Brilliant Earth Group, Inc.

Good day and thank you for standing by. Welcome to the Brilliant Earth fourth quarter and fiscal year 2022 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would like to hand the conference over to your speaker today, Alison Milken of ICR. Please go ahead.

Thank you. Good afternoon, everyone. Thank you for joining us for our fourth quarter and fiscal year 2022 earnings conference call. Joining me today are Beth Gerstein, Chief Executive Officer, and Jeff Klob, Chief Financial Officer. For the call today, Beth will begin with highlights of our fourth quarter and fiscal year financial and operational performance and the drivers of future growth. Jeff will follow with more details on the quarter and year and share our outlook. Following this, the operator will begin the Q&A session with our presenters, Beth and Jeff, available to answer the questions you have for us today. Before we start, I would like to remind you that management will make certain remarks today. that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These future forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to our SEC filing for a description of the risks that could cause our actual performance and the results to differ materially from those expressed or implied in these forward-looking statements. These forward-looking statements reflect our opinions only as of the date of this call, and we undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. Also, during this call, we will discuss both GAAP and non-GAAP financial measures. You will find additional information regarding these non-GAAP financial measures and a reconciliation of these non-GAAP to GAAP measures in today's earnings release, which is available at the investor relations section of our website at investors.brillionaires.com. A live broadcast of this call is also available at the investor relations section of our website. With that, I'll turn the call over to Beth.

Good afternoon, everyone, and thank you for joining us today. We're pleased to share our fourth quarter and full year results with you. When we began the 2022 fiscal year, I shared with you that our approach would be to prudently and strategically invest to grow the Brilliant Earth brand and business, to expand our showroom and omnichannel footprint, and to optimize our significant financial and operating advantage with our asset-light, agile, and highly efficient business model, all with an eye on delivering profitable and sustainable near and long-term growth and on extending our lead as a transformative, modern fine jeweler for today's consumer. While there were certainly unexpected turns in what we all know was a challenging 2022, I'm incredibly proud of our ability to adapt in a changing environment and to gain market share while also staying focused on our dual goals of building and protecting our brand and driving healthy, profitable growth. I'm pleased to report that today's results reflect the success of that approach. Full year revenue grew 16% to $440 million, which represents a 31% four-year CAGR and and 197% four-year stack. As a note, we're providing a four-year comparative due to the anomalies of the COVID years, and as we believe, the 2019 base provides a more normalized benchmark. As we expected, we delivered Q4 revenue of $120 million as the industry came off its biggest year ever in bridal, and we strategically expanded our focus to prioritize growth in fine jewelry. On a four-year CAGR basis, Q4 grew 28% and 170% on a four-year stack. For both the full year and the fourth quarter, we realized record order levels. Our orders grew to approximately 150,000 for the year and approximately 45,000 for the quarter, representing 27% and 14% year-over-year growth respectively. Full year gross margin was 53.3%, a 400 basis point expansion and the highest annual gross margin in our history. Q4 gross margin expanded 360 basis points to 54.7%. We delivered $39 million in adjusted EBITDA for the full year, an 8.9% margin. In Q4, we were very pleased to deliver adjusted EBITDA ahead of our expectations. at $11 million, a 9.2% margin. As you know, these results were delivered in a rapidly shifting consumer and macro environment, and I'm incredibly proud of and grateful for the hard work and dedication our team demonstrated in delivering them. As I said last quarter, we took a more conservative view of the consumer environment and chose not to participate in what we expected to be an aggressive promotional environment. By focusing on quality growth, operational excellence, and building and protecting our premium brand position, we continue to gain share and deliver strong profitability. This again demonstrates our ability to stay focused on executing against our priorities while managing within a dynamic environment. I want to talk about just a few of those priorities today, both the progress we've made over the past year and our focus forward. First, the Brilliant Earth brand. It was a great year for our brand. As a digital-first brand catering to Gen Z and millennial consumers, we know that we have to win in social. We saw our efforts to lead in social pay off in both our brand reach and growing brand awareness. In fact, online searches for Brilliant Earth reached an all-time high, and we saw positive momentum across many other metrics, including a 38% growth in our email capture. We know that self-purchase is an important and growing trend in the jewelry category. And for Brilliant Earth, our strong brand resonance across genders has been a major driver of new customer and order growth. The total number of customers we served grew approximately 25% for the year. And we're excited to see the estimated number of self-purchase orders by females grew by approximately 70% year over year. which tells us that they love our brand and product designs. Our investments in building the brand are driving relevance and resonance with our community. During 2022, we made huge strides in deepening our engagements with customers across social channels, ending the year surpassing 100 million video views. This is just one example of where we've seen strong growth in our share of voice and overall brand awareness. In fact, in 2022, we saw close to a 70% increase in media impressions year over year. Key influencer-led campaigns have been one aspect of this success, and we intend to build on them. You can expect that we will continue to lead in social as we scale, emphasize our mission-driven storytelling, and amplify our unique product offerings. And speaking of product, 2022 was an incredible year for us. We made major progress in curating our design-led product offerings, particularly in fine jewelry. We successfully launched new collections and collaborations, including men's fine jewelry and cocktail rings. In Q4, fashion rings, including our new cocktail ring assortment, generated strong results, as did key on-trend items, such as tennis bracelets and necklaces. The success of these launches drove strong growth in our fine jewelry business. As I said up front, we enjoyed record orders for the year, and we know that our fine jewelry is also attracting new customers to our brand. In Q4, more than one-third of our new customers purchased fine jewelry, and fine jewelry was a record 16% of total company bookings in December. We intend to build on this momentum in 2023 and beyond, as we will make further investments to drive growth and become known as the fine jewelry destination for the next generation consumer. During the year, we saw continued strength in wedding bands, and as we look ahead, we will also continue to focus on and grow our core bridal business. As I said at the outset, 2021 was an unprecedented year of growth in bridal for our industry, and while we anticipate some normalization over the course of this year, we expect to continue to drive share gains as we introduce new collections, including in the coming weeks. Equally important, bridal is a resilient category. We continue to drive strong bridal growth relative to 2019 on a four-year stack basis and are excited about the year ahead. During the quarter, we launched three showrooms, Palo Alto, Santa Monica, and Baltimore, adding 10 new showrooms during the year and bringing our year-end total showroom count to 25. Our showrooms continue to generate strong results in increased Metro bookings, as well as overall uplift over time, further reinforcing our confidence in our omni-channel model. As we've grown our showroom footprint, we've continued to test and evolve various formats and the many attributes that enhance and elevate the overall experience for customers. As we begin 2023, we are expanding our showroom rollout and expect to open at least 10 new showrooms this year. In Q1, we've just opened in Charlotte, North Carolina, and in the near future, we'll be adding Brooklyn, Tampa, and Pasadena. This year, we will continue to test and evolve our showroom concepts and execution, including new formats, such as mall-based showrooms, and evolving the overall customer experience from brand and product storytelling to enhanced service levels, including personalization, customization, and other premium services. I think it's important to point out our ability to elevate our customer experience and to drive growth has been fueled by the investments we have made in technology this year, including a new CRM system and a workforce platform for managing our multi-channel customer facing teams. With 2022 in the books, we're looking ahead to this year with a keen focus on continuing to execute against our mission and our growth priorities. in order to deliver healthy, sustainable, profitable revenue growth. We recognize that we are operating in an ever-changing dynamic macro environment, and I believe 2022 demonstrated our ability to adapt as appropriate and to deliver. We intend to build on that experience in 2023. You can expect we will continue to advance our mission of transforming and modernizing the jewelry industry by leading in transparency, sustainability, and inclusivity. In fact, we've just released our second mission report in which we highlight our progress across a number of areas. Among the many results we highlight, you'll find that 98% of gold and 97% of silver in our jewelry is from recycled sources. Within our diamond supply chain, over 90% of our diamond manufacturers have been audited for safe and healthy working conditions. Last year, we donated over half a million dollars through the Brilliant Earth Foundation to causes that align with our mission and values. These are just a few of the results of our ongoing efforts. I encourage you to read our report on our website to better understand both our progress and our commitment to extending our industry leadership. Looking ahead for the year, our priorities remain consistent. To continue on our path to become the premier global jewelry brand for today's and tomorrow's consumer, driving awareness, resonance, and relevance. To expand and refine our product offerings to create distinctive, high-quality products. To expand and elevate a seamless omni-channel experience across our showrooms and e-commerce. And to invest in the technology and systems to enable our growth. We will execute against these priorities with a keen eye on the consumer and a sustained focus on managing with agility in any environment. We feel great about the strength of our brand and the resilience of this category, and we are balancing that with some degree of caution given the current environment and recognizing that we are coming off our biggest year in weddings. We are confident that we are well-positioned to continue to take share and to deliver another year of healthy, profitable growth. Jeff will take you through our outlook for the year. So I'll conclude by again, complimenting our great team for their dedication and commitment to delivering for our customers and shareholders. Thank you. And here's Jeff.