Results

Brilliant Earth Group Inc.

03/17/2026 | Press release | Distributed by Public on 03/17/2026 14:27

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the information presented in our audited consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. The following discussion and analysis reflects the historical results of operations and financial position of Brilliant Earth Group, Inc. and its consolidated subsidiary, Brilliant Earth, LLC. In addition to historical information, the following discussion contains forward-looking statements, such as statements regarding our expectation for future performance, liquidity and capital resources, that involve risks, uncertainties and assumptions that could cause actual results to differ materially from our expectations. Our actual results may differ materially from those contained in or implied by any forward-looking statements. Factors that could cause such differences include those identified below and those described in "Cautionary Note Regarding Forward-Looking Statements," and "Risk Factors" in this Annual Report on Form 10-K. We assume no obligation to update any of these forward-looking statements. For a comparison of our results of Operations for the fiscal years ended December 31, 2024 and 2023 see Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations for our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the SEC on March 13, 2025.
Company Overview
Brilliant Earth is an innovative, digitally native omnichannel jewelry company, and a global leader in ethically sourced fine jewelry. We offer exclusive designs with superior craftsmanship and supply chain transparency, delivered to customers through a highly personalized omnichannel experience.
Our extensive collection of premium-quality diamond engagement and wedding rings, gemstone rings, and fine jewelry is conceptualized by our leading in-house design studio and then brought to life by expert jewelers. From our award-winning jewelry designs to our responsibly sourced materials, at Brilliant Earth we aspire to exceptional standards in everything we do.
Our mission is to create a more transparent, sustainable, compassionate, and inclusive jewelry industry, and we are proud to offer customers distinctive and thoughtfully designed products that they can truly feel good about wearing.
We were founded in 2005 as an e-commerce company with an ambitious mission and a single showroom in San Francisco. We have rapidly scaled our business while remaining focused on our mission and elevating the omnichannel customer experience. Through our intuitive digital commerce platform and personalized individual appointments in our showrooms, we cater to the shopping preferences of tech-savvy next-generation consumers. We create an educational, joyful, and approachable experience that is unique in the jewelry industry. Today, Brilliant Earth has sold to consumers inover 50 countries.
Throughout our history, we have invested in technology to create a seamless customer experience, inform our data-driven decision-making, improve efficiencies, and advance our mission. Our technology enables dynamic product visualization, augmented reality try-on, blockchain-verified transparency, and rapid fulfillment of our flagship Design Your Own product, a custom design process. We leverage data capabilities to improve our marketing and operational efficiencies, personalize the customer experience, curate showroom inventory and merchandising, inform real estate decisions, and develop new product designs that reflect consumer preferences. We believe the Brilliant Earth digital experience drives higher satisfaction, engagement, and conversion both online and in-showroom.
We have achieved strong financial performance and rapid growth since our founding, and believe we are in the early stages of realizing our potential in a significant market opportunity. We have been growing our fine jewelry sales and believe this represents an opportunity for future growth.
Below is a summary of our performance for the year ended December 31, 2025:
•Net sales of$437.5 million compared to $422.2 million for the year ended December 31, 2024;
•Net loss of $6.4 million compared to net income of $4.0 million for the year ended December 31, 2024;
•Net loss margin of 1.5% compared to net income margin of 0.9% for the year ended December 31, 2024;
•Adjusted EBITDA of $12.0 millioncompared to $21.1 million for the year ended December 31, 2024; and
•Adjusted EBITDA margin of 2.7% compared to 5.0% for the year ended December 31, 2024.
See the section below titled "Non-GAAP Financial Measures" for information regarding Adjusted EBITDA and Adjusted EBITDA margin, including reconciliations to the most directly comparable financial measures prepared in accordance with GAAP.
We operate in one operating and reporting segment, the retail sale of diamonds, gemstones and jewelry.
Key Factors Affecting Our Performance
Our Ability to Increase Brand Awareness
Increasing brand awareness and growing favorable brand equity have been and remain key to our growth. We have a significant opportunity to continue to grow our brand awareness, broaden our customer reach, and maximize lifetime value through brand and performance marketing. We have made and expect to continue to make significant investments to strengthen the Brilliant Earth brand through our dynamic marketing strategy, which includes brand marketing campaigns across email, digital, social media, earned media, and media placements with key influencers. In order to compete effectively and increase our share of the jewelry market, we must maintain our strong customer experience, produce compelling products, and continue our mission of creating a more transparent, sustainable, compassionate and inclusive jewelry industry. Our performance will also depend on our ability to increase the number of consumers aware of Brilliant Earth and our product assortment. We believe our brand strength will enable us to continue to expand across categories and channels, to deepen relationships with consumers, and to expand our presence in the U.S. and international markets.
Cost-Effective Acquisition of New Customers and Retention of Existing Customers.
We have historically had attractive customer acquisition economics, including substantial first order profitability. To continue to grow our business, we must continue to acquire new customers and retain existing customers in a cost-effective manner. The success of our customer acquisition strategy depends on a number of factors, including the level and pattern of consumer spending on the products that we offer, and our ability to cost-effectively drive traffic to our website and showrooms and to convert these visitors to customers. With our strong brand resonance and passionate customer base, we generate significant earned and organic traffic, impressions, and media placements. We continually evolve our dynamic marketing strategies, optimizing our messaging, creative assets, and spending across channels. We also believe our expanded fine jewelry assortment and strategic customer acquisition will continue to drive fine jewelry orders from new customers and repeat orders from existing customers.
Our Ability to Continue Successfully Growing and Managing our Omnichannel Presence
Our ability to successfully grow and manage our omnichannel presence in new markets and locations is an important factor to our success. Historically, we have been successful in new geographic markets we have entered, and we have continued to expand our premium showroom footprint nationwide. We intend to continue leveraging our marketing strategy and growing brand awareness to drive increased qualified consumer traffic to and sales from our website and premium showrooms.
We believe growing and managing our showrooms will drive accelerated growth by increasing our average order value ("AOV") compared to e-commerce orders, improving conversion in the showrooms' metro regions compared to pre-opening conversion, and raising our brand awareness. We intend to strategically open showrooms in the
future, and we believe we can achieve broad national showroom coverage with far fewer locations than many traditional retailers. We rely on this highly efficient showroom model to complement our digital strategy and to drive future growth and profitability.
Our Ability to Successfully Introduce New Products
Product expansion allows us significant opportunity to drive new and repeat purchases by expanding purchase occasions beyond engagement and bridal. We intend to leverage our in-house design capabilities and nimble data-driven product development to expand product assortment for special occasions and self-purchase. In addition, we will have more opportunity to enhance and leverage our CRM and data-segmentation capabilities to increase repeat purchases and lifetime value. We have consistently invested in technology to create a seamless customer experience, including dynamic visualization, augmented reality try-on, and automated, rapid fulfillment, and we intend to continue investing in technology to enhance the digital and showroom experience and help drive conversion. Expanding partnerships and brand collaborations will also expand our reach, broaden our existing assortment, and reinforce our brand ethos.
International Expansion
We are in the early stages of selling globally, and a larger geographic footprint will help drive future growth. Our proof-points from localizing our website for Canada, Australia, and the United Kingdom, and our sales to customers from over 50 countries, provide encouraging signs for future global expansion. We see strong potential in launching e-commerce in new overseas markets and new showrooms in countries where we have already established a localized digital presence. We plan to drive brand awareness through localized marketing channels and expect our data-driven technology platform to continue providing insights for product recommendations and inventory management.
Operational and Marketing Efficiency
We have a unique, asset-light operating model with attractive working capital dynamics, capital-efficient showrooms, and a vast virtual inventory of premium natural and lab-grown diamonds that allows us to offer a broad selection of diamonds while keeping our balance sheet inventory low. This has driven attractive inventory turns and allows us to operate with negative working capital, which we define as our current assets less non-restricted cash minus our current liabilities. Our showroom strategy minimizes the inefficiencies of traditional, retail-first jewelers. Our showrooms are primarily appointment-driven with large catchment regions, so we are less reliant on expensive high foot traffic retail locations. Our showroom locations and formats vary from interior, upper floor locations to more recently higher traffic pedestrian and retail mall locations. In all locations, we also curate showroom inventory for scheduled visits and require limited inventory in each location. Our tech-enabled jewelry consultants can support online customers when not in appointment, increasing workforce utilization. As we continue to scale our business, our future success is dependent on maintaining this capital efficient operating model and driving continued operational improvement as we expand to new locations.
Macroeconomic Trends
We believe we are well positioned at the intersection of key macro-level trends impacting our industry. Consumers are increasingly seeking brands that reflect their values and provide supply chain transparency. This has contributed to our strong brand affinity and loyalty, and further differentiates us from our competitors. Consumers are increasingly favoring seamless omnichannel shopping experiences, and we believe our model is well-suited to satisfy these consumer preferences.
In addition, many of the materials that go into our products are sourced and manufactured internationally. Tariffs on imports into the U.S. have had an impact on our materials costs and have the potential to further impact our business depending on the outcome of changes in U.S. trade policy and any corresponding actions by other countries in which companies with which we do business are located. Similarly, increases in prices of gold, platinum and other precious
metals have also had an impact on our materials costs and have the potential to further impact our business. Any deterioration in macroeconomic conditions resulting from uncertainties and effects from tariffs, increases in the costs of materials, especially of gold, platinum and other precious metals, increased congestion and/or new import/export restrictions at ports that we rely on for our business, or delays or disruptions in the delivery of materials could adversely impact our business, financial condition, and operating results.
The U.S. federal government has in the past experienced, and may in the future experience, shutdowns, funding gaps, or other fiscal disruptions. Such disruptions may result in broader economic uncertainty that could affect demand for our products, disrupt supply chains, or result in reduced discretionary spending by our customers.
The current inflationary environment and changes in macro-level consumer spending trends, due to volatile macro-economic conditions, have had a negative impact on sales and could further negatively impact our operating results.
Seasonality
A larger share of our annual revenues and profits traditionally occur in the fourth quarter because it includes the November and December holiday sales period.
Components of Results of Operations
Net Sales
Our sales are recorded net of estimated sales returns and allowances and sales tax collected from customers. Our net sales primarily consist of revenue from diamond, jewelry, and gemstone retail sales through our website and dedicated jewelry consultants via chat, phone, email, virtual appointment, or in our showrooms. Our net sales are derived primarily in the U.S., but we also sell products to customers outside the U.S. Our website platform allows us to sell to a worldwide customer base, even in markets where we do not have a physical presence. Payment for all of our sales occurs prior to fulfillment. Customers pick up the items in our showrooms, or we deliver purchases to customers, with delivery typically within one to two business days after shipment. We recognize revenue upon pick-up or delivery if an order is shipped. We also offer third-party financing options.
We allow for certain returns within 30 days of when an order is available for shipment or pickup. We also typically provide one complimentary resizing within 60 days of when a purchase is available for shipment or pickup, regardless of sizing range, and within 1 year within sizing range, a lifetime manufacturing warranty (except center diamonds/gemstones), and a lifetime diamond upgrade program on all diamonds that meet certain criteria. We offer an extended protection plan through a third party that has terms ranging from two years to lifetime that vary based on the item purchased.
Revenue is deferred on transactions where payment has been received from the customer, but control has not yet transferred.
Cost of Sales
Cost of sales consists primarily of merchandise costs for the purchase of diamonds and gemstones from our global base of diamond and gemstone suppliers, and the cost of jewelry production from our third-party jewelry manufacturing suppliers. Cost of sales includes merchandise costs, inbound freight charges, costs of shipping orders to customers, certain fulfillment and inventory-related compensation costs, repair costs and related labor expenses. Our cost of sales includes reserves for disposal of obsolete, slow-moving or defective items, and shrinkage, which we estimate and record on a periodic basis.
Operating Expenses
Operating expenses consist primarily ofmarketing and advertising expenses through various online platforms including digital, website, social media, search engine optimization, paid search and product advertisements, influencers and in showroom branding. Operating expenses also consist of general and administrative expenses related to employee costs such as payroll and related benefit costs, including equity-based compensation expense. General and administrative expenses also consist of information technology and other software related costs, rent and lease related expenses, depreciation and amortization expense, merchant processing fees, as well as professional fees, other general corporate expenses and charitable donations in connection with funding the Brilliant Earth Foundation, a donor advised fund, to support our charitable giving efforts.
Interest Expense
Interest expense primarily consists of interest incurred under our SVB Credit Agreement.
Other Income, Net
Other income, net consists primarily of interest income earned on certain cash balances and other miscellaneous income, partially offset by expenses such as losses on exchange rates on consumer payments.
Income Tax Expense
Income tax expense represents the federal and state income or franchise taxes assessed on Brilliant Earth Group, Inc's share of taxable income for the period.
Results of Operations
The results of operations data in the following tables for the periods presented have been derived from the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Comparison of Years Ended December 31, 2025 and 2024
The following table sets forth our statements of operations for the years ended December 31, 2025 and 2024, including amounts and percentages of net sales for each year and the year-to-year change in dollars and percent (dollars in thousands):
Year ended December 31,
2025
2024
Year over year change
Amount
Percent
Amount
Percent
Amount
Percent
Consolidated statements of operations data:
Net sales
$
437,483
100.0
%
$
422,161
100.0
%
$
15,322
3.6
%
Cost of sales
185,979
42.5
%
167,759
39.7
%
18,220
10.9
%
Gross profit
251,504
57.5
%
254,402
60.3
%
(2,898)
(1.1)
%
Operating expenses:
Marketing and advertising
105,965
24.2
%
108,339
25.7
%
(2,374)
(2.2)
%
General and administrative
150,915
34.5
%
142,713
33.8
%
8,202
5.7
%
Total operating expenses
256,880
58.7
%
251,052
59.5
%
5,828
2.3
%
(Loss) income from operations
(5,376)
(1.2)
%
3,350
0.8
%
(8,726)
(260.5)
%
Interest expense
(2,282)
(0.5)
%
(5,031)
(1.2)
%
2,749
54.6
%
Other income, net
3,668
0.8
%
5,835
1.4
%
(2,167)
(37.1)
%
Gain on TRA liability adjustment
7,804
1.8
%
-
-
%
7,804
100.0
%
Loss on extinguishment of debt
(573)
(0.1)
%
-
0.0
%
(573)
(100.0)
%
Income before income tax expense
3,241
0.7
%
4,154
1.0
%
(913)
(22.0)
%
Income tax expense
(9,641)
(2.2)
%
(160)
-
%
(9,481)
(5925.6)
%
Net (loss) income
$
(6,400)
(1.5)
%
$
3,994
0.9
%
$
(10,394)
(260.2)
%
Net (loss) income allocable to non-controlling interest
(2,765)
(0.6)
%
3,453
0.8
%
(6,218)
(180.1)
%
Net (loss) income allocable to Brilliant Earth Group, Inc.
$
(3,635)
(0.8)
%
$
541
0.1
%
$
(4,176)
(771.9)
%
Net Sales
Net sales for the year ended December 31, 2025 increasedby $15.3 million, or 3.6%, compared to the year ended December 31, 2024. The increase in net sales was due to an increase of 13.0% in order volumes, partially offset by a decrease of 8.2% in AOV.
The 13.0% increase in order volumes was due to strong performance in lower price point products, including fine jewelry, continued effectiveness of our customer acquisition and retention activities and the opening of new showrooms.
The decrease in AOV was driven by a higher mix of lower price point products, including fine jewelry, and comparatively stronger performance of engagement rings priced below $5,000.
Gross Profit
Gross profit for the year ended December 31, 2025 decreasedby $2.9 million, or 1.1%, compared to the year ended December 31, 2024. Gross margin, expressed as a percentage and calculated as gross profit divided by net sales, decreased by 280 basis points for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily driven by higher gold and platinum costs. This decrease was partially offset by continued optimization of our pricing engine, procurement efficiencies, and other efforts to manage our gross margins to target levels.
Operating Expenses
Operating expenses for the year ended December 31, 2025 increasedby $5.8 million, or 2.3%, compared to the year ended December 31, 2024. Operating expenses as a percentage of net sales decreased by 80 basis points for the year ended December 31, 2025 compared to the year ended December 31, 2024. The increase in operating expenses was primarily driven by an increase in employment expenses of $5.4 million and an increase in other general and administrative expenses of $2.8 million. These increases were partially offset by a decrease in marketing expenses of $2.4 million compared to the year ended December 31, 2024.
The increasein employment expenses was primarily driven by an increase in salaries and wages and other benefits primarily due to the addition of staff to support our growth. The increase in other general and administrative expenses was a result of increases in rent and lease-related expenses, professional fees, information technology and other software-related costs, and depreciation expense. These increases were partially offset by decreases in product development costs and pre-opening expenses from new showrooms compared to the year ended December 31, 2024. The decrease in marketing expenses from the prior year was a result of our continued focus on improving the effectiveness and efficiency of our marketing spend.
Interest Expense
Interest expense for the year ended December 31, 2025 decreasedby $2.7 million, or 54.6%, compared to the year ended December 31, 2024, primarily due to the prepayment of all principal amounts outstanding of $34.8 million under the SVB Term Loan in August 2025. As a result of the prepayment, the Company recognized a loss on debt extinguishment of $0.6 million associated with the write-off of unamortized debt issuance costs.
Other Income, Net
Other income, net for the year ended December 31, 2025decreased by $2.2 million, or 37.1%, compared to the year ended December 31, 2024, primarily dueto decreased interest income earned on our cash balances. Additionally, this amount includes immaterial losses on exchange rates on consumerpayments and other miscellaneous income.
Gain on TRA Liability Adjustment
The Company entered into a TRA with the Continuing Equity Owners to pay 85% of the tax savings from the tax basis adjustment to them as such savings are realized. As a result of exchanges of Class B common stock for Class A common stock, the long-term portion of the potential TRA liability was $7.8 millionat December 31, 2024. For similar reasons that led the Company to record a full valuation allowance on the deferred tax assets, we evaluated the probability of amounts being owed pursuant to the TRA and determined the likelihood of a future liability was not probable at the current timeand therefore did not record a TRA liability for the year ended December 31, 2025. As a result, the Company reduced the TRA liability to zero and recognized a gain on TRA liability adjustment of $7.8 million in the Company's consolidated statement of operations for the year ended December 31, 2025.
Income Tax Expense
Brilliant Earth Group, Inc.'s income tax expensewas $9.6 million for the year ended December 31, 2025 compared to income tax expense of $0.2 millionfor the year ended December 31, 2024. During the fourth quarter 2025, the Company evaluated the likelihood it would realize its deferred tax assets and determined it was more likely than not that its deferred tax assets would not be realized and a full valuation allowance was recorded. The Company recognized approximately $9.6 million of deferred tax expense in the consolidated statement of operations primarily related to the increase in the valuation allowance and changes in deferred taxes related to the outside basis difference of Brilliant Earth Group, Inc.'s investment in Brilliant Earth, LLC.
Net (Loss) Income Allocable to Non-Controlling Interests
The net loss allocable to the non-controlling interests ("NCI") of Brilliant Earth, LLC was $2.8 millionfor the year ended December 31, 2025, compared to net income of $3.5 million for the year ended December 31, 2024. The decrease in net (loss) income allocable to the NCI was primarily due to a decrease in earnings from the prior year.
Key Metrics
We monitor the key business metrics set forth below to help us evaluate our business and growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts, and assess operational efficiencies. The calculation of the key metrics discussed below may differ from other similarly titled metrics used by other companies, securities analysts or investors.
The following table sets forth our key performance metrics for the periods presented (dollars in thousands, except for AOV):
For the years ended December 31,
2025
2024
Change
% Change
Net Sales
$
437,483
$
422,161
$
15,322
3.6
%
Total Orders
210,158
186,030
24,128
13.0
%
AOV
$
2,082
$
2,269
$
(187)
(8.2)
%
Net Sales
Net sales is defined above in "Components of Results of Operations."
Total Orders
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.
Average Order Value
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 lines and price points, and open additional showrooms.
Non-GAAP Financial Measures
We report our financial results in accordance with GAAP. However, management believes that certain non-GAAP financial measures provide users of our financial information with additional useful information in evaluating our performance and liquidity, as applicable, and to more readily compare these financial measures between past and future periods. There are limitations to the use of the non-GAAP financial measures presented in this Annual Report on Form 10-K. For example, our non-GAAP financial measures may not be comparable to similarly titled measures of other companies. Other companies, including companies in our industry, may calculate non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes.
Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA and Adjusted EBITDA margin, which are non-GAAP financial measures, are included in this Annual Report on Form 10-K because they are used by management and our Board to assess our financial performance. We define Adjusted EBITDA as net (loss) income excluding interest expense, income tax expense (benefit), depreciation expense, amortization of cloud-based software implementation costs, showroom pre-opening expense, equity-based compensation expense, other income, net loss on extinguishment of debt, certain non-operating expenses and income, and other unusual and/or infrequent costs, which we do not consider in our evaluation of ongoing operating performance. We define Adjusted EBITDA margin as Adjusted EBITDA calculated as a percentage of net sales. 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 (loss) income that may vary substantially in frequency and magnitude from period to period. These non-GAAP financial measures are not meant to be considered as indicators of performance in isolation from or as a substitute for net (loss) income prepared in accordance with GAAP and should be read only in conjunction with financial information presented on a GAAP basis. Reconciliations of each of Adjusted EBITDA and Adjusted EBITDA margin to its most directly comparable GAAP financial measure, net (loss) income and net (loss) income margin, are presented below. We encourage you to review the reconciliations in conjunction with the presentation of the non-GAAP financial measures for each of the years presented. In future periods, we may exclude similar items, may incur income and expenses similar to these excluded items, and may include other expenses, costs and non-recurring items.
The following table presents a reconciliation of net (loss) incomeand net (loss) income margin, the most comparable GAAP financial measures, to Adjusted EBITDA and Adjusted EBITDA margin, respectively, for the years presented (dollars in thousands):
For the years ended December 31,
2025
2024
Net (loss) income
$
(6,400)
$
3,994
Interest expense
2,282
5,031
Income tax expense
9,641
160
Depreciation expense
6,109
5,312
Amortization of cloud-based software implementation costs
770
817
Showroom pre-opening expense
1,248
1,705
Equity-based compensation expense
8,920
9,934
Other income, net (1)
(3,668)
(5,835)
Gain on TRA liability adjustment
(7,804)
-
Loss on extinguishment of debt
573
-
Other expenses (2)
300
$
-
Adjusted EBITDA
$
11,971
$
21,118
Net (loss) income margin
(1.5)
%
0.9
%
Adjusted EBITDA margin
2.7
%
5.0
%
(1) Other income, 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.
Liquidity and Capital Resources
Overview
Our primary requirements for liquidity and capital are for purchases of inventory, payment of operating expenses, tax distributions to Continuing Equity Owners, and capital expenditures. Historically, these cash requirements have been met through cash provided by operating activities, cash and cash equivalents, proceeds from capital-raising activities and borrowings under our loan facilities. We have historically had negative working capital driven by our high inventory turns and typical collection of payment from customers prior to payment of suppliers. As of December 31, 2025, we had a cash balance, excluding restricted cash, of $79.1 million, and negative working capital of $(24.5) million.
In August 2025, our Board declared a one-time cash dividend of $0.25 per share to holders of our Class A common stock and holders of common units of Brilliant Earth, LLC, respectively. The distribution from Brilliant Earth, LLC totaled approximately $25.0 million, of which a pro rata portion was used by us to fund the dividend. Payment of the dividend was made on September 8, 2025 to holders of record of our Class A common stock as of the close of business on August 22, 2025. Approximately $21.2 million was paid to holders of common units of Brilliant Earth, LLC and approximately $3.8 million was paid to holders of the Company's Class A common stock.
For the twelve months ended December 31, 2025, the Company declared and paid $6.8 millionof tax distributions to, or on behalf of, members associated with their estimated income tax obligations pursuant to the LLC Agreement. We are committed to continue to make quarterly distributions in connection with member estimated income tax obligations which we expect to fund with cash flow from operations.
Any future determination as to the declaration and payment of dividends, if any, will be at the discretion of the Board, subject to the requirements of applicable law, compliance with contractual restrictions and covenants in the agreements governing our current and future indebtedness. Any such determination will also depend upon the Company's business prospects, results of operations, financial condition, cash requirements and availability, industry trends, and other factors that the Board may deem relevant.
We believe based on our current projections, that we have sufficient sources of liquidity to meet our projected operating and tax distribution requirements for at least the next 12 months following the filing of this Annual Report on Form 10-K.
Additional future liquidity needs may also include payments under the TRA, and state and federal taxes to the extent not offset by our deferred income tax assets, including those arising as a result of purchases or exchanges of common units for Class A and Class D common stock. Although the actual timing and amount of any payments that may be made under the TRA will vary, we expect that the payments that we will be required to make to the Continuing Equity Owners will be significant. Any payments made by us to the Continuing Equity Owners under the TRA will generally reduce the amount of overall cash flow that might have otherwise been available to us or to Brilliant Earth, LLC, and, to the extent that we are unable to make payments under the TRA for any reason, the unpaid amounts generally will be deferred and will accrue interest until paid by us; provided, however, that nonpayment for a specified period may constitute a material breach of a material obligation under the TRA and therefore may accelerate payments due under the TRA.
To the extent that our current liquidity is insufficient to fund future activities, we may need to raise additional funds, such as attempts to raise additional capital through the sale of equity securities or through debt financing arrangements. If we raise additional funds by issuing equity securities, the ownership of our existing stockholders will be diluted. Any additional debt financing would result in debt service obligations, and any future instruments governing such debt could provide for operating and financing covenants that could restrict our operations. We cannot ensure that we could obtain refinancing or additional financing on favorable terms or at all.
Cash Flows from Operating, Investing, and Financing Activities - Comparison of Years Ended December 31, 2025 and 2024
The following table summarizes our cash flows for the years ended December 31, 2025 and 2024 (in thousands):
Years ended December 31,
2025
2024
Net cash provided by operating activities
$
9,718
$
17,595
Net cash used in investing activities
(3,966)
(4,907)
Net cash used in financing activities
(88,455)
(6,567)
Net (decrease) increase in cash, cash equivalents, and restricted cash
(82,703)
6,121
Cash, cash equivalents and restricted cash at beginning of year
162,141
156,020
Cash, cash equivalents and restricted cash at end of year
$
79,438
$
162,141
Operating Activities
For the year ended December 31, 2025, net cash provided by operating activities was $9.7 million compared to net cash provided by operating activities of $17.6 million for the year ended December 31, 2024, a decrease of $7.9 million. This decrease was primarily driven by a decrease in cash provided from net (loss) income adjusted for non-cash addbacks of $7.5 million. There was also an increase in cash used from changes in assets and liabilities related to working capital management activities of $0.4 million. The increase in cash used from changes in working capital
was primarily due to an increase in cash used of $18.4 million in inventories, prepaid expenses and other current assets, other assets, and operating lease liabilities. This was partially offset by a decrease in cash used of $13.6 million in accounts payable, accrued expenses and other current liabilities, and an increase in cash generated of $4.4 million in deferred revenue when compared to the year ended December 31, 2024.
The overall decrease in operating cash flows was primarily driven by a decrease in earnings and higher cash outflows for working capital compared to the prior year as discussed above. The Company had increases in inventory purchases and prepaid expenses and cloud computing assets. Payments on operating lease liabilities increased from the prior year due to additional leased showrooms acquired during the year ended December 31, 2025.
Investing Activities
Net cash used in investing activities was $4.0 millionfor the year ended December 31, 2025 compared to $4.9 million for the year ended December 31, 2024. The decrease of $0.9 million was principally due to a decrease in purchases of property and equipment related to new facilities leased during the year ended December 31, 2025.
Financing Activities
Net cash used in financing activities was $88.5 million for the year ended December 31, 2025 compared to $6.6 million for the year ended December 31, 2024. The increase of $81.9 millionwas primarily due to higher payments made on the SVB Term Loan of $52.0 million and higher dividends and distributions paid to members of $26.2 million. Additionally, the Company paid a one-time cash dividend of $3.8 million to holders of the Company's Class A common stock.
Silicon Valley Bank Credit Facilities
On May 24, 2022, Brilliant Earth, LLC, as borrower, and SVB, as administrative agent and collateral agent for the lenders, entered into a credit agreement (the "SVB Credit Agreement") which provided for a secured term loan credit facility of $65.0 million (the "SVB Term Loan") and a secured revolving credit facility in an amount of up to $40.0 million (the "SVB Revolving Facility", and together with the SVB Term Loan, the "SVB Credit Facilities"). The SVB Credit Facilities were set to mature on May 24, 2027 (the "Maturity Date").
In May 2025, we made principal payments totaling $20 millionon the SVB Term Loan. No additional principal payments were required until the Maturity Date.
In August 2025, we prepaid all principal amounts outstanding of $34.8 millionunder the SVB Term Loan and terminated all commitments outstanding under the SVB Credit Agreement. As a result of the prepayment, we recognized a loss on debt extinguishment of $0.6 millionassociated with the write-off of unamortized debt issuance costs.
As a result of the prepayment of all principal amounts outstanding under the SVB Term Loan, and termination of all commitments outstanding under the SVB Credit Agreement, we are no longer required to be in compliance with any covenants under the SVB Credit Agreement as of December 31, 2025.
For additional information regarding our long-term debt activity, see Note 8,Debt to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Additional Liquidity Requirements
We are a holding company and have no material assets other than our ownership of LLC Interests. We have no independent means of generating revenue. The LLC Agreement provides for the payment of certain distributions to the Continuing Equity Owners and to us in amounts sufficient to cover the income taxes imposed on such members with respect to the allocation of taxable income from Brilliant Earth, LLC as well as to cover our obligations under the TRA and other administrative expenses.
Regarding the ability of Brilliant Earth, LLC to make distributions to us, the terms of their financing arrangements, including the SVB Credit Facilities, contain covenants that may restrict Brilliant Earth, LLC from paying such distributions, subject to certain exceptions. Further, Brilliant Earth, LLC is generally prohibited under Delaware law from making a distribution to a member to the extent that, at the time of the distribution, after giving effect to the distribution, liabilities of Brilliant Earth, LLC (with certain exceptions), as applicable, exceed the fair value of its assets.
Under the TRA, we are required to make cash payments to the Continuing Equity Owners equal to 85% of the tax benefits, if any, that we actually realize (or in certain circumstances are deemed to realize), as a result of (1) increases in our allocable share of the tax basis of Brilliant Earth, LLC's assets resulting from (a) our purchase of LLC Interests from each Continuing Equity Owner; (b) future redemptions or exchanges of LLC Interests for Class A common stock or cash; and (c) certain distributions (or deemed distributions) by Brilliant Earth, LLC; and (2) certain tax benefits arising from payments made under the TRA. We expect the amount of cash payments that we will be required to make under the TRA will be significant. The actual amount and timing of any payments under the TRA will vary depending upon a number of factors, including the timing of redemptions or exchanges by the Continuing Equity Owners, the amount of gain recognized by the Continuing Equity Owners, the amount and timing of the taxable income we generate in the future, and the federal tax rates then applicable. Any payments made by us to the Continuing Equity Owners under the TRA will generally reduce the amount of overall cash flow that might have otherwise been available to us.
Additionally, in the event we declare any cash dividends, we intend to cause Brilliant Earth, LLC to make distributions to us in amounts sufficient to fund such cash dividends declared by us to our shareholders. Deterioration in the financial condition, earnings, or cash flow of Brilliant Earth, LLC for any reason could limit or impair their ability to pay such distributions.
If we do not have sufficient funds to pay taxes or other liabilities or to fund our operations, we may have to borrow funds, which could materially adversely affect our liquidity and financial condition and subject us to various restrictions imposed by any such lenders. To the extent that we are unable to make payments under the TRA for any reason, such payments generally will be deferred and will accrue interest until paid; provided, however, that nonpayment for a specified period may constitute a material breach of a material obligation under the TRA and therefore accelerate payments due under the TRA. In addition, if Brilliant Earth, LLC does not have sufficient funds to make distributions, our ability to declare and pay cash dividends will also be restricted or impaired.
See "Risk Factors-Risks Related to Our Organizational Structure."
In December 2023, the Board approved a share repurchase program authorizing the Company to purchase up to an aggregate of $20.0 million of the Company's Class A common stock through the expiration of the program in December 2026.
The Company may repurchase shares, under the program, from time to time through open market purchases, in privately negotiated transactions or by other means. Open market repurchases will be structured to occur in accordance with applicable federal securities law, including within the pricing and volume requirements of Rule 10b-18 under the Exchange Act. The Company may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of its shares under this authorization. The timing, amount, and manner of stock repurchases will be determined at the Company's discretion, subject to business, economic and market conditions, corporate needs and regulatory requirements, prevailing stock prices and other considerations. The share repurchase program
does not obligate the Company to acquire a specific number of shares of Class A common stock and may be suspended, terminated, or modified at any time without notice, at the discretion of the Board.
Contractual Obligations and Commitments
We lease our showrooms and headquarters office space under non-cancelable lease agreements whereby $9.0 millionis due in the year ended December 31, 2026. Total future lease payments as of December 31, 2025 are $45.2 million.
We have capital commitments of $0.8 million related to new showroom construction and improvements to existing locations as of December 31, 2025.
From time to time in the normal course of business, we will enter into agreements with suppliers or service providers. As of December 31, 2025, contractual obligations with a remaining term in excess of 12 months primarily related to marketing and advertising spending as well as software maintenance totaled $2.9 million. For additional information on our contractual obligations and commitments, see Note 7, Leases, Note 9, Stockholders' Equity and Members Units and Note 13, Commitments and Contingencies, to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Critical Accounting Estimates
In preparing our audited consolidated financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K in conformity with GAAP, we must make decisions that impact the reported amounts of assets, liabilities, revenues, expenses, and related disclosures. Such decisions include the selection of the appropriate accounting principles to be applied and the assumptions on which to base accounting estimates. In reaching such decisions, we apply judgments based on our understanding and analysis of the relevant circumstances, historical experience, and current trends. Actual amounts could differ from those estimated at the time the audited consolidated financial statements are prepared.
Our significant accounting policies are described in Note 2, Summary of significant accounting policies, to our accompanying financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K. Some of those significant accounting policies require us to make difficult, subjective, or complex judgments or estimates. An accounting estimate is considered to be critical if it meets both of the following criteria: (i) the estimate requires assumptions about matters that are highly uncertain at the time the accounting estimate is made, and (ii) different estimates reasonably could have been used, or changes in the estimate that are reasonably likely to occur from period to period may have a material impact on the presentation of our financial condition, changes in financial condition, or results of operations. See Part I, Item 1A. Risk Factors -Risks related to the Ownership of Our Class A Common Stock - If our estimates or judgments relating to our critical accounting policies and estimates prove to be incorrect, our results of operations could be adversely affected.
Our critical accounting estimates include the following:
Revenue Recognition
Net sales primarily consists of revenue from the sale of inventory, and we recognize revenue as control of promised goods is transferred to customers, which generally occurs upon delivery if the order is shipped, or at the time the customer picks up the completed product at a showroom. Revenue arrangements generally have one performance obligation and are reported net of estimated sales returns and allowances, which are determined based on historical product return rates and current economic conditions. We offer an extended protection plan in the capacity of an agent on behalf of a third party that has different terms ranging from two years to lifetime that vary based on the item purchased. The commission that the Company receives from the third party is recognized at the time of sale less an estimate of cancellations based on historical experience. There are no additional performance obligations in relation to the third-party plan.
Wemaintain a returns asset account, less any expected costs to recover, and a refund liabilities account to record the effects of estimated product returns and sales returns and allowances, which are updated at the end of each financial reporting period with the effect of such changes accounted for in the period in which such changes occur. Our sales returns and allowance accounts are based on historical return experience and current period sales levels.
Deferred Tax Asset and Tax Receivable Agreement
We may receive a deferred tax benefit resulting from the step-up in basis which occurs in the event that we redeem LLC interests from the Continuing Equity Owners. Pursuant to a TRA entered into by Brilliant Earth, LLC and the Continuing Equity Owners, we will make payments to the Continuing Equity Owners of 85%of the amount of tax benefits, if any, that Brilliant Earth Group, Inc. actually realizes (or in some circumstances is deemed to realize) as a result of (1) increases in Brilliant Earth Group, Inc.'s allocable share of the tax basis of Brilliant Earth, LLC's assets resulting from (a) Brilliant Earth Group, Inc.'s purchase of LLC Interests from each Continuing Equity Owner, (b) future redemptions or exchanges of LLC Interests for Class A common stock or cash, and (c) certain distributions (or deemed distributions) by Brilliant Earth, LLC; and (2) certain tax benefits arising from payments made under the TRA.
We expect that payments under the TRA will be significant. We will account for the income tax effects and corresponding TRA's effects resulting from future taxable purchases or redemptions of LLC Interests of the Continuing LLC Owners by us or Brilliant Earth, LLC by recognizing an increase in our deferred tax assets, based on enacted tax rates at the date of the purchase or redemption, and assessment of the book basis of the redeemed LLC interests at the time of redemption. Further, we evaluate the likelihood that we will realize any benefit represented by the deferred tax asset and, to the extent that we estimate that it is more likely than not that we will not realize the benefit, we will reduce the carrying amount of the deferred tax asset with a valuation allowance.
The amounts to be recorded for both the deferred tax asset and the liability for our obligations under the TRA will be estimated at the time of any purchase or redemption as a reduction to shareholders' equity. The effect of subsequent changes in the enacted tax rates will be included in net income.
During the fourth quarter of 2025, we evaluated the likelihood we would realize the deferred tax assets and determined the probability was more likely than not that the deferred tax assets will not be realized and recorded a full valuation allowance for the year ended December 31, 2025. In connection with the Company recording a full valuation allowance for its deferred tax assets, it was also determined a TRA liability was not probable at the current time. As a result, the Company reduced the TRA liability to zero and recognized a gain on TRA liability adjustment of $7.8 million in the Company's consolidated statement of operations for the year ended December 31, 2025.
Judgment is required in assessing the future tax consequences of events that have been recognized in Brilliant Earth Group, Inc.'s financial statements. A change in the assessment of such consequences, such as realization of deferred tax assets, changes in tax laws or interpretations thereof could materially impact our results.
Recent Accounting Pronouncements
See Note 2 - Summary of Significant Accounting Policiesto our accompanying financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K for additional information regarding recent accounting developments and their impact on our results.
JOBS Act
We qualify as an "emerging growth company" pursuant to the provisions of the JOBS Act, enacted on April 5, 2012. Section 102 of the JOBS Act provides that, among other reporting exemptions, an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2) (B) of the Securities Act for complying with new or revised accounting standards. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our audited consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
The exemptions afforded to emerging growth companies will apply until we no longer meet the requirements of being an emerging growth company. We will remain an emerging growth company until the earlier of (a) the last day of the fiscal year (i) following the fifth anniversary of the completion of our IPO (December 31, 2026), (ii) in which we have total annual gross revenue of at least $1.235 billionor (iii) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the last business day of our prior second fiscal quarter, and (b) the date on which we have issued more than $1.0 billionin non-convertible debt during the prior three-year period.
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