Arhaus(US:ARHS)2025-05-08 10:37Financial Performance - For the three months ended March 31, 2025, Arhaus generated net revenue of $311.4 million, a gross margin of $115.6 million, and a net income of $4.9 million[77]. - Net revenue increased by $16.2 million, or 5.5%, to $311.4 million for the three months ended March 31, 2025, compared to $295.2 million for the same period in 2024[96]. - Gross margin increased by $0.5 million, or 0.4%, to $115.6 million, but as a percentage of net revenue, it decreased by 190 basis points to 37.1%[97][98]. - Net and comprehensive income decreased by $10.2 million to $4.9 million for the three months ended March 31, 2025, compared to $15.1 million for the same period in 2024[104]. - Adjusted EBITDA for the three months ended March 31, 2025, was $18.6 million, compared to $29.1 million for the same period in 2024[90]. - Adjusted EBITDA decreased to $18.6 million, or 6.0% of net revenue, down from $29.1 million, or 9.9% of net revenue, in the prior year[95]. Showroom Operations - As of March 31, 2025, Arhaus operated 103 Showrooms, maintaining the same total number as of December 31, 2024, with a total square footage of 1,711 thousand[76]. - The company opened 5 new Showrooms from January 1, 2024, to March 31, 2025, while closing 1 permanently, resulting in a total of 103 Showrooms at the end of the period[92]. Expenses and Costs - Selling, general and administrative (SG&A) expenses rose by $13.4 million, or 13.9%, to $110.1 million, representing 35.3% of net revenue, an increase of 250 basis points[100][101]. - Selling, general and administrative expenses (SG&A) are expected to increase as new Showrooms are opened and new product categories are developed[86]. - Gross margin is calculated as net revenue minus cost of goods sold, which includes direct costs associated with merchandise and logistics[85]. Cash Flow and Capital Expenditures - Cash and cash equivalents as of March 31, 2025, were $214.4 million, with operating cash flows expected to meet working capital requirements for at least the next 12 months[105][106]. - Net cash provided by operating activities was $46.5 million for the three months ended March 31, 2025, compared to $36.8 million in the same period of 2024[112][114]. - Total capital expenditures, net of landlord contributions, increased by $9.2 million to $22.1 million for the three months ended March 31, 2025[119]. - The company anticipates total capital expenditures, net of landlord contributions, to be between $90 million and $110 million in fiscal year 2025, primarily for new Showroom openings[120]. - Net cash used in financing activities was $1.9 million for the three months ended March 31, 2025, primarily due to share repurchases for equity-based compensation[121]. Risk Factors - Risks include supply chain constraints, changes in consumer preferences, and potential cyberattacks, which could materially affect business performance[73]. - The company cannot reasonably estimate its future ability to recover inflation impacts through price increases[128]. - A 100 basis point change in interest rates is not expected to materially impact the company's financial condition or results of operations[127]. Financial Management - The company utilizes non-GAAP financial measures to assess performance, which may not be comparable to similar measures disclosed by other companies[79]. - The company purchases the majority of its inventory from vendors outside the United States, primarily in U.S. dollars, minimizing foreign currency exchange risk[126]. - As of March 31, 2025, the company has not drawn upon its 2021 Credit Facility, indicating no current exposure to interest rate risk from this facility[127]. - The company does not currently use derivative instruments to manage foreign currency exchange risk[126]. - The company does not currently use derivative instruments to manage interest rate risk[127]. - The company does not currently use derivative instruments to manage inflation risk[128]. Demand and Market Strategy - Demand comparable growth is a key performance indicator, reflecting year-over-year percentage changes in demand from comparable Showrooms and eCommerce[82]. - The company emphasizes a direct-to-consumer approach, sourcing products directly from factories to offer exclusive assortments at attractive values[74]. - Inflation has historically increased costs related to labor, materials, and transportation, but the company has been able to recover these costs through price increases[128].