Good afternoon, everyone, and welcome to another session of the Goldman Sachs Global Retail Conference. My name is Brooke Roach, and I cover the apparel, accessories, and branded goods sector here at Goldman Research, and I'm thrilled to introduce our next session with Brilliant Earth Group. Here with me today are Beth Gerstein, CEO and Director, and Jeff Kuo, CFO. Welcome, Beth. Welcome, Jeff. Thanks, Brooke. Well, Beth, how about we kick it off with a few opening remarks? Anything that you'd like to start the session with? Yeah. I don't know how familiar you all are with Brilliant Earth, but just to give you guys a little bit of background, I co-founded the company almost twenty years ago, from my apartment, actually, and since then, we've been growing really fast and think of ourselves as the next generation fine jeweler. So we're really reinventing the overall fine jewelry buying experience for the Millennial and Gen Z consumer, and everything from how it's sourced, being ethical and transparent, to how we sell it, which is much more digital first, much more omni-channel, with our showrooms now almost around forty. So in terms of our history, we've been growing through our showrooms, through our fine jewelry initiatives, through the overall omni-channel experience, and I'm sure we're gonna talk more about that. Excellent. Yes, I'm sure we will talk quite a bit about all of those strategic initiatives, but maybe to set the stage, we can talk a little bit more about your recent thoughts on the health of the jewelry category, the industry, and some of the consumer trends that you're seeing today. Yeah, absolutely. So keep in mind that with 2021, 2022, those are some really big years in jewelry, and, you know, us, as well as others, experienced really fast growth. You know, I call 2022 the year of the wedding, 'cause I'm sure most of you experienced so many weddings that year. And so as we're coming off that, you know, we are hitting a more normalized environment overall. I think within fine jewelry, we're seeing a lot of strength and a lot of excitement for the consumers with diamonds, with bigger diamonds, with more jewelry overall. Bridal, as a more considered purchase, has more challenges, I think, and more headwinds for the overall industry. You know, one of the narratives in the market today is just what pressures we're seeing from a consumer perspective by income cohort. I'm curious what engagement trends you're seeing by different income cohorts across your brand. Are you seeing any changes in repeat frequency or AOVs, self-purchase versus not self-purchase in your business today, or is the changing trend just purely driven by bridal? So what we see, you know, what we've seen over the past several quarters are ASPs within engagement rings, specifically, you know, actually increasing. So we see customers continue to shop with a budget. I think just for that younger consumer, you know, 25- 40, this is their largest purchase at the time. They're faced with much higher costs in their life, and I think while they still have interest, they're just taking a little bit longer, so that decision cycle has been lengthened more. And I think we've heard that narrative for considered purchases more generally. As it relates to income, you know, we're not really seeing very different behavior, and I think that shows up in the ASP. In terms of our AOV, we have seen declines, but that's because fine jewelry for us is growing so fast, and we're seeing really strong repeat behavior as well, and part of that is just a lot of the initiatives that we're doing to drive repeat, to increase the assortment for those fine jewelry purchases have been really successful. One of the things that we've been hearing a lot from companies at our conference is this focus on value, given the inflation pressures on the customer. How are you seeing customers engage with the products on that value trend? And then one question we're asking all companies at our conference is: Do you think that this trend of looking for value is cyclical or secular? So I do think, you know, we are in a very heavily promotional environment, probably one of the heaviest ones that we've seen in our history of the company. Our approach is not to have a discount-driven brand. Our brand is much more premium in nature. So the way we think about value is: How can we offer really unique, personalized experiences, a really beautiful product that's going to last a lifetime, and, you know, something that you can tell a story to your, you know, friends and loved ones, and actually give this jewelry to future generations? So it's a much more emotionally driven purchase overall. So we're not trying to compete on price and go down that discount. You know, we think of it as kind of a pitfall overall, and that's gonna keep our brand strong in the long term as we continue to invest in it. One additional question that we're asking all companies at our conference today is regarding the macro. What are your expectations for the environment for your business in the second half of twenty twenty-four relative to your recent results? Do you expect things to be the same, better, or worse? Do you wanna talk about that, Jeff, or you want me to? Sure, I can speak to that. So I think we do maintain a cautious outlook, given some of the macro and consumer environment. With that said, jewelry and engagement jewelry is a resilient and enduring category overall, and I think that we're well positioned to capture demand as it emerges, and we're also having strength in areas like fine jewelry and wedding bands. And so there is certainly a macro environment that we're cognizant of, but I think there's also a lot of strengths based on the area that we play and how we operate as a business. With that macro backdrop out of the way, let's talk a lot more about your strategic initiatives. You know, against this backdrop, what are the most important strategic initiatives that you have in place to gain market share today? ... I think it starts with our brand. You know, we still have relatively low unaided awareness, stronger aided awareness, and it's been growing over time, but still a ton of room there. As we invest in our marketing initiatives, bring to life some of the campaigns that we've been working on to really showcase the beauty of the new product collections that we're introducing and innovating with, I think that's where we're seeing a lot of strong opportunity. Continuing to lean into brand campaigns, new product differentiations, and product collections, continue to invest in our experience. As we've been increasing the number of showrooms that we have, we see really nice uplift in the metros we now have physical presence in, and we've started to add more clusters within those metros. So, you know, later this month, we're gonna be opening our first ground floor location in New York, in Nolita, so we're really excited about that, so continuing to lean in our experience, whether it's digital as well as the showroom, our fine jewelry, and the brand. Those are really the big levers. That's really helpful. On product, you mentioned opportunity there as you build new collections. Some of those areas of extension of the brand include men's and fine. Can you speak a little bit more about the size and the opportunity that you see there, and the biggest opportunities as you go after that revenue growth? Yeah. If you look at the rest of the category, like, the rest of our industry, it's a $300 billion industry with fine jewelry. Most jewelers are actually majority fine, and bridal is a minority of their sales, and we're definitely much more concentrated within bridal. So as we've been growing fine jewelry and really diversifying our overall product mix, we're able to drive much higher repeat rates. Engagement is the entry point into this category for most of our customers, and so they have a great engagement ring experience, and then we continue to sell to them and really be their jeweler for life. And that's been very successful, especially because we have such strong customer connections with our sales associates in our showrooms themselves. You mentioned bridal and your heritage there, which is, you know, a strength of the business. What trends are you seeing in bridal, and how do you think about the outlook for engagement recovery over time? Well, I think that bridal tends to be an enduring category. You're gonna see puts and takes from quarter to quarter based on, like, different macro pressures or, like, we're coming out of COVID still, and as you see more relationships get to that point, we're gonna see more engagement. So we do expect to see that multiyear normalization, but I still think that diamond engagement rings are an enduring tradition. You know, people are looking at bigger diamonds, they're looking at more fancy shapes, and we really pride ourselves on having a broad assortment of both lab and natural diamonds, being leaders as it relates to ethically sourced, having a really high-quality collection that we're continuing to talk about. So all of those, I think, the trend towards bigger diamonds, towards more personalization, that's something that's really important to us as a company. You know, customers are able to pick their diamond, they can pick their setting, whatever the metal is, and I think that kind of more bespoke process is something more and more that the younger generation wants. As we think about that product, one of the opportunities that you have is in product innovation, and that's been a driver of consumer engagement. How should we be thinking about your approach to innovation, and what should we be looking for in the second half of this year? I think that we really pride ourselves on innovation, so we're constantly thinking about new design collections overall, so we introduced our Sol Collection last year, which are these really beautiful starburst patterns. That has done really well for us, and we've actually introduced an extension to that this year. We're about to launch our collection with Jane Goodall, which is something we're really proud of as a company, and you know, that's something she's never done with another fine jeweler, so it's really about how can we have, you know, a moment with our customers, break through the noise, showcase beautiful product, and do it in an innovative way, and we do it with diamond leadership as well. We have a Carbon Capture Collection, which is, lab diamonds that are created from carbon before it's actually even released into the atmosphere. And so we're trying to lead as it relates to sustainability, as it relates to product design, and it's, I think, a really important pillar for our company, as we're very tech-driven, data-driven from the beginning. As you expand into some of these new product extensions and collections, we talked about this a little bit before, but maybe we can dive a little bit deeper. How do we think about ASP growth, and what trends are you seeing within each category, and what does that do to AOV? Sure. So from the ASP front, as we've discussed in our last earnings call, we did see, on a year-over-year basis, for engagement rings, for wedding bands, and for fine jewelry, a year-over-year increase in ASPs, and I think that reflects a number of things. One, that we're thoughtful in cultivating the premium brand. We're not pursuing strategies like going after growth at all costs or leaning into discounting, and it really illustrates the power and the resonance of our brand. From an AOV perspective, which factors in the blend of the different products, that did go down, and we expect that will continue to go down as we diversify into other products, including fine jewelry, that do have lower ASPs. But that's something that is intentional. It's something that's strategic, and we think that there's a lot of value in terms of driving those areas where we can capture additional repeat purchases, self-purchasing, touch the consumer at different points in their life cycle. And so that's how we think about ASP and AOV. ... You spoke a moment there about repeat customer engagement. Talk to me about your initiatives there to drive that repeat customer engagement. What are you doing to drive that loyalty to the brand? I think that it's really important to have the marketing and product initiatives, as well as utilize technology, so to kind of go into that in more detail, we wanna make sure that we have the right product for the customer, so that as they're looking at other occasions or self-purchase, that we have trend-leading products, that we have the Diamond Essentials that every girl needs, and that we're able to make sure that we make that occasion really special, so it starts with the product, and we're constantly curating our product portfolio to make sure that the overall collection is highly curated, that it's really productive, and that it's really personalized to our customer, and then the other important aspect of that is: How do we market to our customers? And so we're constantly thinking about how we can drive repeat through our CRM, through our other marketing initiatives, through segmentation, through the audiences that we use, and utilizing technology as an enabler there. And the other benefit that we have as a company is, through our showrooms, we have these highly engaged customers who are sales associates. So these are really deep connections. You know, oftentimes, our jewelry specialists get invited to their customer's wedding. Like, that's how strong this connection is. And so leveraging that connection for future purchases has also been really successful. Let's dive a little deeper into the showroom strategy, because this is something that you've been working on for a couple of years now. You now have 37 stores in your fleet today. How are these showrooms maturing relative to your expectations? And as a result, what changes or edits to the fleet are you making to make sure that each incremental showroom has strong contribution? I think that the experience that we've created from the beginning has been really successful for us. It's highly personalized. The appointment is curated based on the preferences that you've told us and other indicators that we get through digital means. When someone comes in, we have, you know, all of the product that they want. We have a one-on-one experience. That's been really successful. What we've done is layer on top of that, more ground-floor locations, so that people can come in and browse our collection, so they can shop for fine jewelry, which isn't quite as considered, which can be a little bit more spontaneous overall. And so, as the fleet's matured, we're really thinking about: How do we cater to both of those experiences, optimizing for bridal, but also making sure that we have the fine jewelry that we're increasingly known for? So that's been a successful driver for us. As you think about the ground floor and mall-based showrooms relative to the early showrooms that you laid out, how is that expansion strategy trending relative to your expectations? I think the ground floor has been really great. We want to make sure that we are, our physical retail reflects where our customers are shopping. In certain locations, like if we're in big cities, then going upper floor has made sense. The ground floors in other locations has helped to get people more familiar with the brand. It helps to drive more fine jewelry overall. So having more clusters, having more ground, has been a successful strategy for us. Now, we want to do it in a really ROI-positive way. You know, for us, we still consider ourselves a destination purchase. We don't need to have the most expensive real estate. We're still making sure that for each and every showroom that we have, that it's efficient. And so far, that strategy has been very successful. The fleet that we have is still young, so we're investing in it. We're making sure that we're continuing to bring the brand to life, whether it's in the vitrines, in the windows, or as we have new campaigns, making sure that we're constantly talking and showing all of the innovation that we have. The retail environment is actually a really great way to do that. And then, Jeff, maybe we can bring you in here as well. How do you think about the showroom economics as you've expanded the footprint, and where could that go over time as the business scales? So one of the things that we like to focus on in terms of the showroom economics is incrementality in the business. So this isn't a situation where we're building the box, then crediting what previously were e-com sales to the box, and just looking at that and saying, "This is," you know, "this is a successful launch." We've looked at, you know, throughout our history of trying to drive incrementality, if you're looking across the entire metro, we want to be able to drive overall uplift in sales, and so that's something that we've talked about. We continue to see, you know, nice uplift in the metro when we open new showrooms, and that includes our more recent history of having clustered, which is to open more than one showroom in a given metro, and that's something that we're doing both. You know, we've done both primary and cluster showrooms. They also have compelling four-wall EBITDA. And I think, you know, some of you know how we're able to get there is, like, they do unlock demand in the metros as we open them. We're also able to do things like allocate our staff to meet with demand where it is, so they can serve customers that are walking in. They can also talk to them across other channels and serve them that way, too. And so from a top-line perspective and an OpEx perspective, we're really trying to get that incrementality as we're opening the showrooms and not just have a box and have things credited there. How does your marketing approach change as you open showrooms in new locations and as you continue to open those showrooms? ... I think that the marketing approach, you know, continues to evolve. It's very dynamic. I think we get strong dynamics when we have clusters, and that marketing efficiency usually will continue to increase for those metros, specifically where we have more showrooms, so that's a huge positive, and one of the benefits of these showrooms are the strong word-of-mouth effects that we get, so within if we have more stores within a metro, then you have more people talking about their Brilliant Earth engagement rings and their Brilliant Earth purchases, and that helps to drive more traffic to the showrooms themselves, so we see a lot of strength in that approach overall. As you think about that marketing strategy, how do you think about adapting that, if at all, given, you know, an election cycle coming up in the back half with a shorter holiday season? Do you need to change your strategy, or are you planning for less efficiency, if at all? Well, we're probably not gonna advertise in Wisconsin. No, I'm kidding. Sorry, swing state joke. You know, we have more national digital-based advertising is most of the mix that we have. We have other aspects of it, too, but that's the majority of it. And one of the benefits of what we do is we're very agile, and we're really nimble to moving spend towards what's most efficient at different points in the funnel, and I think it's important to drive awareness. It's important to make sure the upper funnel, that we're continuing to drive awareness there, so that when people are ready to make the purchase, we're top of mind for them. So as you see, you know, CPMs increase in certain areas. I think what's great about what we do is we can be flexible and move the spend to where it's going to be more efficient. I think there are gonna be areas that are going to be less efficient, so we're not gonna do. You know, we're not really. We don't do linear TV anyways. Like, we tend to not do billboards. There are other places where, like, they're not even taking political advertisements that we advertise on, like TikTok, for example. So I think we're gonna just stay flexible this season and make sure that whatever it is, we're gonna drive efficient spend. It's been noted that the jewelry industry has been particularly promotional recently, especially with small mom-and-pop competitors. One of the questions we're asking everyone at our conference today is how they're planning their promotional environment for this holiday relative to last year, and what that outlook is for the industry. What's your view here? So we're expecting a promotional environment, and, you know, frankly, we've been seeing it all summer, so I would be surprised if in the holiday time period that it wouldn't be at least the same or, you know, pretty heavy overall. We really think about it as, how can we introduce really beautiful, beautiful design products, innovation, new campaigns, and drive excitement, and think about it more for value for our customer? You know, as I said, we don't lean into discounts. It's really about how the perceived value for the customer is just gonna make us shine through all of the noise. As we put that all together, between the showrooms, the marketing strategy, et cetera, Jeff, your medium-term targets do call for some marketing leverage on a go-forward basis. How should we be thinking about the cadence and opportunity of that leverage going forward? So we've talked about driving marketing leverage as a percentage of sales starting in 2025, and I think some of how we're gonna capture that includes the top line, you know, the top line trajectory, which we've outlined as getting to a low teens growth rate in 2027. But I think also, there's some of the operational factors would be growing awareness of the brand and the ability to convert and retain customers that way. The uplift that we see from showrooms and being able to unlock demand in those metros is accretive to the customer acquisition economics, and awareness in those metros. Also, areas like fine jewelry, where we can drive additional repeat purchase behavior, that allows us to amortize that acquisition, you know, over multiple purchases or more purchases over a customer's life cycle. I think those factors all work towards how we're thinking about driving leverage in marketing costs as a percentage of sales. One other trend that we're seeing in the jewelry industry is just a higher propensity for certain customers to engage with lab-grown. Mm-hmm. And that's changed the competitive dynamics of the industry a little bit, as some brands lean into this lab-grown marketing message. Can you speak to what you're seeing today on that, and do you think that lab-grown is more competitive than natural stones? I think that, you know, we've been offering lab-grown and natural side by side for over a decade. So we were really pioneers in terms of introducing lab-grown. We think that, you know, for us, for our customer base, it's great. It's a mining-free alternative. You know, the innovation that it introduced is also great for our customers. Some of them, like, really like that it's grown in a lab, and there's a coolness there. I think other customers are drawn towards natural for the history that it has, you know, for the kind of investment value. You can pass this on for generations. So I think overall, you know, we're seeing that there's widespread awareness now, and you do see for independents, I think it's almost a given that they're gonna carry lab-grown. So has it changed the competitive environment? I think it's a new innovation that the jewelry industry is offering. I don't necessarily think that the dynamics have changed. It's always been a competitive industry. I think leaning into discounts is something that, you know, we see in and out based on what the softness of the demand environment is, but I wouldn't say I've necessarily seen a big change overall. I just think that there are more choices for customers to have, and you just have to make your brand and your value proposition even more compelling, which is something that we, you know, strive to do. It's a big objective for us. ... Can you speak to the profitability of the lab-grown diamond business for your business, and how you think about protecting profit dollars if a customer wants the same size but gets a cheaper ASP because of a lab-grown stone? Yeah, we haven't broken out the profitability along those dimensions. I will say that, you know, how we think about managing and optimizing gross margins overall is we are gonna be focused on the premium brand positioning, not leaning into discounting. We're gonna use tools like our price optimization engine, which allow us to dynamically look at what's the trade-off between gross margin percent and top line, with the, you know, objective to try and grow gross profit dollars as much as we can, as well as other operational considerations like procurement efficiencies, and our warranty program. So I think all of those factor in, and that applies to our engagement collection, but also to our wedding bands and fine jewelry as well. Very helpful. You know, as we think about the bridging some of these near-term dynamics with your long-term growth outlook, you spoke about some of the opportunities that you see in marketing. But let's talk in a little holistically about your medium-term targets. You outlined these, a few months ago. Do you believe that the pressures on the jewelry consumer have eased or worsened since you've made those targets? And how do you think about the achievability and timeline of meeting those targets? We do stand by our medium-term targets, which just to recap are for a low teens getting to a low teens growth rate in twenty twenty-seven, having a high fifties gross margin through twenty twenty-seven. We talked a bit about marketing, and then from the EBITDA perspective, getting to a double-digit adjusted EBITDA margin in twenty twenty-seven, so you know I think the bridge from here to there you know includes growing you know growing the top line, and we talked through some of the levers to really get there, including brand, showroom uplift, product diversification, including in fine jewelry, gross margin and marketing. I think in for the rest of the stack, continuing to be disciplined in terms of OpEx management. I think you'll hear us talk about, and I know we've talked about before, just this concept of balance. Like, balancing investing for growth and setting the stage for long-term growth, because we're still early in the journey of this about $300 billion industry, so there's a lot of opportunity ahead. We wanna be making those investments while being cognizant of opportunities there are in capturing efficiencies, being thoughtful about ROI. And I think that all factors into how we're planning to get to that higher Adjusted EBITDA margin in our medium-term targets. That's very helpful. As we think about one component of that Adjusted EBITDA medium-term target, you've got this price optimization model in your business, and that's allowed you to establish some dynamic pricing. You use a variety of factors with that. How are you thinking about the opportunity for pricing within your business over the next twelve months on a like-for-like basis? Yeah, I think dynamic environments, like the one we're in right now, are really an opportunity for our business model to stand out, and I think there's a couple ways. I'll first touch on dynamic pricing, but also touches on our working capital and inventory model. So dynamic pricing really allows us to see, in much closer to real time than the industry as a whole, just like, how should we be pricing things relative to inputs, such as the input costs, consumer demand, seasonality, and factoring that into how we should be pricing to capture that right mix of gross margin percent and top line growth. And I think that also pairs well with our inventory model, which, as you know, is very inventory light. We're able to leverage things like virtual inventory, like consignment, to keep our balance sheet light. I think this does a number of things. This one allows us to tailor the inventory to where we're seeing the demand. Number two, it reduces our exposure to things like commodity price changes, and then it allows just working capital to be unlocked, and this allows us to have just a more efficient balance sheet. I think it couples well with the dynamic pricing model, when you have a lean, efficient inventory that you're able to price based on demands that you're seeing. I think those couple well and allow us to take smaller, faster, and smarter bets than the industry as a whole can. I think in dynamic environment like this, we're just very well positioned and can adapt very quickly to things as we see them evolve. On the other side of pricing is costing, and one of the questions that we're asking nearly all companies at our conference today is how they're thinking about the outlook for cost pressures. Do you expect cost pressures to be the same, better, or worse in 2025? I don't know if we've provided a specific outlook on cost pressure, but I will say that, you know, what I was just discussing about the gross margin and the pricing side allows us to adapt to changing, for example, input costs in a much more nimble fashion than many others in the industry can. And then with respect to other OpEx, we've always been disciplined and ROI sensitive in that same vein of balance that I talked about earlier. And I think that this environment is, in some ways, how we would approach this environment is not different than how we operate just on an ongoing basis. We've always been thoughtful, we've always been scrappy, we've always been efficiency and ROI-focused, but still with an eye toward the long-term prize, which is capturing additional share in a big industry. Beth, we're nearing the end of our time together, so I'm curious if you can reflect on the business and help us understand how you're thinking about the path back to growth for Brilliant Earth. What is the timeline, and what do you think has to happen? Is it in your control, or is it a function of the macro environment? I think that a lot of the initiatives that we've talked about since we went public in 2021, like, we continue to invest in, and we think we have a ton of potential with our brand, with our fine jewelry, with the showrooms overall. And like, look, we're gonna see quarters where we're more influenced by the macro, but we're focused on what we can control. And I think, you know, as you look at the brand awareness, the heat that we have as a company, like how we're driving engagement on social, I think that all of these are generating a lot of interest, are driving a lot of repeat, driving a lot of great fine jewelry sales. And, you know, bridal, I think we're continuing to work through some of the headwinds, but we have a lot, I think, in terms of us having personalization, us having diamond leadership, that, you know, as we see that demand return, we're gonna continuing to lean into it. And the inventory we have, model we have supports it, so we're able to lean in where we see the demand. But we wanna make sure that as a brand, we're protecting the brand, we're strengthening the brand, and it's really a premium positioning. Excellent. Any final thoughts or comments that you'd like to share with the audience before we conclude? No, I don't think so. Excellent. Well, thank you, Beth. Great. Thanks, Brooke. Thank you. Nice to be here. Thank you. Appreciate it.