Brilliant Future AB

Hello, and thank you for standing by. Welcome to Brilliant Earth's third quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. It is now my pleasure to introduce Allison Malkin with ICR.

Thank you. Good afternoon, everyone. Thank you for joining us for our third quarter 2022 earnings conference call. Joining me today are Beth Gerstein, our Chief Executive Officer, and Jeff Kuo, our Chief Financial Officer. For this afternoon's call, Beth will begin with highlights of our third quarter financial and operational performance and the drivers of future growth. Jeff will follow with more details on the quarter 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 filings 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.brillionaire.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 are pleased to share our third quarter results with you, which reflect our fifth consecutive quarter of profitable growth as a public company. These results are the continuation of the multi-year strategy we've been executing to transform the jewelry industry. Transform an industry. I know that is a bold and ambitious aim, But I start there because it is core to everything we do. Our mission to cultivate a more transparent, sustainable, compassionate, and inclusive jewelry industry is unwavering. This is our commitment is to building sustainable long-term profitable growth for our company and our shareholders. We all know that 2022 has been a challenging environment for most companies. As you've heard from us every quarter, We believe that as a growth company, two of our fundamental and related differentiators are our commitment to building and protecting our brand and to driving healthy, profitable growth. And while the macro environment is clearly affecting consumers, I'm very proud of our team's ability to stay focused on delivering on that commitment and delivering for our customers and for our company. I continue to be inspired by their agility and dedication. This quarter, we delivered revenue growth of 17% to $111.4 million. We delivered another quarter of record gross margin at 54.7%, a 430 basis point improvement over the prior year. And we delivered $10 million in adjusted EBITDA. representing an adjusted EBITDA margin of 9%. So what drove those results? First, it was the Brilliant Earth brand and its continuing resonance with millennial and Gen Z consumers, particularly those who share our mission-driven values and who seek our industry-leading craftsmanship and trend-forward unique designs. We know this because they tell us so. As a data-driven company, we are continuously engaging with consumers and using those insights to enhance every aspect of their experience with our brand. For example, we know that our millennial and Gen Z shoppers continue to over-index on research from word of mouth and social media. So during the quarter, and as we have throughout the years, we highlighted stories and products by scaling new and original video content focused on weddings, both engagement rings and wedding bands, as well as fine jewelry across a range of collections. Last quarter, I mentioned that a recent brand study told us that 13% of our customers learned about Brilliant Earth on TikTok. Knowing that, during the third quarter, we scaled significantly more content, including influencer, organic, and branded content, with 50% content growth quarter over quarter, and saw a more than 200% increase in viewership. We also focused on key influencer content for the wedding season with brides shopping in our showrooms, showcasing the best wedding day jewelry, and offering Q&A for styling, driving millions of views. These efforts expanded our brand's reach as we saw growth in both new and repeat customer orders and amplified many product lines that fueled our growth. We continue to see growth in our business with particularly strong growth in wedding bands, driven in part by our growing assortment of unique men's and women's designs, and fine jewelry, which as a small but rapidly growing category continues to outpace our overall growth. Shifting to our showroom strategy, as you know, as a truly omnichannel brand, expanding our showroom locations is a critical part of our growth plans. We've continued our rollout with new showrooms opening in St. Louis, Palo Alto, Santa Monica, and Baltimore, bringing our total to 25 showrooms in key markets across North America. Consistent with our past experiences, showrooms continue to generate uplift within the overall metro areas in which we open. Our showrooms drive growth in average order value and, equally important, deliver strong ROI, reinforcing our belief in the power of the showroom model. We anticipate that we will end the year having approximately doubled our total showroom leases. Our showroom strategy has been and will continue to be a major catalyst for building our brand and business, and we will continue to take a disciplined, ROI-driven approach as we open new, high-quality showrooms. Our ability to create a seamless, joyful omni-channel experience is one of Brilliant Earth's distinguishing attributes. We are continually testing, iterating, and enhancing features across our platform to ensure that we are providing a best-in-class experience and service level, whether in enhanced chat features, evolving imagery and video to further showcase jewelry in real life, or enhancing our appointment scheduling and follow-up. we are providing the highest quality, most personalized, and complete experience in the industry. Our customers give us consistently great feedback on their experience, and as innovators in the industry, we will continue to evolve and lead as we grow. While we're pleased that we have continued to drive sustainable, profitable growth, as we look to finish the year, macro headwinds and the anticipated promotional environment are more difficult than earlier in the year. causing us to be more cautious about our fourth quarter revenue outlook. While we are still seeing strong consumer interest demonstrating the resonance of our brand, we are seeing a further lengthening of the decision-making process given the macroeconomic uncertainty as more customers take a wait-and-see approach. Our outlook reflects our continuing focus on driving high-quality revenue, and prudently making ROI-driven investment decisions to deliver long-term profitable growth. As dynamic as the environment is, we recognize that the key weeks of holiday selling are still ahead of us, and we are well prepared to take advantage of the season. We have a number of trend-leading product launches in our plans, including cocktail rings, a new and expanded Fairmind assortment, a new Art Deco-inspired bridal collection, the expansion of our popular Tecori collection, and continued expansion of limited edition products, to name just a few. We will also continue to make disciplined ROI-focused investments that support our long-term growth plans, such as continuing to strategically grow our showroom presence. I am very confident in our ability to navigate in this and any environment. Our asset-light and agile data-driven business model, coupled with our strong balance sheet, enables us to be both opportunistic and patient through a changing landscape. You can expect that we will stay focused on making sound long-term investments to drive our future growth, while also managing our costs to deliver sustainable top-line growth and bottom-line profit. As I have said in the past, By nimbly and prudently executing our strategy while optimizing our model to grow the brand, we are well positioned to continue to take share in a fragmented industry, to prudently manage our costs, and to deliver profitable growth, all while we continue to advance our mission to transform the jewelry industry. And now, I'll turn it over to Jeff.