BRLT Brilliant Earth Group Inc

Brilliant Earth Group, Inc. (“Brilliant Earth” or the “Company”) (Nasdaq: BRLT), an innovative, global leader in ethically sourced fine jewelry, today announced financial results for the three and nine months ended September 30, 2023.

Third Quarter 2023 Financial Highlights (compared to Third Quarter 2022):

• Delivered net sales of $114.2 million, a 2.5% increase year-over-year, and growth of 22% on a four-year CAGR basis
• Increased order volume by 17%
• Expanded gross margin by 380 bps to 58.5%
• Generated strong profitability
  • Net income was $2.0 million
  • Adjusted EBITDA was $7.6 million

"Our third quarter results highlight the power of Brilliant Earth's brand to drive share gains and sustainable profitable growth," said Beth Gerstein, Co-Founder and Chief Executive Officer. "Most recently, the response to our largest national brand campaign in Company history, featuring our new Sol Collection, exceeded expectations and continues to further elevate and grow awareness of Brilliant Earth. Our differentiators, including our accelerating brand momentum, omnichannel experience, data driven model, curated and customizable products and our authentic mission, position us well to continue to outperform the industry this holiday season and into the future."

Third Quarter 2023 Operational Highlights:

• Strong growth in fine jewelry bookings compared to Q3 2022, with increasing fine jewelry average sales price year-over-year
• Unaided brand awareness more than doubled among target demographic since May 2022*
• Exceeded goal of at least 35 showrooms in 2023 with 37 total showrooms as of September 30, 2023

*Measured by Brilliant Earth’s September 2023 consumer survey.

Third Quarter Results

		Q3 2023			Q3 2022			Change
Total Orders		43,161			36,977			16.7%
AOV	$	2,645		$	3,013			(12.2)%
($ in millions, except per share amounts)
Net Sales	$	114.2		$	111.4			2.5%
Gross Profit	$	66.8		$	60.9			9.7%
Gross Margin		58.5%			54.7%			380 bps
Net income allocable to Brilliant Earth Group, Inc. (1)	$	0.2		$	0.6			(66.7)%
Net income, as reported	$	2.0		$	5.7			(65.1)%
Net income margin		1.8%			5.1%			(330) bps
Adjusted net income (3)	$	4.8		$	6.7			(28.4)%
GAAP Diluted EPS (2)	$	0.02		$	0.05			(60.0)%
Adjusted Diluted EPS (3)	$	0.05		$	0.07			(28.6)%
Adjusted EBITDA (3)	$	7.6		$	10.0			(23.5)%
Adjusted EBITDA margin (3)		6.7%			8.9%			(220) bps

*Percentage changes may not recalculate due to rounding(1) Represents net income allocable to Brilliant Earth Group, Inc. during the third quarter of 2023 and 2022(2) Represents GAAP Diluted EPS for the third quarter of 2023 and 2022(3) Adjusted net income, Adjusted Diluted EPS, Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures. See “Disclosure Regarding Non-GAAP Financial Measures and Key Metrics” for additional information on non-GAAP financial measures and a reconciliation to the most comparable GAAP measures

Nine Month Results

		YTDSeptember2023			YTDSeptember2022			Change
Total Orders		121,641			104,715			16.2%
AOV	$	2,647		$	3,058			(13.4)%
($ in millions, except per share amounts)
Net Sales	$	322.0		$	320.3			0.6%
Gross Profit	$	184.0		$	168.9			9.0%
Gross Margin		57.1%			52.7%			440 bps
Net income allocable to Brilliant Earth Group, Inc. (1)	$	0.3		$	1.4			(78.6)%
Net income, as reported	$	2.8		$	12.8			(78.2)%
Net income margin		0.9%			4.0%			(310) bps
Adjusted net income (3)	$	12.7		$	17.3			(26.6)%
GAAP Diluted EPS (2)	$	0.02		$	0.10			(80.0)%
Adjusted Diluted EPS (3)	$	0.13		$	0.18			(27.8)%
Adjusted EBITDA (3)	$	20.9		$	28.0			(25.2)%
Adjusted EBITDA margin (3)		6.5%			8.7%			(220) bps

*Percentage changes may not recalculate due to rounding(1) Represents net income allocable to Brilliant Earth Group, Inc. during the nine months ended September 30, 2023 and 2022(2) Represents GAAP Diluted EPS for the nine months ended September 30, 2023 and 2022(3) Adjusted net income, Adjusted Diluted EPS, Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures. See “Disclosure Regarding Non-GAAP Financial Measures and Key Metrics” for additional information on non-GAAP financial measures and a reconciliation to the most comparable GAAP measures

Updated Fiscal 2023 Outlook

The Company’s updated 2023 guidance reflects the current normalizing jewelry industry conditions while reiterating management’s expectation to continue gaining market share with increasing order volume and delivering profitable growth. “Our ability to maintain profitability despite industry headwinds speaks to the effectiveness of our agile structure and the speed with which we can adapt,” said Jeff Kuo, Chief Financial Officer.

	Net sales	$444 million - $450 million
	Adjusted EBITDA	$22 million - $24 million

Webcast and Conference Call Information

Brilliant Earth will host an investor conference call and webcast to discuss third quarter results today, November 9, 2023, at 5:00 p.m. ET/2:00 p.m. PT. The webcast can be accessed at https://investors.brilliantearth.com. The conference call can be accessed by using the following link: https://register.vevent.com/register/BI4da3000c6bc846019dde41614bbff493. After registering, an email will be sent including dial-in details and a unique conference call pin required to join the live call. A replay of the event will remain available on the Brilliant Earth investor website after the live webcast concludes.

About Brilliant Earth 

Brilliant Earth is a digitally native, omnichannel fine jewelry Company and a global leader in ethically sourced fine jewelry. Led by our co-founders Beth Gerstein and Eric Grossberg, the Company’s mission since its founding in 2005 has been to create a more transparent, sustainable, and compassionate jewelry industry. Headquartered in San Francisco, CA and Denver, CO, Brilliant Earth has more than 35 showrooms across the United States and has served customers in over 50 countries worldwide. 

Disclosure Regarding Non-GAAP Financial Measures and Key Metrics

In addition to the financial measures presented in this release in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), the Company has included certain non-GAAP financial measures in this release, including Adjusted EBITDA, Adjusted Net income, Adjusted Diluted EPS and Adjusted EBITDA margin. 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 income that may vary substantially in frequency and magnitude from period to period.

We define EBITDA as net income before interest, taxes, depreciation and amortization. We define Adjusted EBITDA as net income before interest, income taxes, depreciation, amortization of cloud-based software implementation costs, adjusted for the impact of certain additional non-cash and other items that we do not consider in our evaluation of ongoing performance of our core operations. These items include showroom pre-opening expense, equity-based compensation expense, costs to fund the Brilliant Earth Foundation and transaction costs and other expenses that we did not incur in the normal course of business. We define Adjusted EBITDA margin as Adjusted EBITDA calculated as a percentage of net sales. We believe that Adjusted EBITDA and Adjusted EBITDA margin, which eliminate the impact of certain expenses that we do not believe reflect our underlying business performance, provide useful information to investors to assess the performance of our business.

We define Adjusted Net income as net income adjusted for the impact of certain additional non-cash and other items that we do not consider in our evaluation of ongoing performance of our core operations. These items include showroom pre-opening expense, equity-based compensation expense, costs to fund the Brilliant Earth Foundation and transaction costs and other expenses that we did not incur in the normal course of business. We define Adjusted Diluted EPS as Adjusted Net income, divided by the diluted weighted average shares of common stock outstanding. The diluted weighted average shares of common stock outstanding is derived from the historical diluted weighted average shares of common stock assuming such shares were outstanding for the entirety of the period presented. We believe Adjusted Net income and Adjusted diluted Earnings Per Share, which eliminate the impact of certain expenses that we do not believe reflect our underlying business performance, provide useful information to investors to assess the performance of our business.

Please refer to “GAAP to Non-GAAP Reconciliations” located in the financial supplement in this release for a reconciliation of GAAP to non-GAAP financial information.

This release includes forward-looking guidance for certain non-GAAP financial measures, including Adjusted EBITDA. These measures will differ from net income (loss), determined in accordance with GAAP, in ways similar to those described in the reconciliations at the end of this release. We are not able to provide, without unreasonable effort, guidance for net income (loss), determined in accordance with GAAP, or a reconciliation of guidance for Adjusted EBITDA to the most directly comparable GAAP measure because the Company is not able to predict with reasonable certainty the amount or nature of all items that will be included in net income.

This press release also contains certain key business metrics which are used to evaluate our business and growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts, and assess operational efficiencies. 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. 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 categories and price points, and open additional showrooms.

Forward-Looking Statements

This press release contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this press release may be forward-looking statements. Statements regarding our future results of operations and financial position, business strategy, and plans and objectives of management for future operations, including, among others, statements regarding expected growth and future capital expenditures, are forward-looking statements. In some cases, you can identify forward-looking statements by terms, such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “evolve,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “strategy,” “target,” “will,” or “would,” or the negative of these terms or other similar expressions. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, and uncertainties that are difficult to predict. You should not rely upon forward-looking statements as predictions of future events. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including, but not limited to: the Company has grown rapidly in recent years and has limited operating experience at our current scale of operations; the Company may be unable to manage growth effectively; increases in costs of diamonds, other gemstones and precious metals and supply shortages; the Company’s ability to maintain a low cost of production and distribution; fluctuations in the pricing and supply of diamonds, other gemstones, and precious metals, particularly responsibly sourced natural and lab-grown diamonds and recycled precious metals such as gold, increases in labor costs for manufacturing such as wage rate increases, as well as inflation, and energy prices; the Company’s ability to cost-effectively turn existing customers into repeat customers or to acquire new customers; risks related to the Company’s expansion plans in the U.S.; an overall decline in the health of the economy and other factors impacting consumer spending, such as recessionary conditions, governmental instability, war or the threat of war, and natural disasters may affect consumer purchases; the Company has a history of losses, and may be unable to sustain profitability; competition in the fine jewelry retail industry; the Company’s ability to manage its inventory balances and inventory shrinkage; a decline in sales of Create Your Own rings would negatively affect the Company’s business, financial condition, and results of operations; the Company ability to maintain and enhance its brand; the Company’s marketing efforts to help grow its business may not be effective; environmental, social, and governance matters may impact the Company’s business and reputation; risks related to the Company’s e-commerce and omnichannel business; the Company’s ability to effectively anticipate and respond to changes in consumer preferences and shopping patterns; the Company’s results of operations and operating cash flows could fluctuate on a quarterly and annual basis, which may make it difficult to predict its future performance; the Company’s principal asset is its interest in Brilliant Earth, LLC, and, as a result, the Company depends on distributions from Brilliant Earth, LLC to pay its taxes and expenses; risks related to the Company’s obligations under its Tax Receivable Agreement and its organizational structure; and the other risks and uncertainties described in the section titled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, which filing is available at www.sec.gov. We qualify all of our forward-looking statements by these cautionary statements. These forward-looking statements speak only as of the date of this press release. Except as required by applicable law, we undertake no obligation to update or revise any forward-looking statements contained in this press release, whether as a result of any new information, future events or otherwise.

Contacts:

Investors:Stefanie Laytoninvestorrelations@brilliantearth.com

BRILLIANT EARTH GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
	Three Months EndedSeptember 30,								Nine Months EndedSeptember 30,
		2023				2022				2023				2022
Net sales	$	114,154			$	111,405			$	322,036			$	320,252
Cost of sales		47,327				50,487				138,044				151,397
Gross profit		66,827				60,918				183,992				168,855
Operating expenses:
Selling, general and administrative		64,813				54,615				180,708				151,576
Income from operations		2,014				6,303				3,284				17,279
Interest expense		(1,322	)			(778	)			(3,808	)			(3,700	)
Other income, net		1,401				374				3,436				266
Loss on extinguishment of debt		—				—				—				(617	)
Income before tax		2,093				5,899				2,912				13,228
Income tax expense		(95	)			(180	)			(119	)			(389	)
Net income		1,998				5,719				2,793				12,839
Net income allocable to non-controlling interest		1,753				5,073				2,452				11,413
Net income allocable to Brilliant Earth Group, Inc.	$	245			$	646			$	341			$	1,426
Earnings per share:
Basic	$	0.02			$	0.06			$	0.03			$	0.13
Diluted	$	0.02			$	0.05			$	0.02			$	0.10
Weighted average shares of common stock outstanding:
Basic		12,149,770				10,884,306				11,780,905				10,571,777
Diluted		97,194,920				96,574,462				96,918,465				96,488,889

BRILLIANT EARTH GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
	September 30,			December 31,
		2023			2022
Assets
Current assets:
Cash and cash equivalents	$	147,131		$	154,649
Restricted cash		209			205
Inventories, net		37,256			39,331
Prepaid expenses and other current assets		11,271			11,764
Total current assets		195,867			205,949
Property and equipment, net		22,402			16,554
Deferred tax assets		9,272			8,948
Operating lease right of use assets		35,459			27,812
Other assets		2,693			3,311
Total assets	$	265,693		$	262,574
Liabilities and equity
Current liabilities:
Accounts payable	$	4,108		$	11,032
Accrued expenses and other current liabilities		35,073			37,833
Current portion of deferred revenue		23,051			18,505
Current portion of operating lease liabilities		4,866			3,873
Current portion of long-term debt		3,656			3,250
Total current liabilities		70,754			74,493
Long-term debt, net of debt issuance costs		56,749			59,462
Operating lease liabilities		37,066			28,537
Payable pursuant to the Tax Receivable Agreement		7,675			6,893
Other long-term liabilities		4			48
Total liabilities		172,248			169,433
Commitments and contingencies (Note 10)
Equity
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, none issued and outstanding at September 30, 2023 and December 31, 2022, respectively		—			—
Class A common stock, $0.0001 par value, 1,200,000,000 shares authorized; 12,260,942 and 11,246,694 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively		1			1
Class B common stock, $0.0001 par value, 150,000,000 shares authorized; 35,669,224 and 35,482,534 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively		4			4
Class C common stock, $0.0001 par value, 150,000,000 shares authorized; 49,119,976 and 49,119,976 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively		5			5
Class D common stock, $0.0001 par value, 150,000,000 shares authorized; none issued and outstanding at September 30, 2023 and December 31, 2022, respectively		—			—
Additional paid-in capital		7,791			7,256
Retained earnings		4,004			3,663
Equity attributable to Brilliant Earth Group, Inc.		11,805			10,929
NCI attributable to Brilliant Earth, LLC		81,640			82,212
Total equity		93,445			93,141
Total liabilities and equity	$	265,693		$	262,574

Unaudited GAAP to Non-GAAP Reconciliations
(in thousands, except share and per share amounts)
ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN
	Three months endedSeptember 30,								Nine months endedSeptember 30,
		2023				2022				2023				2022
Net income, as reported	$	1,998			$	5,719			$	2,793			$	12,839
Interest expense		1,322				778				3,808				3,700
Income tax expense		95				180				119				389
Depreciation expense		1,105				501				2,996				1,248
Amortization of cloud-based software implementation costs		145				50				408				86
Showroom pre-opening expense		1,311				796				4,754				2,602
Equity-based compensation expense		2,569				2,311				7,454				6,563
Loss on extinguishment of debt		—				—				—				617
Other income, net (1)		(1,401	)			(374	)			(3,436	)			(266	)
Transaction costs and other expense (2)		480				—				2,012				180
Adjusted EBITDA	$	7,624			$	9,961			$	20,908			$	27,958
Net income margin		1.8	%			5.1	%			0.9	%			4.0	%
Adjusted EBITDA margin		6.7	%			8.9	%			6.5	%			8.7	%

(1) Other income, net consists primarily of interest and other miscellaneous income, partially offset by expenses such as losses on exchange rates on consumer payments.

(2) These expenses are those that we did not incur in the normal course of business. For the nine month period ended September 30, 2023, costs included a $1 million charitable contribution.

ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE
	Three months endedSeptember 30,								Nine months endedSeptember 30,
		2023				2022				2023				2022
Net income attributable to Brilliant Earth Group, Inc., as reported (1)	$	245			$	646			$	341			$	1,426
Net income impact from assumed redemption of all LLC Units to common stock (2)		1,753				5,073				2,452				11,413
Net income, as reported		1,998				5,719				2,793				12,839
Income tax expense associated with conversion (3)		(454	)			(1,350	)			(634	)			(2,953	)
Tax effected net income after assumed conversion		1,544				4,369				2,159				9,886
Equity-based compensation expense		2,569				2,311				7,454				6,563
Loss on extinguishment of debt		—				—				—				617
Showroom pre-opening expense		1,311				796				4,754				2,602
Transaction costs and other expense (4)		480				—				2,012				180
Tax impact of adjustments		(1,128	)			(748	)			(3,679	)			(2,508	)
Adjusted net income (5)	$	4,776			$	6,728			$	12,700			$	17,340
Diluted weighted average of common stock assumed outstanding		97,194,920				96,574,462				96,918,465				96,488,889
Diluted earnings per share:
As reported	$	0.02			$	0.05			$	0.02			$	0.10
As adjusted	$	0.05			$	0.07			$	0.13			$	0.18

(1) Represents net income allocable to Brilliant Earth Group, Inc. for the three months and nine months ended September 30, 2023 and 2022.

(2) It is assumed that we will elect to issue common stock upon redemption of LLC Units rather than cash settle.

(3) Brilliant Earth Group, Inc. is subject to U.S. Federal income taxes, in addition to state and local taxes with respect to its allocable share of any net taxable income of Brilliant Earth, LLC. Acquisition of LLC units by Brilliant Earth Group, Inc. causes all of the taxable income currently recognized by the members of Brilliant Earth, LLC to become taxable to the Company.

(4) These expenses are those that we did not incur in the normal course of business. For the nine month period ended September 30, 2023, costs included a $1 million charitable contribution.

(5) The Company has removed the adjustment for "other (income) expense, net" in its calculation of Adjusted net income. This adjustment in fiscal years 2022 and 2023 principally consisted of interest income on the Company's cash balances. Prior periods have been adjusted to conform to the current year presentation.