Brilliant Future AB

Thank you for standing by and welcome to the Brilliant Earth second quarter 2024 earnings call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1-1 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 1-1 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Colin Barlin. Please go ahead.

Thank you and good afternoon, everyone. Welcome to Brilliant Earth's second quarter 2024 earnings conference call. Joining me today are Beth Gerstein, our Chief Executive Officer, and Jeff Kuo, 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 risk and uncertainty that could cause actual results to differ materially. Please refer to our SEP filings for a description of the risk 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. any revision to these forward-looking statements in light of new information for future events unless required by law. Also, during this call, management will refer to certain non-GAAP financial measures. A reconciliation of Brilliant Earth's non-GAAP measures to 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 pleased to report that we continue to drive the progress of our strategic initiatives and deliver another quarter of profitability. This is our 12th consecutive quarter of profitability as a public company and something I'm very proud of. It's a testament to the talent and hard work of our incredible team and I want to thank them for their dedication. As we are all seeing, We continue to observe challenges within the $300 billion jewelry industry, particularly highlighted by ongoing and increased promotional activity. Our ability to manage with both agility and discipline within this environment is reflected in our results that were within our net sales guidance and exceeded our profitability guidance for the quarter. I'll start with some highlights of our Q2 performance. and update you on the progress we're making on our key priorities. Net sales declined 4% year over year to $105.4 million, and we're within our net sales guidance range for the quarter. Total orders increased by 4% year over year, while we had another strong quarter in repeat orders, which increased by 17% year over year. Average selling price grew year-over-year across our product assortment, including engagement rings, wedding bands, and fine jewelry in Q2 as they did in Q1. Gross margin was 60.8% or a 320 basis point increase year-over-year, reflecting our continued position as a premium brand within the jewelry industry. Jack will provide additional commentary on our gross margin expansion. Q2 adjusted EBITDA of 5.5 million or a 5.2% margin was ahead of expectations. Our exceptional profitability continues to demonstrate our strategic approach in balancing profitability while setting the stage for long-term growth. While the overall industry remains challenged, particularly in bridal and in e-commerce, we still maintain our expectations around a multi-year path to normalization. I spoke last quarter about the highly promotional environment in the jewelry industry with elevated discounting activity among peers. This persisted in Q2 and continues into Q3, but we remain focused on investing in quality growth and protecting our premium brand to deliver sustainable profitability and position us to take share in this highly fragmented industry. Let's talk about the quarter, starting with the distinctive high-quality products for which we are known. As I mentioned, this quarter saw average selling price growth across our assortment, including engagement rings, wedding bands, and fine jewelry. Even as the engagement market was challenged, including for us, we saw outsized growth within our unique designs only available at Brilliant Earth, with our signature engagement ring collections realizing bookings growth of 6% year-over-year in Q2. This quarter, we also amplified our bridal offering with the launch of our Signature Collections Campaign that features an exquisite array of proprietary designs that celebrate exceptional craftsmanship and unique design. Drawn inspiration from the natural world, each piece in the collection embodies the elegance and wonder of nature. In celebration of the craftsmanship of the Signature Collection, we launched a campaign taking customers through each aspect of the in-house design process. We also launched our Fair Mind Bridal Collection, which promotes economic development and environmental protection of small-scale mining communities. Turning to wedding and anniversary bands, we achieved record sales this quarter within both women's and men's offerings, resulting in double-digit bookings growth year over year. I'm particularly excited about the performance of our men's band assortment, which achieved 32% bookings growth year over year in Q2. Another high point for the quarter came from our continued growth in fine jewelry, where we saw another successful quarter of bookings growth at 29% year over year. As you know, this quarter encompasses two important gifting holidays of the year, Mother's Day and Father's Day, and we were well equipped for everyone's gifting needs. In fact, excluding the holiday shopping period in Q4, we had our biggest ever day of fine jewelry sales in our showrooms. in the lead up to Mother's Day. And for the two weeks leading up to Father's Day, we more than doubled bookings year over year in our men's fine jewelry collection. While fine jewelry is still a small part of our business, we remain excited by the continued trajectory of our offering. As you have heard me say before, fine jewelry offers us an incredible opportunity to acquire lifelong customers outside of our core bridal business and to expand our reach among both first-time and repeat purchasers. We continue to be encouraged by the performance of our 37 showrooms that continue to deliver on our seamless omnichannel strategy and provide our customers with an elevated, approachable shopping experience. As an omnichannel brand, we know that a customer's journey can span multiple touchpoints and purchasing opportunities, from shopping online to seeing products in store. For customers who have visited a showroom, we saw 9% bookings growth year-over-year in engagement rings. while wedding band and fine jewelry bookings growth year-over-year for showroom customers outpaced the total business. Through a combination of our stellar showroom staff, continued enhancements to the customer experience, and our diligent management of expenses, we continue to see strong post-opening metro uplift and compelling four-wall EBITDA from our showrooms. As you know, we plan to open three more showroom locations this year, two in Boston and our first New York City ground location. And we've been busy this quarter continuously enhancing our existing fleet with refreshes in three of our showrooms, Washington, D.C., Denver, and Philadelphia, as well as overall strategic brand elevation focused on design, quality, and elegance. We continue to bring our brand to life both inside and outside our showrooms with brand and cultural moments across Earth Day, Mother's Day, Father's Day, and Pride this quarter. Starting off the quarter with Earth Day, a holiday that directly aligns with our mission, we launched our The Future is Brilliant campaign, where, in celebration of James Goodall's 90th birthday, we invited the next generation of thought leaders and sustainability advocates to advance Brilliant Earth's leadership in sustainability and responsible sourcing. On that note, I'm excited to share that we have officially submitted our near-term and net-zero company-wide emission reduction targets with the Science-Based Targets Initiative, an essential part of driving transformation in our supply chain and innovation in low-carbon technologies and production practices. We look forward to our targets being validated and shared with the public. As the quarter progressed, we reached the top gifting holiday of the quarter, Mother's Day, where our Beauty and the Gesture campaign, in partnership with influencer Tessa Barton, captured in an exclusive feature in People magazine, contributed to the strong performance I mentioned earlier. We also saw continued success in other brand moments this year. We had our most successful VIP bride campaign with Dance Moms alum, Brooke Hyland, generating over 18 million impressions. In closing, in light of ongoing industry and overall consumer headwinds, I'm proud of our results this quarter across our product innovation, omnichannel experience, continued brand momentum, and resulting profitability. Since June, we've encountered a weaker than expected consumer environment, specifically for highly considered purchases. And we remain cautious for the rest of this year, given recent headwinds and economic uncertainty. We recognize that this is a challenging period, and we are not immune to its impact. But as we have said before, we will focus on quality growth that protects and grows our brands, and will continue to take a balanced, agile, and intentional approach to managing the business. We have conviction in our long-term strategy to drive growth and market share gains through brand awareness and relevance, an industry-leading omni-channel experience, and through our differentiated and high-quality products. With that, I will hand the call over to Jeff, who will walk you through how this impacts our financial outlook for the year.