Good day and thank you for standing by. Welcome to Brilliant Earth’s First Quarter 2025 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] Please be advised that today’s conference is being recorded. I would now like to turn the conference over to Colin Bourland. You may now begin.

Thank you, and good afternoon, everyone. Welcome to the Brilliant Earth first quarter 2025 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 morning, everyone, and thank you for joining us today. I am pleased to share that we delivered another quarter of solid performance within our guidance marking our 15th consecutive quarter of profitability as a public company. For the first quarter, we delivered net sales of $93.9 million, which was within our stated guidance range and represented a 3.5% decline year-over-year. We saw encouraging trends in our business with total orders growing 12% year-over-year and repeat orders growing 13% year-over-year as our premium brand, seamless omnichannel experience and differentiated product offerings continue to resonate with both new and existing customers. I'm proud to report that we achieved an adjusted EBITDA of $1.1 million in Q1, representing a 1% adjusted EBITDA margin and within our stated guidance range. Our consistent ability to maintain profitability across varying market conditions underscores the strength of our business model and our disciplined approach to managing expenses. Now let me share some highlights across the business. Starting with engagement rings, we are encouraged to see booking and unit performance improve sequentially over the past few quarters and in Q1 we saw positive year-over-year unit growth. Additionally, we saw another quarter of comparatively strong growth in engagement rings priced under $5,000. Our signature engagement ring collection continues to contribute meaningfully with another quarter of year-over-year bookings growth outpacing our total engagement ring collection by double digits, and we are delighted that customers are increasingly drawn to us for our premium one of a kind products. And our wedding and anniversary band business is strong, driving year-over-year bookings growth with outside success in men's wedding bands as well as women's eternity bands. In fine jewelry, we're making substantial progress on our strategic expansion. As a reminder, our assortment of fine jewelry includes items like earrings, necklaces, bracelets and…

Thanks Beth and good morning everyone. As Beth mentioned, we're pleased to report a quarter where we continue to successfully drive our strategic initiatives, innovate and meet our top line and profitability expectations. Let me take you through the details for Q1. Q1, net sales were $93.9 million within our guidance range, down 3.5% year-over-year and representing a sequential improvement over Q4, 2024 year-over-year performance. Total orders grew 12% year-over-year and repeat orders grew 13% year-over-year in the first quarter, demonstrating the effectiveness of our customer acquisition and retention efforts and the resonance of our brand and products with consumers. Average order value for AOV was $2,062 in Q1. This represents a decline of 14.2% year-over-year in Q1 as we continue to deliver comparatively strong performance in bridal price ranges below $5,000 where we are seeing some of the strongest consumer demand and as we continue to broaden and diversify our overall assortment, including in our fine jewelry collection. Q1 gross margin was 58.6% within our medium term gross margin target in the high 50s and a 130 basis point decline over Q1 last year. The year-over-year change in gross margin was primarily driven by higher gold costs and labor and occupancy spend related to our fulfillment and distribution center, partially offset by continued optimization of our pricing engine, procurement efficiencies and other efforts to manage our gross margin to target levels. We delivered Q1 adjusted EBITDA of $1.1 million or a 1.1% adjusted EBITDA margin within our guidance range. As Beth mentioned, this marks our 15th consecutive quarter of profitability and is driven by our strong gross margin combined with diligent data driven management of our marketing spend and other operating expenses. Q1 operating expense was 62.4% of net sales compared to 59.0% of net sales in Q1 2024.…

Thank you. [Operator Instructions] And our first question will be coming from the line of Ashley Owens of KeyBanc Capital Markets. Your line is open.

Hi, good morning. So first to start, could you just elaborate on some of the dynamics going on within engagement that you're observing? I know you mentioned units were up, but is this a trend you've seen continue thus far into 2Q, or is there any macro impact that could be pressuring a customer or any other dynamics into the quarter that you feel comfortable sharing right now?

Hi Ashley, thanks for the question. We were really encouraged by the positive unit growth that we saw in Q1 and we are continuing to see that in Q2 as well. We've talked about this multi-year normalization, but we were really encouraged by the fact that the brand and the product are resonating, that the signature collection is resonating on the engagement ring side, and that the consumer is coming to us as a bridal leader, so feeling encouraged about that in terms of what we're seeing so far to date in Q2.

Okay, great. And then maybe as well, anything you can talk about with the phasing of revenue between 3Q and 4Q, and it sounds like there's a few comps there that we should be mindful of, but just anything you can say there. And then additionally, I know tariffs talked about a little bit there, Jeff, but could you maybe elaborate on your sourcing exposure and any impacts we're expecting if we do get a tariff resumption? And then additionally too, I think it may be helpful just discussing how your protocol possibly differentiates you from the competition in terms of some of those tariff related risks that are floating out there right now with raw and lab diamonds. Thanks.

Jeff, do you want to take the phasing of revenue and the tariff question?

Yes, thanks Ashley. So in terms of phasing of revenue, we do expect, as mentioned, that revenue is going to be back half weighted with a mid-to-high single digit year-over-year growth rate in the second half. And that's driven by a number of factors that I was mentioning, including improvements in engagement rings, the fact that Q4 is seasonally an important fine jewelry quarter and the strong fine jewelry performance that we've been having growth in the annualization of showrooms and then also noting that we do have a more favorable comp from Q3 of 2024. So I think those are some of the factors that we're considering in terms of thinking about the shaping, over the back half of the year. With respect to tariffs in Q2. As I mentioned, we do have limited impact which is included in our guidance. I think the way that we're thinking about this is that we have been able to move nimbly to mitigate the impact of tariffs and we do believe that we have further opportunities in the rest of the year to manage to similar H2 gross margins as our prior expectations. And this includes operational actions as well as pricing actions. And as you know, we have been able to operationally and with things like price optimization continue to adapt to dynamic environments over our history and we think that we're well equipped here. And we also have, as Beth mentioned, limited direct exposure to China. And this is all contributing to us being able to keep our annual adjusted EBITDA guidance at the same level that we had previously indicated in our last call, which includes management of gross margin plus opportunities for increased efficiency in marketing.

Appreciate the color. Thanks. I'll pass it along.

Thank you. One moment for our next question. And our next question will be coming from the line of Oliver Chen of TD Cowen. Your line is open.

Hi Beth and Jeff. As we think about the growth algorithm going forward, do you expect AOVs to continue to be pressured by fine jewelry and what are your thoughts on achieving growth of mid-single to high single digits longer term? Like, what will it take to get there? Will AOVs continue to be down mid-teens for the next couple of years? Thank you.

Thanks Oliver. I can start that off. So we're really encouraged by the growth that we're seeing in the fine jewelry category. And I gave some numbers earlier that just helps to contextualize it. But the fact that it was up 40% around Valentine's Day, that it's 14% of total bookings, just shows you, while we've been growing a lot even over the last few years, there's still so much headroom in terms of the overall opportunity. We know that for most jewelers this represents the majority of their revenue and we're still very early in the journey. And yet we're also just seeing the brand resonate. The fact that we have a really strong on trend assortment with proprietary design collections and that omnichannel experience where we're really able to bring it into both the digital channels as well as in the showrooms where we're also seeing really nice growth. So all of this to me just shows you that we're increasingly known as the destination for fine jewelry for the millennial and Gen Z audience. And so the AOVs that are resulting is a natural effect of that and I think it's also just showing the resonance of the brand. Jeff can help. Maybe you can help contextualize it a little bit. But I think overall we're very excited that the strategic initiatives that we have around jewelry are working.

Yes. And just to complement what Beth said, I think how we get, how we get to higher growth rates is really a continuation of executing along the strategic initiatives that we have been executing on. Including, as Beth was talking about, the success that we're having in fine jewelry, the uplift that we've been able to drive with our showrooms, the engagement with our brand and our products overall, supplemented by ongoing gradual improvement in engagement rings and we're seeing good signs of that. So it's really a continuation of the focus on the brand and the product and the experience that really gets us to continued success and higher growth rates in the future.

Okay, and a follow up. Did you say engagement trends are negative? What are your thoughts on when the industry might turn positive? And then as we think more broadly, what are some of the building blocks for margin expansion? How do you see marketing as a percentage of sales evolving and how can you drive more fixed cost leverage? Gold may continue to move against you for the next few quarters, I assume until you anniversary this, that's an unknown factor, but would love thoughts there. Thank you.

So I can start on engagement ring trends, which we're seeing positive unit trends in terms of overall asp. There are some pressures there overall, but overall that's driven by the fact that under 5,000 is very strong. And I think that's also a nice indicator that the market has normalized quite a bit from where we were over the past few years. So generally we're encouraged by the engagement ring trends that we are seeing and the unit growth that we've been seeing. Jeff, do you want to talk a little bit about margin expansion and marketing percent.

Sure would be glad to. Thanks for your question Oliver. So in terms of gross margin, just as a reminder is to our medium term algorithm we have guided to and continue to guide to a high 50s percent gross margin and we think that that is that's supported by a number of different things including a steadfast focus on maintaining our premium brand and not being discount oriented as well as operational actions that you know such as our price optimization engine focused on procurement efficiencies and other levers that have been able to get us to the gross margin where we where we are today. And we continue to be agile with respect to how we navigate environment of gold prices or tariffs, and we think that we are better equipped than the average participant in the industry to be nimble to leverage the strong relationships that we have with our suppliers and to be data driven and dynamic in terms of how we approach this to manage to high and strong gross margin levels. In terms of marketing as a percentage of sales, we do expect to be able to over the next few years, including this year, continue to drive to year-over-year leverage in marketing spend as a percentage of sales. And we've been successful in our efforts of growing our brand awareness, using things like the growth of our showrooms to build awareness and drive uplift in metros to leverage things like fine jewelry which allows for additional repeat purchase opportunities to capture more opportunities with each of our customers. And we think that those are some of the levers that will allow us to continue to have success in managing marketing expense as well as our just overall data driven ROI approach to how we think about all of our investments. And then with respect to your question on fixed cost leverage, I think that we always have had a mindset of investing towards things like technology to allow us to scale and grow and manage our OpEx efficiently. And we think that as we continue to expand and make those investments and grow our top line base, there will be opportunities for leveraging those investments over a greater revenue base.

Thanks a lot. Best regards.

Thanks Oliver.

Thank you. [Operator Instructions] Our next question will be coming from the line of Dana Telsey of Telsey Advisory Group. Your line is open.

Hi. Good morning everyone. As you talked about the strength of the two weeks leading up to Valentine's Day, how do you triangulate before and after Valentine's Day of what you saw, what were some of the best sellers during Valentine's Day and how are you thinking about going forward? And lastly, in terms of pricing, with what you had mentioned during Gold, how are you thinking about price changes going forward for the different categories? Thank you.

Thanks, Dana. So in terms of the Valentine's Day performance, I think this just is a testament to how well our team and our brand is performing in these key occasions. We saw great performance over the holiday period. Continued strength with Valentine's Day. We're very excited about upcoming Mother's Day and I think this is a mix of the assortment that we have, which is very deliberate. I mentioned it curated trend forward and it's also, I think brings a lot of newness, so in Valentine's Day we had a really beautiful heart collection that did really nicely. And then we're continuing to sell our diamond essentials, our unique collections like Sol and Jane, as well as some of those occasion specific items. So overall, I would say that the best sellers that we are seeing just are reflective of a lot of the design advantages that we have and the design leadership that we have. And we're going to continue to invest in introducing newness into the category and bringing these fresh new collections to our consumers in a really innovative way with the campaigns behind it. As it relates to how we’re thinking about price changes, Jeff mentioned just the data driven nature of our teams. And I think this is another competitive advantage that we have. The pricing optimization engine allows us to be really thoughtful about how we’re pricing and just continuing to invest in testing and learning so that’s what our history has been really from the beginning. So we’re going to continue to implement new tests and just try and understand what the appetite is from the consumer level. Obviously, there’s a lot of pressures that consumers are feeling now. So we’re making sure that we are keeping our costs down as much as we can, but we are testing. And I think the fact that we have a proprietary collection also allows us to have a little bit more flexibility there.

Got it. And just one follow-up on the showrooms. I think this year, it’s two to three showroom openings. Last year, think it was seven. How are the showrooms doing? What are you looking for in terms performance? Is there a difference by region? And if you think about 26, do you increase the number of openings? Or how you are looking at it?

Yes, I think last year we had three openings, if I remember, maybe something around there. So I think we’re basically keeping it somewhat consistent and as we’re finding new real estate opportunities, we’re leaning in and making sure that we’re taking a very ROI driven approach overall. We have a nice install base at this point with over 40 showrooms. And so we’re going to continue to look for opportunities there. But the complement to that is that we’re also looking to invest in our current showrooms. We think there’s a lot of opportunity, both in terms of bridal, wedding, as well as fine jewelry, where we’re seeing really nice growth as well. In terms of how we’re thinking about approaching it, we continue to see the omnichannel model very successful for us, but I don’t think we’re ready to draw a line in the sand as it relates to 2026 just yet, but continue to see opportunity there. And as we’re seeing locations, we are continuing to find leases.

Thank you.

Thank you. One moment for the next question. And the next question will be coming from the line of Dylan Carden of William Blair. Your line is open.

Thanks. Just on the gross margin bit, it’s seen this nice sustained run over several years, I think in some capacity based on the fine jewelry category. But does that now at a point where it also opens you up to more volatility from a sort of an input? You mentioned the gold price swing. And I know that’s been more volatile than usual, but is it now that fine jewelry is sort of big enough that you can’t have sort of the just in time model that you might have on engagement and therefore we should expect kind of more ebbs and flows in gross margin? Thanks.

Sure. I’ll be glad to take that, Dylan. So in Q1, our gross margin was slightly lower year-over-year, driven by higher gold costs and labor occupancy spend related to our fulfillment distribution center. And I think we’ve been able to be nimble and adjust to changing input costs as we have been and we think that that really represents an advantage for us as a brand. With respect to fine jewelry as a percentage of our businesses that mentioned, it was about 14% of our bookings in Q1. And I think that there’s not a fundamentally different characteristic with respect to how we’re thinking about management of input costs. There is some fine jewelry that’s made to stock, but we are continuing to be very dynamic and data driven regarding how we manage, whether it’s pricing, whether it’s how we source. And it’s still a smaller part of our business and the DNA of how we operate is really to take data, take a variety of different inputs, think about how we operate, how we price, and those have been success factors in how we’ve been able to manage the strong gross margin. I don’t think anything has fundamentally changed in that regard.

Thank you.

Sure.

Thank you. One moment. And we do have a follow-up question coming from the line of Oliver Chen of TD Cowen. Your line is open.

Hi. Thanks again. Beth, would love your take on the road map ahead for fine jewelry in terms of what you’re doing there with innovation and your plans more medium term. Also, as you spoke to engagement earlier on that topic, what do you see happening with the customer in terms of the customer looking for value and value orientated price points there? Do you see that continuing or intensifying? Or is that stabilizing? There’s a lot of cross currents with consumer confidence. Thank you.

Sure, Oliver. Thanks for the question. So in terms of the roadmap for fine jewelry, the playbook that we have in terms of introducing these new innovative collections is continuing. So we had a really successful launch with Jane Goodall last year. We’re continuing to invest in that specific collection. So we’re deepening the existing collections that we have, as well as introducing newness that’s both tied to occasion as well as for self-purchase. So that’s essentially how we’re thinking about the assortment. And we’re complementing that with digital capabilities that we’re investing in, as well as more and more introducing these fine jewelry collections into the showroom and seeing really positive response from that as well. So that’s essentially how we’re thinking about the roadmap. As it relates to engagement, I do think that customers have been looking for value price points. I think that’s part of the driver why we’re seeing outsized performance under the $5,000 ASP. And I wouldn’t say that that has changed in Q1. We still see relatively similar performance as it relates to that engagement ring consumer. But certainly, this is a category where people shop with a budget, and it is, I think, a fact that consumers are more cautious these days. But we’re still seeing sustained unit growth, and I wouldn’t say that Q2 is materially different.

Thanks again.

Thank you, Oliver.

Thank you. And that does conclude today’s Q&A session. I would like to turn the call back over to Beth Kersey for closing remarks. Please go ahead.

Thank you, everyone, for attending our Q1 call, and we’re looking forward to talking to you for Q2. And happy early Mother’s Day, and hope to just talk to you all soon.

Thank you all for joining today’s conference call. You may now disconnect.