Brilliant Earth Group, Inc. Q3 FY2025 earnings call

Key Points

• Marked 20-year anniversary, proud of achievements in redefining luxury jewelry with purpose and profit.
• Q3 net sales grew 10% y-o-y, surpassing guidance; engagement ring bookings returned to growth, wedding/anniversary bands had largest quarter ever, fine jewelry grew 45% y-o-y.
• Q3 adjusted EBITDA $3.6 million, near midpoint of guidance. Maintained gross margin in high 50s despite high metal prices and tariffs.
• Achieved 300 basis points of year-over-year marketing leverage, driving traffic and revenue growth.
• Fine jewelry and iconic collections saw strong growth; Jane Goodall collection was best-performing new launch. Celebrity placements generated over 13 billion impressions in Q3.
• Entering holidays well-prepared with strong pipeline of new products, showroom experiences, and marketing strategy.

Net sales grew 10% year-over-year to $110.3 million. Engagement ring bookings returned to growth, wedding and anniversary band bookings were the largest ever with double-digit year-over-year growth, including men's and women's collections. Fine jewelry, which was 14% of bookings in Q3, grew 45% year-over-year. Q3 gross margin was 57.6%, within the high 50s target. Q3 adjusted EBITDA was $3.6 million, near the midpoint of guidance range.

Guidance

• Raised full-year net sales guidance to 3%-4.5% growth y-o-y, driven by engagement ring recovery, fine jewelry strength, and showroom growth.
• Full-year adjusted EBITDA margin expected to be 2%-3%.
• Q4 gross margin impacted by high metal prices and new 25% India tariff; expect some headwinds into Q1 2026.

Risks

• Metal prices at all-time highs, which could impact margins.
• New 25% tariff on India announced in August 2025, potentially affecting costs and margins.

Q: Good quarter. As we think about engagement ring bookings, it was exciting that they returned to growth this quarter. How sustainable do you think the inflection here? And what are your expectations for bridal recovery versus fine jewelry mix over the next year? Second follow-up is the cost of goods sold and inflation that you're seeing now. You maintained some really high gross margins. What do you think will happen in terms of what you're trying to do with hedging going forward? It's a pretty dynamic environment. And how are customers feeling and executing around pricing from what you see in the market? It's a bifurcated consumer with money to spend, but the consumer is being choiceful in our view.

A: Beth Gerstein responded that they're pleased with consumer demand, see strength across all assortments, expect engagement rings to continue recovering and taking market share, and fine jewelry to continue growing as a massive opportunity.

Q: I'd like to start with the shift in adjusted EBITDA margin guidance. Could you put a finer point on what -- how you're contemplating the various headwinds between the metals pricing and the incremental tariffs? And to what extent you've taken price already to help compensate for some of these? Or could that be layering on to the model in the future?

A: Beth Gerstein said they continually optimize pricing, have taken selective price increases, especially on proprietary Signature styles, and are on a journey of testing and learning with pricing.

Q: Maybe just to start, Jeff, could you talk a little bit about the top line guidance for the full year? I know comp -- and then just backing into 4Q as well. I know comp isn't as favorable as 3Q, but I believe we're looking at a range of about 2% to 7% top line growth in the quarter, if my math is correct. Just anything to call out in terms of headwinds you're embedding, then any insight as to how we should bridge between those 2 goalposts? It sounds like October is off to a good start, if I'm not mistaken. So is there some caution embedded in that top line number?

A: Chuenhong Kuo said they factored in strong performance through October, including growth in engagement, wedding/anniversary bands, and fine jewelry, and are well-positioned for a strong holiday despite some comp headwinds.

Q: Could you just elaborate further on what efficiencies you're seeing in marketing to allow better sales and leverage in that line item?

A: Beth Gerstein said they've driven marketing efficiencies by smarter spend allocation, machine learning models for site conversion, and strength in showrooms, achieving 300 basis points of marketing leverage.

Q: The cash position is also attractive and brilliant. What are your capital priorities as you think ahead -- as you think about marketing versus collections and international expansion in terms of cash and CapEx? And then on this quarter that we just had, what factors drove the upside in terms of find versus engagement or existing versus new customers, if there were factors that you'd call out?

A: Beth Gerstein and Chuenhong Kuo discussed investing in showroom expansion, brand awareness with strong ROI, and bright spots across all collections driving upside, with fine jewelry and iconic collections performing well.