service relationships allow our clients to outsource the management of the testing and packaging of items destined for secondary sales outlets while maintaining control over their inventory.
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MARKET
Each of the Company’s reportable segments has unique market conditions that impact their respective operations. These competitive conditions may adversely affect the Company’s financial condition, results of operations, and its ability to expand and execute its business strategy.
Consumer Segment
Many online and brick-and-mortar retailers are of significant size with substantial resources. We compete to buy and sell pre-owned luxury hard assets such as fine jewelry, luxury watches, diamonds and gemstones, and bullion against established retailers, auction houses, secondary market online platforms, as well as other resale goods marketplaces. Our customers seek to maximize the value of their purchases and have multiple options to evaluate our value and service proposition. Our sales of outright precious metals to refiners and diamonds and gemstones to wholesalers take place at near-spot market values and, as such are not subject to peer competition, but are impacted by macroeconomic conditions impacting their respective markets. All of our products are sourced and sold domestically.
Commercial Segment
Our competition is primarily attributed to the inbound procurement of IT assets and commodities; albeit we do experience certain levels of competition on outright sales of IT assets to consumers. We compete for inbound products against large, diversified recyclers as well as other ITAD-specific companies. Our sales of outright IT assets are primarily marketed through online channels on which our customers can compare like goods against an array of purveyors, with select IT assets being sold wholesale into international markets. Our sales of outright base and precious metals-laden materials are sold at near-spot market values and, as such, are not subject to peer competition but are inherently impacted by macroeconomic market conditions. The commercial segment’s business is also subject to both multi-year and spot transactions, of which the multi-year contracts may be subject to cancellation on short notice.
CYCLICALITY AND SEASONALITY
Each of the Company’s reportable segments has aspects of cyclicality stemming from macroeconomic conditions consumer behavior, and commodity markets, but also from seasonality within a given fiscal year.
Consumer Segment
The consumer segment business experiences seasonality with the fourth quarter holiday months of November and December typically being the highest volume months of the year. However, seasonality is less pronounced than traditional luxury goods retailers as a result of our business being underpinned by our precious metals business, which is driven by the perception of market trends and global economic activity.
Commercial Segment
The commercial segment experiences seasonality with the first quarter months of January and February typically being the highest volume months of the year. We receive a higher volume of assets from our trade-in partners destocking from the post-holiday period.
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ENVIRONMENTAL AND SOCIAL IMPACT
We aspire to operate our business with a positive environmental and social impact while ensuring we create value for our shareholders. We are an environmentally conscious business as we are able to extend the useful life of technology and luxury hard assets along with reducing the reliance on mills and refiners sourcing materials from extractive industries.
Community
We aim to serve and strengthen the communities we operate in by repurposing dormant infrastructure, creating jobs, increasing tax base, and selling sustainably sourced products.
Energy Supply and Resource Consumption
We continue to evaluate opportunities within our store operations, production processes, and supply chains for opportunities to reduce our environmental footprint.
In terms of our electricity, natural gas, and water consumption costs they represented 0.2% and 0.3% of sales for Fiscal 2024 and 2023, respectively.
Sustainability
Sustainability is deep-rooted within our corporate strategy, and instilled in our company values, as a business partner, an employer, a community member, and a value creator for shareholders.
Consumer Segment
Unlike a traditional retail jewelry business, recommerce requires curating an inventory, which is crucial to attracting and retaining customers, and sourcing a diverse inventory takes time and strategy. Due to our size, we are able to source most of our products through our in-store buying programs; except in instances where a new setting or repair is needed. In terms of our retail store footprint, we look to refurbish existing buildings as opposed to ground-up construction which requires new building materials and land consumption. Our recent expansionary efforts have focused on acquiring or leasing former retail bank buildings, which not only offer excellent security infrastructure but are also situated in ideal geographic locations.
In Fiscal 2024 and 2023, the consumer segment sold 2.2 and 2.0 metric tons of refining-grade precious metals destined for new products, respectively.
Commercial Segment
We source products through different strategies, including trade-in programs, returns, buybacks, closeouts, individuals, and companies transitioning technologies. We extend the useful lives of IT assets, divert plastic and base metal waste streams into recycled commodities along with providing precious metal-laden material for refining. As part of our sustainability service offering, we provide traceability of dispositions and ensure we have maximized the recovery of base and precious metals and have taken all steps to reintroduce technology assets back into the marketplace.
In Fiscal 2024 and 2023, the commercial segment sold 1,267,632 and 1,202,838 individual units of secondary electronics and components in which their useful life was extended, respectively.
In Fiscal 2024 and 2023, the commercial segment sold 12,837.7 and 12,862.4 metric tons of electronic scrap containing base and precious metals and other saleable materials destined for new products, respectively.
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HUMAN CAPITAL RESOURCES
We are part of a diverse global community, and we aim to reflect that diversity within our team and values. We believe inclusiveness fosters a collaborative culture allowing for differing perspectives, which fuels our ability to innovate as we work to create a more sustainable future.
Employees
Our management policy is to keep employees informed of material decisions that affect them, encourage employee suggestions, and implement them whenever practicable. We are committed to providing equal employment opportunities regardless of race, color, ancestry, religion, sex, national origin, sexual orientation, age, citizenship, marital status, disability, or gender identity or expression. We sometimes rely on independent contractors and temporary personnel to supplement our workforce, primarily in our commercial segment production facilities. None of our employees are represented by a labor union or covered by a collective bargaining agreement.
In Fiscal 2024 and 2023, we employed 309 and 289 persons, respectively.
Ethics and Compliance
At every level of our Company, we work to create a culture that inspires trust among our employees, with our customers, and in the communities we serve. We empower employees to raise issues and concerns regarding compliance with our code of conduct, policies, and applicable laws by providing third-party and confidential reporting channels. We also believe that ethics and compliance allow us to be a business partner of choice as we are entrusted to substantiate value and authenticity in our consumer segment, while our commercial segment ensures technology assets are responsibly disposed of or reintroduced into the marketplace by our client’s protocols and applicable laws.
Safety
We work to continuously improve all aspects of our safety performance. Our approach to safety is proactive and focuses on active leadership, engagement, risk and hazard identification, training, and verifying controls associated with operating equipment and material handling processes are being adhered to. We also track safety performance using industry-standard metrics. Two key safety performance indicators that we monitor are total recordable injury frequency rate (“TRIFR”) and total lost time injury frequency rate (“LTIFR”).
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The following chart depicts our TRIFR for the past 5 fiscal years:
(1) Number of injuries per 200,000 hours worked.
The following chart depicts our LTIFR for the past 5 fiscal years:
(1) Number of injuries per 200,000 hours worked.
GOVERNMENT REGULATIONS
We use our best efforts to ensure compliance with federal, state, and local laws and regulations, including but not limited to those pertaining to environmental matters, consumer protection, consumer privacy, data protection, waste disposal, truth in advertising, employment, health and safety, building and occupancy codes, metal theft, and AML laws. The laws and
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regulations to which we are subject to include requirements to obtain permits, approvals, licenses or other governmental authorizations to engage in new business or maintain our existing operations. If we violate any of these laws or regulations, we may be subject to civil or potentially criminal prosecution which may result in the imposition of fines and penalties, or cessation of business activities. As a result of business expansion and ever-changing regulatory environments, the past amounts expended to maintain compliance may not be indicative of future requirements. We continually monitor the status of laws and regulations and the impact any developments may have on financial condition and results of operations.
Refer to Item 1A. Risk Factors for further details.
CORPORATE INFORMATION
We were incorporated in Nevada in September 1965. Our Common Stock is currently listed on the New York Stock Exchange (“NYSE”) American under the symbol "ELA." Our principal executive offices are located at 1901 Gateway Drive, Irving, Texas 75038 and our telephone number is (972) 587-4049.
AVAILABLE INFORMATION
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are filed with the U.S. Securities and Exchange Commission (“SEC”). We are subject to the informational requirements of the Exchange Act and file or furnish reports, proxy statements, and other information with the SEC. Such reports and other information filed by us with the SEC are available free of charge on our website at www.envela.com when such reports are available on the SEC's website.
We use our website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.
The contents of the websites referred to above are not incorporated into this filing. Our references to the URLs for these websites are intended to be inactive textual references only.