Arhaus, Inc.

Good morning and welcome to our house third 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. I will now turn the call over to your host, Wendy Watson, Senior Vice President of Investor Relations. Thank you, you may begin.

Good morning, and thank you for joining our house's third quarter 2022 earnings call. On with me today are John Reed, co-founder, chairman, and chief executive officer, and Dawn Philipson, 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 the remainder of 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 September 30, 2022, before market opened today. Those documents are available on our Investor Relations website at ir.ourhouse.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 joining us today. We are pleased to report another strong quarter with record net revenue and significant year-over-year earnings growth. Our team once again executed extremely well in a very dynamic macro environment. satisfying our clients, supporting our growth strategies, and managing our profitability. Turning to some highlights for the third quarter results. One, net revenue of $320 million, a 57% increase over Q3 last year, with our retail channel up 61% and our e-commerce channel up 40% in the quarter. Comp growth of 54.3%. and demand comp growth of 15.8%. Net and comprehensive income increased 160% and adjusted EBITDA increased 87%. Our net revenue performance for the quarter was better than expected from both demand in the quarter and continued delivery of our backlog. Our net income and adjusted EBITDA were also much better than expected. primarily driven by the strong net revenue and leverage on fixed costs. Demand comp growth in the third quarter was a robust 15.8%, significantly exceeding our expectations. In the early part of the fourth quarter, we are continuing to see solid demand with mid-single-digit demand comp growth off of strong prior year Q4 demand comps. This is consistent with our longer-term expectations for comp growth and demand comp growth. Turning to our operational developments in the quarter, our product and marketing continues to resonate with our clients. We are pleased with the fall campaign and just launched our new holiday campaign last week. Regarding supply chain, on the inbound side, we continue to see moderation of the bottlenecks that we have impacted our industry. since the start of the pandemic, and our lead times are coming down steadily. We are seeing lower freight costs persist, although fuel prices remain volatile. On the outbound side, as we discussed in the last quarter's call, our Dallas distribution center is now open, and we have started delivering product out of that facility. While we continue to slow ramp the operation to ensure a seamless transition and client experience, we're making great progress. We're also on track with the expansion of the Ohio Distribution Center, expected to be completed by the end of this year. As a reminder, we believe our new distribution capacity will help alleviate our backlog, reduce our lead times to support our growth over the next seven to 10 years. Turning to showroom growth, we're opening a new design studio in Park City, Utah later this month, as we expand our testing of that concept, which has been very successful, and we plan to open two more design studios over the next several months. Looking ahead, our real estate pipeline is very robust. We will share our showroom opening plans for 2023 early next year. We continue to target adding five to seven new traditional showrooms annually. Given our performance over the third quarter of 2022 and the strength of our backlog, we are reaffirming our full-year net revenue and comparable growth outlook, and raising our full-year net income and adjusted EBITDA outlook that Don will cover next. As we look to the future, remain confident in our strategy and our focus on delivering long-term growth. In closing, I want to reiterate how pleased we are with our performance in the third quarter and truly thank our team for stepping up to every challenge. I'm incredibly proud of each and every one of you. Now I'll turn it over to Dawn.