Brilliant Earth Group, Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual filing; it does not provide a clear standalone fourth-quarter income statement or cash-flow result. The company designs and sells fine jewelry through e-commerce and showrooms and reports one operating segment.
Financial performance and liquidity
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Net sales | $380.2 million | $251.8 million | +51.0% |
| Gross profit / gross margin | $187.4 million / 49.3% | $112.3 million / 44.6% | Margin +4.7 percentage points |
| Operating income / margin | $40.1 million / 10.6% | $26.6 million / 10.6% | Income +50.9% |
| Net income / margin | $26.3 million / 6.9% | $21.6 million / 8.6% | Income +21.7%; margin -1.7 points |
| Adjusted EBITDA / margin | $50.5 million / 13.3% | $27.5 million / 10.9% | EBITDA +83.4% |
| Operating cash flow | $46.1 million | $26.7 million | +$19.4 million |
| Cash and cash equivalents at year-end | $172.9 million | $66.3 million | +$106.6 million |
| Term loan principal at year-end | $65.0 million | $65.0 million | No change |
Total orders rose 48.0% to 118,208; average order value increased 2.0% to $3,216. International sales were $27.1 million, while more than 90% of sales came from the U.S. The company’s reported $26.3 million net income is consolidated; $24.7 million was allocated to non-controlling interests, leaving $1.5 million attributable to Brilliant Earth Group, Inc. for the post-IPO period reflected in its parent-company accounts. Adjusted EBITDA is a non-GAAP measure.
At year-end, current assets were $206.0 million and current liabilities $92.8 million. Management reported working capital excluding cash of negative $59.7 million, consistent with its customer-paid-before-supplier-payment model. The term loan is secured by substantially all company assets, bears variable interest, and matures in October 2023. The filing lists $30.8 million of principal due in 2022 and $34.2 million in 2023, plus a $3.2 million final payment due in 2023. The company reported compliance with loan covenants at year-end.
Material changes and notable items
- Sales growth was driven mainly by a 48.0% increase in orders, continued customer acquisition and conversion, showroom and website activity, and new showroom openings; AOV contributed modestly.
- Gross margin improved 4.7 percentage points, attributed to premium positioning, pricing-engine improvements, procurement efficiencies, and unusually high prior-year supplier and shipping costs. Higher precious-metal prices partly offset gains.
- SG&A rose 71.8% to $147.3 million, faster than sales. Marketing, other general and administrative, and employment expenses increased by $27.3 million, $18.9 million, and $15.4 million, respectively. SG&A rose to 38.7% of sales from 34.0%.
- Net margin declined despite higher net income, reflecting higher SG&A, interest expense, and a $6.3 million increase in warrant fair-value expense. The warrants were exercised in connection with the IPO; the warrant remeasurement was a notable non-cash item.
- The September 2021 IPO issued 9.6 million Class A shares at $12.00 per share and generated $101.6 million net proceeds after offering costs. Proceeds funded purchases and redemption of LLC interests. The company adopted an Up-C structure; at year-end, public-company shareholders held a 10.1% economic interest and non-controlling owners held 89.9%.
Outlook, commentary, and risks
No quantified revenue, earnings, or margin guidance is provided. Management describes plans to increase brand awareness, expand U.S. showrooms, broaden fine-jewelry purchases and customer retention, and pursue international growth. It expects increased public-company costs and says future equity-based compensation is likely to be higher than in 2021. Management stated that cash and expected operating cash flow should meet projected operating, debt-service, and tax-distribution needs for at least the next 12 months.
- Principal business risks include supply availability and cost for diamonds, gemstones, and precious metals; inflation, labor, shipping and energy costs; consumer-demand and competitive pressures; inventory management; and execution of showroom expansion.
- COVID-19-related supply-chain disruptions, fulfillment delays, and showroom impacts remained uncertain. The filing also discusses Russia’s invasion of Ukraine and potential diamond supply and price effects as a subsequent, rapidly evolving risk.
- The Tax Receivable Agreement requires payments to continuing equity owners equal to 85% of specified realized or deemed tax benefits; the company expects these payments to be substantial. Payments can reduce cash available for investment and may accelerate in certain circumstances.
- A putative California class action alleges customer calls were recorded without consent, in violation of state privacy law. The company disputes the claims; at filing, any liability was not considered probable or reasonably estimable.
- Six additional showroom leases were entered into after year-end, with approximately $4.5 million in aggregate future minimum rent payments. The company also authorized approximately 600,000 RSUs in February 2022.
Most important facts for investors to verify
- Obtain quarterly filings or earnings materials to assess standalone fourth-quarter 2021 sales, margins, and cash flow; this annual filing does not clearly report those figures.
- Track whether sales growth and order growth persist while SG&A and marketing spending grow, and reconcile GAAP net income with Adjusted EBITDA.
- Review term-loan amortization, variable-rate exposure, covenant headroom, and the ability to fund 2022–2023 repayments alongside leases and tax distributions.
- Monitor the cash timing and potential acceleration of Tax Receivable Agreement payments, and the effects of continuing-owner exchanges on dilution and ownership.
- Assess diamond and recycled-metal sourcing, cost inflation, supply-chain disruption, showroom returns, and the resolution or financial exposure of the call-recording lawsuit.