Arhaus, Inc.

Good morning and welcome to the Our House Second Quarter 2022 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. Ladies and gentlemen, I will now turn the conference over to Ms. Wendy Watson, Senior Vice President of Investor Relations. Please go ahead.

Good morning, and thank you for joining our house's second quarter 2022 earnings call. On with me today are John Reed, Co-Founder, Chairman, and Chief Executive Officer, and Dawn Phillipson, Chief Financial Officer. John will start with a summary of the main points we made in this morning's press release, along with operational details. Dawn will cover our financial performance and outlook for 2022, and then they will be joined by Jen Porter, our Chief Marketing Officer, for the Q&A session. During Q&A, please limit to one question and one follow-up. If you have additional questions, please return to the queue. We issued our earnings press release and our 10Q for the quarter ended June 30, 2022, before market opened today. Those documents are available on our investor relations website at ir.rhouse.com. A replay of the call will 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 described in our annual report on Form 10-K and subsequent 10-Qs as such factors may be updated from time to time in our 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 reconciliations. I will now turn the call over to John.

Good morning, everyone, and thank you for participating in our second quarter call. We had another great quarter, our third as a public company, and we are excited to share our results. This morning we reported record quarterly net revenue of $306 million, a 66% increase from Q2 last year, with our retail channel up 69% and our e-com channel up 54%. Comp growth was 65.2% and demand growth comp growth was a strong 22.5%. Net and comprehensive income increased 436% and adjusted EBITDA increased 76%. Our second quarter performance is particularly notable on top of last year's very strong second quarter performance that included comp growth of 71% and demand comp growth of 73%. So our two year demand comp stack for the second quarter is over 95%. Despite ongoing macroeconomics, geopolitical concerns, including high inflation, rising interest rates, and ongoing global supply chain challenges, demand for our product remains strong, driven by our passionate approach to design and development. We seek inspiration from all around the world and are thrilled with our clients' response to our unique and artisan crafted assortment. When the pandemic began in the spring of 2020, we continued designing and developing our products, which allowed us to continue to introduce new collections across our portfolio throughout the past year. We know and stay true to what we do well. We are also keenly focused on our client experience. Our showrooms are designed to inspire, highlighting the beauty of every piece of furniture and decor within them. Our design consultants are available to help in any way and undergo rigorous training on our product designs and quality so they can thoughtfully guide our clients through the process of furnishing and decorating their homes. As you can see from our results, this is clearly resonating and we take the showroom and and website experience a step further by offering complimentary in-home designer services to our clients, which result in an average order value that is over three times the company average. We are also very proud of our trade designer program, which continues to grow as we have responded to the needs of the design community on both the front end with our aesthetics, quality, and education, and on the back end with the room design software. We opened two new showrooms during the quarter in Colorado Springs and in White Plains, New York. We continue to be pleased with the strong opening performance and the quick ramp up of our new showrooms. Additionally, our design studios continue to exceed our expectations and we are excited to expand this format in two to three additional markets over the next several months. During the second quarter, we also launched a partnership with the Surf Lodge in Mantoc, New York, redesigning and outfitting the property's beachfront and private dining deck with artisan crafted furnishings from our outdoor collection. Community and timeless designs are what inspire us at our house, and we are thrilled to celebrate these values through our partnership with the Surf Lodge. Regarding our supply chain, both inbound and outbound logistics continue to improve, and our lead times are coming down steadily. We expect lead times to continue to improve over the rest of the year. As we discussed last quarter, we believe our new distribution facilities will help alleviate our backlog, reduce our lead times, and support our growth over the next seven to 10 years. Our North Carolina Distribution Center opening went better than expected and has played a large part in our first half net revenue outperformance. Our Texas Distribution Center is open and we are intentionally ramping up at a slower than expected pace as we work to ensure a seamless integration. We also expect the expansion of our Ohio distribution facility to be complete near the end of this year. Looking forward into Q3, we cannot wait to launch our fall 2022 collection. We've called our fall campaign the Art of Home. And I cannot think of a better title to celebrate this incredible collection of furniture and decor, including hundreds of new arrivals and featuring some key home trends, such as rich textured boucle fabrics, curved and sculptured forms, reading, and the focus of celebration on natural materials and color. This collection is one of the strongest we've ever launched. From the beauty of our materials to the handcrafted artisan design with our furniture and decor, We believe our product is truly special within the market and clients seem to be agreeing. Our style issue catalog will arrive in our client's home and our new products will be in the showrooms by the end of August. As a reminder, we operate in a highly fragmented $60 billion home furnishings market in the United States. Our clients who are predominantly from high income households continue to invest in their homes And we are executing our growth strategy by opening showrooms, making the investment to build the brand awareness and grow our omni-channel footprint, enabling us to gain market share. Our current momentum gives us confidence in our performance for the remainder of the year, and we are raising our full year outlook as Don will discuss. In closing, I want to congratulate and thank our teams for their incredible execution and hard work. In the last year, we have grown our product selection, introduced newness across all categories, posted record sales, doubled our production capacity, moved from one distribution center to three, opened new showrooms, and produced excellent overall results. I have always believed that our people and their passion set our house apart. I am proud to work alongside each of you. Thank you for everything you've done and continue to do to make our house and the team the best in the business. Now I'll turn it over to Dawn. Thank you, John.