Brilliant Earth Group, Inc.

Good day, and thank you for standing by. Welcome to the Brilliant Earth fourth quarter and full year 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the presentation, there will be a question and answer session. To ask the question during the session, you will need to press star 11 on your telephone. You will hear an automated message advising your hand is raised. To answer your question, press star 11 again. And please be advised that today's conference is being recorded. I will now turn the conference over to Stephanie Layton, Senior Vice President, Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. Welcome to Brilliant Earth's fourth quarter and full year 2023 earnings conference call. Joining me today are Beth Gerstein, our Chief Executive Officer, and Jeff Guo, our Chief Financial Officer. During the call today, management will make certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to our SEC filings for a description of the risks that could cause our actual performance and results to differ materially from those expressed or implied in these forward-looking statements. These forward-looking statements reflect our opinion only as of the date of this call, and we undertake no obligation to revise or publicly release the results of any revisions to these forward-looking statements in light of new information or future events unless required by law. Also, during this call, management will refer to certain non-GAAP financial measures. A reconciliation of Brilliant Earth non-GAAP measures to the comparable GAAP measures is available in today's earning release which can be found on the Brilliant Earth Investor Relations website. I'll now turn the call over to Beth.

Good afternoon, and thank you for joining us today. 2023 ended on a high note with our team's exceptional execution throughout the holiday season. Our record revenue in Q4 and the full year capped a strong 2023 performance. I'm pleased that in a year that we anticipated to be transitional and dynamic, we delivered against our strategic priorities, drove another year of healthy, profitable growth, and gained significant share in the $300 billion jewelry industry. Here are a few noteworthy highlights from 2023 and Q4. Q4 net sales grew by 4% year-over-year to $124.3 million, which was within our revenue guidance and which represented 97% growth on a four-year stack. Full-year net sales grew 1.5% to $446.4 million, which represented 122% growth on a four-year stack. We estimate our full-year revenue growth outperformed the industry by 750 basis points, highlighting the strong resonance of our brand among jewelry purchasers. Our Q4 product bookings growth, excluding engagement rings, increased 28% year-over-year. We also drove record order volumes. Total orders grew to approximately 53,000 for the quarter and 175,000 for the year, representing 18% and 17% year-over-year growth, respectively. Q4 gross margin was 58.7%, or a 400 basis point increase year-over-year. Full year gross margin was 57.6%, reflecting a 430 basis point increase year over year. Both were the highest gross margins in company history. Our Q4 adjusted EBITDA of $5.3 million, or a 4.2% margin, was ahead of our expectations, and we delivered $26.2 million in adjusted EBITDA for the full year, or a 5.9% margin. This was our fourth consecutive year and 10th consecutive quarter as a public company delivering positive adjusted EBITDA, reflecting our discipline in operating the business profitably and our ability to manage the business nimbly. I am incredibly grateful for and impressed by our team and their ability to execute and deliver these results in a dynamic environment. Our focus on elevating the Brilliant Earth brand deepened our customer engagement throughout the year. ending with over 250 million organic video views. In addition, online searches for Brilliant Earth reached an all-time high in Q4, and we experienced 30% growth in our email and SMS signups in 2023. The positive momentum we saw across these metrics reinforces our prominence as a leader in social engagement. And our unaided brand awareness for both engagement and fine jewelry has more than doubled in less than two years. Our 2023 campaigns, supported by celebrity and influencer partnerships throughout the year and culminating with our Soul Collection and holiday campaigns, earned us over 2 billion media impressions. And our partnership with Emmy-nominated actress Camille Marone during the Soul Collection launched earned us recognition as one of Us Weekly Magazine's Best Celebrity Brand Partnerships of 2023. More recently, we were delighted to see actresses Ayo Edebiri, Junot Temple, and Zooey Deschanel, each wearing a beautiful assortment of Brilliant Earth jewelry on the red carpet at the Emmys and Oscars. This visibility and elevation of our brand is incredibly exciting and shows our continuing success in driving high-profile awareness of Brilliant Earth. Turning to our fine jewelry assortment, customers are increasingly seeking Brilliant Earth for their essential jewelry pieces, like tennis bracelets and necklaces, as well as popular styles such as bangles and cocktail rings. In 2023, we introduced curated assortments of distinctive, trend-leading pieces with the launch of several new collections, including our Seoul collection. We are very pleased with the results we are seeing from Seoul, with the collection's productivity far outpacing prior collection launches. and we ended 2023 with record performance across our fine jewelry assortment. In December, fine jewelry reached an all-time high at 21% of bookings, and we had our biggest fine jewelry quarter ever in Q4. We are succeeding in driving both new and repeat fine jewelry purchases, as well as self-purchase and gifting, as we continue distinguishing ourselves as the fine jeweler of choice for today's consumer. In fact, Customers whose first Brilliant Earth purchase was from our fine jewelry assortment increased 46% in 2023, highlighting the increasing awareness of Brilliant Earth as a fine jewelry destination. Another area of strength was in wedding, anniversary, and fashion rings, which produced strong double digit growth in Q4. We believe we made significant bridal share gains in 2023, which was a challenging year for the industry. In Q4, order volume for engagement rings above $10,000 increased year-over-year in a positive contrast to the trend from the past few quarters. Additionally, the average sales price for engagement rings was up 4% year-over-year in Q4, demonstrating the strong resonance of our premium brand with consumers. And we continued to lead in product innovation and design last year by launching new products like our capture collections, lab diamonds grown using carbon captured before it can be released into the atmosphere, and our 100% renewable collection, featuring lab diamonds manufactured with 100% renewable energy, both of which have resonated strongly with our customers. We also continue to elevate our customer experience last year across our showrooms and e-commerce platform. We opened 12 new showrooms, including smaller formats, and our first indoor mall locations And we expanded our cluster showroom footprint with multiple locations in a metro area. On the digital front, we released hundreds of new features as we continue to provide an industry-leading digital shopping experience. We're very pleased with the ongoing evolution of our omnichannel model and the key role our showrooms play in attracting new customers and deepening customer relationships. In 2023, we made great progress towards our goal to transform and modernize the jewelry industry by leading in transparency, sustainability, and compassion. We just released our third mission report, where we highlight progress towards our multiple long-range goals. Among our contributions last year, we donated over 950 volunteer hours in our communities and sponsored a meal program for approximately 1,000 children in northern Tanzania. We also expanded our inclusive sizing ranges to our full assortment of rings, improved the energy efficiency in our new showrooms, and reached our goal of auditing 100% of our lab diamond manufacturers for safe working conditions. You can read more about our impact and our mission report available on our investor website to better understand our commitment and industry leadership. Turning to our outlook for 2024, We plan to continue making investments towards driving sustainable long-term growth, and as always, to do so in a disciplined and responsible manner, being cognizant of the industry and macroeconomic environment. This includes continued brand amplification, product innovation, elevating our distinctive omni-channel customer experience, and continuing to drive operational efficiencies across our business. we are already making great progress towards our 2024 product innovation and brand amplification goals. We continue to lead in product design with our recently launched tube collection, a diamond micropave-focused fine jewelry collection, and curated limited edition pieces such as our recently released Lunar New Year pendant. Turning to our showrooms, over the past three years, we have executed against our expansion plan by adding 28 showrooms across the country with a range of formats. New showrooms open at least one year have paid back on average within 16 months and have demonstrated strong post-opening metro uplift. We continue to have strong conviction in showrooms as a key driver of our growth. Our showroom focus for 2024 will be on continuing to amplify the consumer and brand experience in our showrooms, drawing learnings from openings of recent showrooms across a range of formats and locations, and planning for the next phase of our expansion. Understanding that retail requires constant reinvention and evolution, we believe this is a perfect opportunity to double down on our existing fleet. Customer experience enhancements will include amplified seasonal installations and visual merchandising and design enhancements to provide a richer experience of the Brilliant Earth brand for our showroom customers. As we continue to amplify the customer and brand experience in our existing showrooms, we also plan to open two to four new showrooms in the second half of this year. We believe that both continuing to enhance the consumer experience in our existing showroom fleet and selectively opening new locations will put us in an excellent position to drive both near and long-term growth. Turning to our financial guidance, in the first quarter, we've continued to experience a dynamic environment similar to recent quarters. In this environment, we anticipate approximately flat net sales in the first quarter compared to Q1 last year. This reflects continued share gain for Brilliant Earth in the still normalizing bridal and jewelry industry. For the full year, we expect to continue making investments that will set the stage for long-term sustainable growth while also driving current and future share gains and profitability. We do expect 2024 to reflect a profitability turning point with adjusted EBITDA margin increasing each year from 2025 to 2027. Jeff will take you through our outlook in more detail. In closing, we have a compelling opportunity to make outsized share gains in this evolving environment by capitalizing on our brand strength, product differentiation, elevated consumer experience, agile data-driven business model, and strong balance sheet. We believe that our strategy combined with our ability to execute will position us well in both the near and long term. With that, I'll now turn the call over to Jeff.