arhs-20240930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-41009

Arhaus, Inc.

(Exact name of registrant as specified in its charter)


Delaware						87-1729256
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

51 E. Hines Hill Road, Boston Heights, Ohio

(Address of Principal Executive Offices)

44236

(Zip Code)

(440) 439-7700

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, $0.001 par value per share	ARHS	The Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of November 4, 2024 the registrant had 53,414,106 shares of Class A common stock and 87,115,600 shares of Class B common stock outstanding.

Table of Contents


		Page
Part I - Financial Information		2
Item 1.	Financial Statements of Arhaus, Inc. and Subsidiaries	2
	Condensed Consolidated Balance Sheets (unaudited)	2
	Condensed Consolidated Statements of Comprehensive Income (unaudited)	3
	Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited)	4
	Condensed Consolidated Statements of Cash Flows (unaudited)	6
	Notes to Condensed Consolidated Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	29
Part II. Other Information		32
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits	33
Signatures		34

Part I - Financial Information

Item 1. Financial Statements of Arhaus, Inc. and Subsidiaries


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 (Note 9)
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

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


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

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


Arhaus, Inc. and Subsidiaries Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited, amounts in thousands)


	Nine Months Ended
	Common Stock						Treasury Stock			Total Stockholders’ Equity
	Class A			Class B			Class A
	Shares	Amount		Shares	Amount		Shares	Amount		Retained Earnings		Additional Paid-in Capital		Total Stockholders’ Equity
Balances as of December 31, 2023	52,669	$	52	87,116	$	87	84	$	—	$	145,292	$	194,807	$	340,238
Net income	—	—		—	—		—	—		47,256		—		47,256
Shareholder capital contribution	—	—		—	—		—	—		—		24		24
Equity based compensation	609	1		—	—		—	—		—		5,351		5,352
Shares withheld to cover employees’ withholding taxes for equity based compensation	(139)	—		—	—		139	—		—		(1,277)		(1,277)
Dividends declared	—	—		—	—		—	—

SEC Form 10-Q filed by Arhaus Inc.