Brilliant Earth Group, Inc. (BRLT) Earnings

Management highlights

• Valentine's Day was a record with bookings up 9% year over year during the two-week peak shopping period, and the perfect timing campaign drove triple-digit year-over-year growth in organic social engagement. • In January, introduced Bridal Collective with creator hosted events in New York and Beverly Hills locations, turning showrooms into social media destinations for fine jewelry discovery and live styling. • Ended the quarter with 42 showrooms and planning to open two more by end of year. • Fine jewelry bookings in showrooms grew 48% year over year. • Introduced Beverly Hills flagship location in January, which is delivering strong retail orders and foot traffic with exceptional customer sentiment, including date night experience. • Average selling prices up meaningfully across assortment. • Acquired nearly 40% more new fine jewelry customers whose first purchase was $500 or more compared to Q1 last year. • Launched butterfly collection in Q2 and keepsake collection heading into Mother's Day, with new and innovative design collections in pipeline. • Observed consumer environment bifurcation with softness at lower price points but demand at higher price points holding up well. • Sequential gross margin improvement and Q1 marked low point for gross margin this year with levers to pull for increasing gross margin.

Guidance

• Q2 net sales expected to be up in low single-digit percent range year over year, with profitable Q2 and adjusted EBITDA in range of $0.5 to $2 million. • Full year net sales expected to grow in mid single-digit percent range. • Full year gross margin expected to be mid-50s. • Full year marketing expense as percentage of net sales expected to have year-over-year leverage. • Adjusted EBITDA dollars for the year expected to be positive but slightly lower than 2025, with most of adjusted EBITDA coming from Q4.

Segment performance

Net sales grew approximately 6% year over year to $99.5 million. Total orders grew 3% year-over-year. Fine Jewelry bookings grew 33% year-over-year and made up 17% of total bookings. Wedding and anniversary bands also had impressive year-over-year bookings growth. Gross margin was within the mid-50s target. Adjusted EBITDA landed in the upper half of guidance range. Net sales were $99.5 million, up 6% year-over-year. Total orders grew 3% year-over-year. Average order value was approximately $2,131, up 3% year-over-year. Inventory grew principally due to strategic procurement and fine jewelry assortment growth, but inventory turns remained above industry average.

Analyst Q&A

• Q: Hi, Beth and Jeff. Nice job on all the progress and fine jewelry, by the way. As we think about your guidance next quarter, how are things trending lately relative to what you're seeing and also related pricing sensitivity given the increase this quarter and what you're thinking about prices relative to unit and elasticity? I imagine you're being pretty surgical and analytical about how you think about pricing. And then a follow-up question on fine jewelry. What are your thoughts on the LTV and the CACs on the fine jewelry customer relative to your heritage and bridal as well?

  A: Hi, Oliver. Thanks for the questions. Maybe we can start with just what we're seeing lately. I would say Q2 to date, nothing really significant to call out in a big difference in macro. We continue to see top line growth, the high value customer is continuing to perform and show resiliency there. I think your discussion on pricing sensitivity is absolutely something that we think very carefully about. And the ASPs generally are increasing based on a few different factors. One of those factors is we're just continuing to see that strength at the higher end, those higher value customers. And then we are taking selective ASP increases to mitigate some of that increased metal costs. But as you mentioned, we were being very surgical, having a really keen eye for that pricing sensitivity is something that we've developed capability really for many, many years. And so I don't think it's anything new here, but we are being careful to protect value, quality, profitability while still making sure that we are attracting that new customer. As it relates to fine jewelry, I think we're really pleased that we're able to acquire new customers at very strong marketing efficiencies. You know, I mentioned how we are investing heavily in the $500 plus assortment. We're very strategically focused on that higher value customer. and we're seeing very strong results there, growing that customer base. We're having new customers over 40% this year relative to last year, just in that $500 plus assortment. So driving marketing efficiencies across the assortment is always something that we pay very special attention to, but the brand resonance, the assortment, all of that is performing really well and driving nice efficiencies, and as a result, Across the assortment, we are seeing marketing leverage, which is something that we are also heavily focused on.

• Q: Jeff, you've always been very active at managing gross margins with agility. We're facing these unprecedented times with costs. What are you seeing now with gross margins and amongst the volatility? What are the latest strategies in terms of sourcing and what's implied in your guidance?

  A: Thanks, Oliver. I think we did a great job managing our gross margin in Q1. In line with our expectations, we were able to take historically high, all-time high metal prices in Q1, navigate through that really nimbly with a variety of strategies, including price optimization, vendor procurement efficiencies, being thoughtful about product designs and specification and hedging. We're able to package all that together really quickly in a dynamic market and deliver a strong gross margin Within our expectations, I think we're glad to see that sequentially, quarter to date, we've had improving gross margins. And we think that as the year progresses with more time to manage with these tools that we have, we'll be able to deliver increasing gross margins, assuming that metal prices stay where they are. So I think this is a real case study in how Brilliant Earth has just been able to be very nimble and effective, even in the face of significant changes like what we've seen. And this is all included in our guidance, including our agility and our strategies, as well as expectations for metal prices being where they are and some continued volatility. So I think we're feeling good overall at what we were able to deliver.

• Q: Hi, great and good afternoon. Thanks for taking our questions. Maybe just to start, you know, you've noted that nearly half of the new customers are now discovering Brilliant Earth through fine jewelry. So that becomes the primary acquisition channel. How is that changing the customer journey? Are these fine jewelry for customers eventually converting to bridal or Would you say you're building a different customer base than the one you had five years ago?

  A: Yeah, I would say that overall we are acquiring more and more customers through fine jewelry, but we continue to invest in bridal, especially given the importance of it as that first purchase. So, you know, we do see the customer journey where people will buy fine jewelry and then they'll buy bridal and you really, but I would say more frequent you're seeing a bridal customer who is, you know, that's really their first major purchase and then they tend to repeat in the future, whether it's wedding band or additional fine jewelry. So, you know, really I think it's important for us to cater to both the bridal and the fine jewelry customer and driving repeat is something我们 are laser focused on and, you know, essentially making sure that we are increasing our customer loyalty and thinking through the journey, whether it's online or in our showrooms, to be able to ultimately drive that customer loyalty, whether it's starting with bridal or fine jewelry.

• Q: Maybe just as a follow-up on that really quickly, you did highlight the ASP growth across assortment, but I don't think you broke out the engagement rings specifically. Could you just update us on where those landed in one queue? And then Jess, maybe on AOV really quickly, you know, both the joggers you called out with the higher priced items and some of the selective price increases seem pretty durable at this time. Is there a reason that the AOV growth we saw in 1Q wouldn't be a reasonable run rate for the next few quarters? Or does the fine jewelry mix shift kind of eventually reassert some of that pressure we have been seeing for about several quarters?

  A: So I can start on the bridal side. We are happy to see that ASP growth, which is true across all of the different pieces of the assortment. So bridal as well, we're seeing more strength at the higher end with a higher value customer and more resilience there versus at the lower end. So that's kind of what we're seeing on bridal. I would say Q1, bookings were slightly down as it relates to Q2 to date. We're seeing signs of improvement, but a similar bifurcation that we've talked about with the relative strength at the higher price points. Jeff, you want to talk about the AOV and how we're thinking about that projecting forward? Sure. So we're seeing a few things in the Q1 results. I think as we talked about for Q1, I think one, we're seeing a variety of things influencing the ASPs, including the resonance that we have with higher income consumers, consumers mixing in to some higher price point products and the success that we're having in driving some of those higher price point sales, as well as, as Beth mentioned, some of the selective price increases. So You are seeing some of those factors at play. You know, overall, regarding your point about growth of FJ, we do think that, you know, over a longer term, as we continue to have success in fine jewelry, we will expect some moderation in price points overall because they do have lower price points than, for example, bridal. But it's something that we do want to continue to have that success in growing fine jewelry since it's such a big opportunity for us. So你're seeing a variety of different factors at play in the Q1 results, but I think overall we were very pleased to be able to navigate through and drive these results where both orders and AOV increased for the quarter.

• Q: Hi, good afternoon, everyone. Two questions. First of all, new collections has always been, and the innovation and newness has always been a driver. As you think about the comparatives with last year, Anything we should be thinking about, new collection launches and timing this year versus last year? And then certainly with the rise in energy prices, what have you been seeing? How have you incorporated the impact and margins and how would you define it? Any changes to the cadence or shaping of the year given this than you originally expected?

  A: Thank you, Dana. I can start with just the new jewelry collections. And I agree, this is a driver of the success that we've seen in fine jewelry. The assortment is very strong and signature and iconic design collections have been performing very well. Seoul was up 90%, as I mentioned earlier. So we're continuing to invest in existing collections, the iconic collections that we continue to be known for. And we have a really nice pipeline of new product collections as well. So我们mentioned the butterfly collection that's performing really well. We reintroduced our ring pop collaboration, which sold out and was phenomenal. So we think it's a really important part of the strategy to continue to introduce this newness, also introducing it in really fresh, innovative ways with strong marketing campaigns, making sure that we are able to capitalize on key holidays like Valentine's Day and timing the collections appropriately there is also really important. And also making sure that all of this creates a nice halo effect on our diamond essentials, which continue to demonstrate strong growth. So we're excited about the pipeline we have coming up this year. But do recognize that this is a really nice way for us to communicate, drive our brand and overall also activate the showrooms and make sure that we're driving really strong interest, which is why The showrooms as well have very nice fine jewelry growth, about 48 percent. So I think all of these aspects of the strategy are key, and they're working well together. As it relates to energy specifically, I wouldn't say that what we're seeing in the macro has changed our overall outlook in terms of the year. That's why we're reiterating the same guidance that we had last quarter for the full year. So I wouldn't say it's something that we have noticed in terms of very specific behavioral changes that is changing how we are shaping the year.

• Q: Hi, everyone. Thanks for taking my questions. I'm popping off another call, so我apologize if it's been asked. But I was curious on the discussions around bridal. I think Over the past few quarters, we've seen nice momentum within the category. I'm curious if you can read into the consumer a little bit and what's going on that's driving that bifurcation. Is it a response to recent gas prices or broader uncertainty and how you can address that in your go-to-market strategy ahead?

  A: Sure. Thanks, Anna, for the question. I think as it relates to bridal and, frankly, all the categories, we're seeing that similar type of behavior where the higher value customer continues to show resilience and we're seeing a little bit more softness at the lower end, which is likely due to a lot of the factors that you guys have talked about, whether it's increasing gas prices or just some of the overall macro volatility, affordability, et cetera. I think that generally we're pleased to see that high end continue to hold up well. And we've always, as a company, catered to a variety of different price points, but we continue to invest in elevating the brand and catering to a higher value customer, having a really premium experience with new innovations like our date night experience and our showrooms. So I think we're very well positioned in both the breadth of the assortment as well as the premium nature of our brand to take advantage of the strength in that higher value consumer, which is also showing up in the bridal assortment as well.

• Q: And I guess if we can extrapolate more on that, when you have pressure within that lower consumer price, given你speak to a more premium consumer, do you expect that people trade down within your mix or is it that they potentially might seek more value-oriented offerings outside of your core?

  A: I think it's a mixture of either, you know, kind of holding off in terms of buying based on some of the volatility. I think that might be part of it. I think the holding off on purchasing could be an important aspect. But, you know, overall, we want to make sure that we are acquiring customers in a profitable and sustainable way. And so we just have to continue to price optimize to make sure that we're able to acquire that customer where it makes sense to acquire them.