Brilliant Earth Group, Inc. (BRLT) Earnings

Management highlights

• Top-Line & Consumer Demand Trends - Management confirms sustained bifurcation in consumer demand: softness is observed at lower price points, while demand for premium, higher-priced jewelry remains strong, consistent with prior quarters. - The company is strategically focused on growing the $500+ price point segment, where it has achieved consistent growth leveraging premium product assortment and enhanced customer experience. - Mother's Day 2026 was the company's largest ever, with overall bookings up 15% year-over-year in the critical two-week gifting window, demonstrating strong brand resonance and effective cross-functional planning. • Product & Brand Initiatives - New product collections (including the butterfly, keepsakes, expanded locket/medallion assortment, and Seaside Charms collections) received strong customer reception. Proprietary design-forward collections for engagement and wedding rings (including nature-inspired designs and the expanded Pacific Green offering) led segment performance. - High-profile marketing partnerships with creators and tastemakers (including appearances at the Met Gala) have increased brand awareness and cultural resonance with younger millennial and Gen Z consumers. • Omnichannel & Showroom Performance - Walk-in bookings for showrooms from customers without pre-scheduled appointments grew 47% year-over-year, demonstrating strong performance of the company's experiential retail strategy. - The new Beverly Hills flagship showroom has outperformed expectations: total bookings are up more than 40% year-over-year versus the prior location, and fine jewelry bookings nearly doubled year-over-year, with 10% higher average order values than typical showroom appointments, serving as a blueprint for future modern luxury retail expansion. The company opened its 43rd showroom in San Antonio, Texas, demonstrating the successful adaptation of the new showroom concept to smaller footprints. • Operational & Financial Execution - Gross margin outperformed expectations, driven primarily by agile operational execution (dynamic price optimization, thoughtful product design, vendor procurement efficiencies) rather than just recent declines in precious metal prices. - The company achieved 250 basis points of year-over-year leverage in adjusted operating expenses, with leverage across all three core expense categories: 130 basis points of leverage in marketing, 40 basis points in adjusted employee costs, and 80 basis points in adjusted other G&A, reflecting disciplined cost management paired with data/AI-driven efficiency improvement. - Inventory declined sequentially by $1 million, ending the quarter at ~4 turns (well above industry average), supporting the company's capital-efficient, inventory-light competitive advantage. The company ended Q2 with $75 million in cash and no debt, with a sequential cash increase of $16 million, giving it strong balance sheet flexibility for strategic investments.

Guidance

• Full-year 2026 net sales guidance is set at $459 to $462 million, with adjusted EBITDA guidance raised to $13 to $15 million, upward from prior guidance, reflecting the strong Q2 performance and increased confidence in second half profitability. • Gross margin for the second half of 2026 is expected to land in the mid to high 50% range, with Q3 2026 gross margin expected to be similar to Q2 2026 levels. This outlook assumes precious metal prices and tariff rates remain near current levels, and implies a year-over-year gross margin expansion entering Q4 2026. • Full-year 2026 marketing expense as a percentage of net sales is expected to continue declining year-over-year, as the company maintains marketing efficiency gains while making selective brand growth investments. • Q3 2026 guidance calls for roughly flat year-over-year net sales (comps against a very strong Q3 2025 when purchases were pulled forward ahead of expected tariff implementation), which represents a healthy 10% growth on a two-year stacked basis. Q3 2026 adjusted EBITDA is expected to be $3 to $5 million.

Segment performance

Brilliant Earth reports results across three core product segments for Q2 2026: 1) Engagement Rings: Bookings held steady year-over-year, and remained the largest revenue contributor. Average selling prices (ASP) were stable year-over-year. 2) Wedding and Anniversary Bands: Q2 bookings grew at a double-digit year-over-year rate, with ASP up year-over-year. 3) Fine Jewelry: Q2 bookings grew approximately 32% year-over-year, accounting for 18% of total bookings, representing continued diversification beyond bridal. Fine jewelry bookings at price points of $500 and above grew over 40% year-over-year, with ASP up meaningfully year-over-year. On a consolidated basis, Q2 2026 net sales grew 6% year-over-year to $150 million; total orders declined 2% year-over-year, while orders above $500 (which represent only a few percent of total net sales) grew 5% year-over-year. Consolidated gross margin was 57.9%, down 40 basis points year-over-year but up 360 basis points sequentially from Q1 2026. Adjusted EBITDA was $5.8 million (5% margin), far exceeding guidance.

Risks & headwinds

Management noted that forward-looking results are subject to general macroeconomic and consumer environment uncertainty, including continued volatility in precious metal prices and changes to existing tariff rates, which could impact actual performance relative to guidance. No additional material operational risks or failures were discussed during the call.

Analyst Q&A

• Q: Q2 adjusted EBITDA came in $3-4 million above guidance, but the full year guidance raise only captures part of this outperformance. What drives this dynamic, and what order growth trend is expected for H2, especially for sub-$500 orders? /

  A: Management states the full year guidance already includes both the Q2 outperformance and an improved H2 profitability outlook. The company is strategically focused on the $500+ segment, which achieved 5% year-over-year order growth, while sub-$500 orders make up only a small share of net sales. Management expects this trend to continue through the second half, and notes it reflects the premium positioning of the brand.

• Q: Marketing expense as a percentage of sales declined year-over-year, but the holiday season may bring more competitive advertising conditions. How should marketing spend and customer acquisition costs be modeled going forward? /

  A: The company maintains a balanced approach: it continues making strategic investments to grow brand awareness and resonance, while also driving ongoing marketing efficiency via internal data and technology capabilities. The team has a track record of dynamic adjustment to changing market conditions, and will adapt appropriately for the holiday environment.

• Q: What drivers underpin the expected year-over-year gross margin expansion in the back half of 2026, and are additional price increases embedded in this outlook? /

  A: Gross margin expansion is driven by the company's existing operational levers: dynamic price optimization, thoughtful product design and specification, and ongoing vendor procurement efficiencies, which already delivered strong sequential gains in Q2. As the company laps last year's metal price increases entering Q4, the outlook for gross margin improvement is well-supported by these existing capabilities, even in a volatile operating environment.

• Q: What is driving the sharp growth in walk-in, no-appointment showroom bookings, and what does this trend mean for the going forward? /

  A: The growth reflects a mix of factors: increased overall brand awareness from marketing campaigns, strong customer reception for new fine jewelry collections, and improved visual merchandising and inventory optimization in showrooms. Gen Z consumers in particular are seeking premium experiential retail, which is a core strategic focus for the company. This trend builds confidence for fine jewelry performance in the upcoming holiday quarter.