Arhaus, Inc. Reports Second Quarter Financial Results

August 8, 2024  by Karen Parrish in Business Strategy, Industry   

Second Quarter 2024 Highlights

Net revenue of $310 million

Comparable growth(1) of (7.1)%

Net and comprehensive income of $22 million

Adjusted EBITDA of $40 million

Year-to-Date 2024 Highlights, through June 30

Net revenue of $605 million

Comparable growth of (8.3)%

Net and comprehensive income of $37 million

Adjusted EBITDA of $69 million

2024 Outlook Updated

Net revenue of $1.25 billion to $1.29 billion

Comparable growth of (11.0)% to (8.0)%

Net and comprehensive income of $55 million to $75 million

Adjusted EBITDA(8) of $125 million to $145 million

CEO Comments

John Reed, Co-Founder and Chief Executive Officer, commented, “Our team delivered another quarter of solid operational execution, with several new showroom openings, successful new product development and important strategic investments to support our long term growth.

“We have opened 8 new Showrooms in 6 states so far this year and are on pace to meet our goal of opening nine to eleven new Showrooms in 2024. We recently celebrated an important milestone, opening our 100th Showroom. I want to thank our teams across Arhaus for their efforts in this achievement. We have many years of growth ahead as we work toward our long term goal of 165 Traditional Showrooms and up to 100 Design Studios, allowing us to capitalize on our tremendous brand awareness opportunity.”

“Total demand in the second quarter increased mid-single-digits. We continue to be very pleased with the performance of our new showrooms and our new showroom economics.”

“In the second quarter we saw demand comparable growth soften to (3%). We have experienced tremendous growth over the past several years with second quarter demand comparable growth increases of 8.6% on a two-year stacked basis and 31.1% on a three-year stacked basis. I am so proud of the team’s execution while growing exponentially over the last several years and look forward to continuing to build on this solid base with our long term growth strategy.

“Given the consumer and demand comparable growth trends we have seen for the past three months, we are adjusting our expectations for the second half of the year and lowering our full year outlook. We remain confident in our long term growth strategy to expand our showroom footprint, increase brand awareness and invest to drive operational efficiency. Our strong, debt-free balance sheet allows us to continue to invest in our industry-leading growth while navigating the current consumer environment.”

Second Quarter 2024 Results
Net revenue in the second quarter was $310 million, compared to $313 million in the second quarter of 2023. The decrease was the result of the non-recurrence of prior year abnormal backlog deliveries and the implementation of our warehouse management system in our Ohio distribution center.

Comparable growth was (7.1)% and demand comparable growth was (3.0)% in the second quarter of 2024.

Gross margin decreased to $124 million, compared to $140 million in the second quarter of 2023, driven primarily by higher Showroom costs as we continue to expand our footprint, lower product margin related to promotional activity and lower net revenue, and increased delivery and transportation costs.

Selling, general and administrative expenses increased 10.3% to $95 million, compared to $86 million in the second quarter of 2023, primarily driven by higher selling expense mostly related to new Showrooms, 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.

Net and comprehensive income was $22 million compared to $40 million in the second quarter of 2023.

Adjusted EBITDA was $40 million compared to $64 million in the second quarter of 2023. Adjusted EBITDA as a percent of net revenue was 12.9% in the second quarter of 2024, compared to 20.4% in the second quarter of 2023.

Balance Sheet and Cash Flow Highlights, as of June 30, 2024

Cash and cash equivalents totaled $174 million, and the Company had no long-term debt at June 30, 2024. Net merchandise inventory increased $20 million to $274 million, compared to $254 million as of December 31, 2023. Client deposits increased $36 million to $210 million, compared to $174 million as of December 31, 2023.

For the six months ended June 30, 2024, net cash provided by operating activities was $84 million, compared to $64 million for the six months ended June 30, 2023.

For the six months ended June 30, 2024, net cash used in investing activities was approximately $62 million. Company-funded capital expenditures(6) were approximately $40 million, and landlord contributions were approximately $22 million. For the six months ended June 30, 2023, net cash used in investing activities was approximately $35 million. Company-funded capital expenditures were approximately $24 million, and landlord contributions were approximately $11 million.

For the six months ended June 30, 2024, net cash used in financing activities was $71.1 million primarily due to the payment of the special dividend on our Class A and Class B common stock. For the six months ended June 30, 2023, net cash used in financing activities was $0.5 million primarily due to the repurchase of shares for payment of withholding taxes for equity based compensation.

The Company ended the second quarter with 97 total Showrooms across 29 states.

Conference Call

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.