Blue Nile, Inc. (NILE)
Q2 2009 Earnings Call Transcript
August 6, 2009 5:00 p.m. ET

Executives

Eileen Askew - Manager, Investor Relations
Mark C. Vadon - Executive Chairman of the Board
Diane M. Irvine - President, Chief Executive Officer, & Director
Marc D. Stolzman - Chief Financial Officer

Analysts

Jack Murphy - William Blair & Company
Jim Friedland - Cowen and Company
Mark Mahaney - Citigroup
Lorraine Hutchinson - Bank of America/Merrill Lynch
Doug Anmuth - Barclays Capital
Herman Leung - Deutsche Bank

Presentation

Operator

Good afternoon. My name is Christian and I will be your host on this call. Your lines will be placed on a listen-only mode. At the end of the presentation, management will be available for questions. If you have a question, please press star one on your telephone keypad and you will be placed to the question-and-answer queue. At this time, I would like to introduce Eileen Askew, Manager of Investor Relations of Blue Nile.

Eileen Askew

Good afternoon and thank you for joining us on our conference call today to review our second quarter financial results. With me today are Mark Vadon, Executive Chairman; Diane Irvine, Chief Executive Officer; and Marc Stolzman, Chief Financial Officer. All will be available for Q&A following today’s prepared remarks.

Before we begin, I would like to remind you that some of the comments we will make on this call are forward-looking including without limitation, statements regarding expectations of future financial performance, sales, earnings per share, margins, expenses, income, operating cash flow, inventory, capital expenditures, international growth, tax rate, stock-based compensation expense, and other financial statement, or balance sheet items, as well as statements about the global economic environment, diamond and metal prices, the stock market, the credit market, consumer behavior, currency, competition, the industry, market share, future plans, and objectives, beliefs, expectations, targets, goals, outlooks or predictions for the future.

These statements are only predictions based on assumptions that are believed to be reasonable at the time they are made and are subject to significant risks and uncertainties. You should not rely on these forward-looking statements as representing our views in the future, and we undertake no obligation to publicly update or revise these statements. Our actual results may differ materially and adversely from any projections and forward-looking statements discussed on this call.

Our quarterly reports on Form 10-Q, our annual reports on Form 10-K, and other forms on file with the SEC identify important risk factors and uncertainties that you should consider when making an investment decision regarding Blue Nile and that may affect whether our forward-looking statements prove to be correct.

Also, please note that during the course of this conference call, we may discuss certain non-GAAP financial measures as we review the company’s performance. We will discuss non-GAAP free cash flow, which is defined as net cash provided by or used in operating activities, or operating cash flow, less outflows for purchases of fixed assets including internal use software and website development.

We will discuss international sales on a constant exchange rate basis. And we will also discuss non-GAAP adjusted EBITDA, which is defined as earnings before interest and other income, taxes, depreciation, and amortization, adjusted to exclude the effects of stock-based compensation expense.

Please refer to the Investor Relations section of our website to obtain a copy of our earnings release, which contains reconciliations of non-GAAP measures to the nearest comparable GAAP measures.

Now, I would like to turn the call over to Diane Irvine.

Diane M. Irvine

Thank you, Eileen and good afternoon everyone. Since the beginning of 2008 we have talked to you about the challenges faced by the entire retail landscape as a result of the global economic downturn and its significant impact on discretionary consumer spending. At the same time, we have spoken about our unique positioning and our differentiated business model. Today, I am pleased to report excellent Q2 results and positive momentum in our business in a still uncertain environment.

During today’s call, I will review the business highlights for the quarter, provide thoughts on the overall environment, and update you on our progress related to our 2009 business initiatives. I will then turn the call over to Marc Stolzman for an in-depth review of our financial results and a discussion of our financial guidance.