Good afternoon, and welcome to this next session of our Goldman Sachs Global Retailing Conference. My name is Brooke Roach, and I cover the apparel, accessories, and brand sector here at Goldman. I'm very pleased to present our next session with Brilliant Earth. Here today with me is Beth, Co-Founder and CEO, and Jeff, CFO. Welcome, Beth and Jeff. Thanks, Brooke. Thank you. Well, Beth, maybe we could kick it off with a question about the value proposition of Brilliant Earth. What is that value proposition relative to competitors today, and how does that translate into your opportunity to grow market share? So the way we think about it at Brilliant Earth is really thinking about brand, product, and experience. So I'll start with brand. I think that the brand to the consumer is incredibly important in our category. It's a very emotionally driven purchase. And for us, our brand is really about creating authentic connections with our customer, having a mission-driven approach that's centered around sustainability, transparency, and inclusivity, and also making sure that the brand stands for a really premium, high-quality product. So that brings me to my second point here, which is the product I think is also incredibly important as it relates to the jewelry consumer. Where we position ourselves is creating very high quality, premium, very thoughtfully designed products, and we really think of ourselves as more trend leading. We're constantly curating that collection for the customer, and we have a lot behind the scenes that enables us to do that, but really making sure it's personalized, very thoughtfully designed, and high quality. As it relates to experience, we've really approached this category in a very different way. You know, from the beginning, we wanted to create a joyful, luxury experience. Not something that you felt pressured by, that you thought was stressful. Keep in mind, for many people, this is their largest purchase to date, and so it can be a very intimidating process. We want to make sure that it's something that is enjoyable, that it's very much a guided, high education type of purchase. How we do that is creating a really seamless omni-channel experience. So we're digitally native, started out online, but very early in our journey, realized how important showrooms were in terms of making sure that that customer could really touch and feel the product and have a really high trust for the brand. You mentioned the showroom strategy, which I think is one of the big growth drivers of the company. Yeah ... Over the course of the next couple of years. I was hoping, could you contextualize the opportunity that you see here, and provide any initial learnings that you've seen from some of the early initial showrooms that you've rolled out? Yeah, I think that we have a huge opportunity as it relates to increasing our physical footprint. You know, right now, we're gonna end the year with about 37 showrooms that we've announced. We actually just launched in the mall, which we can, I'm sure, talk about later. Oh, it's going to be my next question. Okay. Well, then I'll save that one. But, you know, what we see is that there's a lot of pent-up demand when we go into a market, and really having a showroom unlocks some of that demand, and it's high converting. It's also a really strong customer experience because it's highly personalized, it's curated. What we do is we often know what customers are looking for before they come in because it's appointment-driven, and then we're able to curate that appointment that's really specially designed for that customer. So the customer really feels like it's something special for them, and that's what leads to both a better experience as well as something that is high converting as well. So we're early in the journey. We see that unlock in the metro, and we've been really experimenting with different formats. So we started off upper floor. That was much more appointment driven, and then since then, we've opened additional ground floor locations that continue to have the appointment-driven component, but it also enables a more walk-in, browsing type of customer. And that allows them to see just the variety of assortment that we have, from bridal to the fine jewelry offering that we've been also focusing on. As you've adapted that strategy from the upper floor to the lower floor and now into malls, what's evolving in the showroom strategy, and what are you seeing as a result? I think that what's most important is to be where the customer is shopping. In some markets, it makes a lot of sense to be upper floor, both financially as well as how the customer is shopping. You know, we tend to be in prime retail districts when we're in places like Oak Street in Chicago, for example, or Newbury Street in Boston. In additional markets, you know, they're much more used to shopping in a mall, for example. We're going into Long Island and Roosevelt Field, and that's because, you know, for that market, we know that that's how the customer is shopping, that it's highly trafficked. It's one of the premier malls in the country, and we're able to accommodate the appointment-driven model that we have, but now we're going to see additional benefits as it relates to that walk-in customer and driving awareness. Jeff, do you want to come in here and comment about the financial implications of the showroom strategy? Sure. The showroom economics are compelling for a number of reasons. One, we've talked about the uplift that we see across an entire metro when we open those showrooms, and so that's how we look. We're looking for it to be accretive in terms of being able to drive uplift when you consider the metro in its totality, including e-commerce and showroom, and that's one of the things that we really like about them, is the ability to unlock that demand. We already have the awareness there, but the ability to unlock demand across a broader, you know, broader range of customers. Also, that's, of course, accretive to the customer acquisition economics, and it also helps to build brand halo and awareness, you know, across the entire metro area. You mentioned that brand halo and awareness that the showrooms build, but you've also been testing some alternative marketing strategies as well, including key consumer moment marketing. I'm wondering if you could provide additional context on how your marketing strategy is changing. Well, just the same way that it's important to cater real estate to where the customer is, I think for marketing, that's essential as well. What are the channels that our target demographic are using the most? And for us, our demographic is that 25- to 40-year-old. Social media is incredibly important, so we've, you know, really been investing in places like TikTok, actually, for several years now. And also just making sure that across the funnel, we're able to both optimize in terms of the metrics we're seeing, but also driving really high engagement and awareness. So we've used channels like Connected TV, for example, and have really nice quality video that really showcases who we are as a brand. And then we layer on top of that some really nice brand moments. So I think in, in the last earnings call, I talked about how we have on deck one of our, our biggest brand moments, biggest brand campaigns that we've ever had in our history, and that's coming up. It's just great ways for us to continue to connect with our customers, to be fresh and innovative. We just released a collection called our Carbon Capture Collection, and that was really very innovative in the, in the lab diamond space, and something that we can really show differentiates us, and it's a great way for us to message to our consumers. We're constantly innovating, coming up with new products, introducing collaborations, and then amplifying that with influencers and on social in order to make sure that our community really is able to engage with it. Jeff, as you think beyond this year's investments that the brand is making in marketing, where do you see the most opportunity to drive marketing leverage? I think there are a few different areas which are really a continuation of things that we have already been doing. One, as we continue to grow that brand awareness, I think that has benefits in terms of people becoming aware of the brand, our ability to convert them, and so we've seen good success in building our brand awareness in recent years. And so that is something we expect to continue investing in and which will drive marketing, marketing leverage. Another area is the showrooms that I just talked about and some of the accretiveness to the acquisition economics within those metros, given that we see that uplift across the entire metro post-opening. So that's something that's beneficial, as we have more showrooms across different metros, we see areas to drive leverage there. I think another area is fine jewelry, where as we expand and continue to have success in fine jewelry, that allows us to drive additional repeat purchase behavior, increased LTV. Those are areas that I think are areas that we've been investing in, we've been seeing success, and we expect to be able to drive leverage from some of those, from those. Beth, Jeff brought up fine jewelry, and a lot of legacy customers know Brilliant Earth primarily for engagement rings, but this fine jewelry business has been a growing aspect of your business. Can you contextualize the size of that business today and what the most important growth drivers are for fine jewelry? So the way we look at the overall market, it's, you know, $300 billion fine jewelry market. I think there's a ton of opportunity, especially as it relates to brands in this market. The branded segment is growing even faster than the overall market is. So as it relates to, to Brilliant Earth, you know, we see this as, as a really large and growing opportunity for us. We've been investing in the assortment, in the marketing. We actually recently did a campaign with Logan Hollowell, which is a, a jewelry designer. We did event around it, and it's generated a lot of buzz and excitement. Also, I think it's a great way for us to take a very loyal customer and then make sure that they understand that we have additional offerings for different milestone moments that they have. I think it's something that we're able to drive repeat. We're also attracting new customers, because the brand resonates with females as well. That's an important part of our industry, is self-purchase, and that's an area that we've been doing exceptionally well in. As you think about the opportunity to get that self-purchase customer to come back time after time, what emerging areas of success have you been having in that fine jewelry customer? Is it that bridal customers are now navigating to fine jewelry, or are you able to get that fine jewelry customer to repeat? It's both, actually. You know, it's important for us to be able to drive repeat with the customers that we work so hard to acquire in the first place, and make sure that we have really strong customer experiences so that they'll come back to us for additional purchases. And then I think it's also exciting that we're able to attract new customers as well into the brand. And you can see from the order growth that we've had and from some of the customer growth numbers that we've shared as well, that the strategy has been working really well. Jeff, how does the fine jewelry growth impact the economics of your business? So one of the areas is related to what I was just discussing on marketing efficiencies. I think there's the ability to drive additional repeat and lifetime value with those customers, so to be able to engage with them at more different points throughout their life cycle over the years, and so we see that as beneficial. And we see there's also opportunities in higher-margin fine jewelry. So we, we like fine jewelry for a number of different reasons. That's great. Let's bridge the strategic growth drivers of your business to the current environment today. It's been somewhat of a choppy macro, and jewelry is no different. How would you characterize the health of the jewelry customer today? Are there any shifts in consumer behavior that you're seeing now that are emerging, whether that's by demographic, by age, age of the customer, or other customer trends that you think are worth watching? ... Yeah, I would say that, you know, certainly I think there's macro considerations that we've experienced the same way that others have, as you mentioned. You know, how we think about that is we're continuing to invest in the brand and continue to drive share, regardless of what the conditions that we see are. You know, we're coming off of these very, very big years in weddings and in jewelry, and, you know, we're looking at a more normalized type of environment, but one that we can continue to be successful at. We look at that four-year horizon, I think we've been doing really well, growing at over 20% CAGR, and just continue to have to think about, regardless of what the environment is, how can you speak to the customer and meet them where they are? We offer a really wide variety of price points, so even if their budget is shifting, we're able to have a really nice offering, regardless of where they're coming to us at. You mentioned bridal there. Last year was the year of the wedding, and we're starting to cycle some outsized years of a few years of engagement. What's your outlook for the bridal category overall, and what gives you confidence in normalization as you look ahead? You know, this is a category that we've been operating in for about 18 years now. We've seen the resilience really in different types of, of macroeconomic environments. You know, people are gonna continue to get engaged. The diamond engagement ring is, is here to stay, and it's very consistent year after year in terms of what percent of the market it represents. So, you know, overall, I think that it's, it's a, a staple of the market, and we expect that, yes, we've come off of, you know, a disruption, one that obviously none of us could have expected, but really expect, you know, looking at that four-year view, we're gonna see the normalization, and then I think in the future, it's gonna be business as usual. One of the questions that we're asking every company at our conference today is that of share of wallet. There's been a lot of discussion about consumers and whether or not they're spending their dollars on experiences versus things. As you look into next year, what do you think the most important factor is to drive growth in the jewelry category, in your view? I think that the... You know, frankly, like, the normalization of engagements is gonna start to come up by next year, and that's gonna be a driver that lifts all the boats. But, you know, as I said, regardless of, of what we see and what the specific timing is, we're gonna focus on outperforming just like we have been doing every year. And as long as we're increasing market share, once you see, you know, things start to get more in a normalized cadence, I think you'll, you'll start to see even more outperformance. One of the other questions that we're asking every company at our conference this year is that of the consumer backdrop. Do you think that the consumer will be facing more headwinds or less headwinds next year compared to 2023? As you think about the health of your consumer, do you expect to see any trade down or change in demographic behavior? I honestly think it's very hard to predict. You know, I appreciate that there's a lot that we're gonna start to learn, but even this year, I think, has been very volatile and hard to predict. I think one of the benefits of our model is we're very inventory light. So because of the virtual inventory and make to order dynamics that we have, as soon as we see demand start to increase, we're able to meet that demand. And so in some ways, like, we're ready for the consumer. We're able to offer different price points, so, you know, we have the right experiences for them, and so we'll be there the second that they want us to be. Your business is very inventory light, as you pointed out, but the rest of the jewelry industry isn't necessarily that case. What do you see in terms of the health of the jewelry industry inventory levels in aggregate today? And do you think that some of the other industry participants have started to work through some of their excesses? I think you probably see a variety of different situations. I mean, keep in mind that the majority of our industry is composed of these independent, smaller jewelers. So, you know, we're gonna see a wide variety of different behaviors just based on that fragmentation. You know, generally speaking, it's an industry that does tend to tighten their wallets when they're not seeing the demand that comes through. I think holiday will be very interesting to see, but, you know, typically purchasing right now is, I think, a little bit lower than others had expected. But, you know, it'll be interesting to see based on all of this tariff behavior. As you look ahead into holiday, how are you thinking about the promotional environment? Is, is that a risk? And, where have you forecasted more opportunity for sales contribution this holiday versus, on a category basis? Well, you know, I'll just start that question by saying that we're not a discount-oriented brand, so we don't really participate in some of the heavy promotions that you might see. Frankly, I think that's why our brand has endured and has such a high quality. Overall, you know, we-- it's a category where you do see discounting. It's not the customers that we're chasing, and what's important for us is that we continue to invest in profitable growth and, and not chase, not chase the discounts, because that's not gonna be a long-term sustainable advantage for us as a company. As you think about pricing in your business, and Jeff, you mentioned this on the last call about how you were seeing more momentum with sub-$10,000 categories versus over $10,000 categories. Some of that has to do with mix shift between bridal and fine. How are you thinking about the opportunity for you to grow AURs as you look forward? ... I think I would characterize our approach to thinking about pricing as being agile and dynamic. And so this actually relates to the price optimization engine that I've spoken about in the past. And so I think one thing that differentiates us from a lot of the industry is that we are able to price dynamically and factor in things in more closer to real time than others are. We're able to see trends that are happening in the market, factor in input costs, consumer demand, seasonality, and be able to strike that right mix of optimization between driving top line and gross margin percentage. I think that couples really well with our inventory light model, so we're able to adjust and meet demand where it is in a variety of environments, and I think we're seeing that success in our ability to gain share. I would just say the agility and dynamism is really how we approach that overall. Sticking with you, last quarter, you delivered outsized gross margin performance up over 450 basis points year-over-year. What are the most important drivers near term that you see in gross margin? So overall, we've been able to drive our gross margin by a number of different factors. One is the strength of our brand. You know, so that is important for us to cultivate the premium brand and be able to participate in this gross margin space. And so that's central to our gross margin as well as growing the top line. And operationally, there's a number of different factors. So the price optimization engine that I just talked about allows us to strike that balance between growing the top line and gross margin percentage. And we saw some strong performance in the most recent quarter that exceeded our expectations, and we're pleased to see that. We also work continually on procurement optimization. So this could be things like vendor mix optimization and terms and things like that. We've also talked about our enhanced extended warranty program as something that's allowed us to drive this gross margin. You know, we work to continue to work where we can to expand gross margin. As you bridge that near-term gross margin driver to your longer-term forecast, is mid-50s still the right long-term target, or do you think that there's a lot more scope for stronger for longer? Yeah, so we recognize that our most recent quarter performance is really above that mid-50s range, and we haven't yet extrapolated that out into an updated long-term guidance, as we're still kind of early in some of the enhancements that we've made. We have talked about for the second half, a guidance of gross margin that's kind of similar to what we saw in H1. That was a bit of a step up, and we'll be examining that and thinking through how that might update our long-term margin target, but we haven't as of yet. Let's step down to the EBITDA level here. Can you discuss your view of your business's normalized EBITDA margin structure versus the outlook of about 6% this year? What are the key levers to get there, and what factors are in your control versus what's a function of the external environment? Sure. So for our long-term targets, for Adjusted EBITDA percent, we've talked about a 15%-20%+ Adjusted EBITDA percentage target. Some of the things besides gross margin that factor into that are some of the things that we talked about earlier regarding marketing leverage opportunities. So growing the awareness of the brand, the showroom accretiveness to customer acquisition economics, being able to drive additional repeat purchase behavior through things like fine jewelry, all, I think, play a part in terms of being able to drive leverage in terms of marketing as a percentage of sales. In terms of some of the other areas like employee costs and other G&A, as we've made some investments before going public, after going public, in terms of things like public company operating expenses, building up some of the corporate team, we do expect to be able to amortize investments over a broader revenue base over time. And I think you've seen some of that trend line in our recent results as we've talked about our SG&A. And so I think those are some of the areas that we will be pulling levers to drive toward that longer term target. One of the things that consistently gets called out by investors is your healthy control of working capital, especially as you continue to build out showrooms, which is typically very inventory heavy, to build out a store fleet. Can you talk to your view of working capital, and also free cash flow for the year? Yeah. So our approach to working capital has been and continues to be to be efficient and asset light. So I think one, one characteristic that I think differentiates us is our ability to have a very attractive working capital model. So for example, we have the Create Your Own business, where we're making the ring, bringing in the diamond after we have an order, that is from a consumer. So then that inventory is just gonna be transiently on our balance sheet before it's fulfilled to the customer. So that has attractive characteristics. We're able to dynamically rebalance inventory across our showrooms, so we can have the breadth of offering, but be able to rebalance that in an efficient way. And that leads us to be able to have efficient inventory turns that are much higher than the rest of the industry. So that contributes to, you know, how we think about working capital overall. And then in other areas, for example, like CapEx, as a percentage of sales, we continue to work to keep that efficient. And so when you combine profitability, efficient working capital model, being thoughtful about CapEx, I think that all contributes to, you know, being able to generate free cash flow, and that's something that we really work to try and manage the business to. ... That's great. One of the hot topics of the last couple of weeks is consumer credit, and we've heard a lot of companies talk about a tightening consumer credit environment with rising delinquencies, some increases in bad debt. While not always, it is common for jewelry and the industry to be bought on credit. Does this have any impact on your business at all? And if not, what protects you from that? We work with a number of different credit partners. We have, like, a couple of different third-party offerings for credit, and those are offerings that are, you know, so we're not bearing the credit risk and repayment risk on those. And so we like to offer a range of different options to basically meet people how they want to shop, how they wanna pay for things, and we're continuing to do that, and glad to be able to offer a variety of different payment options. It's not, it's not something that I think we've seen a material impact recently as it relates to some of the financing, but it's not the majority of our business. That's great to hear. Thank you. Technology investments. What investments are top of mind for you today, and where are you looking to invest into the future? We are big in terms of investing in technology. Happened from the beginning as an, you know, e-commerce company. I think that's just crucial. I think investing in personalization is really important. You know, how we think about using AI, I'm sure that's come up once or twice in your conversations. I think just what do you do with the data that you have, and look for insights, but also make sure you're driving efficiencies and improving customer experience. So I think there's a big emphasis right now in our company as it relates to data and personalization, and really making sure that we're targeting that customer in a really effective way. As you think about that data and personalization, how is that impacting your product generation pipeline of innovation? Is it changing the way that you think about designing? Is it changing the way that you think about collaborating, or is it just impacting the way that you're marketing and speaking to that customer? No, I think it has ramifications kind of throughout the company, you know, from operations to product development. You know, as it relates to product development, I think there is art and science that you have to balance really carefully. But certainly, I think we have been incredibly data-driven in terms of understanding how we can create a product portfolio that is highly productive, it's highly curated, and make sure that we're leading on trends. And so that's a difficult thing that we're constantly trying to optimize for. And the celebrity partnerships, given the success of your most recent one, how are you thinking about that opportunity to lean into that as a marketing driver? Well, I think that there is a big opportunity for the brand to continue to increase in terms of visibility to the end consumer. I think that we're talking to a generation that is very impacted by influencers of all kinds, and that's something that we see a high degree of success with as we engage with people on social, in our campaigns, et cetera. So celebrities have a variety of different meanings, but for us it's about how do we find people who can authentically speak about our brand and our mission and drive desire in the product? And that's something that I think we are starting to see success with, and we're gonna continue to lean into. Great. Jeff, maybe we could, we could shift to you for a moment. What are you seeing in terms of procurement and input costs, and what's your outlook for those costs going forward? Yeah. So, for procurement costs, I think I might refer back to some of how we're working capital efficient and pricing dynamically, 'cause it's something that we want—we wanna be able to adapt, and we have been able to adapt to a wide range of market conditions. And so it's something where, as we see fluctuations in input, input costs, we're able to factor that into our pricing algorithms and think about how do we, how do we factor that into where we're pricing to our, our consumers to, again, drive that mix of top line and gross margin percent? I think it does really pair well with the light working capital model, so we're able to move quickly, move with agility, and take small, smart bets that we're adjusting continually, and that's been our approach since our inception and something that continues to be an advantage for us. One more for you, Jeff. How are you thinking about capital allocation? Can you share your latest thoughts on how you're managing all of your various investments? There are a lot of opportunities for us to continue to make investments in areas that we have been investing. So growing brand awareness, we've had success in growing awareness of the brand overall, and we are seeing results of that in things like our aided brand awareness, and we see continued opportunities, like the opportunities that Beth was talking about, some of these big brand moments that are coming up. So that's one area. We're still early in the journey with our showrooms and see opportunities to continue to invest there in different formats and are heartened to see the success that we have and to grow in areas like fine jewelry. It's still a small part of our business, but it's a large part of the industry overall, and I think there's very attractive opportunities there. And so there's really continuation of the investments that we've been making, and we're, we're excited about what lies ahead. Beth, we're almost out of time. Are there any final thoughts or closing comments that you'd like to share with the audience? And if not, what excites you the most as you look ahead for your brand? I think that... You know, first of all, I appreciate all of you coming here, so thank you for that. You know, for us, we're really about creating and reimagining a very different type of experience in a more traditional industry, and so we're innovators. We've created a brand that has meaning to our customer segment and that we're gonna continue to invest in, and we've been doing it profitably, which I think also sets us apart, and we do it in a really, I think, innovative way as it relates to being much more capital efficient and inventory light. So those are probably the takeaways, if I were to impart any. Excellent. Well, thank you, Beth. Thank you, Jeff. Thanks, Brooke. Thank you to all of you in the audience for tuning in.