Brilliant Earth

Geographic Location · Number of Locations · Square Footage

Retail Showrooms and Office Locations

Arizona · 1 · 3,307

California · 8 · 28,128

Colorado · 1 · 11,153

Florida · 2 · 3,680

Georgia · 2 · 5,415

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 · 4 · 11,372

Virginia · 1 · 2,500

Washington · 1 · 2,597

Washington, D.C. · 1 · 4,795

Total Retail Showrooms and Office Locations · 42 · 129,256

Operations center

Secaucus, New Jersey · 1 · 23,818

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. Most of our showroom leases provide for a minimum rent, with escalating rent increases, and generally require us to pay insurance, utilities, real estate taxes and repair and maintenance expenses.

We may negotiate new lease agreements, renew existing lease agreements or use alternate facilities prior to lease termination. We believe that our facilities are adequate for our needs and believe that we should be able to renew any of our leases or secure similar property without an adverse impact on our operations.

• Because we have a short history of operating at our current scale, we may be unable to accurately predict operating results, and may be unable to generate sales growth, profitability and positive cash flow.
• 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.
• Environmental, social, and governance matters may adversely impact our business and reputation.
• 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.
• If we are unable to effectively anticipate and respond to changes in consumer preferences and shopping patterns, or are unable to introduce new products or programs that appeal to new or existing customers, our sales and profitability could be adversely affected.
• We expect a number of factors to cause our results of operations and operating cash flows to fluctuate on a quarterly and annual basis, which may make it difficult to predict our future performance.
• Refunds, cancellations, and warranty claims could harm our business.
• We face the risk of theft, loss, or damage to our products from inventory or during shipment.
• Russia’s invasion of Ukraine, and the military, political, and economic impacts of the conflict there, could have a material adverse effect on our operations and financial condition.
• We plan to continue to expand into international markets, which will expose us to significant risks.
• Our revenue could decline due to changes in credit markets and decisions made by credit providers.
• Our business is affected by seasonality and any negative impact on consumer spending during peak shopping quarters could materially adversely affect our business, financial condition and results of operations.
• We depend on highly skilled personnel to grow and operate our business, and if we are unable to hire, retain, and motivate our personnel, we may not be able to grow effectively.
• Acquisitions, strategic investments, partnerships, or alliances could be difficult to identify, pose integration challenges, divert the attention of management, disrupt our business, dilute stockholder value, and adversely affect our business, financial condition, and results of operations.
• We may require additional capital to support the growth of our business, and this capital might not be available on acceptable terms, if at all.
• The effects of climate change and related regulatory, customer, and investor responses may adversely impact our business.
• Risks Related to Our Legal and Regulatory Environment
• Failure to comply with laws, regulations, and enforcement activities, or changes in statutory, regulatory, accounting, and other legal requirements could potentially impact our operating and financial results.
• 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.
• Third parties may assert rights in or ownership of our trademarks and other intellectual property rights, or trademarks that are similar to our trademarks, or claim that we are infringing, misappropriating or otherwise violating their intellectual property rights. Intellectual property-related litigations and proceedings are expensive and time consuming to defend, and, if resolved adversely, could materially adversely impact our business, financial condition and results of operations.
• We are subject to rapidly changing and increasingly stringent laws, regulations, and industry standards relating to privacy, data security, and data protection. The restrictions and costs imposed by these laws, or our actual or perceived failure to comply with them, could subject us to liabilities that adversely affect our business, operations, and financial performance.
• Regulatory and legislative developments on the use of artificial intelligence and machine learning could adversely affect our use of such technologies in our business.
• Our business could be adversely impacted by changes in the internet and mobile device accessibility of users. Companies and governmental agencies may restrict access to our products and services, our mobile apps, website, app stores, or the internet generally, which could negatively impact our operations.
• We are subject to anti-corruption, anti-bribery, anti-money laundering, and similar laws, and non-compliance with such laws can subject us to criminal or civil liability and harm our business, financial condition, and results of operations.
• From time to time, we may be subject to legal proceedings, regulatory disputes, and governmental inquiries that could cause us to incur significant expenses, divert our management’s attention, and materially harm our business, financial condition, and operating results.
• Risks Related to Our Dependence on Third Parties
• We face risks associated with suppliers from whom our products are sourced and are dependent on a limited number of suppliers.
• Our business relies on third-party providers of cloud services, and any disruption of, or interference with, our use of cloud services could adversely affect our business, financial condition, or results of operations.
• 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.
• 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 third parties for elements of the payment processing infrastructure underlying our business and are subject to risks related to online payment methods.
• We rely primarily on third-party insurance policies to insure our operations-related risks. If our insurance coverage is insufficient for the needs of our business or our insurance providers are unable to meet their obligations, we may not be able to mitigate the risks facing our business, which could adversely affect our business, financial condition, and results of operations.
• Risks Related to Our Organizational Structure
• Our principal asset is our interest in Brilliant Earth, LLC, and, as a result, we depend on distributions from Brilliant Earth, LLC to pay our taxes and expenses, including payments under the Tax Receivable Agreement (as defined herein). Brilliant Earth, LLC’s ability to make such distributions may be subject to various limitations and restrictions.
• The Tax Receivable Agreement with the Continuing Equity Owners requires us to make cash payments to them in respect of certain tax benefits to which we may become entitled, and we expect that such payments will be substantial.
• Our organizational structure, including the Tax Receivable Agreement, confers certain benefits upon the Continuing Equity Owners that will not benefit holders of our Class A common stock to the same extent that it will benefit the Continuing Equity Owners.
• In certain cases, payments under the Tax Receivable Agreement to the Continuing Equity Owners may be accelerated or significantly exceed any actual benefits we realize in respect of the tax attributes subject to the Tax Receivable Agreement.
• We will not be reimbursed for any payments made to the Continuing Equity Owners under the Tax Receivable Agreement in the event that any tax benefits are disallowed.
• Changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our results of operations and financial condition.
• If we were deemed to be an investment company under the Investment Company Act of 1940, as amended (the “1940 Act”), including as a result of our ownership of Brilliant Earth, LLC, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business.
• Risks related to the Ownership of Our Class A Common Stock
• The Continuing Equity Owners have significant influence over us, including control over decisions that require the approval of stockholders.
• Our stock price may change significantly, and you could lose all or part of your investment as a result.
• Our multi-class structure may have a negative impact on the market price of our Class A common stock.
• We are a “controlled company” within the meaning of the rules of the Nasdaq Stock Market LLC (“Nasdaq”) and, as a result, qualify for exemptions from certain corporate governance requirements and holders of our Class A common stock may not have the same protections afforded to stockholders of companies that are subject to such corporate governance requirements.
• Certain provisions of Nevada law and antitakeover provisions in our organizational documents could delay or prevent a change of control.
• The JOBS Act allows us to postpone the date by which we must comply with certain laws and regulations intended to protect investors and to reduce the amount of information we provide in our reports filed with the SEC. This reduced disclosure may make our Class A common stock less attractive to investors.
• Pursuant to the Dodd-Frank Act and SEC rules, we must file public disclosures regarding the country of origin of certain supplies, which could damage our reputation or impact our ability to obtain merchandise if customers or other stakeholders react negatively to our disclosures.
• Our articles of incorporation provides that the Eighth Judicial District Court of the State of Nevada, Clark County, Nevada will be the sole and exclusive forum for certain stockholder litigation matters which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.
• If securities analysts do not publish research or reports about our business or if they downgrade our stock or our sector, or if there is any fluctuation in our credit rating, our stock price and trading volume could decline.
• 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.
• Future sales, or the perception of future sales, by us or our existing stockholders in the public market could cause the market price for our Class A common stock to decline.
• Purchases of shares of our Class A common stock pursuant to our stock repurchase plan may affect the value of our Class A common stock, and there can be no assurance that our stock repurchase plan will enhance stockholder value.
• General Risk Factors
• As a public reporting company, we are subject to rules and regulations established from time to time by the SEC and Nasdaq regarding our internal control over financial reporting. If we fail to establish and maintain effective internal control over financial reporting and disclosure controls and procedures, we may not be able to accurately report our financial results, or report them in a timely manner.