Brilliant Future AB

Good day and thank you for standing by. Welcome to the Brilliant Earth first quarter 2023 earnings conference 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'll 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 now like to hand the conference over to your speaker today, Alison Malkin of ICR.

Thank you. Good afternoon, everyone. Thank you for joining us for our first quarter fiscal year 2023 earnings conference call. Joining me today are Beth Gerstein, our chief executive officer, and Jeff Kuo, our chief financial officer. For our call today, Beth will begin with highlights of our first quarter financial and operational performance and update the progress we have made on our strategic priorities. 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 unless required by law. Also, during this call, we will discuss both GAAP and non-GAAP financial measures. you will find additional information regarding these GAAP financial measures and a reconciliation of these GAAP to non-GAAP measures in today's earnings release, which is available at the investor relations section of our website at investors.brianearth.com. A live broadcast of this call is also available at the investor relations section of our website. And with that, I'll turn the call over to Beth.

Good afternoon and thank you for joining us today to review our first quarter BISCOL 2023 results. It's been a good start to the year with our performance reflecting the continued execution against our near and long-term growth goals with an unrelenting focus on building our brand, growing our share in a dynamic and highly fragmented market, and delivering ongoing sustained profitability. I'm pleased to report that in the eight weeks since we shared our year-end performance, we are reporting first quarter results today that have again exceeded our expectations. We're pleased to deliver these results in a macro environment that has remained relatively unchanged from just two months ago. Highlights include revenue was $97.7 million, which represents minus 2% year-over-year growth and a 27% four-year CAGR. Gross margin was 54.9%, a 480 basis point increase versus Q1 2022. And we delivered adjusted EBITDA of $5.5 million, or a 6% adjusted EBITDA margin. For those of you who know Brilliant Earth, you will recognize the consistency of our mission-driven focus to disrupt and transform the jewelry industry and to extend our lead as the jeweler for today's consumer. As I said on our year-end earnings call, our priorities for 2023 will 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 omnichannel experience across our showrooms and e-commerce, and to invest in the technology and systems to enable our growth. Today, I'd like to touch briefly on a few of the first quarter drivers of our performance against those priorities. As always, it starts with our brand. For us, sustainability, transparency, and inclusivity are embedded in our DNA. and we aim to reflect them in the product and stories that we share with our customers. As we do, we see growing awareness and share gains for our brand. In Q1, we grew our share of voice with 85% more media impressions than last year by featuring our trend-leading product with influencers like Nick Feil from The Bachelor, who shared his proposal with a brilliant earth ring with his 1.1 million Instagram followers. or singer-songwriter Kelsey Ballerini wearing Brilliant Earth at the Grammys. Our ability to execute milestone moments with our distinctive product and social and cultural influencers extends our reach as the largest single brand independent jewelry company in the U.S. It has also elevated our position to be among the top jewelry brands for share of voice. In our most recent brand survey, Aided brand awareness with our demographic grew to 66%. This is a 12-point increase from our measurement approximately two years ago and an indicator of the continuing success we've had in engaging with our millennial and Gen Z target audience. Over the past many years, word-of-mouth recommendations have been primary building blocks for the brand. We expect that to continue while we also expand the channels, platforms, and people that amplify our voice and bring new consumers to Brilliant Earth. We've seen expansion of our reach reflected in our total customer growth, as well as growing fine jewelry self-purchase rates. One of the biggest moments in Q1 was, of course, Valentine's Day. We take tremendous pride in our ability to capture moments of celebration and love for our customers. And what better example than Valentine's Day? Our heart diamond assortment generated strong results along with our expanding assortment of personalized and customizable products. And as a result, for the Valentine's Day holiday gifting period, we generated approximately 70% year-over-year growth in fine jewelry orders. Just as sustainability, transparency, and inclusivity are core to our brand, so too is the quality, craftsmanship, and uniqueness of our product. Our partnership with StepShap, founder of Future Earth, is a great example of how we bring those principles to life with beautiful and meaningful product. This Earth Day, together with staff, we launched a 10-day campaign to advance our shared mission. In addition to educating our community about small steps they can take toward a more sustainable Earth, this partnership highlights what makes our fine jewelry special. We use recycled precious metals and ethically sourced and sustainably created diamonds and gemstones. to deliver on our promise to provide beautiful, unique, trend-leading, and coveted products to our customers. This builds on our already strong bridal offering. Customers recognize Brilliant Earth as a leader and innovator in bridal, from the new trend-leading and proprietary designs we create to the varied on-trend fancy shapes and broad selection of natural and lab diamonds across all budgets. In Q1, we launched the Mosaics Collection, exclusively available at Brilliant Earth. further reinforcing our design leadership with distinctive engagement rings and wedding bands. As you've heard me say often, bridal is a highly resilient category, even as we know we are coming off an unprecedented period for weddings. While we anticipate some normalizing throughout this year, we are quite confident in our ability to continue to grow both demand and market share, as we are increasingly recognized as the go-to brand for high-quality, distinctive bridal jewelry. As planned, we've started the year with openings of six new showrooms in Charlotte, Brooklyn, Tampa, Pasadena, Nashville, and Fairfax, bringing our total showrooms to 31. The overall sales uplift that our showrooms generate when we open in new markets is, of course, an important business driver, and we've continued to see strong performance, including a year-one post-opening Metro bookings uplift of approximately 100% for showrooms open at least one year. Showrooms are also an important part of our overall brand building efforts. Take Brooklyn, for example. We had our eyes on Williamsburg and Brooklyn for some time, as we all know that it's a vibrant community, and our data suggests it would be a great market for us, given its popularity with Gen Z and millennials. We opened in a great location on 6th Street, which is a popular spot for other luxury retailers and D2C millennial-focused brands. Opening weekend was a huge success, as our appointment schedule was 100% booked. and we've had great early response to both our bridal and fine jewelry collections. As we progress through the year, you can expect that we will continue to test and evolve our showroom concepts and executions, including new formats such as mall-based showrooms and evolving the overall customer experience. We're on track to end the year with at least 35 showrooms in total. As a digital-first company, Our success in scaling our omnichannel model is fueled by the investments we continue to make in the technology and systems that will enable our growth, as well as our continuous test, learn, and iterate approach. Our agile development cycle allows us to release new features and functionality every several weeks, including features that enhance our ability to adapt and individualize customer shopping experience to their preferences, ongoing refinements to curation and personalization, and our ever-improving and evolving e-commerce experience. These all reflect our obsession with the customer and, in turn, our commitment to providing the most personalized and joyful experience for them. I'll close by reiterating how pleased we are with our start to the year and by thanking our team and expressing my confidence in our team's ability to continue to execute both our near and long-term growth plans. With Mother's Day only three days away, we're excited to help our customers celebrate a great Mother's Day. Thank you for your continued interest and support. Here's Jeff.