Q2 2022 Brilliant Earth Group Inc Earnings Call

August 11, 2022

The conference will begin shortly to raise your hand during Q&A you can dial star one one.

[music].

Okay.

Good day, and thank you for standing by welcome.

Welcome to the brilliant Earth second quarter 2022 earnings 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 this session you will need to press star one one on your telephone.

Be advised that today's conference is being recorded.

I would now like to hand, the conference over to your Speaker today, Allison Malkin with ICR. Please go ahead.

Yeah.

Thank you good afternoon, everyone. Thank you for joining us for our second quarter 2022 earnings Conference call. Joining me today are best Gerstein, Chief Executive Officer, and Jeff <unk>, Chief Financial Officer.

This morning's call will begin with highlights of our second quarter financial and operational performance.

The drivers of our future growth.

Yeah will follow with more details on the second quarter financial results and guidance.

Following this.

Operator, we will begin the Q&A session with our presenter Baton Jeff available to answer the questions you have for us today.

Before we start I would like to remind you that management will make certain remarks today that are forward looking statements within the meaning of the private Securities Litigation Reform Act of $19 95.

These future 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.

Also during this call we will discuss both GAAP and non-GAAP financial measures.

You'll find additional information regarding these non-GAAP financial measures.

A reconciliation of these non-GAAP to GAAP measures in today's earnings release, which is available at the Investor Relations section of our.

Our web site at <unk>.

<unk> Dot <unk> dot com.

Live broadcast of this call is also available at the Investor Relations section of our website with that I will turn the call over to Beth.

Good afternoon, everyone and thank you for joining us today.

We approach our one year anniversary as a publicly traded company. We are pleased to report our fourth consecutive quarter of strong profitable growth.

It's been an incredible year for our company one in which we have grown the reach and impact of our mission to cultivate a more transparent sustainable compassionate and inclusive jewelry industry. We're proud of the progress our outstanding team has made to date and we're intently focused on the future with a clear.

Our proven track record and significant opportunities for expansion, we are excited about our near and long term potential.

We're pleased with our second quarter results I think demonstrate our continuing ability to navigate in a rapidly changing macroeconomic environment.

Staying focused on nimbly and prudently executing our strategy, while optimizing our asset light business model to grow the brand. We are in a strong position to continue to take share in a fragmented industry and to prudently manage our costs. So that we continue to deliver profitable growth.

A high level review of our Q2 results demonstrate the effectiveness of this approach.

We grew revenue, 18% to $108 8 million.

We delivered record gross margin of 53, 1%, a 460 basis point improvement over the prior year.

And we delivered $9 $6 million in adjusted EBITDA, representing an adjusted EBITDA margin of 9%.

Recent highlights include the continued expansion of our Omnichannel strategy with the opening of showrooms in Bethesda, Columbus, Houston, Minneapolis, Cleveland and Detroit to bring her reach to 'twenty, one showrooms in which our customers can experience a personalized joyful shopping.

Variants.

Each new showroom opening we bring more consumers to our brand while also deepening our relationships with both new and returning customers.

Acknowledging is a big part of delivering an exceptional omnichannel customer experience. Our continued investment in technology and data is helping us in multiple ways.

Our seamless experience allows customers to shop, how and when they want for example, we've recently launched an online weightless to ensure customers can get the right appointment for their schedules, even if we are fully booked.

You can really important our showrooms deliver strong rois.

Going forward, we are maintaining our line of sight to nearly doubling our showrooms. This year. Our showroom strategy has been and will continue to be a major catalyst for building our brands.

Whether in our showrooms are on our website in Q2, we continued to deliver design bladder proprietary products that our customers loved across our curated assortment.

Today, I'll start with fine jewelry, a fast growing small percentage of our total mix with huge growth potential.

As a reminder for US fine jewelry consists of hearings necklaces bracelets and fashion right.

Her mother's day, we enjoyed strong success delivering over 350 basis points of growth in fine jewelry mix over the prior year.

We also launched <unk> fine jewelry, including necklaces bracelets chains and couplings to an enthusiastic response.

This is a new collection, we launched in time for father's day and customers were so excited they found the products on our site even before we marketed them.

When we did launch our strategy included key Influencers media and social content and generated nearly 80 million impressions, while introducing new consumers to our brands.

One of the drivers of differences got them for our brand is how we are executing on social platforms, where our customers are including tictoc to extend our brand reach.

And while millions of views are impressive it's our engagement and community building that we're most excited about in fact in a recently conducted brand survey, 13% of customers indicated they learned about brilliant earth odd tiptop.

And you've heard me say it for the past two quarters 2022 is the year of the wedding and we continue to capitalize on this both mens and womens wedding bands have grown faster than our overall business year to date led by the strength of our product assortment and a record number of weddings that have driven demand.

As you know bridal and wedding are highly considered purchases where consumers normally shop with a budget.

During the quarter, our IB fees were generally in line with past quarters, and we continue to consistently realized profit on first purchase and see growth across our price points.

As our brand grows new and returning customers look to us for trend, leading proprietary product design and craftsmanship.

In concert with our deep supplier integrations and technology.

Added thousands of new lab in natural colored diamonds, offering our customers, an even broader on trend assortment of colors shapes and price points from which to choose.

We know that consumers want choice, our ability to leverage data to understand our customers' preferences, and then to optimize the breadth and depth of our diamond assortment, which today includes over 200000 ladder natural beyond conflict free diamonds.

Enables us to effectively serve the broad needs of our customers.

And finally true to our mission, we launched truly brilliant and expertly curated collection of diamonds with the perfect balance of cut color and clarity and verify the sustainable sourcing.

The assortment includes natural assignments with blockchain powered mine to market traceability for industry, leading transparency.

This collection is targeted for the discerning luxury consumer one who we are increasingly attracting who was seeking premium quality and highly differentiated characteristics.

These product and brand stories and that the results that they drove illustrate what makes brilliant or special our mission our brand our unique and powerful business model and our team whose hard work and commitment is truly exceptional.

In fact, the number one reason employees joined brilliant Earth is because of our mission.

In any environment and as we have since our founding in 2005, we focus on creating the future by serving our customers jointly and responsibly, creating trend leading sustainable products and delivering profitable sustainable long term growth. We are pleased that we are able to profitably grow and increase.

Market share in a volatile environment and remain confident in our outlook for the full year as.

As we look ahead to the rest of the year, we will remain cognizant of ongoing macroeconomic uncertainty and you can expect that we will continue to manage the business as we always have in a nimble fashion to deliver profitable growth and extend our leadership in the fine jewelry industry.

And now I'll turn it over to Jeff.

Thanks, Beth and good afternoon, everyone.

We're pleased to share our second quarter fiscal 2022 results with you today.

During the quarter, we continued to execute our mission driven growth strategy focused on scaling our business and building our brands to be the jeweler for the next generation consumer while simultaneously delivering strong profitable growth.

Our second quarter result demonstrates the disciplined execution of our approach.

Revenue grew to $188 million, which.

<unk>, 18% year over year growth and up 31% on a three year CAGR compared to Q2 2019.

Gross margin expanded to 53, 1%, a 460 basis point increase compared to Q2, 2021, and our highest quarterly gross margin percentage on record.

And adjusted EBITDA was $9 6 million.

Or 9% of revenue.

These results again illustrate and reinforced the power and distinction of our brand growth across our product lines, and our agile and highly efficient business model.

Q2 revenue grew 18% year over year, which was consistent with our expectations in Q2's rapidly changing macroeconomic environment.

This was driven by new and repeat customers, reflecting the increasing strength and awareness of brilliant earth, which led to growth across our product lines.

We continue to see outsized performance within our fine jewelry assortment with growth that far outpaces the business as a whole.

Wedding band sales were also particularly strong in Q2 this year as the strength of our product assortment and historically robust year of the wedding fueled sale.

The outperformance of fine jewelry and wedding bands led to a mid single digit percentage decline our total company blended.

For Q2, as both fine jewelry and wedding bands have a lower average price points than our overall business.

As Beth mentioned, we recently opened our 21st showroom, reflecting the ongoing successful execution of our Omnichannel growth strategy.

As we have shared in the past our showroom strategy continues to perform well in.

In addition to providing customers with even greater access to our unique and joyful shopping experience our showrooms continue to generate robust uplift in metro bookings after opening.

As we look ahead to expanding our showroom presence in additional cities. We will continue to do so with a sharp focus on delivering strong ROI.

Consistent with the plans, we shared since our public offering almost one year ago, we see tremendous opportunities for our business to grow and for brands to lead in the highly fragmented jewelry industry.

Our showroom rollout and further expansion into fine jewelry, both show encouraging results in driving financial performance customer loyalty and lifetime value.

Turning to gross margin Q2 gross margin expanded to 53, 1%, which is up 460 basis points versus the prior year.

Growing demand for the brilliant Earth brands, our premium and differentiated product offerings pricing engine optimization and procurement efficiencies. Once again drove strong gross margin expansion across all product assortment.

As I said last quarter, what we hope will become a well understood refrain from US is that these results illustrate our asset light data driven business model is a competitive and financial advantage.

It enables us to nimbly adapt our supply chain and product pricing to changing market conditions to optimize both margin and revenue.

This is particularly evident for us in Q2, a period that as we all know saw significant macroeconomic volatility our strong gross margin performance is a testament to the strength of our model and our brand.

And this quarter it afforded us the flexibility to continue to invest in prudently scaling the business.

In the second quarter SG&A increased to 47, 9% of net sales compared to 35, 1% of net sales in Q2 2021, an increase of 1280 basis points.

Approximately 130 basis points of this increase was related to net changes in add backs to adjusted EBITDA, including equity based compensation and new showroom Preopening expenses, which are added back in our presentation of adjusted EBITDA.

The remaining approximately 1150 basis point increase over the prior year reflects the investments we made to support our growth.

Marketing costs as a percentage of sales grew by approximately 400 basis points year over year.

Our investments in building the brilliant Earth brands continue to drive growing awareness of the unique and differentiated brilliant earth experience and expand market share in.

In addition, we are continuing to invest in our fine jewelry assortment, which we see as a significant growth opportunity.

During the quarter employee costs were higher by approximately 390 basis points year over year.

Consistent with the drivers from last quarter Q2, 2021, again represented a low comp for employee costs as we were coming out of the initial months of the Covid pandemic with employee costs at a comparatively low run rate in Q2 2021.

In Q2, 2022, we continue to build our team to support our strategic initiatives, new showrooms and operations as a public company.

Other G&A as a percentage of sales increased by approximately 360 bps with one of the largest drivers being increased public company operating costs, which as you know we will not anniversary until late Q3 and Q4 2022.

As a growth company. We are also strategically investing in scaling brilliant earth for the long term.

The combination of strong revenue and gross margin growth balanced by strategic investments in the business delivered $9 6 million in adjusted EBITDA in the second quarter.

Profitability.

Positive free cash flow and a capital efficient operating model continues to differentiate us among direct to consumer companies and we continue to operate the business in an asset light fashion.

We ended the second quarter with $155 $5 million in cash.

As we look ahead to the balance of the year, we remain confident in our long term growth goals.

As you may recall.

Our aim over the long term is to see revenue growth in the high <unk> to low 30% range with growth across our product lines and our Omnichannel model.

Our long term gross margin target is in the mid 50% range driven by our premium products and brands, our price optimization engine procurement efficiencies and growth of higher margin fine jewelry.

Our long term marketing spend target is in the mid to high teens as a percentage of revenue as we continue to grow our brand awareness and to rollout our showroom experiences to drive conversion and repeat customer behavior.

And we are targeting a 15% to 20% plus long term adjusted EBITDA margin driven by several factors gross margin expansion improved effectiveness of our marketing spend and leverage in our G&A expenses.

As I said last quarter. These long term targets guide our approach as we also navigate the ebbs and flows of a dynamic market.

For the balance of the year, we remain confident in our ability to deliver on the full year 2022 outlook, we established last quarter.

We continue to expect net sales in our projected range of $450 million to $470 million. This represents 18% to 24% growth versus fiscal year, 2021, and a three year CAGR of 31% to 33%.

We also expect continuing year over year improvements in our gross margin.

However, the rate of year over year gross margin growth is expected to moderate from the first half of the year as we begin to anniversary improved gross margins from last year.

We also anticipate continuing to make prudent investments and allocating spending across areas of the business that generate a strong ROI consistent with our goal to deliver long term sustainable profitable growth.

As a result, we continue to expect adjusted EBITDA for the year to be $30 million to $40 million or approximately 7% to 9% adjusted EBITDA margin.

Historically, we have seen slightly higher year over year growth rates in Q4 than in Q3, and we expect a similar pattern this year.

An important contributor is a strong outperformance we've seen in fine jewelry and that historically fine jewelry sales are the highest in Q4.

Additionally, we will have a greater number of showrooms opened in Q4 as we continue our successful rollout of new showrooms.

In closing we are pleased with our results this quarter.

We remain focused on executing our initiatives to build and scale, our business and brand and to deliver long term sustainable profitable growth for our shareholders.

With that we'll be happy to take your questions.

Thank you.

As a reminder to ask a question at this time. Please press star one one on your telephone.

We encourage deployment yourself to one question and one follow up.

You may re queue for any additional questions.

Please stand by while we compile the Q&A roster.

Our first question comes from Thomas <unk> with Cowen. Your line is now open.

Yeah.

Alright. Thank you the gross margins were really impressive.

Your thoughts on pricing optimization opportunities in the back half and what you see there.

Well as inflation in cost of goods sold and materials. If that's a factor as you think about you.

Your own pricing strategies as well as cost of goods sold thank you.

I can start that off we were really pleased by our gross margin expansion.

And as a data driven company, we're always looking at opportunities to be able to maximize the benefit of our premium brand as well as the exclusive and unique product offering that we have in both of these are important to driving our strong margins. Another thing to consider is we're not.

A discount oriented brand and so that also I think plays a role in how we're able to take advantage of the premium positioning that we have.

In terms of our overall inflationary environment, Jeff maybe you can speak a little bit more to that as well as our optimization engine.

Sure.

No.

Unlike other retailers.

Retailers have we haven't we've been fortunate that we haven't seen broad based inflation pressure for example, gold and platinum prices have recently come down a bit and so that's something that we haven't seen as you know we do have our pricing optimization engine as well as a light asset and asset light model.

It allows us to adapt very nimbly to changing conditions and so we've been able to manage that you see that in the results that we've delivered with our strong gross margin and we believe that we continue to have opportunities to optimize as well as.

Take actions like optimize on procurement efficiencies as we have done in the past.

And so I think thats something that we do see a lot of continued strength for us in our gross margins.

Thank you this is Oliver Chen otherwise from Cowen.

On the revenue growth potentially conservative on the guidance would love your thoughts on what Youre seeing with.

Upside drivers or downside driver.

And how that may relate to marketing efficiency, we're seeing different things across the sector, where our digital marketing efficiency. It's been volatile. Thank you.

Yeah, I would say kind of starting from the overall revenue growth. We continue to see strong demand and the performance that we have has remained consistent so while they're going to be some fluctuations we're confident in our ability to deliver on our full year guidance.

As it relates to how.

How do we think about our marketing efforts.

The digital environment, we do recognize it is very dynamic it is highly competitive and as such our costs have increased in certain areas that sad our marketing spend remains efficient and we continue to drive profitable growth.

We're continuing to also look at opportunities to be able to invest in marketing to support our strategic initiatives. So investing in brand building for us is incredibly important to be able to drive awareness to continue to take market share word of mouth for us is a big sales contributor so it's really important.

For us to invest here and we've seen that those investments paying off we're also continuing to invest in fine jewelry. This is a category that has massive potential.

And as we're investing we are also.

Seeing some strong results there as well so we'll continue to keep a strong eye towards maximizing ROI.

But really.

Thoughtful about our approach to maximizing revenue and profitability.

Very helpful. Best regards thank you.

Thank you.

Our next question comes from the line of Dana Telsey with Telsey Advisory Group. Your line is now open.

Good afternoon, everyone and congratulations on the results wanted to get some more color on fine jewelry and wedding band given the strength that you saw there how how you're projecting that going forward in regards to the ALJ and then I believe last time, you mentioned that the consumer was taken a longer time to make their.

Given the environment. What are you seeing now has that changed or has it changed at all by category. Thank you.

Hi, Dana Thanks for your questions.

Starting with the consumer.

Overall behavior there.

As I mentioned the performances is relatively consistent now as it relates to bridal while bridal has moderated slightly it does continue to experience strong growth, we continue to gain share.

We recognize that an engagement ring is a higher price point, it's a more considered purchase so it's not surprising to us that it's taking a bit longer for them to make these purchases.

But overall I would say that generally we're seeing consistent performance.

As it relates to fine jewelry were really excited about our opportunity there growth is far outpacing the business.

And we're really well positioned for the upcoming holiday season. So she was being a nice growth driver, especially as we're entering Q4 being a premium gift, giving occasion, just like we saw with mother's day being a real strong performance for us. So I think that's going to be a nice tail.

And for US, we're continuing to invest in marketing in our Assortments in the digital experience and creative imagery a lot of I think important investments there that are really helping to drive that category.

Got it and the impact on gross margin from increased fine jewelry, how do you see that go forward.

Just want to take that one sure.

There is significant gross margin expansion potential.

In fine jewelry fine jewelry is.

It's a strong gross margin part of part of the business and it's growing it's growing quickly so that we see.

It becomes a bigger and bigger part of our mix and we.

Gain scale efficiencies in that area of the business, we see there's opportunities to grow our margin. There. In addition to some of the other initiatives and levers that we have been able to pull historically.

Thank you.

Our next question comes from the line of Matthew Boss with Jpmorgan. Your line is now open.

Great. Thanks, So first could you expand on the excitement that you cited regarding the second half of the year any specific categories or product assortment launches you see them as drivers of momentum in the back half and maybe specifically could you speak to the progression of demand trends that you've seen from the <unk>.

Michelle moderation in April through through early August .

Yeah, absolutely thanks, Matt.

In terms of the progression of demand as I mentioned, there is some fluctuation but for the most part it has been consistent for US demand continues to be strong and so we're excited to be able to capitalize on the residents that we've had with our customer base and as it relates to the second half.

We have I think a very compelling product offering both and really across our product portfolio. I think you know we take a very data driven and thoughtful approach to expanding our assortment and thats been very successful we see success in our personalized offerings for.

For example, in our Zodiac collection.

We see strength in the offerings that really reinforce our mission positioning like our fair mined gold collection and we're continuing to remind the customer that this is a premium product with collections like are truly brilliant collection and I think we're we have a lot of success.

<unk> been demonstrating and I'm really excited, especially as we're opening new showrooms and reaching more and more customers that we're seeing such strong results.

Great and then Jeff could you speak to comfort with your current inventory position exiting the quarter or just help break down the composition of the build into the back half of the year.

Yeah. Thanks, Matt So as you know we operate the business Barry.

Asset efficient way and I think maybe just maybe providing a little bit of context, and how we see that.

For.

For the latter part of the year, we operate are really technology enabled and data driven supply chain with tight integrations with our suppliers and we've worked with for many years and what that really allows us to do is to closely manage our working capital and inventory levels as we grow and then if you look at it in a way.

Such as our inventory that we have on a per showroom level, its very efficient relative to the industry as a whole.

Manage our fine jewelry.

Inventory in a very efficient way. So I think the overall approach that we take is to really have a lot of insight into the trends insight into our supply chain manage things manage things tightly and we expect even with that we will continue to be the case.

In the upcoming quarters.

Great Best of luck, thanks, Matt Thanks.

Thank you. Our next question comes from the line of Edward Derma with Piper Sandler Your line is now open.

Okay.

Hey, guys. Thanks for taking the question I guess.

On gross margin.

Obviously nice continued benefits from pricing optimization.

As you think about the go forward benefit I know you indicated the comparisons get more difficult, but how should we kind of think about where you are in that evolution with the pricing engine and how much more incremental benefit is still possible.

Sure. So we think that there continues to be room to run with the pricing engine. I think this really starts just to set the context from the premium brand premium differentiated proprietary products that we have that allow us to have that premium gross margin thats something that we continue.

Two investing.

With the pricing engine, we've talked through our longer term target of mid <unk> in terms of in terms of gross margin.

Continue to pull levers as we've talked about with pricing engine procurement efficiency and as we get more data.

And input that into our into our algorithms and we continue to refine so it's a living it's a living approach to how we continue to optimize margin. So we believe that there continues to be a lot of room to run with that.

Great and a follow up if I may good to hear the success in fine jewelry I guess when you are finding a customer that comes in the fine jewelry are they are they generally someone that's purchase engagement score and this is a follow up purchase or is fine jewelry successful and kind of introducing people to the brand. Thank you.

Yeah, I would say both actually we are seeing a lot of success and customers that are already boil brilliant earth.

Customers, perhaps they've come into a showroom.

And they already have a really strong connection and we're also seeing new customers come in which I think is also really exciting that we're expanding our customer base. So really seeing I think strong results also with self purchasers in addition to gifting.

And so I think our efforts are really successful there.

Thanks, so much.

Okay.

Thank you.

Our next question comes from Noah that skin with Keybanc. Your line is now open that's on a great quarter and thanks for taking my questions. Just on the showroom rollout I think youll be adding about nine more in the second half if I'm thinking about that correctly can you remind us how you think about the timing.

And the P&L impact from showrooms as they rollout.

I can I can start that off we talked a little bit about how we're planning on doubling the number of showrooms, we're really excited about the metros and how well they've been performing as well as the upcoming ones that are on our road map. There are some timing fluctuations just based on things that are out of our control.

Permitting for example, so we haven't been very specific about how the rest are going to roll out.

Thank you and then just quickly on the truly brilliant collection as well as moist Tonight.

Just any color on trends, there and how youre thinking about both of those opportunities over time. Thank you.

Yeah, So truly Brian is a newer collection for us and we think that this is really nicely targeting for that discerning customer who is looking for premium characteristics.

In terms of our blockchain enabled natural diamonds.

It uses renewable energy for our lab created so a lot of I think really exciting.

Premium sustainability as well as quality characteristics. So we're expecting I think a really strong reception, but I would say it's early in terms of of what we've seen there and then as it relates to mortgage nightmares, Nick Knight remains a nice alternative for customers in terms of.

An engagement ring, so continue to see strength in the overall category, but we usually don't get too granular as it relates to sub categories.

Thank you.

Our next question comes from the line of Randall <unk> with Jefferies. Your line is now open.

Thanks, a lot I just want to go back to the fine jewelry kind of strategy can.

Can you give us some perspective on how we should be thinking about.

The SKU count over kind of that you are offering to the consumer I guess on the on the website and in store and how you should how we should be thinking about how that.

Evolves over the next 12 to 24 months.

How how is that going to kind of be illustrated how much of it is the.

The consumer going to see and so on and so forth just wanted to get an understanding there and then how do you change or how much will this change the inventory kind of needs on the balance sheet.

Probably not in a big way, but just how should we should be expecting that kind of change the inventory model going forward. Thanks guys.

Great. So in terms of how we think about SKU count, we're really looking at productivity across different.

Assortments to make sure that as we're introducing new products, we're continuing to see that productivity level remain strong and that's what we've seen so far as we've been introducing our assortment and increasing the number of Skus. We're seeing very strong performance. So I would say like as we think about 12 months to 24.

This out we're really taking a very dynamic approach there.

We're also taking approach that is more curated so our approach is not.

To introduce an incredibly wide selection at all costs is really to take a more design driven tailored approach, which is more curated and as we see that productivity will continue to be thoughtful about how we drive that increase SKU count.

Jeff do you want to talk a little bit about the inventory.

Sure. Thanks Randy.

We are well positioned to manage our inventory efficiently.

As we expand into fine jewelry I talked earlier about how we really take our data and technology driven approach and integrate tightly with our suppliers.

And it's really in our DNA to operate an asset light fashion I think just also the way that we operate is just efficient in that for you. If you look at our traditional jeweler.

Might need to bring in thousands of pieces there'll be given SKU just to get something started and to have something in every single location. We operate in a different way, where we can we can test and learn start with limited limited allocations of inventory see what's doing well again use that data to see where we want to make those investments in inventory.

And so I think we're well positioned to continue to have an efficient and capital light model.

I think one thing I would just add is we also have the ability to rapidly introduce new products and I think that's a real competitive advantage for us as we're seeing strengthening the assortment to be able to expand on what we're seeing is trends in the marketplace very quickly.

Got it very helpful. And then lastly, you've done a great job with the gross margin and part of that is due to the fine jewelry penetration.

Any kind of color you.

You can kind of give us on just where we are with fine jewelry penetration today, where we might think it might be two years from now in two years.

From now and where you might want to be five years from now just to give people some kind of thought process on how that penetration.

On a gross long term because it's obviously a nicely margin accretive.

<unk> for you guys, just curious there and any color.

Numerically or just qualitatively you can provide us would be great. Thanks, guys.

I think just on a qualitative standpoint.

It's still quite small for us.

And if you look at most jewelers and jewelry, representing the majority of their sales that's really I think what we're targeting in the future.

While we're not providing specific numbers, we do have I think a lot of investment in this area and and are trying to accelerate to the extent that we're able to do it or not in a profitable way.

Understood. Thanks, guys.

Great.

Thank you.

Our next question comes from the line of Rick Patel with Raymond James Your line is now open.

Good afternoon, and congrats on the strong results.

Can you help us understand what youre seeing in the industry in terms of independent jewellers closing doors.

Typically when the economy hit a soft patch the number of mom and pop jewelers tends to shrink I am hoping you could frame, what youre seeing and to what extent you see that as a revenue and market share opportunity in the back half and beyond.

Yeah, I think the recent numbers that I have seen do indicate that there is an acceleration there in terms of the independents closing doors.

Typically there is a bit of a lag.

So.

I think that's what we've seen in previous more challenging times and I think that youre right on to think of the fact that we're probably going to see increased consolidation more generally.

As it relates to the opportunity we continue to see this highly fragmented industry is ripe for disruption and we think we offer tremendous value relative to the independent jeweler. We have strong supplier relationships are mission driven values and the residents that our brand has I think.

<unk> is very compelling. So we think we're definitely poised to be leaders here and really take advantage of some of the dynamics that we see in the industry.

Thank you very much.

Thank you.

Our next question comes from the line of Oliver Chen with Cowen. Your line is now open.

Hey, Thanks for taking my question Youre positioning a brilliant earth with being premium and branded and mission focus is quite differentiated we'd love to hear your thoughts as the industry consolidates, a little bit and your positioning.

Other competitors such as Blue Nile.

Would you say that's in there or are you most different thank you.

Well, while we're not going to comment specifically on a on one particular competitor.

We think that we are very differentiated in the industry you mentioned, our premium positioning we don't have a discount orientation, we really invest and providing a luxury.

<unk> distinguished experience for the customer overall, the mission behind really everything that we do is really important for us as a company the same way that it's important for our customers.

I think that the products that we offer are also very distinctive we're constantly introducing new trend driven collections and those resonate as well with our customer base. So we're really very focused on our own strategy and how we can resonate with the millennial and Gen Z audience.

Seeing great success there.

Thanks Beth.

It's Oliver Chen from Cowen and company, but supply chain, what are your thoughts on vertical integration or the future.

What may evolve, especially as you continue to make such encouraging progress since fine.

Would love your thoughts.

We don't have any immediate plans there I think we have a really attractive model as it relates to our inventory light capital efficient and more agile flexible model.

Not to say, we won't be opportunistic as we see opportunities to continue to drive an improved customer experience and to lower costs, but do recognize that there are trade offs as it relates to inventory there. So.

I think where we're comfortable with our current model and feel really good about the supply chain partners that we've had there very long term and I think we see a lot of benefit in terms of of those long term relationships.

Okay and last question on the consumer of the consumer has become much more considered and disappointed in some ways. What are your thoughts about what's happening going forward with the health of the consumer given the cross currents for below unemployment.

<unk> pressure from high inflation.

Well you know I don't think we necessarily have the crystal ball there what we can say is that for.

Idle is typically quite recession resilient overall as a category. The consumer continues to drive strong demand for our products as it relates to fine jewelry and other categories, though.

Overall, I think even though there have been some macroeconomic headwinds there we're continuing to perform really well.

Thank you best regards thanks Oliver.

Thank you. This concludes the question and answer session I would now like turn the call back over to Beth Gerstein for closing remarks, great. I appreciate everyone's participation and we look forward to talking about.

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Good day, and thank you for standing by welcome.

Welcome to the brilliant or second quarter of 2022 earnings 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 one one on your telephone.

Be advised that today's conference is being recorded.

I would now like to hand, the conference over to your Speaker today, Allison Malkin with ICR. Please go ahead.

Yeah.

This morning's call that will begin with highlights of our second quarter financial and operational performance.

And the drivers of our future growth.

Yeah will follow with more detail on the second quarter financial results and guidance.

Following this.

Operator, we'll begin the Q&A session with our presenters that and Jeff available to answer the questions you have for us today.

These future forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially. Please.

Also during this call we will discuss both GAAP and non-GAAP financial measures.

You'll find additional information regarding these non-GAAP financial measures.

A reconciliation of these non-GAAP to GAAP measures in today's earnings release, which is available at the Investor Relations section of our website at <unk>.

<unk> Dot <unk> dot com.

Live broadcast of this call is also available at the Investor Relations section of our website with that I will turn the call over to Beth.

Good afternoon, everyone and thank you for joining us today as.

As we approach our one year anniversary as a publicly traded company. We are pleased to report our fourth consecutive quarter of strong profitable growth.

Been an incredible year for our company one in which we have grown the reach and impact of our mission to cultivate a more transparent sustainable compassionate and inclusive jewelry industry. We're proud of the progress our outstanding team has made to date and we're intently focused on the future with a clear mission.

<unk>, a proven track record and significant opportunities for expansion. We are excited about our near and long term potential.

We're pleased with our second quarter results as they demonstrate our continuing ability to navigate in a rapidly changing macroeconomic environment.

By staying focused on nimbly and prudently executing our strategy, while optimizing our asset light business model to grow the brand. We are in a strong position to continue to take share in a fragmented industry and to prudently manage our costs. So that we continue to deliver profitable growth.

A high level review of our Q2 results demonstrated the effectiveness of this approach.

It grew revenue, 18% to $108 $8 million we.

We delivered record gross margin of 53, 1%, a 460 basis point improvement over the prior year.

And we delivered $9 $6 million in adjusted EBITDA, representing an adjusted EBITDA margin of 9%.

With each new showroom opening we bring more consumers to our brand while also deepening our relationships with both new and returning customers.

Technology is a big part of delivering an exceptional omnichannel customer experience. Our continued investment in technology and data is helping us in multiple ways.

Our seamless experience allows customers to shop, how and when they want.

For example, we've recently launched an online weightless to ensure our customers can get the right appointment for their schedules.

Even if we are fully booked equally.

Equally important our showrooms deliver strong rois.

Going forward, we are maintaining our line of sight to nearly doubling our showrooms. This year. Our showroom strategy has been and will continue to be a major catalyst for building our brands.

Whether in our showrooms or on our website in Q2, we continued to deliver design led proprietary products that our customers loved across our curated assortment.

But today I'll start with fine jewelry, a fast growing small percentage of our total mix with huge growth potential.

As a reminder for US fine jewelry consists of hearings necklaces bracelets and fashion rigs.

For mother's day, we enjoyed strong success delivering over 350 basis points of growth in fine jewelry mix over the prior year.

We also launched <unk> fine jewelry, including necklaces bracelets chains and couplings to an enthusiastic response.

This is a new collection, we launched in time for father's day and customers were so excited they found the products on our site even before we marketed them.

When we did launch our strategy included key Influencers media and social content and generated nearly 80 million impressions, while introducing new consumers to our brands.

One of the drivers of differences you have them for our brand is how we are executing on social platforms, where our customers are including Tictoc to extend our brand reach.

And while millions of views are impressive if our engagement and community building that we're most excited about in fact in a recently conducted brand survey, 13% of customers indicated they learned about brilliant earth on tiptop.

As you know bridal and wedding are highly considered purchases where consumers normally shop with a budget.

During the quarter, our <unk> were generally in line with past quarters, and we continue to consistently realized profit on first purchase and see growth across our price points.

As our brand grows new and returning customers look to us for trend, leading proprietary product design and craftsmanship.

In concert with our deep supplier integrations and technology, we added thousands of new lab in natural colored diamonds offering our customers, an even broader on trend assortment of colors shapes and price points from which to choose.

Know that consumers want choice, our ability to leverage data to understand our customers' preferences, and then to optimize the breadth and depth of our diamond assortment, which today includes over 200000 lab at natural beyond conflict free diamonds.

Enables us to effectively serve the broad needs of our customers.

And finally true to our mission, we launched truly brilliant and expertly curated collection of diamonds with the perfect balance of cut color and clarity and verify the sustainable sourcing.

The assortment includes natural diamonds with blockchain powered mine to market traceability for industry, leading transparency. This.

This collection is targeted for the discerning luxury consumer one who we are increasingly attracting who was seeking premium quality and highly differentiated characteristics.

These product and brand stories and that the results that they drove illustrate what makes brilliant or special our mission our brand our unique and powerful business model and our team one whose hard work and commitment is truly exceptional.

In fact, the number one reason employees joined brilliant Earth is because of our mission.

Market share in a volatile environment and remain confident in our outlook for the full year as.

And now I'll turn it over to Jeff.

Thanks, Beth and good afternoon, everyone.

We're pleased to share our second quarter fiscal 2022 results with you today.

Our second quarter result demonstrates the disciplined execution of our approach.

Revenue grew to $138 million.

Which represents 18% year over year growth and up 31% on a three year CAGR compared to Q2 2019.

Gross margin expanded to 53, 1%, a 460 basis point increase compared to Q2, 2021, and our highest quarterly gross margin percentage on record.

And adjusted EBITDA was $9 6 million.

9% of revenue.

These results again illustrate and reinforced the power and distinction of our brand growth across our product lines, and our agile and highly efficient business model.

Q2 revenue grew 18% year over year, which was consistent with our expectations in Q2's rapidly changing macroeconomic environment.

This was driven by new and repeat customers, reflecting the increasing strength and awareness of brilliant earth, which led to growth across our product lines.

We continue to see outsized performance within our fine jewelry assortment with growth that far outpaces the business as a whole.

Wedding band sales were also particularly strong in Q2 this year as the strength of our product Assortments and historically robust year for wedding fueled sale.

The outperformance of fine jewelry and wedding bands led to a mid single digit percentage decline in our total company blended.

For Q2, as both fine jewelry and wedding bands have a lower average price points than our overall business.

As Beth mentioned, we recently opened our 21st showroom, reflecting the ongoing successful execution of our Omnichannel growth strategy.

As we have shared in the past our showroom strategy continues to perform well in.

In addition to providing customers with even greater access to our unique and joyful shopping experience our showrooms continue to generate robust uplift in metro bookings after opening.

As we look ahead to expanding our showroom presence in additional cities. We will continue to do so with a sharp focus on delivering strong ROI.

Our showroom rollout and further expansion into fine jewelry, both show encouraging results and driving financial performance customer loyalty and lifetime value.

Turning to gross margin Q2 gross margin expanded to 53, 1%, which is up 460 basis points versus the prior year.

It enables us to nimbly adapt our supply chain and product pricing to changing market conditions to optimize both margin and revenue.

And this quarter it afforded us the flexibility to continue to invest prudently scaling the business.

In the second quarter.

G&A increased to 47, 9% of net sales compared to 35, 1% of net sales in Q2 2021, an increase of one 280 basis points.

The remaining approximately 1150 basis point increase over the prior year reflects the investments we made to support our growth.

Marketing costs as a percentage of sales grew by approximately 400 basis points year over year.

Our investments in building the brilliant Earth brands continue to drive growing awareness of the unique and differentiated brilliant earth experience and expand market share.

In addition, we are continuing to invest in our fine jewelry assortment, which we see as a significant growth opportunity.

During the quarter employee costs were higher by approximately 390 basis points year over year.

In Q2, 2022, we continued to build our team to support our strategic initiatives, new showrooms and operations as a public company.

As a growth company. We are also strategically investing in scaling really an earth for the long term.

The combination of strong revenue and gross margin growth balanced by strategic investments in the business delivered $9 6 million.

Adjusted EBITDA in the second quarter.

Profitability.

Positive free cash flow in a capital efficient operating model continue to differentiate us among direct to consumer companies and we continue to operate the business in an asset light fashion.

We ended the second quarter with $155 $5 million in cash.

As we look ahead to the balance of the year, we remain confident in our long term growth goals.

As you may recall.

Our aim over the long term is to see revenue growth in the high <unk> to low 30% range with growth across our product lines and our Omnichannel model.

Our long term gross margin target is in the mid 50% range driven by our premium products and brands, our price optimization engine procurement efficiencies and growth of higher margin fine jewelry.

As I said last quarter. These long term targets guide our approach as we also navigate the ebbs and flows of a dynamic market.

For the balance of the year, we remain confident in our ability to deliver on the full year 2022 outlook, we established last quarter.

We continue to expect net sales in our projected range of $450 million to $470 million. This represents 18% to 24% growth versus fiscal year, 2021, and a three year CAGR of 31% to 33%.

We also expect continuing year over year improvements in our gross margin.

However, the rate of year over year gross margin growth is expected to moderate from the first half of the year as we begin to anniversary improved gross margins from last year.

As a result, we continue to expect adjusted EBITDA for the year to be $30 million to $40 million more in approximately 7% to 9% adjusted EBITDA margin.

Historically, we have seen slightly higher year over year growth rates in Q4 than in Q3, and we expect a similar pattern this year.

An important contributor is it a strong outperformance we've seen in fine jewelry and that historically fine jewelry sales are the highest in Q4.

Additionally, we will have a greater number of showrooms opened in Q4 as we continue our successful rollout of new shows.

In closing we are pleased with our results this quarter.

We remain focused on executing our initiatives to build and scale, our business and brand and to deliver long term sustainable profitable growth for our shareholders.

With that we'll be happy to take your questions.

Thank you.

As a reminder to ask a question at this time. Please press star one one on your telephone.

We encourage you to limit yourself to one question and one follow up.

You may re queue for any additional questions.

Please stand by while we compile the Q&A roster.

Our first question comes from Thomas <unk> with Cowen. Your line is now open.

Okay.

Hi, Thank you the gross margins were really impressive.

Your thoughts on pricing optimization opportunities in the back half and what you see there.

Well as inflation in cost of goods sold and materials. If that's a factor as you think about you.

Your own pricing strategies as well as cost of goods sold thank you.

I can start that off we were really pleased by our gross margin expansion.

A discount oriented brand and so that also I think plays a role in how we're able to take advantage of the premium positioning that we have in terms of our overall inflationary environment, Jeff maybe you can speak a little bit more to that as well as our optimization engine.

Sure.

So.

Unlike other.

Retailers, who we haven't we've been fortunate that we haven't seen broad based inflation pressure for example, gold and platinum prices have recently come down a bit and so that's something that we haven't seen as you know we do have our pricing optimization engine as well as <unk>.

<unk> asset and asset light model that allows us to adapt very nimbly to changing conditions and so we've been able to manage that youll see that in the results that we've delivered with our strong gross margin and we believe that we continue to have opportunities to optimize as well as.

Take actions like optimize on procurement efficiencies.

We have done in the past.

And so I think that's something that we do see a lot of continued strength for us gross margins.

Thank you this is Oliver Chen by the way from Cowen.

On the on the revenue growth.

<unk> conservative on the guidance would love your thoughts on what Youre seeing with upsell.

Upside drivers or downside driver.

And how that may relate to marketing efficiency, we're seeing different things across the sector, where digital marketing efficiency. It's been volatile. Thank you.

It relates to <unk>.

How we think about our marketing efforts.

The digital environment, we do recognize it's a very dynamic it's highly competitive and as such our costs have increased in certain areas that said, our marketing spend remains efficient and we continue to drive profitable growth.

For us to invest here and we've seen that those investments paying off we're also continuing to invest in fine jewelry. This is a category that has massive potential.

And as we're investing we are also.

Being some strong results there as well so we'll continue to keep a strong eye towards maximizing ROI.

But really.

Thoughtful about our approach to maximizing revenue and profitability.

Very helpful. Best regards thank you.

Thank you.

Our next question comes from the line of Dana Telsey with Telsey Advisory Group. Your line is now open.

Good afternoon, everyone and congratulations on the results wanted to get some more color on fine jewelry and wedding band given the strength that you saw there how how you're projecting that going forward in regards to the ALJ and then I believe last time best you mentioned that the consumer was taken a longer time to make their.

Given the environment. What are you seeing now has that changed and has it changed at all by category. Thank you.

Hi, Dana Thanks for your questions.

Starting with the consumer and the overall behavior there.

As I mentioned the performance is relatively consistent now as it relates to bridal while bridal has moderated slightly it does continue to experience strong growth, we continue to gain share.

We recognize that an engagement ring is a higher price point, it's a more considered purchase so it's not surprising to us that it's taking a bit longer for them to make these purchases.

But overall I would say that generally we're seeing consistent performance.

As it relates to fine jewelry were really excited about our opportunity there growth is far outpacing the business.

And we're really well positioned for the upcoming holiday season. So she just being a nice growth driver, especially as we're entering Q4 being a premium gift, giving occasion, just like we saw with mother's day being a real strong performance for us. So I think that's going to be a nice tam.

And for US, we're continuing to invest in marketing in our assortment and the digital experience and creative imagery a lot of I think important investments there that are really helping to drive that category.

Got it and the impact on gross margin from increased fine jewelry, how do you see that go forward.

Just want to take that one sure.

There is significant gross margin expansion potential.

In fine jewelry fine jewelry is.

It's a strong gross margin part of part of the business and it's growing it's growing quickly so that we see.

It becomes a bigger and bigger part of our mix and we.

Gain scale efficiencies in that area of the business, we see there's opportunities to grow our margin. There. In addition to some of the other initiatives and levers that we've been able to pull historically.

Thank you.

Our next question comes from the line of Matthew Boss with Jpmorgan. Your line is now open.

Great. Thanks, So Beth could you expand on the excitement that you cited regarding the second half of the year any specific categories or product assortment launches you see them as drivers of momentum in the back half and maybe specifically could you speak to the progression of demand trends that you've seen from the <unk>.

Michelle moderation in April through through early August .

Yeah, absolutely thanks, Matt.

In terms of the progression of demand now as I mentioned, there is some fluctuation but for the most part it has been consistent for US demand continues to be strong and so we're excited to be able to capitalize on the residents that we've had with our customer base and as it relates to the second half.

For example, in our Zodiac collection.

We see strength in the offerings that really reinforce our mission positioning like our fair mine Gold collection, and we're continuing to remind the customers that this is a premium product with collections like are truly brilliant collection and I think we're we have a lot of success.

<unk> been demonstrating and I'm really excited, especially as we're opening new showrooms and reaching more and more customers that we're seeing such strong results.

Great and then Jeff could you speak to comfort with your current inventory position exiting the quarter or just help break down the composition of the build into the back half of the year.

Yeah. Thanks, Matt So as you know we operate the business very.

Asset efficient way and I think maybe just maybe providing a little bit of context, and how we see that.

For.

For the latter part of the year, we operate really technology enabled and data driven supply chain, we have tight integrations with our suppliers that we've worked with for many years and what that really allows us to do is to closely manage our working capital and inventory levels as we grow and then if you look at it in a way.

Such as our inventory that we have on a per showroom level, its very efficient relative to the industry as a whole we also manage our fine jewelry.

Centaury in a very efficient way. So I think the overall approach that we take is to really have a lot of insight into the trends insight into our supply chain manage things manage things tightly and we expect even with that we will continue to be the case.

In the upcoming quarters.

Great Best of luck. Thanks.

Thanks.

Thank you. Our next question comes from the line of Edward Derma with Piper Sandler Your line is now open.

Okay.

Hey, guys. Thanks for taking the question I guess just.

On gross margin, obviously nice continued benefits from pricing optimization.

New to investing.

With the pricing engine, we've talked through our longer term target of mid <unk> in terms of in terms of gross margin.

Continue to pull levers as we've talked about with pricing engine procurement efficiency and as we get more data.

Input that into our into our algorithms and we continue to refine so it's a living it's a living approach to how we continue to optimize margin. So we believe that there continues to be a lot of room to run with that.

Great and then a follow up if I may good to hear the success on fine jewelry I guess when you are finding a customer that comes in the fine jewelry are they are they generally someone that's purchase engagement forward and this is a follow up purchase or fine jewelry successful and kind of introducing people to the brand. Thank you.

Yeah, I would say both actually we are seeing a lot of success and customers that are already boil brilliant earth.

Customers, perhaps have come into a showroom.

And so I think our efforts are really successful there.

Thanks, so much.

Okay.

Thank you.

On the P&L impact from showrooms as they rollout.

I can I can start that off we've talked a little bit about how we're planning on doubling the number of showrooms, we're really excited about the metros and how well they've been performing as well as the upcoming ones that are on our road map. There are some timing fluctuations just based on things that are out of our control.

Permitting for example, so we haven't been very specific about how the rest are going to rollout.

Thank you and then just quickly on the truly brilliant collection as well as moist Tonight.

Just any color on trends, there and how youre thinking about both of those opportunities over time. Thank you.

Yeah, So truly Brian is a newer collections for us and we think this is really nicely targeting for that discerning customer who is looking for premium characteristics.

So in terms of our blockchain enabled natural diamonds.

Renewable energy for our lab created so a lot of I think really exciting.

Premiums sustainability as well as quality characteristics. So we're expecting I think a really strong reception, but I would say it's early in terms of of what we've seen there and then as it relates to moist Knight Knight remains a nice alternative for customers in terms of <unk>.

An engagement ring, so continue to see strength in the overall category, but we usually don't get too granular as it relates to sub categories.

Thank you.

Okay.

Thank you.

Our next question comes from the line of Randall <unk> with Jefferies. Your line is now open.

Thanks, a lot I just want to go back to.

Fine jewelry kind of strategy.

Can you give us some perspective on how we should be thinking about.

The SKU count over kind of that you are offering to the consumer I guess on the on the website and in store and how you should how we should be thinking about how that.

Kind of evolves over the next 12 months to 24 months.

How is that going to kind of be illustrated how much of it is the consumer going to see and so on and so forth just wanted to get an understanding there and then how do you change or how much will this change the inventory kind of needs on the balance sheet.

Probably not in a big way, but just how should we should be expecting that kind of change the inventory model going forward. Thanks guys.

Great. So in terms of how we think about SKU count, we're really looking at productivity across different.

Months out, we're really taking a very dynamic approach there.

We're also taking approach that is more curated so our approach is not.

To introduce an incredibly wide selection. It at all costs is really to take a more design driven tailored approach, which is more curated and as we see that productivity will continue to be thoughtful about how we drive that increase SKU count.

Jeff do you want to talk a little bit about the inventory.

Sure. Thanks Randy.

We're well positioned to manage our inventory efficiently.

As we expand into fine jewelry I talked earlier about how we really take our data and technology driven approach and integrate tightly with our suppliers.

And it's really in our DNA to operate an asset light fashion and I think just also the way that we operate is just efficient in that for you. If you look at our traditional jeweler.

Need to bring in thousands of pieces of a given SKU just to get something started and to have something in every single location. We operate in a different way, where we can we can test and learn start with limited limited allocations of inventory see what's doing well again use that data to see where we want to make those investments in inventory.

And so I think we're well positioned to continue to have an efficient and capital light model.

Got it very helpful. And then lastly, you've done a great job with the gross margin and part of that is due to the fine jewelry penetration.

Any kind of color you.

You can kind of give us on just where we are with fine jewelry penetration today, where we might think it might be two years from now in two years.

Now and where you might want to be five years from now just to give people some kind of thought process on how that penetration.

Gross long term because it's obviously a nicely margin accretive.

Opportunity for you guys, just curious there and any color.

Numerically or just qualitatively you can provide us would be great. Thanks, guys.

I think just on a qualitative standpoint.

It's still quite small for us.

And if you look at most jewelers and jewelry, representing the majority of their sales that's really I think what we're targeting in the future. So while we're not providing specific numbers. We do have I think a lot of investment in this area and are trying to accelerate to the extent that we're able to do it or not in our profits.

<unk> way.

Understood. Thanks, guys.

Great.

Thank you Howard.

Our next question comes from the line of Rick Patel with Raymond James Your line is now open.

Good afternoon, and congrats on the strong results.

Can you help us understand what youre seeing in the industry in terms of independent jewellers closing doors.

Yeah, I think the recent numbers that I have seen.

Do indicate that there is an acceleration there in terms of the independents closing doors.

Typically there is a bit of a lag. So I think that's what we've seen in previous more challenging times and I think that youre right on to think of.

The fact that we're probably going to see increased consolidation more generally.

Is very compelling.

So we think we're definitely poised to be leaders here and really take advantage of some of the dynamics that we see in the industry.

Thank you very much.

Thank you.

Our next question comes from the line of Oliver Chen with Cowen. Your line is now open.

Okay.

Hey, Thanks for taking my question Youre positioning a brilliant earth with being premium and branded and mission focus is quite differentiated.

Love to hear your thoughts as the industry consolidates, a little bit and your positioning relative to other competitors such as Blue Nile.

How would you say about severity.

Just different thank you.

Well, while we're not going to comment specifically.

On one particular competitor.

We think that we are very differentiated in the industry you mentioned, our premium positioning we don't have a discount orientation, we really invest and providing a luxury.

Distinguished experience for the customer overall, the mission behind really everything that we do is really important for us as a company the same way that it's important for our customers I.

Seeing great success there.

Thanks, Beth Lastly, it's Oliver Chen from Cowen and company, but supply chain, what are your thoughts on vertical integration or the future.

What may evolve, especially as you continue to make such encouraging progress since fine.

Would love your thoughts.

We don't have any immediate plans there I think we have a really attractive model as it relates to our inventory light capital efficient and more agile flexible model.

I think we're comfortable with our current model and feel really good about the supply chain partners that we've had there very long term and I think we see a lot of benefit in terms of of those long term relationships.

Okay and last question on the consumer the consumer has become much more considered and disappointed in some ways. What are your thoughts about what's happening going forward with the health of the consumer given the cross current for below unemployment.

Obvious pressures of high inflation.

Well.

I don't think we necessarily have the crystal ball there what we can say is that for.

<unk> typically quiet recession resilient overall as a category the consumer continues to drive strong demand for our products as it relates to fine jewelry and other categories. So.

Overall, I think even though there have been some macroeconomic headwinds there we're continuing to perform really well.

Thank you best regards.

<unk>.

Thank you. This concludes the question and answer session I would now like to turn the call back over to Beth Gerstein for closing remarks, great. I appreciate everyone's participation and we look forward to talking to all.

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

Q2 2022 Brilliant Earth Group Inc Earnings Call

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