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. [Operator Instructions] I would now like to hand the call over to Colin Bourland, 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 Bourland, 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 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’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 FY ‘24 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…

Thanks, Beth, and good afternoon, everyone. As Beth mentioned, we’re pleased to report a quarter where we continue to successfully drive our strategic initiatives, innovate, meet our topline expectations and far exceed our profitability expectations. Let me take you through the details for Q4. Q4 net sales were $119.5 million at the high-end of our guidance range, down 4% year-over-year and representing a sequential improvement over Q3’s year-over-year performance. Full-year 2024 net sales were $422.2 million or a decline of 5% year-over-year. Total orders grew 10% year-over-year in the fourth quarter and 7% year-over-year for 2024. In addition, repeat orders increased by 18% and 17% year-over-year in Q4 and the full-year 2024, respectively, demonstrating the effectiveness of our customer acquisition and retention efforts and the resonance of our brand and products with consumers. Average order value, or AOV, was $2,048 in Q4 and $2,269 in 2024. This represents a decline of 13% and 11% year-over-year in Q4 and the full-year 2024, respectively, as we continue to broaden and diversify our overall assortment, including in our fine jewelry collection and drive comparatively strong performance in bridal price ranges below $5,000 where we are seeing some of the strongest consumer demand. Q4 gross margin was 59.6%, a 90 basis point expansion over Q4 last year, and full-year 2024 gross margin was 60.3%, a 270 basis point expansion over full-year 2023. Our gross margin this quarter and for the full-year was again principally driven by our premium brand and proprietary products, our price optimization engine, procurement efficiencies and our enhanced extended warranty program. This gross margin strength is particularly rewarding as we maintain our focus on our premium brand positioning in an environment where others continue to lean into discounting and gold prices are at all-time highs. We delivered Q4 adjusted EBITDA of…

Thank you. [Operator Instructions] Our first question comes from Ashley Owens of KeyBanc Capital Markets. Please go ahead, Ashley.

Hey, good afternoon, and thanks for taking our questions. Maybe just to start, if we could touch on gross margin guidance for the year, what you’re embedding for that in 2025, and if there’s anything to comment regarding contributions from fine jewelry with the normalization of engagement if that’s shifting the mix at all and deleveraging the gross margin line closer to that high-50s? Just any color there you could provide.

We’re continuing to for the medium-term model and that includes this year a guide to a high-50s gross margin, as you pointed out. And, that’s going to be driven by same factors that have been driving our strong gross margin that we’ve had, including the strength of our brand, our proprietary and differentiated product, continuing to optimize our price optimization engine, procurement efficiencies and factors like we’ve been able to leverage before. So, I think that we continue to believe that we have a lot of strengths that will allow us to capture that strong gross margin and that extends across engagement, wedding and fine jewelry.

Okay, got you. And then, quickly to follow-up, I know we touched on this a little bit last quarter too, but just really strong momentum within that repeat order growth still and that’s been a strong point for you guys for some time now. Looking at 2025, maybe if you could touch on anything you’re doing strategically to continue to drive that repeat order, whether it’d be more collaborations or expanding the fine jewelry assortment? And then additionally, with the consumer environment remaining shaky, what levers you can pull to bring in and really attract that new customer base as well?

Great. I’m happy to address that, Ashley. So, as it relates to how we think about repeat, we’re really pleased with the strong repeat order growth that we’ve seen. Part of this is just due to the brand resonance that we have with our customer base as well as the very strong customer experience that we’re delivering and then continuing to invest in. As it relates to our assortment, we continue to introduce new and compelling collections. I mentioned our Jane Goodall Collection introduction being the strongest launch that we’ve had as a company. So, clearly, I think the compelling assortment coupled with the really nice marketing campaigns that we’re supporting those assortments with has been very effective. I think we’re going to continue with this playbook. We’re seeing very strong fine jewelry growth and continuing to create a very curative assortment for our consumers and making sure that we couple that with great showroom experiences and seeing really nice compelling growth from our fine jewelry in our showrooms. I think all of that is contributing to the very strong repeat order growth that we continue to expect to see in 2025. Now, as it relates to how we think about acquiring new customers, I think this is something that, we think of from a variety of different angles. One, how do we think about driving marketing efficiencies? And I think the fact that we have marketing leverage and continuing to see that leverage is a testament to a lot of the activity we’re doing behind the scenes, just that data-driven, very efficient use of our marketing spend. And, we’re continuing to just to be the compelling brand for this generation and the next generation. So, continuing to make sure that we have compelling influencer opportunities. I talked about VIP brides in my earlier remarks, but continuing to have big social moments, which is really where our customers are right now.

Okay. Great. I’ll pass it along. Thank you.

Thank you. Our next question comes from Oliver Chen of TD Cowen. Please go ahead, Oliver.

Thanks so much. Hi, Beth and Jeff. Regarding the guidance of plus one to three, your longer-term guidance calls for low-teens. Just would love your thoughts on what might get you there over time. And related to that is what are you seeing with engagement trends and what’s embedded in that guidance? And as we model the year ahead, would love the color on average order value relative to order count would be great too. Thank you.

Sure. So, maybe I can start a little bit with engagement ring trends. While we still believe it’s going to be a multi-year normalization, we’re happy to have our best year-over-year unit comp in Q4 compared to prior quarters in the year. We also had good year-over-year unit growth in showroom engagement rings in Q4 from units. So, I think we’re starting to see that normalization. We continue to see improvement in sequential engagement ring unit trends in Q1 to-date, with similar performance by price point as we saw in Q4. So, I think very promising trends overall. I think as it relates to what’s going to drive our growth, we have a lot of conviction in the overall strategy where we are investing in our showroom growth for the future, investing in our fine jewelry growth and the compelling products that we’re known for, and continuing to invest in being the premium brand and the most loved jeweler for our consumer base. So, all of those are going to drive our growth, and we’ve seen very strong growth as it relates to non-engagement. And we’re going to continue to lean in there and continue to invest in bridal, which is really the entry point for our consumer base. Jeff, do you want to talk about AOV? I think that was the last question that Oliver had.

Sure. Thanks, Beth. Hi, Oliver. So with respect to AOV, I think this is something that we do expect to see moderate over time with the success that we’re having in fine jewelry in particular. I think that’s just a factor that we expect will continue to be a strategic driver success factor for us. We’re having the growth in orders in fine jewelry. And as you know, fine jewelry orders tend to have a lower average order value. And so this is something that is expected and it is concurrent with the success that we’re having in fine jewelry. So, we do expect that AOVs will continue to moderate over time as we’re driving that success in fine jewelry.

And the only other thing I would add is, as it relates to bridal the we are seeing strongest demand below $5,000 And so that’s the customer demand that we’re seeing, and that’s another contributing factor.

Okay. One quick follow-up. You have a really strong physical showroom experience as well as a digital first experience. But what are your debates in terms of different puts and takes on the margin profile of the speed of physical showroom rollouts, and what decisions you’re making? And finally, this is pretty open ended, Beth, but what are features you think are less appreciated about the investment story that should be more appreciated?

Great. So, as it relates to physical and digital, I think that we continue to believe there’s a lot of opportunity as this premium omnichannel provider. And as it relates to how we think about physical rollout, we’re being very strategic about the locations that we are investing in. We’ve always been very data driven, but continuing to focus on delivering that exceptional customer experience. And that’s something I’m really excited about this year, particularly, is innovating with the customer experience in the big install base that we have with the over 40 showrooms. So, I think we’re just trying to be, very deliberate about our decision making, but continue to see really nice opportunity in both physical and digital and think that it’s really the combination of both that makes us so special. In terms of what’s not appreciated in the investment story, we continue to deliver profitability. It’s the fourteenth consecutive quarter. The cash balance that we have is the highest it’s been, as we mentioned since really early days of going public. So, I think perhaps the investments that we’re making coupled with the profitability is something that not everyone is completely appreciating and just the brand resonance that we have. So, I think the opportunity we have in fine jewelry is something we’re really excited about, and the experience that we have that’s so differentiated from our peers is also very, very compelling. But those are a few of the, I think, what makes us very special and perhaps isn’t quite as appreciated in the investment community.

Thank you for that. Best regards.

Thanks.

Thank you. Our next question comes from Dylan Carden of William Blair. Please go ahead Dylan.

Thank you. Really impressive marketing leverage here. And I’m kind of just curious, it sounds like you kind of came in or did come in even ahead of some of your own expectations there. Can you just kind of unpack that, if there’s been a shift in strategy or cost? And I’m curious if it plays a part in some of the better retention metrics that you’re citing and have been citing. Has there been sort of a shift to more for retention versus acquisition? I’ll leave it there. Thanks.

I wouldn’t say it’s necessarily a shift. I think that we’re constantly optimizing as it relates to the marketing efficiency. I think the fact that we have a very data driven approach, the fact that we have diversified channels within our marketing mix, and the fact that we have invested in our social media platforms, all of that has I think, provided us with nice efficiencies. In addition to that, the showrooms themselves are nice drivers to, improve the marketing efficiency. So, I think it’s everything combined, the strong repeat rate, the brand resonance is creating nice leverage, and it’s something we watch very closely. We’re very nimble, but we’re really proud of the fact that we’ve been able to achieve that, continuing to invest in quality revenue, not chasing unprofitable growth. That’s been kind of the behind the scenes as terms of what’s driving that.

And would you expect, I guess, I don’t know, similar levels of leverage, but how should we think about this year? You mentioned you’re investing behind growth, but you do have showrooms kind of ramping back up. Any color you can give us sort of how that line item might trend this year?

Yes. So, we as you correctly stated, are looking at this year as optimizing that mix between making near and long-term investments that we think we have compelling ROI as well as still being cognizant of driving profitability. I think marketing is one of the levers that we have there, and we are looking to continue to build upon the success that we had in 2024 and continue that into 2025. So, we are guiding to continuing to expect to drive leverage in marketing for 2025 by some of the factors that Beth was just talking about. And then still that’s balanced with making investments in growing awareness of the brand. And so really continuing the playbook that we’ve had of profitability as one of our key guiding principles, but also making the investments that we think are the right things to do both for the near and the long-term.

Great. And then last one for me. The shift in here about I think historically or in the last year or so, it was strengthened kind of the 10,000 and above sort of engagement ring categories and now you’re seeing strength below five. Is that actually just indication that you’re seeing a broader recovery engagement because it’s not just a certain income cohort that’s coming into the category or what’s the best way to interpret that shift? Thanks.

I think that that’s one potential hypothesis. Overall, the demand that we’re seeing under $5,000 is kind of a result of just the, you know, I think changing consumer behavior and we continue to see puts and takes quarter to quarter regarding consumer behavior. What I think is helpful for us is we have a very broad assortment and compelling assortment across different price points. So, we were happy to see that under $5,000 be comparatively stronger.

Great. Thanks a lot guys. Nice work.

Thanks, Dylan.

Thank you. Our next question comes from Dana Telsey of Telsey Advisory Group. Please go ahead, Dana.

Hi, good afternoon, everyone. As you think about for the year and for the fourth quarter, your repeat orders in the fourth quarter up 18%, your total orders up 10% compared to 17% repeat orders for the year and 7% for total orders for the year. What are you seeing with the attachment rate of fine jewelry going to engagement or engagement going to fine jewelry with the repeat orders? And is there any shifts in demographics going on given the shift to fine jewelry in terms of whether it’s income level or guys versus women, men versus women, anything on that demographic profile and how that informs you for planning for AOV and total orders for the upcoming quarter and the year? Thank you.

Great. Well, maybe I can start with the shift in terms of fine jewelry. I think that we haven’t necessarily seen a shift. We remain relatively small in a very big category here, and I think a lot of the efforts that we’re making resonate well with the customer base that we have as it relates to both gifting and self-purchase. And I think we’ve been leaning into that assortment under a $1000, having a really compelling trend forward assortment. Certainly, I think diamonds are highly coveted for everyday as well as those special occasions. And I think that we’re continuing to see nice AOVs within our fine jewelry category as we’ve been investing in the assortment. I’m not sure we have anything specific as it relates to attach with fine jewelry and engagement or vice versa. One of the things that we’re really pleased to see is strong repeat from fine jewelry to just buying additional fine jewelry and seeing people come back there, which I think will be a big driver in terms of the overall repeat.

Got it. And then the cadence of this year, any shift in cadence what you’re seeing either or what you expect, whether it’s with Mother’s Day timing or even Easter timing, anything in terms of how you’re planning with any changes in or read across this from last year with sales growth and operating and adjusted EBITDA profile?

I think one, maybe Jeff, you can talk through some of the just different cadences with the quarters. But I think one thing to note is, obviously, the fine jewelry tends to be more concentrated around the holidays, and we’ve been performing really nicely across key holiday moments like the Christmas holiday, for example. So, that’s part of what’s informing how we’re thinking about the year. But, Jeff, I don’t know if you have, additional commentary there.

Yes. I think with respect to cadence for the year, as I discussed during some of the remarks about how we’re thinking about, for example, H1 versus H2. I think we do expect that on the top line side, the growth will be more back half weighted, and that’s really driven by the investments that we’re making driving returns starting in H2, annualization and growth of showrooms and also kind of keeping in mind just some of the factors such as more favorable comp if you’re looking at Q3 specifically and that Q4 is a big fine jewelry quarter. And so I think that those are some of the considerations as we’re thinking about the shape of the year and how we’re planning.

Thank you.

Thanks, Dana.

Thank you. I would now like to turn the conference back to Beth for closing remarks. Madam?

Thank you everyone for your thoughtful questions. We look forward to talking to you in our next quarterly earnings call.

This concludes today’s conference call. Thank you for participating. You may now disconnect.