Arhaus, Inc.

good morning and welcome to the our house third quarter 2021 earnings conference call at this time all participants are in a listen only mode a question and answer session will follow the formal remarks please note that this call is being recorded and the reproduction of any part of this call is not permitted without written authorization from the company i would not like to turn this call over to your host miss wendy watson senior vice president of investor relations thank you ma'am you may begin your presentation

Good morning, and thank you for joining our house's inaugural earnings call. On with me today are John Reed, co-founder, chairman, and chief executive officer, Jen Porter, chief marketing officer, and Don Phillipson, chief financial officer. John will begin with a company overview and operational details. Jim will discuss the status of marketing initiatives across our omnichannel footprint, and Don will cover our third quarter performance and outlook. After their formal remarks, we will open the call to questions. For Q&A, please limit to one question and one follow-up. If you have additional questions, you may return to the queue. We issued our earnings press release and our 10-Q for the quarter ended September 30, 2021, before market opened today. These documents, along with supplementary slides, will be made available on our investor relations website at ir.ourhouse.com. A replay of the call will also be available on our website within 24 hours. As a reminder, remarks today concerning future expectations, events, objectives, strategies, trends, or results constitute forward-looking statements. Actual results or events may differ materially due to a number of risks and uncertainties. For a summary of these risk factors and additional information, please refer to this morning's press release and the cautionary statements and risk factors contained in the company's third quarter 10-Q, as such factors may be updated from time to time in its other filings with the SEC. The forward-looking statements are made as of today's date. And except as may be required by law, the company undertakes no obligation to update or revise these statements. We will also refer to certain non-GAAP financial measures. And this morning's press release includes the relevant non-GAAP reconciliation. I will now turn the call over to John.

Good morning, everyone, and thank you for taking the time to join our third quarter 2021 earnings call, our first as a publicly traded company following our IPO in early November. This is an exciting milestone for our company, and I want to thank more than the 1,400 Our House team members for working together to get us to this point. You truly are the best in the business, and I am proud to be part of such a dedicated team who cares for one another, our clients, and what we do. We had a record third-quarter performance, with net revenue in both our retail and e-commerce channels up 69%, and comparable growth up over 61% compared to the third quarter last year. Don Phillipson, our CFO, will cover our third-quarter performance. and the outlook for the remainder of the year in more detail later in the call. But we are extremely pleased with our trends in our business. Because this is our inaugural earnings call, I will take a few minutes to introduce our house, describe what makes our brand so special, and explain why I'm so excited about the growth going forward. I founded this company 35 years ago with a simple mission – that furniture should be responsibly sourced, lovingly made, and built to last. In order to fulfill our mission, we built a unique model that differentiates us in the marketplace in four key areas and offers multiple strategies for growth. We believe we are in a position to nearly double the size of our business over the next few years and drive profitable long-term growth for years to come. Our first key differentiator is our product. All of our products are designed in-house and sourced directly from leading artisan vendors around the world. By sourcing our own exclusive products, we control the design, we control the credible quality, the supply chain, and our cost. Through our vertical integration designs and sourcing model, we offer a globally curated assortment of handcrafted products that represent our livable luxury aesthetic. The second key differential is our showrooms. From our very first showroom in Cleveland, Ohio, we have always believed that retail is theater. Our showrooms should showcase our products in a way that is both inspirational and aspirational. When clients walk into our showrooms, we want them to envision that it could be an extension of their own home, We put as much detail and attention into our showrooms as we do in our products, and expanding our showroom base represents a tremendous white space growth opportunity and significantly builds our brand awareness. In the third quarter, we opened two new showrooms, a traditional showroom in Salem, New Hampshire, and a design studio in Burlingame, California. We also relocated a showroom in McLean, Virginia, to the Tyson's Galleria in and converted this showroom into the new format. We ended the third quarter with 77 showrooms across 28 states. We expect to end the year at 79 showrooms. In the US alone, we believe we can grow to as many as 165 total showrooms, and our target is to add five to seven new showrooms per year for the foreseeable future. Within our showrooms, we are also growing our in-home designer program, that offers clients the complimentary service of having a designer personally come to their home. At the end of the third quarter, we had 65 designers in 54 showrooms, and the average order value when the client purchases to our in-home designers is more than three times greater than the standard order. We intend to at least have one in-home designer per showroom with locations accommodating more than one. The third differentiator of our omnichannel experience, Jen Porter will cover our omnichannel initiatives in our detail later in the call, but we will take the same inspirational approach to showcasing our product online and in our catalogs as we do in our showroom. Our omnichannel approach serves to further increase our brand awareness and represents another level of our growth. We only recently begun investing in the digital capabilities. And with e-commerce compromising approximately 18% of net revenue today, we see a significant runway to grow our e-commerce sales as we enhance our omnichannel capabilities. The fourth key differentiator is our client-first mentality. This core value runs through our business. Everything we do, from the way we design our products, build our showrooms, hire, train, and retain associates, and invest in growth, is with our clients in mind. I invite you to visit one of our showrooms and experience our client-first mentality and with our incredible design consultants firsthand. With our tremendous opportunity to continue growing and scaling our business We are closely focused on the current supply chain dynamics and making investments to expand our distribution capabilities. On the inbound side of the supply chain, we are working closely with our vendor partners to fulfill orders and ramp up production. Our vendors have been incredibly resilient to the strong demand environment, increasing their capacity, growing with us, and further deepening our relationships. At the same time, we are also expanding our vendor base and bringing in more new products. In upholstery, we expect to see improvements in lead time with the opening of our new upholstery manufacturing and distribution facility in North Carolina. This facility will double our in-house upholstery manufacturing capabilities. On the outbound side of the supply chain, we are increasing our capacity and expanding our footprint. we have begun a 230,000 square foot expansion in our Ohio distribution and corporate facilities, as well as expanding our offices in North Carolina, which we will add another 310,000 square foot of distribution capacity, in addition to 187 square feet of upholstery manufacturing. In the second half of 2022, we are planning to add a third distribution facility in the Western United States, where we have significant growth opportunities. Along with our ongoing efforts on the inbound side, the increases in our outbound capacity will further allow us to get products to our clients more quickly, more efficiently, reducing backlogs and shortening wait times. In summary, we feel very good about the trends of our business and the investments we're making to drive long-term growth. At a time when consumers are spending more and more time in their home, investing in their home, and looking for more functional spaces, we think we are very well positioned to continue to gain market share. The premium home furnishings market in the United States represents a $60 billion opportunity. Today, our market share is less than 1% of this large and rapidly growing market. and we have multiple avenues, a long runway to pursue sustainable growth. I could not be more excited about the future of our house. We know our products are unique in the marketplace. We have built an incredible team, incredible infrastructure to grow and to scale our business. Now I'll pass the call over to Jen Porter to review the Omnichannel digital initiatives.