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 third quarter ended September 30, 2022.
Third Quarter 2022 Highlights
- Net revenue increased 57.4% to $320 million
- Comparable Growth(1) of 54.3%
- Net and Comprehensive Income of $37 million
- Adjusted Net Income of $38 million
- Adjusted EBITDA increased 86.6% to $57 million
Year-to-Date 2022 Highlights, through September
30
- Net revenue increased 56.2% to $873 million
- Comparable Growth(1) of 53.5%
- Net and Comprehensive Income of $90 million
- Adjusted Net Income of $95 million
- Adjusted EBITDA increased 64.6% to $148 million
2022 Outlook
- Net revenue of $1,173 million to $1,193 million
- Comparable Growth(1) of 43% to 48%
- Net and Comprehensive Income of $109 million to $115
million
- Adjusted EBITDA of $185 million to $192 million
CEO Comments
John Reed, Co-Founder and Chief Executive Officer,
commented,
“We delivered another quarter of strong growth in revenue and
earnings driven by outstanding execution by our team in
implementing our growth strategies and managing our profitability,
an improving supply chain and continued demand growth. As our
industry faces a dynamic environment with inflationary pressure and
macroeconomic challenges, our results in the quarter reflect the
strength of our business.
“We are reaffirming our full year net revenue and comparable
growth outlook for 2022 and raising our full year net income and
adjusted EBITDA outlook. As we look to the future, we remain
confident in our strategy and are focused on delivering long-term
growth.”
Third Quarter 2022 Results
Net revenue increased 57.4% to $320 million, compared to $203
million in the third quarter of 2021. The increase was driven by
strong demand in both Showroom and eCommerce channels, as well as
continued improvements across our supply chain. Comparable
growth(1) was 54.3% and demand comparable growth(2) was 15.8% in
the third quarter of 2022.
Income from operations increased to $47 million, compared to $16
million in the third quarter of 2021, primarily driven by higher
net revenue. The benefit from higher net revenue was partially
offset by variable expense related to the increased net revenue,
including higher product, transportation and variable rent expense,
as well as higher credit card fees related to increased interest
rates and demand. Also offsetting the benefit from increased net
revenue was a $21 million increase in SG&A expenses to support
the growth of the business, including additional warehouse expense
as we expanded from one to three distribution centers year over
year, and new public company related costs.
Net and comprehensive income was $37 million compared to $14
million in the third quarter of 2021. This increase was primarily
driven by higher net revenue, partially offset by the above factors
and a higher post-IPO tax rate. Adjusted net income was $38 million
in the third quarter of 2022 compared to $20 million in the third
quarter of 2021.
Adjusted EBITDA increased 86.6% to $57 million compared to $30
million in the third quarter of 2021. Adjusted EBITDA as a percent
of net revenue increased 280 basis points to 17.7% in the third
quarter of 2022, compared to 14.9% in the third quarter of
2021.
The Company ended the quarter with 80 total showrooms across 28
states.
Balance Sheet and Cash Flow Highlights, as of September
30, 2022
Cash and cash equivalents were $146 million, and the Company had
no long-term debt at September 30, 2022. Net merchandise inventory
increased 40.4% to $293 million, compared to $208 million as of
December 31, 2021.
For the nine months ended September 30, 2022, net cash provided
by operating activities was $58 million, compared to $141 million
for the nine months ended September 30, 2021.
For the nine months ended September 30, 2022, net cash used in
investing activities was approximately $37 million which includes
landlord contributions of approximately $11 million and
company-funded capital expenditures(3) of approximately $26
million. For the nine months ended September 30, 2021, net cash
used in investing activities was approximately $30 million, which
included landlord contributions of approximately $11 million and
company-funded capital expenditures of approximately $18 million.
The increase in company-funded capital expenditures was primarily
driven by growth-related investments, including new distribution
capacity and costs related to new Showroom openings and information
technology.
Outlook
The table below presents our updated expectations for selected
full year 2022 financial operating results and implied fourth
quarter 2022 expectations derived from the outlook.
Full Year 2022 |
Current Guidance |
Previous Guidance |
Implied 4Q 2022 |
Net revenue |
unchanged |
$1,173 to $1,193 million |
$300 to $320 million |
Comparable growth(1) |
unchanged |
43% to 48% |
24% to 32% |
Net income(4) |
$109 to $115 million |
$92 to $98 million |
$19 to $25 million |
Adjusted EBITDA(5) |
$185 to $192 million |
$173 to $180 million |
$36.5 to $43.5 million |
Other estimates: |
|
Company-funded capital expenditures(3) |
$40 to $50 million |
$55 to $65 million |
|
Fully diluted shares |
unchanged |
~141 million |
|
Effective tax rate |
unchanged |
~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 direct-mail catalog.(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 direct-mail catalog.(3) Company-funded capital
expenditures is defined as total net cash used in
investing activities less landlord contributions.(4) U.S. GAAP net
income. (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, and interest expense. 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 2022 financial results scheduled for today,
November 10, 2022, at 8:30 a.m. Eastern Time. The call will be
available over the Internet on our website (https://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: 13725883.
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 https://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 80 showrooms 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 WatsonSVP, Investor Relations(440)
439-7700invest@arhaus.com
Non-GAAP Financial Measures
In addition to the results provided in accordance with GAAP,
this press release and related tables include adjusted EBITDA,
adjusted EBITDA as a percentage of net revenue and adjusted net
income, 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-GAAP measures are not a
substitute for, or superior to, measures of financial performance
prepared in accordance with 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 GAAP
measures. Please refer to the reconciliations of adjusted EBITDA
and adjusted net income to the most directly comparable financial
measures prepared in accordance with GAAP below.
Forward-Looking StatementsCertain statements
contained herein, including statements under the headings “2022
Outlook” 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 reliance on third-party transportation
carriers and risks associated with increased freight and
transportation costs; disruption in our receiving and distribution
system, including delays in the integration of our new distribution
centers and the possibility that we may not realize the anticipated
benefits of multiple distribution centers; our ability to obtain
quality merchandise in sufficient quantities; risks as a result of
constraints in our supply chain; a failure of our vendors to meet
our quality standards; the COVID-19 pandemic and its effect on our
business; declines in general economic conditions that affect
consumer confidence and consumer spending that could adversely
affect our revenue; our ability to manage and maintain the growth
rate of our business; 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; 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; compliance with applicable governmental
regulations; effectively managing our eCommerce business and
digital marketing efforts; and compliance with SEC rules and
regulations as a public reporting company. These factors should not
be construed as exhaustive. Furthermore, the potential impact of
the COVID-19 pandemic on our business operations and financial
results and on the world economy as a whole may heighten the risks
and uncertainties that affect our forward-looking statements
described above. 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 SubsidiariesCondensed
Consolidated Balance Sheets(Unaudited, amounts in
thousands, except share and per share data) |
|
|
September 30,2022 |
|
December 31,2021 |
Assets |
|
|
|
Current assets |
|
|
|
Cash and cash equivalents |
$ |
145,737 |
|
|
$ |
123,777 |
|
Restricted cash
equivalents |
|
6,345 |
|
|
|
7,131 |
|
Accounts receivable, net |
|
1,778 |
|
|
|
228 |
|
Merchandise inventory,
net |
|
292,571 |
|
|
|
208,343 |
|
Prepaid and other current
assets |
|
35,867 |
|
|
|
28,517 |
|
Total current assets |
|
482,298 |
|
|
|
367,996 |
|
Operating right-of-use
assets |
|
224,921 |
|
|
|
— |
|
Financing right-of-use
assets |
|
39,062 |
|
|
|
— |
|
Property, furniture and
equipment, net |
|
128,783 |
|
|
|
179,631 |
|
Deferred tax asset |
|
20,948 |
|
|
|
27,684 |
|
Goodwill |
|
10,961 |
|
|
|
10,961 |
|
Other noncurrent assets |
|
235 |
|
|
|
278 |
|
Total assets |
$ |
907,208 |
|
|
$ |
586,550 |
|
|
|
|
|
Liabilities and
Stockholders’ Equity |
|
|
|
Current liabilities |
|
|
|
Accounts payable |
$ |
58,455 |
|
|
$ |
51,429 |
|
Accrued taxes |
|
12,706 |
|
|
|
7,302 |
|
Accrued wages |
|
17,498 |
|
|
|
16,524 |
|
Accrued other expenses |
|
33,756 |
|
|
|
61,047 |
|
Client deposits |
|
261,801 |
|
|
|
264,929 |
|
Current portion of operating
lease liabilities |
|
39,248 |
|
|
|
— |
|
Current portion of financing
lease liabilities |
|
522 |
|
|
|
— |
|
Total current liabilities |
|
423,986 |
|
|
|
401,231 |
|
Operating lease liabilities,
long-term |
|
263,753 |
|
|
|
— |
|
Financing lease liabilities,
long-term |
|
51,908 |
|
|
|
— |
|
Capital lease obligation |
|
— |
|
|
|
50,525 |
|
Deferred rent and lease
incentives |
|
2,353 |
|
|
|
63,037 |
|
Other long-term
liabilities |
|
4,413 |
|
|
|
1,992 |
|
Total liabilities |
$ |
746,413 |
|
|
$ |
516,785 |
|
Commitments and
contingencies |
|
|
|
Stockholders' equity |
|
|
|
Class A shares, par value
$0.001 per share (600,000,000 shares authorized, 51,437,348 and
50,427,390 shares issued and outstanding as of September 30,
2022 and December 31, 2021, respectively) |
|
51 |
|
|
|
50 |
|
Class B shares, par value
$0.001 per share (100,000,000 shares authorized, 87,115,600 and
86,519,002 shares issued and outstanding as of September 30,
2022 and December 31, 2021, respectively) |
|
87 |
|
|
|
87 |
|
Accumulated Deficit |
|
(26,948 |
) |
|
|
(116,581 |
) |
Additional Paid-in
Capital |
|
187,605 |
|
|
|
186,209 |
|
Total Arhaus, Inc. stockholders' equity |
|
160,795 |
|
|
|
69,765 |
|
Total liabilities and stockholders' equity |
$ |
907,208 |
|
|
$ |
586,550 |
|
|
Arhaus, Inc. and SubsidiariesCondensed
Consolidated Statements of Comprehensive Income
(Unaudited, amounts in thousands, except share and per
share data) |
|
|
Nine months endedSeptember 30, |
|
Three months endedSeptember 30, |
|
|
2022 |
|
|
|
2021 |
|
|
2022 |
|
|
|
2021 |
Net revenue |
$ |
872,595 |
|
|
$ |
558,690 |
|
$ |
320,030 |
|
|
$ |
203,333 |
Cost of goods sold |
|
505,561 |
|
|
|
325,710 |
|
|
183,739 |
|
|
|
118,522 |
Gross margin |
|
367,034 |
|
|
|
232,980 |
|
|
136,291 |
|
|
|
84,811 |
Selling, general and
administrative expenses |
|
246,767 |
|
|
|
196,443 |
|
|
89,145 |
|
|
|
68,266 |
Loss on disposal of
assets |
|
— |
|
|
|
466 |
|
|
— |
|
|
|
452 |
Income from operations |
|
120,267 |
|
|
|
36,071 |
|
|
47,146 |
|
|
|
16,093 |
Interest expense, net |
|
3,367 |
|
|
|
4,091 |
|
|
751 |
|
|
|
1,365 |
Other income |
|
(584 |
) |
|
|
— |
|
|
(109 |
) |
|
|
— |
Income before taxes |
|
117,484 |
|
|
|
31,980 |
|
|
46,504 |
|
|
|
14,728 |
Income tax expense |
|
27,851 |
|
|
|
1,704 |
|
|
9,568 |
|
|
|
500 |
Net and comprehensive income |
$ |
89,633 |
|
|
$ |
30,276 |
|
$ |
36,936 |
|
|
$ |
14,228 |
Less: Net income attributable
to noncontrolling interest |
|
— |
|
|
$ |
17,499 |
|
$ |
— |
|
|
$ |
8,231 |
Net and comprehensive income
attributable to Arhaus, Inc. |
$ |
89,633 |
|
|
$ |
12,777 |
|
$ |
36,936 |
|
|
$ |
5,997 |
|
|
|
|
|
|
|
|
Net and comprehensive
income per share, basic |
|
|
|
|
|
|
|
Weighted-average number of common shares outstanding, basic |
|
137,939,577 |
|
|
|
112,058,742 |
|
|
138,484,495 |
|
|
|
112,058,742 |
Net and comprehensive income per share, basic |
$ |
0.65 |
|
|
$ |
0.11 |
|
$ |
0.27 |
|
|
$ |
0.05 |
Net and comprehensive
income per share, diluted |
|
|
|
|
|
|
|
Weighted-average number of common shares outstanding, diluted |
|
139,545,802 |
|
|
|
112,058,742 |
|
|
139,845,333 |
|
|
|
112,058,742 |
Net and comprehensive income per share, diluted |
$ |
0.64 |
|
|
$ |
0.11 |
|
$ |
0.26 |
|
|
$ |
0.05 |
|
|
|
|
|
|
|
|
Arhaus, Inc. and SubsidiariesCondensed
Consolidated Statements of Cash
Flows(Unaudited, amounts in
thousands) |
|
|
|
Nine months endedSeptember 30, |
|
|
2022 |
|
|
|
2021 |
|
Cash flows from
operating activities |
|
|
|
Net income |
$ |
89,633 |
|
|
$ |
30,276 |
|
Adjustments to reconcile net
income to net cash provided by operating activities |
|
|
|
Depreciation and amortization |
|
18,319 |
|
|
|
17,206 |
|
Amortization of operating lease right-of-use asset |
|
21,976 |
|
|
|
— |
|
Amortization of deferred financing fees and interest on finance
lease in excess of principal paid |
|
8,731 |
|
|
|
839 |
|
Equity based compensation |
|
2,613 |
|
|
|
1,135 |
|
Deferred tax assets |
|
5,458 |
|
|
|
— |
|
Derivative expense |
|
— |
|
|
|
29,905 |
|
Loss on disposal of property, furniture and equipment |
|
— |
|
|
|
466 |
|
Amortization and write-off of lease incentives |
|
(224 |
) |
|
|
(5,889 |
) |
Changes in operating assets and liabilities |
|
|
|
Accounts receivable |
|
(1,550 |
) |
|
|
240 |
|
Merchandise inventory |
|
(84,228 |
) |
|
|
(62,533 |
) |
Prepaid and other current assets |
|
(11,249 |
) |
|
|
(715 |
) |
Other noncurrent liabilities |
|
456 |
|
|
|
(732 |
) |
Accounts payable |
|
10,334 |
|
|
|
1,698 |
|
Accrued expenses |
|
23,682 |
|
|
|
16,259 |
|
Operating lease liabilities |
|
(22,586 |
) |
|
|
— |
|
Deferred rent and lease incentives |
|
— |
|
|
|
6,959 |
|
Client deposits |
|
(3,128 |
) |
|
|
106,076 |
|
Net cash provided by operating activities |
|
58,237 |
|
|
|
141,190 |
|
|
|
|
|
Cash flows from
investing activities |
|
|
|
Purchases of property,
furniture and equipment |
|
(36,950 |
) |
|
|
(29,533 |
) |
Net cash used in investing activities |
|
(36,950 |
) |
|
|
(29,533 |
) |
|
|
|
|
Cash flows from
financing activities |
|
|
|
Issuance of related party
notes |
|
— |
|
|
|
(1,000 |
) |
Proceeds from related party
notes |
|
— |
|
|
|
1,000 |
|
Principal payments under
capital leases |
|
— |
|
|
|
(106 |
) |
Principal payments under
finance leases |
|
(113 |
) |
|
|
— |
|
Shareholder distributions |
|
— |
|
|
|
(12,350 |
) |
Distributions to
noncontrolling interest holders |
|
— |
|
|
|
(7,865 |
) |
Net cash used in financing activities |
|
(113 |
) |
|
|
(20,321 |
) |
Net increase in cash, cash equivalents and restricted cash
equivalents |
|
21,174 |
|
|
|
91,336 |
|
|
|
|
|
Cash, cash equivalents
and restricted cash equivalents |
|
|
|
Beginning of period |
|
130,908 |
|
|
|
64,002 |
|
End of period |
$ |
152,082 |
|
|
$ |
155,338 |
|
|
|
|
|
Arhaus, Inc. and SubsidiariesCondensed
Consolidated Statements of Cash Flows
(continued)(Unaudited, amounts in
thousands) |
|
|
|
Nine months endedSeptember 30, |
|
|
2022 |
|
|
|
2021 |
|
Supplemental
disclosure of cash flow information |
|
|
|
Interest paid in cash |
$ |
3,858 |
|
|
$ |
4,006 |
|
Interest received in cash |
|
316 |
|
|
|
— |
|
Income taxes paid in cash |
|
20,579 |
|
|
|
1,394 |
|
Noncash operating
activities: |
|
|
|
Lease incentives |
|
7,532 |
|
|
|
4,253 |
|
Noncash investing
activities: |
|
|
|
Purchase of property, furniture and equipment in accounts
payable |
|
2,661 |
|
|
|
(428 |
) |
Noncash financing
activities: |
|
|
|
Adjustment to deferred tax asset impact of Reorganization from
partnership to a corporation |
|
(1,278 |
) |
|
|
— |
|
Derecognition of build-to-suit assets as a result of ASC 842
adoption |
|
(31,017 |
) |
|
|
— |
|
Property, furniture and equipment additions due to build-to-suit
lease transactions |
|
— |
|
|
|
1,040 |
|
Capital contributions |
|
62 |
|
|
|
— |
|
Capital lease obligation |
|
— |
|
|
|
2,591 |
|
|
Arhaus, Inc. and
SubsidiariesReconciliation of Net and
Comprehensive Income to Adjusted Net
Income(Unaudited, amounts in thousands, except
share and per share data) |
|
|
Nine months endedSeptember 30, |
|
Three months endedSeptember 30, |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
Net and comprehensive
income |
$ |
89,633 |
|
$ |
30,276 |
|
$ |
36,936 |
|
$ |
14,228 |
Adjustments (pre-tax): |
|
|
|
|
|
|
|
Derivative expense (1) |
|
— |
|
|
29,905 |
|
|
— |
|
|
100 |
Other expenses (2) |
|
6,567 |
|
|
5,806 |
|
|
1,909 |
|
|
5,188 |
Total non-GAAP adjustments pre-tax |
|
6,567 |
|
|
35,711 |
|
|
1,909 |
|
|
5,288 |
Less: Tax effect of
adjustments (3)(4) |
|
1,556 |
|
|
— |
|
|
395 |
|
|
— |
Adjusted net income |
$ |
94,644 |
|
$ |
65,987 |
|
$ |
38,450 |
|
$ |
19,516 |
|
|
|
|
|
|
|
|
Adjusted net income
per share, basic |
|
|
|
|
|
|
|
Weighted-average number of common shares outstanding, basic |
|
137,939,577 |
|
|
112,058,742 |
|
|
138,484,495 |
|
|
112,058,742 |
Adjusted net income per share, basic |
$ |
0.69 |
|
$ |
0.59 |
|
$ |
0.28 |
|
$ |
0.17 |
Adjusted net income
per share, diluted |
|
|
|
|
|
|
|
Weighted-average number of common shares outstanding, diluted |
|
139,545,802 |
|
|
112,058,742 |
|
|
139,845,333 |
|
|
112,058,742 |
Adjusted net income per share, diluted |
$ |
0.68 |
|
$ |
0.59 |
|
$ |
0.27 |
|
$ |
0.17 |
|
|
|
|
|
|
|
|
(1) We repaid our term loan in full on December 28, 2020. The
derivative expense relates to the change in the fair value of the
exit fee at the end of each reporting period. The Company used a
portion of the net proceeds from the IPO to pay the derivative
liability on November 8, 2021.
(2) Other expenses represent costs and investments not
indicative of ongoing business performance, such as third-party
consulting costs, one-time project start-up costs, severance,
signing bonuses, recruiting and project-based strategic
initiatives. For the nine and three months ended September 30,
2022, other expenses consisted largely of $4.6 million and $1.6
million of costs related to the opening and set-up of our Dallas
distribution center, respectively. For the nine and three months
ended September 30, 2021, other expenses consisted primarily of
$5.0 million and $3.5 million of costs related to the
Reorganization and IPO and $1.5 million and $0.5 million of
severance, signing bonuses and recruiting costs, respectively.
(3) The Company applied its normalized tax rate of 23.7% and
20.6% to the adjustment for the nine and three months ended
September 30, 2022, respectively.
(4) Prior to the Reorganization and IPO, the Company was a
limited liability company under the Internal Revenue Code with a
partnership tax election and did not pay federal or most state
corporate income taxes on its taxable income. Accordingly, the
adjustments for the nine and three months ended September 30, 2021
are not tax affected.
|
Arhaus, Inc. and
SubsidiariesReconciliation of Net and
Comprehensive Income to Adjusted EBITDA(Unaudited,
amounts in thousands) |
|
|
Nine months endedSeptember 30, |
|
Three months endedSeptember 30, |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
Net and comprehensive
income |
$ |
89,633 |
|
$ |
30,276 |
|
$ |
36,936 |
|
$ |
14,228 |
Interest expense, net |
|
3,367 |
|
|
4,091 |
|
|
751 |
|
|
1,365 |
Income tax expense |
|
27,851 |
|
|
1,704 |
|
|
9,568 |
|
|
500 |
Depreciation and
amortization |
|
18,319 |
|
|
17,206 |
|
|
6,324 |
|
|
8,297 |
EBITDA |
|
139,170 |
|
|
53,277 |
|
|
53,579 |
|
|
24,390 |
Equity based compensation |
|
2,613 |
|
|
1,135 |
|
|
1,224 |
|
|
708 |
Derivative expense (1) |
|
— |
|
|
29,905 |
|
|
— |
|
|
100 |
Other expenses (2) |
|
6,567 |
|
|
5,806 |
|
|
1,909 |
|
|
5,188 |
Adjusted EBITDA |
$ |
148,350 |
|
$ |
90,123 |
|
$ |
56,712 |
|
$ |
30,386 |
|
|
|
|
|
|
|
|
(1) We repaid our term loan in full on December 28, 2020. The
derivative expense relates to the change in the fair value of the
exit fee at the end of each reporting period. The Company used a
portion of the net proceeds from the IPO to pay the derivative
liability on November 8, 2021.
(2) Other expenses represent costs and investments not
indicative of ongoing business performance, such as third-party
consulting costs, one-time project start-up costs, severance,
signing bonuses, recruiting and project-based strategic
initiatives. For the nine and three months ended September 30,
2022, other expenses consisted largely of $4.6 million and $1.6
million of costs related to the opening and set-up of our Dallas
distribution center, respectively. For the nine and three months
ended September 30, 2021, other expenses consisted primarily of
$5.0 million and $3.5 million of costs related to the
Reorganization and IPO and $1.5 million and $0.5 million of
severance, signing bonuses and recruiting costs, respectively.
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