Ladies and gentlemen, thank you for standing by, and welcome to the Brilliant Earth first quarter 2022 earnings conference call. [Operator instructions] Please be advised that today’s conference is being recorded. [Operator instructions] I would now like to hand the conference over to your speaker for today, Allison Malkin, you may begin.

Thank you. Good afternoon, everyone. Thank you for joining us for our first-quarter fiscal year 2022 conference call. Joining me today are Beth Gerstein, our chief executive officer; and Jeff Kuo, our chief financial officer. For today’s call, Beth will begin with highlights of our first-quarter financial and operational performance and the drivers of our future growth. Jeff will follow with more details on our first quarter financial results and guidance. Following this, the operator will begin the Q&A session with our presenters, Beth and Jeff available to answer the questions you have for us today. Before we start, I would like to remind you that management will make certain remarks today that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These future 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 the results to differ materially from those expressed or implied in these forward-looking statements. These forward-looking statements reflect our opinions 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. Also, during this call, we will discuss both GAAP and non-GAAP financial measures. You will find additional information regarding these non-GAAP financial measures and a reconciliation of these non-GAAP to GAAP measures in today’s earnings release, which is available at the Investor Relations section of our website at investors.brilliantearth.com. A live broadcast of this call is also available at the Investor Relations section of our website. With that, I’ll turn the call over to Beth.

Hello, everyone, and thank you for joining us today. We’re pleased to share our results for the first quarter of the year, which reflect a strong start to what we believe will represent another record year of revenue for our company. The results we’ve reported today again demonstrate the tenets of the Brilliant Earth growth story, one that is laser-focused on disrupting, transforming and modernizing the $280 billion global fine jewelry industry. As a young public company, we know that many people are just getting to know our story. It’s a growth story, one that is built on increasing demand and affinity for the Brilliant Earth brand, among millennial and Gen Z consumers and a business model that is powered by data, a committed and talented team and an incredibly efficient and advantageous asset-light operating model. Our first-quarter results showcase our ability to both lead and to execute in a market that is highly fragmented and in an increasingly uncertain and challenging macro environment. For the first quarter, net sales were $100 million, increasing 42% from Q1 last year and up by 102% from Q1 2020. Gross margin expanded 432 basis points over Q1 2022 to 50.1% and adjusted EBITDA was $8.4 million or 8.4% of net sales. Before Jeff takes you through these results in detail, I want to first share my perspective on the current environment and then highlight a few priorities that you will hear us talk about consistently as they really demonstrate our ability to lead the industry and to execute our long-term growth strategy. It is clear that the recent macro environment is affecting consumer sentiment and behavior. For Brilliant Earth, although we have seen greater variations in recent weeks, we also continue to see strong demand and resonance for our brand. We believe that…

Thanks, Beth, and good afternoon, everyone. We’re pleased to share our first-quarter fiscal 2022 results, which reflect a strong start to the year. During the quarter, the disciplined execution of our expansion plans drove strong revenue growth and continuing profit growth. Briefly touching on some key metrics for the first quarter. Revenue grew to $100 million, which represents 42% year-over-year growth and is up 102% compared to the first quarter of 2020. Gross margin expanded to 50.1%, a 432 basis point increase compared to Q1 2021. And adjusted EBITDA was $8.4 million, up 29% from Q1 last year even as we invest in our growth and incurred public company operating costs. We believe our performance demonstrates the power and distinction of our brand, growth across our product lines and our agile, highly efficient business model. Consistent with our prior quarter’s results and as anticipated, we saw growth in average order value across our product lines on a year-over-year basis. We continue to see outsized growth within our newer category of fine jewelry, which, as you know, has a lower average price point, but higher gross margins than our overall business. As such, our blended Q1 AOV for the entire company was down year over year in the mid-single-digit percentage range. As Beth said, our first quarter results also reflect the continued successful execution of our omnichannel growth strategy. With the recent openings of our 16th, 17th and 18th showrooms in Bethesda, Maryland, Columbus, Ohio and Houston, Texas, the positive impact of our showroom strategy continues to prove out across the brand and the business. Our showrooms have outperformed our initial expectations and are generating continued uplift in initial metro bookings. In Q1, we saw broad-based growth across our product assortment from our core bridal products to wedding bands to fine…

Regarding your new guidance, it does assume lower flow-through versus prior guidance. Could you help us understand some of the deltas between your current and prior guidance? Also, would love your thoughts as a follow-up on categories and categories relative to where you’re seeing more muted demand versus others? That would be helpful.

Great. I can start with the latter part of your question. What we’ve seen is, generally speaking, as the macroeconomic challenges have become a little bit more certain, we do see more moderated growth more generally, I would say, and still expecting very strong growth, but that uncertainty has, I think, created a little bit more moderation. And as it relates to us, specifically, keep in mind, we do have higher price points. And so, as a more considered purchase, it does end up taking a little bit longer in time of uncertainty for customers to actually make their decisions. And that ends up extending the overall sales cycle, which has created a little bit of a slower ramp in terms of the overall revenue growth. So category specifically, I would say, it’s more general across the different categories, but still seeing very strong growth between 18% to 24% over the year. And then, Jeff, do you want to take the beginning part about the flow through?

Sure, be glad to. So while there is some recent consumer uncertainty, given the macroeconomic and geopolitical conditions, there aren’t any changes to the fundamentals of our business. And given the success that we’ve had with our strategic initiatives such as driving brand awareness, the success of our showrooms and how they’re outperforming our expectations and the strength of fine jewelry, we see a unique opportunity to invest and gain share even in this environment. And the strength of our business gives us the confidence to continue to invest to grow and gain share. And then, we do continue, as I described earlier, to work toward our long-term EBITDA target of 15% to 20% plus as our long-term EBITDA target. But we do have opportunities to invest in a really strong position to invest from.

I would just add to that, like we’re looking at the longer term here. We are positioning ourselves to be the category leader. And as we’ve seen success with our brand-building efforts through our showrooms or jewelry, I think really capitalizing on our momentum is important.

Next question comes from the line of Dana Telsey with Telsey Advisory Group.

Okay. And Jeff, I want to hear a little bit about -- more about what you saw in terms of a change in consumer patterns, whether it’s on fine jewelry that you saw and how you see the planning of events differing in consumer spending patterns going forward? And then also, as you think about expenses, any adjustments to expenses that you’re making as we go through this time period?

Yes. In terms of overall changes, I think what I mentioned before is really, I think, the biggest component is just that sales cycle has just been a little bit more extended. Overall, in more uncertain times, we continue to see engagements and weddings. People do tend to invest more in personal relationships, and we are continuing to see that strong growth. I think, the omnichannel strategy we have, I think, sets us up very well in terms of different patterns because we’re really catering to how and when consumers want to shop. So it’s that synergy between digital and showroom that I think is really powerful and why we think omnichannel is such an effective strategy when you have changing patterns with consumer over time. Jeff, do you want to take the second part?

Sure. Would be glad to. So regarding expenses and how we’re thinking about that, I think I would go back to how we are really continuing to invest to be that for long-term leadership in the industry and building on the strength that we’ve seen and the strength of our strategic initiatives like showrooms, brand awareness, fine jewelry. And we think that this really is a unique opportunity to invest and to continue to drive our growth. As always, we will be prudent and strategic in terms of how we are making those investments and always keep a lens of working toward our long-term profitability targets of that 15% to 20% plus EBITDA.

[Operator instructions] Our next question comes from the line of Matthew Boss with J.P. Morgan.

Great. So, Beth, maybe as we think about the more muted top line demand that you’ve seen more recently, how are you thinking about the potential duration or just any shocks to compare what you’re seeing today if we look back historically or how resilient do you think the fine jewelry category is in more dynamic backdrops?

Yes. Well, I would say -- answer that with a few different comments. One is, I think, the guidance that we have just assumes that the current outlook continues for the rest of the year. And part of that is, we’re trying to be prudent and conservative in how we’re thinking about the business. Two, what I’d say is that as we see increasing demand because of our asset-light model, we’re able to respond very quickly, which I think just gives us a competitive advantage. As it relates to the overall category, we do find that in more uncertain times that the fine jewelry category does remain quite strong. In times of inflation, consumers see it as a physical goods, it’s more tangible, it has inherent value, also love persist. So engagements and weddings continue to happen in times of recession. So we do find it to be much more resilient in times of uncertainty, and that’s what we’ve seen in previous times. I think also, it gives us the ability just to continue to gain market share, which we’ve done every year since we were founded.

Great. And then, maybe, Jeff, on the bottom line, could you help us break down the first quarter gross margin beat. I think it was over 400 basis points as we think about procurement pricing, shipping and then just any puts and takes to consider on a gross margin for the remainder of the year?

Sure. So for gross margin, the drivers of the performance in Q1 were similar to those that we’ve seen in prior quarters. So it starts with the premium nature of our brand. The strong resonance that, that has with consumers, the premium nature of our products, which allows us to have healthy and strong gross margins. We continue, as we have in past quarters, to rely on our price optimization engine and to refine that and build that to drive both top line as well as the gross margin targets that we’re working toward as well as procurement efficiencies as we look at our supply chain and how do we purchase and look for optimization opportunities there. Something that is a growing part as we look more toward the longer term is that fine jewelry will be an increasing contributor as it becomes a bigger and bigger part of our business, and that is a higher-margin part of the business. So we’re excited to see that, that continues to be a strong outperformer to drive healthy gross margin. As I mentioned, for the balance of the year, we are projecting modest gross margin improvements as we continue to pull some of these same levers.

Great. Best of luck.

Thank you. At this time, I would now like to turn the call back over to Beth for closing remarks.

Thank you, everyone. We appreciate all of your time and are really pleased with our Q1 results, and we look forward to talking to you in the next quarter.

Ladies and gentlemen this concludes today’s conference call. Thank you for your participation. You may disconnect.