Core Insights - Arhaus reported a record net revenue of $1.38 billion for 2025, marking an 8.5% year-over-year increase, with net revenue nearly tripling since 2019 [5] - The company emphasized its omni-channel strategy, with approximately 90% of total sales in 2025 coming from clients within 50 miles of a showroom [7] - Arhaus is undergoing a multi-year digital transformation with an investment of approximately $30 million through 2030 [13] Sourcing and Manufacturing - The United States accounted for about 32% of total receipts in 2025, with 70% of upholstery sourcing being domestic, primarily from North Carolina facilities [1] - The company is focusing on customization, allowing customers to choose from hundreds of fabrics and designs, supported by expanded domestic capabilities [2] Market and Demand - The U.S. interior design market is valued at approximately $27 billion, with interior designer-assisted projects generating average order values over four times standard orders [3] - Demand among higher-end clients is described as "highly considered," with purchases often deferred rather than lost during uncertain times [4] Financial Performance - Gross profit for 2025 was $536 million, up 7%, while gross margin declined by 50 basis points to 38.9% due to higher showroom occupancy costs [9] - Net income for 2025 was $67 million, down 1.9% year-over-year, reflecting ongoing expansion and investment [10] Showroom Expansion - Arhaus ended 2025 with 107 showrooms after completing 13 new projects, with a focus on testing different merchandising and layout options [7][8] - The company is not exclusively shifting to large-format stores, demonstrating flexibility in market strategy [8] Future Guidance - For 2026, Arhaus projects net revenue between $1.43 billion and $1.47 billion, with net income expected to be between $66 million and $75 million [16] - The company anticipates tariff impacts of $30 million to $40 million for 2026, while continuing to assess pricing strategies [14]

Financial Data and Key Metrics Changes - In 2025, the company achieved record net revenue of $1.38 billion, an increase of 8.5% year-over-year, reflecting the strength of its business model [8][23] - Gross profit reached $536 million, up 7% from the previous year, while gross margin decreased by 50 basis points to 38.9% due to higher showroom occupancy costs [23][24] - Net income was $67 million, a decrease of 1.9% year-over-year, primarily due to showroom expansion and ongoing investments [24] - Adjusted EBITDA was $145 million, an increase of 8.9% year-over-year, with an adjusted EBITDA margin remaining flat at 10.5% [24] Business Line Data and Key Metrics Changes - Upholstery recorded the highest total written sales in the company's history, indicating strong demand for its craftsmanship and product assortment [9][10] - Customization services saw significant growth, with record written sales from clients working with interior designers [10][11] - The company reported a written sales mix focused on home refreshes and renovations, rather than solely on home turnover, reinforcing the durability of its model [11][12] Market Data and Key Metrics Changes - The U.S. interior design market is approximately $27 billion, presenting a significant opportunity for the company to expand its reach within this channel [11][18] - Approximately 90% of total sales came from clients living within 50 miles of an Arhaus showroom, highlighting the importance of showroom locations [19][20] Company Strategy and Development Direction - The company is focused on long-term growth through artisan craftsmanship, personalized service, and a differentiated product offering [5][8] - Strategic investments in technology and distribution are aimed at improving operational efficiency and enhancing the client experience [33][34] - The company plans to continue expanding its showroom footprint, having grown by over 50% since 2019, with 107 showrooms at year-end 2025 [21][32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of its high-end clients and the company's ability to navigate macroeconomic uncertainties [11][22] - The outlook for 2026 includes expected net revenue growth between $1.43 billion and $1.47 billion, with a year-over-year growth rate of 3.7% to 6.6% [38] - The company anticipates continued revenue and profit growth while funding strategic investments [27][39] Other Important Information - The company declared a special cash dividend of $0.35 per share, reflecting its disciplined capital allocation strategy [31] - The company remains debt-free with substantial liquidity, supporting its long-term growth strategy [31][39] Q&A Session Summary Question: Guidance on EBITDA margin leverage - Management highlighted that the guidance for EBITDA margin leverage is driven by gross margin improvements and the ramping of new showrooms, with some softness expected in Q1 due to weather and promotional timing [41][42][45] Question: Tariffs and pricing strategies - The company has taken selective pricing actions to mitigate tariff impacts and is focused on maintaining margins while being nimble in its pricing strategy [48][50][54] Question: Obsolete inventory context - Management explained that the decision to address obsolete inventory was based on insights from warehouse management systems, and overall inventory health remains strong [58][60][63] Question: Trade program growth - The trade business is identified as a major growth platform, with efforts to incentivize external designers to allocate more budgets to the company [67][70] Question: Real estate strategy and showroom sizes - Management discussed the learnings from operating larger showrooms and the flexibility in showroom sizes, indicating that both large and small formats can be profitable [78][81]

Financial Data and Key Metrics Changes - In 2025, the company achieved record net revenue of $1.38 billion, an increase of 8.5% year-over-year, reflecting the strength of its business model [8][23] - Gross profit reached $536 million, up 7% from the previous year, while gross margin decreased by 50 basis points to 38.9% due to higher showroom occupancy costs [23][24] - Net income was $67 million, a decrease of 1.9% year-over-year, primarily due to showroom expansion and ongoing investments [24] - Adjusted EBITDA was $145 million, an increase of 8.9% year-over-year, with an adjusted EBITDA margin remaining flat at 10.5% [24] Business Line Data and Key Metrics Changes - Upholstery recorded the highest total written sales in the company's history, indicating strong demand for its craftsmanship and product assortment [9][10] - Customization services saw significant growth, with record written sales from clients working with interior designers [10][11] - The company reported a written sales mix focused on home refreshes and renovations, rather than solely on home turnover, reinforcing the durability of its business model [11][12] Market Data and Key Metrics Changes - The U.S. interior design market is approximately $27 billion, presenting a significant opportunity for the company to expand its reach within this channel [11][18] - Approximately 90% of total sales came from clients living within 50 miles of an Arhaus showroom, highlighting the importance of showroom locations [19][20] Company Strategy and Development Direction - The company is focused on long-term growth through artisan craftsmanship, personalized service, and a differentiated product offering [5][8] - Strategic investments in technology and distribution are aimed at improving operational efficiency and enhancing the customer experience [34][35] - The company plans to continue expanding its showroom footprint, having grown by over 50% since 2019, with 107 showrooms at year-end 2025 [21][32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of its high-end clients and the company's ability to navigate macroeconomic challenges [11][22] - The outlook for 2026 anticipates net revenue growth between $1.43 billion and $1.47 billion, with a year-over-year growth rate of 3.7% to 6.6% [37] - The company is committed to maintaining a debt-free balance sheet and strong liquidity while investing in growth initiatives [38] Other Important Information - The company declared a special cash dividend of $0.35 per share, reflecting its disciplined capital allocation strategy [31] - The company is in a reinvestment phase, which is expected to improve operating leverage over time [26][27] Q&A Session Summary Question: Guidance on EBITDA margin leverage - The company expects EBITDA margin leverage of about 20 basis points, driven by gross margin improvements and new showroom ramp-up [40][41] Question: Impact of tariffs and pricing strategies - The company has taken selective pricing actions to mitigate tariff impacts and protect margins, with ongoing evaluations of pricing strategies [47][48] Question: Context on obsolete inventory - The company made strategic decisions regarding obsolete inventory, focusing on improving overall inventory health and turnover [56][57] Question: Growth in the trade channel - The trade business is identified as a significant growth area, with efforts to incentivize external designers to allocate more budgets to Arhaus [66][69]

Financial Data and Key Metrics Changes - In 2025, the company achieved record net revenue of $1.38 billion, an increase of 8.5% year-over-year, reflecting the strength of its business model [7][20] - Gross profit reached $536 million, up 7% from the previous year, while gross margin decreased by 50 basis points to 38.9% due to higher showroom occupancy costs [20][21] - Net income was $67 million, a decrease of 1.9% year-over-year, primarily due to showroom expansion and ongoing investments [21] - Adjusted EBITDA was $145 million, an increase of 8.9% year-over-year, with an adjusted EBITDA margin remaining flat at 10.5% [21] Business Line Data and Key Metrics Changes - Upholstery recorded the highest total written sales in the company's history, indicating strong demand for its craftsmanship and product assortment [8][9] - Customization services saw significant growth, with record written sales from clients working with interior designers [9][10] - The company serves clients through three primary demand channels: affluent homeowners, interior designers, and trade channels, with the U.S. interior design market valued at approximately $27 billion [10][11] Market Data and Key Metrics Changes - The company noted that approximately 90% of total sales came from clients living within 50 miles of an Arhaus showroom, emphasizing the importance of showroom locations [17] - The showroom footprint grew by more than 50% since 2019, ending 2025 with 107 showrooms [18] Company Strategy and Development Direction - The company is focused on long-term growth through artisan craftsmanship, personalized service, and a differentiated product offering [5][6] - Strategic investments in technology and distribution are aimed at improving operational efficiency and enhancing customer experience [30][31] - The company plans to continue expanding its showroom presence, with expectations to complete 10-14 total showroom projects in 2026 [29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the business model despite macroeconomic uncertainties, noting that high-end clients continue to invest in quality products [10][19] - The outlook for 2026 includes projected net revenue between $1.43 billion and $1.47 billion, reflecting a year-over-year growth rate of 3.7% to 6.6% [35][36] Other Important Information - The company declared a special cash dividend of $0.35 per share, marking the second special dividend since its IPO [28] - The company remains debt-free with substantial liquidity, supporting its long-term growth strategy [28][36] Q&A Session Summary Question: Guidance for EBITDA margin leverage - Management highlighted that the guidance for EBITDA margin leverage is driven by gross margin improvements and the ramping of new showrooms, with some softness expected in Q1 due to weather and promotional timing [38][39][42] Question: Tariffs and pricing strategies - Management discussed the impact of tariffs and the strategies implemented to protect margins, including selective pricing actions and vendor negotiations [45][48][50] Question: Obsolete inventory context - Management explained the decision to take losses on obsolete inventory to focus on healthier inventory management, emphasizing improvements in inventory turnover and overall health [54][56] Question: Trade program growth - Management noted the significant growth potential in the trade business, emphasizing the company's one-stop-shop model for interior designers and the luxury customer segment [62][66]

Financial Performance - Arhaus, Inc. reported quarterly earnings of $0.11 per share, exceeding the Zacks Consensus Estimate of $0.10 per share, but down from $0.14 per share a year ago, representing an earnings surprise of +15.79% [1] - The company achieved revenues of $364.85 million for the quarter ended December 2025, surpassing the Zacks Consensus Estimate by 3.66% and up from $347.01 million year-over-year [2] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.04 on revenues of $326.72 million, and for the current fiscal year, it is $0.49 on revenues of $1.45 billion [7] - The estimate revisions trend for Arhaus, Inc. was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Retail - Miscellaneous industry, to which Arhaus belongs, is currently in the top 37% of over 250 Zacks industries, suggesting that companies in the top 50% outperform those in the bottom 50% by more than 2 to 1 [8]

INVESTOR PRESENTATION Long-Term Strategy and Q4 & Full-Year 2025 Results February 26, 2026 DISCLAIMERS As of December 31, 2025 Forward-Looking Statements Certain statements contained herein 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," "be ...

Financial Performance - Net revenue for the year ended December 31, 2025, was $1,379.2 million, representing an 8.5% growth compared to $1,271.1 million in 2024[20] - Gross margin as a percentage of net revenue decreased to 38.9% in 2025 from 39.4% in 2024 and 42.0% in 2023[20] - The company has a debt-free balance sheet and strong liquidity, providing financial flexibility for future investments[33] - The company maintains a debt-free balance sheet and strong liquidity to support investments through economic cycles while ensuring financial strength[67] - The company has approximately $236 million in client deposits as of December 31, 2025, which could be at risk if there are disruptions in the financial markets[160] - The company faces substantial lease obligations that account for a significant portion of its selling, general, and administrative expenses, increasing financial risk[156] Market Position and Growth Opportunities - The premium home furnishings market in the United States is estimated to be around $100 billion, providing significant growth opportunities[17] - The company plans to expand its showroom footprint and enhance digital marketing to increase brand awareness and drive higher net revenue over time[71] - The company operates a dedicated program for trade professionals, which represents a long-term growth opportunity due to underpenetration in this market[62] - eCommerce sales represented approximately 17% of total net revenue in 2025, indicating a significant growth opportunity for the company[166] - The company’s growth strategy includes opening new Showrooms in high traffic locations, which entails significant risks and challenges[149] Operational Efficiency and Infrastructure - Investments in technology, distribution, and manufacturing infrastructure are ongoing to support growth and operational efficiency[32] - The distribution center in Boston Heights, Ohio, spans approximately 1,028,500 square feet, with 900,000 square feet dedicated to distribution[64] - The company is investing in technology upgrades, including a new enterprise resource planning (ERP) system, which is critical for operational efficiency and financial reporting[182] - Significant multi-year investments in technology and distribution are aimed at improving operational efficiency and supporting growth[67] Supply Chain and Sourcing - Approximately 70% of upholstery products were sourced domestically in 2025, enhancing control over design and quality[28] - The company relies on foreign manufacturers for a significant portion of its merchandise, exposing it to international risks including tariffs and changes in trade policies[100] - The company may face challenges in sourcing quality merchandise in sufficient quantities, which could adversely affect its reputation and financial performance[94] - Increased commodity prices and freight costs have significantly impacted operating results, with inflationary pressures on freight costs heightened by tariffs and port congestion[108] - Ineffective inventory management and supply chain responsiveness have led to delays in fulfilling elevated product demand, risking client retention and market competitiveness[110] Client Engagement and Marketing - The omni-channel model integrates physical Showrooms and eCommerce, enhancing client engagement and service[50] - The company’s marketing strategy includes a mix of print and digital media, which serves as a key driver of net revenue across sales channels[70] - Clients utilizing interior design services generate average order values (AOVs) over four times higher than standard orders, with approximately 40% becoming repeat purchasers[60] - The company is growing its omni-channel business model to adapt to client shopping preferences, integrating online and in-store experiences[144] Risks and Challenges - Economic conditions affecting the high-end housing market, such as consumer confidence and spending, could adversely impact revenue and results[103] - The company is sensitive to macroeconomic factors that influence consumer spending, including interest rates, unemployment, and economic uncertainty[104] - The reliance on third-party transportation carriers for product shipment exposes the company to risks such as labor disputes and transportation disruptions[106] - The company has experienced fluctuations in revenue growth rates, earnings, and margins, which may not be sustained in future periods[90] - The company may struggle to pass increased costs onto clients, potentially resulting in lower margins and adverse effects on gross margins and financial performance[109] Compliance and Governance - Material weaknesses in internal control over financial reporting have been identified, which could affect the accuracy and timeliness of financial reporting[115] - Remediation activities are ongoing to address identified material weaknesses, including hiring qualified personnel and enhancing internal controls[124] - The company is subject to a $75 million revolving credit facility with Bank of America, which includes restrictive covenants that may limit operational flexibility and future financing options[200] - The dual class structure of the common stock may adversely affect the trading market for Class A common stock, potentially leading to lower market prices and volatility[207] Cybersecurity and Data Protection - The company has experienced and expects to continue facing attempts to compromise its information systems, which could lead to data breaches and significant liability[169] - Ongoing costs associated with the detection and prevention of cyber threats are anticipated, impacting operational results[170] - Compliance with the Payment Card Industry Data Security Standard (PCI DSS) requires significant resources and ongoing attention, with potential fines for non-compliance[179] - The company relies on third-party payment processors, and any breaches in their security could lead to reputational damage and financial losses[174] Human Resources and Talent Management - The company faces challenges in recruiting and retaining qualified personnel, which could materially impact its business operations[129] - Changes in employee-related laws could increase compensation and benefits costs, impacting overall financial performance[192] Brand and Reputation Management - The company's brand identity is crucial for success, and any damage to reputation from product failures or negative publicity could adversely impact business results[111] - Continued investment in brand development and marketing is essential for maintaining and enhancing the company's luxury brand image[112] - The company may incur significant costs to adapt to new corporate responsibility expectations, which could affect brand reputation and financial results[199]

Financial Performance - Arhaus reported record net revenue of $1.38 billion for 2025, an increase of 8.5% compared to 2024[4]. - Comparable Delivered Sales increased by 3.6% for the full year, reflecting strong client demand and operational execution[10]. - Gross margin rose by 7.0% to $536 million, while Selling, General and Administrative expenses increased by 7.7% to $447 million[6]. - The company generated $137 million in net cash from operating activities for the full year ended December 31, 2025[14]. - Cash and cash equivalents totaled $253 million, a 28.3% increase from the prior year, enhancing financial flexibility[7]. - Adjusted EBITDA for 2025 increased by 8.9% to $145 million compared to 2024[6]. - Net revenue for the year ended December 31, 2025, was $1,379,222, representing an increase of 8.5% from $1,271,107 in 2024[34]. - Gross margin increased to $536,408 in 2025, up from $501,229 in 2024, reflecting a gross margin percentage of approximately 39%[34]. - Net and comprehensive income for 2025 was $67,256, a decrease of 1.9% compared to $68,550 in 2024, resulting in a net income margin of 4.9%[34][37]. - Adjusted EBITDA for 2025 was $145,092, an increase of 8.8% from $133,283 in 2024, maintaining an adjusted EBITDA margin of 10.5%[37]. - Cash flows from operating activities for 2025 were $136,848, down from $147,109 in 2024, with free cash flow increasing to $59,032 from $47,575[38]. - Total assets as of December 31, 2025, were $1,394,746, an increase of 15.6% from $1,206,316 in 2024[32]. - Total liabilities increased to $976,518 in 2025, up from $862,571 in 2024, indicating a rise in current liabilities[32]. - The company reported a net cash increase of $55,551 for the year, compared to a decrease of $25,376 in 2024[36]. - Merchandise inventory increased to $338,806 in 2025 from $297,010 in 2024, reflecting a growth of 14.1%[32]. Future Outlook - Arhaus plans to complete approximately 10 to 14 Total Showroom Projects in 2026, with net unit growth expected in the mid-single digits[13]. - The company expects full-year 2026 net revenue between $1.43 billion and $1.47 billion, representing growth of 3.7% to 6.6%[16]. - The company plans to open 4 to 6 new Showrooms and relocate 4 to 5 existing Showrooms in fiscal year 2026, with a total project pipeline of 10 to 14[55]. - The cash payback period for Showrooms is targeted to be less than 2 years[53]. Showroom Performance - The total number of Showrooms increased to 107 as of December 31, 2025, up from 103 in 2024, indicating a growth of 3.9%[47]. - The proportion of mature Showrooms (over 36 months) is 62%, indicating a stable base for future revenue growth[51]. - Contribution margin for Traditional Showrooms at maturity is targeted at approximately 32%[53]. - The company operates in 31 states as of December 31, 2025, an increase from 30 states in 2024[47]. Quarterly Performance - Net revenue for the three months ended December 31, 2025, was $364,845, an increase from $347,011 in 2024, representing a year-over-year growth of approximately 5.3%[41]. - Adjusted EBITDA for the same period was $34,977, down from $41,176 in 2024, reflecting a decrease of about 15.1%[41]. - Net and comprehensive income decreased to $15,090, compared to $21,294 in 2024, resulting in a decline of approximately 29%[41]. - Comparable Written Sales for the first quarter of 2025 showed a year-over-year increase of 4.1%[43]. - The weighted-average number of common shares outstanding increased to 140,697,725 in 2025 from 140,072,148 in 2024[34].

Core Insights - Arhaus, Inc. reported record net revenue of $1.38 billion for 2025, marking an 8.5% increase from the previous year, driven by showroom expansion and strong client engagement [3][9] - The company announced a special cash dividend of $0.35 per share, reflecting its strong financial performance and cash position [6][17] Financial Performance - Net revenue increased to $1,379 million, up 8.5% compared to 2024 [8] - Gross margin rose by 7.0% to $536 million [8] - Selling, general and administrative expenses increased by 7.7% to $447 million [8] - Net and comprehensive income decreased by 1.9% to $67 million [8] - Adjusted EBITDA increased by 8.9% to $145 million [8] Sales Metrics - Comparable Written Sales increased by 1.3% for the full year [4][11] - Comparable Delivered Sales increased by 3.6%, reflecting strong client demand [10][11] Showroom Expansion - The company completed 13 total showroom projects in 2025, including 5 new openings and 7 relocations [12] - As of December 31, 2025, Arhaus operated 107 showrooms across 31 states [12][62] - The company plans to complete approximately 10 to 14 total showroom projects in 2026, including 4 to 6 new openings [13][70] Balance Sheet and Liquidity - Cash and cash equivalents totaled $253 million, a 28.3% increase from the previous year [16] - The company remains debt-free and has substantial liquidity to support long-term growth [8][16] Outlook for 2026 - Projected net revenue for 2026 is between $1.43 billion and $1.47 billion, representing a growth of 3.7% to 6.6% [19] - Expected net income for 2026 is between $66 million and $75 million [19] - The company anticipates comparable delivered sales growth of 0% to 3% for the year [19]

Core Insights - Arhaus, Inc. will release its fourth quarter and full year 2025 results on February 26, 2026, before the stock market opens, followed by a conference call at 8:30 a.m. Eastern Time [1] Company Overview - Arhaus is a growing lifestyle brand and omnichannel retailer of premium artisan-crafted home furnishings, founded in 1986 [3] - The company utilizes a proprietary model to design and source products directly from leading manufacturers and artisans globally, offering exclusive heirloom quality products that are sustainably sourced and built to last [3] - Arhaus operates more than 100 showroom locations across the United States and provides complimentary in-home design services through a team of interior designers, alongside robust online and e-commerce capabilities [3]