Brilliant Earth Group, Inc. Q4 FY2025 earnings call

• Brand momentum: 2025 was a banner year, celebrated 20th anniversary, had brand visibility with stars choosing products and unique partnerships. - Product focus: Expanded into fine jewelry, with fine jewelry mix growing to 17% of bookings in 2025, iconic collections like Pacific green colored lab diamond, medallions with meaning, love-decoded collection. - Shopping experiences: Continued industry-leading digital experiences, opened 42 showrooms, including first flagship showroom in Beverly Hills with new experiential features. - Business model: Asset-light model, utilized technology and processes for profitable growth. Q4 net sales were highest ever, adjusted EBITDA above midpoint of guidance. Full-year net sales up 3.6%, adjusted EBITDA $12 million.

For Q4, net sales were $124.4 million, up 4.1% year-over-year, the largest quarter ever. Full-year net sales were $437.5 million, up 3.6% year-over-year. Q4 gross margin was 55.9%, full-year 57.5%. Fine Jewelry bookings grew 34% year-over-year in Q4, reaching 23% of total bookings mixed for the quarter and 17% for the full year. Bookings from fine jewelry made with lab diamonds grew 61% year-over-year in Q4. Wedding and anniversary bands had double-digit year-over-year growth in Q4. Engagement rings had approximately 1% year-over-year bookings growth in the second half of the year. Signature collections grew double digits year-over-year in Q4. Net sales in Q4 were $124.4 million, full-year $437.5 million. Fine Jewelry contributed significantly with strong growth.

• 2026 net sales expected to grow in mid-single-digit percent range year-over-year. - Gross margin expected to be in mid-50s percent range for 2026, assuming metal prices remain similar to current levels. - Expect to continue driving year-over-year leverage in marketing expense as percentage of net sales. - Expected to deliver positive adjusted EBITDA for 2026 but slightly lower than 2025's $12 million. - Q1 net sales expected to grow in mid-single-digit percent range year-over-year. - Adjusted EBITDA margin expected to be in negative mid-single-digit range in Q1 2026 due to recent gold and platinum price increases. - Do not believe it is appropriate to speak to medium-term targets due to uncertainty in metal prices.

• Industry-wide challenges from record metal prices and fluctuating tariff conditions. - Uncertainty in metal prices impacting gross margin. - Impact of metal price volatility on profitability and ability to meet guidance.

Q: Curious to hear about expectations for AOV growth in the context of guidance for the next year and expectations for gold and platinum hedging and how much of current inventory is effectively hedged or price loaded.

A: Beth mentioned ASPs are up across assortment, fine jewelry strength driving AOV; Jeff mentioned hedging is one tool, also price optimization, design, vendor optimization.

Q: As we think about 2026, how would you frame the key bookings growth drivers across the business, whether that's further bridal recovery, continued fine expansion, and how should we think about share gains relative to industry growth over the next year?

A: Beth said fine jewelry and showroom strategy are key growth drivers, half new customers discover through fine jewelry shows opportunity; Jeff talked about gross margin outlook and mitigation tools.

Q: I'd like to start on the embedded pricing within the guidance. I think on the 3Q call we talked about that 4Q is a particularly challenging time to lift prices as the consumer is generally more price sensitive. Are you assuming that at the turn of the year in 1Q there's better opportunities to offset some of the headwinds that you've been noting in gross margin?

A: Beth said they are seeing improved opportunity to optimize and take selective price increases, have sophisticated system pricing algorithm and premium brand positioning; Jeff talked about gross margin outlook and mitigation tools.

Q: With the mid-50s approximately gross margin assumption, to get to slightly lower profitability from 2025, it seems to imply an escalation in operating expense leverage in the year. Could you maybe talk to the biggest opportunities there?

A: Beth said they've seen strong top-line, guiding to higher growth rate, successful in driving marketing efficiencies, main headwind is metal pricing impact on gross margin, will be disciplined in other OPEX areas.

Q: I was just wondering if you're implying that we could potentially see a negative EBITDA in 2 or 3Q?

A: Beth said they expect most of the profitability in Q4, seasonally Q4 is biggest profit quarter, operating cost structure not highly seasonal, Q4 can amortize over larger revenue base.