Arhaus, Inc.

Previous wording

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q for the three months ended March 31, 2025 (“Form 10-Q”) and our Annual Report on Form 10-K for the year ended December 31, 2024. This Form 10-Q contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they do not fully materialize or are proven incorrect, could cause our business and results of operations to differ materially from those expressed or implied by such forward-looking statements. 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. Such factors include, but are not limited to, the following:

Current wording

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q for thesix and three months ended June 30, 2025 (“Form 10-Q”) and our Annual Report on Form 10-K for the year ended December 31, 2024. This Form 10-Q contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they do not fully materialize or are proven incorrect, could cause our business and results of operations to differ materially from those expressed or implied by such forward-looking statements. 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. Such factors include, but are not limited to, the following:

Previous wording

•Risks as a result of constraints in our supply chain;

Current wording

•Risks as a result of constraints in our supply chain or disruptions due to geopolitical events such as acts of war and/or terrorism or other hostilities;

Previous wording

The risks, uncertainties and assumptions referred to above that could cause our results to differ materially from the results expressed or implied by such forward-looking statements include, but are not limited to, those discussed under Item 1A. Risk Factors, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2024. All forward-looking statements included in this document are based on information available to us as of the date hereof, and we assume no obligation to update these forward-looking statements. These statements are based on information available to us as of the date of this Form 10-Q. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

Current wording

The risks, uncertainties and assumptions referred to above that could cause our results to differ materially from the results expressed or implied by such forward-looking statements include, but are not limited to, those discussed under Item 1A. Risk Factors, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2024, as well as those included under Item 1A. Risk Factors in our quarterly report on Form 10-Q for the quarter ended March 31, 2025. All forward-looking statements included in this document are based on information available to us as of the date hereof, and we assume no obligation to update these forward-looking statements. These statements are based on information available to us as of the date of this Form 10-Q. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

Previous wording

The following discussion contains references to the three months ended March 31, 2025 and March 31, 2024, which represents the condensed consolidated financial results of Arhaus, Inc. and subsidiaries for the three months ended March 31, 2025 and March 31, 2024, respectively.

Current wording

The following discussion contains references to thesix and three months ended June 30, 2025 and June 30, 2024, which represents the condensed consolidated financial results of Arhaus, Inc. and subsidiaries for thesix and three months ended June 30, 2025 and June 30, 2024, respectively.

Previous wording

As of March 31, 2025, we operated 103 Showrooms,91 with in-home interior designers. At December 31, 2024, we operated 103 Showrooms, 89 with in-home interior designers.

Current wording

As of June 30, 2025, we operated 103 Showrooms,93 with in-home interior designers. At December 31, 2024, we operated 103 Showrooms, 89 with in-home interior designers.

Previous wording

For thethree months ended March 31, 2025, we generated $311.4 million of net revenue, $115.6 million of gross margin and $4.9 million of net and comprehensive income.

Current wording

For thesix months ended June 30, 2025, we generated $669.8 million of net revenue, $263.8 million of gross margin and $39.9 million of net and comprehensive income. For thethree months ended June 30, 2025, we generated $358.4 million of net revenue, $148.2 million of gross margin and $35.1 million of net and comprehensive income.

Previous wording

SG&A expenses increased $13.4 million, or 13.9%, to $110.1 million in the three months ended March 31, 2025 compared to $96.7 million in the three months ended March 31, 2024. The increase in SG&A expenses was primarily due to a $7.2 million increase in general and administrative costs primarily related to warehouse expenses, marketing investments, and strategic investments to support and drive the growth of the business, including supply chain and technology improvements, in addition to a $6.2 million increase in selling expenses primarily related to new Showrooms.

Current wording

SG&A expenses increased $19.8 million, or 10.3%, to $211.5 million in the six months ended June 30, 2025 compared to $191.7 million in the six months ended June 30, 2024. The increase was due to a $12.7 million increase in general and administrative costs primarily related to corporate expenses, warehouse expenses and strategic investments to support and drive the growth of the business and a $7.1 million increase in selling expenses primarily related to new Showrooms.

Previous wording

Net revenue increased $16.2 million, or 5.5%, to $311.4 million in the three months ended March 31, 2025 compared to $295.2 million in the three months ended March 31, 2024. The increase was driven primarily by increased demand for our products in both Showrooms and eCommerce sales channels.

Current wording

Net revenue increased $48.6 million, or 15.7%, to $358.4 million in the three months ended June 30, 2025 compared to $309.8 million in the three months ended June 30, 2024. The increase was driven primarily by increased demand for our products and $19.8 million of revenue growth related to new Showrooms opened in 2024 and 2025.

Previous wording

Gross margin increased $0.5 million, or 0.4%, to $115.6 million in the three months ended March 31, 2025 compared to $115.1 million in the three months ended March 31, 2024. The increase was primarily due to higher net revenue, partially offset by increased product costs of $7.1 million, higher Showroom occupancy costs of $5.2 million and higher delivery and transportation costs of $1.7 million.

Current wording

Gross margin increased $23.8 million, or 19.1%, to $148.2 million in the three months ended June 30, 2025 compared to $124.4 million in the three months ended June 30, 2024. The increase was primarily due to higher net revenue, partially offset by increased product costs of $16.0 million, higher delivery and transportation costs of $4.1 million and higher Showroom occupancy costs of $2.9 million.

Previous wording

As a percentage of net revenue, gross margin decreased 190 basis points to 37.1% of net revenue in the three months ended March 31, 2025 compared to 39.0% of net revenue in the three months ended March 31, 2024. The gross margin decrease as a percentage of net revenue was primarily driven by higher Showroom occupancy costs, which increased 120 basis points, and a product margin decrease of 40 basis points.

Current wording

As a percentage of net revenue, gross margin increased 130 basis points to 41.4% of net revenue in the three months ended June 30, 2025 compared to 40.1% of net revenue in the three months ended June 30, 2024. The gross margin increase as a percentage of net revenue was primarily driven by Showroom occupancy costs, which decreased 50 basis points, a product margin increase of 30 basis points and delivery and transportation costs, which decreased 30 basis points.

Previous wording

As a percentage of net revenue, SG&A expenses increased 250 basis points to 35.3% of net revenue in the three months ended March 31, 2025 compared to 32.8% of net revenue in the three months ended March 31, 2024.

Current wording

As a percentage of net revenue, SG&A expenses decreased 240 basis points to 28.3% of net revenue in the three months ended June 30, 2025 compared to 30.7% of net revenue in the three months ended June 30, 2024.

Previous wording

Interest income, net decreased to $0.6 million in the three months ended March 31, 2025 compared to $1.4 million in the three months ended March 31, 2024.

Current wording

Interest income, net increased to $0.7 million in the three months ended June 30, 2025 compared to $0.6 million in the three months ended June 30, 2024.

Previous wording

Income taxes were $1.2 million in the three months ended March 31, 2025 compared to $4.8 million in the three months ended March 31, 2024. Our effective tax rate was 19.7% and 24.2% for the three months ended March 31, 2025 and March 31, 2024, respectively.

Current wording

Income taxes were $12.6 million in the three months ended June 30, 2025 compared to $7.8 million in the three months ended June 30, 2024. Our effective tax rate was 26.4% and 26.0% for the three months ended June 30, 2025 and June 30, 2024, respectively.

Previous wording

Net and comprehensive income decreased $10.2 million to $4.9 million in the three months ended March 31, 2025 compared to $15.1 million in the three months ended March 31, 2024. The decrease was driven by the factors described above.

Current wording

Net and comprehensive income increased $12.9 million to $35.1 million in the three months ended June 30, 2025 compared to $22.2 million in the three months ended June 30, 2024. The increase was driven by the factors described above.

Previous wording

Our primary cash needs have historically been for merchandise inventories, payroll, Showroom rent, marketing catalogs and capital expenditures associated with opening new Showrooms and renovating existing Showrooms, as well as the development of our infrastructure and information technology. We seek out and evaluate opportunities for effectively managing and deploying capital in ways that improve working capital and support and enhance our business initiatives and strategies. As of March 31, 2025, we had cash and cash equivalentsof $214.4 million.

Current wording

Our primary cash needs have historically been for merchandise inventories, payroll, Showroom rent, marketing catalogs and capital expenditures associated with opening new Showrooms and renovating existing Showrooms, as well as the development of our infrastructure and information technology. We seek out and evaluate opportunities for effectively managing and deploying capital in ways that improve working capital and support and enhance our business initiatives and strategies. As of June 30, 2025, we had cash and cash equivalentsof $234.8 million.

Previous wording

For thethree months ended March 31, 2025, our principal sources of liquidity were cash flows from operations. We believe our operating cash flows will be sufficient to meet working capital requirements and fulfill other capital needs for at least the next 12 months, although we may enter into borrowing arrangements in the future.

Current wording

For thesix months ended June 30, 2025, our principal sources of liquidity were cash flows from operations. We believe our operating cash flows will be sufficient to meet working capital requirements and fulfill other capital needs for at least the next 12 months, although we may enter into borrowing arrangements in the future.

Previous wording

On February 29, 2024, the Board of Directors of the Company declared a special cash dividend on the Company’s Class A and Class B common stock of $0.50 per share, payable April 4, 2024, to shareholders of record at the close of business on March 21, 2024. The Company paid out $0.2 million of the aforementioned special cash dividend on its Class A common stock related to equity awards that vested during the three months ended March 31, 2025.

Current wording

On February 29, 2024, the Board of Directors of the Company declared a special cash dividend on the Company’s Class A and Class B common stock of $0.50 per share, payable April 4, 2024, to shareholders of record at the close of business on March 21, 2024. The Company paid out $0.3 million of the aforementioned special cash dividend on its Class A common stock related to equity awards that vested during the six months ended June 30, 2025 and $70.1 million on its Class A and Class B common stock to shareholders as of the Record Date during the six months ended June 30, 2024.

Previous wording

On December 9, 2022, the Company amended the 2021 Credit Facility to increase the revolving credit commitment thereunder by $25.0 million. After giving effect to such increase, the aggregate amount of all commitments under the 2021 Credit Facility is $75.0 million.

Current wording

In December 2022, the Company amended the 2021 Credit Facility to increase the revolving credit commitment thereunder by $25.0 million. After giving effect to such increase, the aggregate amount of all commitments under the 2021 Credit Facility was $75.0 million.

Previous wording

On August 30, 2024, the Company amended the 2021 Credit Facility to adjust the index rate from the Bloomberg Short-Term Bank Yield Index to Term Secured Overnight Financing Rate. The 2021 Credit Facility bears variable interest rates at the prevailing Term Secured Overnight Financing Rate plus the applicable margin (1.75% at March 31, 2025). The 2021 Credit Facility expires on November 8, 2026. At March 31, 2025, we had no borrowingson the 2021 Credit Facility. Refer to Note 4 —Debt to our condensed consolidated financial statements for further information on our 2021 Credit Facility.

Current wording

In August 2024, the Company amended the 2021 Credit Facility to adjust the index rate from the Bloomberg Short-Term Bank Yield Index to Term Secured Overnight Financing Rate. The 2021 Credit Facility bears variable interest rates at the prevailing Term Secured Overnight Financing Rate plus the applicable margin (1.75% at June 30, 2025). The 2021 Credit Facility expires on November 8, 2026. In May 2025, the Company issued an irrevocable standby letter of credit under the 2021 Credit Facility in the amount of $5.1 million in connection with a lease, which remained outstanding at June 30, 2025. At June 30, 2025, we had no borrowings on the 2021 Credit Facility and the available borrowing capacity was $69.9 million. Refer to Note 4 —Debt to our condensed consolidated financial statements for further information on our 2021 Credit Facility.

Previous wording

For thethree months ended March 31, 2024, net cash provided by operating activities was $36.8 million and consisted of net income of $15.1 million and an increase of non-cash items of $26.0 million, which were partially offset by a change in working capital and other activities of $4.3 million. The use of cash from working capital was primarily driven by an increase in merchandise inventory of $14.1 million, an increase in prepaid and other assets of $5.8 million, a decrease in accrued expenses of $5.1 million, a decrease in accounts payable of $4.8 million, and a decrease in operating lease liabilities of $4.2 million primarily due to payments made under the related lease agreements which was partially offset by an increase in client deposits of $29.1 million in thethree months ended March 31, 2024.

Current wording

For thesix months ended June 30, 2025, net cash provided by operating activities was $81.4 million and consisted of net income of $39.9 million adjusted for non-cash items of $60.3 million, which were partially offset by a change in working capital and other activities of $18.8 million. The use of cash from working capital was primarily driven by a decrease in operating lease liabilities of $28.0 million primarily due to payments made under the related lease agreements and an increase in merchandise inventory of $14.1 million, which was partially offset by an increase in client deposits of $12.2 million, an increase in accrued expenses of $4.7 million, a decrease in prepaid and other assets of $4.4 million and an increase in accounts payable of $1.8 million in the six months ended June 30, 2025.

Previous wording

For thethree months ended March 31, 2025, net cash provided by operating activities was $46.5 million and consisted of net income of $4.9 million, an increase of non-cash items of $30.1 million and an increase in working capital and other activities of $11.5 million. The change in working capital was primarily driven by an increase in client deposits of $42.3 million, which was partially offset by a decrease in operating lease liabilities of $13.9 million primarily due to payments made under the related lease agreements, a decrease in accounts payable of $8.7 million, an increase in merchandise inventory of $4.4 million and a decrease in accrued expenses of $3.2 million in the three months ended March 31, 2025.

Current wording

For thesix months ended June 30, 2024, net cash provided by operating activities was $84.3 million and consisted of net income of $37.3 million adjusted for non-cash items of $57.6 million, which were partially offset by a change in working capital and other activities of $10.6 million. The use of cash from working capital was primarily driven by an increase in merchandise inventory of $19.3 million, an increase in prepaid and other assets of $11.5 million, a decrease in accrued expenses of $11.3 million, a decrease in operating lease liabilities of $10.7 million primarily due to payments made under the related lease agreements, which was partially offset by an increase in client deposits of $36.5 million and an increase in accounts payable of $4.6 million in thesix months ended June 30, 2024.

Previous wording

For the three months ended March 31, 2025, net cash used in investing activities was $27.6 million primarily due to investments in Showrooms, vehicles and information technology and systems infrastructure.

Current wording

For the six months ended June 30, 2025, net cash used in investing activities was $41.6 million primarily due to investments in Showrooms, vehicles, investments in our supply chain, and information technology and systems infrastructure.

Previous wording

For thethree months ended March 31, 2024, net cash used in investing activities was $25.9 million primarily due to investments in Showrooms, information technology and systems infrastructure and strategic investments in our supply chain.

Current wording

For thesix months ended June 30, 2024, net cash used in investing activities was $62.2 million primarily due to investments in Showrooms, strategic investments in our supply chain, and information technology and systems infrastructure.

Previous wording

Total capital expenditures, net of landlord contributions increased by $9.2 million in thethree months ended March 31, 2025 compared to thethree months ended March 31, 2024.

Current wording

Total capital expenditures, net of landlord contributions decreased by $9.7 million in the six months ended June 30, 2025 compared to the six months ended June 30, 2024.

Previous wording

We anticipate our total capital expenditures, net of landlord contributions to be between $90 million and $110 million in fiscal year 2025, primarily related to the opening of new Showrooms.

Current wording

We anticipate our total capital expenditures, net of landlord contributions to be between $80 million and $100 million in fiscal year 2025, primarily related to the opening of new Showrooms.

Previous wording

For thethree months ended March 31, 2025, net cash used in financing activities was$1.9 million primarily due to the repurchase of shares for payment of withholding taxes for equity based compensation.

Current wording

For thesix months ended June 30, 2025, net cash used in financing activities was $2.3 million primarily due to the repurchase of shares for payment of withholding taxes for equity based compensation.