Arhaus, Inc.

Good morning, and welcome to the R-House third quarter 2023 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. Please go ahead.

Good morning, and thank you for joining our house's third quarter 2023 earnings call. On with me today are John Reed, co-founder, chairman, and chief executive officer, and Dawn Phillipson, chief financial officer. After prepared remarks, 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 September 30th, 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 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. Now I will turn the call over to John.

Good morning, everyone, and thank you for joining us today. I first want to call out and thank our teams across our house. for delivering another quarter of strong performance. We are very pleased to have reported demand comp growth of 11.7% in the third quarter, a testament to the execution of teams across the company that are developing and delivering our heirloom quality artisan crafted furniture, assisting clients in our inspirational showrooms and via our e-commerce channel to find and purchase the special pieces that will make their spaces a home. The teams that are continuing to elevate and grow our brand and ensure a first-class in-home delivery experience. And the teams that support all of the client-facing and product-facing functions. Thank you. I am so proud of all of you. Many of you have asked why our house is consistently outperforming the industry. The why is our passion and our people. We love designing and working with our incredible vendors to produce beautiful furniture that can be enjoyed for generations. Our new collections are some of the most popular we have ever introduced, allowing us to expand these collections into categories and new finishes. We love creating aspirational showrooms where clients can imagine their home of their dreams and expanding to new locations where new to our house clients can experience our brand of livable luxury. We are passionate about our products and our clients' experience, and this is reflected in our performance. Third quarter highlights include net revenue of $326 million, net and comprehensive income of $20 million with a margin of 6.1%, and adjusted EBITDA of $34 million with a margin of 10.3%. We experienced strong demand across all regions, products, and channels. Moving to profitability, as we communicated last quarter, we saw an expected year-over-year reduction in earnings driven primarily by costs and expenses related to our accelerated new showroom openings and our important donation to the Nature Conservancy. Some new initiatives I'm excited about that will elevate our client experience include new processes, and some key hires to provide an enhanced final mile delivery experience and more in-home designers as we continue to grow this service. We are also focusing on growing our trade business where we see lots of opportunities in 2024 and beyond. Turning to the showroom growth, we have a very busy week, opening two traditional showrooms tomorrow, one in Coral Gables, Florida, and one in Huntington Station, New York. This will bring our year-to-date new showroom opening to eight. And then in December of this year, we plan to open three additional California showrooms, Los Gatos, Palm Desert, and Newport Beach. We are very proud of how our new showrooms perform right out of the gate. And I wanted to remind you that there is a lag before we begin to see financial benefits at our income statement due to the normal timing between when a client makes a purchase in our showrooms and when that purchase is delivered to the client and recognizes revenue. Additionally, our new showrooms are reflected in our report, Demand Comparable Growth. After they have been open for 13 months, and in our reported comparable growth after they have been open for 15 months. We have tremendous white space to continue to grow our showrooms' footprints across the United States, and we expect to accelerate our new showroom openings to five to seven new traditional showrooms annually, plus design studios. In 2024, we are targeting another new and sizable new showroom growth with six to eight new traditional showrooms two new design studios, two to three new outlet locations, and approximately ten relocations, expansions, or renovation projects. These new showrooms are in excellent locations, as varied as the Grove in Los Angeles to a new development in Oklahoma City. In closing, as we finish out 2023 and begin to look at 2024, We are focused on continuing to expand our collection of globally inspired, heirloom-quality, artisan-crafted furniture, on growing our showroom footprint with several exciting new locations, and on making the investment to support our growth for many years into the future. I'm excited about the future of our house, and I look forward to continuing to share our journey with you. Now I'll turn it over to Don.