Arhaus, Inc.

At this time, all participants are in listen-only mode. A question and answer session will follow the form of 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 hand the call over to your host, Wendy Watson, Senior Vice President of Investor Relations.

Good morning. and thank you for joining our house's first quarter 2023 earnings call. On with me today are John Reed, co-founder, chairman, and chief executive officer, and Dawn Phillipson, chief financial officer. Dawn 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 2023, and then they will be joined by Jen Porter, our chief marketing and e-commerce 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 March 31st, 2023 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 revise or update 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. I will keep my comments today brief, providing a few highlights on our first quarter performance. We are very pleased with our first quarter 2023 results, delivering net revenue of $305 million, a 24% increase over Q1 last year, comp growth of 21%, an increase in net and comprehensive income of 112%, and an adjusted EBITDA increase of 76%. Demand comp growth in the first quarter was 5.6%, with March sequentially decelerating to a flat demand comp, following high single-digit demand comps in January and February. In April, our demand comp remained flat. As we discussed with you when we reported last quarter, Our focus in 2023 is investing in the long-term growth in showrooms and systems that will fuel that growth, while at the same time continuing to prioritize product, building brand awareness, and putting our clients first. In the first quarter, the key performance drivers include our product assortment and our marketing campaigns. From a marketing perspective, we are very pleased with our current campaigns. We are very excited for our plans throughout 2023, including some great new partnerships and the support and emphasis we place on marketing our new showroom openings. Speaking on our growing showroom footprint, I am pleased to update you on the progress towards opening 12 new showrooms this year. We opened one new one in a design studio in Asheville, North Carolina on March 10th, and in Naperville, Illinois, on April 14th as well. In June, we expect to open a new showroom in Topanga, California, and a new loft location in the Dallas area, with the remainder of our eight additional expected new showrooms opening in the second half of the year. Our renovation, relocation, and expansion projects are all proceeding as expected, and we're very excited about our new relocation showroom we just opened last week and Townsend, Maryland. Moving to supply chain. As we are well positioned on both the inbound and outbound elements of our supply chain, and in most cases, our product lead times are back to pre-pandemic levels. Our expanded distribution footprint, along with the systems capabilities we are implementing, will support our growth for the next seven to 10 years. One example of these capability enhancements is our warehouse management system, we began implementing last month, which will enable us to move product through the supply chain more efficiently. To share further operational details, I'm very excited about the past two days I just spent at our upholstery production facility in North Carolina. The facility combines state-of-the-art production machinery and tools with skilled upholsters, crafting the best upholstery pieces available anywhere in the world. I was at the facility with our product development and regional sales team leaders. And I'm impressed and inspired by the enthusiasm of these incredibly talented teams coming together to brainstorm and to work on future collections that we believe our clients will love. Turning to our outlook, as we announced this morning, given our solid first quarter 2023 performance, we are reaffirming our full year outlook And Don will share these details with you. In summary, I want to reiterate how pleased we are with the start of 2023. The client reception we have seen to our new products and the progress we continue to make in our showroom growth. As we look to the future, we remain confident in our strategy with a balance sheet that is well positioned to navigate any macro choppiness and focused on delivering long-term growth and shareholder value. Finally, I want to thank our team for continuing to focus on our clients first. It is truly astonishing to me how you have pulled together over the past few years of tremendous growth. Between 2019 and 2022, our net revenue grew 149%. Our net income grew 762%. and our adjusted EBITDA grew 346%. In just the first quarter of 2023, our net income and adjusted EBITDA surpassed all of 2019's net income and adjusted EBITDA. This is a testament to your commitment, and I'm incredibly proud of all of you. Now I'll turn it over to Dawn.