Brilliant Earth at Sidoti Conference: Positive Growth and Strategic Expansion

On Thursday, 20 March 2025, Brilliant Earth Group (NASDAQ: BRLT) presented at the Sidoti Small-Cap Virtual Conference, outlining a robust strategic vision with a focus on growth and innovation. While the company reported strong financial performance and operational progress, challenges in average order value were noted. The conference highlighted Brilliant Earth’s commitment to sustainability and innovative practices, aiming for significant growth in the fine jewelry sector.

Key Takeaways

• Brilliant Earth reported $422 million in net sales for 2024, with a 16% CAGR and a gross margin of 60%.
• Q4 net sales reached $119.5 million, with a 10% increase in total orders and an 18% rise in repeat orders year-over-year.
• The company ended 2024 with $106 million in net cash, the highest since 2021.
• Strategic focus on showroom expansion, product innovation, and omnichannel experiences.
• Medium-term targets include low teens net sales growth and double-digit adjusted EBITDA margin by 2027.

Financial Results

• 2024 Net Sales: $422 million, with a 16% CAGR.
• Q4 Performance: $119.5 million in net sales, 10% growth in total orders, and 18% in repeat orders.
• Gross Margin: 60% for 2024, with Q4 at 59.6%.
• Adjusted EBITDA: $6.9 million for Q4, marking the fourteenth consecutive quarter of positive adjusted EBITDA.
• Net Cash: $106 million at year-end, the highest since 2021.
• Marketing Expenses: Achieved leverage as a percentage of net sales one year ahead of schedule.

Operational Updates

• Showroom Expansion: Opened new locations in Boston and New York, totaling 41 showrooms, with plans for 2-3 new openings in 2025.
• Inventory and Working Capital: Operates with an inventory-light model and negative working capital, leading to higher inventory turns.
• Omnichannel Experience: Focused on seamless integration between digital and physical stores, with new showroom experiences like try-on bars.
• Product and Brand Development: Launched the successful Jane Goodall collection, with strong performance in fine jewelry and anniversary bands.

Future Outlook

• Medium-Term Goals (through 2027): Aim for low teens net sales growth and maintain high fifties gross margin.
• Strategic Priorities for 2025: Focus on becoming the most loved and trusted jeweler, product innovation, and enhancing omnichannel experiences.
• Investment Focus: Emphasizing innovation, data, technology, and human resources to drive efficiency and growth.

Q&A Highlights

• Collaboration Strategy: Emphasizes alignment with partners and innovative design.
• Fine Jewelry Growth: Recognized as a significant growth area, offering multiple customer engagement touchpoints.
• Showroom Strategy: Utilizes e-commerce data and market factors for expansion decisions, aiming for compelling ROI.
• Gross Margin Expansion: Driven by brand strength, price optimization, and procurement efficiencies.
• Competitive Landscape: Positioned as a differentiated brand in a fragmented jewelry market.

For more detailed insights, readers are encouraged to refer to the full transcript of the conference call.

Full transcript - Sidoti Small-Cap Virtual Conference:

Daniel Harriman, Analyst, Sidoti: Okay. We’ll go ahead and get started. Good afternoon, everyone. Welcome back to day two of Sidoti’s March conference. My name is Daniel Harriman.

I’m an analyst here at Sidoti. This afternoon, we are gonna hear from Brilliant Earth Group. That’s ticker BRLT. We have the pleasure of, having an attendance, Jeff Kuo, the company’s CFO. We also have Colin Borland as a reference point as well.

He’s a VP of Strategy, Business Development and Investor Relations. Brilliant Earth has been here several times, and they know the drill. But for those of you who are new, we’re going to give them about twenty minutes to go through the presentation, after which time I’m going to open it up for Q and A. If you do have any questions at any time during the presentation, please feel free to type those into the Q and A box, and time permitting, we’ll get to as many as we can. But with that, please join me in welcoming brilliant Earth and and Jeff.

And with that, we’ll, we’ll

Jeff Kuo, CFO, Brilliant Earth Group: hand it over to you. Thank you so much for being here. Thanks, Daniel. And thank you, everyone. It’s a pleasure to be back here again at the Stody Small Cap Conference.

And thanks for taking the time to, meet with us. I’m Jeff. I’m the CFO of Brilliant Earth, and I’ve been with the company since 02/2015. Before we proceed, we’d just like to highlight our safe harbor language regarding forward looking statements and non GAAP financial measures, and you can also read these in the presentation that’s been posted to our investor relations website. Brilliant Earth is the next generation jeweler for today’s consumer.

We were founded in 02/2005 with a mission to really create a more transparent and sustainable jewelry industry. And we’ve been transforming the industry with the combination of our authentic mission driven brand, beautifully designed, trend leading proprietary products, a seamless omnichannel experience across our now 41 showrooms and digital platform, and an asset light and data driven business model. And this is all translated into our ability to profitably grow, gain share in the large and fragmented jewelry industry. This page walks you through some of the highlights of our company history, and it showcases our leadership in areas like product innovation, media engagement and partnerships, and then some of our financial milestones as well as examples of how we give back to our communities. There’s a number of points to highlight about Brilliant Earth.

If you’ve heard from us before, you know, we’ve talked about these. You know, one, that we operate in a vast industry that is ripe for disruption with an agile, data driven, and tech enabled business model that can really swiftly adapt. We use data to inform our decision making. We have an asset light model that is not burdened by holding excess inventory. And then a well integrated omnichannel shopping experience that provides a a joyful and seamless experience to our customers.

And then a set of values that strongly resonate with our customers. We have a history of driving net sales growth, reaching $422,000,000 in 2024 net sales, and that’s a 16% CAGR over the years shown here. And then we also have been able to deliver strong gross margins, increasing to a gross margin of 60% in 2024. And this really demonstrates the resonance of our brand and our products with our customers and our premium positioning as well as the effectiveness of operational efforts such as our price optimization engine, procurement efficiencies as well as our extended warranty program in driving strong gross margins. And just to highlight a few of our results from Q4, so we delivered a hundred and $19,500,000 in net sales, which was at the high end of our guidance range.

That included a 10% year over year growth in total orders and an even higher year over year growth in repeat orders at 18%. With a strong gross margin at 59.6%. We had a very strong adjusted EBITDA at $6,900,000 which was a significant outperformance versus our guidance, and that was our fourteenth consecutive quarter of positive adjusted EBITDA. So that’s all the quarters that we have reported since going public in 2021. And we also ended ended the year with a hundred $6,000,000 in net cash, which was our highest net cash position since the end of twenty twenty one, which was shortly after our IPO.

This next slide is some of the same statistics but for the year instead of for the quarter. So, we’ll move on to the next page. And just to go through a a in a little bit more detail some of the other highlights. As I mentioned, you know, we delivered net sales in Q4 that are the high end of our provided guidance, and this was our fourteenth consecutive quarter of adjusted positive adjusted EBITDA. Also, just more specifically to the holiday, we had our largest day of bookings in company history on Black Friday.

So we’re well prepared, and we delivered during the holiday season in q four. Another meaningful highlight is the success that we’ve been having in fine jewelry. So in December, we expanded fine jewelry to a 27% of our total bookings mix, which was a new record for the company and expansion of 600 basis points on the same metric year over year, compared to the prior prior year. And so we really have been having a lot of success in driving fine jewelry, which is a big strategic opportunity for the company. We amplified with our new and existing product offerings.

And then also, this next point, we were able to drive a significant amount of year over year leverage in marketing expense as a percentage of net sales. And I think this was a highlight. You know, we’re able to drive this leverage both for the quarter and for the year. And for the year, this represented us being one year ahead of our schedule. When we introduced our medium term outlook about a year ago, we had talked about driving leverage year over year in marketing expense as a percentage of sales starting in 2025.

And we’re pleased to have done that in 2024, a year earlier than we had mentioned and expect to continue to drive leverage, you know, over the next few years. And we see that as an opportunity for us in terms of EBITDA expansion. We opened a couple of new showrooms, in Boston and New York, including our first street level location in Manhattan. And so that took us to 40 for the end of the year, and we’re now at 41 as we recently opened a location in Southlake, Texas. We continue to operate with an efficient working capital model with inventory turns that are significantly higher than the industry average, and that’s definitely a benefit to our business model.

And as I mentioned before, the Q4 ending net cash position was our highest since 2021 shortly after our IPO. For these, we’ve covered a lot of these statistics already. So these are in the presentation if you’d like to view, but we can go on to the next page. And I think just to highlight maybe one point here on our AOV. So our, AOV in q four did go down, due to both growth in fine jewelry, which has a lower average price point than our assortment overall, as well as comparatively strong performance within sub $5,000 engagement rings.

And as we continue to expand and grow in fine jewelry, we do expect that that would that would bring down AOV on a blended basis for the company. And this is expected and in alignment with our strategic initiative of really wanting to continue to drive fine jewelry growth. It’s a big opportunity for us because it’s a smaller part of our business, but the industry as a whole is majority fine jewelry. So that’s a big opportunity for us as we expand into the future. And just these these points and images here really highlight some of the product centric brand campaigns that we have driven and the success that we’re having.

So I won’t go through all of these points, point by point, but I think some some of the highlights,

Daniel Harriman, Analyst, Sidoti: for

Jeff Kuo, CFO, Brilliant Earth Group: the last year included the launch of our Jane Goodall collection, which you may have heard us talk about before, which has been our most successful fine jewelry launch to date, as well as a flawless collection. And then, we continue to drive strong results in in fine jewelry as well as in wedding anniversary bands in Q4 with, you know, continued outperformance in areas like men’s wedding bands. And we’re engaged with with our community with partnerships like, with VIP brides as well as influencers. And so I think we really, through a combination of, like, our strong proprietary products and premium brand, have really been able to successfully engage with our customer base. This is just to highlight some of our business model.

You may have heard us talk about this before, but our business model is compelling in that we’re able to operate with an inventory light model and operate with negative working capital. And so we have a design your own model, and a virtual inventory model that allows us to offer a curated and broad selection to our customers while still keeping our inventory balance sheet low. And this allows us to just manage working capital efficiently to keep inventory turns that are significantly higher than the industry average. And you can see that our inventory ended just about 1% higher year over year in Q4 even as we drove significant growth in fine jewelry and expanded our showroom footprint. Our quarter end cash of $162,000,000 was about $6,000,000 higher year over year even after capital investments and reductions in our debt principal balance.

And as I mentioned before, our Q4 ending net cash of $106,000,000 being the highest it’s been in a number of years was really a highlight. And I think the combination of profitability, efficient working capital, and a strong balance sheet really provide us with strengths and competitive advantages to make the right investments and continue to set us up for success in the future. And just to touch briefly on our omnichannel model, we we do really strive to create a seamless experience for our customers between our digital and our physical footprint. It’s a considered this is a considered purchase, and we really want to be able to cater to customers how they want to shop, when they want to shop, where they want to shop. And I think our combination of digital leadership as well as our expanding showroom footprint allow us to meet customers where they are.

When we open showrooms, we do look to drive uplift overall in the metros where we open them, and we continue to see compelling showroom uplift in, in our showroom footprint. We also continue to evolve and test and learn with new experiences in our showroom. So for example, our most recently opened showrooms feature our try on bars for fine jewelry, and that’s been a new experience in a way for people to get closer to and really experience or find jewelry collection in a compelling way. This is also true in our digital experience. We continue to iterate to create a very compelling and engaging digital, shopping experience.

And And I think this all combines to drive successful metrics like some of some of those that you see here. And as mentioned, we are currently at 41 showrooms, including the Southlake, Texas location that recently opened. And we’re targeting two to three new locations for 2025, including the Southlake location. And just moving on to priorities, for the year, you know, these are, you know, these are some of the areas that we’re really focusing on for 2025 and wanted to spend a moment on these. One is to really continue on our path to become the world’s most loved and trusted jeweler, both for today and tomorrow’s consumer.

And I think we’ve been successfully executing against that. We also continue to innovate on the product front, creating distinctive, ownable collections that blend our innovative craftsmanship and designs and as well as offer customers the opportunity to personalize to their their tastes and preferences. And then we continue to strive to deliver really distinctive omnichannel experiences to delight our customers and foster lasting, hopefully, lifelong relationships and really endeavor to be the standard setter for modern luxury retail. And then as always, we continue to invest in innovation, data, technology, people to really drive operational efficiency and to capture long term sustainable and profitable growth. And then I thought it’d be helpful to go through our medium term targets that you may have heard us talk through before.

But in terms of our medium term targets, which we’re talking about through 2027, we anticipate net sales growth accelerating to a low teens year over year growth rate in 2027. We expect this to be driven by a number of factors, including the gradual normalization of engagements, growth from our showrooms, continued outperformance in fine jewelry and other non engagement assortments, as well as growth of our brand awareness. For gross margin, we expect this to remain in the high fifties percent through 2027 as we continue to drive strong gross margin through our premium brand, our proprietary product collections, our price optimization engine, procurement efficiencies in our warranty program. And then on the expense side, from 2025 to 2027, we’re con targeting continuing to build on the success that we had last year, driving leverage in marketing costs as a percentage of sales from 2025 to 2027. And we expect the contributors to this include growing brand awareness, increased conversion from our showrooms, continued success in fine jewelry, and we think that all of these will help contribute to driving increased leverage in marketing costs from 2025 to 2027.

And we expect, that we are driving towards an adjusted EBITDA margin reaching a double digit margin in 2027. So, that’s just a brief summary of how we’re thinking about our medium term targets and outlook. So really to recap, our premium brand and our differentiated business model, including our data driven decision making, our seamless omnichannel platform, and our asset light structure demonstrate our ability to deliver profitability and achieve our strategic and financial objectives in a variety of different environments. And I’d like to thank you again for taking the time to hear from us today, and I’d be glad to answer some questions.

Daniel Harriman, Analyst, Sidoti: Okay, Jeff. Thank you so much for that presentation. As a reminder, if you do have any questions, please feel free to type those into the box, and we should have enough time to get to all. Jeff, we’ve had quite a few come in already, and I have some of my own. But just to kind of kick things off, you know, I’ve seen you speak about the Jane Goodall collection for the last, you know, couple of presentations.

Can you talk a little bit about your strategy for collaborations and and how you look at that and, you know, any major collaborations that you may have in the pipeline moving forward? Understanding there’s, you know, certain things you can’t say about some that may be planned.

Jeff Kuo, CFO, Brilliant Earth Group: Sure. So with respect to our collaborations, we’re looking to a number of things. One is alignment, between us and partners that we’re working with. And I think that’s one of the factors that has made the Jane Goodall collection successful is the alignment of, our values and and hers. And we’re really proud and honored to collaborate, you know, on that front.

I think another is really to be innovative in design. You know, customers come to us for our leadership in design, and we really want to imbue our our product collections with our our design language and style and bring something that’s innovative, to to our customers. And so I think that’s something that’s that’s also, important. And then we want to bring it to life. You know, we wanna bring that to life in how how you can experience the brand and be able to see the product and touch the product in our showrooms.

And and I think all of these, all of these different factors are some of the ways about how we think about driving successful partnerships. Don’t think there’s anything particular about upcoming collections that we have to share at this point, but, we, you know, we continue to expect to deliver really compelling product assortment as we’re going through the year.

Daniel Harriman, Analyst, Sidoti: Perfect. Thank you. And then it’s great to see fine jewelry of being 27% of total bookings. And I know that you’ve touched on this, but for investors new to the story, can you talk a little bit about why fine jewelry is such an important part of your strategic process moving forward and why it presents such a great opportunity for the company?

Jeff Kuo, CFO, Brilliant Earth Group: Yeah. There are a few different reasons. One, that I alluded to earlier was that it’s it’s a compelling market opportunity. You know, it’s a minority of our business, but for the industry overall, fine jewelry is the majority of the industry. And so it really represents a significant growth opportunity for us to expand into fine jewelry.

Like, beyond that, there are a number of different strategic reasons why I think it’s compelling. One is that it opens up additional touch points that we can engage with customers. So it can be for additional life events and special occasions that you can purchase fine jewelry for gifting and self purchase. We believe that this is beneficial in terms of being able to drive come, additional repeat purchase behavior as well as be accretive to both revenue and customer acquisition economics. And I think that the success that we’ve had, including our q four results and collections like the Jane Goodall collection, really illustrate that we have we have a formula that works in fine jewelry and we’re looking to continue to accelerate and we’re excited by the potential to continue to expand in fine jewelry and offer something really compelling and exciting for our customers.

Daniel Harriman, Analyst, Sidoti: Wonderful. And some of these may be repetitive because you’ve touched on them at on previous presentations with us. But, you know, as we think about your showroom strategy and you’re at 41 now and you expect to maybe finish 25 at 42 or 43, total showrooms. Can you talk a little bit more about, you know, what you look for in in the market in which you may be putting a showroom? And then are there any, you know, regions in The US where you may be a little bit underrepresented right now that you may look to expand to?

Jeff Kuo, CFO, Brilliant Earth Group: Yeah. So in terms of what we look for in the market, we have, an advantage in that we have ecommerce and digital customers across across the country. So we have data about where our customers are, what they’re buying. And so we use that, of course, to help inform our decision making in terms of showroom expansion. And then we combine that with a lot of market specific factors, including, like, how how people are shopping, where people are shopping in those locations, considerations about specific real estate opportunities that may emerge.

And we we combine combine all of those in terms of looking through what’s the range of opportunities that we could expand into. We’re always looking for a compelling ROI as we’re opening new locations. And so that’s some some brief description of of what we’re looking for. In terms of regions regions in The US, we do now have with our 41 showrooms, you know, coverage across many different metro areas. You know, I think there there continue to be opportunities, both first time showrooms in a given metro area.

You’ve also seen us open up clusters, so multiple showrooms in a given metro area. And you’ve seen this in areas like New York, San Francisco Bay Area, Chicago, Southern California. And and I think that, there are opportunities to cover more, you know, more of our customer base with an efficient footprint. Our showrooms tend to be destinations where people come because they want to, they already know about Berlin Earth and they want to experience more. And so that that is compelling and helps us achieve that efficient coverage.

And we’re amplifying that by making it easier with some of our newer shown, footprints and and formats for people to walk in and discover us. So it’s a nice complement between the appointment driven model as well as allowing for retail and walk in discovery and purchase.

Daniel Harriman, Analyst, Sidoti: Perfect. Some questions have come in regarding margins. And, you know, in the fourth quarter, you talked about, you know, going through a competitive and promotional holiday season, but at the same time, expanding margins. And the 15%, I believe it was fifteen percent five year CAGR or 16% CAGR that you’ve seen in gross margins. Can you talk a little bit about the strategy behind that and what’s led to the expansion despite a difficult environment and what, you know, the company’s really been able to do to to see that growth on an annual basis over the last five years?

Jeff Kuo, CFO, Brilliant Earth Group: Yeah. So, maybe first, just on on the CAGR point for five years, that was the net sales. You know, that was net sales. CAGR, which I believe was 16% over the five years shown, and and we’re we’re proud of the growth that we’ve been able to drive there. In terms of the factors that have driven gross mark because gross margin has expanded, you know, during during that time, you know, we think that it’s been driven by a combination of different things.

One, like our premium brand and really being focused on premium brand differentiated products. We’re not discount oriented like many others in the industry may be. Our price optimization engine, which allows us to continually test and optimize for that right mix of top line capture as well as gross margin capture, and that’s something that is a living living, breathing thing that we’re continuing to iterate iterate on and improve as we get get new data. And then also things like procurement efficiencies and our extended warranty program, those have all contributed, to our our strong gross margins, and we expect to continue to work to drive as much gross margin performance as we can using some of those same levers.

Daniel Harriman, Analyst, Sidoti: Perfect. And my apologies on messing up the metric for the 16, but you’re right with net sales. Can you touch a little bit upon the competitive landscape and maybe, you know, how that plays into your strategy moving forward?

Jeff Kuo, CFO, Brilliant Earth Group: Yeah. So the competitive landscape for jewelers is, you know, approximately two thirds of the industry is, independents. And, and so, you know, it’s a relatively it was relatively more fragmented industry, than, you know, certain others in the in the retail and consumer space. And we think that that presents opportunity for company like us that has a compelling brand and assortment of products, a really distinguished omnichannel shopping experience, and really to take all of those things and really make a difference and offer something differentiated to our customers. And and we think it’s a it’s a large industry.

It’s a fragmented industry. And we think that, we have a very compelling offering to make to our customer base.

Daniel Harriman, Analyst, Sidoti: Yeah. And it’s been fun to just, you know, to follow the story as you’ve been coming to these conferences over the last year or so. We’ve got about a minute or two left, so I just wanna turn it back to you for any closing thoughts or parting thoughts for investors that may be watching this that are new to your story.

Jeff Kuo, CFO, Brilliant Earth Group: Yeah. No. Thanks, Daniel. It’s again a pleasure to be here. You know, I think that we we do really offer a compelling a compelling mix of our brand, our experience, our products, and a business model that set us up to be a differentiated and disruptive player in the jewelry space.

And we thank you for the chance to be here. Thanks, everyone, for tuning in and look forward to connecting in the future.

Daniel Harriman, Analyst, Sidoti: Great. Jeff, great to see you again. For all of you in the audience, thank you for your participation. I think we were able to get to most, if not all, of the questions. And Jeff, on behalf of of the attendees and everybody at Sidoti, thank you for sharing Brilliant Earth’s story again and and being with us again at this conference.

Jeff Kuo, CFO, Brilliant Earth Group: Thanks, Daniel. And thanks, everybody.

Daniel Harriman, Analyst, Sidoti: Have a great day, everyone. Thank you so much.

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