• Arhaus Reports Third Quarter 2024 Results

    Источник: Nasdaq GlobeNewswire / 07 ноя 2024 06:30:00   America/New_York

    BOSTON HEIGHTS, Ohio, Nov. 07, 2024 (GLOBE NEWSWIRE) -- Arhaus, Inc. (“Arhaus” or the “Company”) (NASDAQ: ARHS), a rapidly growing lifestyle brand and omni-channel retailer of premium artisan-crafted home furnishings, today reported third quarter 2024 results for the period ended September 30, 2024. Highlights include:

    Third Quarter 2024

    • Net revenue of $319 million
    • Comparable growth(1) of (9.2)%
    • Net and comprehensive income of $10 million
    • Adjusted EBITDA of $23 million

    Year-to-Date 2024, through September 30

    • Net revenue of $924 million
    • Comparable growth of (8.6)%
    • Net and comprehensive income of $47 million
    • Adjusted EBITDA of $92 million

    2024 Outlook (Updated)

    • Net revenue of $1.23 billion to $1.25 billion
    • Comparable growth of (12.0)% to (11.0)%
    • Net and comprehensive income of $55 million to $60 million
    • Adjusted EBITDA(5) of $115 million to $125 million

    John Reed, Co-Founder and Chief Executive Officer, said, “Our third-quarter results demonstrate our team’s commitment to operational excellence in a challenging environment. We remain focused on our long-term growth strategy grounded in our premium, livable luxury offerings and exceptional client experience. With ten new showrooms opened already this year and an eleventh opening tomorrow in Corte Madera, California, we remain committed to expanding our presence in key markets.

    “While demand trends improved throughout the third quarter, we’re adjusting our full-year sales and earnings outlook to reflect a continued tempered consumer environment, which we believe is temporary given our innovative product offerings and compelling marketing campaigns. Despite near term headwinds, our strong, debt-free balance sheet enables us to continue prudent investment in strategic priorities.

    “Our long-term success is driven by our teams’ dedication to delivering the best products and an inspiring showroom experience. I want to thank each of them for their ongoing commitment, which highlights the resilience of our growth strategy and our commitment to creating value for our shareholders.”

    Results and Highlights

    Net revenue in the third quarter was $319 million, compared to $326 million in the third quarter of 2023. The decrease was primarily related to the non-recurrence of prior year abnormal backlog deliveries and lower total demand.

    Comparable growth(1) was (9.2)% and demand comparable growth(2) was (11.3)% in the third quarter of 2024.

    Gross margin was $123 million, compared to $131 million in the third 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 were $112 million, compared to $107 million in the third quarter of 2023, primarily driven by legal costs, marketing investments, and strategic investments to support and drive the growth of the business, including supply chain and technology improvements. This was partially offset by the non-recurrence of last year’s donation to The Nature Conservancy.

    Net and comprehensive income was $10 million compared to $20 million in the third quarter of 2023.

    Adjusted EBITDA was $23 million compared to $34 million in the third quarter of 2023. Adjusted EBITDA as a percent of net revenue was 7.2% in the third quarter of 2024, compared to 10.3% in the third quarter of 2023.

    Balance Sheet and Liquidity

    As of September 30, 2024, the Company reported the following:

    Cash and cash equivalents totaled $178 million, and the Company had no long-term debt at September 30, 2024. Net merchandise inventory increased $41 million to $295 million, compared to $254 million as of December 31, 2023. Client deposits increased $50 million to $224 million, compared to $174 million as of December 31, 2023.

    For the nine months ended September 30, 2024, net cash provided by operating activities was $115 million, compared to $148 million for the nine months ended September 30, 2023.

    For the nine months ended September 30, 2024, net cash used in investing activities was approximately $89 million. Company-funded capital expenditures(3) were approximately $62 million, and landlord contributions were approximately $27 million. For the nine months ended September 30, 2023, net cash used in investing activities was approximately $59 million. Company-funded capital expenditures were approximately $47 million, and landlord contributions were approximately $12 million.

    For the nine months ended September 30, 2024, net cash used in financing activities was $72 million primarily due to the payment of the special dividend on our Class A and Class B common stock. For the nine months ended September 30, 2023, net cash used in financing activities was $2 million primarily due to the repurchase of shares for payment of withholding taxes for equity based compensation.

    The Company ended the third quarter with 101 total Showrooms across 29 states.

    2024 Outlook

    The table below presents our updated expectations for selected full year 2024 financial operating results and sets out our expectations for selected fourth quarter 2024 operating results.

    Full Year Current GuidancePrevious GuidanceQ4 Guidance
    Net revenue$1.23 billion to $1.25 billion$1.25 billion to $1.29 billion$306 million to $326 million
    Comparable growth(1)(12)% to (11)%(11)% to (8)%(22)% to (16)%
    Net income (4)$55 million to $60 million$55 million to $75 million$8 million to $13 million
    Adjusted EBITDA(5)$115 million to $125 million$125 million to $145 million$23 million to $33 million
    Other estimates:
    Company-funded capital expenditures(3)~$80 million$80 million to $100 million 
    Depreciation & amortization~$40 million$40 million to $45 million 
    Fully diluted sharesUnchanged~ $141 million 
    Effective tax rateUnchanged~ 26% 

    (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 income, 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 third quarter 2024 financial results scheduled for today, November 7, 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 (877) 407-3982 within the U.S., or 1 (201) 493-6780, outside the U.S. The conference ID is: 13741050.  

    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 more than 100 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:

    Tara Louise Atwood
    Vice President, Investor Relations
    (440) 439-7700
    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 “2024 Outlook (Updated)” and “2024 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)
     
     September 30,
    2024
     December 31,
    2023
    Assets   
    Current assets   
    Cash and cash equivalents$177,722 $223,098
    Restricted cash 3,216  3,207
    Accounts receivable, net 1,196  2,394
    Merchandise inventory, net 294,596  254,292
    Prepaid and other current assets 32,530  26,304
    Total current assets 509,260  509,295
    Operating right-of-use assets 348,612  302,157
    Financing right-of-use assets 37,129  38,835
    Property, furniture and equipment, net 285,292  220,248
    Deferred tax assets 15,358  19,127
    Goodwill 10,961  10,961
    Other noncurrent assets 2,699  4,525
    Total assets$1,209,311 $1,105,148
        
    Liabilities and Stockholders’ Equity   
    Current liabilities   
    Accounts payable$73,559 $63,699
    Accrued taxes 5,998  9,638
    Accrued wages 11,753  15,185
    Accrued other expenses 47,567  46,062
    Client deposits 224,138  173,808
    Current portion of operating lease liabilities 51,669  33,051
    Current portion of financing lease liabilities 991  904
    Total current liabilities 415,675  342,347
    Operating lease liabilities, long-term 415,410  362,598
    Financing lease liabilities, long-term 53,453  53,870
    Deferred rent and lease incentives   1,952
    Other long-term liabilities 4,128  4,143
    Total liabilities$888,666 $764,910
        
    Commitments and contingencies   
        
    Stockholders’ equity   
    Class A shares, par value $0.001 per share (600,000,000 shares authorized, 53,636,032 shares issued and 53,412,809 outstanding as of September 30, 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 September 30, 2024; 87,115,600 shares issued and outstanding as of December 31, 2023) 87  87
    Retained earnings 121,600  145,292
    Additional paid-in capital 198,905  194,807
    Total stockholders’ equity 320,645  340,238
    Total liabilities and stockholders’ equity$1,209,311 $1,105,148


     
    Arhaus, Inc. and Subsidiaries
    Condensed Consolidated Statements of Comprehensive Income
    (Unaudited, amounts in thousands, except share and per share data)
     
     Nine months ended Three months ended
     September 30, September 30,
      2024   2023   2024   2023 
    Net revenue$924,096  $943,696  $319,133  $326,229 
    Cost of goods sold 561,598   544,481   196,061   195,372 
    Gross margin 362,498   399,215   123,072   130,857 
    Selling, general and administrative expenses 304,085   275,890   112,401   106,977 
    Income from operations$58,413  $123,325  $10,671  $23,880 
    Interest income, net (2,582)  (1,731)  (544)  (1,080)
    Other income (447)  (738)  (250)  (78)
    Income before taxes 61,442   125,794   11,465   25,038 
    Income tax expense 14,186   31,771   1,542   5,297 
    Net and comprehensive income$47,256  $94,023  $9,923  $19,741 
            
    Net and comprehensive income per share, basic       
    Weighted-average number of common shares outstanding, basic 139,990,522   139,365,870   140,166,990   139,628,776 
    Net and comprehensive income per share, basic$0.34  $0.67  $0.07  $0.14 
    Net and comprehensive income per share, diluted       
    Weighted-average number of common shares outstanding, diluted 140,732,337   140,021,670   140,722,915   140,140,899 
    Net and comprehensive income per share, diluted$0.34  $0.67  $0.07  $0.14 


     
    Arhaus, Inc. and Subsidiaries
    Condensed Consolidated Statements of Cash Flows
    (Unaudited, amounts in thousands)
     
     Nine months ended
     September 30,
      2024   2023 
    Cash flows from operating activities   
    Net income$47,256  $94,023 
    Adjustments to reconcile net income to net cash provided by operating activities   
    Depreciation and amortization 27,895   21,439 
    Amortization of operating lease right-of-use asset 27,432   24,733 
    Amortization of deferred financing fees, interest on finance lease in excess of principal paid and interest on operating leases 19,859   16,037 
    Equity based compensation 5,352   5,752 
    Deferred tax assets 3,769   256 
    Amortization of cloud computing arrangements 1,206   386 
    Amortization and write-off of lease incentives (80)  (241)
    Insurance proceeds    60 
    Changes in operating assets and liabilities   
    Accounts receivable 1,198   (228)
    Merchandise inventory (40,304)  17,399 
    Prepaid and other assets (6,527)  (4,363)
    Other noncurrent liabilities 224   273 
    Accounts payable 8,983   (10,141)
    Accrued expenses (8,096)  3,502 
    Operating lease liabilities (23,071)  (30,836)
    Client deposits 50,330   9,819 
    Net cash provided by operating activities 115,426   147,870 
    Cash flows from investing activities   
    Purchases of property, furniture and equipment (88,686)  (58,808)
    Insurance proceeds    333 
    Net cash used in investing activities (88,686)  (58,475)
    Cash flows from financing activities   
    Principal payments under finance leases (686)  (503)
    Repurchase of shares for payment of withholding taxes for equity based compensation (1,277)  (1,024)
    Cash dividend payments (70,144)   
    Net cash used in financing activities (72,107)  (1,527)
    Net (decrease) increase in cash, cash equivalents and restricted cash (45,367)  87,868 
    Cash, cash equivalents and restricted cash   
    Beginning of period 226,305   152,527 
    End of period$180,938  $240,395 
        
    Supplemental disclosure of cash flow information   
    Interest paid in cash$3,402  $3,962 
    Interest received in cash 7,068   5,395 
    Income taxes paid in cash 16,001   28,856 
    Noncash investing activities:   
    Purchase of property, furniture and equipment in current liabilities 12,650   13,210 
    Noncash financing activities:   
    Capital contributions 24   42 


     
    Arhaus, Inc. and Subsidiaries
    Reconciliation of Net Income to Adjusted EBITDA
    (Unaudited, amounts in thousands)
     
     Nine months ended Three months ended
     September 30, September 30,
      2024   2023   2024   2023 
    Net and comprehensive income$47,256  $94,023  $9,923  $19,741 
    Interest income, net (2,582)  (1,731)  (544)  (1,080)
    Income tax expense 14,186   31,771   1,542   5,297 
    Depreciation and amortization 27,895   21,439   10,186   7,299 
    EBITDA 86,755   145,502   21,107   31,257 
    Equity based compensation 5,352   5,752   2,001   1,848 
    Other expenses (1)    992      555 
    Adjusted EBITDA$92,107  $152,246  $23,108  $33,660 
            
    Net revenue$924,096  $943,696  $319,133  $326,229 
    Net and comprehensive income as a % of net revenue 5.1%  10.0%  3.1%  6.1%
    Adjusted EBITDA as a % of net revenue 10.0%  16.1%  7.2%  10.3%

    _______________________
    (1) Other expenses represent costs and investments not indicative of ongoing business performance, such as public offering costs, severance and recruiting costs. For the nine and three months ended September 30, 2023, these expenses consisted largely of $0.7 million and $0.6 million of public offering costs, respectively.


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