Arhaus(US:ARHS)2025-11-06 11:11Financial Performance - For the nine months ended September 30, 2025, Arhaus generated net revenue of $1,014.4 million, a gross margin of $397.2 million, and net income of $52.2 million[87]. - For the three months ended September 30, 2025, net revenue was $344.6 million, with a gross margin of $133.4 million and net income of $12.2 million[87]. - Net revenue increased by $90.3 million, or 9.8%, to $1,014.4 million for the nine months ended September 30, 2025, compared to $924.1 million for the same period in 2024[105]. - Gross margin increased by $34.7 million, or 9.6%, to $397.2 million for the nine months ended September 30, 2025, maintaining a gross margin percentage of 39.2%[106][107]. - Net and comprehensive income increased by $4.9 million to $52.2 million for the nine months ended September 30, 2025, compared to $47.3 million for the same period in 2024[112]. - The company reported a net income of $52.2 million for the nine months ended September 30, 2025, compared to $47.3 million in 2024, marking an increase of 6.9%[133][134]. Showroom Operations - As of September 30, 2025, Arhaus operated 103 Showrooms, maintaining the same total number as of December 31, 2024, with an increase in traditional Showrooms from 85 to 87[86]. - The total square footage of Showroom locations increased from 1,676 thousand square feet at December 31, 2024, to 1,718 thousand square feet by September 30, 2025[87]. - The company opened 7 new Showrooms from January 1, 2024, to September 30, 2025, while closing 1 permanently and relocating 6[101]. - Total showrooms at the end of the period increased to 103, up from 101 in the previous year[104]. Expenses and Costs - Selling, general and administrative (SG&A) expenses rose by $24.4 million, or 8.0%, to $328.5 million for the nine months ended September 30, 2025, with SG&A as a percentage of net revenue decreasing to 32.4%[108][109]. - Selling, general and administrative expenses (SG&A) are expected to increase as new Showrooms are opened and new product categories are developed[95]. - The gross margin is calculated as net revenue minus cost of goods sold, which includes various operational costs associated with merchandise[94]. Cash Flow and Investments - The company had cash and cash equivalents of $262.2 million as of September 30, 2025, with operating cash flows expected to meet working capital requirements for at least the next 12 months[121][122]. - For the nine months ended September 30, 2025, net cash provided by operating activities was $127.5 million, an increase from $115.4 million in the same period of 2024, representing a growth of 10.1%[133][134]. - Net cash used in investing activities for the nine months ended September 30, 2025, was $59.7 million, a decrease from $88.7 million in 2024, reflecting a reduction of 32.8%[136][137]. - Total capital expenditures, net of landlord contributions, decreased by $18.4 million to $42.9 million for the nine months ended September 30, 2025, compared to $61.3 million in 2024[139]. - The company anticipates total capital expenditures, net of landlord contributions, to be between $65 million and $75 million in fiscal year 2025, primarily for opening new Showrooms[140]. - Net cash used in financing activities was $2.9 million for the nine months ended September 30, 2025, significantly lower than $72.1 million in 2024, indicating a reduction of 96.0%[141][142]. Tax and Interest - The effective tax rate increased to 26.6% for the nine months ended September 30, 2025, compared to 23.1% for the same period in 2024[111]. - Interest income, net decreased to $2.1 million for the nine months ended September 30, 2025, compared to $2.6 million for the same period in 2024[110]. Strategic Initiatives - The company is undergoing a multi-year transformation with an expected investment of approximately $30 million for technology upgrades, including a new ERP system[125]. - The company emphasizes a direct-to-consumer approach, sourcing products directly from factories to offer exclusive assortments at attractive values[84]. - Demand comparable growth is a key performance indicator, reflecting year-over-year percentage changes in demand from comparable Showrooms and eCommerce[91]. Financial Instruments and Risks - The company does not currently use derivative instruments to manage foreign currency exchange risk or interest rate risk[146][147]. - Inflation has historically been managed through price increases, but the company cannot estimate future recovery of these costs[148]. - The company has no borrowings under the 2021 Credit Facility as of September 30, 2025, except for a $5.1 million irrevocable standby letter of credit[147].