Q4 2023 Brilliant Earth Group Inc Earnings Call
Okay.
Good day, and thank you for standing by welcome to the bargain power fourth quarter and full year 2023 earnings cockpit.
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I would now like to turn the conference Oh, We're just Stefanie Layton senior Vice President of Investor Relations. Please go ahead.
Thank you and good afternoon, everyone welcome to brilliant Earth fourth quarter and full year of 2023 earnings Conference call. Joining me today are Chris <unk>, our Chief Executive Officer.
And Jeff <unk>, our Chief Financial Officer.
During the call today management will make certain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
These forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially.
Please refer to our SEC filings for a description of the risks that could cause our actual performance and results.
The affirmative really 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 revisions to these forward looking statements in light of new information or future events unless required by law.
Also during this call management will refer to certain non-GAAP financial measures a reconciliation of non.
non-GAAP measures to the comparable GAAP measures is available in todays earning release, which can be found on our investor Relations website.
Now I'll turn the call over to Beth.
Good afternoon, and thank you for joining US today 2023 ended on a high note with our teams exceptional execution throughout the holiday season, our record revenue in Q4, and the full year capped a strong 2023 performance.
I'm pleased that in a year that we anticipated to be transitional in dynamic we delivered against our strategic priorities drove another year of healthy profitable growth and gained significant share in the 300 billion dollar jewelry industry.
Here are a few noteworthy highlights from 'twenty to 'twenty, three and Q4.
Q4, net sales grew by 4% year over year to $124 3 million, which was within our revenue guidance and which represented 97% growth on a four year stack full.
Full year net sales grew one 5% to $446 4 million, which represented 122% growth on a four year stock.
We estimate our full year revenue growth outperformed the industry by 750 basis points, highlighting the strong residents of our brand among jewelry purchasers.
Our Q4 product bookings growth, excluding engagement rings increased 28% year over year.
We also drove record order volumes total orders grew to approximately 53000 for the quarter and 175000 for the year, representing 18% and 17% year over year growth respectively.
Q4, gross margin was 58, 7% or 400 basis point increase year over year full.
Full year gross margin was 57, 6%, reflecting a 430 basis point increase year over year.
Both were the highest gross margins in company history.
Our Q4, adjusted EBITDA of $5 3 million or four 2% margin was ahead of our expectations and we delivered $26 $2 million and adjusted EBITDA for the full year or a five 9% margin.
This was our fourth consecutive year and 10th consecutive quarter as a public company delivering positive adjusted EBITDA, reflecting our discipline in operating the business profitably and our ability to manage the business nimbly.
I'm incredibly grateful for and impressed by our team and their ability to execute and deliver these results in a dynamic environment.
Our focus on elevating the brilliant Earth brand deepened our customer engagement throughout the year ending with over 250 million organic video views.
In addition online searches for brilliant Earth reached an all time high in Q4, and we experienced 30% growth in our email and SMS sign ups in 2023.
The positive momentum we saw across these metrics reinforces our prominence as a leader in social engagement.
And our unaided brand awareness for both engagement and fine jewelry has more than doubled in less than two years.
Our 2023 campaigns supported by celebrity and Influencer partnerships throughout the year, and culminating with our sole collection and holiday campaigns.
Just over 2 billion media impressions.
And our partnership with Emmy nominated actress Camille I'm around during the so collection launched earned US recognition as one of US weekly magazines best celebrity partnerships of 2023.
More recently, we were delighted to see actresses are you at a Berry Juno temple and Sui deschanel, each wearing a beautiful assortment of brilliant earth jewelry on the red carpet at the Emmys and Oscars This visibility and elevation of our brand is incredibly exciting and shows our continuing success.
And driving high profile awareness a brilliant earth.
Turning to our fine jewelry assortment customers are increasingly seeking brilliant earth for their essential jewelry pieces like tennis bracelets necklaces as well as popular styles, such as Bengals and cocktail rings.
In 2023, we introduced curated assortments of distinctive trend leading pieces with the launch of several new collections, including our so collections.
We are very pleased with the results, we're seeing from Sul with the collections productivity far outpacing prior collection lunches.
And we ended 2023 with record performance across our fine jewelry assortment.
In December fine jewelry reached an all time high at 21% of bookings and we had our biggest fine jewelry quarter ever in Q4.
We are succeeding in driving both new and repeat fine jewelry purchases as well as self purchase and gifting as we continue distinguishing ourselves as the fine jewelry of choice for today's consumer.
In fact customers, whose first brilliant earth purchase was from our fine jewelry assortment increased 46% in 2023, highlighting the increasing awareness of brilliant earth as a fine jewelry destination.
Another area of strength was in wedding anniversary and fashion ratings, which produced strong double digit growth in Q4.
We believe we made significant bridal share gains in 2023, which was a challenging year for the industry.
In Q4 order volume for engagement rings above $10000 increased year over year in a positive contrast to the trend from the past few quarters.
Additionally, the average sales price for engagement rings was up 4% year over year in Q4, demonstrating the strong residents of our premium brand with consumers.
And we continue to lead in product innovation and design last year by launching new products like our capture collection lab diamond's grown using carbon captured before it can be released into the atmosphere and are 100% renewable collection featuring lab diamonds manufactured with 100% renewable energy.
Both of which have resonated strongly with our customers.
We also continued to elevate our customer experience last year across our showrooms and E Commerce platform.
We opened 12, new showrooms, including smaller formats, and our first indoor mall locations.
And we expanded our cluster showroom footprint with multiple locations in a metro area.
On the digital front, we released hundreds of new features as we continue to provide an industry leading digital shopping experience were very pleased with the ongoing evolution of our Omnichannel model and the key role, our showrooms play and attracting new customers and deepening customer relationships.
In 2023, we made great progress towards our goal to transform and modernize the jewelry industry by leading and transparency sustainability and compassion. We just released our third mission report, where we highlight progress towards our multiple long range goals among.
Among our contributions last year, we donated over 950 volunteer hours in our communities and sponsored a meal program for approximately 1000 children in northern Tanzania.
We also expanded our inclusive sizing ranges to our full assortment of rings improve the energy efficiency and our new showrooms and reached our goal of auditing, 100% of our lab Diamond manufacturers for safe working conditions, you can read more about our impact in our mission report available on our investor website to better understand.
And our commitment and industry leadership.
Turning to our outlook for 2024, we plan to continue making investments towards driving sustainable long term growth and as always to do so in a disciplined and responsible manner big cognizant of the industry and macroeconomic environment.
This includes continued brand amplification product innovation, elevating our distinctive omni channel customer experience and continuing to drive operational efficiencies across our business.
We're already making great progress towards our 2020 for product innovation and brand amplification goals. We continue to lead in product design with our recently launched two collection.
Simon Micropod, they focus fine jewelry collection and curated limited edition pieces, such as our recently released lunar new year attendance.
Turning to our showrooms over the past three years, we have executed against our expansion plan by adding 28 showrooms across the country with a range of formats, New showrooms open at least one year have payback on average within 16 months and have demonstrated strong post opening metro uplift we can see.
We need to have strong conviction in showrooms as a key driver of our growth.
Our showroom focused for 2024 will be on continuing to amplify the consumer and brand experience in our showrooms strong learnings from openings of recent showrooms across a range of formats and locations and planning for the next phase of our expansion.
Understanding that retail requires constant reinvention and evolution. We believe this is a perfect opportunity to double down on our existing fleet.
Customer experience enhancements will include amplified seasonal installations, and visual merchandising and design enhancements to provide a richer experience of the brilliant earth brands for our showroom customers.
We continue to amplify the customer and brand experience in our existing showrooms. We also plan to open two to four new showrooms in the second half of this year.
We believe that both continuing to enhance the consumer experience in our existing showroom fleet and selectively opening new locations will put us in an excellent position to drive both near and long term growth.
Turning to our financial guidance in the first quarter, we've continued to experience a dynamic environment similar to recent quarters.
In this environment, we anticipate approximately flat net sales in the first quarter compared to Q1 last year.
This reflects continued share gains for brilliant earth in the still normalizing bridal jewelry industry.
For the full year, we expect to continue making investments that will set the stage for long term sustainable growth, while also driving current and future share gains and profitability. We do expect 2024 to reflect the profitability turning point with adjusted EBITDA margin, increasing each year from 2025.
For 2027, Jeff will take you through our outlook in more detail.
In closing, we have a compelling opportunity to make outsized share gains in this evolving environment by capitalizing on our brand strength product differentiation.
<unk> consumer experience agile data driven business model and strong balance sheet, we believe that our strategy combined with our ability to execute will position us well in both the near and long term.
With that I'll now turn the call over to Jeff.
Thanks, Beth and good afternoon, everyone.
As Beth highlighted we finished the year delivering record quarter and full year net sales.
<unk> market share gains in Q4 profitability that exceeded our expectations, despite the challenging external environment.
Let me take you through some highlights from my end.
In the fourth quarter net sales of $124 3 million represented a 4% increase year over year and was within our guidance range.
Full year 2023, net sales grew one 5% over the prior year to $446 $4 million, which represented 122% growth on a full.
For your stack.
Q4 order volume increased 18% year over year and full year 2023 order volume increased 17% compared to 2022.
Total orders for 2023 reached approximately 175000, another new record for us.
In addition, we realized 22% year over year order growth from repeat customers in 2023.
Illustrating the success, we are having in driving repeat customer engagement.
For Q4 average order value or <unk> was down 12% year over year and for the full year <unk> was down 13%.
For Q4, the year over year changes in <unk> were principally driven by growth in fine jewelry, which we were thrilled to see.
That's fine jewelry becomes a larger and larger part of our product mix, we expect overall <unk>.
We will continue to moderate.
Looking at the collections independently the average selling price or ESP for engagement rings increased 4% year over year in Q4, and Asps for fine jewelry increased 3% year over year in Q4.
These ESP gains illustrate the strength of our premium brand and proprietary product assortment.
Q4 gross margin was 58, 7%, which is a 400 basis points expansion over the prior year and a slight sequential increase over Q3 2023.
Full year 2023 gross margin was 57, 6%, a 430 basis point increase year over year.
The sustained strength of our gross margin demonstrates the competitive advantage of our premium brand and proprietary products.
Price optimization engine procurement efficiencies and our enhanced extended warranty program.
Our strong gross margin together with disciplined cost management contributed to us exceeding our adjusted EBITDA expectations for the fourth quarter, delivering $5 3 million in adjusted EBITDA for a four 2% adjusted EBITDA margin.
This brought our full year 2023, adjusted EBITDA to $26 $2 million or a five 9% adjusted EBITDA margin.
SG&A for the quarter and the year continue to reflect our investments in growing the brilliant Earth brand expanding our omni channel reach and scaling the business.
SG&A was 57, 8% of net sales for the quarter and 50.
<unk> 56, 6% of net sales for the year.
Adjusted SG&A, which nets out items that are added back in our presentation of adjusted EBITDA, such as equity based compensation expense.
Preopening expense depreciation and amortization and nonrecurring charges was 54, 5% of net sales for Q4, representing approximately 900 basis points of deleverage year over year from investments in marketing our team and other G&A.
Marketing costs as a percentage of net sales grew by approximately 570 basis points year over year for the quarter.
Our ongoing investments in building the <unk> brand continue to pay off in terms of growing awareness and demand for brilliant Earth as we have seen in our strong order growth market share gains and higher brand awareness.
While we saw a deleverage on a year over year basis due to the headwinds in the bridal industry and the investments made in the largest brand campaign in our company's history.
We believe that these investments will drive continuing growth of brand awareness and support long term profitable growth.
During the quarter adjusted employee costs were higher as a percentage of net sales by approximately 80 basis points year over year.
As we discussed previously we are focusing on investing in a disciplined fashion in both new showroom employees as well as key corporate talent to support our current and future growth.
Adjusted other G&A as a percentage of net sales increased by approximately 250 basis points year over year during the quarter.
Including higher showroom operating costs such as web.
Our balanced approach in 2023 allowed us to realize significant market share gains, while making investments for long term growth and delivering in year profitability.
Our business model has also delivered working capital efficiency, our inventory turns in 2023 significantly exceeded the industry average.
In addition, we ended 2023 with a $1 $5 million decrease in inventory ending the year at $37 8 million compared to $39 3 million in 2022, even with our growth in fine jewelry and the opening of 12, new showroom highlighting the benefits of our.
Asset light model and our ability to use data to efficiently and dynamically manage working capital.
We finished the year once again with no net debt and a strong balance sheet.
Our cash balance increased year over year, ending at $156 million as of December 31, 2023, even with the investments we made to expand our showroom footprint and after paying down over $3 million of debt.
Our ability to decrease inventory increased cash pay down debt and operate with negative working capital in 2023, while accounting for substantial expansion speaks to the exceptional execution by our team.
Our agile business model and our discipline in cost management.
All of this was accomplished during the year with a challenging consumer backdrop.
Our strong balance sheet puts us in a position to continue to make strategic investments in this environment.
I would also like to highlight that as we continue to manage the business in an agile fashion to maximize our ability to capture opportunities as they arise. We recently amended our debt facility to spin the testing of our consolidated fixed charge coverage ratio covenant through Q2, 2024 and added.
Any liquidity covenant over the same period, this will provide additional flexibility and making appropriate investments in the first half of the year.
We also announced a share repurchase program, which the board authorized the repurchase of up to $20 million of our class a common stock through December eight 2026.
As a growth company, we are keenly focused on seizing value creation opportunities, including when we see an opportunity to strategically buy back our common stock our strong balance sheet provides the ability to execute the share repurchase program and to realize the significant opportunity we see ahead.
While we did not make any repurchases in 2023, given that we adopted the share repurchase program late in the year, we intend to use this program strategically while balancing our overall investment decisions, including consideration of factors such as trading volumes and our public float.
Turning to our outlook for 2024 and beyond we expect to continue making investments that will set the stage for long term sustainable growth, while also driving in year growth share gains and profitability in the context of you still normalizing industry.
Our outlook includes the assumption that the path towards a more normalized bridal market continues over the next few years and that the broader economic environment remains relatively unchanged.
For Q1, we expect net sales between 96, five and $98 $5 million. This represents approximately negative 1% to positive 1% growth over Q1 2023.
This also reflects continued share gains for brilliant earth through this transitional period for the bridal and jewelry industry.
We expect Q1, adjusted EBITDA of one to $2 $5 million. This.
This includes an expectation of similar gross margins as we saw in the second half of last year.
Annualized <unk> of investments made during 2023 as well as the fact that seasonally the first quarter is our lowest net sales quarter of the year.
Our expansion such as rent and employee expenses do not have a significant degree of seasonality. Therefore seasonally lower Q1 revenue contributes to lower Q1 adjusted EBITDA.
For 2024, our current expectation is for net sales between 455 and $469 million, which is approximately 2% to 5% year over year growth with acceleration as we progress through the year.
This represents positive momentum in the context of the steel normalizing bridal and jewelry industry.
As Beth mentioned, we believe there are compelling opportunities to invest in this environment to drive long term growth.
These include investments to amplify brand awareness enhance the showroom consumer experience and technology investments, including AI and machine learning to drive operational efficiency.
We are also annualizing certain costs, such as showroom stuff and rent expenses from investments made last year.
As a result of these investments we expect adjusted EBITDA for the year between 14 and $22 million we.
We expect some modest sequential increase in adjusted EBITDA from Q1 to Q2 with a significant majority of adjusted EBITDA in the second half of the year.
Similar to our previously mentioned comments on Q1, we expect gross margin for the year to be at a similar level.
As each two of last year.
We expect quarterly marketing expense as a percentage of net sales to be similar to the 2023 average and to drive leverage in marketing expense as a percentage of sales in Q4.
This reflects disciplined continued investment in the business as we believe that there are compelling investment opportunities in this environment that will deliver long term profitable growth and shareholder value, while still delivering in year profitability.
As we look beyond 2024, we would also like to introduce a medium term growth outlook, which will provide visibility into how we plan to manage the business as the bridal and jewelry industry gradually normalize over the next few years.
For net sales, we expect net sales growth accelerating from low to mid single digit growth this year to a low teens growth rate in 2027 weeks.
We expect this to be driven by the gradual normalization of engagements over the next few years.
Growth from existing showrooms.
A measure of the acceleration of new showroom openings compared to 2024.
<unk> outperformance in fine jewelry, and other non engagement assortments as well as growth of our brand awareness.
We expect our gross margin to remain in the high 50% through 2027.
While we do not expect the same pace of annual expansion that we achieved in recent years as we strike a balance between driving topline growth and margin expansion. We do see further opportunities to increase gross margin through our premium brands.
<unk> product collections price optimization engine.
Procurement efficiencies and our warranty program.
On the expense side from $2 25 to 2027.
We expect to increasingly drive leverage in marketing costs compared to 2020.
We expect that growing brand awareness increased conversion from our showrooms and continued success in fine jewelry will all contribute to driving increasing leverage in marketing costs from 2025 to 2027.
We anticipate that 2024 will represent the peak of our investment growth as a percentage of net sales.
And expect profitability to increase sequentially beginning in 2025 through 2027 with adjusted EBITDA margin, reaching double digits in 2027.
In closing our performance for the quarter and the year reinforces the ability of our brand.
Seamless omnichannel experience.
<unk> asset light business model and exceptional team to deliver profitable growth and share gains in a capital efficient manner, and we believe our continued disciplined and balanced approach this year and over the next few years positions us well to deliver strong shareholder value.
With that I'll turn the call back over to the operator for questions.
Yeah.
Thank you if you'd like to ask a question. Please press star one on your telephone.
As well limit yourself to one question and one follow up.
We ask that you wait for your name and company to be announced before proceeding. What's your question one moment for the first question.
And our first question will be coming from Randal <unk> of Jefferies. Your line is open.
Hey, Thanks, guys.
I guess question for Beth and then a question for Jeff I guess I just wanted to get some perspective from you on <unk>.
Pack.
The idea of a normalizing.
Environment kind of give us your perspective on where we are in that kind of a pathway and what sounds like what is normal look like to you from an industry perspective, as we kind of think about the next couple of years, because I'm trying to get an understanding of the baseline youre looking at from an industry growth perspective.
Appreciating all the share gains that you're you're you're undergoing in the in the industry.
And then just I guess, what I'd like to understand from you is.
Unpack the commentary can we unpack the commentary around double digit margins.
By 2027.
I just really have always been focused on the SG&A portion of the business. So is it your view that most of the incremental degradation in EBITDA margin had been just marketing expense.
Going to kind of keep that now like going flat.
After 2024, I just want to understand the different areas of SG&A, where are you going to pull back or keeps flat or whatever it is.
As we get towards that double digit EBITDA margin again in 2020, thanks guys.
Great well thanks, Randy for the question in terms of how we think about engagement rings.
We do expect to see more gradual normalization over the next several years you know keep in mind that our customer demographics, the gen Z and millennial audience, they're still facing continuing pressure so inflation rent hikes.
And they are still adjusting to a lot of the changes that they've been experiencing over the last couple of years. So we do expect to see this category come back it's a very resilient category, where people end up shopping with the budget. So overall. This is you know the the overall jewelry industry is 300 billion.
We're expecting that mid single digit growth in the long term, but we just recognize that we are experiencing a little bit of headwinds right now and we do expect that to normalize I think the great aspect of what we shared in the call earlier is this a significant share gains that we've experienced so it's been a.
<unk> environment, but we're executing exceptionally well I also think in a timeline.
You start to see more challenges than in the bridal segment yeah.
Recognize that two thirds of our industry, our independence and so you know in in more challenging times, you do see an acceleration of closures within these independents. So as we're gaining more share as a strong omnichannel brand, we just see an enormous opportunity.
As we look to further out years.
And then Randy with regards to your question about SG&A and the path to adjusted EBITDA.
Wanted to talk to a few different things.
We have seen deleverage this past year in marketing expenses as we have been making investments, including the largest brand campaign in our company's history in Q4 in a still normalizing environment I think we've been seeing a lot of very strong results as a result of these efforts including the share.
So we've been making strong order growth brand awareness and we believe that these are really setting the stage for both current and long term long term growth. Our approach as you know has always been to be very dynamic in terms of how we're thinking about allocating our marketing spend and focus on driving.
Efficiencies and we're very confident.
And a big reason why has been successful as a digital first.
The outlook as we keep going forward.
For this year, we're expecting marketing spend at a similar level as a percentage of sales as this past year and actually getting to leverage year over year as we get to Q4 and then looking further ahead from 25 to 2027, we expect to progress.
Have we drive additional leverage in each year as we have success with growing our brand awareness.
Getting uplift from our showroom portfolio driving success in areas like fine jewelry and that'll be a meaningful contributor towards our path to increasing our adjusted EBITDA in 2027 to the levels that I spoke of.
Okay.
Yeah, right. So just on the follow up there.
Because it sounds like you would assume that through 2027, we'd keep the gross margins in the high Fifty's.
Is that correct and then b out to 'twenty seven within would that then assume that.
You would keep marketing dollars kind of flattish.
Out to that 2007 year to get that leverage.
So first with respect to gross margins, yes, we do expect gross margins to be in the high fifty's through that time horizon through 2027, we do see opportunities to continue to drive some incremental gross margin improvement through areas like leveraging the strength of our brand and our <unk>.
<unk> the price optimization engine.
In other areas. So we do see opportunities there, although not at the same level of magnitude that we've seen in recent years with a few hundred bps per year of improvement as we're striking the balance between top line and gross margin expansion.
So we do see opportunities there and then.
With regards to <unk>.
Marketing how are you.
Think about it is we.
As always <unk>.
Balanced in the approach and look for opportunities to drive efficiency as we are still.
Growing brand awareness and growing growing the overall business to manage manage within there to get to that overall increase in adjusted adjusted EBITDA, We do expect that as a percentage of sales. It will it will go down.
Over each year from 'twenty five 'twenty six 'twenty seven and then will contribute towards that EBITDA EBITDA overall going up to that double digit level as we get topline growth getting to the low teens by 2027.
Thank you.
It's Randy.
Thank you one of them for the next question.
Okay.
Yeah.
Our next question will be coming from Oliver Chen.
T D. Cowen your line is open.
Hi, This is Tom on for Oliver.
And Jeff if you could just talk about the strength youre seeing across price points and really the main drivers of the ASP increase in Q4, and then it would be great to hear your view on the competitive environment in the fine jewelry category from both a pricing and an innovation standpoint.
Sure absolutely. So you know as it relates to <unk>.
Our ASP increase we were really pleased to see that asps were up for the engagement ring selection, 4%.
And we saw particular strength in that $10000 plus customers. So I think it speaks to a lot of the investments that we've been making in terms of creating that premium brand and customer experience and overall because of the experience, we're providing as well as a differentiator.
Product, we're really able to drive higher price points, we continue to look across a variety of price points to make sure that we are introducing a curated selection this highly productive.
And I think we're also just seeing that that customer is responding really well to some of these investments that we're making so as it relates to the fine jewelry category.
Another I think really bright spot for the company you know the fact that we had the strongest fine jewelry quarter ever with 20% of our bookings in December just speaks to the strength and all of the efforts that we're making.
In terms of fine jewelry, I think what we're really focused on is providing a really curated assortments and the strategy that we're introducing which is to introduce innovation.
Really fresh trend forward product and then amplifying.
That you know about product differentiation across the marketing across our channels is really I think some of the what's been sparking strong engagement and really strong results there and we've been doing this across a variety of price points I think.
The fact that we're able to drive repeat and drive new as well as self purchase and gifting.
Kind of speaks to the efforts that we have you know one of the the.
Statistics that I was also proud of is the fact that we have a 46% increase in customers, whose first purchase is fine jewelry. So we're increasingly being known as a destination.
For higher price point, fine jewelry, and really across a wide range of assortment. So we're able to meet customers where they are.
Yeah.
Great and a follow up on the opening of the New mall format would be great to hear any color you have on neutral.
Productivity and performance there and then any considerations we should model in.
Pre opening costs and inventory build as you continue to open more mall formats in the future.
Yeah, what I'd say about the mall locations you know we recognize its early definitely pleased with the locations that we've selected.
What we're encouraged by is that we've seen good foot traffic, both inside and outside the showrooms and in particular for walk in so we've been able to accommodate that appointment experience that we are so well known for and we are also encouraged that for our mall locations. The walk in business is.
Double the share of the business versus the rest of the fleet. So it really showcases how important that walk and experience is and we really like this combination of walk ins plus appointment. So overall I would say.
Early in terms of or you know, we've only have three of these locations, but seeing promising results.
And then in terms of the inventory cost and build.
We do have some inventory needs for our showrooms as we open them, but we do run into very inventory efficient fashion leveraging things like our virtual inventory. So that we don't have to.
Oil up the inventory at the same level that the rest of the industry does as we build out the suite and I think one point that we're proud of is that over this past year, we were actually able to decrease inventory as we opened opened 12, new showrooms and saw success in areas like fine jewelry I think that's a very helpful.
Ada point to show you, how we can be nimble and agile to keep working capital efficient even as we opened new showrooms. So we will we'll add as we opened new showrooms, but as we've seen with our recent results. We will do so in an efficient fashion.
Yeah.
[noise].
Oh.
Yeah.
Thank you one month to the next question.
Our next.
<unk> will be coming from Edward Roma of P. S. C. Your line is open.
Hey, good afternoon, guys. Thanks for taking the questions I guess first some interesting commentary on some of the repositioning of the historically.
Adding new kind.
Kind of a new function new features is that a capital intensive process.
Or are you expecting around the <unk> expense line and I guess kind of what gives you the confidence that now is really the time to embrace multichannel retailing and then as a follow up.
Good to hear the commentary on $10000 higher price points do you think that because youre seeing just better engagement trends there or have you done something proactive and assortment aside that's allowing you to penetrate the premium side of the market more effectively thank you.
Great well thanks for the question AD in terms of how we're thinking about the overall store fleet, maybe Jeff do you want to just talk about how that's flowing through.
Yeah, so for.
For the investments for the investments in the store fleet.
We're going to approach how we make.
The amplification of the experience in the existing store fleet.
<unk> to how we opened new showrooms and that is to say that we'll do it.
Capital capital efficient way.
The causes of really trying to drive drive strong ROI as we as we invest in the showrooms and so I think the overall approach will be to do so capital efficiently and in a targeted way, where we're really seeing.
Really seeing results and thats been our approach to opening and managing the showrooms and just overall managing our capital. So so we're going to do it but we're going to do it in a targeted way.
And I think what I would add to that is no. We feel really great about the customer experience that we've created but we continue to realize that we need to evolve the overall experience and have a big focus internally just in terms of doubling down on on such a strong fleet that we have already.
In terms of how we think about multichannel retailing them and I would say that we have been thinking about.
Hum.
An omni channel approach from the beginning and really thinking about looking at multiple formats, where.
The location and the depth and the metro market really dictate what type of format. We have so I wouldn't say that the approach has necessarily changed there I would just say that we recognize that we've been opening a large number of showrooms you know at this point, we wanted to just make sure that we are maximizing the productivity that we're enhancing the experience.
<unk>.
As we lay the foundation for additional acceleration of showroom expansion into 2025 and beyond.
And then I guess your second question as it relates to the $10000 plus I would say that where it. It's really a result of be engagement, we're seeing from our customers.
And some of the more brand enhancing activities that we're doing so we know that we're resonating with a higher price point higher income customer. We also know that the showrooms do end up driving a higher ASP.
And as we see success with the showrooms.
That's that's naturally one of the consequences.
Okay.
Yes.
Thanks, so much.
Okay.
Thank you one moment for our next question.
Yeah.
And our next question will be coming from actually own.
Of Keybanc capital markets. Your line is open.
Great. Thanks, just wanted to circle back really quickly on fine I'm just curious on your thoughts as to how large this portion of the business can become to seeing that 20% in December do you think there is a scenario down the road, where this grows rapidly and surpasses engagement or how are you thinking about your product mix and growth opportunities seen there.
[noise] section you have in fine.
I think that this is <unk>.
Very much a massive opportunity for the company.
You look at most independents and other jewelers, you really see the mix of fine in bridal about 50 50. So we have a ways to go before we get there.
Definitely growing incredibly fast and I think we're investing a lot in order to become that fine jewelry destination, but I see a huge potential for the company.
Yes.
Yes.
Inc.
Thank you one moment to the next question.
Yeah.
And our next question is coming from Dana.
Oh Jeez leaf Advisory group your line is open.
Hi.
One as you think about 2024 compared to 2023, given the consumer and how your mix shift as adjusting what should we be looking at as we compare against anything to note on the cadence and then Beth and sorry about my voice I've lost My voice and then Beth as you think about fine jewelry.
And engagement and overall average selling price points, what's happening with raw materials and newness in the product offering and how you envision pricing in 2024 compared to 2023.
You.
Yeah, well, maybe I'll start with the kind of the last question that you asked Dana and thanks for the question.
It really is as we think about pricing you know this is a very dynamic aspect.
Aspect that we manage the business very nimbly so.
The way, we think about it as we provide them.
Variety of different assortments within different price buckets.
And as we see enhanced productivity, we're constantly introducing new products and shaping the assortment based on how the customers are responding. We're also really thinking about how do we maximize margin. While also considering that we're driving growth. So you know I I don't know if I have a crystal ball for 2024 and pricing and other.
Other than that we we continue to believe we have a real pricing advantage based on the brand and the differentiation that we have.
And we'll continue to just continue to test and learn there you know as it relates to some of the the raw materials.
One of the great things about our model is even in the face of increased metal costs. For example, we've still been able to maintain those high margins and I think the fact that we're inventory light just allows us not to invest capital at a higher cost we're able to be really nimble. So I think we have a real advantage in the marketplace over.
We're all.
As it relates from 24 versus <unk> 23.
That a lot of the strategy remains the same in terms of investing in brands investing in fine jewelry.
We see a big opportunity with showrooms, where we really want to make sure that we're driving.
Organization productivity and just the best customer experience that we can in the current fleet as we're still seeing more selective in how we're opening.
And then overall you know we do expect that more gradual normalization with engagement rings, while we continue to experience really strong growth across our non engagement ring selection.
Got it thank you.
Thank you. This does conclude the Q&A session for today I would like to turn the call back over to Beth Bernstein for closing remarks. Please go ahead.
Well. Thank you everyone for joining us for our Q4 2023 earnings call I look forward to talking to you next quarter.
This concludes today's conference call you may all disconnect.
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Good day, and thank you for standing by welcome to the Bergen birth fourth quarter and full year 2023 earnings conference call.
At this time, all participants on a listen only mode. After the presentation there will be a question and answer session.
Ask a question during the session you will need to press star one one on your telephone you will hear an automated message advising your hand is right.
To withdraw your question Press Star one again.
And please be advised that today's conference is being recorded.
Now, let's turn the conference over to Stefanie Layton Senior Vice President Investor Relations. Please go ahead.
Thank you and good afternoon, everyone welcome to brilliant Earth fourth quarter and full year 2023 earnings Conference call. Joining me today are Bhaskar clean, our Chief Executive Officer, and Jeff <unk>, Our Chief Financial Officer during the call today management will make certain forward looking.
Statements within the meaning of the private Securities Litigation Reform Act of 1995.
These forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to our SEC filings for a description of the risks that could cause our actual performance or 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.
By law.
During this call management will refer to certain non-GAAP financial measures.
A reconciliation of.
non-GAAP measures to the comparable GAAP measures is available in todays earning release, which can be found on our investor Relations website.
I'll now turn the call over to Beth.
Good afternoon, and thank you for joining us today.