• Arhaus Announces First Quarter 2024 Financial Results

    المصدر: Nasdaq GlobeNewswire / 09 مايو 2024 05:30:10   America/Chicago

    BOSTON HEIGHTS, Ohio, May 09, 2024 (GLOBE NEWSWIRE) -- Arhaus, Inc. (NASDAQ: ARHS; “Arhaus” or the “Company”), a rapidly growing lifestyle brand and omni-channel retailer of premium artisan-crafted home furnishings, reported financial results for the first quarter ended March 31, 2024.

    First Quarter 2024 Highlights

    • Net revenue of $295 million
    • Comparable growth(1) of (9.5)%
    • Net and comprehensive income of $15 million
    • Adjusted EBITDA of $29 million

    2024 Outlook Reaffirmed

    • Net revenue of $1.33 billion to $1.37 billion
    • Comparable growth(1) of (4.0)% to (2.0)%
    • Net and comprehensive income of $95 million to $105 million
    • Adjusted EBITDA of $185 million to $200 million

    CEO Comments

    John Reed, Co-Founder and Chief Executive Officer, commented,

    “I want to thank our teams for delivering a solid start to 2024 and executing on our key priorities. We are pleased to have exceeded our top and bottom line outlook for the quarter as the Arhaus team executed well, and first quarter benefited from the shift in our new warehouse management system implementation to April from March. We are building on our track record of industry-leading market share gains with demand comparable growth(2) of 1.3% in the first quarter. January’s weather-impacted high-single-digit demand comparable decline was more than offset by demand comparable growth of mid-single-digit and high-single-digit in February and March, respectively. We also continued our strategic investments in systems, eCommerce capabilities and our in-home designer and trade programs during the quarter.

    “We are thrilled with client response to the new product introductions we have made this year and are excited to be opening several new Showrooms in the second quarter, including in new markets, as we capitalize on our tremendous brand awareness opportunity and remain keenly focused on strategic growth. We are on track to deliver on our goals for the year and are reaffirming our 2024 full year financial outlook.”

    First Quarter 2024 Results

    Net revenue in the first quarter was $295 million, compared to $305 million in the first quarter of 2023. The decrease was the result of the non-recurrence of prior year abnormal backlog deliveries and a weather-related impact on deliveries in January, partially offset by favorable demand versus prior year.

    Comparable growth(1) was (9.5)% and demand comparable growth(2) was 1.3% in the first quarter of 2024.

    Gross margin decreased to $115 million, compared to $128 million in the first quarter of 2023, driven primarily by lower net revenue and higher Showroom costs as we continue to expand our footprint.

    Selling, general and administrative expenses increased 16.8% to $97 million, compared to $83 million in the first quarter of 2023, primarily driven by higher selling expense related to new Showrooms and demand strength, higher corporate expense as we continue to invest in our strategic initiatives to support and drive the growth of the business, and increased warehouse expense as our Dallas location continues to increase productivity.

    Net and comprehensive income was $15 million compared to $34 million in the first quarter of 2023.

    Adjusted EBITDA was $29 million compared to $55 million in the first quarter of 2023. Adjusted EBITDA as a percent of net revenue was 9.9% in the first quarter of 2024, compared to 18.0% in the first quarter of 2023.

    Balance Sheet and Cash Flow Highlights, as of March 31, 2024

    Cash and cash equivalents totaled $233 million, and the Company had no long-term debt at March 31, 2024. Net merchandise inventory increased 5.6% to $268 million, compared to $254 million as of December 31, 2023. Client deposits increased 16.8% to $203 million, compared to $174 million as of December 31, 2023.

    For the three months ended March 31, 2024, net cash provided by operating activities was $37 million, compared to $11 million for the three months ended March 31, 2023.

    For the three months ended March 31, 2024, net cash used in investing activities was approximately $26 million, which includes landlord contributions of approximately $13 million and company-funded capital expenditures(3) of approximately $13 million. For the three months ended March 31, 2023, net cash used in investing activities was approximately $11 million, which included landlord contributions of approximately $3 million and company-funded capital expenditures(3) of approximately $8 million.

    Outlook

    The table below reaffirms our previously provided expectations for selected full year 2024 financial operating results and sets out our expectations for selected second quarter 2024 operating results.

    Full Year 2024Q2 2024
    Net revenue$1.33 billion to $1.37 billion$310 million to $320 million
    Comparable growth(1)(4)% to (2)%(9)% to (7)%
    Net income(4)$95 million to $105 million$14 million to $18 million
    Adjusted EBITDA(5)$185 million to $200 million$33 million to $38 million
    Other estimates: 
    Company-funded capital expenditures(3)$80 million to $100 million 
    Depreciation & amortization$45 million to $50 million 
    Fully diluted shares~141 million 
    Effective tax rate~ 26% 


    In 2024, the Company plans to open nine to eleven new Showrooms, as well as renovate, relocate and expand several locations.

    (1) Comparable growth is a key performance indicator and is defined as the year-over-year percentage change of the dollar value of orders delivered (based on purchase price), net of the dollar value of returns (based on amount credited to client), from our comparable Showrooms and eCommerce, including through our catalogs and other mailings.
    (2) Demand comparable growth is a key performance indicator and is defined as the year-over-year percentage change of demand from our comparable Showrooms and eCommerce, including through our catalogs and other mailings.
    (3) Company-funded capital expenditures is defined as total net cash used in investing activities less landlord contributions.
    (4) U.S. GAAP net income (loss).
    (5) We have not reconciled guidance for Adjusted EBITDA to the corresponding GAAP financial measure because we do not provide guidance for the various reconciling items. These items include, but are not limited to, future share-based compensation expense, income taxes, interest expense, and transaction costs. We are unable to provide guidance for these reconciling items because we cannot determine their probable significance, as certain items are outside of our control and cannot be reasonably predicted due to the fact that these items could vary significantly from period to period. Accordingly, reconciliations to the corresponding GAAP financial measure is not available without unreasonable effort.

    Conference Call

    You are invited to listen to Arhaus’ conference call to discuss the first quarter 2024 financial results scheduled for today, May 9, 2024, at 8:30 a.m. Eastern Time. The call will be available over the Internet on our website (http://ir.arhaus.com) or by dialing (800) 715-9871 within the U.S., or 1 (646) 307-1963, outside the U.S. The conference ID is: 9650241.

    A recorded replay of the conference call will be available within approximately three hours of the conclusion of the call and can be accessed online at http://ir.arhaus.com for approximately twelve months.

    About Arhaus

    Founded in 1986, Arhaus is a rapidly growing lifestyle brand and omni-channel retailer of premium home furnishings. Through a differentiated proprietary model that directly designs and sources products from leading manufacturers and artisans around the world, Arhaus offers an exclusive assortment of heirloom quality products that are sustainably sourced, lovingly made, and built to last. With over 90 showrooms and design center locations across the United States, a team of interior designers providing complimentary in-home design services, and robust online and eCommerce capabilities, Arhaus is known for innovative design, responsible sourcing, and client-first service. For more information, please visit www.arhaus.com.

    Investor Contact:

    Wendy Watson
    SVP, Investor Relations
    (440) 439-7700 x3409
    invest@arhaus.com

    Non-GAAP Financial Measures

    In addition to the results provided in accordance with U.S. GAAP, this press release and related tables include adjusted EBITDA and adjusted EBITDA as a percentage of net revenue which present operating results on an adjusted basis.

    We use non-GAAP measures to help assess the performance of our business, identify trends affecting our business, formulate business plans and make strategic decisions. In addition to our results determined in accordance with U.S. GAAP, we believe that providing these non-GAAP financial measures is useful to our investors as they present an informative supplemental view of our results from period to period by removing the effect of non-recurring items. However, our inclusion of these adjusted measures should not be construed as an indication that our future results will be unaffected by unusual or infrequent items or that the items for which we have made adjustments are unusual or infrequent or will not recur. These non-

    U.S. GAAP measures are not a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP. Because not all companies use identical calculations, the presentations of these measures may not be comparable to other similarly titled measures of other companies and can differ significantly from company to company. These measures should only be read together with the corresponding U.S. GAAP measures. Please refer to the reconciliation of adjusted EBITDA to net income, the most directly comparable financial measure prepared in accordance with U.S. GAAP, below.

    Forward-Looking Statements

    Certain statements contained herein, including statements under the headings “Full Year 2024 Outlook Reaffirmed” and “Outlook”, are not based on historical fact and are “forward-looking statements” within the meaning of applicable securities laws.

    Forward-looking statements can generally be identified by the use of forward-looking terminology, including, but not limited to, “may,” “could,” “seek,” “guidance,” “predict,” “potential,” “likely,” “believe,” “will,” “expect,” “anticipate,” “estimate,” “plan,” “intend,” “forecast,” or variations of these terms and similar expressions, or the negative of these terms or similar expressions. Past performance is not a guarantee of future results or returns and no representation or warranty is made regarding future performance. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond our control that could cause our actual results, performance or achievements to be materially different from the expected results, performance or achievements expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to: our ability to manage and maintain the growth rate of our business; our ability to obtain quality merchandise in sufficient quantities; disruption in our receiving and distribution system, including delays in the integration of our distribution centers and the possibility that we may not realize the anticipated benefits of multiple distribution centers; the possibility of cyberattacks and our ability to maintain adequate cybersecurity systems and procedures; loss, corruption and misappropriation of data and information relating to clients and employees; changes in and compliance with applicable data privacy rules and regulations; risks as a result of constraints in our supply chain; a failure of our vendors to meet our quality standards; declines in general economic conditions that affect consumer confidence and consumer spending that could adversely affect our revenue; our ability to anticipate changes in consumer preferences; risks related to maintaining and increasing showroom traffic and sales; our ability to compete in our market; our ability to adequately protect our intellectual property; compliance with applicable governmental regulations; effectively managing our eCommerce business and digital marketing efforts; our reliance on third-party transportation carriers and risks associated with increased freight and transportation costs; and compliance with SEC rules and regulations as a public reporting company.
    These factors should not be construed as exhaustive. Further information on potential factors that could affect the financial results of the Company and its forward-looking statements is included in the Company’s filings with the Securities and Exchange Commission. The Company assumes no obligation to update any forward-looking statement, except as may be required by law. These forward-looking statements speak only as of the date of this release. All forward-looking statements are qualified in their entirety by this cautionary statement.


    Arhaus, Inc. and Subsidiaries
    Condensed Consolidated Balance Sheets
    (Unaudited, amounts in thousands, except share and per share data)
     
     March 31,
    2024
     December 31,
    2023
    Assets     
    Current assets  
    Cash and cash equivalents$        233,230  $        223,098 
    Restricted cash 3,210   3,207 
    Accounts receivable, net 1,805   2,394 
    Merchandise inventory, net 268,410   254,292 
    Prepaid and other current assets 33,122   26,304 
    Total current assets 539,777   509,295 
    Operating right-of-use assets 322,905   302,157 
    Financing right-of-use assets 38,209   38,835 
    Property, furniture and equipment, net 243,167   220,248 
    Deferred tax assets 18,953   19,127 
    Goodwill 10,961   10,961 
    Other noncurrent assets 2,407   4,525 
    Total assets$        1,176,379  $        1,105,148 
          
    Liabilities and Stockholders’ Equity  
    Current liabilities  
    Accounts payable$        62,135  $        63,699 
    Dividends payable 70,628    
    Accrued taxes 13,296   9,638 
    Accrued wages 11,156   15,185 
    Accrued other expenses 43,195   46,062 
    Client deposits 202,922   173,808 
    Current portion of operating lease liabilities 42,694   33,051 
    Current portion of financing lease liabilities 919   904 
    Total current liabilities 446,945   342,347 
    Operating lease liabilities, long-term 383,684   362,598 
    Financing lease liabilities, long-term 53,658   53,870 
    Deferred rent and lease incentives 1,871   1,952 
    Other long-term liabilities 4,574   4,143 
    Total liabilities$        890,732  $        764,910 
          
    Commitments and contingencies  
       
    Stockholders’ equity  
    Class A shares, par value $0.001 per share (600,000,000 shares authorized, 53,361,983 shares issued and 53,241,316 outstanding as of March 31, 2024; 53,254,088 shares issued and 53,169,711 outstanding as of December 31, 2023) 53   52 
    Class B shares, par value $0.001 per share (100,000,000 shares authorized, 87,115,600 shares issued and outstanding as of March 31, 2024; 87,115,600 shares issued and outstanding as of December 31, 2023) 
    87
       87 
    Retained earnings 89,206   145,292 
    Additional paid-in capital 196,301   194,807 
    Total Arhaus, Inc. stockholders’ equity$        285,647  $        340,238 
    Total liabilities and stockholders’ equity$        1,176,379  $        1,105,148 

     

    Arhaus, Inc. and Subsidiaries
    Condensed Consolidated Statements of Comprehensive Income
    (Unaudited, amounts in thousands, except share and per share data)

     
            
     Three months ended
    March 31,

      2024   2023 
    Net revenue$295,162  $304,568 
    Cost of goods sold 180,108   176,330 
    Gross margin 115,054   128,238 
    Selling, general and administrative expenses 96,693   82,782 
    Income from operations 18,361   45,456 
    Interest expense (income), net (1,432)  (173)
    Other income (122)  (572)
    Income before taxes 19,915   46,201 
    Income tax expense 4,816   12,102 
    Net and comprehensive income$15,099  $34,099 
       
    Net and comprehensive income per share, basic  
    Weighted-average number of common shares outstanding, basic 139,816,792   139,072,756 
    Net and comprehensive income per share, basic$0.11  $0.25 
    Net and comprehensive income per share, diluted
    Weighted-average number of common shares outstanding, diluted 140,556,031   139,939,543 
    Net and comprehensive income per share, diluted$0.11  $0.24 
            

     

    Arhaus, Inc. and Subsidiaries
    Condensed Consolidated Statements of Cash Flows
    (Unaudited, amounts in thousands)
     
     Three months ended
    March 31,
      2024 
      2023 
    Cash flows from operating activities     
    Net income$15,099  $34,099 
    Adjustments to reconcile net income to net cash provided by operating activities  
    Depreciation and amortization 8,603   6,740 
    Amortization of operating lease right-of-use asset 8,738   7,559 
    Amortization of deferred financing fees, interest on finance lease in excess of
    principal paid and interest on operating leases
     6,233   4,640 
    Equity based compensation 2,024   1,630 
    Deferred tax assets 174   4,599 
    Amortization of cloud computing arrangements 310    
    Amortization and write-off of lease incentives (80)  (80)
    Insurance proceeds    47 
    Changes in operating assets and liabilities  
    Accounts receivable 589   (173)
    Merchandise inventory (14,118)  (5,750)
    Prepaid and other assets (5,758)  (1,286)
    Other noncurrent liabilities 18   93 
    Accounts payable (4,819)  (12,625)
    Accrued expenses (5,092)  (13,346)
    Operating lease liabilities (4,207)  (10,628)
    Client deposits 29,114   (4,654)
    Net cash provided by operating activities 36,828   10,865 
    Cash flows from investing activities  
    Purchases of property, furniture and equipment (25,932)  (11,693)
    Insurance proceeds    333 
    Net cash used in investing activities (25,932)  (11,360)
    Cash flows from financing activities  
    Principal payments under finance leases (221)  (65)
    Repurchase of shares for payment of withholding taxes for equity based compensation (540)  (347)
    Net cash used in financing activities (761)  (412)
    Net increase (decrease) in cash, cash equivalents and restricted cash 10,135   (907)
    Cash, cash equivalents and restricted cash  
    Beginning of period 226,305   152,527 
    End of period$236,440  $151,620 
            
    Supplemental disclosure of cash flow information       
    Interest paid in cash$840  $1,305 
    Interest received in cash 2,871   1,507 
    Income taxes paid in cash 991   1,246 
    Noncash investing activities:       
    Purchase of property, furniture and equipment in current liabilities 15,250   8,025 
    Noncash financing activities:       
    Capital contributions: 11   17 
            


    Arhaus, Inc. and Subsidiaries
    Reconciliation of Net Income to Adjusted EBITDA
    (Unaudited, amounts in thousands)
      
     Three months ended
    March 31,
      2024   2023 
    Net and comprehensive income$15,099  $34,099 
    Interest expense (income), net (1,432)  (173)
    Income tax expense 4,816   12,102 
    Depreciation and amortization 8,603   6,740 
    EBITDA 27,086   52,768 
    Equity based compensation 2,024   1,630 
    Other expenses(1)    437 
    Adjusted EBITDA$29,110  $54,835 
            
    Net revenue$295,162  $304,568 
    Net and comprehensive income as a % of net revenue 5.1%  11.2%
    Adjusted EBITDA as a % of net revenue 9.9%  18.0%
            
    (1) Other expenses represent costs and investments not indicative of ongoing business performance, such as public offering costs, severance, signing bonuses and recruiting costs. For the three months ended March 31, 2023, these expenses consisted largely of $0.3 million of severance, signing bonuses and recruiting costs and $0.1 million of public offering costs.
     

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