Arhaus (ARHS) Q2 2024 earnings summary

Executive summary

• Q2 2024 net revenue was $310 million, net income $22 million, and adjusted EBITDA $40 million, reflecting a 7.1% comp decline and year-over-year margin pressure from higher costs and lower backlog deliveries.

• Year-to-date net revenue reached $605 million, net income $37 million, and adjusted EBITDA $69 million, all down from the prior year.

• New showroom performance remains strong, with eight new showrooms opened year-to-date and the 100th location milestone achieved.

• Full-year 2024 outlook was lowered due to softer demand, macroeconomic headwinds, and consumer trends, but long-term growth strategy and debt-free balance sheet remain emphasized.

• Gross margin declined to 39.6% for the first half, primarily due to higher showroom, delivery, and promotional costs.

Financial highlights

• Q2 net revenue: $310 million; net income: $22 million; adjusted EBITDA: $40 million (12.9% margin), all down from prior year.

• Gross margin for Q2 was $124 million (40.1% of revenue), down from $140 million (44.8%).

• SG&A expense increased to $95 million in Q2, mainly from new showrooms and strategic investments.

• Cash and cash equivalents at June 30, 2024 were $174 million, with no long-term debt.

• Special cash dividend of $0.50 per share paid in April 2024, totaling $70.1 million.

Outlook and guidance

• Full-year 2024 net revenue expected between $1.25 billion and $1.29 billion, with comparable growth forecasted at (11.0)% to (8.0)% and net income guidance of $55 million to $75 million.

• Adjusted EBITDA projected at $125 million to $145 million for 2024.

• Q3 2024 net revenue guidance is $325 million to $345 million, with adjusted EBITDA of $25 million to $35 million.

• Company plans to open nine to eleven new showrooms in 2024, with ongoing renovations and expansions.

• Management expects operating cash flows to be sufficient for working capital and capital needs for at least the next 12 months.