Brilliant Future AB

Good day, and thank you for standing by. Welcome to the Brilliant Earth second quarter 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 will need to press star 1-1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Allison Malkin with ICR. Please go ahead.

Thank you. Good afternoon, everyone. Thank you for joining us for our second quarter 2022 earnings conference call. Joining me today are Beth Gerstein, Chief Executive Officer, and Jeff Close, Chief Financial Officer. For this morning's call, Beth will begin with highlights of our second quarter financial and operational performance and the drivers of our future growth. Jeff will follow with more details on the second quarter financial results and guidance. 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 Security 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 opinion 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.grillionaires.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.

As we approach our one-year anniversary as a publicly traded company, we are pleased to report our fourth consecutive quarter of strong, profitable growth. It's been an incredible year for our company, one in which we've grown the reach and impact of our mission to cultivate a more transparent, sustainable, compassionate, and inclusive jewelry industry. We're proud of the progress our outstanding team has made to date, and we're intently focused on the future. With a clear mission, a proven track record, and significant opportunities for expansion, we are excited about our near and long-term potential. We're pleased with our second quarter results as they demonstrate our continuing ability to navigate in a rapidly changing macroeconomic environment. By staying focused on nimbly and prudently executing our strategy while optimizing our asset light business model to grow the brand, We are in a strong position to continue to take share in a fragmented industry and to prudently manage our costs so that we continue to deliver profitable growth. A high-level review of our Q2 results demonstrates the effectiveness of this approach. We grew revenue 18% to $108.8 million. We delivered record gross margin of 53.1%, a 460 basis point improvement over the prior year. And we delivered $9.6 million in adjusted EBITDA, representing an adjusted EBITDA margin of 9%. Recent highlights include the continued expansion of our omnichannel strategy with the opening of showrooms in Bethesda, Columbus, Houston, Minneapolis, Cleveland, and Detroit to bring our reach to 21 showrooms in which our customers can experience a personalized, joyful shopping experience. With each new showroom opening, we bring more consumers to our brand, while also deepening our relationships with both new and returning customers. Technology is a big part of delivering an exceptional omnichannel customer experience. Our continued investment in technology and data is helping us in multiple ways. Our seamless experience allows customers to shop how and when they want, For example, we've recently launched an online waitlist to ensure customers can get the right appointment for their schedules, even if we are fully booked. Equally important, our showrooms deliver strong ROI. Going forward, we are maintaining our line of sight to nearly doubling our showrooms this year. Our showroom strategy has been and will continue to be a major catalyst for building our brand. Whether in our showrooms or on our website, in Q2, we continue to deliver design-led, proprietary products that our customers loved across our curated assortment. But today, I'll start with fine jewelry, a fast-growing, small percentage of our total mix with huge growth potential. As a reminder, for us, fine jewelry consists of earrings, necklaces, bracelets, and fashion rigs. For Mother's Day, we enjoyed strong success, delivering over 350 basis points of growth in fine jewelry mix over the prior year. We also launched men's fine jewelry, including necklaces, bracelets, chains, and cufflinks to an enthusiastic response. This is a new collection we launched in time for Father's Day, and customers were so excited they found the products on our site even before we marketed them. When we did launch, our strategy included key influencers, media, and social content and generated nearly 80 million impressions while introducing new consumers to our brand. One of the drivers of this enthusiasm for our brand is how we are executing on social platforms where our customers are, including TikTok, to extend our brand reach. And while millions of views are impressive, it's our engagement and community building that we're most excited about. In fact, in a recently conducted brand survey, 13% of customers indicated they learned about Brilliant Earth on TikTok. And you've heard me say it for the past two quarters, 2022 is the year of the wedding, and we continue to capitalize on this. Both men's and women's wedding bands have grown faster than our overall business year to date, led by the strength of our product assortment and a record number of weddings that have driven demand. As you know, Bridal and wedding are highly considered purchases, where consumers normally shop with a budget. During the quarter, our AOBs were generally in line with past quarters, and we continued to consistently realize profit on first purchase and see growth across our price points. As our brand grows, new and returning customers look to us for trend-leading proprietary product, design, and craftsmanship. In concert with our deep supplier integrations and technology, we added thousands of new Lab & Natural colored diamonds, offering our customers an even broader on-trend assortment of colors, shapes, and price points from which to choose. We know that consumers want choice. Our ability to leverage data, to understand our customers' preferences, and then to optimize the breadth and depth of our diamond assortment which today includes over 200,000 lab and natural beyond conflict-free diamonds, enables us to effectively serve the broad needs of our customers. And finally, true to our mission, we launched Truly Brilliant, an expertly curated collection of diamonds with the perfect balance of cut, color, and clarity, and verified sustainable sourcing. The assortment includes natural diamonds with blockchain-powered mine-to-market traceability for industry-leading transparency. This collection is targeted for the discerning luxury consumer, one who we are increasingly attracting, who is seeking premium quality and highly differentiated characteristics. These products and brand stories and the results that they drove illustrate what makes BrilliantArt special, our mission, our brand, our unique and powerful business model, and our team, one whose hard work and commitment is truly exceptional. In fact, the number one reason employees join Brilliant Earth is because of our mission. In any environment, and as we have since our founding in 2005, we focus on creating the future by serving our customers joyfully and responsibly, creating trend-leading, sustainable products, and delivering profitable, sustainable long-term growth. We are pleased that we are able to profitably grow and increase market share in a volatile environment. and remain confident in our outlook for the full year. As we look ahead to the rest of the year, we will remain cognizant of ongoing macroeconomic uncertainty, and you can expect that we will continue to manage the business as we always have in a nimble fashion to deliver profitable growth and extend our leadership in the fine jewelry industry. And now, I'll turn it over to Jeff.