Brilliant Future AB

Good day, and thank you for standing by. Welcome to the Brilliant Earth first quarter 2024 earnings call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there'll 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 today's conference is being recorded. I would now like to hand the conference over to your speaker today, Allison Malkin of ICR. Please go ahead.

Thank you, and good afternoon, everyone. Welcome to Brilliant Earth's first quarter 2024 earnings conference call. Joining me today are Beth Gerstein, our chief executive officer, and Jeff Close, our chief financial officer. During the call today, management will make certain forward-looking statements within the meeting 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 revision 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 earnings 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. I'm excited to report that we started this fiscal year driving continued success on our strategic initiatives and delivering our 11th consecutive quarter of profitability as a public company. By driving strong order growth, further expanding gross margin, and delivering strong marketing efficiency, we far exceeded our profitability expectations for this quarter. I'm proud of our consistent record of gaining share and delivering profitability through many environments. And this quarter's outperformance is another example of both our focus and our agility. Our results continue to show the increasing resonance of our brand and the success with which we execute and gain share in the still normalizing $300 billion global jewelry industry. We're beginning the year with positive momentum, and we believe we are in a great position to deliver on our goals for the full fiscal year. Here are a few noteworthy performance highlights from Q1. Net sales were approximately flat year-over-year at $97.3 million and within our revenue guidance range. Total orders increased by 13.7% and repeat order volume increased by more than 20% year-over-year. Average selling price, or ASP, grew year-over-year across our product assortment, including engagement rings, wedding vans, and fine jewelry. Gross margin was 59.9%, or a 500 basis point increase year over year. Q1 adjusted EBITDA of $5.1 million, or a 5.2% margin, was ahead of our expectations. Our outperformance on profitability serves as another testament to our premium brand positioning and to our ability to manage the business nimbly, including highly disciplined management of our marketing spend. I'm incredibly grateful for and impressed by our team and their execution to deliver consistent and sustainable profitability. I'd like to touch briefly on a few first quarter success drivers, including brand, product, and our omnichannel experience. As you know, we continually focus on elevating and expanding the Brilliant Earth brand, and Q1 was no exception. For the biggest gifting holiday of the quarter, Valentine's Day, We launched our Real Love campaign, featuring the love stories of Brilliant Earth customers to a resounding response, including strong social and media engagement with prominent spots on Good Morning America and with Jenna and Hoda on the Today Show, resulting in over 50 million media impressions. Additionally, following on this year's earlier red carpet success, where we were the brand of choice for some of today's brightest young stars, We were thrilled to have Sydney Sweeney dress head to toe in Brilliant Earth jewelry for the 35th annual GLAAD Media Awards. The first quarter was also a big moment for us on social media with our strongest ever social engagement. With a combination of organic and influencer-driven content, we saw overall social media engagement grow 100% quarter over quarter. On Instagram alone, we saw impressions and video views grow approximately 100% and 258% quarter over quarter, respectively. And finally, we had the amazing opportunity to launch our partnership with legendary conservationist Dr. Jane Goodall in support of the Jane Goodall Institute. We are honored to partner with Jane to advance our mutual goals of sustainability and social responsibility. As champions of ethical practices and environmentalism, both Brilliant Earth and the Jane Goodall Institute are committed to creating a positive impact on the planet and its inhabitants. Not only is it a tremendous honor to have Jane's support, but also a strong validation of our nearly 20-year mission to transform the jewelry industry. I look forward to sharing more about the partnership, including a fine jewelry collection, in the coming months. Our strong brand performance amplified the carefully crafted and distinctive product for which Brilliant Earth is known. We had spectacular performance in our fine jewelry assortment with a particularly strong Valentine's Day. In the two weeks leading up to Valentine's Day, fine jewelry grew 45% year over year, highlighting our continued momentum in this space. Our customers are coming to us for both timeless styles, such as tennis bracelets and diamond stud earrings, as well as trend-leading designs. Throughout the quarter, we expanded on the success of our tube collection drop mentioned in our previous call by launching additional trend-leading collections like our hearts and clover collections to great success. We saw heart-shaped jewelry sales grow 182% year-over-year in the quarter. We continue to see robust performance in our wedding and anniversary ring assortment, resulting in another quarter of double digit growth year over year. Furthermore, we're driving outsized growth in our men's wedding ring collection, including strong demand for our textured and accented rings. We also see more and more customers purchase our rings for occasions outside of weddings. For example, we believe that more and more of our eternity ring sales are self-purchases. We also see impressive performance in our fashion rings assortment with 75% growth year over year in Q1. And finally, in engagement rings, we believe we had strong performance despite ongoing industry challenges and a heavy discount-oriented promotional environment, which we choose not to follow. Our premium brand and curated proprietary assortments continue to resonate with engagement ring consumers. and we saw another quarter of year-over-year ASP growth in engagement rings, with particular strength in areas such as our signature collections that are exclusive to us. We also continue to assert our leadership in offering transparency into the origin of our natural diamonds through blockchain, with more than 10,000 blockchain-enabled diamonds on our site today. We believe we are on a multi-year path to recovery in engagements starting this year, And we are confident in our ability to continue to grow market share as we are increasingly recognized as the go-to brand for premium, distinctive bridal jewelry. As you know, over the last two years, we've been expanding our showroom density within existing metros, including San Francisco, Los Angeles, and Washington, D.C. And we continue to see positive incremental growth as we add multiple showrooms in metros. I'm incredibly proud of this result, which shows the impact of our prudent and measured approach to new showroom launches. With that said, we continue to build our pipeline for future showroom locations and remain on track to achieve our goal of two to four new locations this year. We will be opening three premium outdoor locations with two showrooms in Boston, in Seaport and Chestnut Hill, as well as our first street-level location in New York City, in Nolita. In March, I told you that this year we expect to continue making investments that will set the stage for long-term sustainable growth. As a technology-driven company, our teams have been hard at work over the last few months deploying and improving new platforms and systems to improve both customer satisfaction and operational efficiencies. One great example is the significant enhancements to our CRM platform to improve our ability to manage the customer journey and drive improved customer economics. As jewelry is a highly considered high-value purchase, our continued innovation in customer engagement further differentiates us from the industry. As you saw in our release, we've reiterated our full-year guidance, and Jeff will walk you through our Q2 expectations in more detail. In Q2 to date, we continue to drive strong order growth and repeat purchase behavior and have strong momentum in wedding bands and fine jewelry. offset with a softer start to engagement rings. As I have previously mentioned, we do expect that this year will be the beginning of a multi-year path to normalization in engagements. We recognize that there are puts and takes in any given quarter, but I am confident that we are well positioned to gain share and drive profitability as we nimbly adapt in this environment. In closing, I'd like to note how pleased we are with the start of the year, especially with our outperformance in profitability amidst headwinds in the industry and macro environment. I have high confidence that we will continue to gain share with our premium, approachable brand, elevated, omni-channel customer experience, our differentiated product, and excellence in execution. Finally, I'd like to introduce a member of our team. Colin Borland is our VP of Strategy and Business Development and will be taking on a larger role, including investor relations. Colin has been with Brilliant Earth since 2020 and brings a wealth of knowledge about our strategy, operations, and financials. We are thrilled to have him take on a broader role, and we're looking forward to you getting to know him in the coming months. With that, I'll now turn the call over to Jeff.