Brilliant Future AB

Thank you for standing by and welcome to Brilliant Earth's fourth quarter 2024 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 1-1 on your telephone. To remove yourself from the queue, you may press star 1-1 again. I would now like to hand the call over to Colin Borland. Vice President of Strategy, Business Development, and Investor Relations. Please go ahead.

Thank you and good afternoon, everyone. Welcome to the Brilliant Earth fourth quarter 2024 earnings conference call. My name is Colin Borland, Vice President of Strategy, Business Development, and Investor Relations. 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 risks and uncertainties that can 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'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, everyone, and thank you for joining our Q4 and full year FY24 earnings call. I'm pleased to share that we had a strong finish to 2024, delivering solid performance and setting us up well for 2025. We achieved Q4 net sales at the high end of our expectations, and our Q4 profitability far exceeded our guidance. marking our 14th consecutive quarter of profitability as a public company. This is a direct result of our disciplined execution and our commitment to building sustainable value over the long term. Let me walk you through our key financial highlights. We delivered Q4 net sales of $119.5 million at the higher end of our guidance range, representing a 4% decline year over year, For the full year, net sales reached $422.2 million, a 5% decline year over year. Total orders grew by 10% year over year in Q4, contributing to a 7% year over year growth for the full year. Notably, repeat order growth outpaced total order growth, with repeat orders growing 18% year over year in Q4 and 17% year over year for the year. This trend reaffirms the resonance of our strong brand and compelling product designs. As more consumers discover our joyful shopping experience, it's gratifying to see them returning time and time again, especially in a peak gifting quarter. We expanded our gross margin by 90 basis points year-over-year in Q4 and a robust 270 basis points year-over-year for the full year. our strong gross margin reflects our premium brand positioning. Our nimble approach to marketing continued to yield results. In Q4, marketing expenses as a percentage of net sales saw leverage of 340 basis points year-over-year, with 100 basis points year-over-year improvement for fiscal year 24. This was achieved one year ahead of our goal of driving leverage starting in 2025, and it demonstrates the ability of our agile, ROI-focused allocation of marketing spend to drive efficiency and top-line performance. We delivered $6.9 million in adjusted EBITDA in Q4, or a 5.8% adjusted EBITDA margin, a performance that significantly exceeded our guidance. For fiscal year 24, we achieved $21.1 million in adjusted EBITDA, or a 5% adjusted EBITDA margin, Again, highlighting our ability to deliver profitability and capture efficiencies, even as we make long-term strategic investments in the business. In our last call, I told you how excited and prepared we were to bring our brand to life for the holiday season. I'm happy to say that performance exceeded our expectations, with sequential year-over-year bookings improvement as we move through the quarter. And we were pleased with our results and execution during Cyber Week, both online and in our 40 showrooms. In fact, Black Friday was our biggest day of bookings in company history, underscoring the strength of our execution in one of the most competitive periods of the year. These results are particularly gratifying in what was a highly promotional environment and again demonstrate our ability to leverage our agile business model to drive high-quality revenue. Turning towards engagement rings, we were encouraged with our best year-over-year units comp in Q4 compared to prior quarters in the year. We believe that the trajectory of our bridal business can be improved over last year as we amplify our brand with continued success in differentiated designs, diamond leadership, and an industry-leading omnichannel experience. In fact, our signature engagement ring collection shined in Q4. delivering year-over-year bookings growth that outpaced the overall engagement ring business by double digits, illustrating how our proprietary designs continue to be a premium differentiator for Brilliant Earth. Overall, engagement ring ASP was down in Q4, as we saw comparatively stronger performance in price ranges under $5,000, where we see some of the strongest consumer demand. And we continue to see growth opportunities with our fleet of 40 showrooms and counting, with year-over-year growth in showroom engagement ring units in the fourth quarter. Additionally, we continue to invest in growing our core bridal business. Through our Rethink Everything You Know About Diamonds campaign, focused on our diamond leadership, we launched the Flawless Collection, a curation of flawless or internally flawless diamonds, those with the highest grades in clarity, cut, and color. Less than 0.1% of the world's diamonds are graded flawless or internally flawless, and even fewer are sourced to our exacting standards. The performance of this collection has been very strong and again demonstrates customers' trust and confidence in Brilliant Earth. In addition to continuing to build Brilliant Earth as a leading trusted brand, the Rethink campaign has resulted in over 1 billion earned media impressions to date. Within wedding and anniversary bands, we delivered another quarter of year-over-year bookings growth with continued outperformance in men's wedding bands. And finally, our fine jewelry assortment experienced another banner quarter, underscoring our ability to capture customers' hearts during the holiday season. We recorded strong double-digit bookings growth in the quarter, with December fine jewelry contributing a record-breaking share of total bookings at 27%. and approximately 600 basis point expansion over December last year. Our fine jewelry results for the quarter were led by continued success in trend-leading collections such as diamond tennis jewelry, key diamond essentials including studs and hoops, iconic products from our sole collection, and the success of our Jane Goodall collection. The Jane Goodall collection has been our most successful fine jewelry collection launch to date and further reinforces our confidence and our long-term opportunities to grow in fine jewelry. In addition, we also doubled down on our strategy to expand our gifting options to respond to growing consumer demand across our assortment. We expanded our assortment priced under $1,000, ideal for gifting and self-purchase, with resounding customer success during the holiday season. As we've discussed in quarters past, we've been growing our showroom presence while simultaneously elevating our retail experience overall. In Q4, we opened our first street-level location in New York City in the prime shopping neighborhood of Nolita, as well as our Boston Seaport location. We celebrated our opening in Nolita with a launch event featuring the artist, Klim Evernden, and several influencer partners, which generated strong buzz and awareness. All three of our new locations in 2024 include our new try-on bar, featuring an expanded fine jewelry shopping format. And so far, we're seeing promising results. In total, we had record fine jewelry bookings within our showrooms in both Q4 and 2024. Building upon our success in seasonal activations in Q4, we executed our most comprehensive holiday campaign ever, Be Together, Be Brilliant, across our physical and digital channels, including visually compelling and high-performing physical and digital storefronts from our showroom windows to our homepage. We also generated strong engagement through our VIP bridal partnerships in Q4. Together, these activations drove high customer engagement and elevated customer experiences in Q4. As we reflect on our accomplishments in Q4 and fiscal year 24, I am proud of what we achieved in this highly dynamic environment, and remain highly optimistic about our direction. Looking forward to 2025, we remain committed to driving sustainable long-term growth. This includes focusing on delighting customers by setting new standards with our omnichannel experience, offering premium distinctive products, investing in continued brand amplification, and continuing to capture data-driven operational efficiencies. As always, we plan to do so in a disciplined and responsible manner, being cognizant of the industry and macroeconomic environment. We are already making significant progress on our 2025 product innovation and brand amplification goals. We will continue to lead in design and innovation, building on recent successful collections, while further expanding our showroom footprint with two to three new locations this year. including our recently opened location in South Lake, Texas. We continue to draw on learnings from recent showroom openings and will be planning for the next phase of our expansion. These efforts, including enhancements like our try-on bars, will continue to create unforgettable customer experiences. We continue to operate in a highly dynamic environment encompassed by pricing shifts in both lab and natural diamonds, normalizing engagement trends, and changing trends in consumer sentiment. As we look ahead, we feel confident that our premium brand positioning combined with our ongoing investments will allow us to take advantage of any environment and achieve our goal of being the most loved and trusted jeweler for today's and tomorrow's consumer. Turning to our Q1 outlook, we anticipate Q1 net sales to be slightly down year-over-year, a slight sequential improvement to Q4. We continue to see improvement in sequential engagement ring unit trends, with similar performance by price point as we saw in Q4. We also continue to drive robust growth across wedding and anniversary bands and fine jewelry, and healthy overall order and repeat order growth. While the overall macro environment is dynamic, we remain confident that the investments we are making today and our ability to execute will drive future share gains and profitability. For the full year, we expect net sales to be slightly up year over year, with profitability slightly lower than in 2024, as we make targeted strategic investments that we expect will generate compelling returns in both the near and long term. Before concluding, I want to extend my heartfelt thanks to the entire Brilliant Earth team. Their dedication and hard work have been instrumental in achieving these outstanding results. Now, I'll hand the call over to Jeff, who will walk you through our financials and outlook for the year ahead in more detail.