Q2 2023 Brilliant Earth Group Inc Earnings Call
Thank you for standing by and welcome to the brilliant Earth second quarter 2023 earnings Conference call. At this time all participants are in 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 on your telephone.
Your question has been answered and you'd like to remove yourself from the queue simply press star one one again.
A reminder, today's program is being recorded and now I'd like to introduce your host for today's program Allison Malkin.
I C R.
Thank you good afternoon, everyone and thank you for joining us for our second quarter fiscal year 2023 earnings Conference call. Joining me today are Beth Kurth team, our Chief Executive Officer, and Jeff <unk>, our chief.
Financial officer for our call today that will begin with highlights of our second quarter financial and operational performance and update the progress we have made on our strategic priorities.
Jeff will follow with more detail on the quarter and share our outlook. Following that we will hold a Q&A session with our presenters bathroom, 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 1995 days.
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.
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. We will discuss both GAAP and non-GAAP financial measures you will find additional information.
Regarding these GAAP financial measures and a reconciliation of these GAAP to non-GAAP measures in today's earnings release, which is available at the Investor Relations section of our website at investors <unk> com.
Live broadcast of this call is also available at the Investor Relations section of our website and with that I'll turn the call over to Beth.
Good afternoon, and thank you for joining US today, we're pleased to share our second quarter results, which met and in many instances exceeded the expectations. We set at the start of the fiscal year, including growth in revenue further expansion in gross margin and ongoing profitability.
Our performance continues to demonstrate the increasing residents of our brand the agility with which we execute and the advantages of our asset light data driven operating model.
The quarter sauce grew share in the highly fragmented 300 billion dollar global fine jewelry market as we advance our mission to disrupt and transform the jewelry industry and to extend our lead as the jeweler for todays consumer.
We begin the second half of the year with positive momentum and we believe we are in a great position to deliver on our goals for the full fiscal year.
I would like to thank our incredible team for their dedication and hard work to drive another strong quarter.
I'll start with some highlights of our quarterly performance and update you on the progress we're making on our key priorities for the second quarter revenue was $110 $2 million, increasing 1% from the prior year quarter with 23% growth on a four year CAGR basis.
Gross margin was 57, 6% an expansion of 450 basis points compared to Q2 2022.
Collecting the strong residents of our brand and proprietary products enhancements to our price optimization engine and continued discipline in managing procurement efficiencies as well as benefits from our enhanced extended warranty program.
Adjusted EBITDA was $7 $7 million or a 7% adjusted EBITDA margin, reflecting our continued focus on balancing profitability and investing in support of our long term growth.
During the quarter, we made strong progress on our key priorities, namely to build our brand awareness to expand and refine our distinctive high quality product offerings to expand and elevate a seamless omnichannel experience across our showrooms and e-commerce and to invest in the technology and systems that enable our growth.
Starting with our brands as a digitally native company, leading in social continues to be an important avenue for building and expanding our brand through both awareness and engagement.
Q2, our social first campaigns on Earth day, and mother's day were good examples of how we are building, even deeper and more impactful connections with our core millennial and Gen Z consumers.
By creating compelling and resident branded product stories, we saw order growth across fine jewelry, and bridal and we delivered our best mother's day gifting period in our history.
Speaking of bridal, we continue to drive order growth in this business. In addition to the always powerful word of mouth that brilliant Earth inspires, we're growing our customer base by building, a strong and compelling presence across social media.
We benefited from Influencers, Dean and Kalen, a Bachelor Fame as they shared content featuring their brilliant earth engagement ring as well as actor and television personality, Cory Brooks, who shared his experience shopping for wedding rings with brilliant Earth.
These efforts generate meaningful engagement with our audience in fact, even in caylin drove more than a million views on social.
These are just a few of many social and Influencer activations that helped to deliver another quarter of sequential increase in media impressions.
As we continue to invest in building ever stronger brand equity. We are pleased to find both new and existing customers seeking out brilliant earth for our proprietary trend leading signature styles. These styles, which extend across both bridal and fine jewelry are increasingly becoming must have styles of the season.
In Q2, we expanded our signature collections with new engagement rings, and wedding rings and fine jewelry.
Signature proprietary collections are outperforming within the Assortments in both bookings and productivity. This is a great example of how we are building proprietary differentiated highly curated products across the breadth of our assortment. This quarter also marked the expansion of our quick ship assortment with ready to ship engagement rings.
A convenient option for customers alongside our already strong creature on product offering.
Over the past several quarters, we've talked a lot about the trends, we're seeing in consumer demand across bridal.
As I said last quarter, we entered the year anticipating a degree of normalization in weddings, and we've continued to see that play out.
During Q2, we drove growth in the sub $10000 price range and we continue to capture market share as our brand demonstrates ongoing residents with our millennial and Gen Z audience.
During Q2, as we entered the ever popular summer wedding season, we saw double digit growth in wedding bands, even as we comped a very strong quarter last year, we saw particular strength in men's wedding rings, demonstrating that our brand resonates across genders.
Turning to fine jewelry, which as you know is an important and relatively new category for us we're continuing to demonstrate strong growth, we're seizing the opportunity to attract new and repeat customers, where they're thoughtful balance of both classic and on trend jewelry are distinctive and high quality personalized jewelry, such as nameplate necklaces have been.
Some of our bestsellers alongside reversible hoop earrings wrap rings, and leering novelty and accented chance.
Finally shifting to our Omnichannel experiences, we opened four new showrooms in the second quarter in Pasadena, Nashville, Fairfax and a second location in Chicago.
Year to date, we have opened eight locations and plan to finish the year with at least 35, we continue to test learn and refine our showroom experiences and will soon open our first indoor mall based showroom in King of Prussia, Pennsylvania. The first of three indoor mall showrooms that will open soon.
Several of our recent openings further extend our reach in major Metro markets like Los Angeles, Chicago, and Washington, D C and which we now have multiple locations and are realizing strong results.
We're excited to test and learn from our showroom expansion as we work to continually refine and optimize our existing fleet.
As we do that you can expect that we will focus on elevating our brand experience to build upon what we believe is a best in class joyful and premium experience. We know that today's consumers expect a seamless experience across any brand's digital and physical platforms, our ability to deliver an ever evolving.
Rated omnichannel experience is core to what makes brilliant Earth special.
Also core to our company is our track record of leadership and innovation as a mission driven company, we placed sustainability transparency and inclusivity at the center of everything we do.
Last week, we again demonstrated our leadership by launching two new collections that highlight the heart of our mission. The capture collection, an extensive collection of planet first lab diamonds grown using carbon captured before it can be released into the atmosphere and the renewable collection featuring lab diamonds and manufactured with a 100.
Percent renewable energy, it's a new era for our industry and we're very proud to lead it.
Finally, before I turn the call over to Jeff I want to introduce a new member of our team Stefanie Layton has recently joined the company as our senior Vice President of Investor Relations.
She comes to brilliant Earth with significant Investor relations and ESG experience most recently from offer pad.
We're thrilled to have her join brilliant earth as we aim to build a best in class Investor Relations program, Stephanie will be a valuable resource for the investment community and we're looking forward to you getting to know her in the coming months Here's Jeff.
Thanks, Beth and good afternoon, everyone.
For joining us today to discuss our second quarter fiscal 2023 results.
As Beth mentioned, we're pleased to report a quarter that was in line with our top line expectations and that exceeded our expectations for profitability.
We also continue to generate benefits from our asset light operating model, maintaining our strong inventory turns and cash flow.
Let me take you through the results.
Revenue of $110 2 million represented a 1% increase year over year and growth of 23% on a four year CAGR basis.
This result is consistent with our expectation of continued strong year over year order growth, which for the quarter rose approximately 21%.
Offset by a decline in <unk>.
Which was down approximately 16%.
Q2, gross margin was 57, 6% exceeding our expectations.
This 450 basis point expansion year over year reflects the strength of our brand our differentiated product offerings and enhancements to our pricing algorithm that have shown promising initial results and which we plan to continue refining in upcoming quarters.
Our gross margin expansion also reflects our ongoing rigor and discipline in managing procurement efficiencies and benefits from our enhanced extended warranty program.
SG&A was 56, 4% of revenue compared to 47, 9% of revenue in Q2 2022.
With approximately 220 basis points of the change driven by expenses that are added back in our presentation of adjusted EBITDA, such as equity based compensation showroom pre opening expenses depreciation and amortization.
Charitable contribution and other nonrecurring expenses the.
The remaining approximately 630 basis points of growth.
Reflecting our continued investment in the brilliant Earth brand, while expanding our omni channel reach and scaling the business.
Q2 marketing costs as a percentage of revenue grew by approximately 470 basis points year over year.
We have been gaining market share and as a growth company, we intend to be opportunistic and making marketing investments to continue building awareness of our brand and capturing share gains while keeping a keen eye on profitability.
As we have seen higher than expected gross margin. We've invested some of this margin to amplify our share gains and drive long term growth, while still achieving an adjusted EBITDA that exceeded our expectations.
Our ongoing investments in building our brands continue to pay off in terms of growing awareness and demand for brilliant earth.
We are pleased to see results from our ongoing disciplined efforts in Opex management as we've progressively reduced our year over year deleverage in both employee costs and other G&A in each of the past four quarters.
For the second quarter employee costs were higher by approximately 110 basis points year over year, reflecting additional showroom employee costs and selective investments in key corporate hires.
Other G&A as a percentage of sales increased by approximately 50 basis points year over year during the second quarter as we continue to maintain a disciplined focus on management of G&A expenses.
We delivered a Q2 adjusted EBITDA of $7 $7 million or a 7% adjusted EBITDA margin, which exceeded our expectations driven by our strong gross margin performance balanced by our diligent management of Opex.
Our profitability and capital efficient operating model continues to differentiate us among direct to consumer companies.
We ended Q2 with approximately $150 million in cash an increase of more than $3 million compared to Q1 2023.
We continue to maintain a strong balance sheet with no net debt.
In addition, we operate the business in an asset light fashion with efficient working capital and our inventory turns are among the highest in the industry.
As I mentioned last quarter, our inventory model continues to evolve as we expand fine jewelry to be a larger part of our business and grow our showroom footprint.
However, we expect to continue tightly managing our inventory turns through our data driven approach and leveraging our strategic relationships with vendors, which allows us to have a vast assortment of products to meet customer needs, while limiting the expansion of our balance sheet inventory.
We are also able to dynamically rebalanced inventory across our showrooms to maintain efficient inventory levels.
These efforts continue to pay off as we have reduced inventory level since Q3 of last year, even as we have significantly expanded our showroom count and driven strong growth and fine jewelry.
Our plans for 2023 reflect the priorities as outlined earlier, coupled with our clear and focused commitment to delivering profitable growth.
We've reiterated our annual top line guidance, which reflects our ability to continue to gain share in a dynamic macro environment.
Our guidance continues to be for full year 2023, net sales in the range of $460 million to $490 million, which.
<unk>, 5% to 11% growth versus fiscal year 2022.
A four year CAGR of 23% to 25% and a four year stacked growth of 128% to 143%.
As we've mentioned, we anticipate higher year over year revenue growth rates in the second half of the year as we lap lower comparative growth rates from the prior year and continued to see success in our showrooms and the performance of our fine jewelry assortment.
Similar to our comments during the last earnings call. We expect the distribution of revenue and the remaining two quarters of 2023 to be generally consistent with the shape of these quarters in 2021 with a slightly higher weighting towards Q4, driven by the opening and maturation of new showrooms.
And the fact that Q4 is seasonally the biggest quarter for fine jewelry.
We also expect to continue driving strong gross margin performance, we expect our second half gross margin percentage to be in a similar range as our first half gross margin percentage as we continue building our brand refining the recent enhancements to our price optimization engine.
Continue our focus on disciplined cost management.
We expect to reinvest a portion of the gross margin gains in both Q3 and Q4.
S G&A.
Including marketing to further build brand awareness and position us for success during the holiday season.
We expect to continue driving profitability this year as we focus on driving sustainable profitable growth.
We've increased our full year adjusted EBITDA guidance to two 2 million to $35 million for an adjusted EBITDA margin of five 7%.
And we plan to exit the year driving leverage on a run rate basis in adjusted EBITDA.
This reflects a balanced approach of continued prudent investments to gain market share while managing the business for profitability.
In closing on behalf of Beth myself and our entire team.
Thank you for your support and we'll be happy to answer your questions.
Certainly and ladies and gentlemen, if you do have a question at this time. Please press star one on your telephone.
And we ask that you. Please limit yourselves to one question and one follow up you may get back in the queue as time allows.
Our first question comes from the line of Edward.
From Piper Sandler your question please.
Hey, good afternoon, guys. Thanks for taking the questions I guess first on the indoor malls showrooms I know, you've historically tried to kind of get lower rent lower traffic locations I guess kind of how do the economics potentially defer here and then I know you guys would call out on the kind of maybe softness or implied softness of over 10000 engagements is this just a customer trading down.
Or are there some other dynamics happening at the more premium price point. Thank you.
Hi, Ed Thanks, so much for the question.
I can start off with the indoor mall showroom.
As we think about the overall our wide that we looked out for the indoor mall showroom, we thought the financials. We're also very attractive and and while it is somewhat of a departure from our original offering which is upper floor appointment driven even as we've gone on to see other ground formats, we've seen.
Really compelling economics, and we think that this is going to give us a chance really to.
Launch and some of the best malls in the country and help to see some of the other benefits in terms of driving awareness, while still seeing very compelling economics, and still offering a really premium customer experience. So I think overall, we're we're still in a test and learn approach but in these markets.
It is really where the customers are shopping so we feel good that the customer data supports us going into the mall or adjacencies support at our demographic data supports that so we have I think good expectations for what's going to materialize there.
As it relates to the $10000 plus customer I think we haven't seen a real change there in terms of continued moderation in that $10000 plus.
I think though one of the things that we're really pleased with is as we look at the aggregate demand under $10000. We've seen some nice improved growth there and I think this just goes to the strength of our product offering we have compelling product offering across a variety of price points. So we're really able to meet demand.
We see it and that's one of the things that distinguishes us.
Thank you.
Yes.
Thank you one moment for our next question.
Our next question comes from the line of Noah <unk> skin from Keybanc capital markets. Your question. Please.
Hi, Thanks for taking my question.
Obviously gross margin came in quite a bit stronger than expectations. This quarter and when we think about the long term mid 50 target as it relates to the performance this quarter like has anything structurally changed there.
Or do you think that mid fifties.
Kind of level is still the right way to think about gross margins going forward.
Thanks Noah.
So we're pleased with our gross margin performance from Q2, and I think this reflects a number of different things, including the strength of our brand and our differentiated products. Some technology enhancements to our price optimization engine continued procurement efficiencies as well as our enhanced extended warranty program.
Graham So we continue to drive.
<unk> strong performance there.
And we are still in process and we're finding some of these enhancements to the price optimization engine and so will be.
Reviewing our longer term targets as we prepare our 2020 for guidance and as we mentioned during our remarks, we expect that <unk> to gross margins will be in a similar range as each one gross margins.
Very helpful.
And you talked a little bit about the phasing of revenue.
Between <unk> and <unk>.
Just wondering if you could share any color on the Opex line as well. Thanks, Okay. Sure. So first I can talk to the phasing phasing of revenue and then as well Opex. So I mentioned during my remarks, and similar to what we've discussed in the past we do expect that the distribution of revenue in the remaining two <unk>.
Orders of 2023 be generally consistent with the shape of those quarters in 2021 with a slightly higher weighting towards Q4, and we're really excited about our preparation and positioning for a successful Q4, we have a number of compelling new upcoming product launches. We continue to open new showrooms include.
Our first three indoor mall locations and continue to see strong showroom performance. So that will be a nice nice benefit going into Q4, our outperformance in fine jewelry is is very hardening coupled with the fact that Q4 is seasonally the most important quarter for fine jewelry were also planning.
On launching some of our biggest brand building campaigns in our history in Q4 as we continue investing in the long term growth of our business and I think one other thing that we keep in mind is that we do have lower comps in Q4 of 2022, and we do expect normalization of bridal grow.
With rates towards the end of the year. So in terms of how that shapes out of in terms of the revenue shape for Q3 and Q4, we think about that as starting from <unk>.
<unk> 2021, and whats the percentage distribution between Q3 and Q4 among the second half and then we'd expect an additional about $5 million move from Q3 to Q4, reflecting this slight shift towards Q4.
And then in terms of some of the Opex, we do see compelling opportunities to make.
Investments in SG&A to drive drive growth drive long term brand awareness set ourselves up for a successful Q4. So we do expect to be investing some of the incremental gross margin in.
In SG&A in both Q3 and Q4, while still managing the business to overall profitability and the increased EBITDA guidance adjusted EBITDA guidance that we provided.
Thank you.
Thank you one moment for our next question.
And our next question comes from the line of Rick Patel from Raymond James Your question. Please.
Hi, guys. This is Josh filling in for Rick Thanks for taking the question.
I was wondering if you could update us on what you see going on with the precious metals and diamond prices in the market and how is this really impacting average selling prices.
Sure Josh.
Nice to have you on the call so.
Seeing some of the input price changes is just something that we've navigated really from the beginning of our history and I think we've developed a lot of internal capabilities in terms of being able to adjust our pricing dynamically based on the input costs that we see.
Really to optimize on margin the other.
Alright, thank benefit that we that we have is the fact that where inventory light and so we don't really carry a lot of the inventory on our balance sheet, we have virtual inventory model as well as make to order and so as you see fluctuations relating to both metal and diamond prices, we can adapt dynamically and we don't have a lot of capital invested in.
In those.
Inputs so overall.
We're going to see fluctuations over time I think we are at a competitive advantage overall.
And the main drivers in terms of ASP.
Are really some of that moderation above 10000, like we said before the fact that we're seeing.
More aggregate demand under $10000 as well as some of the acceleration that we've seen with fine jewelry keep in mind that.
The mother's day gifting period is the second most important holiday for fine jewelry.
After Christmas and I think we did a really great job capitalizing on the holiday we had some really strong mother's day campaigns, we had a really compelling product assortments.
With signature offerings and all of that I think resulted in in the overall ASP.
That resulted in it and I think that's just a consequence of the strategic efforts that we've really been focused on.
Yes, thanks, so much for the color.
Great.
Thank you one moment for our next question.
And our next question comes from the line of Dylan Carden from William Blair. Your question. Please.
Yes. Thank you.
Just curious and kind of looking at the cadence as to the first half and what's implied in the guidance do you feel either philosophically or just where the model is at this point.
You are in a position to actually flow through more of the gross margin upside.
Yeah.
All the way down at this point.
I think that I can start that Jeff and maybe that's something that that you can follow Ed I think that as we've seen an outperformance in gross margin. We've had a really strong opportunity to reinvest in brand building efforts and those brand building efforts have seen some great success, we actually just had a launch.
Yesterday with a designer Logan hollow out that's a really great response, it was a fine jewelry collection, that's nature inspired just very beautiful.
Actually just got from people magazine that we are the number one brand to shop right now for fashion launches. So that's just a great example of how we think about brand building campaigns that drive relevance and residents with our millennial and Gen Z audience and overall I think about how do we position the brand for the long term.
So the marketing efforts that we are reinvesting and we're driving engagement, we're driving I think awareness overall and we've also seen I think some good results from that that have given us reason to reinvest while we're investing in brand building. We're also maintaining strong market.
<unk> efficiency overall and as Jeff pointed out we are raising our overall EBITDA guidance for the year. So we are still able to capture some of those profits.
Would the idea then there'll be that.
I mean at some point will you.
Just sort of keep investing with that in mind sort of a one on one for one or more or less one basis gross margin profit sort of flows into brand building at some point you would think that.
You would want to reap some of the benefits of that of those efforts right.
Well I think we are reaping some of the benefits by increasing the overall guidance for adjusted EBITDA. That's showing you that we are actually taking some of those profits, but as we see opportunity to invest in the brand and we're seeing strong ROI, we're going to continue to take that balanced approach.
Sure.
And the other but just on the new store in Chicago.
How youre thinking about kind of urban area density.
And sort of your longer term store targets. You think is there sort of those stores are relatively close to one another or are you seeing much.
By way of cannibalization or do you think you maybe have more opportunities to kind of infill some locations and some of your older markets.
We're still pretty early in that journey in terms of having a multiple showroom.
Cluster and tougher for our Metro market I think we've been really excited about the performance we've seen so far but just recognizing it's pretty early Fulton market launched.
Just a few months ago. So I think we're still getting data and but some of the.
Early results that we've seen are promising and I think it is a real opportunity for us to think about having multiple showrooms within a metro and we've already.
Have several in the D. C area, we have several in southern California, and we're seeing strong results. There. So we're still in a test and learn phase overall, but so far I think we've been please.
And then last one just on the sort of the dynamic between <unk> and orders really.
Impressive strong nice to see order growth.
It's been something that as you switch and define.
It's naturally going to decline as part of the <unk> decline, though that's sort of weakness in the higher 10000 above price points or anything else kind of going on there.
Yeah, and part driving some of the order growth I guess, just trying to understand those to make sure I would say that.
What we've seen in that $10000 plus price.
Price point is pretty consistent actually with what we've seen in the past.
I think it's more frankly, the fact that it's underneath in that lower price point under 10000 dollar that we're seeing growth that's been accelerating so I think that's actually a positive for the company overall.
But I wouldn't say that this is a new trend in the $10000 plus.
I think there's just still continued pressure in that customer and I think that's been reported more widely.
So more of a mix shift as per sort of what's been happening with the model is buying growth.
Okay.
Great. Thank you very much nice work.
Thank you one moment for our next question.
And our next question.
Comes from the line of Oliver Chen from TV Cowen Your question. Please.
Hi, Beth and Jeff in the past what you've seen is a more considered consumer I'm just curious about what's happening now with traffic relative to conversion and if there is volatility or more stabilization.
And then Jeff you commented earlier.
The engagement and wedding trends would just love your thoughts on what your guidance assumes for the overall industry as we think about this year as well as next and if there'll be a fair bit of volatility embedded in what youre seeing with the market. Thanks.
Thanks, a lot.
Thanks, Oliver I can start off in terms of just what we're seeing with some of the digital performance and I would say, we're seeing strong digital performance in terms of traffic and conversion I wouldn't say there's anything.
In terms of a degradation that we've seen we still see strong strong traffic to the site I think it's converting quite well and I think the the Omnichannel overall strategy is working with showroom is really I think being very synergistic with the digital channel.
Jeff I don't know if you want to speak to kind of assumptions on bridal.
Sure so with respect to bridal trends.
We are anticipating.
A return to a more normalization of industry growth rates towards the end of the year and thats embedded in our guidance for for.
For 2023, and how we think about this is also that.
We are consistently gaining share.
In the industry and this is reflected in the strong brand awareness that we have the strong order growth rates that we have and so that normalization. The continued strength of the brand and traction with millennial and Gen. Z customers are embedded are embedded in our guidance, we havent yet provided a perspective.
On beyond 2023, but I think we are very well positioned for long term growth long term share gains as we're still early in the journey of a very large $300 billion industry.
Okay, and you've made a lot of great progress with fine and some really nice proof points.
Will happen over time in terms of networking capital efficiency and your thoughts on.
What you may need to do to continue the momentum.
And that business and also a key catalyst in categories indoor price points, you're focused on with fine that make the most sense for you.
I mean earlier earnings thank you.
Jack you want me to start on I can start on the price points that we're focused on and then maybe you can follow up on that great. Okay. Great. So I would say we have a pretty fulsome.
Offering across different price points and this kind of goes to the overall philosophy of our company, which is we want to meet our customers, where they are and be able to cater to their budget. Since this is a category where people are shopping with budgets.
So as we see performance strengthened in certain price point, we're able to quickly increase our offerings and drive productivity in those price range. So that's just part of the the data driven model that we have where we're constantly understanding our customer sales and were able to introduce products.
Very quickly and cater to that customer so I think it's actually.
You'll see strong offerings really from I would say $2 50 up to $10000 plus and as we see customers that are self purchase that tends to be a little bit.
Under a thousand dollar and we've really nice offering their gifting, we have I think really compelling offering across the diamond basics as well as our more differentiated styles, which I think I mentioned in the call. We're really excited that some of our signature offerings are doing really well as it relates to both productivity and bookings so Jeff.
Why don't you talk a little on the networking capital efficiency sure as I mentioned during my remarks, I think we do recognize that our inventory model will evolve as we expand.
In fine jewelry and that becomes a bigger part of our.
Bigger part of our business I think we do however, really keep it really tight visibility and management of working capital with our data driven approach toward how do we manage working capital efficiencies and I think a really compelling proof point.
Our inventory level between for example end of Q3 last year and the end of Q2 this year, where we saw inventory actually go down between.
Q3 of last year in Q2 of this year and this is despite the fact that we've been seeing outsized growth in fine jewelry and opening numerous thing about 10, new showrooms during that time, and so I think thats, a very illustrative of how we're able to efficiently manage working capital even though the dynamics are changing.
And we expect to continue that tight discipline going forward.
Thank you best regards thanks Oliver.
Thank you and as a reminder, if you have a question. Please press star one on your telephone.
For our next question.
And our next question comes from the line of Matthew Boss from Jpmorgan. Your question. Please.
Great. Thanks, It's Amanda Douglas on for Matt.
Can you elaborate on the positive momentum entering the second half of the year as he cited in the release and what do you believe is driving your recent market share gains as you look across product categories.
Sure. So in terms of what's driving the recent market share I think a lot of the initiatives frankly that we'd been working on.
Are showing strong results, so driving brand awareness growing our showrooms really leaning into fine jewelry.
I think the fact that we have this differentiated product offering with highly curated styles I think all of those are really what's driving our performance. The fact that we're leaning into some of these brand campaigns and seeing some really nice early results all of that I think is what's creating some positive momentum for us.
I think overall I'm not sure that there's much more that I have to offer other than the fact that we saw positive momentum exiting the quarter and then throughout the quarter. We also saw that.
The momentum was building so all of that I think showcases that the.
A lot of the efforts that we put in are really starting to work.
Thanks, that's helpful and then to follow up on your long term targets. It seems like marketing is the largest opportunity for leverage multiyear I guess is there a point in time or an inflection point, where you believe marketing expenses could start to leverage or just how best to think about that timeline.
Sure I can take that great.
Great.
Glad to take that so I.
I think we think about our investments in marketing in the lens of driving towards overall long term sustainable profitable growth.
<unk> by looking at efficiencies in the marketing spend as Beth has mentioned and we do see compelling opportunities to invest to gain share because we are still early early in the journey. We are a growth company, it's a very large and fragmented industry, where we do see a lot of compelled.
<unk> long term opportunity. So that's one lens that we use in terms of thinking about those investments.
Balanced by our management of the business to profitability and managing to for example, being able to increase our guidance for the year for adjusted EBITDA. So it's really a balanced approach of how we think about that.
In terms of sources of leverage we do see as we opened showrooms and they continue to come up the maturation curve, we see a compelling uplift and ability to drive accretive customer acquisition economics. There the growth of the brand is another area, where we see opportunities to drive.
Leverage so.
I think there are areas of the business, where we see.
We see strong results and we're balancing driving growth and long term with profitability.
Thanks, Jeff.
Thanks Amanda.
Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to Beth great Steve for any further remarks. Thank.
Thank you everyone for joining our second quarter of fiscal 2023 earnings call. We look forward to talking to you next quarter.
Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
Yeah.
Okay.
[music].