Brilliant Earth (BRLT) Q4 2025 Earnings Transcript
Second, create great product that is distinctive and ownable and builds affinity for the Brilliant Earth Group, Inc. brand. Have particular focus on expanding beyond our core bridal business into fine jewelry. And 2025 was a breakthrough year in which we grew fine jewelry mix to 17% of bookings with many iconic product releases, including our signature Pacific green-colored lab diamond collection, our Medallions with Meaning, and our Love Decoded collection. Our success in fine jewelry has turned what was a nascent portion of sales just five years ago into a business on a path to $100,000,000 annually. Third, deliver joyful and personalized shopping experiences that delight customers, foster lasting relationships, and set new standards for modern luxury retail.
Last year, we continued to deliver industry-leading digital experiences and opened two new showrooms, reaching 42 in total. And our physical retail strategy continues to evolve with the opening of our first flagship showroom in Beverly Hills earlier this year, which showcases our new approach to experiential retail. And fourth, continue to develop our industry-leading asset-light business model utilizing cutting-edge technology and processes to drive long-term profitable growth. The results we shared today demonstrate the power of our model and this team's ability to deliver. Now let me walk you through some performance highlights of Q4. For the fourth quarter, net sales were $124,400,000, representing 4.1% growth year over year, and the highest quarter of net sales in our history.
ASPs in Q4 were up year over year across the assortment. Much of the growth in ASP was driven by changes in mix to higher-priced items within each assortment, as we are seeing particular strength with the higher-end consumer combined with strong total and repeat order growth. For the full year, net sales reached $437,500,000, up 3.6% year over year. We delivered a fantastic holiday performance, including another record-breaking Cyber Weekend. Throughout the holiday selling period, our seamless omnichannel model drove strong traffic and conversion, both online and in our showrooms.
From our Joyful Delight in the Details holiday campaign to showroom executions, including new experiences like trunk shows and deeper inventory investments, we saw strong performance during the quarter, especially in the ten days leading up to Christmas, where we drove 15% year-over-year bookings growth as customers sought Brilliant Earth Group, Inc. as their go-to gifting destination. Our gross margin was 55.9% in Q4 and 57.5% for the full year, approximately in line with what we had communicated during our Q3 earnings call, highlighting our ability to drive strong margins despite significant metal and tariff headwinds. You all know that the challenges presented by record metal prices and fluctuating tariff conditions are unprecedented.
Our ability to manage through these conditions has been a testament to the strength of our business model and our team. This is an industry-wide impact, but our ability to optimize the performance drivers within our control has allowed us to navigate these challenges and still deliver profitability within our expectations. Jeffrey will talk more about the impacts, but as we are now into the new year, you can expect that we will continue to focus on optimizing our business in the ways that we can control to mitigate as much of the external cost pressures as possible.
Our strong gross margin, another quarter and year of year-over-year marketing leverage, and overall operating expense discipline enabled us to drive a Q4 adjusted EBITDA of $4,200,000, or a 3.3% margin, and full-year adjusted EBITDA of $12,000,000, or a 2.7% margin, illustrating the agility of our business model and our continued discipline in cost management. Turning to some additional highlights for the quarter. Fine jewelry was a clear standout. In Q4, for the first time, we had multiple days where we hit $1,000,000 in fine jewelry bookings.
We are seeing strong demand for both self-purchase and gifting, with almost half of new customers discovering Brilliant Earth Group, Inc. through fine jewelry in Q4, resulting in another record quarter in fine jewelry. Fine jewelry bookings grew 34% year over year in Q4, with strong unit and ASP growth, reaching 23% of total bookings mix for the quarter and 17% for the full year. As you know, fine jewelry has been one of our top strategic priorities for several years as we diversify beyond our bridal heritage, and we have driven extraordinary results. Our full-year 2025 fine jewelry bookings are more than three times bigger than they were just four years ago at the time of our IPO.
Our iconic and signature fine jewelry collections, like Jane Goodall, Soul, and Love Decoded, and collaborations like Ring Pop, continued to significantly outpace overall fine jewelry bookings growth as customers are increasingly drawn to Brilliant Earth Group, Inc.'s one-of-a-kind styles through campaigns that capture consumers' imagination. We have also had great success driving growth in lab-grown diamond fine jewelry. As you know, we are early leaders in the lab diamond space. We have immense opportunities as lab diamonds continue to increase in popularity amongst consumers.
In Q4, bookings from fine jewelry made with lab diamonds grew 61% year over year, and we continue to see significant opportunities for lab diamonds to increase the addressable market of consumers looking to buy diamond jewelry for everyday wear. In wedding and anniversary bands, we set another record, delivering our largest fourth quarter of bookings ever with double-digit year-over-year growth. And we continue to see success across both our men's and women's collections, with outperformance in giftable and higher price point diamond rings in Q4. And in engagement rings, we continue to drive booking of approximately 1% year over year in the second half of the year.
Our signature collections, the exclusive designs we are known for, continue to drive strong results, growing double digits year over year in Q4. Turning to our seamless omnichannel experience, we continue to innovate across our digital and in-person customer experience. In digital, we made many enhancements from online imagery and merchandising to overall up-leveling of our online shopping experience. In showrooms, we opened two new locations in 2025, one in Southlake, Texas, and another in Alpharetta, Georgia, ending the year with 42. And as our showroom format strategy continues to evolve to more ground-floor and mall locations, we have had increasing success with retail customers who walk into the showroom without a prior appointment.
In fact, orders from these retail customers grew 61% year over year in Q4. In January, we opened our first flagship showroom in Beverly Hills. This showroom is a new and evolved concept that celebrates the artistry, craftsmanship, and quality that we are known for, while immersing customers in the fullest physical expression of our brand to date. In addition to elevating our hallmark appointment experience, we have introduced several new features, including an eternity bar featuring the widest breadth of our engagement and wedding assortment and our unique design-your-own experience, a fine jewelry personalization station, a dedicated VIP showroom, and an exclusive new date night appointment offering that is an exceptional personalized experience for couples.
The date night appointment is a simple idea that takes what can be a stressful process for couples and makes it genuinely fun and celebratory. The Beverly Hills flagship is both an evolution and elevation of our retail strategy. In fact, Forbes called our concept a blueprint for the future of luxury jewelry retail, and we agree. Beyond the opening of our flagship, we expect to open another two showrooms in 2026. For Q1 to date, I am pleased to report that we have seen a continuation of strong performance with strong year-over-year bookings growth, year-over-year new and repeat order growth, as well as an encouraging Valentine's Day start to the year.
ASPs are also up year over year across engagement rings, wedding and anniversary bands, and fine jewelry, consistent with what we observed in Q4, demonstrating strength among our higher-income consumers. We also recognize that the industry is facing historically high metal costs. We believe we are well positioned to navigate this environment with our agile and sophisticated merchandising, pricing, and sourcing strategies. Before I hand the call over, I also want to share that today we released our 2025 Mission Report, which marks our two decades of impact and charts our progress toward our four mission pillars: transparency, sustainability, compassion, and inclusion.
I invite you to read the report, in which we also introduced the next generation of initiatives designed to expand our impact even further. And finally, I want to thank our incredible team for their commitment and tireless efforts this past year. Their passion and execution are the reason we can stand here today, twenty years in, and say with confidence that the best is still ahead for Brilliant Earth Group, Inc. I will now turn the call over to Jeffrey.
Jeffrey Kuo: Thanks, Beth, and good morning, everyone. As Beth mentioned, we are pleased to report fourth quarter and full-year results where we continue to successfully drive our strategic initiatives, deliver top-line growth, and sustain profitability and positive free cash flow despite a challenging cost environment. Let me take you through the details. Q4 net sales were $124,400,000, up 4.1% year over year, which was our biggest quarter ever and near the midpoint of our stated guidance range. Full-year 2025 net sales were $437,500,000, up 3.6% year over year. Total orders grew 6.5% year over year in Q4 and 13% for the full year.
Repeat orders grew 15% year over year in Q4 and 13% for the full year, demonstrating the effectiveness of our customer acquisition and retention efforts, and the continued resonance of our brand and products with consumers. Average order value, or AOV, was $2,001 in Q4 and $2,082 for the full year. This represents a decline of 2.3% year over year in Q4 and 8.2% for the full year. Our Q4 AOV reflects the continued success we have had in driving strong fine jewelry performance, which carries a comparatively lower price point, along with year-over-year growth in ASPs across the assortment, as we see strong success driving sales of higher price point items.
Q4 gross margin was 55.9%, and full-year gross margin was 57.5%. This represents a 370 basis point decline year over year in Q4 and a 280 basis point decline for the full year. To put the Q4 margin environment in context, gold prices at the end of Q4 were up approximately 67% year over year, while platinum was up approximately 144% year over year, both at or near what were then all-time highs, and we continue to navigate a challenging tariff environment.
We are extraordinarily proud of our ability to deliver strong gross margins in this environment, which speaks to the strength of our premium brand positioning, our data-driven price optimization engine, our globally diversified supply chain, and the agility of our team and business model to adapt quickly to changing market conditions. We delivered Q4 adjusted EBITDA of $4,200,000, or a 3.3% adjusted EBITDA margin. During that time, the gold spot price increased approximately $400 an ounce and platinum over $675 an ounce between the time of our last earnings call and the end of the year, and we were still able to deliver adjusted EBITDA above the midpoint of our guidance range and exceeding expectations.
Full-year 2025 adjusted EBITDA was $12,000,000, or a 2.7% adjusted EBITDA margin. This highlights the sustainability of our business model, driven by our strong gross margins, continued marketing leverage, and overall operating expense discipline. Q4 operating expense was 55.9% of net sales compared to 57.6% of net sales in Q4 2024, representing approximately 170 basis points of leverage year over year. Full-year 2025 operating expense was 58.7% of net sales compared to 59.5% in 2024, representing approximately 80 basis points of leverage year over year. Our disciplined management of expenses while also driving growth and investing in the business is demonstrated in this year-over-year leverage. Q4 adjusted operating expense was 52.7% of net sales compared to 53.9% in Q4 2024.
Full-year 2025 adjusted operating expense was 54.9% of net sales compared to 55.4% in 2024. Adjusted operating expense does not include items such as equity-based compensation, depreciation and amortization, showroom pre-opening expenses, and other nonrecurring expenses. Q4 marketing expense was 24.6% of net sales compared to 26.1% in Q4 2024. This represents approximately 150 basis points of year-over-year leverage. Full-year marketing expense was 24.2% of net sales compared to 25.7% in 2024, also approximately 150 basis points of marketing leverage.
This is our second year of driving year-over-year leverage in marketing spend, and these results speak to our dynamic management of marketing spend, including use of AI and machine learning to drive efficiencies, while still making strategic investments to grow the brand. Employee costs as a percentage of net sales were higher in Q4 by approximately 110 basis points as adjusted year over year. For the full year, employee costs were approximately 90 basis points higher as adjusted. This includes growth in showroom employees, including from newly opened showrooms; we continue to strategically invest in our showroom expansion.
Other G&A as a percentage of net sales declined year over year by approximately 90 basis points as adjusted in Q4, as we continue to drive operating expense efficiencies and amortize expenses over a larger net sales base. For the full year, other G&A as a percentage of net sales was higher by approximately 10 basis points as adjusted, as we balanced prudent investment with disciplined cost management. Year-over-year inventory grew approximately 39%, principally as a result of strategic procurement opportunities to purchase diamond and jewelry inventory at advantageous prices during the year in light of tariffs.
Even with this increase, our 4x inventory turns as of year end continue to be significantly higher than the industry average of one to two times. We maintain conviction that the agility of our data-driven, capital-efficient, and inventory-light operating model continues to be a compelling competitive advantage. We ended the fourth quarter with approximately $79,100,000 in cash. As you know, during Q3, we paid off our term loan, leaving us with no debt on the balance sheet, and we completed the one-time dividend and distribution of approximately $25,000,000. For the full year, we generated approximately $5,800,000 in free cash flow, demonstrating our continued ability to generate cash while making strategic investments and driving growth. Turning to our outlook for 2026.
As Beth mentioned, we have carried our momentum into the new year. For our annual guidance, we expect net sales to grow in the mid-single-digit percent range year over year. We expect continued headwinds in gross margin, with metal prices near all-time highs, and expect gross margin to be in the mid-50s percent range for the year, assuming that metal prices remain at similar levels to where they are today. We expect to continue driving year-over-year leverage in marketing expense as a percentage of net sales for the year, continuing the success we have had in the past two years, driving increasing efficiency while delivering strong top-line results.
We will continue to make selective medium- and longer-term investments in 2026, including in employee costs and other G&A, such as investments in technology and in our showrooms. We expect to deliver positive adjusted EBITDA for the year, but slightly lower than last year's adjusted EBITDA dollars given the challenging metal cost environment. We also expect that most of this year's adjusted EBITDA will come from Q4. For Q1, we expect net sales to grow in the mid-single-digit percent range year over year.
We expect adjusted EBITDA margin to be in the negative mid-single-digit range as a percentage of sales, driven in significant part by both the speed and magnitude of recent gold and platinum price increases, with both metals remaining near all-time highs. I also want to address our previously stated medium-term outlook. As many of you know, we laid out a set of medium-term targets, and we have been on our way to delivering on those medium-term targets. You can see this in our improving net sales growth trajectory and our continued leverage of marketing expense as a percentage of net sales, where we have now delivered two consecutive years of full-year leverage.
However, the precious metal environment we are operating in today is unlike anything our industry has experienced. Gold and platinum prices have reached levels that were impossible to anticipate when we set those targets, and this has had a meaningful impact on gross margin. Because of this level of uncertainty in metal prices and the magnitude of their impact, we do not believe it is appropriate to speak to targets beyond the current year at this time. We remain confident in the underlying health and trajectory of our business, and we will continue to share our perspective on the path forward as visibility improves.
In closing, our data-driven approach, including agile price optimization, disciplined expense management, and our asset-light business model, positions us well to outperform the industry while delivering profitable growth. With that, I will turn the call over to the operator for questions.
Operator: Thank you. We will now open for questions. To ask a question, please press 11 and wait for your name to be announced. To withdraw your question, please press 11 again. The first question comes from Oliver Chen with TD Securities. Your line is open.
Julia Shlansky: This is Julia Shlansky on for Oliver Chen. I am curious to hear about your expectations for AOV growth in the context of guidance for the next year, and expectations for gold and platinum hedging, and how much of your current inventory that you have secured throughout the year is effectively hedged or price loaded. Thank you.
Beth Gerstein: Okay, great. I can start on AOV. In Q4, it was slightly down, which I think is actually the smallest decrease that we have seen for a bit of a while. Overall, what is driving AOV is we are seeing ASPs increase across the assortment. Part of that is due to the price positioning that we have, the strength of our brand, and the strong reception we are seeing for our iconic jewelry collections, as well as a great reception from our higher-income customers. So ASPs are up across the assortment. We are also seeing really strong performance in fine jewelry, and as fine jewelry is a lower category, that is what is driving the overall effect.
That is what we are seeing from a high level. Jeffrey, I do not know if you want to comment more on AOV, and then maybe you can lean into the gold and platinum question.
Jeffrey Kuo: No, I think you covered that well, Beth. From the perspective of how we are managing metal costs, we have a variety of different tools that we use. Hedging is one of those strategies. As you know, we also are able to price optimize and really think dynamically about pricing, think about things like design and product engineering and ways to manage costs while maintaining very high quality standards, as well as vendor optimization and negotiations. We have a lot of different tools at our disposal, and you can see that in the results of how we navigated Q4.
We were able to navigate these very significant changes in metal prices and still deliver an adjusted EBITDA that was within our expected range.
Colin Bourland: Great. Thank you both.
Operator: Thank you. Our next question will come from Ashley Owens with KeyBanc Capital Markets. Your line is open.
Ashley Owens: Hi, great. Good morning, and thanks for taking our questions. As we think about 2026, how would you frame the key bookings growth drivers across the business, whether that is further bridal recovery or continued fine expansion? And how should we think about share gains relative to industry growth over the next year?
Beth Gerstein: We are really encouraged by the growth that we have been seeing and the continuation of some of the strong growth that we saw in Q4. The drivers that I mentioned in the remarks—with fine jewelry being very strong, with our showroom strategy, and with the brand awareness—continue to be key growth drivers in 2026. It is really a continuation of all of the initiatives that we have been talking about, and we are very encouraged by the brand resonance that we are seeing and by some of the breakthrough moments that we are partnering with and driving overall increased awareness. On the fine jewelry side, we are going to continue to see this be a growth driver.
There is a lot of opportunity. It is a very large market, and we are also continuing to outperform the industry as it relates to fine jewelry. We are very encouraged by the growth signals that we are seeing there and are going to continue to lean in and continue to be that go-to destination for jewelry. One of the stats that I mentioned—that half of our new customers discover us now through fine jewelry—just shows you the size of the opportunity and how it is gaining momentum.
Ashley Owens: Within the $100,000,000 longer-term opportunity you called out, do you expect the business to become less dependent on some of the engagement ring cycles and volatility we have seen and driven more by repeat purchases and gifting occasions? And then quickly on gross margin and the mid-50s outlook for the year given the metal environment, as we think about modeling for 2026, should we assume that persists through the year, or is there potential for sequential improvement as pricing, sourcing adjustments, or fine jewelry mix growth increase and those things flow through? Thank you.
Beth Gerstein: Sure. Yes, in terms of how we are thinking about the business, fine jewelry is a continuation of the diversification away from our bridal heritage. We are continuing to be bridal leaders and introduce new collections, and we continue to see that as an important part of our overall growth, but fine jewelry becomes more and more of a driver. We are continuing to see that diversification. Even wedding and anniversary bands, having double-digit growth, show an evolution of the business, and if you look at a lot of the independents out there where the mix is leaning more toward fine jewelry, that is the path that we are on as well.
Jeffrey, do you want to talk about gross margin?
Jeffrey Kuo: In terms of gross margin outlook for the year, as I mentioned, we are looking at gross margin to be in the mid-50s percent for the year given the metal environment. As we go through the year, we do have more and more ways to mitigate some of the headwinds, including things like pricing and the operational actions that I mentioned earlier. We have more tools over time.
We do not have a more specific shaping on a quarter-by-quarter basis of how we expect gross margin to look, but we think that our agility overall that we have demonstrated in recent quarters continues to serve us well, and we are better positioned than the industry at large to be able to navigate a variety of different conditions.
Ashley Owens: Super helpful. I will pass it along. Thank you.
Operator: Thank you. As a reminder, to ask a question, please press 11. The next question comes from Anna Glaessgen with B. Riley Securities. Your line is open.
Anna Glaessgen: Hi. Good morning. Thanks for taking my questions. I would like to start on the embedded pricing within the guidance. I think on the Q3 call we talked about Q4 being 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 Q1 there is better opportunity to offset the headwinds that you have been noting in gross margin?
Beth Gerstein: Yes, I can start there. We are seeing an improved opportunity in terms of continuing to optimize and take selective price increases. Jeffrey mentioned the speed and the volatility in terms of metal prices overall, which is especially notable in Q1. One of the advantages that we have is a very sophisticated pricing algorithm. We are very much a test-and-learn and data-driven company, and we also have a premium brand positioning with proprietary designs. All of that enables us to have more pricing power. Q1 certainly gives us a better opportunity than Q4, where we tend to be a little bit more selective.
This is something that we have a lot of experience navigating throughout our history, and we are going to continue to use the tools available to us, but we do see opportunity to be selective in terms of increasing our pricing.
Anna Glaessgen: Great. Turning to OpEx, 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?
Jeffrey Kuo: Yes, I would be glad to. I would like to frame how we are thinking about overall guidance for the year. You can see that we have seen strong performance on the top-line side, and we are guiding to a higher growth rate overall for the year than last year. We have been very successful in driving marketing efficiencies and expect to be able to continue to drive year-over-year marketing efficiencies this year. The big headwind that is incorporated is on the metal pricing side and the impact on gross margin. That is something that is facing the entire industry.
You can see the very large and very fast shifts in terms of metal price recently, and that is really the main factor. Some of the things like marketing leverage help us to offset that, and we are going to be disciplined in terms of other OpEx areas such as employee and other G&A costs to balance, as we always have, making medium- and longer-term investments with driving profitability. Our approach to OpEx is that we are going to be disciplined and look to continue to drive efficiency in areas like marketing. What you are seeing in terms of the year-over-year change in profitability is really coming from the metal cost that we are seeing in the environment overall.
Anna Glaessgen: Got it. One more follow-up, if I may. I believe, Jeffrey, you said in the prepared remarks that most of the adjusted EBITDA in 2026 should be from Q4. That seems to be roughly in line with historical seasonality. I was just wondering if you are implying that we could potentially see a negative EBITDA in Q2 or Q3?
Jeffrey Kuo: You are right that we do expect most of the profitability in Q4, and that factors in a number of different things. Seasonally, Q4 is our biggest quarter, and you are going to see that come into play. We may have discussed in prior calls how a lot of our operating cost structure is not highly seasonal, so you have a relatively more stable base of things like employee costs and other G&A over the course of the year. In Q4, you have the opportunity to amortize that over a much larger revenue base, and that is factored into our guidance.
As you go over the course of the year, we think that we have more and more opportunities to capture efficiencies and be able to mitigate some of the metal cost headwinds as we go through the year.
Anna Glaessgen: Great. Thanks.
Operator: Thank you. I am showing no further questions in the queue at this time. I will now turn the call back over to Beth for closing remarks.
Beth Gerstein: Thank you, everyone, for joining us, and we look forward to talking to you in our next quarterly call.
Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
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