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What changed in Brilliant Earth Group, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Brilliant Earth Group, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+443 added−433 removedSource: 10-K (2025-03-13) vs 10-K (2024-03-28)

Top changes in Brilliant Earth Group, Inc.'s 2024 10-K

443 paragraphs added · 433 removed · 362 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

80 edited+24 added−18 removed49 unchanged
Biggest changeThey expect to be able to shop when and where they want with a seamless journey between brick-and-mortar and online. This requires strong digital capabilities and a true omnichannel experience. Millennial and Gen Z consumers also seek purpose-driven brands that are authentic, engaged with social and environmental issues, and help them express their individuality.
Biggest changeWhile Millennial and Gen Z consumers appreciate digitally native brands, many also want an in-person experience where they can see, touch, and feel products, especially for a high value purchase. They expect to be able to shop when and where they want with a seamless journey between brick-and-mortar and online. This requires strong digital capabilities and a true omnichannel experience.
We were among the first retail jewelers to offer blockchain diamonds at scale, defining next-generation traceability standards in the jewelry industry, and offer thousands of blockchain-verified diamonds. This technology tracks a diamond from its origins at the mining operator, through cutting and polishing, to the customer. This provides even greater transparency into the responsible origins of these blockchain-verified diamonds.
We were among the first retail jewelers to offer blockchain-verified diamonds at scale, defining next-generation traceability standards in the jewelry industry, and offer thousands of blockchain-verified diamonds. This technology tracks a diamond from its origins at the mining operator, through cutting and polishing, to the customer. This provides even greater transparency into the responsible origins of these blockchain-verified diamonds.
Fulfillment and Logistics Many of our products are made-to-order, and delivered in as little as six to twelve business days. For products that sell in higher, more consistent volumes, such as certain rings and finished jewelry, we batch produce and stock items to enable even faster customer delivery, typically in just two to five business days.
Fulfillment and Logistics Many of our products are made-to-order and delivered in as little as six to twelve business days. For products that sell in higher, more consistent volumes, such as certain rings and fine jewelry, we batch produce and stock items to enable even faster customer delivery, typically in just two to five business days.
For more information regarding the risks related to our intellectual property, see “Risk Factors—Risks related to Our Legal and Regulatory Environment—Failure to adequately obtain, maintain, protect and enforce our intellectual property and proprietary rights or prevent third parties from making unauthorized use of such rights could harm our brand, devalue our proprietary content and technology, and adversely affect our ability to compete effectively.” Government Regulation We are required to comply with numerous laws and regulations covering areas such as consumer protection, consumer privacy, data protection, privacy, consumer credit, payment processing, marketing and advertising, insurance, health and safety, waste disposal, supply chain integrity, truth in advertising and employment.
For more information regarding the risks related to our intellectual property, see “Risk Factors—Risks related to Our Legal and Regulatory Environment—Failure to adequately obtain, maintain, protect and enforce our intellectual property and proprietary rights or prevent third parties from making unauthorized use of such rights could harm our brand, devalue our proprietary content and technology, and adversely affect our ability to compete effectively.” Government Regulation We are required to comply with numerous laws and regulations covering areas such as consumer protection, consumer privacy, data protection, privacy, consumer credit, payment processing, marketing and advertising, insurance, environmental matters, health and safety, waste disposal, supply chain integrity, use of artificial intelligence, truth in advertising and employment.
We also integrate blockchain technology to showcase the journey of a select collection of blockchain-verified diamonds. • Sustainable : Our jewelry is crafted from primarily recycled precious metals and arrives in our iconic ring boxes crafted with wood sourced from Forest Stewardship Council (“FSC”) certified forests.
We also integrate blockchain technology to showcase the journey of a select collection of blockchain-verified diamonds. • Sustainable : Our jewelry is crafted from primarily repurchased precious metals and arrives in our iconic ring boxes crafted with wood sourced from Forest Stewardship Council (“FSC”) certified forests.
Since then, we have donated $2 million to the areas where diamonds, gemstones and precious metals are mined and the communities where our teams and customers live. • Inclusion: We are deeply committed to diversity, equity, and inclusion, and we strive to embody our values through our product collections, customer experience, non-profit initiatives, and internal practices.
Since then, we have donated $2 million to the areas where diamonds, gemstones and precious metals are mined and the communities where our teams and customers live. • Inclusion: We are deeply committed to inclusion, and we strive to embody our values through our product collections, customer experience, non-profit initiatives, and internal practices.
Our technology systems, including our customized enterprise resource planning ("ERP"), CRM, supply chain, inventory management, order fulfillment and other systems, provide a unified data source and single view of our customer, and ensure quality standards and a more efficient turnaround for our flagship Design Your Own product.
Our technology systems, including our customized enterprise resource planning (“ERP”), CRM, supply chain, inventory management, order fulfillment and other systems, provide a unified data source and single view of our customer, and ensure quality standards and a more efficient turnaround for our flagship Design Your Own product.
Our customer typically begins their Brilliant Earth journey with an engagement ring, so we are often the first significant jewelry purchase in our customer’s life, which we believe creates a lasting, emotional connection with the Brilliant Earth brand. While engagement ring purchases have historically been male-dominated, we thoughtfully built our brand messaging and customer experience to appeal to all genders.
Our customers typically begin their Brilliant Earth journey with an engagement ring, so we are often the first significant jewelry purchase in our customer’s life, which we believe creates a lasting, emotional connection with the Brilliant Earth brand. While engagement ring purchases have historically been male-dominated, we thoughtfully built our brand messaging and customer experience to appeal to all genders.
We offer our customers a wide variety of powerful decision-making tools, including real diamond videos, and dynamic product visualization. Our advanced Virtual Try On tool allows customers to see any ring with any gemstone size, shape, and color on their own hand, then seamlessly shop, save or share their one-of-a-kind creation.
We offer our customers a wide variety of powerful decision-making tools, including real diamond videos, and dynamic product visualization. Our advanced Virtual Try On tool allows customers to see any ring with any 13 Table of Contents gemstone size, shape, and color on their own hand, then seamlessly shop, save or share their one-of-a-kind creation.
We believe that we compete favorably in the market for bridal and other fine jewelry products by focusing on these factors as well as our core values of transparency, sustainability, inclusivity, and giving back. 18 Table of Contents We believe our premium omnichannel customer experience, unique and exclusive designs, and purpose-driven brand create limited overlap with other industry participants.
We believe that we compete favorably in the market for bridal and other fine jewelry products by focusing on these factors as well as our core values of transparency, sustainability, inclusivity, and giving back. We believe our premium omnichannel customer experience, unique and exclusive designs, and purpose-driven brand create limited overlap with other industry participants.
We also offer pre-set gemstone rings with our most popular gemstones for customers seeking a more curated choice. Our collection of fine jewelry includes earrings, necklaces, and bracelets. We offer a broad and evolving assortment for gifting and self-purchase, from classic diamond stud earrings and tennis bracelets to unique pendants and distinctive gemstone styles.
We also offer pre-set gemstone rings with our most popular gemstones for customers seeking a more curated choice. 12 Table of Contents Our collection of fine jewelry includes earrings, necklaces, and bracelets. We offer a broad and evolving assortment for gifting and self-purchase, from classic diamond stud earrings and tennis bracelets to unique pendants and distinctive gemstone styles.
Our partners go through a rigorous onboarding process to ensure they meet our strict compliance and quality standards, including recycled metal content. Because we own the designs created by our in-house studio, we have flexibility to determine where the jewelry is manufactured to optimize cost, manufacturing capabilities and turnaround times.
Our partners go through a rigorous onboarding process to ensure they meet our strict compliance and quality standards, including repurposed precious metal content. Because we own the designs created by our in-house studio, we have flexibility to determine where the jewelry is manufactured to optimize cost, manufacturing capabilities and turnaround times.
Using our customer data, we curate the inventory for our in-person appointments, ensuring showroom visitors see a personalized and relevant selection. Pricing with our suppliers is determined based on product specifications, market conditions, and other variables. For example, diamond prices are determined based on market conditions, competition, and other factors, including the diamond’s attributes.
Using our customer data, we curate the inventory for our in-person appointments, so that showroom visitors see a personalized and relevant selection. Pricing with our suppliers is determined based on product specifications, market conditions, and other variables. For example, diamond prices are determined based on market conditions, competition, and other factors, including the diamond’s attributes.
Intellectual Property and Other Proprietary Rights Our long-term commercial success is connected to our ability to obtain and maintain intellectual property protection for our brand, products, and technology; defend and enforce our intellectual property rights; preserve the confidentiality of our trade secrets; operate our business without infringing, misappropriating, or otherwise violating the intellectual property or proprietary rights of third parties; and prevent third parties from infringing, misappropriating, or otherwise violating our intellectual property rights.
Intellectual Property and Other Proprietary Rights Our long-term commercial success is connected to our ability to obtain and maintain intellectual property protection for our brand, products, and technology; defend and enforce our intellectual property rights; preserve the confidentiality of our trade secrets; operate our business without infringing, misappropriating, or otherwise violating 18 Table of Contents the intellectual property or proprietary rights of third parties; and prevent third parties from infringing, misappropriating, or otherwise violating our intellectual property rights.
We monitor changes in these laws to maintain compliance with applicable requirements. We are subject to numerous local, state, federal and foreign laws and regulations regarding privacy and data protection.
We monitor changes in these laws to maintain compliance with applicable requirements. We are subject to numerous local, state, federal and foreign laws and regulations regarding privacy and data protection, marketing, and consumer protection.
In the event of a security breach, these laws may subject us to incident response, notice and remediation costs. Failure to safeguard data adequately or to destroy data securely could subject us to regulatory investigations or enforcement actions under applicable data protection, data security, unfair practices or consumer protection laws.
In the event of a security breach, laws in various jurisdictions may subject us to incident response, notice and remediation costs. Failure to safeguard data adequately or to destroy data securely could subject us to regulatory investigations or enforcement actions under applicable data protection, data security, unfair practices or consumer protection laws.
We also analyze over 50 attributes associated with our products to optimize our merchandising and inventory decisions. 13 Table of Contents Our in-house expertise drives an agile product development cycle, with new products developed in as little as four months. This agility enables us to rapidly launch, test, and learn based on performance feedback with minimal capital outla y.
We also analyze over 50 attributes associated with our products to optimize our merchandising and inventory decisions. Our in-house expertise drives an agile product development cycle, with new products developed in as little as four months. This agility enables us to rapidly launch, test, and learn based on performance feedback with minimal capital outla y.
We thoughtfully develop our 10 Table of Contents brand messaging and customer experience to appeal to all genders, which is important because couples are increasingly shopping together for engagement and wedding rings. Alongside our mission, we believe our joyful, premium customer experience and unique, exclusive jewelry designs drive our strong brand affinity and loyalty.
We thoughtfully develop our brand messaging and customer experience to appeal to all genders, which is important because couples are increasingly shopping together for engagement and wedding rings. Alongside our mission, we believe our joyful, premium customer experience and unique, exclusive jewelry designs drive our strong brand affinity and loyalty.
Orders are shipped to customers directly from our fulfillment centers or from our manufacturing partners. 17 Table of Contents Packaging Our responsibly sourced wood ring boxes are designed to be as iconic as the jewelry they hold. They are crafted with wood sourced from FSC certified forests, which are responsibly managed to protect the forests for future generations.
Orders are shipped to customers directly from our fulfillment centers or from our manufacturing partners. Packaging Our responsibly sourced wood ring boxes are designed to be as iconic as the jewelry they hold. They are crafted with wood sourced from FSC certified forests, which are responsibly managed to protect the forests for future generations.
According to The Bain Report, approximately 65% of th e diamond jewelry retail industry is composed of small retailers. Many small jewelry retailers are struggling to address evolving consumer preferences for personalization and e-commerce, and are further limited by reduced purchasing power and an inventory-heavy model.
According to the Bain Report, approximately 65% of the diamond jewelry retail industry is composed of small retailers. Many small jewelry retailers have struggled to address evolving consumer preferences for personalization and e-commerce, and are further limited by reduced purchasing power and an inventory-heavy model.
Customers choose their ideal ring setting, precious metal type, and ring size, and select their favorite Beyond Conflict Free TM natural diamond or lab-grown diamond to create their one-of-a-kind ring. Our collection of wedding and anniversary rings includes classic precious metal bands and bands accented with diamonds or gemstones.
Customers choose their ideal ring setting, precious metal type, and ring size, and select their favorite natural diamond or lab-grown diamond to create their one-of-a-kind ring. Our collection of wedding and anniversary rings includes classic precious metal bands and bands accented with diamonds or gemstones.
We believe we will continue to drive brand awareness through marketing, earned media, showroom expansion, and word-of-mouth referrals. Expand Omnichannel Reach We are expanding our showrooms nationwide, and expect to focus in the near term on major urban markets in the U.S. where we can maximize our growth potential.
We believe we will continue to drive brand awareness through marketing, earned media, showroom expansion, and word-of-mouth referrals. 11 Table of Contents Expand Omnichannel Reach We are expanding our showrooms nationwide and expect to focus in the near term on markets in the U.S. where we can maximize our growth potential.
Our inventory of independently graded diamonds spans a wide variety of shapes, sizes, premium qualities, and price points to cater to unique customer preferences. We offer both our Beyond Conflict Free TM natural diamonds with a listed origin and lab-grown diamonds to appeal to different customer preferences.
Our inventory of independently graded diamonds spans a wide variety of shapes, sizes, premium qualities, and price points to cater to unique customer preferences. We offer both natural diamonds with a listed origin and lab-grown diamonds to appeal to different customer preferences.
We strive to offer gemstones sourced in alignment with safe working conditions and environmentally responsible principles. By working with our colored gemstone suppliers to improve standards and traceability, we strive to promote higher standards for gemstone sourcing and encourage responsible practices.
We strive to offer gemstones sourced in alignment with safe working conditions and environmentally responsible principles. By working with our colored gemstone suppliers to improve standards and traceability, we strive to promote higher 16 Table of Contents standards for gemstone sourcing and encourage responsible practices.
We founded the company to provide an ethical alternative to historical jewelry industry practices, which have raised environmental and social concerns and lacked transparency. • Transparency: We go above and beyond current industry standards to offer Beyond Conflict Free TM Diamonds that have been selected for their ethical and environmentally responsible origins.
We founded the company to provide an ethical alternative to historical jewelry industry practices, which have raised environmental and social concerns and lacked transparency. 10 Table of Contents • Transparency: We strive to go above and beyond current industry standards to offer Beyond Conflict Free Diamonds ® that have been selected for their ethical and environmentally responsible origins.
We have a vast collection of Beyond Conflict Free TM natural diamonds and lab-grown diamonds that meet what we believe are rigorous standards for sourcing and quality. Our collection offers extensive coverage across quality characteristics and price points. Through our Design Your Own model, customers can customize their jewelry to reflect their individuality and personal preferences, creating one-of-a-kind jewelry pieces.
Our natural diamonds and lab-grown diamonds meet what we believe are rigorous standards for sourcing and quality. Our collection offers extensive coverage across quality characteristics and price points. Through our Design Your Own model, customers can customize their jewelry to reflect their individuality and personal preferences, creating one-of-a-kind jewelry pieces.
As part of our commitment to social and environmental responsibility, we offer Beyond Conflict Free ™ Diamonds, recycled precious metals and FSC-certified wood ring 15 Table of Contents boxes. We strive to offer products sourced in alignment with responsible labor and environmental practices, and continually work with our suppliers to seek to improve standards and traceability.
As part of our commitment to social and environmental responsibility, we offer Beyond Conflict Free Diamonds ® , Pathway to Beyond Conflict Free Diamonds TM repurposed precious metals and FSC-certified wood ring boxes. We strive to offer products sourced in alignment with responsible labor and environmental practices, and continually work with our suppliers to seek to improve standards and traceability.
These specialists strive to create lasting connections with customers. Unique and Award-Winning Designs We believe that customers should never have to compromise between beauty, quality, and conscience. Our commitment to our core values is matched by our passion for innovative design and exceptional craftsmanship.
Unique and Award-Winning Designs We believe that customers should never have to compromise between beauty, quality, and conscience. Our commitment to our core values is matched by our passion for innovative design and exceptional craftsmanship.
Below is a summary of our performance for the year ended December 31, 2023: • Net sales of $446.4 million, compared to $439.9 million for the year ended December 31, 2022; • Net income o f $4.7 million compared to $19.0 million for the year ended December 31, 2022; and • Net income margin o f 1.1% compared to 4.3% for the year ended December 31, 2022.
Below is a summary of our performance for the year ended December 31, 2024: • Net sales of $422.2 million, compared to $446.4 million for the year ended December 31, 2023; • Net income o f $4.0 million compared to $4.7 million for the year ended December 31, 2023; and • Net income margin o f 0.9% compared to 1.1% for the year ended December 31, 2023.
The Brilliant Earth Difference Exceptional Omnichannel Customer Experience We have reimagined the jewelry shopping experience with our seamless omnichannel model—allowing our customers to shop anywhere, anytime. Customers have joyful, personalized, and meaningful experiences on our website and in our reimagined showrooms.
Exceptional Omnichannel Customer Experience We have reimagined the jewelry shopping experience with our seamless omnichannel model which aims to allow our customers to shop anywhere, anytime and have joyful, personalized, and meaningful experiences on our website and in our showrooms.
Our advanced Virtual Try On and product visualization technology allow customers to envision our ring designs with diamonds and gemstones of many sizes, shapes, and colors. Dynamic product customization and an intelligent diamond recommendation engine simplify and personalize the shopping experience. While many customers shop with us exclusively online, others also want an in-person experience.
Our advanced Virtual Try On and product visualization technology allow customers to envision our ring designs with diamonds and gemstones of many sizes, shapes, and colors. Dynamic product customization and an intelligent diamond recommendation engine simplify and personalize the shopping experience.
We track over 50 attributes associated with our products to inform our development and merchandising decisions. We create unique, exclusive styles that are expertly crafted to be beautiful from every angle and have been featured in leading publications, including Vogue, Forbes, and Women's Wear Daily . Approximately two-thirds of our ring collection is proprietary and available exclusively at Brilliant Earth.
We track over 50 attributes associated with our products to inform our development and merchandising decisions. We create unique, exclusive styles that are expertly crafted to be beautiful from every angle and have been featured in leading publications, including Vogue, Forbes, and Women's Wear Daily .
We believe that there is substantial potential to launch e-commerce in new overseas markets, and new showrooms in countries where we have already established a localized digital presence. 12 Table of Contents Product Assortment and Merchandising We are passionate about beautiful and innovative product design.
We believe that there is substantial potential to launch e-commerce in new overseas markets, and new showrooms in countries where we have already established a localized digital presence. We are in the early stages of selling internationally and believe there is significant opportunity for future expansion. Product Assortment and Merchandising We are passionate about beautiful and innovative product design.
Our engagement rings are highly personalized to reflect our customers’ individuality and unique preferences. Through our Design Your Own model, customers choose their ideal ring design, precious metal type, and ring size, and select their diamond or gemstone from our marketplace.
Approximately sixty percent of our ring collection is proprietary and available exclusively at Brilliant Earth. Our engagement rings are highly personalized to reflect our customers’ individuality and unique preferences. Through our Design Your Own model, customers choose their ideal ring design, precious metal type, and ring size, and select their diamond or gemstone from our marketplace.
Corporate and Available Information Our internet website address is www.brilliantearth.com. In addition to the information about us and our subsidiaries contained in this Annual Report on Form 10-K, information about us can be found on our website.
In addition to the information about us and our subsidiaries contained in this Annual Report on Form 10-K, information about us can be found on our website.
Our objective is to help reduce the negative impacts of dirty gold and other metals by reducing demand for newly mined metals, focusing on recycled precious metals, and contributing to programs dedicated to improving mining practices. Colored Gemstones Our colored gemstone offerings include sapphires, emeralds, moissanites, and aquamarines.
Our objective is to help reduce the negative impacts of dirty gold and other metals by reducing our demand for newly mined metals, focusing on repurposed precious metals, and contributing to programs dedicated to improving mining practices.
Since our founding, we have fostered deep connections with our highly engaged community, leading to an outsized social media presence. We believe our brand resonance, authentic content, and focus on staying ahead of social trends have contributed to our leading engagement rates. Exceptional Customer Experience and Differentiated Omnichannel Model Drive Growth and Conversion We have reimagined the jewelry shopping experience.
Since our founding, we have fostered deep connections with our highly engaged community, leading to an outsized social media presence. We believe our brand resonance, authentic content, and focus on staying ahead of social trends have contributed to our leading engagement rates.
We also release exclusive jewelry collections throughout the year to highlight our passion for design. We believe our customers love our beautiful and unique styles—using our Virtual Try On feature, they frequently visualize rings with different diamond shapes and sizes on their own hand, then share their unique creations on social media.
We believe our customers love our beautiful and unique styles—using our Virtual Try On feature, they frequently visualize rings with different diamond shapes and sizes on their own hand, then share their unique creations on social media.
Sourcing and Supply Chain Responsible sourcing is an important aspect of our mission and values. We work with a complex, global network of trusted suppliers and manufacturers who agree to our strict Supplier Code of Conduct and with whom we have developed deep relationships, generally over many years.
We work with a complex, global network of trusted suppliers and manufacturers who agree to our strict Supplier Code of Conduct and with whom we have developed deep relationships, generally over many y ears.
Regulators throughout the United States and around the world have adopted or proposed and continue to adopt and propose limitations on, or requirements regarding, the collection, disclosure, distribution, use, security and storage of personal information, payment card information or other confidential information of individuals and the FTC and many state attorneys general are applying federal and state consumer protection laws to impose standards on the online collection, use and dissemination of data.
Regulators throughout the United States and around the world have adopted or proposed and continue to adopt and propose limitations on, or requirements regarding, the collection, disclosure, distribution, use, security and storage of personal information, payment card information or other confidential information of individuals.
We have built a sophisticated technology platform to manage our supplier network, resulting in high-quality, customized jewelry produced at scale. Inventory Management We are able to offer a vast virtual inventory of diamonds while keeping our asset inventory low. Our sophisticated inventory management system and deep integration with our suppliers allow us to rapidly bring in inventory for appointments.
Inventory Management We are able to offer a vast virtual inventory of diamonds while keeping our asset inventory low. Our sophisticated inventory management system and deep integration with our suppliers allow us to rapidly bring in inventory for appointments.
Our customers are deeply involved with the Brilliant Earth brand, sharing thousands of images, videos, and stories of their proposals and weddings every year. Brand Marketing Our in-house social media team prioritizes a mix of aspirational yet approachable product and lifestyle imagery, authentic user-generated content, unique educational content, and purpose-driven storytelling that aligns with our audience’s values.
Brand Marketing Our in-house social media team prioritizes a mix of aspirational yet approachable product and lifestyle imagery, authentic user-generated content, unique educational content, and purpose-driven storytelling that aligns with our audience’s values.
Our Opportunity Global Jewelry Market The global jewelry industry was estimated to be approximately $300 billion in 2023, according to Statista. De spite its size, the jewelry industry is highly fragmented and includes players like mall jewelers, local independent stores, and department stores, among other s.
Our Opportunity Global Jewelry Market The global jewelry industry was estimated to be approxima tely $350 billion i n 2024, according to Statista. Despite its size, the jewelry industry is highly fragmented and includes players like mall jewelers, local independent stores, and department stores, among others.
Our head of product development has been driving innovation at Brilliant Earth for over ten years. Our team uses state-of-the-art technology and the artistry of hand-drawn sketches to create hundreds of new designs per year. Each design is perfected using computer-aided design (“CAD”) technology to ensure beauty from all angles, high quality and manufacturability.
Our team uses state-of-the-art technology and the artistry of hand-drawn sketches to create hundreds of new designs per year. Each design is perfected using computer-aided design (“CAD”) technology to ensure beauty from all angles, high quality and manufacturability. We also release exclusive jewelry collections throughout the year to highlight our passion for design.
Many mall jewelers have also been slow to modernize an outdated retail experience, and 8 Table of Contents face declining foot traffic. We believe the rapidly changing industry provides ample opportunity for Brilliant Earth to take share. The bridal category—where we currently derive a large portion of our business—is among the most resilient in the jewelry industry.
Many mall jewelers have also been slow to modernize an outdated retail experience, and 8 Table of Contents face declining foot traffic. We believe the rapidly changing industry provides ample opportunity for Brilliant Earth to take share. Changing consumer preferences We believe that Millennial and Gen Z consumers are the largest opportunity for the jewelry industry.
We are proud that women comprise the majority of our employees, senior executive team, and our board of directors (the “Board”). Our Strengths The Brilliant Earth Brand We are a mission-driven, premium brand founded on core values of transparency, sustainability, inclusivity and giving back. These values resonate strongly with Millennial and Gen Z customers.
The Brilliant Earth Difference The Brilliant Earth Brand We are a mission-driven, premium brand founded on core values of transparency, compassion, sustainability, and inclusivity. These values resonate strongly with Millennial and Gen Z customers.
These consumers represent the core consumer of bridal-related products and a significant portion of the fine jewelry market. They are drawn to purpose-driven brands, are digitally savvy, and expect to shop whenever and wherever they want. As consumers continue to shift purchases online, we believe consumers seek authentic brands with a strong digital presence and an engaged community.
These consumers represent the core consumer of bridal-related products and a significant portion of the fine jewelry market. They are drawn to purpose-driven brands, are digitally savvy, engaged with social and environmental issues, and expect to shop whenever and wherever they want at brands that are authentic and help them express their individuality.
Blockchain-Verified To further our commitment to transparency and responsible sourcing, we have partnered with a leading technology enterprise that uses blockchain to securely track and trace the provenance of diamonds. This technology tracks a diamond from its origins at the mining operator, through cutting and polishing, to the customer. We offer thousands of blockchain-verified diamonds.
This technology tracks a diamond from its origins at the mining operator, through cutting and polishing, to the customer. We offer thousands of blockchain-verified diamonds.
Our strong connection with our audience allows us to stay ahead of trends and adapt to reflect their interests. We also collaborate with key influencers who are deeply passionate about our mission and products. We partner with them to create authentic and unique product collections and content, which helps to expand our reach to new and highly relevant audiences.
Our strong connection with our audience allows us to strive to stay ahead of trends and adapt to reflect their interests. 14 Table of Contents We also collaborate with key influencers who are deeply passionate about our mission and products.
Beyond Conflict Free ™ Diamonds We go above and beyond current industry standards to offer Beyond Conflict Free ™ Diamonds that have been selected for their ethical and environmentally responsible origins.
Beyond Conflict Free Diamonds ® Our Beyond Conflict Free Diamonds ® have been selected for their ethical and environmentally responsible origins.
In 2020, we also released one of the industry’s first gender-fluid collections. Innovative, Data-Driven Technology As a digitally native company, we use technology to deliver a superior customer experience, improve marketing and operational efficiencies, curate showroom inventory and merchandising, inform real estate decisions, and develop new product designs that reflect consumer preferences.
We believe our showrooms accelerate our financial performance in the markets where they are located. 9 Table of Contents Customer Focused Innovative, Data-Driven Technology We are digitally native, and we use technology to deliver what we believe is a superior customer experience, improve marketing and operational efficiencies, curate showroom inventory and merchandising, inform real estate decisions, and develop new product designs that reflect consumer preferences.
We believe the exacting standards of our made-to-order process deliver a higher quality finished product as compared to other offerings that use pre-fabricated rings retrofitted to accommodate a new center gemstone and ring size. Mission-Driven Ethos Our mission is to create a more transparent, sustainable, compassionate, and inclusive jewelry industry.
We believe the exacting standards of our made-to-order process deliver a higher quality finished product as compared to other offerings that use pre-fabricated rings retrofitted to accommodate a new center gemstone and ring size. We leverage our data to curate collections and inform new product development strategy, so our offerings are current, fresh, and reflect consumer preferences.
These suppliers are required to source diamonds that originate from specific mine operations in specific countries that have demonstrated their commitment to follow internationally recognized labor, trade, and environmental standards. Our natural diamonds are sourced from approved mines in countries ranked low to moderate risk according to the Gemstones and Jewellery Community Platform Index for Conflict-Affected High-Risk Areas.
These suppliers are required to source Beyond Conflict Free Diamonds ® that originate from specific mine operations in specific countries that have demonstrated their commitment to follow internationally recognized labor, trade, and environmental standards.
These diamonds have the same physical, chemical, and optical characteristics as natural diamonds, and exhibit the same fire, scintillation, and sparkle. Lab-grown diamonds provide a mining-free alternative to natural diamonds. Recycled Precious Metals We strive to use 100% recycled gold and silver and generate year-over-year increases in the use of recycled platinum for our products.
These diamonds have the same physical, chemical, and optical characteristics as natural diamonds, and exhibit the same fire, scintillation, and sparkle. Lab-grown diamonds provide a mining-free alternative to natural diamonds.
Our Beyond Conflict Free TM natural diamonds have been selected based on their ethical and environmentally responsible origins, and we believe we are pioneers in offering diamonds with listed and transparent origins. Our lab-grown diamonds have the same physical, chemical, and optical characteristics as natural diamonds, exhibit the same sparkle and provide a mining-free alternative to naturally sourced diamonds.
Our Beyond Conflict Free Diamonds® have been selected based on their ethical and environmentally responsible origins, and we believe we are pioneers in offering diamonds with listed and transparent origins.
We were one of the first jewelers to offer lab-grown diamonds in 2012. In-House Design Studio Our award-winning in-house design team creates distinctive new jewelry designs and updates classic styles with fresh modern appeal. Over two-thirds of our ring collection is proprietary and available exclusively at Brilliant Earth.
In-House Design Studio Our award-winning in-house design team creates distinctive new jewelry designs and updates classic styles with fresh modern appeal. Over sixty percent of our ring collection is proprietary and available exclusively at Brilliant Earth. Our head of product development has been driving innovation at Brilliant Earth for over ten years.
Our customers enjoy a fun, relaxing, and educational environment while learning about our mission and browsing gemstones and jewelry selected just for them. 9 Table of Contents Dedicated jewelry specialists are available at every step of their journey via chat, phone, email, virtual appointment, or in our showrooms, which we believe drives strong engagement and high customer satisfaction.
Customers meet with a dedicated jewelry consultant in a fun, relaxing, and educational environment that fosters lasting connections and propels strong engagement and conversion across channels. Dedicated jewelry consultants are available at every step of each customer’s journey via chat, phone, email, virtual appointment, or in our showrooms, which we believe drives strong engagement and high customer satisfaction.
We also use data from our customers’ digital interactions to personalize their appointments and curate the inventory they see in the showroom. As of December 31, 2023, we had 37 showrooms across the United States. Our showrooms are in prime destinations in major metro areas, including ground, mall or upper floor locations in areas with premium retail adjacencies.
These consultants strive to create lasting connections with customers. As of December 31, 2024, we had 40 showrooms across the United States. Our showrooms are in prime destinations in major metro areas, including ground, mall or upper floor locations in areas with premium retail adjacencies.
With our strong brand resonance with Millennials and Gen Z consumers, we also believe our fine jewelry assortment and strategic customer acquisition will continue to drive fine jewelry orders from new customers. Expand Internationally We are in the early stages of expanding globally and believe there is significant opportunity for expansion.
With our strong brand resonance with Millennials and Gen Z consumers, we also believe our fine jewelry assortment and strategic customer acquisition will continue to drive fine jewelry orders from new customers. Expand Internationally We have sold to customers from over 50 countries despite minimal existing language, logistics and currency support for those geographies.
Currently our gold and silver fine jewelry is made primarily of recycled materials, and we continue to work with our suppliers to increase the usage of recycled metal in our products. 16 Table of Contents Metal mining, and gold mining in particular, is one of the most environmentally destructive types of mining, and gold miners often earn low wages in dangerous working conditions.
Metal mining, and gold mining in particular, is one of the most environmentally destructive types of mining, and gold miners often earn low wages in dangerous working conditions.
Capital Efficient Operating Model We have an asset-light operating model with attractive working capital dynamics, capital efficient showrooms, and a vast virtual inventory of premium natural and lab-grown diamonds. We are able to offer a broad selection of diamonds while keeping our balance sheet inventory low, which has driven our attractive inventory turns.
We are proud that women currently comprise the majority of our employees, senior executive team, and our board of directors (the “Board”). Capital Efficient Operating Model We have an asset-light operating model with attractive working capital dynamics, capital efficient showrooms, and a vast virtual inventory of premium natural and lab-grown diamonds.
Our paper-based shipping boxes are FSC Recycled and made from 100% post-consumer or pre-consumer recycled content. Our People We are extremely proud of our team who we believe embody our culture of diversity, equity and inclusion. As of December 31, 2023, we employed 668 full-time employees and 11 part-time employees in the U.S.
Our paper-based shipping boxes are FSC Recycled and made from 100% post-consumer or pre-consumer recycled content. 17 Table of Contents Our People We are extremely proud of our team who we believe embody our culture and core values, focused on inclusivity, collaboration and accountability.
We 14 Table of Contents leverage data—including our own first-person customer data, revenue, e-commerce behavior, population and demographic data, and market growth—to inform our showroom real estate decisions. Jewelry Specialists We have a dedicated team of jewelry specialists available to our customers through every step of their journey via chat, phone, email, virtual appointment, and in our showrooms.
We leverage data—including our own first-person customer data, revenue, e-commerce behavior, population and demographic data, and market growth—to inform our showroom real estate decisions.
Our recycled diamonds have been graded by an independent gemological lab and can be compared to newly mined diamonds for their quality characteristics. This product category is still nascent in the industry. Operations, Manufacturing and Fulfillment We manage complex global operations, manufacturing, and logistics networks to enable rapid turnaround times without compromising our commitment to quality, craftsmanship, and ethical sourcing.
Recycled Diamonds Recycled diamonds consist of existing polished diamonds that were previously sold and are either in original condition or were re-polished and re-graded. Our recycled diamonds have been graded by an independent gemological lab and can be compared to newly mined diamonds for their quality characteristics. This product category is still nascent in the industry.
Data-Driven Merchandising We thoughtfully curate our collections to offer beautiful and differentiated designs with broad appeal. Our data-driven merchandising strategy leverages our robust dataset, strong relationships with our customers, and highly engaged social media community to continuously uncover new insights and trends.
We also use a leading data visualization platform for real-time business intelligence across our teams to drive decision making and continuous improvement. Data-Driven Merchandising Our data-driven merchandising strategy leverages our robust dataset, strong relationships with our customers, and highly engaged social media community to continuously uncover new insights and trends.
Our made-to-order capabilities and virtual inventory model generat e attractive inventory turns and negative working capital, which we define as our current assets less cash minus our current liabilities. We have achieved strong financial performan ce 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 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.
Performance Marketing We take a data-driven and digital-centric approach to performance marketing including search engine optimization, paid search and product listing advertisements, paid and earned social, retargeting, email, display, direct mail, and more. We continuously track performance and make adjustments across channels, campaigns, and creative assets to optimize performance. Our performance marketing drives attractive customer acquisition and retention metrics.
Our marketing efforts deliver growing brand awareness and frequent press mentions in leading publications, including Forbes, Vogue, and Women's Wear Daily. Performance Marketing We take a data-driven and digital-centric approach to performance marketing including search engine optimization, paid search and product listing advertisements, paid and earned social, retargeting, email, display, direct mail, and more.
We host thousands of individual consultations per month, where we provide diamond and jewelry guidance and education in a relaxing environment, and we provide personalized product recommendations and styling advice for our customers. Jewelry specialists leverage our unified view of the customer to ensure a personalized experience and create a fun, approachable, and educational environment that fosters lasting connections.
We maintain a flexible and high utilization staffing model in which consultants can seamlessly support online customers when not in customer appointments. We host thousands of individual consultations per month, where we provide diamond and jewelry guidance and education in a relaxing environment, and we provide personalized product recommendations and styling advice for our customers.
Our limited owned-inventory and rapid cash cycle—where we are typically paid by our customers before we pay our suppliers—allow us to scale with limited capital outlays. Our showroom strategy generates highly favorable unit economics and avoids the inefficiencies of traditional jewelers that have too many physical stores, employees, and inventory.
Our showroom strategy generates highly favorable unit economics and avoids the inefficiencies of traditional jewelers that have too many physical stores, employees, and inventory. Our showrooms are appointment-driven with large catchment regions. We curate showroom inventory for scheduled visits and need limited inventory for each location.
We consider our commitment to inclusion integral to our company, helping to inform our product offerings and customer experience. Our Growth Strategies There is a significant growth opportunity ahead. We are less than one percent penetrated in the jewelry category today.
Our Growth Strategies We believe that there is a significant growth opportunity ahead in both new and existing markets and that we are less than one percent penetrated in the jewelry category today. Increase Brand Awareness Increasing brand awareness and growing favorable brand equity have been and remain central to our growth.
Marketing We employ a variety of dynamic brand marketing and performance marketing strategies to broaden our customer reach, build brand awareness, and maximize lifetime customer value. We use data-driven insights to produce targeted marketing content across a variety of mediums and optimize our marketing efficiency.
In addition, outbound initiatives such as proactive live chats and marketing emails to visit showrooms increase customer engagement and conversion. Marketing We employ a variety of dynamic brand marketing and performance marketing strategies to broaden our customer reach, build brand awareness, and maximize lifetime customer value.
Our precious metals are sourced from certified responsible refiners who also hold recycling certifications from the Responsible Jewellery Council or other third-party validation.
Our precious metals are sourced from certified responsible refiners who also hold recycling certifications from the Resp onsible Jewellery Council or other third-party validators. Currently our gold and silver fine jewelry is made primarily of repurposed materials, and we continue to work with our suppliers to increase the usage of repurposed metal in our products.
U.S. federal and state and foreign laws and regulations are constantly evolving. The scope and interpretation of these laws could change and the associated burdens and our compliance costs could increase in the future.
The scope and interpretation of these laws could change, the associated burdens and our compliance costs could increase in the future, and we may be subject to liabilities that adversely affect our business, operations and financial performance.
Our team serves customers across more than 50 countries on inquiries ranging from diamond education, style recommendations, jewelry care, and payment options. We maintain a flexible and high utilization staffing model in which specialists can seamlessly support online customers when not in customer appointments.
Jewelry Consultants We have a dedicated team of jewelry consultants available to our customers through every step of their journey via chat, phone, email, virtual appointment, and in our showrooms. Our team serves customers across more than 50 countries on inquiries ranging from diamond education, style recommendations, jewelry care, and payment options.
We are deeply committed to fostering an inclusive work environment, and we strive to embody our values through our internal practices. We are proud that women comprise majorities of our employees, senior executive team, and the Board. We believe that our diversity makes us a stronger company.
As of December 31, 2024, we employed 756 full-time employees and 17 part-time employees in the U.S. We are deeply committed to fostering an inclusive work environment, and we strive to embody our values through our internal practices.
In 2021, we launched our Moyo Gems Collection, which empowers female artisanal miners in Tanzania through safer work environments, better mining practices, and improved equity in fair trade markets. Recycled Diamonds Recycled diamonds consist of existing polished diamonds that were previously sold, and are either in original condition or were re-polished and re-graded.
In 2021, we launched our Moyo Gems Collection, which empowers female artisanal miners in Tanzania through safer work environments, better mining practices, and improved equity in fair trade markets and in 2022, we began a three year grant with our grant partners, Pact, to expand the Moyo Gems program into Kenya to fund financial literacy trainings for female artisanal gemstone miners.
We are continuously improving our processes and working with our partners toward ever more rigorous procedures for diamond sourcing and handling. Our goal is to work with our suppliers and industry partners to continue leading the diamond industry in traceability.
Our Beyond Conflict Free Diamonds ® are sourced from approved mines in countries ranked low to moderate risk according to the Gemstones and Jewellery Community Platform Index for Conflict-Affected High-Risk Areas. 15 Table of Contents We are continuously improving our processes and working with our partners toward ever more rigorous procedures for diamond sourcing and handling.
When not in appointment, our tech-enabled team of jewelry specialists supports online customers, maximizing workforce utilization. 11 Table of Contents Founder-Led and Diverse Leadership Team Committed to Inclusion We care deeply about diversity, equity, and inclusion. We are led by our chief executive officer (“CEO”) and co-founder Beth Gerstein.
When not in appointments, our tech-enabled team of jewelry consultants support online customers, maximizing workforce utilization. Founder-Led Team Committed to Inclusion We consider our commitment to inclusion integral to our company, helping to inform our product offerings and customer experience.
We have tens of thousands of customer interactions per month on average. We respond to most inbound inquiries within 24 hours. In addition, outbound initiatives such as proactive live chats and marketing emails to visit showrooms increase customer engagement and conversion.
Jewelry consultants leverage our unified view of each customer to cultivate a personalized experience and create a fun, approachable, and educational environment that fosters lasting connections. We have tens of thousands of customer interactions per month on average. We respond to most inbound inquiries within 24 hours.
They are highly active on social media, where many proposees look for engagement ring inspiration. While Millennial and Gen Z consumers appreciate digitally native brands, many also want an in-person experience where they can see, touch, and feel products, especially for a high value purchase.
As consumers continue to shift purchases online, we believe consumers seek authentic brands with a strong digital presence and an engaged community. They are highly active on social media, where many proposees look for engagement ring inspiration.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFor so long as we are an “emerging growth company,” we will, among other things: 57 Table of Contents • not be required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act; • not be required to hold a nonbinding advisory stockholder vote on executive compensation pursuant to Section 14A(a) of the Exchange Act; • not be required to seek stockholder approval of any golden parachute payments not previously approved pursuant to Section 14A(b) of the Exchange Act; • be exempt from the requirement of the Public Company Accounting Oversight Board, regarding the communication of critical audit matters in the auditor’s report on the financial statements; and • be subject to reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.
Biggest changeWe are subject to reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Additionally, our Beyond Conflict Free ™ Diamonds standards go beyond the Kimberly Process definition of “conflict free” diamonds, which limits our supply of ethically and environmentally sourced diamonds more than other fine jewelers. In addition, the lead times associated with certain materials are lengthy and may impede or preclude rapid changes in design, quantities, and delivery schedules.
Additionally, our Beyond Conflict Free ® standards go beyond the Kimberly Process definition of “conflict free” diamonds, which limits our supply of ethically and environmentally sourced diamonds more than other fine jewelers. In addition, the lead times associated with certain materials are lengthy and may impede or preclude rapid changes in design, quantities, and delivery schedules.
Our ability to grow our marketing efforts depends to a significant extent on our ability to expand our sales and marketing organization. We plan to continue expanding our sales force, an d may further expand internationally in the future. We also plan to dedicate significant resources to sales and marketing programs.
Our ability to grow our marketing efforts depends to a significant extent on our ability to expand our sales and marketing organization. We plan to continue expanding our sales force, an d may further expand internationally in the future. We also plan to continue to dedicate significant resources to sales and marketing programs.
The successful operation of our business as well as our ability to provide a positive shopping experience that will generate orders and drive subsequent visits depends on efficient and uninterrupted operation of our order-taking and fulfillment operations.
The successful operation of our business as well as our ability to provide a positive shopping experience that will generate orders and drive subsequent visits depends on the efficient and uninterrupted operation of our order-taking and fulfillment operations.
In addition, natural disasters such as hurricanes, tornadoes, earthquakes, or wildfires, or a combination of these or other factors, could damage or destroy our facilities or make it difficult for the salesforce or customers to travel our showrooms, thereby negatively affecting our business and results of operations.
In addition, natural disasters such as hurricanes, tornadoes, earthquakes, or wildfires, or a combination of these or other factors, could damage or destroy our facilities or make it difficult for the salesforce or customers to travel to our showrooms, thereby negatively affecting our business and results of operations.
The third-party providers provide the cloud computing infrastructure we use to host our website and mobile apps, serve our customers, and support our operations and many of the internal tools we use to operate our business. Our website, mobile apps, and internal tools use computing, storage, data transfer, and other functions and services provided by third parties.
The third-party providers provide the cloud computing infrastructure we use to host our website, serve our customers, and support our operations and many of the internal tools we use to operate our business. Our website, mobile apps, and internal tools use computing, storage, data transfer, and other functions and services provided by third parties.
For more information, see “—We rely heavily on our information technology systems, as well as those of our third-party vendors and service providers, for our business to effectively operate and to safeguard confidential information and any significant failure, inadequacy or interruption of these systems, security breaches or loss of data could materially adversely affect our business, financial condition and operations.” The third-party providers do not have an obligation to renew their agreements with us on terms acceptable to us or at all.
For more information, see “—We rely heavily on our information technology systems, as well as those of our third-party vendors and service providers, for our business to effectively operate and to safeguard confidential information and any significant failure, inadequacy or interruption of these systems, security breaches or loss of data could materially adversely affect our business, financial condition and operations.” Our third-party providers do not have an obligation to renew their agreements with us on terms acceptable to us or at all.
The price of shares of our Class A common stock has fluctuated in the past and may continue to fluctuate in response to a variety of factors, including the following: • technological developments and changes in consumer behavior in our industry; • security breaches related to our systems or those of our affiliates or strategic partners; • changes in general economic or market conditions or trends in our industry or the economy as a whole and, in particular, in the jewelry and consumer retail environment; • changes in market valuations of, or earnings and other announcements by, companies in our industry; • declines in the market prices of stocks generally, particularly those of jewelry and consumer retail; • strategic actions by us or our competitors; • announcements by us, our competitors or our strategic partners of significant contracts, new products, acquisitions, joint marketing relationships, joint ventures, other strategic relationships, or capital commitments; • changes in business or regulatory conditions; • future sales of our Class A common stock or other securities; • investor perceptions of the investment opportunity associated with our Class A common stock relative to other investment alternatives; • the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC; • announcements relating to litigation or increases in compliance or enforcement inquiries and investigations by regulatory authorities; • guidance, if any, that we provide to the public, any changes in this guidance, or our failure to meet this guidance; • changes in accounting principles; • short sales, hedging and other derivative transactions involving our common stock; and effects of recession or economic growth in the United States and abroad, rising high inflation and interest rates, bank failures, fuel prices, international currency fluctuations, corruption, political instability, acts of war, including the conflicts in Europe and the Middle East, acts of terrorism, an outbreak of highly infectious or contagious diseases, or responses to these events; and • the other factors described in this “Risk Factors” section of this Annual Report on Form 10-K.
The price of shares of our Class A common stock has fluctuated in the past and may continue to fluctuate in response to a variety of factors, including the following: • technological developments and changes in consumer behavior in our industry; • security breaches related to our systems or those of our affiliates or strategic partners; • changes in general economic or market conditions or trends in our industry or the economy as a whole and, in particular, in the jewelry and consumer retail environment; • changes in market valuations of, or earnings and other announcements by, companies in our industry; • declines in the market prices of stocks generally, particularly those of jewelry and consumer retail companies; • strategic actions by us or our competitors; • announcements by us, our competitors or our strategic partners of significant contracts, new products, acquisitions, joint marketing relationships, joint ventures, other strategic relationships, or capital commitments; • changes in business or regulatory conditions; • future sales of our Class A common stock or other securities; • investor perceptions of the investment opportunity associated with our Class A common stock relative to other investment alternatives; • the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC; • announcements relating to litigation or increases in compliance or enforcement inquiries and investigations by regulatory authorities; • guidance, if any, that we provide to the public, any changes in this guidance, or our failure to meet this guidance; • changes in accounting principles; • short sales, hedging and other derivative transactions involving our common stock; and effects of recession or economic growth in the United States and abroad, rising high inflation and interest rates, bank failures, 55 Table of Contents fuel prices, international currency fluctuations, corruption, political instability, acts of war, including the conflicts in Europe and the Middle East, acts of terrorism, an outbreak of highly infectious or contagious diseases, or responses to these events; and • the other factors described in this “Risk Factors” section of this Annual Report on Form 10-K.
If any of these events were to occur, our business, financial condition, and results of operations could be materially adversely affected. We occasionally receive orders placed with fraudulent credit card or other payment data, including stolen credit card numbers, or from clients who have closed bank accounts or have insufficient funds in open bank accounts to satisfy payment obligations.
If any of these events were to occur, our business, financial condition, and results of operations could be materially adversely affected. We occasionally receive orders placed with fraudulent credit cards or other payment data, including stolen credit card numbers, or from clients who have closed bank accounts or have insufficient funds in open bank accounts to satisfy payment obligations.
Moreover, even if more consumers begin to shop for fine jewelry online, if we are unable to address their changing needs and anticipate or respond to market trends and new technologies in a timely and cost-efficient manner, we could experience increased customer churn and other negative impacts on our business and results of operations.
Moreover, even as more consumers begin to shop for fine jewelry online, if we are unable to address their changing needs and anticipate or respond to market trends and new technologies in a timely and cost-efficient manner, we could experience increased customer churn and other negative impacts on our business and results of operations.
Overall growth of our net sales will depend on a number of factors, including our ability to: • price our products and services effectively so that we are able to attract new customers, expand our relationships with existing customers, and maintain or grow our gross profit margins; • accurately forecast our net sales and plan our operating expenses; • successfully compete with other companies that are currently in, or may in the future enter, the markets in which we compete, and respond to developments from these competitors such as pricing changes and the introduction of new products and services; • comply with laws and regulations applicable to our business; • successfully expand in existing markets and enter new markets, including new geographies and categories; 23 Table of Contents • successfully launch new offerings and enhance our products and services and their features, including in response to new trends or competitive dynamics or the needs or preferences of customers or potential customers; • successfully identify and acquire or invest in businesses, products, or technologies that we believe could complement or expand our business; • avoid interruptions or disruptions in distributing our products and services; • manage potential fluctuations in the supply or market conditions for natural or lab-grown diamonds and other inputs that could result in fluctuations in diamond prices and other input costs; • provide customers with high-quality support that meets their needs; • hire, integrate, and retain talented sales, customer service, and other personnel; • effectively manage growth of our business, personnel, and operations, including new showroom openings; • effectively manage our costs related to our business and operations; and • maintain and enhance our reputation and the value of our brand.
Overall growth of our net sales will depend on a number of factors, including our ability to: • price our products and services effectively so that we are able to attract new customers, expand our relationships with existing customers, and maintain or grow our gross profit margins; • accurately forecast our net sales and plan our operating expenses; • successfully compete with other companies that are currently in, or may in the future enter the markets in which we compete, and respond to developments from these competitors such as pricing changes and the introduction of new products and services; • comply with laws and regulations applicable to our business; • successfully expand in existing markets and enter new markets, including new geographies and categories; 23 Table of Contents • successfully launch new offerings and enhance our products and services and their features, including in response to new trends or competitive dynamics or the needs or preferences of customers or potential customers; • successfully identify and acquire or invest in businesses, products, or technologies that we believe could complement or expand our business; • avoid interruptions or disruptions in distributing our products and services; • manage potential fluctuations in the supply or market conditions for natural or lab-grown diamonds and other inputs that could result in fluctuations in diamond prices and other input costs; • provide customers with high-quality support that meets their needs; • hire, integrate, and retain talented sales, customer service, and other personnel; • effectively manage growth of our business, personnel, and operations, including new showroom openings; • effectively manage our costs related to our business and operations; and • maintain and enhance our reputation and the value of our brand, including our mission-centric approach.
We plan to expand showrooms in the U.S., which may expose us to significant risks. Our growth strategy includes opening new showrooms throughout the U.S. There can be no assurance that we will be able to successfully expand or acquire critical market presence for our brand in new geographical markets in the U.S .
We plan to continue to expand showrooms in the U.S., which may expose us to significant risks. Our growth strategy includes opening new showrooms throughout the U.S. There can be no assurance that we will be able to successfully expand or acquire critical market presence for our brand in new geographical markets in the U.S .
We do not have control over the operations of the facilities of the third-party providers that we use. The third-party providers’ facilities may be vulnerable to damage or interruption from earthquakes, hurricanes, floods, fires, cybersecurity attacks, terrorist attacks, power losses, telecommunications failures, and other events beyond our control.
We do not have control over the operations of the facilities of the third-party providers that we use. The third-party providers’ facilities may be vulnerable to damage or interruption from earthquakes, hurricanes, floods, droughts, fires, cybersecurity attacks, terrorist attacks, power losses, telecommunications failures, and other events beyond our control.
Conversely, if we underestimate future demand for a particular product or do not respond quickly enough to replenish our best performing products, we may have a shortfall in inventory of such products, likely leading to unfulfilled orders, reduced net sales, and customer dissatisfaction.
Conversely, if we underestimate future demand for a particular product or do not respond quickly enough to replenish our best performing products, we may have a shortfall in inventory of such products, likely leading to unfulfilled orders, reduced net sales and profitability, and customer dissatisfaction.
The Company’s failure to identify climate and other environmental risks, to mitigate these risks, or to meet consumer expectations regarding sustainability may adversely affect our ability to attract and retain top talent, negatively impact our reputation and consumer loyalty, disrupt our supply chain, and result in lost sales.
The Company’s failure to identify climate and other environmental risks, to mitigate these risks, or to meet consumer expectations regarding sustainability may adversely affect our ability to attract and retain top talent, negatively impact our reputation and consumer loyalty, disrupt our supply chain, and result in lost sales and profits.
As a result, any decisions made to restrict the supply of rough diamonds by these firms to our suppliers of Beyond Conflict Free TM Diamonds could substantially impair our ability to acquire such diamonds at commercially reasonable prices, if at all. Generally, diamond prices depend on the attributes of the diamond.
As a result, any decisions made to restrict the supply of rough diamonds by these firms to our suppliers of Beyond Conflict Free Diamonds ® could substantially impair our ability to acquire such diamonds at commercially reasonable prices, if at all. Generally, diamond prices depend on the attributes of the diamond.
These provisions provide for, among other things: • a classified board of directors with staggered three-year terms; • the ability of our Board to issue one or more series of preferred stock; • at any time when Mainsail and our Founders beneficially own, in the aggregate, at least a majority of the voting power of our outstanding capital stock, our stockholders may take action by consent without a meeting, and at any time when Mainsail and our Founders beneficially own, in the aggregate, less than the majority of the voting power of our outstanding capital stock, our stockholders may not take action by consent, but may only take action at a meeting of stockholders; • vacancies on our Board will be able to be filled only by our Board and not by stockholders, subject to the rights granted pursuant to the stockholders agreement; 56 Table of Contents • advance notice procedures apply for stockholders (other than the parties to our stockholders agreement for nominations made pursuant to the terms of the stockholders agreement) to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders; • the inability of our stockholders to call a special meeting of stockholders; • prohibit cumulative voting in the election of directors; • at any time when Mainsail and our Founders beneficially own, in the aggregate, at least a majority of the voting power of our outstanding capital stock, directors may be removed at any time with or without cause upon the affirmative vote of the holders of capital stock representing a majority of the voting power of our outstanding shares of capital stock entitled to vote thereon, and at any time when Mainsail and our Founders beneficially own, in the aggregate, less than the majority of the voting power of our outstanding shares of capital stock entitled to vote generally in the election of directors, in the aggregate, directors may only be removed for cause and only upon the affirmative vote of at least 66 2/3% of the holders of capital stock representing the voting power of our outstanding shares of capital stock entitled to vote thereon; and • that certain provisions of amended and restated certificate of incorporation may be amended only by the affirmative vote of at least 66 2/3% of the voting power represented by our then-outstanding common stock.
These provisions provide for, among other things: • a classified board of directors with staggered three-year terms; • the ability of our Board to issue one or more series of preferred stock; • at any time when Mainsail and our Founders beneficially own, in the aggregate, at least a majority of the voting power of our outstanding capital stock, our stockholders may take action by consent without a meeting, and at any time when Mainsail and our Founders beneficially own, in the aggregate, less than the majority of the voting power of our outstanding capital stock, our stockholders may not take action by consent, but may only take action at a meeting of stockholders; • vacancies on our Board will be able to be filled only by our Board and not by stockholders, subject to the rights granted pursuant to the stockholders agreement; • advance notice procedures apply for stockholders (other than the parties to our stockholders agreement for nominations made pursuant to the terms of the stockholders agreement) to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders; • the inability of our stockholders to call a special meeting of stockholders; • prohibit cumulative voting in the election of directors; • at any time when Mainsail and our Founders beneficially own, in the aggregate, at least a majority of the voting power of our outstanding capital stock, directors may be removed at any time with or without cause upon the affirmative vote of the holders of capital stock representing a majority of the voting power of our outstanding shares of capital stock entitled to vote thereon, and at any time when Mainsail and our Founders beneficially own, in the aggregate, less than the majority of the voting power of our outstanding shares of capital stock entitled to vote generally in the election of directors, in the aggregate, directors may only be removed for cause and only upon the affirmative vote of at least 66 2/3% of the holders of capital stock representing the voting power of our outstanding shares of capital stock entitled to vote thereon; and • that certain provisions of amended and restated certificate of incorporation may be amended only by the affirmative vote of at least 66 2/3% of the voting power represented by our then-outstanding common stock.
The risks we face in connection with acquisitions include: • an acquisition may negatively affect our financial results because it may require us to incur charges or assume substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may expose us to claims and disputes by stockholders and third parties, including intellectual property claims and disputes, may not generate sufficient financial return to offset additional costs and expenses related to the acquisition, or may not perform as well financially as expected; • we may encounter difficulties or unforeseen expenditures in integrating the business, offerings, technologies, personnel, or operations of any company that we acquire, particularly if key personnel of the acquired company decide not to work for us; • an acquisition may disrupt our ongoing business, divert resources, increase our expenses, and distract our management; • an acquisition may result in a delay or reduction of customer purchases for both us and the company acquired due to customer uncertainty about continuity and effectiveness of service from either company; • we may encounter difficulties in, or may be unable to, successfully sell any acquired products; • our use of cash to pay for an acquisition would limit other potential uses for our cash; 36 Table of Contents • if we incur debt to fund such acquisition, such debt may subject us to material restrictions on our ability to conduct our business, as well as financial maintenance covenants; and • if we issue a significant amount of equity securities in connection with future acquisitions, existing stockholders may be diluted and earnings per share may decrease.
The risks we face in connection with acquisitions include: • an acquisition may negatively affect our financial results because it may require us to incur charges or assume substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may expose us to claims and disputes by stockholders and third parties, including intellectual property claims and disputes, may not generate sufficient financial return to offset additional costs and expenses related to the acquisition, or may not perform as well financially as expected; • we may encounter difficulties or unforeseen expenditures in integrating the business, offerings, technologies, personnel, or operations of any company that we acquire, particularly if key personnel of the acquired company decide not to work for us; • an acquisition may disrupt our ongoing business, divert resources, increase our expenses, and distract our management from other business concerns; • an acquisition may result in a delay or reduction of customer purchases for both us and the company acquired due to customer uncertainty about continuity and effectiveness of service from either company; • we may encounter difficulties in, or may be unable to, successfully sell any acquired products; • our use of cash to pay for an acquisition would limit other potential uses for our cash; • if we incur debt to fund such acquisition, such debt may subject us to material restrictions on our ability to conduct our business, as well as financial maintenance covenants; and • if we issue a significant amount of equity securities in connection with future acquisitions, existing stockholders may be diluted and earnings per share may decrease.
In addition, we may from time to time choose to hold more inventory, purchase raw materials at an earlier stage in the supply chain, or enter into commercial agreements of a nature that we currently do not use.
We may from time to time choose to hold more inventory, purchase raw materials at an earlier stage in the supply chain, or enter into commercial agreements of a nature that we currently do not use.
Unfavorable publicity about our brand or products, including perceived quality and safety, customer service, or privacy practices, whether true or untrue, could also harm our reputation and diminish confidence in, and the popularity of, our products and services.
Unfavorable publicity about our brand or products, including perceived quality, customer service, or privacy practices, whether true or untrue, could also harm our reputation and diminish confidence in, and the popularity of, our products and services.
In addition, we may have to upgrade our existing IT Systems or choose to incorporate new technology systems from time to time for such systems to support the increasing needs of our expanding business.
In addition, we may have to upgrade or replace our existing IT Systems or choose to incorporate new technology systems from time to time for such systems to support the increasing needs of our expanding business.
Risks Related to Our Business and Industry 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, which account for the majority of our merchandise costs, increases in labor costs for manufacturing such as wage rate increases, as well as inflation, and energy prices could adversely impact our sales, earnings and cash availability.
Risks Related to Our Business and Industry Fluctuations in the pricing and supply of diamonds, other gemstones, and precious metals, particularly responsibly sourced natural and lab-grown diamonds and repurposed precious metals such as gold, which account for the majority of our merchandise costs, increases in labor costs for manufacturing such as wage rate increases, as well as inflation, and energy prices could adversely impact our sales, earnings and cash availability.
If passed, we may incur additional expenses and costs associated with complying with such laws, as well as face heightened potential liability if we are unable to comply with these laws.
We may incur additional expenses and costs associated with complying with such laws, as well as face heightened potential liability if we are unable to comply with these laws.
A loss of any of these partners could negatively affect our business. We rely on a limited number of contract manufacturers and logistics partners to manufacture and transport our products.
We rely on a limited number of contract manufacturers and logistics partners for our products. A loss of any of these partners could negatively affect our business. We rely on a limited number of contract manufacturers and logistics partners to manufacture and transport our products.
These requirements may not always be uniform across jurisdictions, which may result in increased complexity, and cost, for compliance. Separately, various regulators have adopted, or are considering adopting, regulations on environmental marketing claims, including but not limited to the use of “sustainable”, “eco-friendly”, “organic”, “recyclable” or similar language in product marketing.
Environmental disclosure requirements may not always be uniform across jurisdictions, which may result in increased complexity, and cost, for compliance. Separately, various regulators have adopted, or are considering adopting, regulations on environmental marketing claims, including but not limited to the use of “sustainable”, “eco-friendly”, “organic”, “recyclable” or similar language in product marketing.
In addition, our IT Systems and those of our third-party service providers and business partners may be vulnerable to data breaches, cyberattacks, phishing, social engineering, ransomware, and other security incidents compromising the confidentiality, integrity, and availability of our IT Systems and Confidential Information, acts of vandalism, computer viruses and malware, malicious code embedded in open-source software, or misconfigurations, "bugs" or other vulnerabilities in commercial software that is integrated into our (or our suppliers' or service providers') IT systems, products or services, errors or malfeasance of personnel, security vulnerabilities in the software or systems 29 Table of Contents on which we rely, or other similar events.
In addition, our IT Systems and those of our third-party service providers and business partners may be vulnerable to data breaches, cyberattacks, phishing, social engineering, ransomware, and other security incidents compromising the confidentiality, integrity, and availability of our IT Systems and Confidential Information, acts of vandalism, computer viruses and malware, malicious code embedded in open-source software, or misconfigurations, "bugs" or other vulnerabilities in commercial software that is integrated into our (or our suppliers' or service providers') IT systems, products or services, errors or malfeasance of personnel, security vulnerabilities in the software or systems on which we rely, or other similar events.
Changes in weather patterns and an increased frequency, intensity and duration of extreme weather events (such as floods, droughts, wildfires and severe storms) could, among other things, disrupt the operation of our supply chain, disrupt retail operations and foot traffic at our showrooms, damage or destroy our showrooms, cause shipping delays, and increase our product costs.
Changes in weather patterns and an increased frequency, intensity and duration of extreme weather events (such as floods, droughts, hurricanes, earthquakes, wildfires, and severe storms) could, among other things, disrupt the operation of our supply chain, disrupt retail operations and foot traffic at our showrooms, damage or destroy our showrooms, cause shipping delays, and increase our product costs.
We are building and improving machine learning models and other technological capabilities to drive improved customer experience, as well as efficiencies in our operati ons, such as virtual try-ons, vir tual appointments with jewelry specialists, optimized payment processing and customer service, and automated key support workflows.
We are building and improving machine learning models and other technological capabilities to drive improved customer experience, as well as efficiencies in our operati ons, such as virtual try-ons, vir tual appointments with jewelry consultants, optimized payment processing and customer service, and automated key support workflows.
Our sourcing operations may also be hurt by health concerns regarding infectious diseases in countries in which our resources are produced. Moreover, negative press or reports about internationally sourced resources may sway public opinion, and thus customer confidence, away from the products sold in our stores.
Our sourcing operations may also be impaired by health concerns regarding infectious diseases in countries in which our resources are produced. Moreover, negative press or reports about internationally sourced resources may sway public opinion, and thus customer confidence, away from the products sold in our stores.
There could also be a lag time before particularly sharp increases or other volatility in diamond, gemstones, and precious metal costs can be reflected in retail prices. Even if price changes are implemented, there is no certainty that these changes will be sustainable or sufficient.
There could also be a lag time before particularly sharp increases or other volatility in diamonds, gemstones, and precious metal costs can be reflected in retail prices. Even if price changes are implemented, there is no certainty that these changes will be sustainable or sufficient.
Additionally, our litigation costs could be significant. Adverse outcomes with respect to litigation or any of these legal proceedings may result in significant settlement costs or judgments, penalties and fines, or require us to modify our products or services, all of which could negatively affect our revenue growth.
Adverse outcomes with respect to litigation or any of these legal proceedings may result in significant settlement costs or judgments, penalties and fines, or require us to modify our products or services, all of which could negatively affect our revenue growth.
Risks associated with our e-commerce and omnichannel business include: • uncertainties associated with our technology platforms and websites, including changes in required technology interfaces, website downtime, and other technical failures, costs, and technical issues as we upgrade our website software, inadequate system capacity, computer viruses, human error, security breaches, legal claims related to our website operations, and e-commerce fulfillment; • disruptions in internet service or power outages; • reliance on third parties for computer hardware and software, as well as delivery of merchandise to our customers; • rapid technology changes; • credit or debit card fraud and other payment processing related issues; • changes in applicable federal, state, and international regulations; • liability for online content; • cybersecurity and data privacy concerns and regulations; and • natural disasters or adverse weather conditions.
Risks associated with our e-commerce and omnichannel business include: • uncertainties associated with our technology platforms and websites, including changes in required technology interfaces, website downtime, and other technical failures, costs, and technical issues as we upgrade our website software, inadequate system capacity, computer viruses, human error, security breaches, legal claims related to our website operations, and e-commerce fulfillment; • disruptions in internet service or power outages; • reliance on third parties for computer hardware and software, as well as delivery of merchandise to our customers; • rapid technological changes; • credit or debit card fraud and other payment processing related issues; • changes in applicable federal, state, and international regulations; • liability for online content; • cybersecurity and data privacy concerns and regulations; and • natural disasters or adverse weather conditions, exacerbated by climate change.
We do not have long-term arrangements with most of our materials suppliers, and disruptions in the supply chain, have affected, and may in the future affect the availability and cost of recycled precious metal, Beyond Conflict Free ™ Diamonds, and other materials used in our products.
We do not have long-term arrangements with most of our materials suppliers, and disruptions in the supply chain, have affected, and may in the future affect the availability and cost of repurposed precious metal, Beyond Conflict Free Diamonds ® , and other materials used in our products.
W e intend, as its managing member, to cause Brilliant Earth, LLC to make cash distributions to the holders of LLC Interests in an amount sufficient to (1) fund all or part of their tax obligations in respect of taxable 50 Table of Contents income allocated to them and (2) cover our operating expenses, including payments under the Tax Receivable Agreement.
W e intend, as its managing member, to cause Brilliant Earth, LLC to make cash distributions to the holders of LLC Interests in an amount sufficient to (1) fund all or part of their tax obligations in respect of taxable income allocated to them and (2) cover our operating expenses, including payments under the Tax Receivable Agreement.
To effectively manage and capitalize on our growth, we must continue to expand our sales and marketing, continue to evolve our omnichannel experience across both our website and showroom locations, focus on innovativ e product, and upgrade our management information systems and other processes.
To effectively manage and capitalize on our growth, we must continue to expand our sales and marketing, continue to evolve our omnichannel experience across both our website and showroom locations, focus on innovativ e products, and upgrade our management information systems and other processes.
If we hire employees from competitors or other companies, their former employers may attempt to assert that these employees or we have breached various legal obligations, resulting in a diversion of our time and resources. In addition, prospective and existing employees often consider the value of the equity awards they receive in connection with their employment.
If we hire employees from competitors or other companies, their former employers may attempt to assert that these employees or we have breached various legal obligations, resulting in a diversion of our time and resources. In addition, prospective and existing employees often consider the 36 Table of Contents value of the equity awards they receive in connection with their employment.
In Canada, where we operate, PIPEDA, and various provincial laws require that companies give detailed privacy notices to consumers, obtain consent to use personal information, with limited exceptions, allow individuals to access and correct their personal information, and report certain data breaches. In addition, Canada’s Anti-Spam Legislation (“CASL”) prohibits email marketing without the recipient’s consent, with limited exceptions.
In Canada, PIPEDA, and various provincial laws require that companies give detailed privacy notices to consumers, obtain consent to use personal information, with limited exceptions, allow individuals to access and correct their personal information, and report certain data breaches. In addition, Canada’s Anti-Spam Legislation (“CASL”) prohibits email marketing without the recipient’s consent, with limited exceptions.
Similarly, we craft our gold and silver fine jewelry from primarily recycled precious metals, and we work with our suppliers to source recycled platinum when available and from refiners that are known to use recycled materials in their platinum products.
Similarly, we craft our gold and silver fine jewelry from primarily repurposed precious metals, and we work with our suppliers to source repurposed platinum when available and from refiners that are known to use repurposed materials in their platinum products.
To the extent that we are unable to make timely payments under the Tax Receivable Agreement 51 Table of Contents for any reason, the unpaid amounts 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 Tax Receivable Agreement resulting in the acceleration of payments due under the Tax Receivable Agreement.
To the extent that we are unable to make timely payments under the Tax Receivable Agreement for any reason, the unpaid amounts 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 Tax Receivable Agreement resulting in the acceleration of payments due under the Tax Receivable Agreement.
Any of the foregoing may require us to make additional investments in facilities and equipment, require us to incur additional costs for the collection of data and/or preparation of disclosures and associated internal controls, may impact the availability and cost of key raw materials used in the production of our products or the demand for our products, and, in turn, may adversely impact our business, operating results, and financial condition.
Any of the foregoing may require us to make additional investments in facilities and equipment, require us to incur additional 31 Table of Contents costs for the collection of data and/or preparation of disclosures and associated internal controls, may impact the availability and cost of key raw materials used in the production of our products or the demand for our products, and, in turn, may adversely impact our business, operating results, and financial condition.
In addition, in order to prepare for our peak shopping quarters, we must increase the staffing at our showrooms and order and keep in stock more merchandise than we carry during other parts of the year. This staffing increase and inventory build-up may require us to expend cash faster than is generated by our operations during these periods.
In ad dition, in order to prepare for our peak shopping quarters, we must increase the staffing at our showrooms and order and keep in stock more merchandise than we carry during other parts of the year. This staffing increase and inventory build-up may require us to expend cash faster than is generated by our operations during these periods.
Our business is subject to rapidly changing consumer preferences and future sales may suffer if the consumer preferences shift away from our product offerings or styles. Changes in fashion could also affect the popularity and, therefore, the value of engagement rings and fine jewelry designs and 32 Table of Contents products as well as diamonds and gemstones.
Our business is subject to rapidly changing consumer preferences and future sales may suffer if the consumer preferences shift away from our product offerings or styles. Changes in fashion could also affect the popularity and, therefore, the value of engagement rings and fine jewelry designs and products as well as diamonds and gemstones.
If any of our infrastructure providers increase the costs of their services, our business, financial condition, or results of operations could be materially and adversely affected. We rely on our suppliers, third-party carriers, and third-party jewelers as part of our fulfillment process, and these third parties may fail to adequately serve our customers.
If any of our infrastructure providers increase the costs of their services, our business, financial condition, or results of operations could be materially and adversely affected. 48 Table of Contents We rely on our suppliers, third-party carriers, and third-party jewelers as part of our fulfillment process, and these third parties may fail to adequately serve our customers.
For example, from July 2017 to April 2023, S&P Dow 55 Table of Contents Jones excluded companies with multiple share classes from the S&P Composite 1500 (composed of the S&P 500, S&P MidCap 400, and S&P SmallCap 600). Indices have discretion to reassess and implement such policies with respect to multi-class differing voting right structures.
For example, from July 2017 to April 2023, S&P Dow Jones excluded companies with multiple share classes from the S&P Composite 1500 (composed of the S&P 500, S&P MidCap 400, and S&P SmallCap 600). Indices have discretion to reassess and implement such policies with respect to multi-class differing voting right structures.
Such actions could require the investment of cash and/or additional management skills and may not resolve supply issues or result in the expected returns and other projected benefits anticipated by management. An inability to increase retail prices to reflect higher diamond, gemstone, or precious metal costs would result in lower profitability.
Such actions could require the investment of significant cash and/or additional management skills and may not resolve supply issues or result in the expected returns and other projected benefits anticipated by management. Our inability to increase retail prices to reflect higher diamond, gemstone, or precious metal costs would result in lower profitability.
Federal and state consumer protection laws and regulations may apply to our operations and retail offers.
Federal, state and international consumer protection laws and regulations may apply to our operations and retail offers.
Additionally, many of our suppliers and business partners may be subject to similar requirements, which may augment or create additional risks, including risks that may not be known to us. 31 Table of Contents Further, our emphasis on ESG issues may not maximize short-term financial results and may yield financial results that conflict with the market’s expectations.
Additionally, many of our suppliers and business partners may be subject to similar requirements, which may augment or create additional risks, including risks that may not be known to us. Further, our emphasis on ESG issues may not maximize short-term financial results and may yield financial results that conflict with the market’s expectations.
The terms of existing or future debt instruments may restrict us from adopting some of these alternatives. Any failure to make payments of interest and principal on our outstanding 37 Table of Contents indebtedness on a timely basis or failure to comply with certain restrictions in our debt instruments would result in a default under our debt instruments.
The terms of existing or future debt instruments may restrict us from adopting some of these alternatives. Any failure to make payments of interest and principal on our outstanding indebtedness on a timely basis or failure to comply with certain restrictions in our debt instruments would result in a default under our debt instruments.
In addition, international supply chains may be impacted by events outside of our control and limit our ability to procure timely delivery of supplies or finished goods and services.
In addition, international supply chains may be impacted by events outside of our control and limit our ability to cost-effectively procure timely delivery of supplies or finished goods and services.
The terms of such a settlement or judgment may require us to cease some or all of our operations or pay substantial amounts to the other 41 Table of Contents party. Even if we have an agreement to indemnify us against such costs, the indemnifying party may be unable or unwilling to uphold its contractual obligations.
The terms of such a settlement or judgment may require us to cease some or all of our operations or pay substantial amounts to the other party. Even if we have an agreement to indemnify us against such costs, the indemnifying party may be unable or unwilling to uphold its contractual obligations.
General Data Protection Regulation and Data Protection Act 2018 (the “U.K. GDPR” and together with the EU GDPR, the “GDPR”). The GDPR imposes strict requirements on controllers and processors of personal data. The GDPR also provides individuals with various rights in respect of their personal data, including rights of access, erasure, portability, rectification, restriction, and objection. In addition, the E.U.
General Data Protection Regulation and Data Protection Act 2018 (the “U.K. GDPR” and together with the EU GDPR, the “GDPR”). The GDPR imposes strict requirements on controllers and processors of personal data. The GDPR also provides individuals with various rights in respect of their personal data, including rights of access, erasure, portability, rectification, restriction, and objection.
To the extent such vertical integration efforts are successful, some of the fragmentation in the existing diamond supply chain could be eliminated, our ability to obtain an adequate supply of diamonds and fine jewelry from multiple sources could be limited, and our competitors may be able to obtain diamonds at lower prices.
To the extent 47 Table of Contents such vertical integration efforts are successful, some of the fragmentation in the existing diamond supply chain could be eliminated, our ability to obtain an adequate supply of diamonds and fine jewelry from multiple sources could be limited, and our competitors may be able to obtain diamonds at lower prices.
Such interruptions may be due to, among other things, 48 Table of Contents temporary closures of our facilities or those of our contract manufacturers, and other vendors in our supply chain; restrictions on travel or the import/export of goods and services from certain ports that we use; and local quarantines.
Such interruptions may be due to, among other things, temporary closures of our facilities or those of our contract manufacturers, and other vendors in our supply chain; restrictions on travel or the import/export of goods and services from certain ports that we use; and local quarantines.
Any changes in U.S. or foreign taxation may increase our worldwide effective tax rate and harm our business, financial condition, and results of operations. In particular, new income or other tax laws or regulations could be 53 Table of Contents enacted at any time, which could adversely affect our business operations and financial performance.
Any changes in U.S. or foreign taxation may increase our worldwide effective tax rate and harm our business, financial condition, and results of operations. In particular, new income or other tax laws or regulations could be enacted at any time, which could adversely affect our business operations and financial performance.
If unauthorized parties gain access to our networks or databases, or those of our third-party service providers or business partners, they may be able to steal, publish, delete, use inappropriately, or modify information we process, including credit card information and personal identification information.
If unauthorized parties gain access to our networks or databases, or those of our third-party service providers or business partners, they may be able to steal, publish, delete, use inappropriately, or modify information we process, including credit card information and personal identification 29 Table of Contents information.
These antitakeover provisions could make it more difficult for a third party to acquire us, even if the third party’s offer may be considered beneficial by many of our stockholders. As a result, our stockholders may be limited in their ability to obtain a premium for their shares.
These anti-takeover provisions could make it more difficult for a third party to acquire us, even if the third party’s offer may be considered beneficial by many of our stockholders. As a result, our stockholders may be limited in their ability to obtain a premium for their shares.
This means that in the event of a security breach we could face government scrutiny, regulatory fines, remediation costs, or consumer class actions alleging statutory damages amounting to hundreds of millions, and possibly billions of U.S. dollars.
This means that in the event of a security breach we could face government scrutiny, regulatory 30 Table of Contents fines, remediation costs, or consumer class actions alleging statutory damages amounting to hundreds of millions, and possibly billions of U.S. dollars.
These laws and regulations, which may be mandatory, have the potential to impact our operations indirectly as a result of required compliance by our suppliers.
These laws and regulations, which may be mandatory, have the potential to impact our operations directly or indirectly as a result of required compliance by our suppliers.
The price of fine jewelry relative to other products also influences consumer spending habits for fine jewelry. 25 Table of Contents Many of our competitors have greater financial and operational resources, longer operating histories, greater brand recognition, and broader geographic presence than we do.
The price of fine jewelry relative to other products also influences consumer spending habits for fine jewelry. Many of our competitors have greater financial and operational resources, longer operating histories, greater brand recognition, and broader geographic presence than we do.
If we fail to maintain, protect, and enhance our brand successfully or to maintain loyalty among customers, or if we incur substantial expenses in unsuccessful attempts to maintain, protect, and enhance our brand, we may fail to attract or increase the engagement of customers, and our business, financial condition, and results of operations may suffer.
If we fail to maintain, protect, and enhance our brand successfully or to maintain loyalty among customers, or if we incur substantial expenses in unsuccessful attempts to maintain, protect, 26 Table of Contents and enhance our brand, we may fail to attract or increase the engagement of customers, and our business, financial condition, and results of operations may suffer.
For example, we may be subject to the requirements of the European Union Corporate Sustainability Reporting Directive and its implementing laws and regulations and other European Union directives or European Union and European Union member state regulations, various disclosure requirements (such as information on greenhouse gas emissions, climate risks, use of offsets, and emissions reduction claims) from the State of California as well as the SEC’s climate disclosure rules, among other regulations or requirements.
For example, we may be subject to the requirements of the European Union Corporate Sustainability Reporting Directive (“CSRD”) and its implementing laws and regulations and other directives, regulations, disclosure requirements (such as information on greenhouse gas emissions, climate risks, use of offsets, and emissions reduction claims) such as the State of California as well as the SEC’s climate disclosure rules, among other regulations or requirements.
The benefits we currently experience from our supplier relationships could be adversely affected if our suppliers: • discontinue selling resources to us; • enter into arrangements with competitors that could impair our ability to source their products, including by giving our competitors exclusivity arrangements or limiting our access to certain resources; • raise the prices they charge us; • change pricing terms to require us to pay on delivery or upfront, including as a result of changes in the credit relationships some of our suppliers have with their various lending institutions; or • lengthen their lead times.
The benefits we currently experience from our supplier relationships could be adversely affected if our suppliers: • discontinue selling resources to us; • enter into arrangements with competitors that could impair our ability to source their products, including by giving our competitors exclusivity arrangements or limiting our access to certain resources; • fail to source ethically or responsibly according to our established guidelines; • raise the prices they charge us; • change pricing terms to require us to pay on delivery or upfront, including as a result of changes in the credit relationships some of our suppliers have with their various lending institutions; or • lengthen their lead times.
Furthermore, Our Beyond Conflict Free TM Diamonds are sourced from a select group of diamond suppliers with a robust chain of 46 Table of Contents custody protocol for their diamonds and are required to source diamonds that originate from specific mine operations or specific countries that have demonstrated their commitment to follow internationally recognized labor, trade, and environmental standards.
Furthermore, Our Beyond Conflict Free Diamonds ® are sourced from a select group of diamond suppliers with a robust chain of custody protocol for their diamonds and are required to source diamonds that originate from specific mine operations or specific countries that have demonstrated their commitment to follow internationally recognized labor, trade, and environmental standards.
Our e-commerce and omnichannel business faces distinct risks, and our failure to successfully manage those risks could have a negative impact on our profitability. As an e-commerce and omnichannel retailer, we encounter risks and difficulties frequently experienced by internet-based businesses.
Our e-commerce and omnichannel business face distinct risks, and our failure to successfully manage those risks could have a negative impact on our sales and profitability. As an e-commerce and omnichannel retailer, we encounter risks and difficulties frequently experienced by internet-based businesses.
If we fail to comply with existing or future laws or regulations, or if these laws or regulations are violated by importers, manufacturers, or distributors, we may be subject to governmental or judicial fines or sanctions, while incurring substantial legal fees and costs.
If we fail to comply with existing or future laws or regulations, or if these laws or regulations are violated by importers, manufacturers, or distributors, we may be subject to governmental, regulatory or judicial fines, sanctions or corrective measures, while incurring substantial legal fees and costs.
We can be held liable for the corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize such activities.
We can be 45 Table of Contents held liable for the corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize such activities.
Bribery Act”), by us, our employees, and our business partners; • complexity and other risks associated with current and future legal requirements in other countries, including legal requirements related to consumer protection, consumer product safety, and data privacy 34 Table of Contents frameworks, such as the Personal Information Protection and Electronic Documents Act (“PIPEDA”), the U.K.
Bribery Act”), by us, our employees, and our business partners; • complexity and other risks associated with current and future legal requirements in other countries, including legal requirements related to consumer protection, consumer product safety, and data privacy frameworks, such as the Personal Information Protection and Electronic Documents Act (“PIPEDA”), the U.K.
Litigation may be necessary in the future to enforce our intellectual property rights and to protect our trade secrets. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming, and distracting to management, and could result in the impairment or loss of portions of 40 Table of Contents our intellectual property.
Litigation may be necessary in the future to enforce our intellectual property rights and to protect our trade secrets. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming, and distracting to management, and could result in the impairment or loss of portions of our intellectual property.
Any challenge to our intellectual property rights could result in them being narrowed in scope or declared invalid or unenforceable. We do not currently own any issued patents, and even if we seek patent protection in the future, we may be unable to obtain or maintain such protection.
Any challenge to our intellectual property rights 40 Table of Contents could result in them being narrowed in scope or declared invalid or unenforceable. We do not currently own any issued patents, and even if we seek patent protection in the future, we may be unable to obtain or maintain such protection.
Although we will retain 15% of the amount of such tax benefits, this and other aspects of our organizational structure may adversely impact the future trading market for our Class A common stock.
Although we will retain 15% of the amount of such tax benefits, 52 Table of Contents this and other aspects of our organizational structure may adversely impact the future trading market for our Class A common stock.
We have grown rapidly over the last several years, and our recent growth rates and financial performance should not necessarily be considered indicative of our future performance. We were founded in 2005 and since then, we have grown to 37 showrooms across the U.S. as of December 31, 2023.
We have grown rapidly over the last several years, and our recent growth rates and financial performance should not necessarily be considered indicative of our future performance. We were founded in 2005 and since then, we have grown to 40 showrooms across the U.S. as of December 31, 2024.
The order seeks to balance innovation with addressing risks associated with AI by providing eight guiding principles and priorities, such as ensuring that consumers are protected from fraud, discrimination and privacy risks related to AI. Legislation has also been promulgated on the state level.
The order seeks to balance innovation with addressing risks associated 44 Table of Contents with AI by providing eight guiding principles and priorities, such as ensuring that consumers are protected from fraud, discrimination and privacy risks related to AI. Legislation has also been promulgated on the state level.
In addition, privacy advocates and industry groups have regularly proposed, and may propose in the future, self-regulatory standards by which we are legally or contractually bound. If we fail to comply with these contractual 43 Table of Contents obligations or standards, we may face substantial liability or fines.
In addition, privacy advocates and industry groups have regularly proposed, and may propose in the future, self-regulatory standards by which we are legally or contractually bound. If we fail to comply with these contractual obligations or standards, we may face substantial liability or fines.
Increased lead times, supply shortages, and supply changes could disrupt our business and have an adverse effect on our operations, financial condition, and results. Meeting customer demand partially depends on our ability to obtain timely and adequate delivery of materials for our products and services.
Increased lead times, supply shortages, and changes in our supply chain, including increased costs, could disrupt our business and have an adverse effect on our operations, financial condition, and results. Meeting customer demand partially depends on our ability to obtain timely and adequate delivery of materials for our products and services.
We can give no assurance that our efforts will remediate the material weakness in our internal control over financial reporting, or that additional material weaknesses will not be identified in the future.
We can give no assurance that our efforts will remediate the material weakness in our internal control over financial reporting, or that additional material weaknesses will not be identified in the future or that we will be able to remediate such material weaknesses identified.
The CCPA imposes obligations on businesses that process personal information of California residents. The enactment of the CCPA is prompting a wave of similar legislative developments in other states in the United States, which creates the potential for a patchwork of overlapping but different state laws.
The CCPA, for example, imposes obligations on businesses that process personal information of California residents. The enactment of the CCPA prompted a wave of similar legislative developments in other states in the United States, which creates the potential for a patchwork of overlapping but different state laws.
While we expect these technologies to lead to improvements in the performance of our business and operations, including inventory prediction and customer traffic prediction and management, any flaws or failures of such technologies could cause interruptions or delays in our service, which could result in customer dissatisfaction with us and could impair our ability to grow our customer base, which may harm our business, financial condition, and results of operations.
While we expect these technologies to lead to improvements in the performance of our business and operations, including inventory prediction and customer traffic prediction and management, any flaws or failures of such technologies could cause interruptions or delays in our service, which could result in customer dissatisfaction with us and could impair our ability to grow our customer base.
Despite our efforts to comply with all applicable data protection laws and regulations, our interpretations of such laws and regulations and such measures to comply therewith may have been or may prove to be insufficient or incorrect, and we may not be successful in achieving compliance with the rapidly evolving privacy, data security, and data protection requirements discussed above.
Despite our efforts to comply with all applicable data protection laws and regulations and the associated laws on cookies and tracking technologies, our interpretations of such laws and regulations and such measures to comply therewith may have been or may prove to be insufficient or incorrect, and we may not be successful in achieving compliance with the rapidly evolving privacy, data security, and data protection requirements discussed above.
Additionally, our natural diamonds in particular are subject to our Beyond Conflict Free ™ Diamonds standards and Chain of Custody Protocol, requiring our suppliers to source diamonds that originate from specific mine operators that follow internationally recognized labor, trade, and environmental standards. Similarly, our gold and silver fine jewelry is crafted from recycled precious metals.
Additionally, our natural diamonds in particular are subject to our standards and Chain of Custody Protocol, requiring our suppliers to source diamonds that originate from specific mine operators that follow internationally recognized labor, trade, and environmental standards. Similarly, our gold and silver fine jewelry is crafted from repurposed precious metals.
As a newly public company and being subject to new rules and regulations, it has become more expensive for us to obtain director and officer liability and other types of insurance and we may in the future be required to accept reduced coverage or incur substantially higher costs to obtain coverage.
As a result of being subject to rules and regulations as a public company, it has become increasingly expensive for us to obtain director and officer liability and other types of insurance, and we may in the future be required to accept reduced coverage or incur substantially higher costs to obtain coverage.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeTo date, we have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition. 62 Table of Contents Cybersecurity Governance Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to the Audit Committee oversight of cybersecurity and other information technology risks.
Biggest changeTo date, we have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected us, including our operations, business strategy, results of operations, or financial condition.
This does not imply that we meet any particular technical standards, specifications, or requirements, only that we use the CIS Controls as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business. Our cybersecurity risk management program is part of our overall risk management program.
This does not imply that we meet any particular technical standards, specifications, or requirements, only that we use the CIS Controls as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business. Our cybersecurity risk management program is part of our overall risk management activities.
Our management team members have relevant experience in risk assessment and management, and our Director of Security’s experience includes over 10 years of cybersecurity experience, Certified Information Systems Security Professional (CISSP) certification, and prior experience at other publicly traded companies with security frameworks, application security, IT security, Cloud security, SOX IT General Controls audits, and PCI-DSS compliance.
Our management team members have relevant experience in risk assessment and management, and our Senior Director's experience includes over 11 years of cybersecurity experience, Certified Information Systems Security Professional (CISSP) certification, and prior experience at other publicly traded companies with security frameworks, application security, IT security, Cloud security, SOX IT General Controls audits, and PCI-DSS compliance.
The Committee reports to the full Board regarding its activities, including those related to cybersecurity. The full Board also receives briefings from management on our risk management program, which includes our cybersecurity risk management. Presentations on cybersecurity topics are made by our SVP, Technology a nd internal cybersecurity staff.
The Committee reports to the full Board regarding its activities, including those related to cybersecurity, at every Board meeting. The full Board also receives periodic briefings from management on our risk management activities, which includes our cybersecurity risk management. Presentations on cybersecurity topics are made by our SVP, Technology a nd internal cybersecurity staff.
The Committee oversees management’s implementation of our cybersecurity risk management program. The Committee receives periodic reports on our cybersecurity risks and processes from management. In addition, management updates the Committee, as necessary, regarding any material cybersecurity incidents, as well as any incidents with lesser impact potential.
The Committee oversees management’s implementation of our cybersecurity risk management program. The Committee receives periodic reports on our cybersecurity risks and processes and material cybersecurity incidents, if any from management. In addition, management updates the Committee, as necessary, with a summary of incidents with an immaterial impact.
Our management team, including our Chief Executive Officer, Chief Financial Officer, General Counsel, SVP of Technology, and Director of Security, among others in support roles as needed, are responsible for assessing and managing our material risks from cybersecurity threats. This team has primary responsibility for our overall cybersecurity risk management program and supervises our internal cybersecurity personnel.
Our management team, including our Chief Executive Officer, Chief Financial Officer, General Counsel, SVP of Technology, and Senior Director IT & Cybersecurity (“Senior Director”), among others in support roles as needed, are responsible for assessing and managing our material risks from cybersecurity threats.
Added
We face risks from cybersecurity threats that, if realized, are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition.
Added
See “Risk Factors – We rely heavily on our information technology systems, as well as those of our third-party vendors and service providers, for our business to effectively operate and to safeguard confidential information and any significant failure, inadequacy or interruption of these systems, security breaches or loss of data could materially adversely affect our business, financial condition and operations.” 62 Table of Contents Cybersecurity Governance Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to the Audit Committee oversight of cybersecurity and other information technology risks.
Added
This team has primary responsibility for our overall cybersecurity risk management program and supervises our internal cybersecurity personnel.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeGeographic Location Number of Locations Square Footage Retail Showrooms Arizona 1 3,307 California 8 28,128 Colorado 1 11,153 Florida 2 3,680 Georgia 1 2,950 Illinois 2 4,339 Maryland 2 6,706 Massachusetts 1 3,761 Michigan 1 3,111 Minnesota 1 3,112 Missouri 1 2,365 New York 3 11,511 North Carolina 1 1,663 Ohio 2 4,883 Oregon 1 2,660 Pennsylvania 2 5,150 Tennessee 1 1,800 Texas 3 9,088 Virginia 1 2,500 Washington 1 2,597 Washington, D.C. 1 4,795 Total Retail Showrooms 37 119,259 Operations center Secaucus, New Jersey 1 23,817 All of our executive offices and retail showrooms are leased from third parties, and our leases generally have a term of 5 to 10 years and typically include five-year renewal options.
Biggest changeGeographic Location Number of Locations Square Footage Retail Showrooms Arizona 1 3,307 California 8 28,128 Colorado 1 11,153 Florida 2 3,680 Georgia 1 2,950 Illinois 2 4,339 Maryland 2 6,706 Massachusetts 3 6,897 Michigan 1 3,111 Minnesota 1 3,112 Missouri 1 2,365 New York 4 13,623 North Carolina 1 1,663 Ohio 2 4,883 Oregon 1 2,660 Pennsylvania 2 5,150 Tennessee 1 1,800 Texas 3 9,088 Virginia 1 2,500 Washington 1 2,597 Washington, D.C. 1 4,795 Total Retail Showrooms 40 124,507 Operations center Secaucus, New Jersey 1 23,817 All of our executive offices and retail showrooms are leased from third parties, and our leases generally have a term of 5 to 10 years and typically include five-year renewal options.
Item 2. Properties Our principal executive offices are located in San Francisco, CA and Denver, CO. We lease retail showroom, office and operational locations. As of December 31, 2023, we had 37 showrooms and one operations center in the United States. The table below sets forth certain information regarding these properties, all of which are leased.
Item 2. Properties Our principal executive offices are located in San Francisco, CA and Denver, CO. We lease retail showroom, office and operational locations. As of December 31, 2024, we had 40 showrooms and one operations center in the United States. The table below sets forth certain information regarding these properties, all of which are leased.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe Company intends to vigorously defend the alleged individual and representative claims, and, on May 9, 2023, the Company appealed the Superior Court's denial of its petition to compel arbitration to the California Court of Appeal, Second Appellate District and the appeal is currently pending.
Biggest changeOn May 9, 2023, the Company appealed the Superior Court's denial of its petition to compel arbitration to the California Court of Appeal, Second Appellate District. On February 24, 2025, the Court of Appeal affirmed the Superior Court’s ruling.
At this time, any liability related to the alleged claims is not currently probable or reasonably estimable .
The Company intends to vigorously defend the alleged individual and representative claims, and, at this time, any liability related to the alleged claims is not currently probable or reasonably estimable.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAny such determination will also depend upon our business prospects, results of operations, financial condition, cash requirements and availability, industry trends, and other factors that our Board may deem relevant. Recent Sales of Unregistered Securities There were no unregistered sales of our equity securities during the period covered by this Annual Report on Form 10-K.
Biggest changeAny such determination will also depend upon our business prospects, results of operations, financial condition, cash requirements and availability, industry trends, and other factors that our Board may deem relevant.
Stockholders As of March 25, 2024 , there were approximately 21 holders of record of our Class A common stock, 25 holders of record of our Class B common stock and 1 holder of record of our Class C common stock. No shares of our Class D common stock are outstanding.
Stockholders As of March 10, 2025 , there were approxima tely 21 ho lders of record of our Class A common stock, 25 holders of record of our Class B common stock and 1 holder of record of our Class C common stock. No shares of our Class D common stock are outstanding.
Removed
Purchase of Equity Securities by the Issuer and Affiliated Purchasers We did not repurchase any of our equity securities during the quarter ended December 31, 2023. Item 6. [Reserved] 66 Table of Contents
Added
Recent Sales of Unregistered Securities There were no unregistered sales of our equity securities during the period covered by this Annual Report on Form 10-K. 66 Table of Contents Purchase of Equity Securities by the Issuer The following table presents information with respect to our repurchases of our Class A common stock during the three months ending December 31, 2024: Period Total Number of Shares Purchased Average Price Paid per share Total Number of shares Purchased as Part of Publicly Announced Plans or Programs 1 Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs October 1 - October 31 41,142 $ 1.80 41,142 $19.5 million November 1 - November 30 35,843 $ 1.75 35,843 $19.4 million December 1 - December 31 30,441 $ 2.01 30,441 $19.4 million (1) On December 8, 2023, the Company announced that the Board of Directors 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 on December 8, 2026.
Added
The repurchases may be executed from time to time, subject to business, economic and market conditions, corporate needs and regulatory requirements, prevailing stock prices and other considerations, through open market purchases or privately negotiated transactions, or by other means, which may include repurchases through Rule 10b5-1 plans.
Added
The repurchase program does not obligate the Company to acquire any particular amount of Class A common stock and may be modified, suspended or terminated at any time at the discretion of our Board of Directors.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeComparison of Years Ended December 31, 2023 and 2022 The following table sets forth our statements of operations for the years ended December 31, 2023 and 2022, including amounts and percentages of net sales for each year and the year-to-year change in dollars and percent (amounts in thousands): Year ended December 31, 2023 2022 Year over year change Amount Percent Amount Percent Amount Percent Consolidated statements of operations data*: Net sales $ 446,382 100.0 % $ 439,882 100.0 % $ 6,500 1.5 % Cost of sales 189,382 42.4 % 205,591 46.7 % (16,209) (7.9) % Gross profit 257,000 57.6 % 234,291 53.3 % 22,709 9.7 % Operating expenses: Selling, general and administrative 252,518 56.6 % 210,964 48.0 % 41,554 19.7 % Income from operations 4,482 1.0 % 23,327 5.3 % (18,845) (80.8) % Interest expense (5,128) (1.1) % (4,658) (1.1) % (470) 10.1 % Other income, net 4,949 1.1 % 805 0.2 % 4,144 514.8 % Loss on extinguishment of debt — — % (617) (0.1) % 617 nm Income before tax 4,303 1.0 % 18,857 4.3 % (14,554) (77.2) % Income tax benefit 431 0.1 % 168 — % 263 156.5 % Net income $ 4,734 1.1 % $ 19,025 4.3 % $ (14,291) (75.1) % Net income allocable to non-controlling interest 4,150 0.9 % 16,890 3.8 % (12,740) (75.4) % Net income allocable to Brilliant Earth Group, Inc. $ 584 0.1 % $ 2,135 0.5 % $ (1,551) (72.6) % * Amounts may not sum due to rounding nm - Not meaningful Net Sales Net sales for the year ended December 31, 2023 increased by $6.5 million , or 1.5%, compared to the year ended December 31, 2022.
Biggest changeComparison of Years Ended December 31, 2024 and 2023 The following table sets forth our statements of operations for the years ended December 31, 2024 and 2023, including amounts and percentages of net sales for each year and the year-to-year change in dollars and percent (amounts in thousands): Year ended December 31, 2024 2023 Year over year change Amount Percent Amount Percent Amount Percent Consolidated statements of operations data*: Net sales $ 422,161 100.0 % $ 446,382 100.0 % $ (24,221) (5.4) % Cost of sales 167,759 39.7 % 189,382 42.4 % (21,623) (11.4) % Gross profit 254,402 60.3 % 257,000 57.6 % (2,598) (1.0) % Operating expenses: Marketing and advertising 108,339 25.7 % 119,341 26.7 % (11,002) (9.2) % General and administrative 142,713 33.8 % 133,177 29.8 % 9,536 7.2 % Total operating expenses 251,052 59.5 % 252,518 56.6 % (1,466) (0.6) % Income from operations 3,350 0.8 % 4,482 1.0 % (1,132) (25.3) % Interest expense (5,031) (1.2) % (5,128) (1.1) % (97) (1.9) % Other income, net 5,835 1.4 % 4,949 1.1 % 886 17.9 % Income before tax 4,154 1.0 % 4,303 1.0 % (149) (3.5) % Income tax (expense) benefit (160) — % 431 0.1 % (591) (137.1) % Net income $ 3,994 0.9 % $ 4,734 1.1 % $ (740) (15.6) % Net income allocable to non-controlling interest 3,453 0.8 % 4,150 0.9 % (697) (16.8) % Net income allocable to Brilliant Earth Group, Inc. $ 541 0.1 % $ 584 0.1 % $ (43) (7.4) % * Amounts may not sum due to rounding Net Sales Net sales for the year ended December 31, 2024 decreased by $24.2 million , or 5.4%, compared to the year ended December 31, 2023.
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 in 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.
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.
In addition, 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.
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.
Our early proof-points from localizing our website for Canada, Australia, and the United Kingdom, and our sales to customers fr om over 50 countries, pro vide 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.
Our proof-points from localizing our website for Canada, Australia, and the United Kingdom, and our sales to customers fr om over 50 countries, pro vide 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 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 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.
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.
Expanding affiliations and brand collaborations will also broaden our existing assortment, reinforce our brand ethos, and feature like-minded designers, which will help to drive both new and repeat purchases. International Expansion We are in the early stages of expanding globally, and a larger geographic footprint will help drive future growth.
Expanding affiliations and brand collaborations will also broaden our existing assortment, reinforce our brand ethos, and feature like-minded designers, which will help to drive both new and repeat purchases. International Expansion We are in the early stages of selling globally, and a larger geographic footprint will help drive future growth.
Critical Accounting Policies and 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.
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.
Additional future liquidity needs may 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.
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.
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. 81 Table of Contents Recent Accounting Pronouncements See 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 for additional information regarding recent accounting developments and their impact on our results.
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. 82 Table of Contents Recent Accounting Pronouncements See 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 for additional information regarding recent accounting developments and their impact on our results.
On February 21, 2024, we entered into the First Amendment to the SVB Credit Agreement (the “First Amendment”), pursuant to which the lenders agreed to suspend the requirement to comply with the Consolidated Fixed Charge Coverage Ratio covenant on the last day of the fiscal quarters ending December 31, 2023, March 31, 2024, and June 30, 2024.
On February 21, 2024, we entered into the First Amendment to the SVB Credit Agreement (the “First Amendment”), pursuant to which the lenders agreed to suspend the requirement to comply with the Consolidated Fixed Charge Coverage Ratio covenant on the last day of the fiscal quarters ended December 31, 2023, March 31, 2024, and June 30, 2024.
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 specialists via chat, phone, email, virtual appointment, or in our showrooms.
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.
For additional information on our contractual obligations and commitments, see Note 7, Leases , Note 9, Stockholders’ Equity and Members Units and Note 12, Commitments and Contingencies , to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
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.
Remaining compliant and satisfying our obligations as a public company, while maintaining forecasted gross margins and operating results, and attracting and retaining qualified persons to serve on our Board, our Board committees, or as our executive officers is critical to our future success. Macroeconomic Trends We believe we are well-positioned at the intersection of key macro-level trends impacting our industry.
Remaining compliant and satisfying our obligations as a public company, while maintaining forecasted gross margins and operating results, and attracting and retaining qualified persons to serve on our Board, our Board committees, or as our executive officers is critical to our future success. 70 Table of Contents Macroeconomic Trends We believe we are well-positioned at the intersection of key macro-level trends impacting our industry.
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 industr y.
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.
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 specialist team can support online customers when not in appointment, increasing workforce utilization.
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.
Cost of sales includes merchandise costs, inbound freight charges, costs of shipping orders to customers and certain fulfillment and inventory-related compensation costs. 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.
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.
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. 73 Table of Contents Non-GAAP Financial Measures We report our financial results in accordance with GAAP.
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.
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 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 sup pliers.
We define Adjusted EBITDA as net income excluding interest expense, income taxes, depreciation expense, amortization of cloud-based software implementation costs, showroom pre-opening expense, equity-based compensation expense, 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 as net income excluding interest expense, income taxes, depreciation expense, amortization of cloud-based software implementation costs, showroom pre-opening expense, equity-based compensation expense, 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 also provide one complimentary resizing for standard ring styles within 60 days of when an order is available for shipment or pickup, a lifetime manufacturing warranty (except on estate and vintage jewelry and center diamonds/gemstones), and a lifetime diamond upgrade program on all diamonds that meet certain criteria.
We also typically provide one complimentary resizing for standard ring styles within 60 days of when an order is available for shipment or pickup, a lifetime manufacturing warranty (except center diamonds/gemstones), and a lifetime diamond upgrade program on all diamonds that meet certain criteria.
Income Tax Benefit Brilliant Earth Group, Inc.’s income tax benefit was $0.4 million fo r the year ended December 31, 2023 compared to an income tax benefit of $0.2 million for the year ended December 31, 2022.
Income Tax (Expense) Benefit Brilliant Earth Group, Inc.’s income tax expense was $0.2 million fo r the year ended December 31, 2024 compared to an income tax benefit of $0.4 million for the year ended December 31, 2023 .
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 continue to drive growth and profitability.
We intend to strategically open showrooms in the future, and we believe we can 69 Table of Contents 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.
As of December 31, 2023, contractual obligations with a remaining term in excess of 12 months primarily related to marketing and advertising spending as well as software maintenance totaled $8.1 million.
As of December 31, 2024, contractual obligations with a remaining term in excess of 12 months primarily related to marketing and advertising spending as well as software maintenance totaled $8.2 million .
The First Amendment also requires us to maintain Balance Sheet Cash (defined as unrestricted cash and cash equivalents held in accounts with the lenders and their affiliates) in an amount greater than the sum of the aggregate principal amount outstanding under the SVB Revolving Facility (including issued letters of credit) and the aggregate principal amount of the SVB Term Loan outstanding at such time, which requirement applies at all times commencing on February 21, 2024 until the last day of the fiscal quarter ending June 30, 2024.
The First Amendment also required us to maintain Balance Sheet Cash (defined as unrestricted cash and cash equivalents held in accounts with the lenders and their affiliates) in an amount greater than the sum of the aggregate principal amount outstanding under the SVB Revolving Facility (including issued letters of credit) and the aggregate principal amount of the SVB Term Loan outstanding at such time, which requirement applied at all times commencing on February 21, 2024 until the last day of the fiscal quarter ended June 79 Table of Contents 30, 2024.
Gross margin, expressed as a percentage and calculated as gross profit divided by net sales, increa sed by 430 basis points for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Gross margin, expressed as a percentage and calculated as gross profit divided by net sales, increa sed by 270 basis points for the year ended December 31, 2024 compared to the year ended December 31, 2023.
(the “Bridge Bank”) which assumed the deposits 78 Table of Contents and obligations of SVB. On March 26, 2023, the FDIC announced that it had entered into a purchase and assumption agreement with First-Citizens Bank & Trust Company, Raleigh, North Carolina (“First Citizens”) under which all deposits and loans of the Bridge Bank were assumed by First Citizens.
On March 26, 2023, the FDIC announced that it had entered into a purchase and assumption agreement with First-Citizens Bank & Trust Company, Raleigh, North Carolina (“First Citizens”) under which all deposits and loans of the Bridge Bank were assumed by First Citizens.
The current inflationary environment and changes in macro-level consumer spending trends, due to volatile macro-economic conditions could negatively impact our operating results. 69 Table of Contents 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.
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.
In addition, we 68 Table of Contents will have more opportunity to enhance and leverage our CRM and data-segmentation capabilities to increase repeat purchases and lifetime value.
In addition, we will have more opportunity to enhance and leverage our CRM and data-segmentation capabilities to increase repeat purchases and lifetime value.
The SVB Credit Facilities mature on May 24, 2027 (the “Maturity Date”). 77 Table of Contents As of December 31, 2023, there were no amounts outstanding under the SVB Revolving Facility and there was $60.1 million of total debt outstanding under the SVB Term Loan, of w hich $56.1 million is cla ssified as long-term debt.
The SVB Credit Facilities mature on May 24, 2027 (the “Maturity Date”). As of December 31, 2024, there were no amounts outstanding under the SVB Revolving Facility and there was $56.1 million of total debt outstanding under the SVB Term Loan, of w hich $50.4 million is cla ssified as long-term debt.
The success of our customer acquisition strategy depends on a number of factors, including the level and pattern of consumer spending in the product categories in which we operate, and our ability to cost-effectively drive traffic to our website and showrooms and to convert these visitors to customers.
The success of our customer acquisition strategy depends on a number of factors, including the level and pattern of consumer spending in 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.
Other Income, Net Other income, net for the year ended December 31, 2023 increased by $4.1 million , compared to the year ended December 31, 2022, primarily due to increased interest income earned on our cash balances. Additionally, this amount includes immaterial losses on exchange rates on consumer payments and other miscellaneous income.
Other Income, Net Other income, net for the year ended December 31, 2024 increased by $0.9 million , or 17.9%, compared to the year ended December 31, 2023, primarily due to increased interest income earned on our cash balances. Additionally, this amount includes immaterial losses on exchange rates on consumer payments and other miscellaneous income.
Total future lease payments as of December 31, 2023 are $49.8 million . 79 Table of Contents We have capital commitments of $0.8 million related to new showroom construction and improvements to existing locations as of December 31, 2023. From time to time in the normal course of business, we will enter into agreements with suppliers or service providers.
We have capital commitments of $0.8 million related to new showroom construction and improvements to existing locations as of December 31, 2024. From time to time in the normal course of business, we will enter into agreements with suppliers or service providers.
As of December 31, 2023, the SVB Credit Agreement had an outstanding principal balance of $60.1 million , excluding unamortized debt issuance costs of $0.5 million , of which $56.1 million is classified as long-term. 75 Table of Contents We also have scheduled principal payments on our SVB Credit Agreement as presented below (in thousands): Principal Years ending December 31, 2024 $ 4,063 2025 5,688 2026 6,500 2027 43,875 Total aggregate future principal payments $ 60,126 We believe based on our current projections, that we have sufficient sources of liquidity to meet our projected operating, debt service, and tax distribution requirements for at least the next 12 months following the filing of this Annual Report on Form 10-K.
We also have scheduled principal payments on our SVB Credit Agreement as presented below (in thousands): Principal Years ending December 31, 2025 $ 5,688 2026 6,500 2027 43,875 Total aggregate future principal payments $ 56,063 We believe based on our current projections, that we have sufficient sources of liquidity to meet our projected operating, debt service, and tax distribution requirements for at least the next 12 months following the filing of this Annual Report on Form 10-K.
The following table sets forth our key performance metrics for the periods presented (amounts in thousands, except for total orders and AOV): For the years ended December 31, 2023 2022 Change % Change Net Sales $ 446,382 $ 439,882 $ 6,500 1.5 % Total Orders 174,576 149,613 24,963 16.7 % AOV $ 2,557 $ 2,940 $ (383) (13.0) % 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).
The following table sets forth our key performance metrics for the periods presented (amounts in thousands, except for total orders and AOV): For the years ended December 31, 2024 2023 Change % Change Net Sales $ 422,161 $ 446,382 $ (24,221) (5.4) % Total Orders 186,030 174,576 11,454 6.6 % AOV $ 2,269 $ 2,557 $ (288) (11.3) % 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 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.
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 .
Our critical accounting policies and 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.
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 . 81 Table of Contents 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.
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.
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 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 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.
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. 74 Table of Contents The following table presents a reconciliation of net income and net income margin, the most comparable GAAP financial measures, to Adjusted EBITDA and Adjusted EBITDA margin, respectively, for the years presented (in thousands): For the years ended December 31, 2023 2022 Net income $ 4,734 $ 19,025 Interest expense 5,128 4,658 Income tax benefit (431) (168) Depreciation expense 4,200 1,922 Amortization of cloud-based software implementation costs 583 263 Showroom pre-opening expense 4,953 4,450 Equity-based compensation expense 9,952 8,840 Loss on extinguishment of debt — 617 Other income, net (1) (4,949) (805) Transaction costs and other expenses (2) 2,012 180 Adjusted EBITDA $ 26,182 $ 38,982 Net income margin 1.1 % 4.3 % Adjusted EBITDA margin 5.9 % 8.9 % (1) Other income, net con sists primarily of interest and other miscellaneous income, partially offset by expenses such as losses on exchange rates on consumer payments.
The following table presents a reconciliation of net income and net income margin, the most comparable GAAP financial measures , to Adjusted EBITDA and Adjusted EBITDA margin, respectively, for the years presented (in thousands): For the years ended December 31, 2024 2023 Net income $ 3,994 $ 4,734 Interest expense 5,031 5,128 Income tax expense (benefit) 160 (431) Depreciation expense 5,312 4,200 Amortization of cloud-based software implementation costs 817 583 Showroom pre-opening expense 1,705 4,953 Equity-based compensation expense 9,934 9,952 Other income, net (1) (5,835) (4,949) Transaction costs and other expenses (2) — 2,012 Adjusted EBITDA $ 21,118 $ 26,182 Net income margin 0.9 % 1.1 % Adjusted EBITDA margin 5.0 % 5.9 % (1) Other income, net con sists primarily of interest and other miscellaneous income, partially offset by expenses such as losses on exchange rates on consumer payments.
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.
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.
(as amended, the "Runway Term Loan"). 70 Table of Contents 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.
Interest Expense Interest expense primarily consists of interest incurred under our SVB Credit Agreement (defined below) . 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.
Selling, General and Administrative Expenses Selling, general and administrative (“SG&A”) expenses consist primarily of marketing, advertising, and promotional expenses; payroll and related benefit costs for our employees, including equity-based compensation expense; merchant processing fees; certain facility-related costs; customer service; technology; and depreciation and amortization expenses, 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.
General and administrative expenses also consist of information technology and other software related costs, rent 71 Table of Contents 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.
Silicon Valley Bank Credit Facilities On May 24, 2022 (the “Closing Date”), 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 provides 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 decrease in tax distributions paid to members was partially offset by an increase in payments made on the SVB Credit Agreement (defined below) of $0.8 million, repurchases of $0.6 million of our Class A common stock under the share repurchase program, and the payment of debt issuance costs of $0.1 million in connection with the First Amendment (as defined below). 78 Table of Contents Silicon Valley Bank Credit Facilities On May 24, 2022 (the “Closing Date”), 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 provides 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”).
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.
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. 75 Table of Contents 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.
As of December 31, 2023, Brilliant Earth has sold to consumers in over 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.
Today, Brilliant Earth has sold to consumers in over 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.
After such time, the minimum Balance Sheet Cash covenant no longer applies. On March 10, 2023, SVB was closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation (“FDIC”) was appointed as receiver. On March 14, 2023, the FDIC announced the establishment of Silicon Valley Bridge Bank, N.A.
After such time, the minimum Balance Sheet Cash covenant no longer applied. As of December 31, 2024 the Company was in compliance with all applicable covenants under the SVB Credit Agreement. On March 10, 2023, SVB was closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation (“FDIC”) was appointed as receiver.
Selling, General and Administrative Expenses SG&A expenses for the year ended December 31, 2023 increased by $41.6 million , or 19.7%, compared to the year ended December 31, 2022. SG&A expenses as a percentage of net sales increased by 861 basis points for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Operating Expenses Operating expenses for the year ended December 31, 2024 decreased by $1.5 million , or 0.6%, compared to the year ended December 31, 2023. Operating expenses as a percentage of net sales increased by 290 basis points for the year ended December 31, 2024 compared to the year ended December 31, 2023.
The increase in order volumes was partially offset by a decline of 13.0% in AOV driven by an increase in sales of lower price point products, including fine jewelry and moderation in sales growth of products above the $10,000 price point.
The decrease in net sales was due to a decrease of 11.3% in AOV, partially offset by an increase in order volumes of 6.6%. The decrease in AOV was driven by a higher mix of lower price point products, including fine jewelry.
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.
For example, our non-GAAP financial measures may not be comparable to similarly titled measures of other companies.
See “Risk Factors—Risks Related to Our Organizational Structure.” Contractual Obligations and Commitments We lease our showrooms and headquarters office space under non-cancelable lease agreements whereby $7.1 million is due in the year ended December 31, 2024.
Contractual Obligations and Commitments We lease our showrooms and headquarters office space under non-cancelable lease agreements whereby $8.4 million is due in the year ended December 31, 2025. Total future lease payments as of December 31, 2024 are $50.9 million .
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.
Income Tax (Expense) Benefit Income tax (expense) benefit represents the federal and st ate income or franchise taxes asse ssed on Brilliant Earth Group, Inc's share of taxable income for the period. 72 Table of Contents 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.
For the twelve months ended December 31, 2023, the Company declared and paid $9.9 million of distributions to, or on behalf of, members associated with their estimated income tax obligations. 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.
For the twelve months ended December 31, 2024, the Company declared and paid $1.8 million of tax distributions and TRA payments to, or on behalf of, members associated with their estimated income tax obligations.
The expected dividend yield is nil as we have not paid and do not anticipate paying dividends on our common stock. 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.
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.
Financing Activities Net cash used in financing activities was $13.1 million for the year ended December 31, 2023, which consisted of tax distributions to members pursuant to the LLC Agreement of $9.9 million and repayments on the SVB Credit Agreement (defined below).
Financing Activities Net cash used in financing activities was $6.6 million for the year ended December 31, 2024 compared to $13.1 million for the year ended December 31, 2023. The decrease of $6.5 million was primarily due to lower tax d istributions to members pursuant to the LLC Agreement of $8.1 million.
The increase in income tax benefit was primarily due to additional benefit related to additional taxable losses and a reduction in income from Brilliant Earth, LLC as compared to the year ended December 31, 2022. 72 Table of Contents Net Income Allocable to Non-Controlling Interests The net income allocable to the non-controlling interests (“NCI”) of Brilliant Earth, LLC was $4.2 million , and 87.7% of net income of the Company for the year ended December 31, 2023, compared to $16.9 million and 88.8% of net income of the Company for the year ended December 31, 2022.
Net Income Allocable to Non-Controlling Interests The net income allocable to the non-controlling interests (“NCI”) of Brilliant Earth, LLC was $3.5 million , and 86.5% of net income of the Company for the year ended December 31, 2024, compared to $4.2 million and 87.7% of net income of the Company for the year ended December 31, 2023.
The change in assets and liabilities related to operating activities, which are a result of working capital management, primarily reflects a $4.3 million increase in operating lease liabilities, offset by a $4.1 million decrease in prepaid expenses and other current assets, inventories, and other current assets along with a $2.0 million increase in accounts payable, accrued expenses and other current liabilities and a $1.0 million increase in deferred revenue.
The decrease from changes in working capital was primarily due to an increase in cash used of $3.4 million in other assets and inventories, an increase in cash used of $2.8 million in accounts payable, accrued expenses and other current liabilities, and an increase in cash used of $1.4 million in operating lease liabilities.
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 decrease in net income allocable to the NCI was primarily due to a decrease in net income from the prior year. 74 Table of Contents 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.
Liquidity and Capital Resources Overview Our primary requirements for liquidity and capital are for purchases of inventory, payment of operating expenses, tax distributions to LLC members, debt service, 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.
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, 2023 the Company was in compliance with such covenants. For additional information regarding our long-term debt activity, see Note 8, Debt to the audited consolidated financial statements included elsewhere in the Annual Report on Form 10-K.
For additional information regarding our long-term debt activity, see Note 8, Debt to the audited consolidated financial statements included elsewhere in the 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.
Consumers are increasingly favoring seamless omnichannel shopping experiences, and we believe our model is well-suited to satisfy these consumer preferences.
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.
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 powerful 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 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.
Below is a summary of our performance for the year ended December 31, 2023: • Net sales of $446.4 million compared to $439.9 million for the year ended December 31, 2022; • Net income of $4.7 million compared to $19.0 million for the year ended December 31, 2022; • Net income margin of 1.1% co mpared to 4.3% for the year ended December 31, 2022; • Adjusted EBITDA of $26.2 million compared to $39.0 million for the year ended December 31, 2022; and • Adjusted EBITDA margin of 5.9% c ompared to 8.9% for the year ended December 31, 2022. 67 Table of Contents 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 have been growing our fine jewelry sales a nd believe this represents an opportunity for future growth. 68 Table of Contents Below is a summary of our performance for the year ended December 31, 2024: • Net sales of $422.2 million compared to $446.4 million for the year ended December 31, 2023; • Net income of $4.0 million compared to $4.7 million for the year ended December 31, 2023; • Net income margin of 0.9% co mpared to 1.1% for the year ended December 31, 2023; • Adjusted EBITDA of $21.1 million compared to $26.2 million for the year ended December 31, 2023; and • Adjusted EBITDA margin of 5.0% c ompared to 5.9% for the year ended December 31, 2023.
Cash Flows from Operating, Investing, and Financing Activities — Comparison of Years Ended December 31, 2023 and 2022 The following table summarizes our cash flows for the years ended December 31, 2023 and 2022 (in thousands): Years ended December 31, 2023 2022 Net cash provided by operating activities $ 26,214 $ 14,506 Net cash used in investing activities (11,944) (9,124) Net cash used in financing activities (13,104) (23,598) Net increase (decrease) in cash, cash equivalents, and restricted cash 1,166 (18,216) Cash, cash equivalents and restricted cash at beginning of year 154,854 173,070 Cash, cash equivalents and restricted cash at end of year $ 156,020 $ 154,854 76 Table of Contents Operating Activities Net cash provided by operating activities was $26.2 million for the year ended December 31, 2023, consisting of $4.7 million in net income adjusted for $18.7 million in non-cash expense addbacks, primarily composed of equity based compensation, operating lease costs, depreciation e xpense and amortization of debt issuance costs and $2.8 million from changes in assets and liabilities related to operating activities.
We cannot ensure that we could obtain refinancing or additional financing on favorable terms or at all. 77 Table of Contents Cash Flows from Operating, Investing, and Financing Activities — Comparison of Years Ended December 31, 2024 and 2023 The following table summarizes our cash flows for the years ended December 31, 2024 and 2023 (in thousands): Years ended December 31, 2024 2023 Net cash provided by operating activities $ 17,595 $ 26,214 Net cash used in investing activities (4,907) (11,944) Net cash used in financing activities (6,567) (13,104) Net increase in cash, cash equivalents, and restricted cash 6,121 1,166 Cash, cash equivalents and restricted cash at beginning of year 156,020 154,854 Cash, cash equivalents and restricted cash at end of year $ 162,141 $ 156,020 Operating Activities For the year ended December 31, 2024, net cash provided by operating activities was $17.6 million compared to net cash provided by operating activities of $26.2 million for the year ended December 31, 2023, a decrease of $8.6 million.
The increase in other general and administrative expenses was a result of overall Company growth that was principally driven by a $3.6 million increase in information technology and other software-related costs, a $3.1 million increase in rent and lease related expenses, a $2.3 million increase in depreciation expense, and a $1.0 million increase in donations.
The increase in general and administrative expenses was primarily due to an increase in employment expenses, which increased $8.5 million or 12.3%, from additional staff to support our growth initiatives, and annual compensation increases. The remaining increase in general and administrative expenses was a result of increases in rent, lease-related expenses, information technology and other software-related costs, and depreciation expense.
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, 2023, we had a cash balance, excluding restricted cash, of $155.8 million , and negative working capital, excluding non-restricted cash, of $(27.9) million .
As of December 31, 2024, we had a cash balance, excluding restricted cash, of $161.9 million , and negative working capital, excluding non-restricted cash, of $(28.7) million .
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.
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. 80 Table of Contents 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.
This was primarily driven by our premium brand and differentiated product offerings, performance of our pricing engine, procurement efficiencies, and benefits from our extended warranty program.
The increase in gross margin was primarily driven by the continued optimization of our pricing engine, procurement efficiencies, and benefits from our extended warranty program. The gross margin improvements were partially offset by certain repair and fulfillment-related costs.
Investing Activities Net cash used in investing activities was $11.9 million for the year ended December 31, 2023, and $9.1 million for the year ended December 31, 2022, which primarily consisted of purchases of property and equipment related to new facilities leased during the years ended December 31, 2023 and 2022.
Payments on operating lease liabilities increased from the prior year due to additional leased showrooms acquired during the year ended December 31, 2024. Investing Activities Net cash used in investing activities was $4.9 million for the year ended December 31, 2024 compared to $11.9 million for the year ended December 31, 2023.
There are no additional performance obligations in relation to the third-party plan.
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.
Interest Expense Interest expense for the year ended December 31, 2023 increased by $0.5 million , or 10.1%, compared to the year ended December 31, 2022, primarily due to an increase in the variable interest rate pursuant to the SVB Credit Agreement entered into on May 24, 2022.
Interest Expense Interest expense for the year ended December 31, 2024 decreased by $0.1 million , or 1.9%, compared to the year ended December 31, 2023, primarily due to a decrease in the average principal debt outstanding during the year ended December 31, 2024 as compared to the prior year.
The increase in net sales was primarily driven by a 16.7% increase in order volumes due to: 71 Table of Contents • continued effectiveness of our customer acquisition activities; • strong omnichannel performance across the Company's products and new product collection releases; and • the opening of new showrooms.
The 6.6% 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. 73 Table of Contents Gross Profit Gross profit for the year ended December 31, 2024 decreased by $2.6 million, or 1.0%, compared to the year ended December 31, 2023.
(2) These expenses are those that we did not incur in the normal course of business. For the year ended December 31, 2023, these costs include a $1 million charitable contribution. For the year ended December 31, 2022, these costs include professional fees in connection with the evaluation and preparation for operations as a public company.
(2) These expenses are those that we did not incur in the normal course of business.
Net cash provided by operating activities was $14.5 million for the year ended December 31, 2022, consisting of $19.0 million in net income adjusted for $15.2 million in non-cash expense addbacks, primarily composed of equity based compensation, operating lease costs, depreciation expense, loss on extinguishment of debt and amortization of debt issuance costs, offset by a $19.7 million decrease from changes in assets and liabilities related to operating activities.
This decrease was primarily driven by $10.6 million from changes in assets and liabilities related to changes in working capital and an increase in net income adjusted for non-cash addbacks of $2.0 million.
The increase in SG&A expenses was driven by an increase in marketing expenses, other general and administrative expenses, and employment expenses, which increased by $22.0 million , $11.8 million , and $7.8 million, res pectively, from the year ended December 31, 2022 to the year ended December 31, 2023.
The decrease in operating expenses was primarily driven by a decrease in marketing expenses partially offset by an increase in general and administrative expenses. The decrease in marketing expenses, which decreased by $11.0 million or 9.2%, from the prior year was a result of our continued focus on improving the effectiveness and efficiency of our marketing spend.
Removed
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.
Added
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.
Removed
Consumers are increasingly becoming more conscious of the products they purchase, seeking brands that stand for sustainability, supply chain transparency, and social and environmental responsibility. This has contributed to our strong brand affinity and loyalty, and further differentiates us from our competitors.
Added
Operating Expenses Operating expenses consist primarily of marketing 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. Ope rating expenses also consist of general and administrative expenses related to employee costs such as payroll and related benefit costs, including equity-based compensation expense.
Removed
Revenue related to customer purchases of our in-house extended service plan was deferred and recognized ratably over the service plan term. However, in 2022, the Company stopped offering this plan.
Added
These increases were partially offset by a decrease in pre-opening expenses from new showrooms and a decrease in charitable contributions compared to the year ended December 31, 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item. 82 Table of Contents
Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item. 83 Table of Contents

Other BRLT 10-K year-over-year comparisons