Arhaus(US:ARHS)2022-05-10 16:00Financial Performance - For the three months ended March 31, 2022, Arhaus generated net revenue of $246.3 million, with a gross margin of $97.7 million and a net income of $16.1 million[95]. - Net revenue increased by $75.0 million, or 43.8%, to $246.3 million for the three months ended March 31, 2022, compared to $171.3 million for the same period in 2021[118]. - Adjusted EBITDA rose to $31.2 million, up from $25.5 million, representing an increase of 22.4%[116]. - Gross margin increased by $27.4 million, or 38.9%, to $97.7 million, but as a percentage of net revenue, it decreased to 39.7% from 41.1%[119][120]. - Selling, general and administrative (SG&A) expenses increased by $15.8 million, or 26.8%, to $74.8 million, while as a percentage of net revenue, SG&A expenses decreased to 30.4% from 34.5%[121]. - Net and comprehensive income increased by $6.8 million to $16.1 million for the three months ended March 31, 2022, compared to $9.2 million for the same period in 2021[124]. Operational Metrics - As of March 31, 2022, Arhaus operated 78 Showrooms, a decrease from 79 Showrooms at December 31, 2021, with total square footage of 1,260 thousand[94]. - Arhaus opened no new Showrooms and closed one Showroom in the three months ended March 31, 2022, following the opening of ten Showrooms and closing of five in 2021[111]. - Total showrooms increased to 78 at the end of the period, up from 75 in the previous year[116]. - Demand comparable growth is a key performance indicator, measuring year-over-year percentage change of demand from comparable Showrooms and eCommerce[102]. Cash Flow and Liquidity - Cash and cash equivalents as of March 31, 2022, were $148.8 million, indicating strong liquidity[125]. - Net cash provided by operating activities was $35.2 million for the three months ended March 31, 2022, compared to $73.1 million for the same period in 2021[134]. - Net cash provided by operating activities decreased to $35.2 million for the three months ended March 31, 2022, from $73.1 million in the same period of 2021, reflecting a decline of approximately 51.8%[135]. - Net cash used in investing activities increased to $10.2 million for the three months ended March 31, 2022, compared to $7.0 million in the same period of 2021, representing a rise of approximately 45.7%[136]. - Total capital expenditures, net of landlord contributions, rose by $4.8 million to $8.4 million for the three months ended March 31, 2022, compared to $3.6 million in the same period of 2021[137]. - Net cash used in financing activities was $1.0 thousand for the three months ended March 31, 2022, a significant decrease from $5.7 million in the same period of 2021[139]. Supply Chain and Market Conditions - The company anticipates ongoing supply chain constraints due to the COVID-19 pandemic, which may continue to affect its ability to meet demand during fiscal year 2022[97]. - The company is exposed to market risks including foreign currency exchange rate fluctuations, but these did not significantly impact operations for the three months ended March 31, 2022[141]. - Interest rate risk is present due to the 2021 Credit Facility, but a 100 basis point change in interest rates is not expected to materially impact financial conditions[142]. - Inflation has historically been recoverable through price increases, but future recoverability cannot be estimated[143]. Corporate Structure and Strategy - The company emphasizes a direct-to-consumer approach, sourcing products from over 400 vendors, which allows for exclusive assortments at attractive values[93]. - The company defines adjusted EBITDA as a useful measure of operating performance, facilitating consistent comparisons from period to period[108]. - Arhaus's omni-channel model integrates physical Showrooms and online platforms, enhancing customer engagement and brand awareness[94]. - The company has no material off-balance sheet arrangements as of March 31, 2022[140]. - The company is classified as an "emerging growth company" under the JOBS Act, allowing it to delay adopting new accounting standards[144]. - Selling, general and administrative expenses (SG&A) are expected to increase as Arhaus opens new Showrooms and develops new product categories[107].