arhs-20250331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2025


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-41009

Arhaus, Inc.

(Exact name of registrant as specified in its charter)


Delaware						87-1729256
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

51 E. Hines Hill Road, Boston Heights, Ohio

(Address of Principal Executive Offices)

44236

(Zip Code)

(440) 439-7700

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, $0.001 par value per share	ARHS	The Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of April 30, 2025 the registrant had 53,818,122 shares of Class A common stock and 87,115,600 shares of Class B common stock outstanding.

Table of Contents


		Page
Part I - Financial Information		2
Item 1.	Financial Statements of Arhaus, Inc. and Subsidiaries	2
	Condensed Consolidated Balance Sheets (unaudited)	2
	Condensed Consolidated Statements of Comprehensive Income (unaudited)	3
	Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited)	4
	Condensed Consolidated Statements of Cash Flows (unaudited)	5
	Notes to Condensed Consolidated Financial Statements (unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	25
Part II. Other Information		29
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	30
Item 6.	Exhibits	31
Signatures		32

Part I - Financial Information

Item 1. Financial Statements of Arhaus, Inc. and Subsidiaries


Arhaus, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited, amounts in thousands, except share and per share data)


	March 31, 2025		December 31, 2024
Assets
Current assets
Cash and cash equivalents	$	214,394	$	197,511
Restricted cash	3,520		3,418
Accounts receivable, net	1,050		1,252
Merchandise inventory, net	301,403		297,010
Prepaid and other current assets	32,391		31,852
Total current assets	552,758		531,043
Operating right-of-use assets	345,661		322,302
Financing right-of-use assets	34,608		36,105
Property, furniture and equipment, net	297,538		282,520
Deferred tax assets	21,449		21,091
Goodwill	10,961		10,961
Other noncurrent assets	1,967		2,294
Total assets	$	1,264,942	$	1,206,316

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	59,709	$	68,621

Accrued taxes	10,835		10,480
Accrued wages	14,221		11,538
Accrued other expenses	39,832		47,668
Client deposits	263,206		220,873
Current portion of operating lease liabilities	48,916		42,247
Current portion of financing lease liabilities	600		1,024
Total current liabilities	437,319		402,451
Operating lease liabilities, long-term	422,848		402,916
Financing lease liabilities, long-term	52,550		53,312

Other long-term liabilities	3,397		3,892
Total liabilities	$	916,114	$	862,571
Commitments and contingencies (Note 9)
Stockholders’ equity
Class A shares, par value $0.001 per share (600,000,000 shares authorized, 54,265,837 shares issued and 53,783,985 outstanding as of March 31, 2025; 53,788,036 shares issued and 53,514,062 outstanding as of December 31, 2024)	54		53
Class B shares, par value $0.001 per share (100,000,000 shares authorized, 87,115,600 shares issued and outstanding as of March 31, 2025; 87,115,600 shares issued and outstanding as of December 31, 2024)	87		87
Retained earnings	147,840		142,898
Additional paid-in capital	200,847		200,707
Total stockholders’ equity	348,828		343,745
Total liabilities and stockholders’ equity	$	1,264,942	$	1,206,316

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


Arhaus, Inc. and Subsidiaries Condensed Consolidated Statements of Comprehensive Income (Unaudited, amounts in thousands, except share and per share data)


	Three months ended
	March 31,
	2025		2024
Net revenue	$	311,372	$	295,162
Cost of goods sold	195,785		180,108
Gross margin	115,587		115,054
Selling, general and administrative expenses	110,058		96,693
Loss on disposal of assets	108		—
Income from operations	$	5,421	$	18,361
Interest income, net	(573)		(1,432)

Other income	(86)		(122)
Income before taxes	6,080		19,915
Income tax expense	1,198		4,816
Net and comprehensive income	$	4,882	$	15,099

Net and comprehensive income per share, basic
Weighted-average number of common shares outstanding, basic	140,361,588		139,816,792
Net and comprehensive income per share, basic	$	0.03	$	0.11
Net and comprehensive income per share, diluted
Weighted-average number of common shares outstanding, diluted	141,090,633		140,556,031
Net and comprehensive income per share, diluted	$	0.03	$	0.11

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


Arhaus, Inc. and Subsidiaries Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited, amounts in thousands)


	Three Months Ended
	Common Stock						Treasury Stock			Total Stockholders’ Equity
	Class A			Class B			Class A
	Shares	Amount		Shares	Amount		Shares	Amount		Retained Earnings		Additional Paid-in Capital		Total Stockholders’ Equity
Balances as of December 31, 2024	53,289	$	53	87,116	$	87	274	$	—	$	142,898	$	200,707	$	343,745
Net income	—	—		—	—		—	—		4,882		—		4,882
Shareholder capital contribution	—	—		—	—		—	—		—		4		4
Equity based compensation	478	1		—	—		—	—		—		1,594		1,595
Shares withheld to cover employees’ withholding taxes for equity based compensation	(159)	—		—	—		208	—		—		(1,458)		(1,458)
Dividends declared	—	—		—	—		—	—		60		—		60
Balances as of March 31, 2025	53,608	$	54	87,116	$	87	482	$	—	$	147,840	$	200,847	$	348,828

	Three Months Ended
	Common Stock						Treasury Stock			Total Stockholders’ Equity
	Class A			Class B			Class A
	Shares	Amount		Shares	Amount		Shares	Amount		Retained Earnings		Additional Paid-in Capital		Total Stockholders’ Equity
Balances as of December 31, 2023	52,669	$	52	87,116	$	87	84	$	—	$	145,292	$	194,807	$	340,238
Net income	—	—		—	—		—	—		15,099		—		15,099
Shareholder capital contribution	—	—		—	—		—	—		—		11		11
Equity based compensation	129	1		—	—		—	—		—		2,023		2,024
Shares withheld to cover employees’ withholding taxes for equity based compensation	(37)	—		—	—		37	—		—		(540)		(540)
Dividends declared	—	—		—	—		—	—		(71,185)		—		(71,185)
Balances as of March 31, 2024	52,761	$	53	87,116	$	87	121	$	—	$	89,206	$	196,301	$	285,647

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


Arhaus, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited, amounts in thousands)


	Three months ended
	March 31,
	2025		2024
Cash flows from operating activities
Net income	$	4,882	$	15,099
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	11,362		8,603
Amortization of operating lease right-of-use asset	10,046		8,738
Amortization of deferred financing fees, interest on finance lease in excess of principal paid and interest on operating leases	6,902		6,233
Equity based compensation	1,595		2,024
Deferred tax assets	(358)		174
Amortization of cloud computing arrangements	413		310
Loss on disposal of property, furniture and equipment	108		—
Amortization and write-off of lease incentives	—		(80)

Changes in operating assets and liabilities
Accounts receivable	202		589
Merchandise inventory	(4,393)		(14,118)
Prepaid and other assets	(380)		(5,758)

Other noncurrent liabilities	(377)		18
Accounts payable	(8,685)		(4,819)
Accrued expenses	(3,209)		(5,092)
Operating lease liabilities	(13,926)		(4,207)
Client deposits	42,333		29,114
Net cash provided by operating activities	46,515		36,828

Cash flows from investing activities
Purchases of property, furniture and equipment	(27,621)		(25,932)

Net cash used in investing activities	(27,621)		(25,932)

Cash flows from financing activities
Principal payments under finance leases	(212)		(221)
Repurchase of shares for payment of withholding taxes for equity based compensation	(1,458)		(540)
Cash dividend payments	(239)		—
Net cash used in financing activities	(1,909)		(761)
Net increase in cash, cash equivalents and restricted cash	16,985		10,135

Cash, cash equivalents and restricted cash
Beginning of period	200,929		226,305
End of period	$	217,914	$	236,440

Supplemental disclosure of cash flow information
Interest paid in cash	$	1,258	$	840
Interest received in cash	1,938		2,871
Income taxes paid in cash	541		991
Noncash investing activities:
Purchase of property, furniture and equipment in current liabilities	6,648		15,250

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Arhaus, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Nature of Business and Basis of Presentation

Nature of Business

Arhaus, Inc. (“Arhaus,” “Company,” “we,” “us” or “our”) is a Delaware corporation and is a premium retailer in the home furnishings market, specializing in livable luxury supported by heirloom quality merchandise. We offer merchandise in a number of categories, including furniture, outdoor, lighting, textiles and décor. Our curated assortments are presented across our merchandise sales channels in sophisticated, family friendly and unique lifestyle settings. We position our retail locations as Showrooms for our brand, while our website acts as a virtual extension of our Showrooms. The Company operated 103 Showrooms as of March 31, 2025.

Basis of Presentation

The condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying condensed consolidated financial statements include our accounts and those of our wholly owned subsidiaries. Accordingly, all intercompany balances and transactions have been eliminated through the consolidation process.

The accompanying condensed consolidated balance sheets at March 31, 2025 and December 31, 2024, the condensed consolidated statements of comprehensive income and changes in stockholders’ equity for the three months ended March 31, 2025 and March 31, 2024, the condensed consolidated statements of cash flows for the three months ended March 31, 2025 and March 31, 2024 and the related interim condensed consolidated disclosures are unaudited and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

In management’s opinion, the accompanying condensed consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the Company’s financial position at March 31, 2025, the results of operations and changes in stockholders’ equity and cash flows for the three months ended March 31, 2025. The condensed consolidated balance sheet as of December 31, 2024 included herein was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP.

The results for the three months ended March 31, 2025 and March 31, 2024 are not necessarily indicative of the operating results to be expected for the full fiscal year or any future period. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2024.

Use of Estimates

The preparation of our condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The accounting estimates and other matters included within our condensed consolidated financial statements and notes to the condensed consolidated financial statements we have assessed include, but were not limited to, revenue recognition, including a reserve for merchandise returns, inventory reserves, impairment of long-lived assets and fair value of financial instruments which include, but are not limited to, accounts receivable, payables and lease obligations.

Client Deposits

Client deposits represent payments made by clients on orders. At the time of order, the Company collects deposits for all orders equivalent to at least 50 percent of the clients’ purchase price. Orders are recognized as revenue when the merchandise is delivered to the client and at the time of delivery the client deposit is no longer recorded as a liability. The

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Arhaus, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited)

Company expects substantially all client deposits as of March 31, 2025 will be recognized as net revenue within the next 12 months as the performance obligations are satisfied.

Gift Cards

The Company sells gift cards to clients in our Showrooms. Such gift cards do not have expiration dates. We defer revenue when payments are received in advance of performance for unsatisfied obligations related to our gift cards. The liability related to unredeemed gift cards at March 31, 2025 and December 31, 2024 of $0.5 million and $0.5 million, respectively, is recorded in the accrued other expenses line item of the condensed consolidated balance sheets. The Company recognizes income associated with breakage proportional to actual gift card redemptions. For the three months ended March 31, 2025 and March 31, 2024, breakage income was minimal.

Fair Values of Financial Instruments

The Company’s primary financial instruments are cash and cash equivalent investments, accounts receivable, payables, lease obligations and equity based compensation instruments. Due to the short-term maturities of cash and cash equivalent investments, accounts receivable and payables, the Company believes the fair values of these instruments approximate their respective carrying values at March 31, 2025 and December 31, 2024. See Note 5 — Leases for discussion of our lease obligations and Note 6 — Equity Based Compensation for discussion of our equity based compensation instruments.

The Company has established a hierarchy to measure our financial instruments at fair value, which requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs represent market data obtained from independent sources, whereas unobservable inputs reflect the Company’s own market assumptions, which are used if observable inputs are not reasonably available without undue cost and effort. The hierarchy defines three levels of inputs that may be used to measure fair value:

Level 1Unadjusted quoted prices in active markets for identical, unrestricted assets and liabilities that the reporting entity has the ability to access at the measurement date.

Level 2Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.

Level 3Unobservable inputs that reflect the entity’s own assumptions about the assumptions market participants would use in the pricing of the asset or liability and are consequently not based on market activity but rather through particular valuation techniques.

The Company invests in Level 1 cash and cash equivalent investments such as money market funds and interest-bearing checking accounts. For the three months ended March 31, 2025, the Company earned $1.9 million in interest income. For the three months ended March 31, 2024, interest income was $2.8 million, which is included within interest income, net on our condensed consolidated statements of comprehensive income.

Accounts Receivable

The Company’s accounts receivables are $1.1 million and $1.3 million, respectively, at March 31, 2025 and December 31, 2024, net of allowance for expected credit losses of $0.4 million and $0.4 million, respectively. The allowance for expected credit losses is determined by considering a number of factors, including the length of time trade accounts receivable are past due, previous loss history, the client’s current ability to pay its obligations, and the current and future condition of the general economy and industry as a whole. Accounts receivable are written off when they become uncollectible and any payments subsequently received on such receivables are credited to the allowance for expected credit losses. Accounts receivable are recorded at the invoiced amount and do not bear interest.

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Arhaus, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited)

2. Recently Issued Accounting Standards

New Accounting Standards Recently Adopted

The Company adopted Accounting Standards Updates (“ASU”) 2023-07 — Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures in our annual financial statements for the year ended December 31, 2024. Our comparative segment disclosure in the interim financial statements in this report has been updated to reflect the new disclosure requirements. Refer to Note 7 — Segment Reporting for disclosures required by this ASU.

Accounting Standards Not Yet Adopted

The following table summarizes accounting pronouncements which we have not yet adopted but will be adopted in upcoming fiscal years. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. We believe the adoption will not have a material impact on our accounting policies, financial position or results of operations but could require additional disclosures. ASU 2024-03 is effective for annual periods beginning after December 15, 2026. We are evaluating the impact ASU 2024-03 will have on our consolidated financial statements and related disclosures. ASU 2025-01 is effective for annual periods beginning after December 15, 2026. We are evaluating the impact ASU 2025-01 will have on our consolidated financial statements and related disclosures.

ASU

Description

Adoption Date

ASU 2023-09

Income Taxes (Topic 740): Improvements to Income Tax Disclosures

Fiscal Year 2025

ASU 2024-03

Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses

Fiscal Year 2027

ASU 2025-01

Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date

Fiscal Year 2027

3. Merchandise Warranties

The Company warrants certain merchandise to be free of defects in both construction materials and workmanship from the date the performance obligation was fulfilled to the client for three to ten years depending on the merchandise category. The Company accounts for merchandise warranties by accruing an estimated liability when we recognize revenue on the sale of warrantied merchandise. We estimate future warranty claims based on claim experience which includes materials and labor costs to perform the repairs or replace products. We use judgment in making our estimates. We record differences between our estimated and actual costs when the differences are known.

A reconciliation of the changes in our limited merchandise warranty liability is as follows (amounts in thousands):


	Three months ended
	March 31,
	2025		2024
Balance as of beginning of period	$	7,627	$	7,084
Accruals during the period	2,949		3,080
Settlements during the period	(2,905)		(3,136)
Balance as of end of the period(1)	$	7,671	$	7,028

(1) $4.4 million and $4.0 million were recorded in accrued other expenses at March 31, 2025 and March 31, 2024, respectively. The remainder is recorded in other long-term liabilities on our condensed consolidated balance sheets.

We recorded accruals during the periods presented in the table above, primarily to reflect charges that relate to limited merchandise warranties issued during the respective periods.

4. Debt

On November 8, 2021, the Company entered into a revolving credit facility (the “2021 Credit Facility”). The 2021 Credit Facility provides for, among other things, (1) a revolving credit facility in an aggregate amount not to exceed at any time

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Arhaus, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited)

outstanding the amount of such lender’s commitment, (2) a letter of credit commitment in an amount equal to the lesser of (a) $10.0 million, and (b) the amount of the revolving credit facility as of such date, and (3) a swingline loan in an amount equal to the lesser of (a) $5.0 million, and (b) the amount of the revolving credit facility as of such date. The aggregate amount of all commitments of all lenders under the 2021 Credit Facility was initially $50.0 million. The 2021 Credit Facility contains restrictive covenants and has certain financial covenants, including a maximum rent-adjusted total leverage ratio and a minimum fixed charge ratio. The 2021 Credit Facility initially bore variable interest rates at the prevailing Bloomberg Short-Term Bank Yield index rate plus the applicable margin (1.50% at March 31, 2024), whereas the applicable margin is adjusted quarterly based on the Company’s consolidated rent-adjusted total leverage ratio.

On December 9, 2022, the Company amended the 2021 Credit Facility to increase the revolving credit commitment thereunder by $25.0 million. After giving effect to such increase, the aggregate amount of all commitments under the 2021 Credit Facility is $75.0 million.

On August 30, 2024, the Company amended the 2021 Credit Facility to adjust the index rate from the Bloomberg Short-Term Bank Yield Index to Term Secured Overnight Financing Rate. The 2021 Credit Facility bears variable interest rates at the prevailing Term Secured Overnight Financing Rate plus the applicable margin (1.75% at March 31, 2025). The 2021 Credit Facility expires on November 8, 2026.

At March 31, 2025 and December 31, 2024, we had no borrowings on the 2021 Credit Facility. Deferred financing costs related to the 2021 Credit Facility of $0.4 million and $0.4 million as of March 31, 2025 and December 31, 2024, respectively, are recorded in other noncurrent assets on the condensed consolidated balance sheets and will be amortized over the term of the 2021 Credit Facility on a straight-line basis. Accumulated amortization related to deferred financing costs for the 2021 Credit Facility was $0.2 million as of March 31, 2025 and $0.2 million as of December 31, 2024.

The Company was in compliance with all applicable debt covenants at March 31, 2025 and December 31, 2024, and expects to remain in compliance over the next 12 months.

5. Leases

The Company leases real estate and equipment under operating and finance leases, some of which are from related parties as discussed in Note 10 — Related Party Transactions. The most significant obligations under these lease agreements require the payments of periodic rentals, real estate taxes, insurance and maintenance costs. Depending on particular Showroom leases, the Company can also owe a percentage rent payment if particular Showrooms meet certain sales figures. Certain prior year amounts have been reclassified to conform to the current year presentation.

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Arhaus, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table summarizes the amounts recognized in our condensed consolidated balance sheets related to leases (amounts in thousands):


	Condensed Consolidated Balance Sheet Classification	March 31, 2025		December 31, 2024
Assets
Operating lease assets	Operating right-of-use assets	$	345,661	$	322,302
Finance lease assets	Financing right-of-use assets	34,608		36,105
Total leased assets		$	380,269	$	358,407

Liabilities
Current operating leases	Current portion of operating lease liabilities	$	48,916	$	42,247
Non-current operating leases	Operating lease liabilities, long-term	422,848		402,916
Total operating lease liabilities		471,764		445,163

Current finance leases	Current portion of financing lease liabilities	600		1,024
Non-current finance leases	Financing lease liabilities, long-term	52,550		53,312
Total finance lease liabilities		53,150		54,336
Total lease liabilities		$	524,914	$	499,499

The components of lease cost recognized within our condensed consolidated statements of comprehensive income are as follows (amounts in thousands):


	Three months ended
	March 31,
	2025		2024
Lease costs:
Operating lease costs(1)	$	16,444	$	14,686
Finance lease costs
Amortization of right-of-use assets(1)	602		626
Interest expense on lease liabilities(2)	1,289		1,301
Variable lease costs(3)	12,242		9,488
Short term lease costs(4)	44		18

Total lease costs	$	30,621	$	26,119

(1) Operating lease costs and amortization of finance lease right-of-use assets are included in cost of goods sold or selling, general and administrative expenses on the condensed consolidated statements of comprehensive income based on our accounting policy.

(2) Included in interest income, net on the condensed consolidated statements of comprehensive income.

(3) Represents variable lease payments under operating and finance lease agreements, primarily associated with contingent rent that is based on a percentage of retail sales over contractual levels as well as charges associated with common area maintenance, property taxes and insurance. These costs are included in cost of goods sold or selling, general and administrative expenses on the condensed consolidated statements of comprehensive income based on our accounting policy.

(4) Represents leases with an initial term of 12 months or less which are not recorded on the balance sheet and instead expensed on a straight-line basis over the lease term, excluding expenses relating to leases with a lease term of one month or less.

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Arhaus, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited)

We often have options to renew lease terms for Showrooms and other assets. The exercise of lease renewal options is generally at our sole discretion. In addition, certain lease agreements may be terminated prior to their original expiration date at our discretion. We evaluate each renewal and termination option at the lease commencement date to determine if we are reasonably certain to exercise the option on the basis of economic factors. The weighted average remaining lease terms are as follows:


	Three months ended
	March 31,
Weighted Average Remaining Lease Term (In Years)	2025	2024
Operating leases	8.73	9.24
Finance leases	20.23	20.66

When readily determinable, we use the discount rate implicit within the lease as determined at the time of lease commencement. However, the discount rate implicit within many of our leases is generally not determinable at the time of lease commencement and therefore the Company determines the discount rate based on its incremental borrowing rate (“IBR”). For leases in which the discount rate was not explicit, the Company utilized a market-based approach to estimate the IBR, which required significant judgment. The Company estimated the base IBR based on an analysis of (i) yields on the Company’s 2021 Credit Facility, as well as comparable companies and (ii) unsecured yields and discount rates. The Company applied adjustments to the base IBRs to account for full collateralization and lease term. The weighted average discount rates used to measure our lease liabilities are as follows:


	Three months ended
	March 31,
Weighted Average Discount Rate	2025		2024
Operating leases	6.04	%	6.04	%
Finance leases	9.67	%	9.64	%

Future lease liabilities at March 31, 2025 are as follows (amounts in thousands):


Year Ending December 31,	Operating Lease Liabilities (1)		Finance Lease Liabilities		Total Lease Liabilities
Remainder of 2025	$	60,053	$	4,027	$	64,080
2026	79,490		5,828		85,318
2027	73,665		5,911		79,576
2028	67,568		5,635		73,203
2029	64,541		5,224		69,765
2030	59,477		5,224		64,701
Thereafter	220,971		99,488		320,459
Total lease payments	625,765		131,337		757,102
Less: Amounts representing interest	(154,001)		(78,187)		(232,188)
Total	$	471,764	$	53,150	$	524,914

(1) Includes leases with related parties. See Note 10 — Related Party Transactions for amounts leased from related parties.

At March 31, 2025, the Company has entered into leases for Showrooms and equipment which have not yet commenced with expected lease terms ranging from 8 to 16 years. The aggregate minimum rental payments over the term of the leases of approximately $173.3 million are not included in the above table.

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Arhaus, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited)

Supplemental cash flow information related to leases is as follows (amounts in thousands):


	Three months ended
	March 31,
	2025		2024
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	19,437	$	15,996
Operating cash flows for finance leases	1,217		1,230
Financing cash flows for finance leases	212		221
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	33,481	$	28,751
Finance leases	(986)		—

6. Equity Based Compensation

Activity of the Company’s Restricted Stock and their related equity based compensation expense are summarized in the following tables (amounts in thousands, except share and per share data):


	Restricted Stock - Class A
	Amount	Weighted Average Grant Date Fair Value
Unvested at December 31, 2024	224,452	$	18.61
Granted	—	—
Forfeited	(48,628)	18.61
Vested	—	—
Unvested at March 31, 2025	175,824	$	18.61


	Three months ended
	March 31,
	2025		2024
Equity based compensation expense - Restricted Stock(1)	$	122	$	660

(1) Total unrecognized equity based compensation to be recognized in future periods is $1.9 million at March 31, 2025, and will be recognized over a weighted average period of 1.18 years. Equity based compensation expense is recorded within selling, general and administrative expenses on our condensed consolidated statements of comprehensive income.

The Arhaus, Inc. 2021 Equity Incentive Plan (the “2021 Plan”) was adopted on November 8, 2021. The 2021 Plan authorizes the Company the ability to grant stock options (either incentive or non-qualified), stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), performance shares, performance share units (“PSUs”) and other stock-based awards with respect to our Class A common stock to our employees, officers, consultants, advisors and directors. The maximum number of Class A common stock that may be granted under the 2021 Plan is 11,205,100 shares.

Per the 2021 Plan, each RSU and PSU represents a contingent right to receive one share of the Company’s Class A common stock upon vesting. The RSUs granted to award recipients will vest pro rata over two to four years (depending on the terms of the award) on each anniversary of the grant date, provided that the award recipient continues to serve the Company through the applicable vesting date (“Continuous Service”). If the award recipient’s Continuous Service terminates for any reason other than death, disability or in connection with a change in control (as such terms are defined in the 2021 Plan), unless the Compensation Committee of the Board of Directors determines otherwise, all RSUs that are unvested at the time of such termination shall be forfeited and canceled immediately without consideration. RSU and PSU awards contain forfeitable rights to dividend equivalents. Dividend equivalents for outstanding awards are accrued when dividends are declared on the Company’s common stock but are not paid until the awards vest, and dividend equivalents

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Arhaus, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited)

accrued for awards that ultimately do not vest are forfeited. The RSUs issued to certain members of the Board of Directors will generally vest on the one-year anniversary of the grant date.

The number of PSUs earned will be based on the Company’s financial performance as measured against pre-established target goals for cumulative demand revenue and cumulative adjusted EBITDA (the “Performance Goals”) over the applicable performance period. PSUs will vest as of the end of the performance period subject to the award recipient’s Continuous Service, but will not settle and payout until the number of PSUs earned is determined by the Compensation Committee. The award recipient may earn between 0% and 200% of the PSU target award based on the Company’s achievement of the Performance Goals. The Company accounts for forfeitures as they occur.

Activity of the Company’s PSU and RSU awards and their related equity based compensation expense are summarized in the following tables (amounts in thousands, except share and per share data):


	PSU Awards			RSU Awards
	Amount	Weighted Average Grant Date Fair Value		Amount	Weighted Average Grant Date Fair Value
Unvested at December 31, 2024	426,756	$	12.37	960,548	$	10.50
Granted	—	—		1,350,000	9.08
Forfeited	(40,139)	12.17		(67,025)	9.68
Vested	—	—		(90,017)	9.44
Unvested at March 31, 2025	386,617	$	12.39	2,153,506	$	9.67


	Three months ended
	March 31,
	2025		2024
Equity based compensation expense - PSUs(1)	$	73	$	352
Equity based compensation expense - RSUs(2)	$	1,400	$	1,012

(1) Total unrecognized equity based compensation for the PSUs to be recognized in future periods is $1.4 million at March 31, 2025, and will be recognized over a weighted average period of 1.59 years. Equity based compensation expense is recorded within selling, general and administrative expenses on our condensed consolidated statements of comprehensive income.

(2) Total unrecognized equity based compensation for the RSUs to be recognized in future periods is $17.5 million at March 31, 2025, and will be recognized over a weighted average period of 3.07 years. Equity based compensation expense is recorded within selling, general and administrative expenses on our condensed consolidated statements of comprehensive income.

7. Segment Reporting

Our chief operating decision maker (“CODM”) is our Chief Executive Officer (“CEO”), who reviews financial information presented on a consolidated basis for purposes of making decisions, assessing financial performance and allocating resources. We operate our business as one operating segment and therefore we have one reportable segment that offers an assortment of merchandise across a number of categories, including furniture, outdoor, lighting, textiles, and décor. The assortment of merchandise can be purchased through our Retail and eCommerce sales channels.

The majority of our revenue is generated through sales to clients in the United States. Sales to clients outside of the United States are not significant. Further, no single client represents ten percent or more of our net revenue. There are no inter-segment transactions.

The accounting policies of our single operating segment are the same as those described within our summary of significant accounting policies. The CODM assesses performance at the consolidated level and makes business decisions based on various key performance indicators, primarily net income, which is also reported on the consolidated statements of comprehensive income as net and comprehensive income.

Our CODM uses net income to determine the allocation of resources for investments in retail Showrooms, information technology and systems infrastructure, as well as supply chain investments. Net income is also used as a method for

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Arhaus, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited)

planning and forecasting overall expected performance and for evaluating, on a quarterly and annual basis, actual results against such expectations.

Asset information is reported on the consolidated balance sheets as total assets. However, asset information is not used for purposes of making decisions, assessing financial performance or allocating resources.

Refer to the consolidated statements of cash flow for property, furniture and equipment expenditures, related depreciation and amortization and other significant noncash items.

The following table shows revenue by merchandise sales channel and significant segment expenses (amounts in thousands):


	Three months ended
	March 31,
	2025		2024
Retail	$	255,453	$	243,255
eCommerce	55,919		51,907
Total net revenue	$	311,372	$	295,162
Less significant costs and expenses:
Cost of goods sold	195,785		180,108
Corporate and administrative expenses(1)	54,609		48,902
Selling expenses	44,392		38,219
Marketing expenses	11,057		9,572
Loss on disposal of assets	108		—
Interest income, net	(573)		(1,432)
Other income	(86)		(122)
Income before taxes	6,080		19,915
Income tax expense	1,198		4,816
Net and comprehensive income	$	4,882	$	15,099

(1) Corporate and administrative expenses primarily include warehouse expenses, equity based compensation costs, information technology, human resources and legal costs, insurance expenses, accounting fees and corporate sustainability costs.

8. Net and Comprehensive Income per Share

Basic and diluted net and comprehensive income per share were calculated by dividing net and comprehensive income by the number of basic and diluted weighted-average common shares outstanding. The Company has elected to not adjust net and comprehensive income for forfeitable dividend equivalents, when declared, related to unvested equity awards. The Company will recognize dividends paid on common shares when the dividend equivalents are no longer forfeitable, such as if the contingency is met or the share-based payment awards vest into common shares.

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Arhaus, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited)

Basic and diluted net and comprehensive income per share are as follows (amounts in thousands, except per share data):


	Three months ended
	March 31,
	2025		2024
Numerator
Net and comprehensive income	$	4,882	$	15,099

Denominator—Weighted Average Shares Outstanding
Weighted-average number of common shares outstanding, basic	140,361,588		139,816,792
Effect of dilutive restricted stock (1) (2)	729,045		739,239
Weighted-average number of common shares outstanding, diluted	141,090,633		140,556,031

Net and Comprehensive Income Per Share
Net and comprehensive income per share, basic	$	0.03	$	0.11
Net and comprehensive income per share, diluted	$	0.03	$	0.11

(1) During the three months ended March 31, 2025, 410,380 shares of unvested restricted stock and RSUs were excluded from the computation of diluted earnings per share because their effect would have been anti-dilutive. During the three months ended March 31, 2024, 412,487 shares of unvested restricted stock and RSUs were excluded from the computation of diluted earnings per share because their effect would have been anti-dilutive.

(2) During the three months ended March 31, 2025, 386,617 PSUs were excluded from the calculation of the effect of dilutive restricted stock because they did not meet the required performance criteria. During the three months ended March 31, 2024, 540,335 PSUs were excluded from the calculation of the effect of dilutive restricted stock because they did not meet the required performance criteria.

9. Commitments and Contingencies

The Company is involved in litigation and claims that are incidental to its business. Although the outcome of these matters cannot be determined at the present time, management of the Company believes that the ultimate resolution of these matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. As of March 31, 2025 and December 31, 2024, the Company has accrued legal costs of $6.5 million and $6.1 million, respectively, that are included within accrued other expenses in our condensed consolidated balance sheet.

From time to time, the Company has received inquiries from a number of state and local taxing agencies with respect to the remittance of sales, use, telecommunications, excise, and income taxes. Several jurisdictions are currently conducting tax audits of the Company's records. The Company collects, or has accrued for, taxes that it believes are required to be remitted. The amounts that have been remitted have historically been within the accruals established by the Company. The Company adjusts its accrual when facts relating to specific exposures warrant such adjustment. As of March 31, 2025 and December 31, 2024, we recorded liabilities of $0.5 million and $0.7 million, respectively, in accrued other expenses on the condensed consolidated balance sheets for non-income tax matters that were probable and reasonably estimable.

On February 29, 2024, the Board of Directors of the Company declared a special cash dividend on the Company’s Class A and Class B common stock of $0.50 per share, payable April 4, 2024, to shareholders of record at the close of business on March 21, 2024 (the “Record Date”). The Company paid out $0.2 million of the aforementioned special cash dividend on its Class A common stock related to equity awards that vested during the three months ended March 31, 2025. As of March 31, 2025 and December 31, 2024, dividends payable of $0.3 million and $0.5 million, respectively, are included within accrued other expenses and $0.1 million and $0.2 million, respectively, are included within other long-term liabilities on our condensed consolidated balance sheet. The remaining dividends payable balance recorded on our condensed consolidated balance sheet relates to dividend equivalents on outstanding equity awards under the Company’s equity incentive plans that were unvested as of the Record Date.

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Arhaus, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited)

10. Related Party Transactions

Leasing transactions

In November 2000, the Company entered into a lease agreement with Pagoda Partners, LLC, a company of which John Reed, our CEO, indirectly owns 50%, for our warehouse in Walton Hills, Ohio. The base lease term was 17 years with a 5-year renewal option. In August 2020, the Company amended the lease agreement to extend the lease term to April 2024. The monthly rental payments were $0.1 million. In July 2023, the Company amended the lease agreement to extend the lease term to April 2034 with one additional 5-year renewal option. The monthly rental payments range from $0.1 million to $0.2 million. Rent expense was $0.4 million and $0.4 million for the three months ended March 31, 2025 and March 31, 2024, respectively.

In July 2010, the Company entered into a lease agreement with Brooklyn Arhaus, a company of which our CEO and Mr. Beargie, a Director of the Company, own 85% and 15%, respectively, for our Outlet in Brooklyn, Ohio. The base lease term is 15 years with no lease renewal options. The monthly rental payments are $20 thousand. Rent expense was $0.1 million and $0.1 million for the three months ended March 31, 2025 and March 31, 2024, respectively.

In March 2021, the Company entered into a lease agreement with Premier Conover, LLC, a company of which our CEO indirectly owns 40%, for a distribution center and manufacturing building, for which construction was completed in the fourth quarter of 2021. The base lease term is for 12 years, with a 10-year renewal option and two additional 5-year renewal options at the higher of the minimum base rent or the fair market rent at the time of renewal execution. The monthly rental payments range from $0.2 million to $0.3 million during the 12-year base lease term and from $0.4 million to $0.5 million during the 10-year renewal period. Rent expense was $1.0 million and $1.0 million for the three months ended March 31, 2025 and March 31, 2024, respectively.

Other transactions

The accounts payable due to related parties for state and federal income tax refunds were $0.2 million and $0.2 million at March 31, 2025 and December 31, 2024, respectively, and are included within accounts payable on the condensed consolidated balance sheets.

11. Income Taxes

Income tax expenses were $1.2 million and $4.8 million in the three months ended March 31, 2025 and March 31, 2024, respectively. The effective tax rate was 19.7% and 24.2% for the three months ended March 31, 2025 and March 31, 2024, respectively.

As of March 31, 2025, no unrecognized tax benefits have been recognized. The Company files income tax returns in the U.S. and various state and local jurisdictions. The tax years after 2020 remain open to examination by the state taxing jurisdictions in which the Company is subject to tax. As of March 31, 2025, the Company was not under examination by the Internal Revenue Service.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q for the three months ended March 31, 2025 (“Form 10-Q”) and our Annual Report on Form 10-K for the year ended December 31, 2024. This Form 10-Q contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they do not fully materialize or are proven incorrect, could cause our business and results of operations to differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements can generally be identified by the use of forward-looking terminology, including, but not limited to, “may,” “could,” “seek,” “guidance,” “predict,” “potential,” “likely,” “believe,” “will,” “expect,” “anticipate,” “estimate,” “plan,” “intend,” “forecast,” or variations of these terms and similar expressions, or the negative of these terms or similar expressions. Past performance is not a guarantee of future results or returns and no representation or warranty is made regarding future performance. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond our control that could cause our actual results, performance or achievements to be materially different from the expected results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to, the following:

•Our ability to manage and maintain the growth rate of our business;

•Our ability to obtain quality merchandise in sufficient quantities;

•Disruption in our receiving and distribution system, including delays in the integration of our distribution centers and the possibility that we may not realize the anticipated benefits of multiple distribution centers;

•Effects of new or proposed tariffs and changes to international trade policies and agreements;

•The possibility of cyberattacks and our ability to maintain adequate cybersecurity systems and procedures;

•Loss, corruption and misappropriation of data and information relating to clients and employees;

•Changes in and compliance with applicable data privacy rules and regulations;

•Risks as a result of constraints in our supply chain;

•A failure of our vendors to meet our quality standards;

•Declines in general economic conditions that affect consumer confidence and consumer spending that could adversely affect our revenue;

•Our ability to anticipate changes in consumer preferences;

•Risks related to maintaining and increasing Showroom traffic and sales;

•Our ability to compete in our market;

•Our ability to adequately protect our intellectual property;

•Compliance with applicable governmental regulations;

•Effectively managing our eCommerce sales channel and digital marketing efforts;

•Our reliance on third-party transportation carriers and risks associated with freight and transportation costs; and

•Compliance with SEC rules and regulations as a public reporting company.

The risks, uncertainties and assumptions referred to above that could cause our results to differ materially from the results expressed or implied by such forward-looking statements include, but are not limited to, those discussed under Item 1A. Risk Factors, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2024. All forward-looking statements included in this document are based on information available to us as of the date hereof, and we assume no obligation to update these forward-looking statements. These statements are based on information available to us as of the date of this Form 10-Q. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

The following discussion contains references to the three months ended March 31, 2025 and March 31, 2024, which represents the condensed consolidated financial results of Arhaus, Inc. and subsidiaries for the three months ended March 31, 2025 and March 31, 2024, respectively.

Overview

Arhaus is a growing lifestyle brand and premium retailer in the U.S. home furnishings market, specializing in livable luxury supported by globally-sourced, heirloom-quality merchandise. We offer a differentiated direct-to-consumer approach to furniture and décor. Our curated assortments are presented across our sales channels in sophisticated, family friendly and unique lifestyle settings. We offer merchandise assortments across a number of categories, including furniture,

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outdoor, lighting, textiles and décor. Our products, designed to be used and enjoyed throughout the home, are sourced directly from factories and vendors with no wholesale or dealer markup, allowing us to offer an exclusive assortment at an attractive value. Our product development teams work alongside our direct sourcing partners to bring to market proprietary merchandise that is a great value to clients, while delivering attractive margins.

We believe in providing a dynamic and welcoming experience in our Showrooms and online with the conviction that retail is theater. Our national omni-channel business positions our retail locations as Showrooms for our brand, while our website acts as a virtual extension of our Showrooms. Our theater-like Showrooms are highly inspirational and function as an invaluable brand awareness vehicle. Our seasoned sales associates and in-home designers provide expert advice and assistance to our client base that drives significant client engagement. Our omni-channel model allows clients to begin or end their shopping journey online, while also experiencing our theater-like Showrooms throughout the shopping journey.

As of March 31, 2025, we operated 103 Showrooms, 91 with in-home interior designers. At December 31, 2024, we operated 103 Showrooms, 89 with in-home interior designers.


	March 31, 2025	December 31, 2024
Traditional Showrooms	87	85