Brilliant Future AB

Good day, and thank you for standing by. Welcome to the Brilliant Earth Third Quarter 2025 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 will 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'd now like to hand the conference over to your first speaker today, Colin Borland, Vice President of Strategy, Business Development, and Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to the Brilliant Earth Third Quarter 2025 Irving's 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 today's call, 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 early earths 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 morning, everyone, and thank you for joining us today. As always, we're pleased to share our third quarter results with you, and this quarter is more special than usual, as it marks the 20-year anniversary of Brilliant Earth's founding. Two decades ago, Eric Gersberg and I set out to create a company that reimagined our industry with impact at its core. Over the years, we've created industry-leading practices that set new standards for how jewelry is sourced and manufactured. And we have revolutionized how consumers shop for and experience jewelry with a highly personalized and seamless omni-channel shopping experience. I am incredibly proud of our achievements over the past 20 years, and today's results reflect both the consistency and the resilience with which we've built our company. We've built something truly extraordinary that has redefined what luxury means, creating a globally loved brand with beautifully designed collections, and we've shown that purpose and profit can be a powerful force for good. We've been able to do this with an innovative, asset-light, data-driven business model, while achieving consistent profitability quarter after quarter. As we look to the next 20 years, our optimism and ambition are as strong as ever. As one of the largest standalone jewelers, we are uniquely positioned to continue challenging the status quo, capturing market share, and leading the transformation of the highly fragmented $350 billion jewelry industry. And now, turning to our third quarter performance, I'm pleased to report that we delivered exceptional results across the board. Our net sales grew 10% year-over-year, surpassing our guidance and exceeding expectations. This strong performance included a return to growth in engagement ring bookings, our largest quarter ever in wedding and anniversary band bookings, and an impressive 45% year-over-year growth in fine jewelry. We believe that we are continuing to outpace industry growth and build brand awareness. And we were able to do this all while delivering another quarter of profitability with Q3 Adjusted Ethica landing at $3.6 million near the midpoint of our guidance range. I'm particularly proud of how we delivered this profitability with two key operational advantages that demonstrate the strength and differentiation of our business model. First, we showed our ability to maintain strong gross margins despite facing some of the most challenging input cost pressures our industry has ever seen. During the quarter, on average, Gold and platinum prices were up approximately 40% year-over-year at or near all-time highs, while we also navigated new industry-wide tariff impacts. Despite these significant industry-wide headwinds, we maintained our gross margin within our medium-term target range of the high 50s. This speaks directly to the strength of our geographically diversified supply chain, our strong vendor relationships, our price optimization engine, and our ability to adapt quickly in dynamic environments, advantages that truly set us apart from competitors. Second, we achieved remarkable marketing efficiency, driving 300 basis points of year-over-year marketing leverage while still increasing traffic and delivering double-digit revenue growth. Our ability to continually optimize our model and to leverage technology, including AI and machine learning, has enabled us to keep refining how we allocate our marketing spend while also driving increased awareness and quality traffic. Now, let me take you through some other highlights from the quarter. For Q3, total orders grew 17% year-over-year, while repeat orders grew 16% year-over-year, demonstrating strong brand resonance in attracting new customers as well as driving long-term customer loyalty. As you know, engagement rates are an important first purchase for our customer, as well as a meaningful portion of our sales. Over the past several years, you've heard me speak about the multi-year market normalization following the peaks in engagements during 2021 and 2022. I'm thrilled to share that this quarter marks an inflection point in our engagement business with a return to year-over-year bookings growth. We've also seen continued stabilization in engagement ring average selling prices, with sequential ASP growth in the last two quarters this year. This reflects the strength of our brand positioning and product assortment, especially our exclusive signature collections. These signature collections, exclusive collections that we are known for, grew nearly three times faster than our total engagement ring assortment. This tells us that customers are increasingly seeking Brilliant Earth as a design leader for one of the most meaningful purchases in their lives. Together, our engagement ring acceleration demonstrates that the investments we've been making over the last few years are delivering strong returns as the bridal market recovers. And this momentum extends beyond our bridal portfolio. Our wedding and anniversary band assortment delivered double-digit year-over-year bookings growth, including growth in both men's and women's collections, resulting in our largest quarter of wedding and anniversary band bookings ever. Fine Jewelry, which was 14% of our bookings in Q3, continues to be a standout growth driver. looking through an impressive 45% year-over-year, driven by both unit and ASP growth, reinforcing the increasing resonance that we have as a fine jewelry destination of choice. As an engagement ring, our iconic fine jewelry collection significantly outpaced our total fine jewelry growth. This quarter, we added breathtaking new pieces to our design-leading Sol and James Goodall collections. Collections that are increasingly establishing Berliners as a go-to brand for unique and distinctive fine jewelry. The Jane Goodall Collection remains our best performing new collection launch to date and is a testament to how customers connect with jewelry that combines exceptional design with meaningful purpose. Sadly, Jane passed away just a week after we launched our second collection with her. Our hearts go out to her family and the Jane Goodall Institute. Over the past two years, I had the honor of getting to know Jane personally. She was an innovator, disruptor, and champion for good. We couldn't have asked for a better partner for Brilliant Earth. We're so proud to continue honoring her legacy through our ongoing partnership with the Institute. Our business results reflect our continued strategic brand investments, which are delivering awareness and resonance. This quarter alone, we achieved incredible celebrity placements with stars like Justin Bieber, Sabrina Carpenter, Sidney Sweeney, Halsey, and Brittany Snow choosing Brilliant Earth for everything from music videos to the red carpet. These celebrity moments resulted in over 200 placements and generated over 13 billion impressions in Q3. Additionally, Our partnership with tennis champion Madison Keys as our first athlete ambassador continues to resonate powerfully. These authentic brand moments combined with our strategic marketing investments are driving outside success across earned marketing channels, ultimately translating to accelerated order growth and strong brand recognition. As we enter the holidays, I'm confident we're more prepared than ever to deliver another successful season. We've approached this quarter with exceptional focus across the business to ensure we maximize this critical opportunity and build on our track record of strong holiday performance. We're exceptionally well positioned for this season, from our showroom experiences and marketing strategy to a strong pipeline of new products, including our recent Love Decoded collection and the expansion of our incredibly popular 20th anniversary Pacific Green Diamond, into a new fun jewelry collection. We've curated an incredible range of giftable products under $1,000 that we believe will resonate strongly this holiday season. And as the holidays are also a peak engagement season, we're leading bridal design trends with new styles, including wider widths, bezel settings, and fancy shapes, alongside our timeless bestsellers and ready-to-ship preset engagement rings. This holiday, you will see us execute elevated visual merchandising, targeted showroom events like trunk shows, and increased inventory to continue elevating our overall showroom experience. These investments reflect the application of our continuous test and learn approach and the growing sophistication of our omnichannel model. Our captivating Delight in the Details holiday campaign celebrates the artistry and craftsmanship behind our jewelry through whimsical illustration by renowned French illustrator Geoffroy de Creuset, capturing both the precision of our collections and the joy of the season. We're still early in the season, but I'm pleased with the performance we're seeing across the business through October, including year-over-year bookings growth in engagement and wedding and anniversary bands, strong outperformance in fine jewelry, and year-over-year growth in both new and repeat orders, While metal prices and tariffs continue to present industry-wide headwinds, our agile, data-driven business model and globally diversified supply chain position us to navigate these challenges and deliver successful business performance this holiday season, just as we've done throughout the year. Before I hand the call over to Jeff, I want to thank our incredible team whose dedication and execution continue to drive these outstanding results. This is just the beginning of what we can achieve as we leverage our 20 years of expertise of designing beautiful collections, driving brand strength, and executing with industry-leading operational excellence to capture the enormous opportunity ahead in the global jewelry market.