Brilliant Earth Group, Inc. (“Brilliant Earth” or the “Company”)
(Nasdaq: BRLT), an innovative, digital-first jewelry company and
global leader in ethically sourced fine jewelry, today announced
financial results for the three months ended March 31, 2023.
First Quarter
2023 Highlights (quarterly period
ended March 31,
2023):
- Delivered net sales
of $97.7 million, a
2.3% decrease from the prior
year, achieving a record level of orders for the
first quarter and reflecting growing demand for and resonance of
the Brilliant Earth brand.
- Expanded gross margin
by 480 basis points to
54.9% for the first quarter, driven by continued strong brand
resonance, differentiated product offerings, performance of the
Company's pricing engine, procurement efficiencies and benefits
from the Company's enhanced extended warranty program.
- Generated strong
profitability:
- Adjusted
EBITDA was $5.5 million for the first quarter; and
- Net loss was
$0.4 million for the first quarter.
- Continued omnichannel
leadership: In the first quarter of 2023, Brilliant Earth
opened three new showrooms, bringing its U.S. showroom count to 28
as of March 31, 2023.
Beth Gerstein, Co-Founder and Chief Executive
Officer said, “We are pleased with our start to the year, reporting
first quarter results that surpassed our guidance. The first
quarter marked our seventh consecutive period of consistently
strong performance, reflecting continued share gains from the
successful execution of our strategy and the discipline and agility
with which we execute to drive strong revenue, significant
expansion in gross margin, solid profitability, and sustained
balance sheet strength.”
“Our mission-driven focus to disrupt and
transform the jewelry industry and extend our lead as the jeweler
for today’s consumer has increased the awareness and resonance of
the Brilliant Earth brand with millennial and Gen Z consumers.”
Gerstein continued, “We are excited about the
opportunities ahead and expect the continued success of our
strategic initiatives from product innovation and curation to
showroom expansion to be drivers of our growth. When coupled with
the unique qualities of our agile, asset-light business model, we
are well positioned to meet our annual goals.”
First Quarter
2023 Financial Highlights
- Net sales were
$97.7 million compared to $100.0 million in the first
quarter of 2022, with 10.1% growth in Total Orders offset by a
11.3% decrease in AOV.
- Gross profit was
$53.7 million, or a 54.9% gross profit margin, compared to
$50.1 million, or a 50.1% gross profit margin in the first
quarter of 2022.
- Net loss was $0.4 million, compared
to net income of $3.4 million in the first quarter of fiscal
2022.
- Adjusted net income was $2.4
million, compared to $4.7 million in the first quarter of 2022
(3).
- Adjusted
EBITDA was $5.5 million, compared to $8.4 million in the first
quarter of 2022 (3).
First Quarter Results
|
|
Q1 2023 |
|
Q1 2022 |
|
% Change |
Total Orders |
|
35,631 |
|
32,372 |
|
10.1% |
AOV |
$ |
2,742 |
$ |
3,090 |
|
(11.3)% |
($ in millions, except per share amounts) |
|
|
|
|
|
|
Net Sales |
$ |
97.7 |
$ |
100.0 |
|
(2.3)% |
Net (loss) income allocable to Brilliant Earth Group, Inc. (1) |
$ |
(0.1) |
$ |
0.4 |
|
(125.0)% |
Net (loss) income, as reported |
$ |
(0.4) |
$ |
3.4 |
|
(113.1)% |
Net (loss) income margin |
|
(0.5)% |
|
3.4% |
|
(114.7)% |
Adjusted net income (3) |
$ |
2.4 |
$ |
4.7 |
|
(48.9)% |
GAAP Diluted EPS (2) |
$ |
0.00 |
$ |
0.03 |
|
(100.0)% |
Adjusted Diluted EPS (3) |
$ |
0.03 |
$ |
0.05 |
|
(40.0)% |
Adjusted EBITDA (3) |
$ |
5.5 |
$ |
8.4 |
|
(33.8)% |
Adjusted EBITDA margin (3) |
|
5.7% |
|
8.4% |
|
(32.1)% |
*Percentage changes may not recalculate due to rounding |
(1) |
Represents net income allocable to Brilliant Earth Group, Inc.
during the first quarter of 2023 and 2022 |
(2) |
Represents GAAP Diluted EPS for the first quarter of 2023 and
2022 |
(3) |
Adjusted net income, Adjusted Diluted EPS, Adjusted EBITDA and
Adjusted EBITDA margin are non-GAAP financial measures. See
“Disclosure Regarding Non-GAAP Financial Measures and Key Metrics”
for additional information on non-GAAP financial measures and a
reconciliation to the most comparable GAAP measures |
|
|
Fiscal 2023 Outlook
|
Net sales |
$460 million - $490 million |
|
|
Adjusted EBITDA |
$17 million - $32 million |
|
|
|
|
|
Webcast and Conference Call Information
Brilliant Earth will host an investor conference
call and webcast to discuss first quarter results today,
May 11, 2023, at 5:00 p.m. ET/2:00 p.m. PT. The webcast can be
accessed at https://investors.brilliantearth.com. The conference
call can be accessed by using the following link:
https://register.vevent.com/register/BI55086f4d7e4f4fe785651b1a363f0782.
After registering, an email will be sent including dial-in details
and a unique conference call pin required to join the live call. A
replay of the webcast will remain available on the website for 90
days.
About Brilliant Earth
Brilliant Earth is a digitally native,
omnichannel fine jewelry company and a global leader in ethically
sourced fine jewelry. Led by our co-founders Beth Gerstein and Eric
Grossberg, the Company’s mission since its founding in 2005 has
been to create a more transparent, sustainable, and compassionate
jewelry industry. Headquartered in San Francisco, CA and Denver,
CO, Brilliant Earth has 31 showrooms and has served customers in
over 50 countries worldwide.
Disclosure Regarding Non-GAAP Financial Measures and Key
Metrics
In addition to the financial measures presented
in this release in accordance with U.S. Generally Accepted
Accounting Principles (“GAAP”), the Company has included certain
non-GAAP financial measures in this release, including Adjusted
EBITDA, Adjusted Net income, Adjusted Diluted EPS and Adjusted
EBITDA margin. These non-GAAP financial measures provide users of
our financial information with useful information in evaluating our
operating performance and exclude certain items from net income
that may vary substantially in frequency and magnitude from period
to period.
We define EBITDA as net income (loss) before
interest, taxes, depreciation and amortization. We define Adjusted
EBITDA as net income (loss) before interest, income taxes,
depreciation, amortization of cloud-based software implementation
costs, adjusted for the impact of certain additional non-cash and
other items that we do not consider in our evaluation of ongoing
performance of our core operations. These items include showroom
pre-opening expense, equity-based compensation expense, costs to
fund the Brilliant Earth Foundation and transaction costs and other
expenses that we did not incur in the normal course of business. We
define Adjusted EBITDA margin as Adjusted EBITDA calculated as a
percentage of net sales. We believe that Adjusted EBITDA and
Adjusted EBITDA margin, which eliminate the impact of certain
expenses that we do not believe reflect our underlying business
performance, provide useful information to investors to assess the
performance of our business.
We define Adjusted Net income as net income
adjusted for the impact of certain additional non-cash and other
items that we do not consider in our evaluation of ongoing
performance of our core operations. These items include showroom
pre-opening expense, equity-based compensation expense, costs to
fund the Brilliant Earth Foundation and transaction costs and other
expenses that we did not incur in the normal course of business. We
define Adjusted Diluted EPS as Adjusted Net income, divided by the
diluted weighted average shares of common stock outstanding. The
diluted weighted average shares of common stock outstanding is
derived from the historical diluted weighted average shares of
common stock assuming such shares were outstanding for the entirety
of the period presented. We believe Adjusted Net income and
Adjusted diluted Earnings Per Share, which eliminate the impact of
certain expenses that we do not believe reflect our underlying
business performance, provide useful information to investors to
assess the performance of our business.
Please refer to “GAAP to Non-GAAP
Reconciliations” located in the financial supplement in this
release for a reconciliation of GAAP to non-GAAP financial
information.
This release includes forward-looking guidance
for certain non-GAAP financial measures, including Adjusted EBITDA.
These measures will differ from net income (loss), determined in
accordance with GAAP, in ways similar to those described in the
reconciliations at the end of this release. We are not able to
provide, without unreasonable effort, guidance for net income
(loss), determined in accordance with GAAP, or a reconciliation of
guidance for Adjusted EBITDA to the most directly comparable GAAP
measure because the Company is not able to predict with reasonable
certainty the amount or nature of all items that will be included
in net income (loss).
This press release also contains certain key
business metrics which are used to evaluate our business and growth
trends, establish budgets, measure the effectiveness of our sales
and marketing efforts, and assess operational efficiencies. We
define total orders as the total number of customer orders
delivered less total orders returned in a given period (excluding
those repair, resize, and other orders which have no revenue). We
view total orders as a key indicator of the velocity of our
business and an indication of the desirability of our products to
our customers. Total orders, together with AOV, is an indicator of
the net sales we expect to recognize in a given period. Total
orders may fluctuate based on the number of visitors to our website
and showrooms, and our ability to convert these visitors to
customers. We believe that total orders is a measure that is useful
to investors and management in understanding our ongoing operations
and in an analysis of ongoing operating trends. We define average
order value, or AOV, as net sales in a given period divided by
total orders in that period. We believe that AOV is a measure that
is useful to investors and management in understanding our ongoing
operations and in an analysis of ongoing operating trends. AOV
varies depending on the product type and number of items per order.
AOV may also fluctuate as we expand into and increase our presence
in additional product categories and price points, and open
additional showrooms.
Forward-Looking Statements
This press release contains forward-looking
statements. We intend such forward-looking statements to be covered
by the safe harbor provisions for forward-looking statements
contained in Section 27A of the Securities Act of 1933, as amended
(the “Securities Act”), and Section 21E of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”). All statements other
than statements of historical facts contained in this press release
may be forward-looking statements. Statements regarding our future
results of operations and financial position, business strategy,
and plans and objectives of management for future operations,
including, among others, statements regarding expected growth and
future capital expenditures, are forward-looking statements. In
some cases, you can identify forward-looking statements by terms,
such as “anticipate,” “believe,” “contemplate,” “continue,”
“could,” “estimate,” “evolve,” “expect,” “intend,” “may,” “plan,”
“potential,” “predict,” “seek,” “should,” “strategy,” “target,”
“will,” or “would,” or the negative of these terms or other similar
expressions. Accordingly, we caution you that any such
forward-looking statements are not guarantees of future performance
and are subject to risks, assumptions, and uncertainties that are
difficult to predict. You should not rely upon forward-looking
statements as predictions of future events. We have based these
forward-looking statements largely on our current expectations and
projections about future events and trends that we believe may
affect our financial condition, results of operations, business
strategy, short-term and long-term business operations and
objectives, and financial needs. Although we believe that the
expectations reflected in these forward-looking statements are
reasonable as of the date made, actual results may prove to be
materially different from the results expressed or implied by the
forward-looking statements. These forward-looking statements are
subject to a number of risks, uncertainties, and assumptions,
including, but not limited to: the Company has grown rapidly in
recent years and has limited operating experience at our current
scale of operations; the Company may be unable to manage growth
effectively; increases in costs of diamonds, other gemstones and
precious metals and supply shortages; the Company’s ability to
maintain a low cost of production and distribution; fluctuations in
the pricing and supply of diamonds, other gemstones, and precious
metals, particularly responsibly sourced natural and lab-grown
diamonds and recycled precious metals such as gold, increases in
labor costs for manufacturing such as wage rate increases, as well
as inflation, and energy prices; the Company’s ability to
cost-effectively turn existing customers into repeat customers or
to acquire new customers; risks related to the Company’s expansion
plans in the U.S.; an overall decline in the health of the economy
and other factors impacting consumer spending, such as recessionary
conditions, governmental instability, war or the threat of war, and
natural disasters may affect consumer purchases; the Company has a
history of losses, and may be unable to sustain profitability;
competition in the fine jewelry retail industry; the Company’s
ability to manage its inventory balances and inventory shrinkage; a
decline in sales of Create Your Own rings would negatively affect
the Company’s business, financial condition, and results of
operations; the Company ability to maintain and enhance its brand;
the Company’s marketing efforts to help grow its business may not
be effective; environmental, social, and governance matters may
impact the Company’s business and reputation; risks related to the
Company’s e-commerce and omnichannel business; the Company’s
ability to effectively anticipate and respond to changes in
consumer preferences and shopping patterns; the Company’s results
of operations and operating cash flows could fluctuate on a
quarterly and annual basis, which may make it difficult to predict
its future performance; the Company’s principal asset is its
interest in Brilliant Earth, LLC, and, as a result, the Company
depends on distributions from Brilliant Earth, LLC to pay its taxes
and expenses; risks related to the Company’s obligations under its
Tax Receivable Agreement and its organizational structure; and the
other risks and uncertainties described in the section titled “Risk
Factors” in our Annual Report on Form 10-K for the year ended
December 31, 2022, which filing is available at www.sec.gov. We
qualify all of our forward-looking statements by these cautionary
statements. These forward-looking statements speak only as of the
date of this press release. Except as required by applicable law,
we undertake no obligation to update or revise any forward-looking
statements contained in this press release, whether as a result of
any new information, future events or otherwise.
Contacts:
Investors: Allison
MalkinICRBrilliantEarth@icrinc.com
|
BRILLIANT EARTH GROUP, INC. |
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
(in thousands, except share and per share amounts) |
|
|
|
Three months ended March 31, |
|
|
2023 |
|
|
|
2022 |
|
Net sales |
$ |
97,698 |
|
|
$ |
100,038 |
|
Cost of sales |
|
44,022 |
|
|
|
49,922 |
|
Gross profit |
|
53,676 |
|
|
|
50,116 |
|
Operating expenses: |
|
|
|
Selling, general and administrative |
|
53,766 |
|
|
|
44,816 |
|
(Loss) income from operations |
|
(90 |
) |
|
|
5,300 |
|
Interest expense |
|
(1,206 |
) |
|
|
(1,776 |
) |
Other income (expense), net |
|
843 |
|
|
|
(59 |
) |
(Loss) income before tax |
|
(453 |
) |
|
|
3,465 |
|
Income tax benefit (expense) |
|
13 |
|
|
|
(96 |
) |
Net (loss) income |
|
(440 |
) |
|
|
3,369 |
|
Net (loss) income allocable to
non-controlling interest |
|
(388 |
) |
|
|
3,013 |
|
Net (loss) income allocable to Brilliant Earth Group, Inc. |
$ |
(52 |
) |
|
$ |
356 |
|
|
|
|
|
Earnings per share: |
|
|
|
Basic |
$ |
0.00 |
|
|
|
0.04 |
|
Diluted |
$ |
0.00 |
|
|
|
0.03 |
|
Weighted average shares of
common stock outstanding: |
|
|
|
Basic |
|
11,387,936 |
|
|
|
10,010,798 |
|
Diluted |
|
11,387,936 |
|
|
|
96,526,843 |
|
|
BRILLIANT EARTH GROUP, INC. |
UNAUDITED CONDENSED CONSOLIDATED BALANCE
SHEETS |
(in thousands, except share and per share amounts) |
|
|
|
|
|
March 31, |
|
December 31, |
|
|
2023 |
|
|
|
2022 |
|
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
145,972 |
|
|
$ |
154,649 |
|
Restricted cash |
|
205 |
|
|
|
205 |
|
Inventories, net |
|
37,864 |
|
|
|
39,331 |
|
Prepaid expenses and other current assets |
|
11,541 |
|
|
|
11,764 |
|
Total current assets |
|
195,582 |
|
|
|
205,949 |
|
Property and equipment,
net |
|
20,252 |
|
|
|
16,554 |
|
Deferred tax assets |
|
9,336 |
|
|
|
8,948 |
|
Operating lease right of use
assets |
|
33,707 |
|
|
|
27,812 |
|
Other assets |
|
3,423 |
|
|
|
3,311 |
|
Total assets |
$ |
262,300 |
|
|
$ |
262,574 |
|
|
|
|
|
Liabilities and equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
8,099 |
|
|
$ |
11,032 |
|
Accrued expenses and other current liabilities |
|
30,053 |
|
|
|
37,833 |
|
Current portion of deferred revenue |
|
21,854 |
|
|
|
18,505 |
|
Current portion of operating lease liabilities |
|
5,315 |
|
|
|
3,873 |
|
Current portion of long-term debt |
|
3,250 |
|
|
|
3,250 |
|
Total current liabilities |
|
68,571 |
|
|
|
74,493 |
|
|
|
|
|
Long-term debt, net of debt
issuance costs |
|
58,693 |
|
|
|
59,462 |
|
Operating lease
liabilities |
|
33,750 |
|
|
|
28,537 |
|
Payable pursuant to the Tax
Receivable Agreement |
|
7,834 |
|
|
|
6,893 |
|
Other long-term
liabilities |
|
26 |
|
|
|
48 |
|
Total liabilities |
|
168,874 |
|
|
|
169,433 |
|
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
Equity |
|
|
|
Preferred stock, $0.0001 par value, 10,000,000 shares authorized;
none issued and outstanding at March 31, 2023 and
December 31, 2022, respectively |
|
— |
|
|
|
— |
|
Class A common stock, $0.0001 par value, 1,200,000,000 shares
authorized; 11,571,521 and 11,246,694 shares issued and outstanding
at March 31, 2023 and December 31, 2022,
respectively |
|
1 |
|
|
|
1 |
|
Class B common stock, $0.0001 par value, 150,000,000 shares
authorized; 35,526,085 and 35,482,534 shares issued and outstanding
at March 31, 2023 and December 31, 2022,
respectively |
|
4 |
|
|
|
4 |
|
Class C common stock, $0.0001 par value, 150,000,000 shares
authorized; 49,119,976 and 49,119,976 shares issued and outstanding
at March 31, 2023 and December 31, 2022,
respectively |
|
5 |
|
|
|
5 |
|
Class D common stock, $0.0001 par value, 150,000,000 shares
authorized; none issued and outstanding at March 31, 2023 and
December 31, 2022, respectively |
|
— |
|
|
|
— |
|
Additional paid-in capital |
|
7,615 |
|
|
|
7,256 |
|
Retained earnings |
|
3,611 |
|
|
|
3,663 |
|
Equity attributable to Brilliant Earth Group, Inc. |
|
11,236 |
|
|
|
10,929 |
|
NCI attributable to Brilliant Earth, LLC |
|
82,190 |
|
|
|
82,212 |
|
Total equity |
|
93,426 |
|
|
|
93,141 |
|
Total liabilities and
equity |
$ |
262,300 |
|
|
$ |
262,574 |
|
|
Unaudited GAAP to Non-GAAP Reconciliations |
(in thousands, except share and per share amounts) |
|
ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN |
|
|
|
Three months endedMarch 31, |
|
2023 |
|
2022 |
Net (loss) income, as reported |
$ |
(440 |
) |
|
|
$ |
3,369 |
|
|
Interest expense |
|
1,206 |
|
|
|
|
1,776 |
|
|
Income tax (benefit)
expense |
|
(13 |
) |
|
|
|
96 |
|
|
Depreciation expense |
|
951 |
|
|
|
|
349 |
|
|
Amortization of cloud-based
software implementation costs |
|
124 |
|
|
|
|
— |
|
|
Showroom pre-opening
expense |
|
1,772 |
|
|
|
|
475 |
|
|
Equity-based compensation
expense |
|
2,258 |
|
|
|
|
2,104 |
|
|
Other (income) expense, net
(1) |
|
(843 |
) |
|
|
|
59 |
|
|
Transaction costs and other
expense (2) |
|
532 |
|
|
|
|
146 |
|
|
Adjusted EBITDA |
$ |
5,547 |
|
|
|
$ |
8,374 |
|
|
Net (loss) income margin |
|
(0.5 |
) |
% |
|
|
3.4 |
|
% |
Adjusted EBITDA margin |
|
5.7 |
|
% |
|
|
8.4 |
|
% |
(1) |
Other (income) expense, net consists primarily of interest and
other miscellaneous income, partially offset by expenses such as
losses on exchange rates on consumer payments. |
|
|
(2) |
These expenses are those that we did not incur in the normal course
of business. |
|
ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER
SHARE |
|
|
|
Three months endedMarch 31, |
|
|
2023 |
|
|
|
2022 |
|
Net (loss) income attributable
to Brilliant Earth Group, Inc., as reported (1) |
$ |
(52 |
) |
|
$ |
356 |
|
Net (loss) income impact from
assumed redemption of all LLC Units to common stock (2) |
|
(388 |
) |
|
|
3,013 |
|
Net (loss) income, as
reported |
|
(440 |
) |
|
|
3,369 |
|
Income tax benefit (expense)
associated with conversion (3) |
|
100 |
|
|
|
(753 |
) |
Tax effected net (loss) income
after assumed conversion |
|
(340 |
) |
|
|
2,616 |
|
Equity-based compensation
expense |
|
2,258 |
|
|
|
2,104 |
|
Showroom pre-opening
expense |
|
1,772 |
|
|
|
475 |
|
Other (income) expense, net
(4) |
|
(843 |
) |
|
|
59 |
|
Transaction costs and other
expense (5) |
|
532 |
|
|
|
146 |
|
Tax impact of adjustments |
|
(962 |
) |
|
|
(696 |
) |
Adjusted Net income |
$ |
2,417 |
|
|
$ |
4,704 |
|
Diluted weighted average of
common stock assumed outstanding |
|
11,387,936 |
|
|
|
96,526,843 |
|
Adjustments: |
|
|
|
Vested LLC Units that are exchangeable for common stock (6) |
|
84,617,787 |
|
|
|
— |
|
Unvested LLC Units that are exchangeable for common stock (6) |
|
500,420 |
|
|
|
— |
|
RSUs and stock options |
|
171,154 |
|
|
|
— |
|
Adjusted diluted weighted
average of common stock assumed outstanding |
|
96,677,297 |
|
|
|
96,526,843 |
|
|
|
|
|
Diluted earnings per
share: |
|
|
|
As reported |
$ |
0.00 |
|
|
$ |
0.03 |
|
As adjusted |
$ |
0.03 |
|
|
$ |
0.05 |
|
(1) |
Represents net income allocable to Brilliant Earth Group, Inc. for
the three months ended March 31, 2023 and 2022. |
|
|
(2) |
It is assumed that we will elect to issue common stock upon
redemption of LLC Units rather than cash settle. |
|
|
(3) |
Brilliant Earth Group, Inc. is subject to U.S. Federal income
taxes, in addition to state and local taxes with respect to its
allocable share of any net taxable income of Brilliant Earth, LLC.
Acquisition of LLC units by Brilliant Earth Group, Inc. causes all
of the taxable income currently recognized by the members of
Brilliant Earth, LLC to become taxable to the Company. |
|
|
(4) |
Other (income) expense, net consists primarily of interest and
other miscellaneous income, partially offset by expenses such as
losses on exchange rates on consumer payments. |
|
|
(5) |
These expenses are those that we did not incur in the normal course
of business. |
|
|
(6) |
Assumes the exchange of all outstanding LLC Units for shares of
common stock, resulting in the elimination of the non-controlling
interest and recognition of the net (loss) income attributable to
non-controlling interest. |
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