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 fourth quarter and full year ended December 31, 2022.
Fourth Quarter 2022 Highlights
- Net revenue increased 49.6% to $356 million
- Comparable Growth(1) of 47.0%
- Net and Comprehensive Income of $47 million
- Adjusted Net Income of $48 million
- Adjusted EBITDA increased 126.4% to $74 million
Full Year 2022 Highlights
- Net revenue increased 54.2% to $1,229 million
- Comparable Growth(1) of 51.6%
- Net and Comprehensive Income of $137 million
- Adjusted Net Income of $142 million
- Adjusted EBITDA increased 81.1% to $223 million
Full Year 2023 Outlook Highlights
- Net revenue of $1,240 million to $1,300 million
- Comparable Growth(1) of (4)% to 1%
- Net and Comprehensive Income of $95 million to $110
million
- Adjusted EBITDA of $180 million to $195 million
CEO Comments
John Reed, Co-Founder and Chief Executive Officer,
commented,
“I am so proud of the tremendous accomplishments of the Arhaus
team in 2022. We achieved over $1.2 billion in net revenue, up 54%
from 2021, with net income of $137 million and adjusted EBITDA of
$223 million, an 81% increase over 2021.
“Our remarkable fourth quarter performance was driven in large
part by the investments in our supply chain and distribution
infrastructure that enabled us to accelerate delivery of product in
the backlog we had previously expected to deliver in 2023. This
resulted in stronger than expected net revenue and earnings
performance in the quarter, and most importantly, drove better
delivery times and delighted our clients.
“As we look to 2023, the year is off to a strong start, with
demand comparable growth(2) in the first two months of the quarter
up high-single-digits. We are very pleased to be continuing to
invest in the business for growth this year, and these investments
along with the uncertain macroeconomic backdrop and the
pull-forward of backlog delivery into late 2022, are expected to
temporarily weigh on net revenue and profitability.
“Notably, we are most excited about our expected showroom
enhancements in 2023 that include seventeen separate real estate
projects, by far our most aggressive showroom opening, relocation
and expansion schedule to date. We are planning to add a record
number of new showrooms during the year, with twelve new showroom
openings and five renovation, relocation and expansion projects,
most in the second half of the year.”
Fourth Quarter 2022 Results
Net revenue increased 49.6% to $356 million, compared to $238
million in the fourth quarter of 2021. The increase was driven by
strong demand in both our Showroom and eCommerce sales channels and
the delivery of orders in the backlog as our supply chain continues
to improve.
Comparable growth(1) was 47.0% and demand comparable growth(2)
was 10.0% in the fourth quarter of 2022.
Gross margin increased 63.0% to $158 million, compared to $97
million in the fourth quarter of 2021, driven by higher net
revenue, partially offset by higher variable costs related to the
increase in net revenue, including product, transportation and
variable rent expense.
Selling, general and administrative (“SG&A”) expenses
decreased 6.1% to $94 million, compared to $100 million in the
fourth quarter of 2021, primarily driven by the non-recurrence of
derivative expense related to the termination of a former credit
facility, lower equity-based compensation expense, the
non-recurrence of one-time initial public offering ("IPO")
expenses, and lower variable compensation in our Showrooms. This
was partially offset by increased warehouse expense and corporate
expense to support the growth of the business.
Net and comprehensive income was $47 million, a 606.1% increase
compared to $7 million in the fourth quarter of 2021. This includes
the non-recurrence in 2021 of an income tax benefit of
$12 million primarily related to the recognition of a deferred
tax asset that arose from the November 2021 reorganization of the
Company’s ownership structure for the purpose of issuing stock on a
publicly traded exchange (the “Reorganization”). Net Income as a
percent of net revenue increased 1040 basis points to 13.2% in the
fourth quarter of 2022, compared to 2.8% in the fourth quarter of
2021. Adjusted Net Income was $48 million in the fourth quarter of
2022, compared to $17 million in the fourth quarter of 2021.
Adjusted EBITDA increased 126.4% to $74 million, compared to $33
million in the fourth quarter of 2021. Adjusted EBITDA as a percent
of net revenue increased 700 basis points to 20.8% in the fourth
quarter of 2022, compared to 13.8% in the fourth quarter of
2021.
Full Year 2022 Results
Net revenue in 2022 increased 54.2% to $1,229 million, compared
to $797 million in 2021. The increase was driven primarily by
higher demand in both Showroom and eCommerce channels as well as
the delivery of orders in the backlog as our supply chain improved.
Net revenue from eCommerce increased 43.3% to $207 million.
Full year comparable growth(1) was 51.6%, compared to 51.0% in
2021 and full year demand comparable growth(2) was 13.8%.
Gross margin increased 59.1% to $525 million in 2022, compared
to $330 million in 2021, driven by higher net revenue, partially
offset by higher variable costs related to the increase in net
revenue, including product, transportation and variable rent
expense, as well as higher credit card fees related to increased
interest rates and demand.
Full year SG&A expense increased 15.0% to
$340 million, compared to $296 million in 2021. The increase was
primarily driven by investments to support the growth of the
business, including higher corporate and warehouse expenses as new
Showrooms open and we expand distribution capacity, as well as new
public company related costs, partially offset by the
non-recurrence of both derivative expense related to the
termination of a former credit facility and one-time IPO
expenses.
Net and comprehensive income of $137 million was a 270.0%
increase compared to $37 million in 2021. The increase was driven
by higher net revenue, partially offset by the above factors and
the non-recurrence of an income tax benefit of $10 million
primarily related to the deferred tax asset that arose from the
Reorganization. Net Income as a percent of net revenue increased
650 basis points to 11.1% in 2022, compared to 4.6% in 2021.
Adjusted net income of $142 million was a 70.6% increase compared
to $83 million in 2021.
Adjusted EBITDA increased 81.1%, to $223 million, compared to
$123 million in 2021. Adjusted EBITDA as a percent of net revenue
increased 270 basis points to 18.1% in 2022, compared to 15.4% in
2021.
To support long term growth, the Company invested significantly
in the expansion of its distribution footprint, opening an
approximately 800,000 square foot distribution center facility in
Dallas and expanding the distribution facility in Ohio by
approximately 200,000 square feet.
The Company ended the year with 81 total showrooms across 29
states.
Balance Sheet and Cash Flow Highlights, as of
December 31, 2022
Cash and cash equivalents totaled $145 million, and the
Company had no long-term debt at December 31, 2022. Net merchandise
inventory increased 37.5% to $286 million, compared to
$208 million as of December 31, 2021. Client deposits
decreased 23.5% to $203 million, primarily due to improved
delivery of orders in backlog and lower demand comparable growth(2)
in 2022.
For the year ended December 31, 2022, net cash provided by
operating activities was $74 million, compared to
$146 million for the full year ended December 31,
2021.
For the full year ended December 31, 2022, net cash used in
investing activities was approximately $53 million, which
includes landlord contributions of approximately $16 million
and company-funded capital expenditures(3) of approximately
$36 million. For the full year ended December 31, 2021,
net cash used in investing activities was approximately
$48 million, which included landlord contributions of
approximately $18 million and company-funded capital
expenditures of approximately $30 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 investments to enhance
omni-channel and technology capabilities, including information
technology and systems infrastructure, all of which are expected to
accelerate brand awareness, support growth and generate
efficiencies from scale.
Outlook
The table below presents our expectations for selected full year
2023 financial operating results.
Full Year 2023 |
Net revenue |
$1,240 million to $1,300 million |
Comparable growth(1) |
(4)% to 1% |
Net income(4) |
$95 million to $110 million |
Adjusted EBITDA(5) |
$180 million to $195 million |
Other estimates: |
Company-funded capital expenditures(3) |
$75 million to $85 million |
Fully diluted shares |
~141 million |
Effective tax rate |
~26% |
In 2023, the Company plans to open twelve new showrooms, as well
as renovate, relocate and expand five 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 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, 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 fourth quarter and full year 2022 financial results scheduled
for today, March 9, 2023, 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:
13735043.
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 81 showroom 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 WatsonSVP, Investor Relations(440) 439-7700
x3409invest@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 Statements
Certain statements contained herein, including statements under
the headings “Full Year 2023 Outlook Highlights” 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
new 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; the COVID-19 pandemic
and its effect on our business; 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
Subsidiaries Consolidated Balance
Sheets(In thousands, except share
and per share data) December 31, 2022 and
2021
|
|
|
2022 |
|
2021 |
Assets |
|
|
|
Current assets |
|
|
|
Cash and cash equivalents |
$ |
145,181 |
|
$ |
123,777 |
|
Restricted cash
equivalents |
|
7,346 |
|
|
7,131 |
|
Accounts receivable, net |
|
1,734 |
|
|
228 |
|
Merchandise inventory,
net |
|
286,419 |
|
|
208,343 |
|
Prepaid and other current
assets |
|
37,371 |
|
|
28,517 |
|
Total current assets |
|
478,051 |
|
|
367,996 |
|
Operating right-of-use
assets |
|
252,055 |
|
|
— |
|
Financing right-of-use
assets |
|
38,522 |
|
|
— |
|
Property, furniture and
equipment, net |
|
135,066 |
|
|
179,631 |
|
Deferred tax asset |
|
16,841 |
|
|
27,684 |
|
Goodwill |
|
10,961 |
|
|
10,961 |
|
Other noncurrent assets |
|
296 |
|
|
278 |
|
Total assets |
$ |
931,792 |
|
$ |
586,550 |
|
|
|
|
|
Liabilities and
stockholders’ / members' equity (deficit) |
|
|
|
Current liabilities |
|
|
|
Accounts payable |
$ |
62,636 |
|
$ |
51,429 |
|
Accrued taxes |
|
12,256 |
|
|
7,302 |
|
Accrued wages |
|
20,860 |
|
|
16,524 |
|
Accrued other expenses |
|
35,169 |
|
|
61,047 |
|
Client deposits |
|
202,587 |
|
|
264,929 |
|
Current portion of operating
lease liabilities |
|
39,744 |
|
|
— |
|
Current portion of financing
lease liabilities |
|
531 |
|
|
— |
|
Total current liabilities |
|
373,783 |
|
|
401,231 |
|
Operating lease liabilities,
long-term |
|
289,871 |
|
|
— |
|
Financing lease liabilities,
long-term |
|
51,835 |
|
|
— |
|
Capital lease obligation |
|
— |
|
|
50,525 |
|
Deferred rent and lease
incentives |
|
2,272 |
|
|
63,037 |
|
Other long-term
liabilities |
|
4,336 |
|
|
1,992 |
|
Total liabilities |
$ |
722,097 |
|
$ |
516,785 |
|
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
Stockholders' equity |
|
|
|
Class A shares, par value
$0.001 per share (600,000,000 shares authorized, 51,437,348 shares
issued and outstanding as of December 31, 2022, 50,427,390 shares
issued and outstanding as of December 31, 2021) |
$ |
51 |
|
$ |
50 |
|
Class B shares, par value
$0.001 par value per share (100,000,000 shares authorized,
87,115,600 shares issued and outstanding as of December 31, 2022,
86,519,002 shares issued and outstanding as of December 31,
2021) |
|
87 |
|
|
87 |
|
Retained Earnings (Accumulated
Deficit) |
|
20,053 |
|
|
(116,581 |
) |
Additional Paid-in
Capital |
|
189,504 |
|
|
186,209 |
|
Total Arhaus, Inc. stockholders' equity |
|
209,695 |
|
|
69,765 |
|
Total liabilities and stockholders' equity |
$ |
931,792 |
|
$ |
586,550 |
|
Arhaus, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(In thousands, except share and per share
data)Years ended December 31, 2022 and
2021
|
|
|
2022 |
|
2021 |
Net revenue |
$ |
1,228,928 |
|
|
$ |
796,922 |
|
Cost of goods sold |
|
703,869 |
|
|
|
466,989 |
|
Gross margin |
|
525,059 |
|
|
|
329,933 |
|
Selling, general and
administrative expenses |
|
340,388 |
|
|
|
296,117 |
|
Loss on disposal of
assets |
|
— |
|
|
|
466 |
|
Income from operations |
|
184,671 |
|
|
|
33,350 |
|
Interest expense, net |
|
3,387 |
|
|
|
5,432 |
|
Loss on extinguishment of
debt |
|
— |
|
|
|
1,450 |
|
Other income |
|
(1,294 |
) |
|
|
(320 |
) |
Income before taxes |
|
182,578 |
|
|
|
26,788 |
|
Income tax expense
(benefit) |
|
45,944 |
|
|
|
(10,144 |
) |
Net and comprehensive income |
$ |
136,634 |
|
|
$ |
36,932 |
|
Less: Net income attributable
to noncontrolling interest |
|
— |
|
|
|
15,815 |
|
Net and comprehensive income
attributable to Company |
|
136,634 |
|
|
|
21,117 |
|
Net and comprehensive income
attributable to Arhaus, Inc. |
$ |
136,634 |
|
|
$ |
21,117 |
|
Net and comprehensive
income per share, basic |
|
|
|
Weighted-average number of common shares outstanding, basic |
|
138,094,180 |
|
|
|
116,013,492 |
|
Net and comprehensive income per share, basic |
$ |
0.99 |
|
|
$ |
0.18 |
|
Net and comprehensive
income per share, diluted |
|
|
|
Weighted-average number of common shares outstanding, diluted |
|
139,605,550 |
|
|
|
119,521,442 |
|
Net and comprehensive income per share, diluted |
$ |
0.98 |
|
|
$ |
0.18 |
|
Arhaus, Inc. and
SubsidiariesConsolidated Statements of Cash
Flows (In thousands)Years Ended
December 31, 2022 and 2021
|
|
|
2022 |
|
2021 |
Cash flows from
operating activities |
|
|
|
Net income |
$ |
136,634 |
|
|
|
36,932 |
|
Adjustments to reconcile net
income to net cash provided by operating activities |
|
|
|
Depreciation and amortization |
|
24,901 |
|
|
|
23,922 |
|
Amortization of operating lease right-of-use asset |
|
29,052 |
|
|
|
— |
|
Amortization of deferred financing fees and interest on
finance/capital lease in excess of principal paid |
|
12,649 |
|
|
|
1,734 |
|
Loss on extinguishment of debt |
|
— |
|
|
|
1,450 |
|
Equity based compensation |
|
4,288 |
|
|
|
6,383 |
|
Deferred tax assets |
|
9,771 |
|
|
|
(10,216 |
) |
Derivative expense associated with Term Loan exit fee |
|
— |
|
|
|
44,544 |
|
Loss on disposal of property, furniture and equipment |
|
— |
|
|
|
466 |
|
Amortization and write-off of lease incentives |
|
(304 |
) |
|
|
(6,112 |
) |
Changes in operating assets and liabilities |
|
|
|
Accounts receivable |
|
(1,506 |
) |
|
|
372 |
|
Merchandise inventory |
|
(78,076 |
) |
|
|
(100,321 |
) |
Prepaid and other current assets |
|
(9,252 |
) |
|
|
(3,333 |
) |
Other noncurrent assets |
|
(77 |
) |
|
|
(288 |
) |
Other noncurrent liabilities |
|
638 |
|
|
|
493 |
|
Accounts payable |
|
14,014 |
|
|
|
17,595 |
|
Accrued expenses |
|
27,746 |
|
|
|
17,302 |
|
Operating lease liabilities |
|
(33,682 |
) |
|
|
— |
|
Deferred rent and lease incentives |
|
— |
|
|
|
4,518 |
|
Client deposits |
|
(62,342 |
) |
|
|
110,802 |
|
Net cash provided by operating activities |
|
74,454 |
|
|
|
146,243 |
|
Cash flows from
investing activities |
|
|
|
Purchases of property,
furniture and equipment |
|
(52,658 |
) |
|
|
(47,870 |
) |
Net cash used in investing activities |
|
(52,658 |
) |
|
|
(47,870 |
) |
Cash flows from
financing activities |
|
|
|
Payments on fees associated
with early extinguishment of debt |
|
— |
|
|
|
(609 |
) |
Repayments of related party
notes |
|
— |
|
|
|
(1,000 |
) |
Proceeds from related party
notes |
|
— |
|
|
|
1,000 |
|
Payments of debt issuance
costs |
|
— |
|
|
|
(288 |
) |
Principal payments under
capital leases |
|
— |
|
|
|
(107 |
) |
Principal payments under
finance leases |
|
(177 |
) |
|
|
— |
|
Payment of Term Loan exit fee
derivative |
|
— |
|
|
|
(64,139 |
) |
Payments of pre-IPO dividend
to noncontrolling interests of Arhaus, LLC |
|
— |
|
|
|
(50,659 |
) |
Shareholder distributions |
|
— |
|
|
|
(61,915 |
) |
Proceeds from capital
contribution |
|
— |
|
|
|
2,764 |
|
Proceeds from issuance of
Class A common stock sold in IPO, net of underwriting costs |
|
— |
|
|
|
157,258 |
|
Payments of offering
costs |
|
— |
|
|
|
(5,907 |
) |
Distributions to
noncontrolling interest holders |
|
— |
|
|
|
(7,865 |
) |
Net cash used in financing activities |
|
(177 |
) |
|
|
(31,467 |
) |
Net increase in cash, cash equivalents and restricted cash
equivalents |
|
21,619 |
|
|
|
66,906 |
|
Cash, cash equivalents
and restricted cash equivalents |
|
|
|
Beginning of year |
|
130,908 |
|
|
|
64,002 |
|
End of year |
$ |
152,527 |
|
|
$ |
130,908 |
|
|
|
|
|
Supplemental
disclosure of cash flow information |
|
|
|
Interest paid in cash |
$ |
5,155 |
|
|
$ |
5,121 |
|
Interest received in cash |
|
1,373 |
|
|
|
— |
|
Income taxes paid in cash |
|
34,943 |
|
|
|
1,403 |
|
Noncash operating
activities: |
|
|
|
Lease incentives |
|
4,312 |
|
|
|
5,352 |
|
Noncash investing
activities: |
|
|
|
Purchase of property, furniture and equipment in accounts
payable |
|
3,160 |
|
|
|
5,968 |
|
Noncash financing
activities: |
|
|
|
Conversion of units of Arhaus, LLC to shares of Arhaus, Inc. |
|
— |
|
|
|
124 |
|
Contribution of deferred tax asset from wholly owned
subsidiary |
|
— |
|
|
|
17,436 |
|
Capital contribution from CEO related to long-tenured employee
award |
|
— |
|
|
|
4,551 |
|
Capital contribution from CEO for deferred compensation plan |
|
— |
|
|
|
3,872 |
|
Adjustment to deferred tax asset impact of Reorganization from
partnership to a corporation |
|
(1,072 |
) |
|
|
— |
|
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 |
|
— |
|
|
|
31,017 |
|
Capital contributions |
|
80 |
|
|
|
— |
|
Capital lease obligation |
|
— |
|
|
|
2,591 |
|
Arhaus, Inc. and Subsidiaries
Reconciliation of Net Income to Adjusted Net
Income (In thousands)Years ended
December 31, 2022 and 2021
|
|
|
2022 |
|
2021 |
Net income |
$ |
136,634 |
|
$ |
36,932 |
Adjustments (pre-tax): |
|
|
|
Loss on extinguishment of debt |
|
— |
|
|
1,450 |
Derivative expense(1) |
|
— |
|
|
44,544 |
Other expenses(2) |
|
7,382 |
|
|
11,609 |
Total non-GAAP adjustments pre-tax |
|
7,382 |
|
|
57,603 |
Less: Change in tax status (3) |
|
— |
|
|
9,137 |
Less: Tax effect of adjustments(4) |
|
1,912 |
|
|
2,118 |
Adjusted net income |
$ |
142,104 |
|
$ |
83,280 |
|
|
|
|
Adjusted net income
per share, basic |
|
|
|
Weighted-average number of common shares outstanding, basic |
|
138,094,180 |
|
|
116,013,492 |
Adjusted net income per share, basic |
$ |
1.03 |
|
$ |
0.72 |
Adjusted net income
per share, diluted |
|
|
|
Weighted-average number of common shares outstanding, diluted |
|
139,605,550 |
|
|
119,521,442 |
Adjusted net income per share, diluted |
$ |
1.02 |
|
$ |
0.70 |
|
|
|
|
(1) We repaid a term loan from a prior credit facility (“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, one-time costs
related to the Reorganization and IPO, severance, signing bonuses,
recruiting and project-based strategic initiatives. For
the year ended December 31, 2022, these other expenses
consisted largely of $5.0 million of costs related to the opening
and set-up of our Dallas distribution center and $1.6 million
severance, signing bonuses and recruiting costs. For the year ended
December 31, 2021, these other expenses consisted primarily of
$9.7 million of costs related to the Reorganization and IPO and
$2.1 million of severance, signing bonuses and recruiting
costs.
(3) Reflects income tax benefit related to the change in tax
status of a subsidiary as a result of the Reorganization.
(4) The Company applied its normalized tax rate of 25.9% and
14.5% on adjustments recognized after the Company’s change in tax
status for the years ended December 31, 2022 and December 31, 2021,
respectively.
Arhaus, Inc. and
SubsidiariesReconciliation of Net Income to
Adjusted EBITDA (Dollars in
thousands)Years Ended December 31, 2022 and
2021
|
2022 |
|
2021 |
Net income |
$ |
136,634 |
|
|
$ |
36,932 |
|
Interest expense, net |
|
3,387 |
|
|
|
5,432 |
|
Income tax expense
(benefit) |
|
45,944 |
|
|
|
(10,144 |
) |
Depreciation and
amortization |
|
24,901 |
|
|
|
23,922 |
|
EBITDA |
|
210,866 |
|
|
|
56,142 |
|
Equity based
compensation(1) |
|
4,288 |
|
|
|
9,147 |
|
Loss on extinguishment of
debt |
|
— |
|
|
|
1,450 |
|
Derivative expense(2) |
|
— |
|
|
|
44,544 |
|
Other expenses(3) |
|
7,382 |
|
|
|
11,609 |
|
Adjusted EBITDA |
$ |
222,536 |
|
|
$ |
122,892 |
|
|
|
|
|
Net revenue |
$ |
1,228,928 |
|
|
$ |
796,922 |
|
Net income as a % of net
revenue |
|
11.1 |
% |
|
|
4.6 |
% |
Adjusted EBITDA as a % of net
revenue |
|
18.1 |
% |
|
|
15.4 |
% |
|
|
|
|
(1) Equity based compensation represents compensation expense
for equity awards provided to employees and compensation expense
related to John Reed’s one-time transfer of Class A Common stock to
certain long-tenured employees in 2021.
(2) We repaid a term loan from a prior credit facility (“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.
(3) Other expenses represent costs and investments not
indicative of ongoing business performance, such as third-party
consulting costs, one-time project start-up costs, one-time costs
related to the Reorganization and IPO, severance, signing bonuses,
recruiting and project-based strategic initiatives. For the year
ended December 31, 2022, these other expenses consisted largely of
$5.0 million of costs related to the opening and set-up of our
Dallas distribution center and $1.6 million of severance, signing
bonuses and recruiting costs. For the year ended December 31, 2021,
these other expenses consisted primarily of $9.7 million of costs
related to the Reorganization and IPO and $2.1 million of
severance, signing bonuses and recruiting costs.
Arhaus, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(In thousands, except share and per share
data)Three Months Ended December 31, 2022 and
2021
|
|
|
2022 |
|
2021 |
Net revenue |
$ |
356,333 |
|
|
$ |
238,232 |
|
Cost of goods sold |
|
198,308 |
|
|
|
141,279 |
|
Gross margin |
|
158,025 |
|
|
|
96,953 |
|
Selling, general and
administrative expenses |
|
93,621 |
|
|
|
99,674 |
|
Loss on disposal of
assets |
|
— |
|
|
|
— |
|
Income from operations |
|
64,404 |
|
|
|
(2,721 |
) |
Interest expense, net |
|
20 |
|
|
|
1,341 |
|
Loss on extinguishment of
debt |
|
— |
|
|
|
1,450 |
|
Other income |
|
(710 |
) |
|
|
(320 |
) |
Income before taxes |
|
65,094 |
|
|
|
(5,192 |
) |
Income tax expense
(benefit) |
|
18,093 |
|
|
|
(11,848 |
) |
Net and comprehensive income |
$ |
47,001 |
|
|
$ |
6,656 |
|
Less: Net income (loss)
attributable to noncontrolling interest |
|
— |
|
|
|
(1,684 |
) |
Net and comprehensive income
(loss) attributable to Company |
|
47,001 |
|
|
|
8,340 |
|
Net and comprehensive income
(loss) attributable to Arhaus, Inc. |
$ |
47,001 |
|
|
$ |
8,340 |
|
Net and comprehensive
income per share, basic |
|
|
|
Weighted-average number of common shares outstanding, basic |
|
138,552,948 |
|
|
|
127,748,782 |
|
Net and comprehensive income per share, basic |
$ |
0.34 |
|
|
$ |
0.07 |
|
Net and comprehensive
income per share, diluted |
|
|
|
Weighted-average number of common shares outstanding, diluted |
|
139,782,193 |
|
|
|
127,748,782 |
|
Net and comprehensive income per share, diluted |
$ |
0.34 |
|
|
$ |
0.07 |
|
Arhaus, Inc. and Subsidiaries
Reconciliation of Net Income to Adjusted Net
Income (In thousands)Three Months
Ended December 31, 2022 and 2021
|
|
|
2022 |
|
2021 |
Net income |
$ |
47,001 |
|
$ |
6,656 |
Adjustments (pre-tax): |
|
|
|
Loss on extinguishment of debt |
|
— |
|
|
1,450 |
Derivative expense(1) |
|
— |
|
|
14,639 |
Other expenses(2) |
|
815 |
|
|
5,803 |
Total non-GAAP adjustments pre-tax |
|
815 |
|
|
21,892 |
Less: Change in tax status(3) |
|
— |
|
|
9,137 |
Less: Tax effect of adjustments(4) |
|
213 |
|
|
2,118 |
Adjusted net income |
$ |
47,603 |
|
$ |
17,293 |
|
|
|
|
Adjusted net income
per share, basic |
|
|
|
Weighted-average number of common shares outstanding, basic |
|
138,552,948 |
|
|
127,748,782 |
Adjusted net income per share, basic |
$ |
0.34 |
|
$ |
0.14 |
Adjusted net income
per share, diluted |
|
|
|
Weighted-average number of common shares outstanding, diluted |
|
139,782,193 |
|
|
127,748,782 |
Adjusted net income per share, diluted |
$ |
0.34 |
|
$ |
0.14 |
|
|
|
|
(1) We repaid a term loan from a prior credit facility (“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, one-time costs
related to the Reorganization and IPO, severance, signing bonuses,
recruiting and project-based strategic initiatives. For
the three months ended December 31, 2022, these other expenses
consisted largely of $0.4 million of costs related to the opening
and set-up of our Dallas distribution center and $0.4 million
severance, signing bonuses and recruiting costs. For the three
months ended December 31, 2021, these other expenses consisted
primarily of $4.7 million of costs related to the Reorganization
and IPO and $0.6 million of severance, signing bonuses and
recruiting costs.
(3) Reflects income tax benefit related to the change in tax
status of a subsidiary as a result of the Reorganization.
(4) The Company applied its normalized tax rate of 26.2% and
14.5% on adjustments recognized after the Company’s change in tax
status for the three months ended December 31, 2022 and December
31, 2021, respectively.
Arhaus, Inc. and
SubsidiariesReconciliation of Net Income to
Adjusted EBITDA (Dollars in
thousands)Three Months Ended December 31,
2022 and 2021
|
2022 |
|
2021 |
Net income |
$ |
47,001 |
|
|
$ |
6,656 |
|
Interest expense, net |
|
20 |
|
|
|
1,341 |
|
Income tax expense
(benefit) |
|
18,093 |
|
|
|
(11,848 |
) |
Depreciation and
amortization |
|
6,582 |
|
|
|
6,716 |
|
EBITDA |
|
71,696 |
|
|
|
2,865 |
|
Equity based
compensation(1) |
|
1,674 |
|
|
|
8,012 |
|
Loss on extinguishment of
debt |
|
— |
|
|
|
1,450 |
|
Derivative expense(2) |
|
— |
|
|
|
14,639 |
|
Other expenses(3) |
|
815 |
|
|
|
5,803 |
|
Adjusted EBITDA |
$ |
74,185 |
|
|
$ |
32,769 |
|
|
|
|
|
Net revenue |
$ |
356,333 |
|
|
$ |
238,232 |
|
Net income as a % of net
revenue |
|
13.2 |
% |
|
|
2.8 |
% |
Adjusted EBITDA as a % of net
revenue |
|
20.8 |
% |
|
|
13.8 |
% |
|
|
|
|
(1) Share based compensation represents compensation expense for
equity awards provided to employees and compensation expense
related to John Reed’s one-time transfer of Class A Common stock to
certain long-tenured employees.
(2) We repaid a term loan from a prior credit facility (“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.
(3) Other expenses represent costs and investments not
indicative of ongoing business performance, such as third-party
consulting costs, one-time project start-up costs, one-time costs
related to the Reorganization and IPO, severance, signing bonuses,
recruiting and project-based strategic initiatives. For the three
months ended December 31, 2022, these other expenses consisted
largely of $0.4 million of costs related to the opening and set-up
of our Dallas distribution center and $0.4 million severance,
signing bonuses and recruiting costs. For the three months ended
December 31, 2021, these other expenses consisted primarily of $4.7
million of costs related to the Reorganization and IPO and $0.6
million of severance, signing bonuses and recruiting costs.
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