Has anyone heard of Brilliant Earth? Raise your hand. Thank you. I'm excited to have Jeff Kuo here, the CFO of Brilliant Earth since its formation. Jeff joined Brilliant Earth in 2015, and previously served as the VP of both finance and technology. Before joining Brilliant Earth, he founded and managed Xetum, a wristwatch company, and also worked as a management consultant at Bain. Jeff, thanks for being here with us. Thanks for having me, Oliver. Appreciate it. Jeff, for starters, what sets Brilliant Earth apart? What makes Brilliant Earth so special? We are particularly impressed with how mission-focused you've been and how digital-first you've been as well. I think there's a number of things that really set Brilliant Earth apart, including our brand, which has a mission component, our omni-channel experience, as well as our products. You know, so I think in terms of the brand, we really have an authentic, mission-driven brand that resonates with Millennial and Gen Z customers. We're focused on cultivating, developing that premium brand. We offer a seamless omni-channel experience between e-commerce and our 37 and growing number of showrooms, where you can move in between different channels with a seamless touch. And then we also have a curated collection of proprietary signature products that really differentiate us from the industry. And I think the combination of those, combined with our asset-light and data-driven model, really create a compelling opportunity for us in the jewelry industry. Being asset-light and data-driven is quite unique. Could you explain the working capital and how your model works, and why you are so generative in terms of cash flow? Yeah. So we do have a negative working capital, and I think that we have a compelling model. For example, if you think about an engagement ring sale, we actually collect from our customers before, as they're placing their order, but before it's fulfilled to them. So we have the cash that's coming in from customers, and then we'll make the product after we have the order, bring in the diamond. The vast majority of our inventory for diamonds is not on our books at the time that the customer places the order. Then, that inventory may live on our balance sheet, just transiently for a number of days or weeks, as it's waiting to be shipped or picked up by the customer, and then we have payment terms on the other end with our suppliers. That creates an attractive working capital cycle for a significant portion of the business. Jeff, you're famous for your bridal product. What should investors know about the engagement and bridal industry right now, and also your expectations embedded, and what will happen to the industry relative to your guidance? In terms of the industry right now, we are expecting a few-year path to normalization in terms of engagements, after some of the peaks that we saw in 2021 and 2022, and some of the disruptions in the cadence of the progression of different, different milestones as people go from meeting each other to ultimately getting engaged or married. We do expect that that will normalize over the period of a few years, and that's embedded in how we think about our medium term, medium term guidance. And in the meantime, we also continue to see strong performance in areas like fine jewelry and in wedding and anniversary bands. As we think about a normalization of the industry, what are some key data points that you're looking at, and that we should monitor, as this unfolds? We look at a variety of different, different sources. Wouldn't say that there is one that we would hang our hat on, but we look at and triangulate a variety of different data sources, and, and that's how we formulate that portion of our insight on the industry. Another aspect of your business, fine jewelry. Could you brief us on your fine jewelry footprint, and also what's working really well, and, how it's growing, and what trends have you noticed here? Yeah. So, as you know, fine jewelry is a minority of our business right now, but it's fast-growing. It's growing faster than the rest of the business. We see a lot of opportunity in fine jewelry, given that the industry as a whole is majority fine jewelry, whereas we're majority bridal. And we have seen strong performance, I think Beth talked about in our last earnings call, in the couple of weeks leading up to Valentine's Day, we had a 45% year-over-year growth in fine jewelry. And I think that we see people coming to us for a combination of timeless styles, this could be things like tennis bracelets or stud earrings, and also trend-leading collections, like our tube collection. And so we really offer a breadth of curated products there- Mm-hmm. People are increasingly seeing us also as a fine jewelry destination. That leads into the next question. As we think about modeling revenue, we've had total orders grow, with average order values lower. Will this dynamic continue, given the mix and the changes? How should we model AOV relative to transactions? Yeah. We are glad to see the order growth that we've demonstrated, and I think that really illustrates the resonance that the brand has with our consumers. AOV, as you pointed out, has come down on an overall basis, and this is expected as fine jewelry becomes a bigger part of the mix. One thing that it's helpful to point out is, if you look at the ASP individually for engagement rings, for wedding bands, for fine jewelry, each of those went up- Mm ... year-over-year in Q1, and I think that illustrates, again, the resonance and power of the brand, as well as the fact that we are not discount-oriented, and really continuing to drive, ASPs up, if you look at them individually. But if you look at the blended effect, that takes AOV down, and that's due to the growth of the strategic area of fine jewelry. ... another impressive part has been your gross margin. They've been higher than the long-term algorithm. What factors led to this, and how should we think about modeling it? It's generally had a lot of upside relative to expectations there. In terms of the gross margin, the areas and the levers that we utilize to drive growth in gross margin and the strength in gross margin, and really, it does start from the brand, and having and cultivating that premium brand, which allows us to participate in this gross margin space. Then we complement that operationally with a number of different areas, including our price optimization engine, which I know we've talked about, that allows us to really dynamically manage pricing using a combination of inputs such as market conditions, input prices, consumer demand, and allows us to strike that right balance between gross margin percentage and top-line growth, with the ultimate goal being able to drive as much gross profit dollars as we can. There are also things like procurement efficiencies and our extended warranty program that have been beneficial there. What we've talked about in terms of our medium-term outlook through 2027 is an expectation of gross margin in the high 50s, high 50s%. And we expect there will be puts and takes in a given quarter, but expect to be able to continue to drive a strong gross margin profile. What about your current EBITDA margin relative to your longer-term algorithm of you know, 15%-20%? What do you see happening to get there on a longer-term basis, and which parts are most leverageable in the income statement? Yeah, so I think in terms of our Adjusted EBITDA, probably, you know, call people to our medium-term targets- Mm-hmm ... which we've talked about, getting to a double-digit adjusted EBITDA margin in 2027. And I think that, you know, the levers to get there are continuing to drive a strong gross margin performance, and then also being thoughtful about that right balance between investing in OpEx, but also capturing efficiencies, and that will also be a component. One thing that we've talked about, in particular in the OpEx stack, is in marketing, where we've talked about an expectation that beginning in 2025- Yeah ... to drive, a reduction or leverage in marketing as a percentage of net sales. How can you do that? Are you sure that's a good decision? Yeah, so, we do expect to have that balance between making investment, both for near and long term, as well as driving the efficiencies. I think that some areas that allow us to do that include growth in awareness of the brand- Yeah ... and just that being beneficial to people coming to, and buying from, and buying again from Brilliant Earth. Growth of our showroom footprint and continued growth of our existing showrooms as they, as they get bigger, which is accretive to the customer acquisition economics within those metros. There's also areas like fine jewelry. Yeah. Fine Jewelry, as that becomes a bigger part of the business, unlocks opportunities in terms of driving additional repeat purchase behavior, customer lifetime value, and I think all of those areas, plus our overall underlying ethos of being very data-driven, being very ROI-focused, and constantly managing for, optimization in acquisition of customers and marketing spend- Mm-hmm ... I think those factors all, drive towards, you know, that's why we feel confident about that marketing spend. Jeff, that also segues into showrooms. 37 to date, and plans for 2-4 more this year. What's the big opportunity here? It's still pretty small in terms of the number of showrooms, and how do you think about, format selection, adjacencies, and how might that have evolved? We do think there's definitely room to continue to expand the showroom footprint. Yeah. I think Beth's talked about, for this year, at least the three, three more, with two in the Boston area and our first ground floor location in New York, in Nolita. And so there's additional opportunity. You know, this isn't a thousands of showroom game for us. We think that we can get broad coverage across the country with an efficient footprint, and I think there's a couple reasons. One is that our showrooms tend to be destinations. People know and are thinking about Brilliant Earth, and they want to go there, and then we can unlock demand with people going there. We've complemented that in ground floor, mall, and centers, with the ability to browse and walk in and discover us, like that. And so we think there's, there still remains opportunity in a lot of large metros. We have just a few showrooms, and so there's additional opportunity there, but we think we can do so with an efficient footprint. Inventory levels have also been very efficient. They've been only up slightly, most recently, but they were down in second half. What should we think about in terms of modeling inventory relative to revenue growth going forward? And, you're quite conducive to effective inventory management. How may this evolve with fine jewelry continuing to grow quite compellingly? Yeah, our overall approach has been to manage inventory very efficiently. You know, that's helped by that negative working capital model. As you point out, for the last quarter, we had a modest growth in inventory, even as we significantly grew the showroom footprint and expanded in fine jewelry. We do expect that over time, you know, the inventory model will evolve as we continue to open showrooms and grow in fine jewelry, but we'll do so efficiently, and I think this is reflected in that inventory growth stat that you cited, or the fact that our inventory turns are just far higher than the industry overall, and I think we will continue to do that. We have the data, systems, business model, and the ability to leverage things like virtual and consignment inventory to keep the balance sheet lean and to allow us to be agile in the market. Other management teams during this conference are mentioning factors such as election year, also a consumer that's being very considered and delayed. On the other hand, the consumer does have money and spending power, but what risk factors could drive guidance to the downside or upside? Yeah, I think that, you know, we're cognizant of the macro environment as we think about our outlook for the year. I think that overall, you know, jewelry and bridal are resilient categories- Yeah ... and they have a long tradition. And I think that, you know, how we might think about, you know, upside, you know, or, like, different scenarios, are that we are positioned well with our asset-light model, dynamic pricing to meet demand where it is. And so I think we have the ability to be more agile than the industry as a whole, versus legacy players that might be taking big bets at certain times and then need to get the sell-through in order to make that work out. Mm-hmm. Jeff, what do you think is least well understood about the business model? I think the combination of things that I referenced in some of the earlier question about the combination of the premium brand, a really differentiated, seamless, omni-channel experience, the opportunity and product, including things like fine jewelry, coupled with the asset-light, data-driven model, I think that combination is very unique. Yeah ... and differentiated, and is why we are a disruptive force in the industry. What about customer acquisition costs? What have you been seeing lately, and what are your thoughts about how they may trend? Overall, it's inflated a lot on a multi-year basis. Yeah, so, I think a couple of ways that you could think about that are, one, we are glad to see things like repeat orders grow. So in the first quarter, we had overall order growth 14%, but repeat order growth at 20%. Mm. So we see repeat orders growing, and those are both on a year-over-year basis. We see... You know, so the strength in repeat orders, I think, is something that's helpful for customer acquisition. I think also helpful to note is that, you know, we'd talked about a target of marketing spend in each of our quarters being similar this year as a percentage of sales to the overall percentage of sales last year, and we outperformed that in Q1. I think that is one aggregate indicator that we are being successful and being thoughtful about ROI and efficiency in things like marketing spend. Another important hot topic is, is lab-grown diamonds. What have you seen there? You've been early, and you're known for this as well. Mm-hmm. What's important for investors to know? I think that a few things that are important to know are that we were one of the first to really offer at scale. So we have offered natural and lab alongside each other for more than a decade now, and we see this as one aspect of customer choice. Like, people come to us for a brand, and then we offer them a curated selection of both natural and lab diamonds, as well as well-crafted proprietary jewelry designs. And so that's one aspect of the decision. People tend to come to us and shop in this area with a budget, and so we offer a variety of ways for them to meet that budget. And then I think also, we continue to innovate and differentiate in areas like our Capture Collection, our 100% renewable collection, in terms of offering things that really differentiate us, and that is part of how we've always operated, and I think those are a couple of examples that pertain to lab. You've been highly relevant to Generation Z as well. How do you see your customer, ages or profile evolving over time or not? Yeah, so, we, we do have a significant Millennial and Gen Z customer base, and I think we're resonating with that customer group that is looking to really connect with their brand. They're really conscious about the authenticity of the brands that they shop with. People are often shopping together as a couple, so the proposer and the proposee together are an integral part of the shopping process, and we cater to, we cater to both of them. And I think that, our approach continues to really resonate, resonate with that audience. What about commodity costs in general on the gross margin line? What are you seeing with diamond costs and other input costs that we should think about in our models? With respect to input costs, I think it's important to highlight a couple things, the asset-light model and our dynamic pricing. Mm. So I think the earlier commentary about inventory turns being efficient, working capital being light, it's particularly relevant and differentiating in times when there's volatility in input costs, whether it's diamonds or gemstones or metal, 'cause we can adapt much more quickly than others can because our inventory profile is lighter, as opposed to taking a big bet at potentially the wrong time and having that then sit on your balance sheet, and you need to figure out something to do. We're the opposite of that, and then I think that couples well with the dynamic pricing model. And then we're able to take that asset-light model, view conditions as we see them in the market price in the right way, and so I think if we're just able to adapt to changes in the market, including input costs. Very helpful. A few questions we're asking all of the C-suite: How do you rate the health of your consumer from one to ten? And how are you using AI in your business? Any examples? In terms of health of the consumer, I would say in the six or seven. Mm-hmm ... 6 or 7 range. I think, going back to one of my earlier comments, jewelry and bridal are enduring, you know, enduring categories- Yeah ... with a lot of tradition, although we're cognizant of pressures that there may be in the consumer, like inflation- Mm-hmm ... you know, inflation, for example. And in terms of the use of AI in the business, we do use AI in areas like data analysis in marketing, and then we're actively and ongoing looking at how we can use AI throughout the business. Anywhere that there's data to analyze, review, or integrate, I think there's opportunities, and we've always, as you know, been very technology and data driven, and I think AI is the next, you know, the next iteration of that, and I think it caters well to our innovation and tech-driven approach. I'll open it up to questions. Feel free to raise your hand if you have any questions. There's one in the front. Yeah, could you talk a little bit about your brand awareness levels, and then, off of that, how your marketing strategy has changed over time, given the recent investments, and how that will change relative to the planned lever in 2025? Yeah. So, we have spoken in the past about our, you know, strong, you know, strong unaided brand awareness, and then also, you know, as we continue to grow in terms of areas like social engagement, partnerships with... For example, the most recent that we announced was the Jane Goodall partnership, and we're really honored to partner with her and her institute. I think those continue to elevate the profile of the brand and drive awareness. Showrooms also are an important part of growing the brand awareness within the metros, and it creates the opportunity to further engage with the brand and our products in a deeper level. And we also have great profiles of, like, celebrities, like Sydney Sweeney, wearing our jewelry on the red carpet, and so I think those all raise the profile of the brand, and we're very conscious about cultivating and growing that awareness, and glad to see the results that we're seeing. Other questions? We had a general question, Jeff. What do you think your biggest challenges will be over the next few years? I think that one thing that has always been important to us is just operational excellence and just operating like we have, you know, in areas, whether it's looking at the efficiency of marketing spend, to the price optimization engine, to being strategic and thoughtful about where we locate our showrooms, what types of formats we use, there's, you know, just a real laser focus in terms of being thoughtful as to the granular levels, levers that drive the business. And I think that we need to continue to keep our eye on that ball as we grow in size, as we grow in scale and footprint. Just continuing to keep that focus is important, and I think our data-driven approach and the team that we have position us well to do that, but it's something that we have to continue to keep our eyes on. The industry is fairly competitive, but also somewhat fragmented. Well, how would you speak to the nature of your competition and also promotions? Other players do have to promote if they're missing sales. The industry, as you know, is largely characterized by independence, and so it's somewhat unusual in retail and consumer space in that about two-thirds or so of the industry is made up of independents. And we think that that represents an opportunity for us with our brand, with our financial profile, with our balance sheet, to really gain share in that industry context. And I think with respect to promotions, you know, that's something we are not and have never been a discount-oriented brand. We're very thoughtful about maintaining the premium nature of the brand that's both, you know, for the overall brand top-line growth, our gross margin profile, and, you know, that's just an approach that we do not follow. I think that that's, you know, for the long-term health and growth of the company, it has been and will continue to be an important lever. What about supply chain? What do you see, next in terms of five years? What are you thinking about? You're very asset-light and agile. Mm-hmm. But should you be more vertically integrated or not? Yeah, in terms of supply chain, I think that we are. I would say that we're an attractive partner to our suppliers in that we have scale, scale, longevity, reputation, and we're able then to have and cultivate long-term relationships with our suppliers. That's an important part of how we're able to have things like virtual inventory and to be able to drive our, you know, strong gross margins. And so I think that we're an attractive customer in the space, and I think that there continue to be opportunities for us in terms of procurement efficiencies. Those procurement efficiencies, which ones are most exciting to you? I think there are areas like vendor mix optimization- Mm. terms, you know, terms that we have. I think as we continue to scale- Mm. You know, I think there are additional opportunities that we'll be able to capture. You've had some fun partnerships in fine jewelry as well. What do you see as your brand statement in terms of the ethos of how you'll continue to evolve fine jewelry? What will set Brilliant Earth apart in that category? There are a number of things. One would be for the designs. Yeah. I think, like, the quality and compelling nature of the product designs are central, of course, here. There's examples of this, like our tube collection, which is a diamond micro pavé, you know, focused collection of fine jewelry. Our Sol Collection, which we launched last year to a strong reception. You know, I think we continue to innovate in terms of trends, as well as, as I mentioned earlier, timeless styles, like tennis bracelets. So, I think there's really opportunity to meet the customers with a breadth, a breadth of offering, and it's a fast-growing part of our business, and we see enormous potential there. Which part of the business excites you the most in terms of, where do you have the most fun? I think, you know, I'm a science background, you know, by major, and so I think that all the things that we do in terms of data and analysis, you know, I still, you know, I find a lot of joy in just uncovering insights. Mm. I think as our team has grown, you know, across the different, the different departments, I think we're just doing more and more innovative things with data. Things that, you know, even a couple of years ago, we're just, like, doing things that are far more advanced. And that really excites me, just, like, how much data drives our decision-making. And Jeff, on the customer analysis, anything that's happening, bifurcation seems to be happening with greater pressure at the low and middle. Are you seeing any trends that are noteworthy in terms of household income or customer segments that you follow? I think this is... I mean, this is an area where people do tend to shop with a budget. Yeah. And, and so that's something that is an enduring part of how people shop in this area. And I think we're able to meet people at different points, you know, where their budget is, with a broad but curated assortment, and I think that approach continues, and now we're able to do so more and more with showrooms in different formats and locations. And, we're glad to be able to do that. When we think about customer lifetime value and that framework, it's a class I teach at Columbia Business School as well. Which levers of LTV are you most excited about, whether it be retention or customer acquisition costs or LTV contribution margins? Yeah, I think one of the exciting areas is in retention and driving additional repeat, you know, for example, in things like fine jewelry. With fine jewelry growing and becoming a bigger part of the business, you know, I think that allows us to engage with people at more different points- Mm ... in their life cycle, and I think that's a very attractive opportunity for us. Great. We had a question over there. Hey, Jeff, thanks for the time today. I had a, kind of a broad question on sort of where the consumer is right now and, and with budgets, like you just talked about. So when a couple or an individual comes to you guys and they have a budget, are they sort of looking to spend to that maximum, or are they saying, "Oh, well, I was... You know, I had this budget in mind, but if I go lab-grown versus natural, I can save myself money"? So I guess, in other words, do you see customers sort of hitting that max that they always felt like they might, and it just depends on which product, or are they kind of trading down and viewing lab-grown as a way to sort of save money compared to a traditional diamond? Yeah, I think the overall approach to, you know, consumers in this area has been to shop with that budget. You know, that has been just, you know, a behavior that, that we've seen. And we offer a variety of dimensions, whether it's one of the Four Cs, whether it's lab natural, whether it's the engagement ring setting style. So there's a lot of different things that they're trying to do, and it's ultimately a very personal decision. And I think that one, you know, one of the proof points I'd probably like to call back to is just the fact that, if you're looking at engagement ring ASPs overall for Q1, those were up year-over-year. I think that, you know, kind of is one of the ultimate proof points in terms of what are we seeing in aggregate for ASPs, and so I think that's how we would think about that. Any other questions? Well, Jeff, we had that lightning round, final one. What about what book, TV series, or streaming show or movie have you enjoyed lately? I recently dusted off something that I probably read when I was in junior high or high school, which was the original Foundation trilogy by Isaac Asimov. You know, after it, you know, came on streaming, I broke out the book, and I've reread the trilogy and a couple of the prequels and enjoyed them as much as I did, you know, when I first read them. Well, Jeff, thanks for highlighting all the logic and magic and also the uniqueness of Brilliant Earth and the execution underway. Thanks for your time. Thanks. Thanks for having me.