Brilliant Earth Group Inc.
11/05/2025 | Press release | Distributed by Public on 11/05/2025 15:04
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the information presented in the unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes for the fiscal year ended December 31, 2024, as disclosed in our 2024 Form 10-K. In addition to historical information, the following discussion contains forward-looking statements, such as statements regarding our expectation for future performance, growth, liquidity and capital resources, that involve risks, uncertainties and assumptions that could cause actual results to differ materially from our expectations. Our actual results may differ materially from those contained in or implied by any forward-looking statements. Factors that could cause such differences include those identified below and those described in "Cautionary Note Regarding Forward-Looking Statements,"and "Risk Factors"in this Quarterly Report on Form 10-Q and Part I, Item 1A. "Risk Factors"in our 2024 Form 10-K. We assume no obligation to update any of these forward-looking statements.
Company Overview
Brilliant Earth is an innovative, digitally native omnichannel jewelry company, and a global leader in ethically sourced fine jewelry. We offer exclusive designs with superior craftsmanship and supply chain transparency, delivered to customers through a highly personalized omnichannel experience.
Our extensive collection of premium-quality diamond engagement and wedding rings, gemstone rings, and fine jewelry is conceptualized by our leading in-house design studio and then brought to life by expert jewelers. From our award-winning jewelry designs to our responsibly sourced materials, at Brilliant Earth we aspire to exceptional standards in everything we do.
Our mission is to create a more transparent, sustainable, compassionate, and inclusive jewelry industry, and we are proud to offer customers distinctive and thoughtfully designed products that they can truly feel good about wearing.
We were founded in 2005 as an e-commerce company with an ambitious mission and a single showroom in San Francisco. We have rapidly scaled our business while remaining focused on our mission and elevating the omnichannel customer experience. Through our intuitive digital commerce platform and personalized individual appointments in our showrooms, we cater to the shopping preferences of tech-savvy next-generation consumers. We create an educational, joyful, and approachable experience that is unique in the jewelry industry. Today, Brilliant Earth has sold to consumers in over 50 countries.
Throughout our history, we have invested in technology to create a seamless customer experience, inform our data-driven decision-making, improve efficiencies, and advance our mission. Our technology enables dynamic product visualization, augmented reality try-on, blockchain-verified transparency, and rapid fulfillment of our flagship Design Your Own product, a custom design process. We leverage data capabilities to improve our marketing and operational efficiencies, personalize the customer experience, curate showroom inventory and merchandising, inform real estate decisions, and develop new product designs that reflect consumer preferences. We believe the Brilliant Earth digital experience drives higher satisfaction, engagement, and conversion both online and in-showroom.
Below is a summary of our performance for the three months ended September 30, 2025:
•Net sales of $110.3 million, up 10.4%compared to $99.9 million for the three months ended September 30, 2024;
•Netloss of $0.7 million, up 37.5%compared to net loss of $1.1 million for the three months ended September 30, 2024;
•Net loss margin of 0.6%, compared to net loss margin of 1.1% for the three months ended September 30, 2024;
•Adjusted EBITDA of $3.6 million, flat compared to $3.6 million for the three months ended September 30, 2024; and
•Adjusted EBITDA margin of 3.2%, compared to 3.6% for the three months ended September 30, 2024.
Below is a summary of our performance for the nine months ended September 30, 2025:
•Net sales of $313.1 million, up 3.4% compared to$302.6 million for the nine months ended September 30, 2024;
•Net loss of $5.1 million,down 469.6%compared to net income of $1.4 million for the nine months ended September 30, 2024;
•Net loss margin of 1.6%, compared to net income margin of 0.5% for the nine months ended September 30, 2024;
•Adjusted EBITDA of $7.8 million, down 44.9%, compared to $14.2 million for the nine months ended September 30, 2024; and
•Adjusted EBITDA margin of 2.5%, compared to 4.7% for the nine months ended September 30, 2024.
See the section below titled "Non-GAAP Financial Measures" for information regarding Adjusted EBITDA and Adjusted EBITDA Margin, including reconciliations to the most directly comparable financial measures prepared in accordance with U.S. generally accepted accounting principles ("GAAP").
We operate in one operating and reporting segment, the retail sale of diamonds, gemstones and jewelry.
Key Factors Affecting Our Performance
Our Ability to Increase Brand Awareness
Increasing brand awareness and growing favorable brand equity have been and remain key to our growth. We have a significant opportunity to continue to grow our brand awareness, broaden our customer reach, and maximize lifetime value through brand and performance marketing. We have made and expect to continue to make significant investments to strengthen the Brilliant Earth brand through our dynamic marketing strategy, which includes brand marketing campaigns across email, digital, social media, earned media, and media placements with key influencers. In order to compete effectively and increase our share of the jewelry market, we must maintain our strong customer experience, produce compelling products, and continue our mission of creating a more transparent, sustainable, compassionate and inclusive jewelry industry. Our performance will also depend on our ability to increase the number of consumers aware of Brilliant Earth and our product assortment. We believe our brand strength will enable
us to continue to expand across categories and channels, to deepen relationships with consumers, and to expand our presence in the U.S. and international markets.
Cost-Effective Acquisition of New Customers and Retention of Existing Customers.
We have historically had attractive customer acquisition economics, including substantial first order profitability. To continue to grow our business, we must continue to acquire new customers and retain existing customers in a cost-effective manner. The success of our customer acquisition strategy depends on a number of factors, including the level and pattern of consumer spending on the products that we offer, and our ability to cost-effectively drive traffic to our website and showrooms and to convert these visitors to customers. With our strong brand resonance and passionate customer base, we generate significant earned and organic traffic, impressions, and media placements. We continually evolve our dynamic marketing strategies, optimizing our messaging, creative assets, and spending across channels. We also believe our expanded fine jewelry assortment and strategic customer acquisition will continue to drive fine jewelry orders from new customers and repeat orders from existing customers.
Our Ability to Continue Successfully Growing and Managing our Omnichannel Presence
Our ability to successfully grow and manage our omnichannel presence in new markets and locations is an important factor to our success. Historically, we have been successful in new geographic markets we have entered, and we have continued to expand our premium showroom footprint nationwide. We intend to continue leveraging our marketing strategy and growing brand awareness to drive increased qualified consumer traffic to and sales from our website and premium showrooms.
We believe growing and managing our showrooms will drive accelerated growth by increasing our average order value ("AOV") compared to e-commerce orders, improving conversion in the showrooms' metro regions compared to pre-opening conversion, and raising our brand awareness. We intend to strategically open showrooms in the future, and we believe we can achieve broad national showroom coverage with far fewer locations than many traditional retailers. We rely on this highly efficient showroom model to complement our digital strategy and to drive future growth and profitability.
Our Ability to Successfully Introduce New Products
Product expansion allows us significant opportunity to drive new and repeat purchases by expanding purchase occasions beyond engagement and bridal. We intend to leverage our in-house design capabilities and nimble data-driven product development to expand product assortment for special occasions and self-purchase. In addition, we will have more opportunity to enhance and leverage our customer relationship management ("CRM") and data-segmentation capabilities to increase repeat purchases and lifetime value. We have consistently invested in technology to create a seamless customer experience, including dynamic visualization, augmented reality try-on, and automated, rapid fulfillment, and we intend to continue investing in technology to enhance the digital and showroom experience and help drive conversion. Expanding affiliations and brand collaborations will also broaden our existing assortment, reinforce our brand ethos, and feature like-minded designers, which will help to drive both new and repeat purchases.
International Expansion
We are in the early stages of selling globally, and a larger geographic footprint will help drive future growth. Our proof-points from localizing our website for Canada, Australia, and the United
Kingdom, and our sales to customers from over 50 countries, provide encouraging signs for future global expansion. We see strong potential in launching e-commerce in new overseas markets and new showrooms in countries where we have already established a localized digital presence. We plan to drive brand awareness through localized marketing channels and expect our data-driven technology platform to continue providing insights for product recommendations and inventory management.
Operational and Marketing Efficiency
We have a unique, asset-light operating model with attractive working capital dynamics, capital-efficient showrooms, and a vast virtual inventory of premium natural and lab-grown diamonds that allows us to offer a broad selection of diamonds while keeping our balance sheet inventory low. This has driven attractive inventory turns and allows us to operate with negative working capital, which we define as our current assets less cash minus our current liabilities. Our showroom strategy minimizes the inefficiencies of traditional, retail-first jewelers. Our showrooms are primarily appointment-driven with large catchment regions, so we are less reliant on expensive high foot traffic retail locations. Our showroom locations and formats vary from interior, upper floor locations to more recently higher traffic pedestrian and retail mall locations. In all locations, we also curate showroom inventory for scheduled visits and require limited inventory in each location. Our tech-enabled jewelry consultants can support online customers when not in appointment, increasing workforce utilization. As we continue to scale our business, our future success is dependent on maintaining this capital efficient operating model and driving continued operational improvement as we expand to new locations both in the U.S. and internationally.
Costs of Operating as a Public Company
The costs of operating as a public company are significant as we are subject to the reporting, listing, and compliance requirements of various governing bodies and applicable securities laws and regulations. Since becoming a public company, compliance with rules and regulations has increased and may continue to increase our legal, financial, and technology compliance costs, and to make some activities more difficult, time-consuming, and costly. Remaining compliant and satisfying our obligations as a public company, while maintaining forecasted gross margins and operating results, and attracting and retaining qualified persons to serve on our board of directors, our board committees, or as our executive officers is critical to our future success.
Macroeconomic Trends
We believe we are well-positioned at the intersection of key macro-level trends impacting our industry. Consumers are increasingly seeking brands that reflect their values and provide supply chain transparency. This has contributed to our strong brand affinity and loyalty, and further differentiates us from our competitors. Consumers are increasingly favoring seamless omnichannel shopping experiences, and we believe our model is well-suited to satisfy these consumer preferences.
In addition, many of the materials that go into our products are sourced and manufactured internationally. Tariffs on imports into the U.S. have had an impact on our materials costs and have the potential to further impact our business depending on the outcome of changes in U.S. trade policy and any corresponding actions by other countries in which companies with which we do business are located. Similarly, increases in prices of gold and other precious metals have also had an impact on our materials costs and have the potential to further impact our business. Any deterioration in macroeconomic conditions resulting from uncertainties and effects from tariffs, increases in the costs of materials,
especially of gold and other precious metals, increased congestion and/or new import/export restrictions at ports that we rely on for our business, or delays or disruptions in the delivery of materials could adversely impact our business, financial condition, and operating results.
In addition, on October 1, 2025, the U.S. government shut down and certain regulatory agencies, such as the SEC, have had to furlough critical government employees and stop critical activities. If a prolonged government shutdown occurs, it could impact our ability to access the public markets and obtain necessary capital in order to properly fund our operations.
The current inflationary environment and changes in macro-level consumer spending trends, due to volatile macro-economic conditions have had a negative impact on sales and could further negatively impact our operating results.
Seasonality
A larger share of our annual revenues and profits traditionally occur in the fourth quarter because it includes the November and December holiday sales period.
Components of Results of Operations
For a description of the components of our results of operations, refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 2024 Form 10-K.
Results of Operations
The results of operations data in the following table for the periods presented have been derived from the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Comparison of Three Months Ended September 30, 2025 and 2024
The following table sets forth our statements of operations for the three months ended September 30, 2025 and 2024, including amounts and percentages of net sales for each period and the period-to-period change in dollars and percent (amounts in thousands):
| Three months ended September 30, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | Period change | |||||||||||||||||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||||||
| Net sales | $ | 110,252 | 100.0 | % | $ | 99,873 | 100.0 | % | $ | 10,379 | 10.4 | % | |||||||||||||||||||||||
| Cost of sales | 46,801 | 42.4 | % | 39,103 | 39.2 | % | 7,698 | 19.7 | % | ||||||||||||||||||||||||||
| Gross profit | 63,451 | 57.6 | % | 60,770 | 60.8 | % | 2,681 | 4.4 | % | ||||||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||||||||
| Marketing and advertising | 26,132 | 23.7 | % | 26,678 | 26.7 | % | (546) | (2.0) | % | ||||||||||||||||||||||||||
| General and administrative | 37,939 | 34.4 | % | 35,161 | 35.2 | % | 2,778 | 7.9 | % | ||||||||||||||||||||||||||
| Total operating expenses | 64,071 | 58.1 | % | 61,839 | 61.9 | % | 2,232 | 3.6 | % | ||||||||||||||||||||||||||
| Loss from operations | (620) | (0.6) | % | (1,069) | (1.1) | % | 449 | 42.0 | % | ||||||||||||||||||||||||||
| Interest expense | (272) | (0.2) | % | (1,320) | (1.3) | % | 1,048 | 79.4 | % | ||||||||||||||||||||||||||
| Other income, net | 837 | 0.8 | % | 1,525 | 1.5 | % | (688) | (45.1) | % | ||||||||||||||||||||||||||
| Loss on extinguishment of debt | (573) | (0.5) | % | - | - | % | (573) | (100.0) | % | ||||||||||||||||||||||||||
| Loss before tax | (628) | (0.6) | % | (864) | (0.9) | % | 236 | 27.3 | % | ||||||||||||||||||||||||||
| Income tax expense | (44) | - | % | (211) | (0.2) | % | 167 | 79.1 | % | ||||||||||||||||||||||||||
| Net loss | (672) | (0.6) | % | (1,075) | (1.1) | % | 403 | 37.5 | % | ||||||||||||||||||||||||||
| Net loss allocable to non-controlling interest | (565) | (0.5) | % | (934) | (0.9) | % | (369) | (39.5) | % | ||||||||||||||||||||||||||
| Net loss allocable to Brilliant Earth Group, Inc. | $ | (107) | (0.1) | % | $ | (141) | (0.1) | % | $ | 34 | 24.1 | % | |||||||||||||||||||||||
Net Sales
Net sales for the three months ended September 30, 2025increased by $10.4 million, or 10.4%, compared to the three months ended September 30, 2024. The increase in net sales was due to an increase of 16.8% in order volumes partially offset by a decrease of 5.5% in AOV.
The increase of 16.8% in order volumes was due to strong performance in lower price point products, including fine jewelry, continued effectiveness of our customer acquisition and retention activities and the opening of new showrooms.
The decrease in AOV was primarily driven by a higher mix of lower price point products, including fine jewelry.
Gross Profit
Gross profit for the three months ended September 30, 2025increased by $2.7 million, or 4.4%, compared to the three months ended September 30, 2024. Gross margin, expressed as a percentage and calculated as gross profit divided by net sales, decreased by 320 basis points for the three months ended
September 30, 2025compared to the three months ended September 30, 2024, primarily driven by higher gold and platinum costs and the impact of tariffs. This decrease was partially offset by continued optimization of our pricing engine, procurement efficiencies, and other efforts to manage our gross margins to target levels.
Operating Expenses
Operating expenses for the three months ended September 30, 2025 increased by $2.2 million, or 3.6%, compared to the three months ended September 30, 2024. Operating expenses as a percentage of net sales decreased by 380 basis points for the three months ended September 30, 2025, compared to the three months ended September 30, 2024.The increase in operating expenses was primarily driven by an increase in employment expenses of $1.8 million and an increase in other general and administrative expenses of $0.9 million. These increases were partially offset by a decrease in marketing expenses of $0.5 million for the period.
The increase in employment expenses was primarily driven by an increase in salaries and wages and other benefits expense primarily due to the addition of staff to support our growth. The increase in other general and administrative expenses was primarily driven by increases in rent, and lease-related expenses, professional fees and depreciation expense. These increases were partially offset by a decrease in pre-opening expenses from the opening of new showrooms and a decrease in information technology and other software-related costs as compared to the three months ended September 30, 2024. The decrease in marketing expenses compared to the three months ended September 30, 2024 resulted from our continued focus on improving the effectiveness and efficiency of our marketing spend.
Interest Expense
Interest expense for the three months ended September 30, 2025 decreasedby $1.0 million, or 79.4%, compared to the three months ended September 30, 2024, primarily due to the prepayment of all principal amounts outstanding of $34.8 million under the SVB Term Loan in August 2025. As a result of the prepayment, the Company recognized a loss on debt extinguishment of $0.6 million associated with the write-off of unamortized debt issuance costs.
Other Income, net
Other income, net for the three months ended September 30, 2025 decreasedby $0.7 million, or 45.1%,compared to the three months ended September 30, 2024,primarily due to decreased interest income earned on our cash balances. Additionally, this amount includes immaterial losses on exchange rates on consumer payments and other miscellaneous income.
Income Tax Expense
The decrease in Brilliant Earth Group, Inc.'s income tax expense of $0.2 millionfor the three months ended September 30, 2025 compared to the three months ended September 30, 2024 was primarily due to changes in deferred taxes related to the outside basis difference of Brilliant Earth Group, Inc.'s investment in Brilliant Earth, LLC.
Comparison of Nine Months Ended September 30, 2025 and 2024
The following table sets forth our statements of operations for the nine months ended September 30, 2025 and 2024, including amounts and percentages of net sales for each period and the period-to-period change in dollars and percent (amounts in thousands):
| Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | Period change | |||||||||||||||||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||||||
| Net sales | $ | 313,072 | 100.0 | % | $ | 302,636 | 100.0 | % | $ | 10,436 | 3.4 | % | |||||||||||||||||||||||
| Cost of sales | 131,075 | 41.9 | % | 119,483 | 39.5 | % | 11,592 | 9.7 | % | ||||||||||||||||||||||||||
| Gross profit | 181,997 | 58.1 | % | 183,153 | 60.5 | % | (1,156) | (0.6) | % | ||||||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||||||||
| Marketing and advertising | 75,365 | 24.1 | % | 77,122 | 25.5 | % | (1,757) | (2.3) | % | ||||||||||||||||||||||||||
| General and administrative | 111,988 | 35.8 | % | 105,091 | 34.7 | % | 6,897 | 6.6 | % | ||||||||||||||||||||||||||
| Total operating expenses | 187,353 | 59.8 | % | 182,213 | 60.2 | % | 5,140 | 2.8 | % | ||||||||||||||||||||||||||
| (Loss) income from operations | (5,356) | (1.7) | % | 940 | 0.3 | % | (6,296) | (669.8) | % | ||||||||||||||||||||||||||
| Interest expense | (2,282) | (0.7) | % | (3,827) | (1.3) | % | 1,545 | 40.4 | % | ||||||||||||||||||||||||||
| Other income, net | 3,215 | 1.0 | % | 4,476 | 1.5 | % | (1,261) | (28.2) | % | ||||||||||||||||||||||||||
| Loss on extinguishment of debt | (573) | (0.2) | % | - | - | % | (573) | (100.0) | % | ||||||||||||||||||||||||||
| (Loss) income before tax | (4,996) | (1.6) | % | 1,589 | 0.5 | % | (6,585) | (414.4) | % | ||||||||||||||||||||||||||
| Income tax expense | (56) | - | % | (222) | (0.1) | % | 166 | 74.8 | % | ||||||||||||||||||||||||||
| Net (loss) income | (5,052) | (1.6) | % | 1,367 | 0.5 | % | (6,419) | (469.6) | % | ||||||||||||||||||||||||||
| Net (loss) income allocable to non-controlling interest | (4,313) | (1.4) | % | 1,184 | 0.4 | % | (5,497) | (464.3) | % | ||||||||||||||||||||||||||
| Net (loss) income allocable to Brilliant Earth Group, Inc. | $ | (739) | (0.2) | % | $ | 183 | 0.1 | % | $ | (922) | (503.8) | % | |||||||||||||||||||||||
Net Sales
Net sales for the nine months ended September 30, 2025 increased by $10.4 million, or 3.4%, compared to the nine months endedSeptember 30, 2024. The increase in net sales was due to an increase of 15.9% in order volumes, partially offset by a decrease of 10.7% in AOV.
The 15.9%increase in order volumes was due to strong performance in lower price point products, including fine jewelry, continued effectiveness of our customer acquisition and retention activities and the opening of new showrooms.
The decrease in AOV was driven by a higher mix of lower price point products, including fine jewelry, and comparatively stronger performance of engagement rings priced below $5,000.
Gross Profit
Gross profit for the nine months endedSeptember 30, 2025 decreased by $1.2 million, or 0.6%, compared to the nine months endedSeptember 30, 2024. Gross margin, expressed as a percentage and calculated as gross profit divided by net sales, decreased by 240 basis points for the nine months ended
September 30, 2025 compared to the nine months ended September 30, 2024, primarily driven by higher gold and platinum costs. This decrease was partially offset by continued optimization of our pricing engine, procurement efficiencies, and other efforts to manage our gross margins to target levels.
Operating Expenses
Operating expenses for the nine months ended September 30, 2025increased by $5.1 million, or 2.8%, compared to the nine months endedSeptember 30, 2024. Operating expenses as a percentage of net sales decreased by 40 basis points for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The increase in operating expenses was primarily driven by an increase in employment expenses of $3.7 million and an increase in other general and administrative expenses of $3.2 million. These increases were partially offset by a decrease in marketing expenses of $1.8 million for the period.
The increase in employment expenses was primarily driven by an increase in salaries and wages and other benefits expense primarily due to the addition of staff to support our growth. The increase in other general and administrative expenses was primarily driven by an increase in rent, and lease-related expenses, professional fees, information technology and other software-related costs, and depreciation expense. These increases were partially offset by a decrease in product development costs as compared to the nine months ended September 30, 2024. The decrease in marketing expenses compared to the nine months ended September 30, 2024 resulted from our continued focus on improving the effectiveness and efficiency of our marketing spend.
Interest Expense
Interest expense for the nine months ended September 30, 2025 decreased by $1.5 million, or 40.4%, compared to the nine months ended September 30, 2024, primarily due to the principal payments made on the SVB Term Loan totaling $20 million in May 2025, as well as, the prepayment of all principal amounts outstanding of $34.8 million under the SVB Term Loan in August 2025. As a result of the prepayment, the Company recognized a loss on debt extinguishment of $0.6 million associated with the write-off of unamortized debt issuance costs.
Other Income, net
Other income, net for the nine months ended September 30, 2025 decreased by $1.3 million, or 28.2%, compared to the nine months ended September 30, 2024, primarily due to decreased interest income earned on our cash balances. Additionally, this amount includes immaterial losses on exchange rates on consumer payments and other miscellaneous income.
Income Tax Expense
The decrease in Brilliant Earth Group, Inc.'s income tax expense of $0.2 millionfor the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 was primarily due to lower pre-tax income in the current year and changes in deferred taxes related to the outside basis difference of Brilliant Earth Group, Inc.'s investment in Brilliant Earth, LLC.
Key Metrics
We monitor the key business metrics set forth below to help us evaluate our business and growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts, and assess operational efficiencies. The calculation of the key metrics discussed below may differ from other similarly titled metrics used by other companies, securities analysts or investors.
The following table sets forth our key performance metrics for the periods presented(amounts in thousands, except for total orders and AOV):
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
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| 2025 | 2024 | Change | % Change | 2025 | 2024 | Change | % Change | ||||||||||||||||||||||||||||||||||||||||
| Net Sales | $ | 110,252 | $ | 99,873 | $ | 10,379 | 10.4 | % | $ | 313,072 | $ | 302,636 | 10,436 | 3.4 | % | ||||||||||||||||||||||||||||||||
| Total Orders | 49,910 | 42,744 | 7,166 | 16.8 | % | 147,980 | 127,673 | 20,307 | 15.9 | % | |||||||||||||||||||||||||||||||||||||
| AOV | $ | 2,209 | $ | 2,337 | $ | (128) | (5.5) | % | $ | 2,116 | $ | 2,370 | $ | (254) | (10.7) | % | |||||||||||||||||||||||||||||||
Total Orders
We define total orders as the total number of customer orders delivered less total orders returned in a given period (excluding those repair, resize, and other orders which have no revenue). We view total orders as a key indicator of the velocity of our business and an indication of the desirability of our products to our customers. Total orders, together with AOV, is an indicator of the net sales we expect to recognize in a given period. Total orders may fluctuate based on the number of visitors to our website and showrooms, and our ability to convert these visitors to customers. We believe that total orders is a measure that is useful to investors and management in understanding our ongoing operations and in an analysis of ongoing operating trends.
Average Order Value
We define average order value, or AOV, as net sales in a given period divided by total orders in that period. We believe that AOV is a measure that is useful to investors and management in understanding our ongoing operations and in an analysis of ongoing operating trends. AOV varies depending on the product type and number of items per order. AOV may also fluctuate as we expand into and increase our presence in additional product lines and price points, and open additional showrooms.
Non-GAAP Financial Measures
We report our financial results in accordance with GAAP. However, management believes that certain non-GAAP financial measures provide users of our financial information with additional useful information in evaluating our performance and liquidity, as applicable, and to more readily compare these financial measures between past and future periods. There are limitations to the use of the non-GAAP financial measures presented in this Quarterly Report on Form 10-Q. For example, our non-GAAP financial measures may not be comparable to similarly titled measures of other companies. Other companies, including companies in our industry, may calculate non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes.
Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA and Adjusted EBITDA margin, which are non-GAAP financial measures, are included in this Quarterly Report on Form 10-Q because they are used by management and our board of directors to assess our financial performance. We define Adjusted EBITDAas net (loss) income excluding interest expense, income taxes, depreciation expense, amortization of cloud-based software implementation costs, showroom pre-opening expense, equity-based compensationexpense, certain non-operating expenses and income, and other unusual and/or infrequent costs, which we do not consider in our evaluation of ongoing operating performance. We define Adjusted EBITDA margin as Adjusted EBITDA calculated as a percentage of net sales. These non-GAAP financial measures provide users of our financial information with useful information in evaluating our operating performance and exclude certain items from net (loss) income that may vary substantially in frequency and magnitude from period to period. These non-GAAP financial measures are not meant to be considered as indicators of performance in isolation from or as a substitute for net (loss) income prepared in accordance with GAAP and should be read only in conjunction with financial information presented on a GAAP basis. Reconciliations of each of Adjusted EBITDA and Adjusted EBITDA margin to its most directly comparable GAAP financial measure, net (loss) income and net (loss) income margin, are presented below. We encourage you to review the reconciliations in conjunction with the presentation of the non-GAAP financial measures for each of the periods presented. In future periods, we may exclude similar items, may incur income and expenses similar to these excluded items, and may include other expenses, costs and non-recurring items.
The following table presents a reconciliation of net (loss) income and net (loss) income margin, the most comparable GAAP financial measures, to Adjusted EBITDA and Adjusted EBITDA margin, respectively, for the periods presented (amounts in thousands):
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Net (loss) income | $ | (672) | $ | (1,075) | $ | (5,052) | $ | 1,367 | |||||||||||||||
| Interest expense | 272 | 1,320 | 2,282 | 3,827 | |||||||||||||||||||
| Income tax expense | 44 | 211 | 56 | 222 | |||||||||||||||||||
| Depreciation expense | 1,549 | 1,341 | 4,581 | 3,846 | |||||||||||||||||||
| Amortization of cloud-based software implementation costs | 203 | 241 | 569 | 659 | |||||||||||||||||||
| Showroom pre-opening expense | 173 | 599 | 1,074 | 1,221 | |||||||||||||||||||
| Equity-based compensation expense | 2,256 | 2,524 | 6,953 | 7,536 | |||||||||||||||||||
|
Other income, net (1)
|
(837) | (1,525) | (3,215) | (4,476) | |||||||||||||||||||
| Loss on extinguishment of debt | 573 | - | 573 | - | |||||||||||||||||||
| Adjusted EBITDA | $ | 3,561 | $ | 3,636 | $ | 7,821 | $ | 14,202 | |||||||||||||||
| Net (loss) income margin | (0.6) | % | (1.1) | % | (1.6) | % | 0.5 | % | |||||||||||||||
| Adjusted EBITDA margin | 3.2 | % | 3.6 | % | 2.5 | % | 4.7 | % | |||||||||||||||
Liquidity and Capital Resources
Overview
Our primary requirements for liquidity and capital are for purchases of inventory, payment of operating expenses, tax distributions to Continuing Equity Owners, and capital expenditures. Historically, these cash requirements have been met through cash provided by operating activities, cash and cash equivalents, proceeds from capital-raising activities and borrowings under our loan facilities. We have historically had negative working capital driven by our high inventory turns and typical collection of payments from customers prior to payment of suppliers. As of September 30, 2025, we had a cash balance, excluding restricted cash, of $73.4 million, and negative working capital, excluding non-restricted cash, of ($20.7) million.
In May 2025, the Company made principal payments totaling $20 million on the SVB Term Loan.
In August 2025, the Company prepaid all principal amounts outstanding of $34.8 million under the SVB Term Loan, and terminated all commitments outstanding under the SVB Credit Agreement. The SVB Credit Agreement provided Brilliant Earth, LLC with a term loan facility in the aggregate principal amount of $65.0 million and the ability to borrow under its revolving loan facility in an aggregate principal amount of up to $40.0 million. As a result of the prepayment, the Company recognized a loss on debt extinguishment of $0.6 million associated with the write-off of unamortized debt issuance costs. Refer to Note 7. "Debt" to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information regarding the SVB Credit Facilities.
In August 2025, our Board of Directors declared a one-time cash dividend of $0.25 per share to holders of our Class A common stock and holders of common units of Brilliant Earth, LLC, respectively. The distribution from Brilliant Earth, LLC totaled approximately $25.0 million, of which a pro rata portion was used by us to fund the dividend. Payment of the dividend was made on September 8, 2025 to holders of record of our Class A common stock as of the close of business on August 22, 2025. Approximately $21.2 million was paid to holders of common units of Brilliant Earth, LLC and approximately $3.8 million was paid to holders of the Company's Class A common stock.
For the nine months endedSeptember 30, 2025, the Company declared and paid $6.7 millionof distributions to, or on behalf of, members associated with their estimated income tax obligations pursuant to the LLC Agreement. We are committed to continue to make quarterly distributions in connection with member estimated income tax obligations which we expect to fund with cash flow from operations.
Any future determination as to the declaration and payment of dividends, if any, will be at the discretion of our Board of Directors, subject to the requirements of applicable law, compliance with contractual restrictions and covenants in the agreements governing our current and future indebtedness. Any such determination will also depend upon our business prospects, results of operations, financial condition, cash requirements and availability, industry trends, and other factors that our Board of Directors may deem relevant.
We believe, based on our current projections, that we have sufficient sources of liquidity to meet our projected operating, tax distribution requirements for at least the next 12 months following the filing of this Quarterly Report on Form 10-Q.
Additional future liquidity needsmay also include payments under the TRA, and state and federal taxes to the extent not offset by our deferred income tax assets, including those arising as a result of purchases or exchanges of common units for Class A and Class D common stock. Although the actual timing and amount of any payments that may be made under the TRA will vary, we expect that the payments that we will be required to make to the Continuing Equity Owners will be significant. Any payments made by us to the Continuing Equity Owners under the TRA will generally reduce the amount of overall cash flow that might have otherwise been available to us or to Brilliant Earth, LLC, and, to the extent that we are unable to make payments under the TRA for any reason, the unpaid amounts generally will be deferred and will accrue interest until paid by us; provided, however, that nonpayment for a specified period may constitute a material breach of a material obligation under the TRA and therefore may accelerate payments due under the TRA.
To the extent that our current liquidity is insufficient to fund future activities, we may need to raise additional funds, such as attempts to raise additional capital through the sale of equity securities or through debt financing arrangements. If we raise additional funds by issuing equity securities, the ownership of our existing stockholders will be diluted. Any new debt financing would result in debt service obligations, and any future instruments governing such debt could provide for operating and financing covenants that could restrict our operations. We cannot ensure that we could obtain new debt financing on favorable terms or at all.
Cash Flow Analysis
The following table summarizes our cash flows for the nine months endedSeptember 30, 2025 and 2024(in thousands):
| Nine Months Ended September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net cash provided by operating activities | $ | 2,551 | $ | 3,504 | |||||||
| Net cash used in investing activities | (2,493) | (2,730) | |||||||||
| Net cash used in financing activities | (88,423) | (3,926) | |||||||||
| Net decrease in cash, cash equivalents and restricted cash | (88,365) | (3,152) | |||||||||
| Cash, cash equivalents and restricted cash at beginning of period | 162,141 | 156,020 | |||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 73,776 | $ | 152,868 | |||||||
Net Cash Provided By Operating Activities
For the nine months ended September 30, 2025, net cash provided by operating activities was $2.6 million compared to net cash provided by operating activities of $3.5 million for the nine months ended September 30, 2024, a decrease of $1.0 million. This decrease was primarily driven by a decrease in cash provided from net (loss) income adjusted for non-cash expense addbacks of $4.6 million. This decrease was partially offset by a $3.6 million decrease in cash used from changes in assets and liabilities related to working capital management activities. The decrease in cash used from changes in working capital was primarily due to a decrease in cash used of $12.8 million in accounts payable, accrued expenses and other current liabilities and other assets. This was offset by increases in cash used of $14.0 million in inventories, prepaid expenses and other current assets and operating lease liabilities. Also impacting the decrease in cash used was an increase in cash generated of $4.8 million in deferred revenue.
Net Cash Used In Investing Activities
For the nine months endedSeptember 30, 2025, net cash used in investing activities was $2.5 million compared to $2.7 million for the nine months ended September 30, 2024. The decrease of $0.2 million was principally due to a decrease in purchases of property and equipment related to new facilities leased during the period.
Net Cash Used In Financing Activities
For the nine months endedSeptember 30, 2025, net cash used in financing activities was $88.4 millioncompared to $3.9 millionfor the nine months ended September 30, 2024. The increase of $84.5 million was primarily due to higher payments made on the SVB Term Loan of $54.4 million and higher dividends and distributions paid to members of $26.2 million. Additionally, the Company paid a one-time cash dividend of $3.8 million to holders of the Company's Class A common stock.
Additional Liquidity Requirements
We are a holding company and have no material assets other than our ownership of LLC Interests. We have no independent means of generating revenue. The LLC Agreement provides for the payment of certain distributions to the Continuing Equity Owners and to us in amounts sufficient to cover
the income taxes imposed on such members with respect to the allocation of taxable income from Brilliant Earth, LLC as well as to cover our obligations under the TRA and other administrative expenses.
Under the TRA, we are required to make cash payments to the Continuing Equity Owners equal to 85%of the tax benefits, if any, that we actually realize (or in certain circumstances are deemed to realize), as a result of (1) increases in our allocable share of the tax basis of Brilliant Earth, LLC's assets resulting from (a) our purchase of LLC Interests from each Continuing Equity Owner; (b) future redemptions or exchanges of LLC Interests for Class A common stock or cash; and (c) certain distributions (or deemed distributions) by Brilliant Earth, LLC; and (2) certain tax benefits arising from payments made under the TRA. We expect the amount of cash payments that we will be required to make under the TRA will be significant. The actual amount and timing of any payments under the TRA will vary depending upon a number of factors, including the timing of redemptions or exchanges by the Continuing Equity Owners, the amount of gain recognized by the Continuing Equity Owners, the amount and timing of the taxable income we generate in the future, and the federal tax rates then applicable. Any payments made by us to the Continuing Equity Owners under the TRA will generally reduce the amount of overall cash flow that might have otherwise been available to us.
Additionally, in the event we declare any cash dividends, we intend to cause Brilliant Earth, LLC to make distributions to us in amounts sufficient to fund such cash dividends declared by us to our shareholders. Deterioration in the financial condition, earnings, or cash flow of Brilliant Earth, LLC for any reason could limit or impair their ability to pay such distributions.
If we do not have sufficient funds to pay taxes or other liabilities or to fund our operations, we may have to borrow funds, which could materially adversely affect our liquidity and financial condition and subject us to various restrictions imposed by any such lenders. To the extent that we are unable to make payments under the TRA for any reason, such payments generally will be deferred and will accrue interest until paid; provided, however, that nonpayment for a specified period may constitute a material breach of a material obligation under the TRA and therefore accelerate payments due under the TRA. In addition, if Brilliant Earth, LLC does not have sufficient funds to make distributions, our ability to declare and pay cash dividends will also be restricted or impaired.
Contractual Obligations and Commitments
As of September 30, 2025, there were no material changes to our contractual obligations and commitments as disclosed in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations"of our 2024 Form 10-K.
Critical Accounting Policies and Estimates
There have been no changes to the Company's critical accounting policies and estimates from those described under "Critical Accounting Policies and Estimates" in the Management's Discussion and Analysis of Financial Condition and Results of Operations of our 2024 Form 10-K.
Recent Accounting Pronouncements
For information regarding recent accounting pronouncements, see Note 1 to our unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q.
JOBS Act
We qualify as an "emerging growth company" pursuant to the provisions of the JOBS Act, enacted on April 5, 2012. Section 102 of the JOBS Act provides that, among other reporting exemptions, an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2) (B) of the Securities Act for complying with new or revised accounting standards. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our unaudited condensed consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
The exemptions afforded to emerging growth companies will apply until we no longer meet the requirements of being an emerging growth company. We will remain an emerging growth company until the earlier of (a) the last day of the fiscal year (i) following the fifth anniversary of the completion of our IPO (December 31, 2026), (ii) in which we have total annual gross revenue of at least $1.235 billion or (iii) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the last business day of our prior second fiscal quarter, and (b) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
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