Cover
Cover - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Mar. 22, 2022 | |
Document Information [Line Items] | ||
Document Type | 10-K | |
Document Annual Report | true | |
Current Fiscal Year End Date | --12-31 | |
Document Period End Date | Dec. 31, 2021 | |
Document Transition Report | false | |
Entity File Number | 001-41009 | |
Entity Registrant Name | Arhaus, Inc. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 87-1729256 | |
Entity Address, Address Line One | 51 E. Hines Hill Road | |
Entity Address, City or Town | Boston Heights | |
Entity Address, State or Province | OH | |
Entity Address, Postal Zip Code | 44236 | |
City Area Code | 440 | |
Local Phone Number | 439-7700 | |
Title of 12(b) Security | Class A common stock, $0.001 par value per share | |
Trading Symbol | ARHS | |
Security Exchange Name | NASDAQ | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Documents Incorporated by Reference | Portions of the registrant’s Proxy Statement for the Annual Meeting of Stockholders to be held May 5, 2022 are incorporated by reference into Part III of this Annual Report on Form 10-K to the extent stated herein. | |
Entity Central Index Key | 0001875444 | |
Document Fiscal Year Focus | 2021 | |
Document Fiscal Period Focus | FY | |
Amendment Flag | false | |
Entity Public Float | $ 0 | |
Class A | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 52,947,617 | |
Class B | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 87,115,600 |
Audit Information
Audit Information | 12 Months Ended |
Dec. 31, 2021 | |
Auditor [Line Items] | |
Auditor Name | PricewaterhouseCoopers LLP |
Auditor Firm ID | 238 |
Auditor Location | Cleveland, Ohio |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Dec. 31, 2021 | Dec. 31, 2020 |
Current assets | ||
Cash and cash equivalents | $ 123,777 | $ 57,093 |
Restricted cash equivalents | 7,131 | 6,909 |
Accounts receivable, net | 228 | 600 |
Merchandise inventory, net | 208,343 | 108,022 |
Prepaid and other current assets | 28,517 | 19,988 |
Total current assets | 367,996 | 192,612 |
Property, furniture and equipment, net | 179,631 | 117,696 |
Deferred tax asset | 27,684 | 0 |
Goodwill | 10,961 | 10,961 |
Other noncurrent assets | 278 | 1,284 |
Total assets | 586,550 | 322,553 |
Current liabilities | ||
Accounts payable | 51,429 | 29,113 |
Accrued taxes | 7,302 | 7,910 |
Accrued wages | 16,524 | 9,660 |
Accrued other expenses | 61,047 | 12,405 |
Client deposits | 264,929 | 154,127 |
Total current liabilities | 401,231 | 213,215 |
Capital lease obligation | 50,525 | 47,600 |
Deferred rent and lease incentives | 63,037 | 71,213 |
Other long-term liabilities | 1,992 | 24,966 |
Total liabilities | 516,785 | 356,994 |
Commitments and contingencies (Note 12) | ||
Stockholders’ Equity | ||
Accumulated Deficit | (116,581) | (28,422) |
Additional Paid-in Capital | 186,209 | 1,670 |
Total Arhaus, Inc. stockholders' / members' equity (deficit) | 69,765 | (26,752) |
Noncontrolling interest | 0 | (7,689) |
Total equity | 69,765 | (34,441) |
Total liabilities and stockholders' / members' equity (deficit) | 586,550 | 322,553 |
Class A Units | ||
Stockholders’ Equity | ||
Stock issued | $ 0 | |
Class A | ||
Stockholders’ Equity | ||
Stock issued | 50 | |
Class B | ||
Stockholders’ Equity | ||
Stock issued | $ 87 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2021 | Dec. 31, 2020 |
Class A Units | ||
Common stock, par value (in dollars per share) | $ 0 | $ 0 |
Common stock, shares issued (in shares) | 0 | 4,803 |
Common stock, shares outstanding (in shares) | 0 | 4,803 |
Class A | ||
Common stock, par value (in dollars per share) | $ 0.001 | |
Common stock , shares authorized (in shares) | 600,000,000 | |
Common stock, shares issued (in shares) | 50,427,390 | |
Common stock, shares outstanding (in shares) | 50,427,390 | |
Class B | ||
Common stock, par value (in dollars per share) | $ 0.001 | |
Common stock , shares authorized (in shares) | 100,000,000 | |
Common stock, shares issued (in shares) | 86,519,002 | |
Common stock, shares outstanding (in shares) | 86,519,002 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Income Statement [Abstract] | |||
Net revenue | $ 796,922 | $ 507,429 | $ 494,538 |
Cost of goods sold | 466,989 | 307,925 | 318,550 |
Gross margin | 329,933 | 199,504 | 175,988 |
Selling, general and administrative expenses | 296,117 | 168,616 | 146,306 |
Loss on disposal of assets | 466 | 8 | 23 |
Income from operations | 33,350 | 30,880 | 29,659 |
Interest expense | 5,432 | 13,057 | 13,449 |
Loss on extinguishment of debt | 1,450 | 0 | 0 |
Other income | (320) | 0 | 0 |
Income before taxes | 26,788 | 17,823 | 16,210 |
Income tax expense (benefit) | (10,144) | 783 | 368 |
Comprehensive income (loss) attributable to the shareholders | 36,932 | 17,040 | 15,842 |
Net income (loss) attributable to the shareholders | 36,932 | 17,040 | 15,842 |
Less: Net income attributable to noncontrolling interest | 15,815 | 10,958 | 8,315 |
Net and comprehensive income attributable to Company | 21,117 | 6,082 | 7,527 |
Net and comprehensive income attributable to Arhaus, Inc. | 21,117 | 3,235 | 5,016 |
Comprehensive income (loss) | $ 21,117 | $ 3,235 | $ 5,016 |
Net and comprehensive income per share, basic | |||
Weighted-average number of common shares outstanding, basic (in shares) | 116,013,492 | 112,058,742 | 112,058,742 |
Net and comprehensive income (loss) per unit, basic (in dollars per share) | $ 0.18 | $ 0.03 | $ 0.04 |
Net and comprehensive income per share, diluted | |||
Weighted-average number of common shares outstanding, diluted (in shares) | 119,521,442 | 112,058,742 | 112,058,742 |
Net and comprehensive income (loss) per unit, diluted (in dollars per share) | $ 0.18 | $ 0.03 | $ 0.04 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Changes in Mezzanine Equity and Members’ Deficit - USD ($) $ in Thousands | Total | Class B Units | Class A | Class B | Member UnitsClass A Units | Member UnitsClass B Units | Common StockClass A | Common StockClass B | Retained Earnings (Accumulated Deficit) | Additional Paid-in Capital | Noncontrolling Interest |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||
Ending balance | $ (46,473) | $ (36,673) | $ 1,095 | $ (10,895) | |||||||
Beginning balance (in shares) at Dec. 31, 2018 | 1,250,000 | ||||||||||
Beginning balance at Dec. 31, 2018 | $ 15,695 | ||||||||||
Increase (Decrease) in Temporary Equity [Roll Forward] | |||||||||||
Preferred units dividend unpaid | $ 2,511 | ||||||||||
Ending balance (in shares) at Dec. 31, 2019 | 1,250,000 | ||||||||||
Ending balance at Dec. 31, 2019 | $ 18,206 | ||||||||||
Beginning balance (in shares) at Dec. 31, 2018 | 645,000 | 4,158,000 | |||||||||
Beginning balance at Dec. 31, 2018 | (46,473) | (36,673) | 1,095 | (10,895) | |||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||
Net income | 15,842 | 7,527 | 8,315 | ||||||||
Tax distribution | (5,130) | (5,130) | |||||||||
Preferred units dividend unpaid | (2,511) | (2,511) | |||||||||
Share based compensation | 272 | 272 | |||||||||
Ending balance (in shares) at Dec. 31, 2019 | 645,000 | 4,158,000 | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||
Ending balance | (38,000) | (31,657) | 1,367 | (7,710) | |||||||
Preferred units dividend unpaid | 2,847 | ||||||||||
Preferred units dividend paid | $ (8,553) | ||||||||||
Preferred units repayments (in shares) | (1,250,000) | ||||||||||
Preferred units repayments | $ (12,500) | ||||||||||
Ending balance (in shares) at Dec. 31, 2020 | 0 | ||||||||||
Ending balance at Dec. 31, 2020 | $ 0 | ||||||||||
Beginning balance at Dec. 31, 2019 | (38,000) | (31,657) | 1,367 | (7,710) | |||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||
Net income | 17,040 | 6,082 | 10,958 | ||||||||
Tax distribution | (10,937) | (10,937) | |||||||||
Preferred units dividend unpaid | (2,847) | (2,847) | |||||||||
Preferred units dividend paid | 0 | ||||||||||
Share based compensation | 309 | 309 | |||||||||
Repurchase of incentive units | (6) | ||||||||||
Ending balance (in shares) at Dec. 31, 2020 | 645,000 | 4,158,000 | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||
Ending balance | (34,441) | (28,422) | 1,670 | (7,689) | |||||||
Ending balance (in shares) at Nov. 08, 2021 | 0 | ||||||||||
Ending balance at Nov. 08, 2021 | $ 0 | ||||||||||
Beginning balance at Dec. 31, 2020 | (34,441) | (28,422) | 1,670 | (7,689) | |||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||
Net income | 23,843 | 8,028 | 15,815 | ||||||||
Tax distribution | (7,865) | (7,865) | |||||||||
Shareholder distribution | (12,350) | (12,350) | |||||||||
Pre-IPO dividend to noncontrolling interests of Arhaus, LLC | (50,659) | (50,659) | |||||||||
Shareholder distributions | (49,565) | (46,528) | (3,037) | ||||||||
Initial public offering less underwriter fees (in shares) | 12,903,000 | ||||||||||
Initial public offering less underwriter fees | 157,258 | $ 13 | 157,245 | ||||||||
Issuance of Class A and B common stock to vested incentive unit holders (in shares) | 5,837,000 | 6,148,000 | |||||||||
Issuance of Class A and B common stock to vested incentive unit holders of Arhaus, LLC | 0 | $ 6 | $ 6 | (12) | |||||||
Non-controlling interest adjustment, in exchange of Class A common stock (in shares) | 31,267,000 | 1,097,000 | |||||||||
Non-controlling interest adjustment, in exchange of Class A common stock | 0 | $ 31 | $ 1 | (50,398) | (32) | 50,398 | |||||
Controlling interest adjustment, in exchange of Class B common stock | (645,000) | (4,158,000) | 79,695,000 | ||||||||
Controlling interest adjustment, in exchange of Class B common stock | 0 | $ 80 | (80) | ||||||||
Shareholder capital contribution | 3,872 | 3,872 | |||||||||
Share based compensation | 1,367 | 1,367 | |||||||||
Ending balance (in shares) at Nov. 08, 2021 | 0 | 0 | 50,007,000 | 86,940,000 | |||||||
Beginning balance (in shares) at Dec. 31, 2020 | 0 | ||||||||||
Beginning balance at Dec. 31, 2020 | $ 0 | ||||||||||
Ending balance (in shares) at Dec. 31, 2021 | 0 | ||||||||||
Ending balance at Dec. 31, 2021 | $ 0 | ||||||||||
Beginning balance (in shares) at Dec. 31, 2020 | 645,000 | 4,158,000 | |||||||||
Beginning balance at Dec. 31, 2020 | (34,441) | (28,422) | 1,670 | (7,689) | |||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||
Net income | 36,932 | ||||||||||
Initial public offering less underwriter fees (in shares) | 31,266,536 | 80,792,206 | |||||||||
Preferred units dividend unpaid | 0 | ||||||||||
Ending balance (in shares) at Dec. 31, 2021 | 0 | 0 | 50,428,000 | 86,519,000 | |||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||
Ending balance | 31,460 | $ 50 | $ 87 | (129,670) | 160,993 | 0 | |||||
Beginning balance (in shares) at Nov. 08, 2021 | 0 | ||||||||||
Beginning balance at Nov. 08, 2021 | $ 0 | ||||||||||
Ending balance (in shares) at Dec. 31, 2021 | 0 | ||||||||||
Ending balance at Dec. 31, 2021 | $ 0 | ||||||||||
Beginning balance (in shares) at Nov. 08, 2021 | 0 | 0 | 50,007,000 | 86,940,000 | |||||||
Beginning balance at Nov. 08, 2021 | 31,460 | $ 50 | $ 87 | (129,670) | 160,993 | 0 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||
Net income | 13,089 | 13,089 | |||||||||
Deferred tax impact of Reorganization from partnership to a corporation | 17,436 | 17,436 | |||||||||
Transfer of Class B common stock to Class A common stock for long-tenured employees (in shares) | 421,350 | (421,000) | |||||||||
Transfer of Class B common stock to Class A common stock for long-tenured employees | 7,315 | 7,315 | |||||||||
Share based compensation | 465 | 465 | |||||||||
Ending balance (in shares) at Dec. 31, 2021 | 0 | 0 | 50,428,000 | 86,519,000 | |||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||
Ending balance | $ 69,765 | $ 50 | $ 87 | $ (116,581) | $ 186,209 | $ 0 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Cash flows from operating activities | |||
Net income | $ 36,932 | $ 17,040 | $ 15,842 |
Adjustments to reconcile net income to net cash provided by operating activities | |||
Depreciation and amortization | 23,922 | 16,957 | 15,964 |
Amortization of deferred financing costs, payment-in-kind interest and interest on capital lease in excess of principal paid | 1,734 | 3,731 | 3,906 |
Loss on extinguishment of debt | 1,450 | 0 | 0 |
Equity based compensation | 6,383 | 403 | 272 |
Derivative expense associated with Term Loan exit fee | 44,544 | 17,928 | 0 |
Loss on disposal of assets | 466 | 8 | 23 |
Deferred tax assets | (10,216) | 0 | 0 |
Amortization and write-off of lease incentives | (6,112) | (8,034) | (7,751) |
Changes in operating assets and liabilities | |||
Accounts receivable | 372 | (160) | (180) |
Merchandise inventory | (100,321) | 2,049 | (7,818) |
Prepaid and other current assets | (3,333) | (8,356) | (5,822) |
Other noncurrent assets | (288) | (1,522) | 0 |
Other noncurrent liabilities | 493 | (1,191) | (778) |
Accounts payable | 17,595 | 1,611 | 2,130 |
Accrued expenses | 17,302 | 8,305 | 3,319 |
Deferred rent and lease incentives | 4,518 | 9,559 | 4,486 |
Client deposits | 110,802 | 89,934 | (3,554) |
Net cash provided by operating activities | 146,243 | 148,262 | 20,039 |
Cash flows from investing activities | |||
Purchases of property, furniture and equipment | (47,870) | (13,011) | (9,877) |
Proceeds from sale of property, furniture and equipment | 0 | 0 | 12 |
Net cash used in investing activities | (47,870) | (13,011) | (9,865) |
Cash flows from financing activities | |||
Proceeds from revolving debt | 0 | 30,600 | 30,900 |
Payments on revolving debt | 0 | (34,600) | (26,900) |
Payments on long-term debt | 0 | (36,972) | (13,280) |
Payments on fees associated with early extinguishment of debt | (609) | 0 | 0 |
Repayments of related-party notes | (1,000) | (19,405) | (2,100) |
Proceeds from related-party notes | 1,000 | 1,155 | 2,184 |
Payments of debt issuance costs | (288) | 0 | 0 |
Payments of preferred units dividends | 0 | 8,553 | 0 |
Preferred units repayments | 0 | (12,500) | 0 |
Repurchase of incentive units | 0 | (100) | 0 |
Principal payments under capital leases | (107) | 0 | 0 |
Payment of Term Loan exit fee derivative | (64,139) | 0 | 0 |
Payments of pre-IPO dividend to noncontrolling interests of Arhaus, LLC | (50,659) | 0 | 0 |
Distributions to noncontrolling interest holders | (61,915) | 0 | 0 |
Proceeds from capital contribution | 2,764 | 0 | 0 |
Proceeds from issuance of Class A common stock sold in IPO, net of underwriting costs | 157,258 | 0 | 0 |
Payments of offering costs | (5,907) | 0 | 0 |
Distributions to noncontrolling interest holders | (7,865) | (10,937) | (5,130) |
Net cash used in financing activities | (31,467) | (91,312) | (14,326) |
Net increase (decrease) in cash, cash equivalents and restricted cash equivalents | 66,906 | 43,939 | (4,152) |
Cash, cash equivalents and restricted cash equivalents | |||
Beginning of year | 64,002 | 20,063 | 24,215 |
End of year | 130,908 | 64,002 | 20,063 |
Supplemental disclosure of cash flow information | |||
Interest paid in cash | 5,121 | 9,295 | 11,255 |
Income taxes paid in cash | 1,403 | 1,304 | 538 |
Lease incentives | 5,352 | 5,196 | 3,199 |
Noncash Investing and Financing Activities [Abstract] | |||
Purchase of property, furniture and equipment in accounts payable | 5,968 | 1,249 | 248 |
Conversion of units of Arhaus, LLC to shares of Arhaus, Inc. | 124 | 0 | 0 |
Contribution of deferred tax asset from wholly owned subsidiary | 17,436 | 0 | 0 |
Capital contribution from CEO related to long-tenured employee award | 4,551 | 0 | 0 |
Capital contribution from CEO for deferred compensation plan | 3,872 | 0 | 0 |
Property, furniture and equipment additions due to build-to-suit lease transactions | 31,017 | 0 | 0 |
Capital lease obligations | 2,591 | 0 | 0 |
Dividends—unpaid | $ 0 | $ 0 | $ 2,511 |
Nature of Business
Nature of Business | 12 Months Ended |
Dec. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Business | 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 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 79 Showrooms at December 31, 2021. Arhaus was formed on July 14, 2021 for the purpose of completing an initial public offering (“IPO”) of its common stock and related transactions in order to carry on the business of Arhaus, LLC (“LLC”) and its subsidiaries. Pursuant to the corporate reorganization and completion of the IPO in November 2021, the Company became a holding company for LLC and its subsidiaries. Reorganization and Initial Public Offering On November 4, 2021, the Company completed its IPO and sold 12,903,226 shares of Class A common stock at an IPO price of $13.00 per share and received proceeds of $151.4 million, net of underwriting discounts and commissions of $10.4 million and offering expenses of $5.9 million. The Company used a portion of the net proceeds to pay the Term Loan exit fee of $64.1 million, as discussed i n Note 5 . The remainder of the net proceeds were used for general corporate purposes, including payment of fees and expenses in connection with the IPO and to replenish working capital following a pre-IPO payment in the amount of $100.0 million which consisted of a $50.7 million dividend to noncontrolling interests and a $49.3 million distribution to the owners of Homeworks . In connection with the IPO, the Company reorganized its ownership structure from a limited liability company to a corporation for the purpose of issuing common stock on a publicly traded exchange. Pursuant to the terms of the Integrated Contribution Agreement by and among the Company, FS Arhaus Holding, Inc. (“FS Arhaus,” “Class B Units,” or “noncontrolling interest”), a Delaware corporation, Homeworks Holdings Inc. (“Homeworks,” or “Class A Units”) and the unit holders (“Management Unitholders”) of LLC, a series of transactions were completed on November 8, 2021, which we refer to, collectively, as the “Reorganization.” LLC and Homeworks were identified as entities under common control, in which both entities are ultimately controlled by the same party before and after the Reorganization and therefore resulted in a change in reporting entity. In accordance with ASC 805-50-45-5, for transactions between entities under common control, the consolidated financial statements for periods prior to the Reorganization have been adjusted to retrospectively combine the previously separate entities for presentation purposes. The effects of the change in reporting entity resulted in the inclusion of $6.4 million of cash and cash equivalents, $5.0 million of deferred compensation liability and $7.7 million of noncontrolling interest on the consolidated balance sheets at December 31, 2020. The Reorganization transactions included: • the amendment and restatement of the certificate of incorporation of Arhaus, Inc., to authorize two classes of common stock, Class A common stock and Class B common stock and to authorize the Company to issue up to 750,000,000 shares of common stock, consisting of 600,000,000 share of Class A common stock, par value of $0.001 per share, 100,000,000 shares of Class B common stock, par value of $0.001 and 50,000,000 shares of Preferred Stock, par value of $0.001; and • the Company’s acquisition of the units of LLC held by FS Arhaus, Homeworks, John Reed (“Reed”) through the John P. Reed Trust dated April 29, 1985, as Amended (“Reed Revocable Trust”) and the Management Unitholders, pursuant to the mergers and exchanges described below, and the issuance in those transactions of Class A common stock to the holders of FS Arhaus and the Management Unitholders and Class B common stock to Homeworks, Reed and the Reed Revocable Trust. The following steps describe the transactions that were completed to effect the Reorganization on November 8, 2021: • Step 1: The Company formed two wholly owned subsidiaries, Ash Merger Sub 1, Inc. (“Merger Sub 1”), a Delaware corporation, and Ash Merger Sub 2, Inc. (“Merger Sub 2”), a Delaware corporation; • Step 2(a): Merger Sub 1 merged with and into FS Arhaus, with FS Arhaus surviving the merger, or Surviving Corporation 1, and became a wholly owned subsidiary of the Company and the holders of FS Arhaus received shares of Class A common stock; • Step 2(b): Merger Sub 2 merged with and into Homeworks, with Homeworks surviving the merger, or Surviving Corporation 2, and became a wholly owned subsidiary of the Company and the owners of Homeworks received shares of Class B common stock; • Step 2(c): The Management Unitholders contributed their units in LLC to the Company in exchange for shares of Class A common stock; • Step 2(d): Reed and the Reed Revocable Trust contributed their respective units in LLC to the Company in exchange for shares of Class B common stock; • Step 2(e): The Company contributed the units of LLC that it owns directly to Surviving Corporation 1 and Surviving Corporation 2 in proportion to the units of LLC owned by Surviving Corporation 1 and Surviving Corporation 2; and • Step 3: The Company issued shares of Class A common stock to the purchasers in the IPO. As a result of the Reorganization, a total of 39,623,041 shares of Class A common stock and 87,536,950 shares of Class B common stock were issued to the former holders of FS Arhaus, the former holders of Homeworks, Reed, the Reed Revocable Trust and the Management Unitholders. Of the total 127,159,991 shares of common stock issued, 2,520,227 shares of Class A common stock and 596,598 shares of Class B common stock issued to Management Unitholders are subject to certain vesting conditions specified in individual award agreements and were issued as restricted stock with the exact time-based vesting provisions as the incentive units that were exchanged for such shares. If the vesting conditions of the restricted stock are not satisfied, such restricted stock will be forfeited and canceled. Effects of COVID-19 on Our Business The COVID-19 outbreak in the first quarter of 2020 caused disruption to our business operations. In our initial response to the COVID-19 pandemic, we undertook immediate adjustments to our business operations including temporarily closing all retail locations, furloughing employees, minimizing expenses and delaying investments, and pausing some inventory orders while we assessed the impact to our business. Our approach to the pandemic evolved quickly and business trends substantially improved during the second through fourth quarters of 2020, as a result of both the reopening of our Showrooms and strong consumer demand for our products. We reopened all of our Showrooms and Outlet stores by June 30, 2020. While we have been able to serve our clients and operate our business through the ongoing COVID-19 pandemic, there can be no assurance that future events will not have an impact on our business, results of operations or financial condition since the extent and duration of the pandemic remains uncertain. Future adverse developments in connection with the COVID-19 pandemic, including additional waves or resurgences of COVID-19 outbreaks, new strains or variants of the virus, evolving international, federal, state and local restrictions and safety regulations in response to COVID-19 risks, changes in consumer behavior and health concerns, the pace of economic activity in the wake of the COVID-19 pandemic, or other similar issues could adversely affect our business, results of operations or financial condition in the future, or our financial results and business performance in future periods. Various constraints in our merchandise supply chain have resulted in delays in our ability to convert demand into net revenue at normal historical rates. We anticipate that the business conditions created by COVID-19 will continue to impact the capacity of our vendors and supply chain to meet our demand during 2022. We expect that our supply chain may catch up to demand in the foreseeable future, but business circumstances and operational conditions cannot be predicted with certainty. Depending on the future course of the pandemic and further outbreaks, we may experience further restrictions and closures of our Showrooms and Outlet stores. Although we experienced strong demand for our products during 2020 and 2021, some of the demand may have been driven by consumers reinvesting in their homes and furnishings as they spend more time at home due to the pandemic. The exact impact that COVID-19 will have on future consumer behavior and related demand for our products cannot be predicted with certainty. |
Basis of Presentation and Summa
Basis of Presentation and Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2021 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Summary of Significant Accounting Policies | Basis of Presentation and Summary of Significant Accounting Policies A summary of significant accounting policies applied in the preparation of the consolidated financial statements are as follows: Basis of Presentation The accounting and reporting policies of the Company are in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The 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. Certain reclassifications have been made to prior years' consolidated financial statements to conform to the current year's presentation. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents The Company considers cash and all other highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company regularly carries deposits in excess of federally insured amounts, but does not believe that it is exposed to significant concentration of credit risk as they are carried at a high-quality financial institution with an investment-grade rating. Cash and cash equivalents include $9.1 million and $5.7 million at December 31, 2021 and 2020, respectively, for amounts in-transit from credit card companies since settlement is reasonably assured and not restricted. Restricted Cash Equivalents The Company maintains certain cash balances restricted as to withdrawal or use. Restricted cash is comprised primarily of cash used as collateral for the Company’s credit card sales processing partner, a portion of our workers’ compensation obligations that our insurance carrier requires us to collateralize and a portion of our customs obligation that the U.S Customs and Border Protection requires us to collateralize. Accounts Receivable The Company’s accounts receivables are $0.2 million and $0.6 million, respectively, at December 31, 2021 and 2020, net of allowance for doubtful accounts of $0.2 million and $0.3 million, respectively. The allowance for doubtful accounts 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 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 doubtful accounts. Accounts receivable are recorded at the invoiced amount and do not bear interest. Revenue Recognition Net revenue consists of sales to clients, net of returns, discounts, and rebates. Net revenue and cost of goods sold are recognized when performance obligations under the terms of the contract are satisfied and the control of merchandise has been transferred to a client, which occurs when merchandise is received by our clients. Net revenue from “direct-to-client” and “home-delivered” sales are recognized when the merchandise is delivered to the client. Net revenue from “cash-and-carry” Showroom sales are recognized at the point of sale in the Showroom. Discounts provided to clients are accounted for as a reduction of sales at the point of sale. Sales commissions are incremental costs and are expensed as incurred. A reserve is recorded for projected merchandise returns based on actual historical return rates. The Company provides an allowance for sales returns based on historical return rates, which is presented on a gross basis. The allowance for sales returns is presented within other current liabilities and the estimated value of the right of return asset for merchandise is presented within prepaid expense and other current assets on the consolidated balance sheets. Actual merchandise returns are monitored regularly and have not been materially different from the estimates recorded. Merchandise returns are granted for various reasons, including delays in merchandise delivery, merchandise quality issues, client preference and other similar matters. The Company has various return policies for their merchandise, depending on the type of merchandise sold. Returned merchandise often represents merchandise that can be resold. Amounts refunded to clients are generally made by issuing the same payment tender as used in the original purchase. Merchandise exchanges of the same merchandise at the same price are not considered merchandise returns and, therefore, are excluded when calculating the sales returns reserve. The allowance for sales returns of $5.6 million and $5.1 million at December 31, 2021 and 2020, respectively, is recorded in the accrued other expenses line item on the consolidated balance sheets. All taxes assessed by a government authority that are both imposed on and concurrent with a specific revenue producing transaction and collected by the Company from clients are excluded from the measurement of the transaction price. As a result, sales are stated net of tax. Shipping and handling is recognized as an activity to fulfill the performance obligation of transferring merchandise to clients, therefore the fees are recorded in net revenue. The costs incurred by the Company for shipping and handling are included in cost of goods sold, and the costs of shipping and handling activities are accrued for in the same period as the delivery to clients. The Company collects various taxes as an agent in connection with the sale of merchandise and remits these amounts to the respective taxing authorities. These taxes are included within accrued taxes line item of the consolidated balance sheets until remitted to the respective taxing authorities. Client deposits represent payments made by clients on orders. At the time of purchase, the Company collects deposits for all orders equivalent to at least 50 percent of the client’s 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 Company expects that substantially all client deposits as of December 31, 2021 will be recognized within 2022 as the performance obligations are satisfied. Private Label Credit Card The Company has an agreement with a Credit Card Issuer (“Issuer”) to provide clients with private label credit cards (the “Card Agreement”) which was amended on January 13, 2021 to extend the term of the agreement through August 31, 2026. Each private label credit card bears the Arhaus brand logo and can only be used at the Company’s Showroom locations or website. The Issuer is the sole owner of the accounts issued under the private label credit card program and absorbs the losses associated with non-payment by the private label card holders and a portion of any fraudulent usage of the accounts. During the term of the Card Agreement, the Company receives a percentage of private label credit card sales from the Issuer and is also eligible to receive incentive payments for the achievement of certain targets. These funds are recorded within net revenue in the consolidated statements of comprehensive income. The Company also receives reimbursement funds from the Issuer for certain expenses the Company incurs. These reimbursement funds are used by the Company to fund marketing and other programs associated with the private label credit card and are recorded within net revenue in the consolidated statements of comprehensive income. Merchandise Inventory The Company’s merchandise inventory is comprised primarily of finished goods and is carried at the lower of cost or net realizable value, with cost determined on a weighted-average cost method. To determine if the value of inventory should be marked down, below original cost, we use estimates to determine the lower of cost or net realizable value, which considers current and anticipated demand, client preference and merchandise age. Reserves for shrinkage are estimated and recorded throughout the period as a percentage of current merchandise inventory levels and historical shrinkage results. Actual shrinkage is recorded throughout the year based upon periodic cycle counts and the results of the Company’s annual physical inventory counts. Merchandise inventory includes reserves of $4.2 million and $2.7 million at December 31, 2021 and 2020, respectively. Prepaid and Other Current Assets Prepaid and other current assets include cash advanced by the Company for leasehold improvements at new (or existing, in some cases) Showroom locations. These amounts represent capital costs associated with opening new Showroom locations, a substantial portion of which is subject to recovery from the lessor upon completion. The amount to be recovered totaled $11.5 million and $10.2 million at December 31, 2021 and 2020, respectively. Advertising Costs Except for costs associated with the semi-annual catalogs, the Company expenses advertising costs as incurred because data is limited and not conclusive in justifying the capitalization of such expenses for future benefit. Advertising costs amounted to $35.9 million, $24.4 million and $23.4 million for the years ended December 31, 2021, 2020 and 2019, respectively, and are included within the selling, general and administrative expenses line item on the consolidated statements of comprehensive income. Expense associated with the catalogs are recognized upon the delivery of the catalogs to the carrier. Property, Furniture and Equipment Property, furniture and equipment is stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization is calculated using the straight-line method generally using the following useful lives: Asset class/ type Useful Life-Years Leased property under capital lease Term of the underlying lease Leasehold improvements Lesser of 10 years or lease term Landlord improvements Lesser of 10 years or lease term Furniture and fixtures 3 to 5 years Computers and equipment 3 to 10 years Vehicles 5 to 10 years Capitalized software costs relate to third-party developed software and are amortized on a straight-line basis over the estimated useful life of the software, which generally is three years. Depreciation and amortization expense was $23.9 million, $17.0 million and $16.0 million for the years ended December 31, 2021, 2020 and 2019, respectively. Property, furniture and equipment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. For further discussion regarding the impairment accounting policy refer to “Long-Lived Assets.” Goodwill Goodwill represents the excess of the purchase price over the fair value of assets and liabilities acquired in a business combination. The Company operates as one segment and has a single reporting unit, Arhaus Consolidated. For the purposes of goodwill impairment testing, a reporting unit is defined as an operating segment or one level below an operating segment (referred to as a component) for which discrete financial information is available. We test goodwill for impairment on an annual basis in the fourth quarter of each year, and more frequently if events or changes in circumstances indicate that it might be impaired. Circumstances that may indicate impairment include, but are not limited to: • Deterioration in general economic conditions, limitations on accessing capital, or other developments in equity and credit markets; • Industry and market considerations such as deterioration in the environment in which the Company operates, an increased competitive environment, a decline in market dependent multiples or metrics, a change in the market for the Company’s merchandise or services, or a regulatory or political development; • Cost factors that have a negative effect on earnings and cash flows; • Overall financial performance; • Changes in management, key personnel, strategy, or clients; • A sustained decrease in share price in either absolute terms or relative to peers. Under U.S. GAAP, we have the option to first assess qualitative factors in order to determine if it is more likely than not that the fair value of our reporting unit is greater than its carrying value (“Step 0”). The term more likely than not refers to a level of likelihood that is more than 50 percent. If the qualitative assessment leads to a determination that the reporting unit’s fair value is less than its carrying value, or if we elect to bypass the qualitative assessment altogether, we are required to perform a quantitative impairment test (“Step 1”) by calculating the fair value of the reporting unit and comparing the fair value with its associated carrying value. We will recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. We determine fair values using an equally weighted combination of the discounted cash flow approach (“income approach”) and the guideline public company method (“market approach”), based upon the relevance and availability of the data at the time we perform the valuation. Under the income approach, fair value is determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. We use our internal forecasts to estimate future cash flows and include an estimate of long-term future growth rates based on our most recent views of the long-term outlook for the reporting unit. Actual results may differ from those assumed in our forecasts. We derive our discount rate based on our weighted average cost of capital determined by using a combination of the capital asset pricing model, the cost of debt and an appropriate industry capital structure. We use a discount rate that is commensurate with the risks and uncertainty inherent in the respective businesses and in our internally developed forecasts. Valuations using the market approach are derived from metrics of publicly traded companies that are deemed sufficiently similar to the Company. Estimating the fair value of reporting units requires the use of estimates and significant judgments that are based on a number of factors including actual operating results. It is reasonably possible that the judgments and estimates described above could change in future periods. Long-Lived Assets The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of those assets may not be recoverable. Circumstances that may indicate impairment include, but are not limited to: • A significant decrease in the market price of a long-lived asset or asset group; • A significant adverse change in the extent or manner in which a long-lived asset or asset group is being used or in its physical condition; • A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset or asset group, including an adverse action or assessment by a regulator; • an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset or asset group; • A current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group; • A current expectation that, more likely than not, a long-lived asset or asset group will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. An asset group is defined as the lowest level for which identifiable cash flows are available and largely independent of the cash flows of other groups of assets, which for our Showrooms is the individual Showroom level. In those circumstances, the Company performs an undiscounted cash flow analysis to determine if an impairment exists. If the sum of the estimated undiscounted future cash flows over the remaining life of the asset are less than the carrying value, the Company will recognize an impairment charge equal to the difference between the carrying value and the fair value, usually determined by the estimated discounted future cash flows associated with the asset. Based on management’s analysis there were no events or circumstances identified during 2021 or 2020, indicating a potential impairment of any long-lived assets. Deferred Rent and Lease Incentives For leases that contain fixed escalations of the minimum annual lease payment during the original term of the lease, the Company recognizes rental expense on a straight-line basis over the lease term and records the difference between rent expense and the amount currently payable as deferred rent. The Company records rental expense during the construction period, as the expected lease term begins the date the Company takes possession for construction or other purposes. Deferred lease incentives include construction allowances received from landlords, which are amortized on a straight-line basis over the initial lease term, including the construction period. 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 A reconciliation of the changes in our limited merchandise warranty liability were as follows (amounts in thousands): 2021 2020 Balance as of beginning of year $ 3,326 $ 3,164 Accruals during the year 7,903 4,548 Settlements during the year (6,505) (4,386) Balance as of end of the year (1) $ 4,724 $ 3,326 (1) $2.7 million and $1.8 million were recorded in accrued other expenses at December 31, 2021 and 2020 , respectively. The remainder is recorded in other long-term liabilities. We recorded accruals during the periods presented in the table above, primarily to reflect charges that relate to warranties issued during the respective periods. Income Taxes We account for income taxes under an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. In estimating future tax consequences, we generally take into account all expected future events then known to us, other than changes in the tax law or rates which have not yet been enacted and which are not permitted to be considered. We may record a valuation allowance to reduce our net deferred tax assets to the amount that is more-likely-than-not to be realized. The determination as to whether a deferred tax asset will be realized is made on a jurisdictional basis and is based upon the weight of available evidence. Future taxable income of the appropriate character in either the carryback or carryforward period under the tax law and ongoing prudent and feasible tax planning are considered in determining the amount of the valuation allowance, and the amount of the allowance is subject to adjustment in the future. Specifically, in the event we were to determine that it is not more-likely-than-not that we would be able to realize our net deferred tax assets in the future, an adjustment to the valuation allowance would decrease net income in the period such determination is made. This allowance does not alter our ability to utilize the underlying tax net operating loss and credit carryforwards in the future, the utilization of which requires future taxable income. The accounting standard for uncertainty in income taxes prescribes a recognition threshold that a tax position is required to meet before being recognized in the financial statements and provides guidance on subsequent recognition, derecognition, and measurement based on management’s best judgement given the facts, circumstances, and information available at the reporting date. Differences between tax positions taken in a tax return and amounts recognized in the financial statements generally result in an increase in liability for income taxes payable or a reduction of an income tax refund receivable, or a reduction in a deferred tax asset or an increase in a deferred tax liability, or both. At December 31, 2021 and 2020, the Company assessed its income tax positions and concluded that it had no unrecognized tax benefits. We recognize interest and penalties related to unrecognized tax benefits in income tax expense on the consolidated statements of comprehensive income. No such interest and penalties were recorded for the years ended December 31, 2021, 2020 or 2019. Prior to the Reorganization, the Company was a limited liability company under the Internal Revenue Code that had elected to be taxed as a partnership and did not pay federal or most state corporate income taxes on its taxable income, but rather its members were liable for their respective portions of the taxable income (loss) of Arhaus, LLC. Therefore, no provision for federal income taxes are included in these consolidated financial statements prior to the Reorganization. Subsequent to the Reorganization, Arhaus, LLC’s taxable income flows through to FS Arhaus and Homeworks who are subject to U.S. federal and state corporate income taxes. The Company is subject to state and local income tax examinations by tax authorities. With few exceptions, the Company is no longer subject to state and local tax examinations for the years before 2017. Cost of Goods Sold Cost of goods sold includes, but is not limite d to, the direct cost of purchased merchandise, inventory shrinkage, inbound freight, all freight costs to get merchandise to our Showrooms, design, buying and allocation costs, credit card fees, occupancy costs related to Showroom operations and supply chain such as rent, property tax and common area maintenance for our leases, depreciation and amortization of leasehold improvements, equipment and other assets in our S howrooms and distribution centers, sourcing related costs, and all logistics costs associated with shipping merchandise to clients. Selling, General and Administrative Expenses Selling, general and administrative expenses include all operating costs not included in cost of goods sold. These expenses include payroll and payroll related expenses, Showroom expenses other than occupancy,and expenses related to many of our operations at our corporate headquarters, including utilities, depreciation and amortization and marketing expense, which primarily includes catalog production, mailing and print advertising costs. Payroll includes both fixed compensation and variable compensation. Variable compensation includes Showroom commissions and Showroom bonus compensation related to demand, likely before the client obtains control of the merchandise. Variable compensation is primarily received by Showroom employees and is not significant in our eCommerce channel. All new Showroom opening expense other than occupancy are included in selling, general and administrative expenses and are expensed as incurred. Loyalty Reward Program In January of 2019, the Company established a loyalty reward program for clients who use the Company’s private label credit card to receive rewards based on the client’s merchandise purchases. The liabilities associated with the rewards are established on the consolidated balance sheets when the rewards are issued and are removed from the consolidated balance sheets, either when used by the client or upon expiration (3 months from when the reward is issued). At December 31, 2021 and 2020, outstanding liabilities related to the loyalty reward program of $1.3 million and $0.9 million, respectively, and are included within the accrued other expenses line item of the consolidated balance sheets. The Company recognizes expense upon the establishment of the liability. Gift Cards The Company sells gift cards to our clients in our Showrooms and through our website. 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 of $0.9 million and $0.8 million at December 31, 2021 and 2020, respectively, is recorded in the accrued other expenses line item of the consolidated balance sheets. The Company recognizes income associated with breakage proportional to actual gift card redemptions. Self-Insurance We maintain insurance coverage for significant exposures as well as those risks that, by law, must be insured. In the case of health care coverage for employees, we have a managed self-insurance program related to claims filed. Expenses related to this self-insured program are computed on an actuarial basis, based on claims experience, regulatory requirements, an estimate of claims incurred but not yet reported (“IBNR”) and other relevant factors. The projections involved in this process are subject to uncertainty related to the timing and number of claims filed, levels of IBNR, fluctuations in health care costs and changes to regulatory requirements. We had liabilities of $0.9 million and $0.6 million at December 31, 2021 and 2020, respectively, recorded in the accrued other expenses line item of the consolidated balance sheets. We carry workers’ compensation insurance subject to a deductible amount for which we are responsible on each claim. We had liabilities related to workers’ compensation claims of $0.2 million and $0.4 million at December 31, 2021 and 2020, respectively, recorded in the accrued taxes line item of the consolidated balance sheets. Credit Risk and Concentration Risk Appr oximately 18% and 25% of the Company’s merchandise w ere purchased from one vendor for the years ended December 31, 2021 and 2020, respectively. Fair Values of Financial Instruments The Company’s primary financial instruments are accounts receivable, payables, lease obligations, derivatives, and equity based compensation instruments. Due to the short-term maturities of accounts receivable and payables, the Company believes the fair values of these instruments approximate their respective carrying values at December 31, 2021 and 2020. See Note 5 for discussion of our derivative, Note 6 for discussion of our lease obligations and Note 9 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 1 Unadjusted 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 2 Inputs 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 3 Unobservable 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. Deferred Financing Fees Debt issuance costs were recorded as part of the establishment of the Company’s financing arrangements (see Note 5). The debt issuance costs were recorded within the other noncurrent assets line item on the consolidated balance sheets and were amortized as interest expense over the contractual life of the debt structure using the straight-line method, which approximates the effective interest rate method. Noncontrolling Interest Noncontrolling interests represent the ownership interests of the Company held by FS Arhaus. The Company identifies its noncontrolling interests separately within the equity section on the Company’s consolidated balance sheets and within the Company’s consolidated statements of changes in mezzanine equity and stockholders’/members’ equity (deficit). The amounts of consolidated net and comprehensive income attributable to the Company and to the noncontrolling interest are presented separately on the Company’s consolidated statements of comprehensive income. As part of the Reorganization, the noncontrolling interest held by FS Arhaus was exchanged for shares of class A common stock. Accordingly, net and comprehensive income attributable to noncontrolling interest shown for 2021 on the consolidated statements of comprehensive income only represents income statement activity until the day of the Reorganization. Equity Based Compensation In connection with the Reorganization, the Company adopted the 2021 Equity Incentive Plan (the “2021 Equity Plan”), which authorized the Company to grant stock options (either incentive or non-qualified), stock appreciation rights or SARs, restricted stock, restricted stock units or RSUs, performance shares, performance share units and other stock-based awards with respect to our Class A common stock. As of December 31, 2021, the Company has not granted any awards to employees under the 2021 Equity Plan. Prior to the Reorganization, the Company granted incentive units to employees and computes the costs arising from the grants at fair value and recognizes such costs as expense over the vesting period for the units. The Company uses the Black-Scholes valuation model which requires the input of assumptions regarding the expected term, expected volatility, dividend yield and risk-free interest rate to estimate the fair value of its incentive unit arrangements. The Company accounts for forfeitures as they occur. See Note 9 for further discussion of the incentive unit arrangements. Net and comprehensive income (loss) per share Basic net and comprehensive income (loss) per share is computed as net income (loss) attributable to Arhaus, Inc. divided by the weighted-average number of common shares outstanding for the period. Diluted net and comprehensive income (loss) per share is computed as net income (loss) attributable to Arhaus, Inc. divided by the weighted-average number of common shares outstanding for the period and common share equivalents under equity plans using the treasury stock method. Potential dilutive securities are excluded from the computation of diluted net income per share if their effect is anti-dilutive. Emerging Growth Company Status The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. New Accounting Standard or Updates Adopted In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill by removing the second step of the two-step impairment test. The amendment requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. A goodwill impairment will be the amount by which a reporting unit’s carrying value exceeds its |
Property, Furniture, and Equipm
Property, Furniture, and Equipment | 12 Months Ended |
Dec. 31, 2021 | |
Property, Plant and Equipment [Abstract] | |
Property, Furniture and Equipment | Property, Furniture and Equipment Property, furniture and equipment, net consists of the following at December 31, 2021 and 2020 (amounts in thousands): 2021 2020 Leased property under capital lease $ 48,303 $ 45,205 Leasehold improvements 42,418 39,704 Landlord improvements 137,106 126,245 Furniture and fixtures 5,411 4,598 Computer and equipment 25,124 17,965 Vehicles 9,229 78 Build-to-suit properties 31,017 — Construction in process 10,457 638 309,065 234,433 Less: Accumulated depreciation (54,054) (46,759) Less: Landlord improvement accumulated depreciation (75,380) (69,978) Property, furniture and equipment, net $ 179,631 $ 117,696 |
Goodwill
Goodwill | 12 Months Ended |
Dec. 31, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill | Goodwill During 2021, we reviewed Arhaus Consolidated, our one reporting unit’s goodwill for impairment by performing a qualitative assessment in the fourth quarter. Based on the results, it was identified that it was more likely than not the fair value of goodwill recorded exceeded the current carrying value and concluded no impairment existed. During the years ended December 31, 2021 and 2020, there was no change in the recorded goodwill balances and we have not recorded any historical goodwill impairments. |
Long-Term Debt
Long-Term Debt | 12 Months Ended |
Dec. 31, 2021 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | Long-Term Debt The Company’s prior debt structure entered into in 2017 (“Prior Credit Facilities”) included a revolving credit facility of $30.0 million (the “Prior Revolver”) and a term loan of $40.0 million (the “Term Loan”). The Prior Revolver’s availability was limited pursuant to a borrowing base formula based on specified percentages of eligible inventories and accounts receivable. The Company had the option, subject to terms and conditions, to borrow on the Prior Revolver by means of any combination of Base Rate Loans or LIBOR Loans. The Company’s borrowings under the Prior Revolver bore variable interest rates for Base Rate Loans of the greater of (a) the Federal Funds Rate plus 0.5%, (b) the Prime Rate, (c) the LIBOR Rate plus 1.0%, and (d) 4.0% and at LIBOR loans at the LIBOR rate (“LIBOR”) plus the applicable margin (6.25% at December 31, 2019). The Prior Revolver carried a non-use fee of 0.50% per annum. Deferred financing costs related to the Prior Revolver were recorded in other noncurrent assets and were amortized over the term of the debt on a straight-line basis , which approximated the effective interest method . Amortization expense was $0.2 million and $0.5 million for the years ended December 31, 2020 and 2019, respectively, and included in interest expense within the consolidated statements of comprehensive income. The unamortized balance of these loan costs of $0.6 million as of June 25, 2020 were written off to interest expense within the consolidated statements of comprehensive income, as the Company terminated the Prior Revolver and entered in a new credit agreement with new lenders. The Term Loan bore interest at a rate equal to 16.0% per annum, of which 12.0% per annum was to be paid in cash and 4.0% per annum was to be paid in kind by capitalizing such amount and adding it to the principal amount of the loan each quarter. The Company was required to make a prepayment on the Term Loan in an amount not less than 50 percent of the Company’s Excess Cash Flow, as defined in the Term Loan agreement, on or before May 15th of the year following such year. Other than the mandatory Excess Cash Flow payments, as defined, which were calculated at the end of each year, the Term Loan had no required periodic principal payments during the term. The Term Loan facility permitted early principal payments subject to a 1.0% prepayment premium through December 26, 2020, and none thereafter. The Term Loan was paid in full on December 28, 2020. Deferred financing costs related to the Term Loan were amortized over the term of the Term Loan, on a straight-line basis, which approximated the effective interest method. Amortization expense was $0.6 million and $0.6 million for the years ended December 31, 2020 and 2019 , respectively, and is included in interest expense within the consolidated statements of comprehensive income . On December 28, 2020, in connection with the repayment of the Term Loan, the unamortized balance of these financing costs of $0.7 million were written off to interest expense. The Company’s Term Loan had an exit fee clause which allowed the holder of the Term Loan to receive either $3.0 million upon repayment of the Term Loan or a payout equivalent to 4.0% of the total equity value of the Company. The 4.0% of the total equity value of the Company payout was payable upon a change of control, qualified IPO or sale of all or substantially all assets of the Company. In connection with the repayment of the Term Loan on December 28, 2020, the holder informed the Company they would decline the option to receive the $3.0 million and elect to receive a payout equivalent to 4.0% of the equity value. The exit fee was treated as a derivative and adjusted to fair value each reporting period. The Company recorded a liability of $19.6 million at December 31, 2020, related to the derivative that was classified within other long-term liabilities on the consolidated balance sheets . In connection with the Company’s IPO the fair value of the exit fee was determined to be $64.1 million and was paid by the Company in November 2021 using proceeds from the IPO. The company recorded $44.5 million and $17.9 million of derivative expense for the years ended December 31, 2021 and 2020, respectively in selling, general and administrative expenses within the consolidated statements of comprehensive income. At December 31, 2020, the Company used a discounted cash flow method and guideline public company method to determine the fair value of equity which was used to calculate the fair value of the derivative liability. The key assumptions used within the valuation as December 31, 2020 were as follows: Term . . . . . . . . . . . . 10 years Risk-free rate of return 0.90% Volatility . . . . . . . . 40.00% Dividend yield . . . . 0% On June 25, 2020, the Company entered into a credit agreement (the “Revolver”), which included a revolving credit facility of $30.0 million with availability limited pursuant to a borrowing base formula based on specified percentages of eligible inventory, net of reserves. The Company’s borrowings under the Revolver bore variable interest at LIBOR plus the applicable margin (5.5% at December 31, 2020). In the event LIBOR ceased to be available during the term of the Revolver, the Revolver provided procedures to determine an Alternate Base Rate. At December 31, 2020, the availability on the Revolver was $3.1 million based on the borrowing base formula. The Company had the option, subject to terms and conditions, to borrow on the Revolver by means of LIBOR loans. The Revolver had certain financial covenants, including a minimum fixed charge ratio and minimum EBITDA requirements. The Revolver carried a non-use fee of 0.50% per annum. Deferred financing costs related to the Revolver of $1.5 million were recorded in other noncurrent assets on the consolidated balance sheets and were amortized over the term of the Revolver on a straight-line basis, which approximated the effective interest method. Amortization expense was $0.4 million and $0.2 million for the years ended December 31, 2021 and 2020 , respectively and were included in interest expense within the consolidated statements of comprehensive income . The Revolver was set to expire on June 25, 2023. On November 4, 2021 the Company terminated the Revolver of which there were no borrowings drawn. The termination of the Revolver resulted in a $1.4 million loss on extinguishment of debt. The loss, which included a $0.6 million early termination fee and a write off of the remaining unamortized loan costs of $0.8 million, included in the loss on extinguishment of debt within the consolidated statements of comprehensive income. On November 8, 2021, the Company entered into a new 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 outstanding the amount of such lender’s commitment, (2) a letter of credit commitment, in an amount equal to the lesser of (a) $10 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 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 is $50 million, which may be increased pursuant to the terms of the 2021 Credit Facility. The 2021 Credit Facility contains restrictive covenants and has certain financial covenants, including a minimum rent-adjusted total leverage ratio and minimum fixed charge ratio. The 2021 Credit Facility bears variable interest rates at the prevailing Bloomberg Short-Term Bank Yield index rate plus the applicable margin (1.75% at December 31, 2021 ), whereas the applicable margin is adjusted quarterly based on the Company’s consolidated rent-adjusted total leverage ratio. At December 31, 2021 , we had no borrowings on the 2021 Credit Facility. Deferred financing costs related to the 2021 Credit Facility of $0.3 million are recorded in other noncurrent assets on the consolidated balance sheets and will be amortized over the term of the debt on a straight-line basis, which approximates the effective interest method. The 2021 Credit Facility expires on November 8, 2026. In accordance with the change in reporting entity, the Company’s consolidated financial statements include the effect of related-party promissory notes from Reed to Homeworks which were paid off in December 2020. Interest expense related to these promissory notes of $0.4 million and $0.4 million were included within interest expense within the consolidated statements of comprehensive income for the years ended December 31, 2020 and 2019, respectively . The Company was in compliance with all covenants at December 31, 2021 and 2020, and expects to remain in compliance over the next 12 months. |
Leases
Leases | 12 Months Ended |
Dec. 31, 2021 | |
Leases [Abstract] | |
Leases | Leases The Company leases real estate and equipment under operating leases, some of which are from related parties. The most significant obligations under these lease agreements require the payments of periodic rents, real estate taxes, insurance and maintenance costs. The Company has received certain rent abatements, and has scheduled rent increases, under various real estate leases. The consolidated statements of comprehensive income reflects rent expense on a straight-line basis over the terms of the respective leases. Rent expense for the years ended December 31, 2021, 2020 and 2019 was $66.5 million, $58.6 million and $57.3 million, respectively. Depending on particular Showroom leases, the Company can also owe a percentage rent payment if particular Showrooms meet certain sales figures. Percentage rent expense for the years ended December 31, 2021, 2020 and 2019 was $6.1 million, $1.0 million and $1.5 million, respectively. Amortization of landlord improvements for the years ended December 31, 2021, 2020 and 2019 was $13.5 million, $10.4 million and $8.7 million, respectively. A deferred rental obligation of $63.0 million and $71.2 million related to lease incentives and straight-line rent expense is reflected in the consolidated balance sheets at December 31, 2021 and 2020, respectively, in the deferred rent and lease incentives line item. In September 2014, the Company entered into a lease agreement with a related party on a triple net basis for our headquarters building and distribution center, with construction completed during 2016. The base lease term is 17 years, with a 10-year renewal option at fixed rental payments, with two additional 5-year renewal options at fair market rental payments. The monthly rental payments range from $0.2 million to $0.5 million during the 17-year base lease term and from $0.5 million to $0.6 million during the 10-year renewal period. The Company concluded that the lease is a capital lease. The capital lease obligation and related asset were valued at $45 million and were recorded in 2016 when the Company took control of the property. In September 2021, the Company amended the existing capital lease agreement to extend the lease term for an additional three years with monthly rental payments of $0.6 million. Our capital lease obligation increased by $2.4 million as a result of the extension. Accumulated amortization was $9.9 million and $5.3 million at December 31, 2021 and 2020 , respectively. Further, the amended capital lease agreement provides for the expansion of the Company’s distribution center and for monthly rental payments that have not been de termined as of December 31, 2021 . During the fourt h quarter of 2021, the related party lessor sold its interest in the leased assets to a third party. As a result, the lease will no longer be with a related party of the Company. Future minimum lease payments for the capital lease related to the Company’s corporate headquarters and distribution center at December 31, 2021, are as follows (amounts in thousands): Year Ending December 31, 2022 $ 4,673 2023 4,673 2024 4,673 2025 4,673 2026 5,132 Thereafter 120,390 144,214 Less: Amounts representing interest (94,064) $ 50,150 In March 2021, the Company entered into a lease agreement with a related party for a distribution center and manufacturing building in North Carolina, 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 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. The Company has concluded that the lease is an operating lease. Future minimum rental payments required under operating leases with initial or remaining noncancelable lease terms in excess of one year at December 31, 2021, are as follows (amounts in thousands): Year Ending December 31, Third Party Related Party Total 2022 $ 43,540 $ 2,352 $ 45,892 2023 41,145 2,362 43,507 2024 37,191 1,468 38,659 2025 32,159 966 33,125 2026 29,105 798 29,903 Thereafter 125,252 4,246 129,498 $ 308,392 $ 12,192 $ 320,584 Some of our operating and capital leases require construction and or other modifications to prepare the leased asset for use. For certain operating and capital leases, we qualify as the deemed owner of the construction project due to our significant involvement during the construction period under build-to-suit lease accounting requirements within ASC 840, Leases . We recorded the cost of these construction projects of $31.0 million in property, furniture and equipment, net with an the offsetting lease financing obligation in accrued other expenses on our consolidated balance sheets , at December 31, 2021. |
Employee Benefit Plans
Employee Benefit Plans | 12 Months Ended |
Dec. 31, 2021 | |
Retirement Benefits [Abstract] | |
Employee Benefit Plans | Employee Benefit PlansThe Company has a defined contribution retirement savings plan covering substantially all employees. The Company may contribute a discretionary matching contribution equal to a percentage that the Company deems advisable. Total costs recorded in selling, general and administrative expenses on the consolidated statements of comprehensive income related to the plan were $2.2 million, $0.5 million and $1.1 million at December 31, 2021, 2020 and 2019, respectively. |
Mezzanine Equity and Stockholde
Mezzanine Equity and Stockholders'/Members' Equity (Deficit) | 12 Months Ended |
Dec. 31, 2021 | |
Temporary Equity Disclosure [Abstract] | |
Mezzanine Equity | Mezzanine Equity and Stockholders’/Members’ Equity (Deficit) Homeworks Equity Structure Prior to Reorganization In accordance with the change in reporting entity, the Company’s consolidated financial statements were retrospectively adjusted to include Homeworks’ financial results for all periods presented (see Note 1). Prior to the Reorganization, Homeworks’ historical equity structure was comprised of 645 voting and 4,158 non-voting shares. The equity of Homeworks includes their investment in LLC, the noncontrolling interest in LLC and the Class B Preferred Units discussed below, which were owned by FS Arhaus and management incentive unit holders. Prior to the Reorganization, Homeworks and Reed held Class A units in LLC while FS Arhaus held Class B Units in LLC. Refer below for information on the LLC equity structure prior to the Reorganization. For the year ended December 31, 2021 cash distribution made were $61.9 million . Arhaus, LLC Equity Structure Prior to Reorganization Prior to the Reorganization, LLC established a multi-class unit structure with its members. Pursuant to LLC’s Third Amended and Restated Limited Liability Company Agreement dated June 26, 2017 (the “2017 LLC Agreement”) and the Arhaus, LLC 2017 Equity Plan (the “2017 Equity Plan”), LLC was authorized to issue up to 20,938,265 Class A Units, 7,488,248 Class B Units, 3,185,435 Class C Units, 285,387 Class D Units, 3,158,501 Class F Units, 3,158,501 Class F-1 Units, 1,250,000 Class A Preferred Units and 1,250,000 Class B Preferred Units. In connection with the issuance of the Prior Credit Facilities discussed in Note 5, the Class A and Class B unit equity holders made an aggregate $25.0 million capital contribution to the Company in exchange for 1,250,000 Class A Preferred Units and 1,250,000 Class B Preferred Units, respectively (collectively, the “Preferred Units”). The Preferred Units were issued pursuant to the 2017 LLC Agreement and accrued a 16% per annum (compounded annually) preferred return. The Preferred Units had no voting rights and did not participate in profits or losses. Preferred Unit holders were entitled to receive distributions in excess of tax distributions to Class A and B members in proportion to the accrued and unpaid preferred return and unreturned capital contributions. Further, Preferred Unit holders were entitled to receive proceeds upon a capital transaction before other unit holders in proportion to the accrued and unpaid preferred return and unreturned capital contributions. The Company could redeem the Preferred Units at our discretion, however, because the Preferred Unit holders control the board of directors (“Board”) and could force the Company to redeem the Preferred Units they were recorded as mezzanine equity. Upon the retrospective adjustment to include Homeworks, the Class A preferred units were eliminated upon consolidation. On December 29, 2020, the Preferred Units were repaid in full, including the preferred return dividend payment of $8.6 million. In May 2021, the 2017 LLC Agreement and 2017 Equity Plan were amended to authorize the Company to issue up to 967,987 Class G incentive units. Additionally, in accordance with the amendments, the authorized Class F and Class F-1 incentive units that could be issued were reduced to 2,190,514 and 2,190,514, respectively. No changes to the Company’s Class C and D incentive units were made. The Class C, D, F, F-1 and G Units (collectively referred to as the “Incentive Units) were incentive units to be issued to employees, directors, and others pursuant to the terms of the amended 2017 Equity Plan and have no voting rights and do not participate in profits or losses. Only the Class A and Class B Units had voting rights. Distributions were payable to the various unit classes only upon the occurrence of certain capital events, based upon participation thresholds and waterfalls as defined within the amended 2017 LLC Agreement. If Class B Units or Class B Preferred Units remained outstanding on January 6, 2023, the holder of those units, as defined, would have the right to cause a sale of the Company. Income and loss of the Company is allocated proportionately based off of the equity waterfall defined in the 2017 LLC Agreement. Prior to the Reorganization, the Company could make quarterly tax distributions to the Class A and B members pro rata based on the taxable income allocated to such members in an amount equal to the product of each member’s distributive share of the Company’s taxable income relating to each quarter (as estimated by the Board based on the results of the quarter), including any guaranteed payments, and the assumed tax rate. For the years ended December 31, 2021, 2020 and 2019, the Company’s tax distributions made to Class A and B members we re $7.9 million, $10.9 million and $5.1 million, respectively. Prior to the Reorganization, the Company made a pre-IPO payment in the amount of $100.0 million which consisted of a $50.7 million dividend to noncontrolling interests and a $49.3 million distribution to the owners of Homeworks. Amendment and Restatement of Certificate of Incorporation In connection with the Reorganization, the Company’s Certificate of Incorporation was amended and restated to authorize two classes of common stock, Class A common stock and Class B common stock, and to authorize the Company to issue up to 750,000,000 shares of common stock, consisting of 600,000,000 shares of Class A common stock, par value of $0.001 per share, 100,000,000 shares of Class B common stock, par value of $0.001 and 50,000,000 shares of Preferred Stock, par value of $0.001. Holders of Class A common stock are entitled to one vote per share, and holders of Class B common stock are entitled to ten votes per share. Except as otherwise required in the Certificate of Incorporation or by applicable law, the holders of Class A common stock and Class B common stock shall vote together as a single class on all matters. Further, except as otherwise required in the Certificate of Incorporation or by applicable law, the holders of Class A common stock and Class B common stock shall be treated equally, identically and ratable in all respects as to all matters including, dividends, distributions, subdivision or combination and change of control transactions. Initial Public Offering On November 4, 2021, the Company completed its IPO and sold 12,903,226 shares of Class A common stock at an IPO price of $13.00 per share and received proceeds of $151.4 million, net of underwriting discounts and commissions of $10.4 million and offering expenses of $5.9 million. The Company used a portion of the net proceeds to pay the Term Loan exit fee of $64.1 million, as discussed in Note 5 . The remainder of the net proceeds were used for general corporate purposes, including payment of fees and expenses in connection with the IPO and to replenish working capital following the payment of the Pre-IPO dividend to LLC Unit holders. 2021 Equity Incentive Plan In connection with the Reorganization, the Company adopted the 2021 Equity Incentive Plan (the “2021 Equity Plan”), which authorized the Company the ability to grant stock options (either incentive or non-qualified), stock appreciation rights or SARs, restricted stock, restricted stock units or RSUs, performance shares, performance share units and other stock-based awards with respect to our Class A common stock. As of December 31, 2021, the Company has not granted any awards to employees under the 2021 Equity Plan. |
Equity Based Compensation
Equity Based Compensation | 12 Months Ended |
Dec. 31, 2021 | |
Share-based Payment Arrangement [Abstract] | |
Equity Based Compensation | Equity Based Compensation In January 2014, the Arhaus, LLC 2014 Equity Plan was established which allowed for the granting of Class C and D incentive units to employees. In June 2017, the Board adopted the 2017 Equity Plan, which allowed for the granting of Class F/F-1 incentive units to employees and in May 2021, the 2017 LLC Agreement and 2017 Equity Plan were amended to allow for the granting of Class G incentive units. In May, June and July 2021, the Company granted a total of 701,965 Class G incentive units that vest over a five three The Incentive Units represent interests that share only in proceeds from defined capital transactions above specified participation thresholds. Upon the Incentive Unit holder’s termination of employment, all unvested units are forfeited, and the Company has the right to purchase all vested units at a per unit price equal to the fair market value of a unit determined at the date such right is exercised by an independent appraisal firm to be mutually agreed to by the Company and the unit holder; provided however, all vested and unvested units are forfeited without compensation in the event of termination for cause. The grant-date fair value of the Class C, D and F/F-1 incentive units is determined through use of the Black-Scholes option pricing model. The key assumptions used for the January 31, 2019 and September 30, 2019 Class F/F-1 incentive unit grants within the Black-Scholes model were as follows: September 30, 2019 January 31, 2019 Term 5 years 5 years Risk-free rate of return 1.90% 2.60% Volatility 36.10% 73.40% Dividend yield 0% 0% The Company’s valuation of the Class G incentive units granted in May, June and July 2021 were measured using the probability-weighted expected return model (“PWERM”). The PWERM is a scenario-based methodology that estimates the fair value of the Incentive Units awarded based upon an analysis of future values for the Company. The Company considered two different scenarios: (a) remain private and (b) IPO. Under the remain private scenario, as of June 30, 2021, the Company estimated the enterprise value by weighting the guideline public company method and the discounted cash flow method, and then relied on the option pricing model and applied a discount for lack of marketability. The option pricing model estimated the value using the Black-Scholes option pricing model. 2021 Awards Term 10 years Risk-free rate of return 1.50% Volatility 40.00% Dividend yield 0% The expected term represents our expected time until a liquidity event, as of the valuation date. The volatility assumption is based on an identified group of comparable public companies over a similar term. The risk-free rate of return is based on the yields of U.S. Treasury securities with maturities similar to the expected term. We used an expected divided yield of zero, as we do not plan to pay cash dividends for the foreseeable future. The fair values of each class of units have been determined utilizing unobservable inputs, and therefore are Level 3 measurements under the fair value hierarchy. Additionally, a probability distribution of possible future equity values is completed and incorporated into the calculation of respective unit fair values. This is necessary as upon the occurrence of a liquidity event in the future, the proceeds thereof will be allocated in accordance with the distribution waterfall defined within the amended 2017 LLC Agreement. Prior to the Reorganization in November 2021, the Incentive Unit activity for the period prior to the Reorganization in 2021 and the year ended December 31, 2020, was as follows: Incentive Units Class C Class D Class F/F-1 Class G Units Weighted Units Weighted Units Weighted Units Weighted December 31, 2019 1,868,913 $ 0.57 96,318 $ 0.83 4,984,390 $ 0.63 — $ — Purchased — — (36,638) 0.36 — Forfeited — — (566,722) 0.61 — December 31, 2020 1,868,913 0.57 96,318 0.83 4,381,030 0.63 — — Granted 701,965 18.10 Forfeited — — (109,916) 0.77 November 7, 2021 1,868,913 $ 0.57 96,318 $ 0.83 4,271,114 $ 0.63 701,965 $ 18.10 (1) - For each Class F Unit a corresponding Class F-1 Unit is authorized, issued and outstanding. The Class F Units and Class F-1 Units are aggregated for purposes of valuation In connection with the Reorganization, the Incentive Unit holders contributed their units of LLC to Arhaus, Inc. in exchange for shares of Class A or Class B common stock for their vested Incentive Units and Class A or Class B restricted stock for their unvested Incentive Units (collectively referred to as the "Exchanged Stock"). The Exchanged Stock's fair value was equal to the respective Incentive Units’ fair market value prior to the Reorganization, which was in accordance with the distribution waterfall defined in the 2017 LLC Agreement. The vesting requirements for the exchanged Class A and Class B restricted stock (collectively the "Restricted Stock") did not change from the original Incentive Unit terms. The exchange of the Exchanged Stock was accounted for as a Type I (probable-to-probable) modification in accordance with ASC 718, Stock Based Compensation, in which no incremental fair value was determined to have been given to the Incentive Unit holders. The Exchanged Stock activity from the Reorganization to December 31, 2021 , is as follows: Common Stock Restricted Stock Class A Class B Class A Class B Shares Weighted Shares Weighted Shares Weighted Shares Weighted November 8, 2021 — — — — — — — — Issued 5,836,278 $ 16.28 6,148,146 $ 0.13 2,520,227 $ 16.28 596,598 $ 0.13 December 31, 2021 5,836,278 $ 16.28 6,148,146 $ 0.13 2,520,227 $ 16.28 596,598 $ 0.13 In November 2021, the 2021 Equity Plan was adopted by the Board of Directors which allows for the granting of nonqualified stock options, incentive stock options, stock appreciation rights or SARs, restricted stock, restricted stock units or RSUs, performance shares, performance share units, and other awards. As of December 31, 2021, the Company has not granted any awards to employees under the 2021 Equity Plan. Vested Incentive Units prior to the Reorganization in 2021 and the year-ended December 31, 2020, was as follows: Incentive Units Class C Class D Class F/F-1 Class G December 31, 2020 1,653,476 96,318 2,167,547 — November 7, 2021 1,868,913 96,318 2,982,442 — No shares of Class A or Class B restricted stock have vested from the Reorganization to December 31, 2021. The shares of the Incentive Units and Restricted Stock time vest and are accounted for as equity awards in which the fair value of the award is determined at the grant-date. The Company has recorded compensation expense of $1.8 million, $0.4 million and $0.3 million at December 31, 2021, 2020 and 2019, respectively, within the selling, general and administrative expenses line item of the consolidated statements of comprehensive income. Total unrecognized compensation cost to be recognized in future periods was $11.6 million at December 31, 2021, and will be recognized over a weighted average period of 4.31 years. The total grant-date fair value of units vested during the years ended December 31, 2021 and 2020, was $0.3 million and $0.4 million, respectively. In December 2021, Reed, a related party, transferred 421,350 shares of Class B common stock, which were automatically converted upon transfer to shares of Class A common stock to certain long-tenured employees of the Company, which was treated as an equity award. The transferred shares of Class A common stock do not have any vesting requirements. As a result of the transfer and awarding of the Class A common stock to employees, the Company recorded $4.6 million of compensation expense at December 31, 2021, within the selling, general and administrative expenses line item of the consolidated statements of comprehensive income. Further, Reed contributed $2.8 million to the Company in relation to the tax withholding obligations of the Company and those long tenured employees. The contribution was recorded as withholding expense within the selling, general and administrative expenses line item of the consolidated statements of comprehensive income. In accordance with the change in reporting entity, the Company’s consolidated financial statements include a deferred compensation liability related to a former employee of Homeworks. The current portion of the deferred compensation liability is included within accrued other expenses on the consolidated balance sheets for $1.1 million at December 31, 2020. The non-current portion of the deferred compensation liability is recorded within other long-term liabilities on the consolidated balance sheets for $3.9 million at December 31, 2020 , respectively. At the time of the Reorganization, Reed assumed the remaining deferred compensation liability which resulted in a capital contribution to additional paid-in-capital for $3.9 million at December 31, 2021. |
Segment Reporting
Segment Reporting | 12 Months Ended |
Dec. 31, 2021 | |
Segment Reporting [Abstract] | |
Segment Reporting | Segment Reporting Our chief operating decision maker (“CODM”) is our Chief Executive Officer, 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, lighting, textiles, décor, and outdoor. 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 more than ten percent or more of our net revenue. The following table shows revenue by merchandise sales channel for the years ended December 31, 2021, 2020 and 2019 (amounts in thousands): 2021 2020 2019 Retail $ 652,790 $ 417,426 $ 439,660 eCommerce 144,132 90,003 54,878 Total Net revenue $ 796,922 $ 507,429 $ 494,538 |
Net and Comprehensive Income pe
Net and Comprehensive Income per Share | 12 Months Ended |
Dec. 31, 2021 | |
Earnings Per Share [Abstract] | |
Net and Comprehensive Income per Share | Net and comprehensive income per share As a result of the Reorganization and IPO, existing Class A and Class B Unitholders of the Company were issued Class A and Class B common stock in Arhaus, Inc., in accordance with the distribution waterfall defined in the Company’s 2017 LLC Agreement. The Class A Unitholders received 80,792,206 shares of Class B common stock and the Class B Unitholders received 31,266,536 shares of Class A common stock. Accordingly, all share and per share amounts for all periods presented in the consolidated statements of comprehensive income and this note have been adjusted retroactively, where applicable, to reflect the Reorganization. Basic and diluted net and comprehensive income per share for the years ended December 31, 2021, 2020 and 2019 was calculated by adjusting net and comprehensive income attributable to Arhaus, Inc. for preferred dividends, net and comprehensive income attributable to noncontrolling interest and dividing by basic and diluted weighted-average number of common shares outstanding (amounts in thousands except unit and per share data). Management Incentive Unitholders and Preferred Unitholders do not participate in the earnings or losses of the Company as of December 31, 2021, 2020 and 2019 and therefore are not participating securities. As such, they are not included within the calculation of basic or diluted earnings per share as of December 31, 2021, 2020 and 2019 . Basic and diluted net and comprehensive income per share for the years ended December 31, 2021, 2020 and 2019, is as follows (amounts in thousands except unit and per unit data): 2021 2020 2019 Numerator Net and comprehensive income $ 36,932 $ 17,040 $ 15,842 Less: Preferred unit dividend unpaid $ — $ 2,847 $ 2,511 Less: Net and comprehensive income attributable to noncontrolling interest 15,815 10,958 8,315 Net and comprehensive income attributable to Arhaus, Inc. $ 21,117 $ 3,235 $ 5,016 Denominator—Weighted Average Shares Outstanding Weighted-average number of common shares outstanding, basic 116,013,492 112,058,742 112,058,742 Effect of dilutive restricted stock 3,507,950 — — Weighted-average number of common shares outstanding, diluted 119,521,442 112,058,742 112,058,742 Net and Comprehensive Income Per Share Net and comprehensive income per share, basic $ 0.18 $ 0.03 $ 0.04 Net and comprehensive income per share, diluted $ 0.18 $ 0.03 $ 0.04 |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and ContingenciesThe 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.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 December 31, 2021 and 2020, we recorded liabilities of $1.2 million and $1.2 million, respectively, in accrued other expenses on the consolidated balance sheets for non-income tax matters that were probable and reasonably estimable. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2021 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions The Company has beneficial owners and affiliated entities under the related party definition in ASC 850, “Related Party Disclosures.” Related parties include those defined in the Company’s proxy statement which has been incorporated by reference herein. In accordance with the change in reporting entity, the Company’s consolidated financial statements include a related-party receivable between Homeworks and Reed. The related-party receivable of $0.1 million is included within prepaid and other current assets on the consolidated balance sheets at December 31, 2020. In January of 2021, the Company also entered into a related-party note receivable with Reed for $1.0 million. The full principal on the note and accrued interest were received in May 2021. In accordance with the Reorganization, the Company has accounts payable due to the former noncontrolling interests of LLC for state and federal income tax refunds filed for tax periods prior to the Reorganization. The accounts payable due to related parties of $2.9 million at December 31, 2021 are included within accounts payable on the consolidated balance sheets. For additional discussion of the Company’s related party transactions see Notes 1, 5, 6 and 9. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2021 | |
Income Tax Disclosure [Abstract] | |
Income Tax Disclosure | Income Taxes Components of income (loss) before provision for (benefit from) income taxes include (in thousands): 2021 2020 Domestic $ 26,788 $ 17,823 Foreign — — Income (loss) before taxes $ 26,788 $ 17,823 The components of the provision for (benefit from) income taxes include (in thousands): 2021 2020 Current Federal $ 112 $ — State 218 783 Total current expense (benefit) 330 783 Deferred Federal (1) (7,754) State (1) (2,720) Total deferred expense (benefit) (10,474) — Income tax expense (benefit) $ (10,144) $ 783 (1) The 2021 deferred tax benefit reflects the recognition of deferred taxes as a result of the Reorganization. After the Reorganization, Arhaus LLC’s taxable income flows through to FS Arhaus and Homeworks who are subject to U.S. federal and state corporate income taxes. The difference between income taxes expected at the U.S. federal statutory income tax rate of 21% and the provision (benefit) for income taxes is summarized as follows: 2021 2020 Federal statutory income tax rate $ 5,625 $ 3,743 State taxes 101 783 Nontaxable partnership (a) (6,999) (3,743) FS Arhaus and Homeworks investment in LLC (a) (9,137) — Other 266 — Provision (benefit) for income taxes $ (10,144) 783 (a) Prior to the Reorganization, the Company was not subject to corporate income taxes. After the Reorganization, a deferred tax benefit related to Homeworks investment in the Arhaus, LLC partnership was recognized through income tax expense because Homeworks lost its nontaxable status through the Reorganization. The deferred tax benefit related to FS Arhaus, Inc.’s investment in Arhaus, LLC was recognized as a capital contribution to additional paid-in-capital for $17.4 million. Components of our deferred tax assets and liabilities include (in thousands): 2021 2020 Deferred tax assets Interest expense carryforwards $ 7,465 $ — Net operating loss carryforwards 1,768 — FS Arhaus investment in LLC 13,034 — Homeworks investment in LLC 5,417 — Total deferred tax assets 27,684 — Less: valuation allowance — — Total deferred tax assets, net of valuation allowance $ 27,684 $ — At year-end 2021, we have a federal NOL carryforward of $1.7 million that does not expire, state NOL carryforwards of $0.1 million that begin to expire in 2026 and an interest expense carryforward of $7.5 million that does not expire. A portion of our interest carryforward is subject to Section 382 as a result of the Reorganization. Based on available evidence (namely, a three-year cumulative income position), management believes it is more-likely-than-not that the net U.S. and state deferred tax assets will be fully realizable. We have not recorded a valuation allowance against deferred tax assets. No unrecognized tax benefits have been recognized as of December 31, 2021 and 2020. We recognize accrued interest and penalties related to unrecognized tax benefits within the provision for income taxes in the consolidated statements of operations. There were no amounts of interest and penalties accrued as of December 31, 2021 and 2020. We file income tax returns in the U.S. and various state and local jurisdictions. The tax years after 2017 remain open to examination by the state taxing jurisdictions in which the Company is subject to tax. As of December 31, 2021, the Company was not under examination by the Internal Revenue Service or any state tax jurisdiction. |
Basis of Presentation and Sum_2
Basis of Presentation and Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2021 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accounting and reporting policies of the Company are in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The 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. Certain reclassifications have been made to prior years' consolidated financial statements to conform to the current year's presentation. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Cash and Cash Equivalents | Cash and Cash EquivalentsThe Company considers cash and all other highly liquid investments with an original maturity of three months or less to be cash equivalents. |
Restricted Cash Equivalents | Restricted Cash Equivalents The Company maintains certain cash balances restricted as to withdrawal or use. Restricted cash is comprised primarily of cash used as collateral for the Company’s credit card sales processing partner, a portion of our workers’ compensation obligations that our insurance carrier requires us to collateralize and a portion of our customs obligation that the U.S Customs and Border Protection requires us to collateralize. |
Accounts Receivable | Accounts Receivable The Company’s accounts receivables are $0.2 million and $0.6 million, respectively, at December 31, 2021 and 2020, net of allowance for doubtful accounts of $0.2 million and $0.3 million, respectively. The allowance for doubtful accounts 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 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 doubtful accounts. Accounts receivable are recorded at the invoiced amount and do not bear interest. |
Revenue Recognition | Revenue Recognition Net revenue consists of sales to clients, net of returns, discounts, and rebates. Net revenue and cost of goods sold are recognized when performance obligations under the terms of the contract are satisfied and the control of merchandise has been transferred to a client, which occurs when merchandise is received by our clients. Net revenue from “direct-to-client” and “home-delivered” sales are recognized when the merchandise is delivered to the client. Net revenue from “cash-and-carry” Showroom sales are recognized at the point of sale in the Showroom. Discounts provided to clients are accounted for as a reduction of sales at the point of sale. Sales commissions are incremental costs and are expensed as incurred. A reserve is recorded for projected merchandise returns based on actual historical return rates. The Company provides an allowance for sales returns based on historical return rates, which is presented on a gross basis. The allowance for sales returns is presented within other current liabilities and the estimated value of the right of return asset for merchandise is presented within prepaid expense and other current assets on the consolidated balance sheets. Actual merchandise returns are monitored regularly and have not been materially different from the estimates recorded. Merchandise returns are granted for various reasons, including delays in merchandise delivery, merchandise quality issues, client preference and other similar matters. The Company has various return policies for their merchandise, depending on the type of merchandise sold. Returned merchandise often represents merchandise that can be resold. Amounts refunded to clients are generally made by issuing the same payment tender as used in the original purchase. Merchandise exchanges of the same merchandise at the same price are not considered merchandise returns and, therefore, are excluded when calculating the sales returns reserve. The allowance for sales returns of $5.6 million and $5.1 million at December 31, 2021 and 2020, respectively, is recorded in the accrued other expenses line item on the consolidated balance sheets. All taxes assessed by a government authority that are both imposed on and concurrent with a specific revenue producing transaction and collected by the Company from clients are excluded from the measurement of the transaction price. As a result, sales are stated net of tax. Shipping and handling is recognized as an activity to fulfill the performance obligation of transferring merchandise to clients, therefore the fees are recorded in net revenue. The costs incurred by the Company for shipping and handling are included in cost of goods sold, and the costs of shipping and handling activities are accrued for in the same period as the delivery to clients. The Company collects various taxes as an agent in connection with the sale of merchandise and remits these amounts to the respective taxing authorities. These taxes are included within accrued taxes line item of the consolidated balance sheets until remitted to the respective taxing authorities. Client deposits represent payments made by clients on orders. At the time of purchase, the Company collects deposits for all orders equivalent to at least 50 percent of the client’s 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 Company expects that substantially all client deposits as of December 31, 2021 will be recognized within 2022 as the performance obligations are satisfied. Private Label Credit Card The Company has an agreement with a Credit Card Issuer (“Issuer”) to provide clients with private label credit cards (the “Card Agreement”) which was amended on January 13, 2021 to extend the term of the agreement through August 31, 2026. Each private label credit card bears the Arhaus brand logo and can only be used at the Company’s Showroom locations or website. The Issuer is the sole owner of the accounts issued under the private label credit card program and absorbs the losses associated with non-payment by the private label card holders and a portion of any fraudulent usage of the accounts. During the term of the Card Agreement, the Company receives a percentage of private label credit card sales from the Issuer and is also eligible to receive incentive payments for the achievement of certain targets. These funds are recorded within net revenue in the consolidated statements of comprehensive income. The Company also receives reimbursement funds from the Issuer for certain expenses the Company incurs. These reimbursement funds are used by the Company to fund marketing and other programs associated with the private label credit card and are recorded within net revenue in the consolidated statements of comprehensive income. Gift Cards The Company sells gift cards to our clients in our Showrooms and through our website. 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 of $0.9 million and $0.8 million at December 31, 2021 and 2020, respectively, is recorded in the accrued other expenses line item of the consolidated balance sheets. The Company recognizes income associated with breakage proportional to actual gift card redemptions. |
Merchandise Inventory | Merchandise Inventory The Company’s merchandise inventory is comprised primarily of finished goods and is carried at the lower of cost or net realizable value, with cost determined on a weighted-average cost method. To determine if the value of inventory should be marked down, below original cost, we use estimates to determine the lower of cost or net realizable value, which considers current and anticipated demand, client preference and merchandise age. |
Advertising Costs | Advertising Costs Except for costs associated with the semi-annual catalogs, the Company expenses advertising costs as incurred because data is limited and not conclusive in justifying the capitalization of such expenses for future benefit. Advertising costs amounted to $35.9 million, $24.4 million and $23.4 million for the years ended December 31, 2021, 2020 and 2019, respectively, and are included within the selling, general and administrative expenses line item on the consolidated statements of comprehensive income. Expense associated with the catalogs are recognized upon the delivery of the catalogs to the carrier. |
Property, Furniture and Equipment | Property, Furniture and Equipment Property, furniture and equipment is stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization is calculated using the straight-line method generally using the following useful lives: Asset class/ type Useful Life-Years Leased property under capital lease Term of the underlying lease Leasehold improvements Lesser of 10 years or lease term Landlord improvements Lesser of 10 years or lease term Furniture and fixtures 3 to 5 years Computers and equipment 3 to 10 years Vehicles 5 to 10 years Capitalized software costs relate to third-party developed software and are amortized on a straight-line basis over the estimated useful life of the software, which generally is three years. |
Property, Furniture and Equipment, Impairment | Property, furniture and equipment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. For further discussion regarding the impairment accounting policy refer to “Long-Lived Assets.” |
Goodwill | Goodwill Goodwill represents the excess of the purchase price over the fair value of assets and liabilities acquired in a business combination. The Company operates as one segment and has a single reporting unit, Arhaus Consolidated. For the purposes of goodwill impairment testing, a reporting unit is defined as an operating segment or one level below an operating segment (referred to as a component) for which discrete financial information is available. We test goodwill for impairment on an annual basis in the fourth quarter of each year, and more frequently if events or changes in circumstances indicate that it might be impaired. Circumstances that may indicate impairment include, but are not limited to: • Deterioration in general economic conditions, limitations on accessing capital, or other developments in equity and credit markets; • Industry and market considerations such as deterioration in the environment in which the Company operates, an increased competitive environment, a decline in market dependent multiples or metrics, a change in the market for the Company’s merchandise or services, or a regulatory or political development; • Cost factors that have a negative effect on earnings and cash flows; • Overall financial performance; • Changes in management, key personnel, strategy, or clients; • A sustained decrease in share price in either absolute terms or relative to peers. Under U.S. GAAP, we have the option to first assess qualitative factors in order to determine if it is more likely than not that the fair value of our reporting unit is greater than its carrying value (“Step 0”). The term more likely than not refers to a level of likelihood that is more than 50 percent. If the qualitative assessment leads to a determination that the reporting unit’s fair value is less than its carrying value, or if we elect to bypass the qualitative assessment altogether, we are required to perform a quantitative impairment test (“Step 1”) by calculating the fair value of the reporting unit and comparing the fair value with its associated carrying value. We will recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. We determine fair values using an equally weighted combination of the discounted cash flow approach (“income approach”) and the guideline public company method (“market approach”), based upon the relevance and availability of the data at the time we perform the valuation. Under the income approach, fair value is determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. We use our internal forecasts to estimate future cash flows and include an estimate of long-term future growth rates based on our most recent views of the long-term outlook for the reporting unit. Actual results may differ from those assumed in our forecasts. We derive our discount rate based on our weighted average cost of capital determined by using a combination of the capital asset pricing model, the cost of debt and an appropriate industry capital structure. We use a discount rate that is commensurate with the risks and uncertainty inherent in the respective businesses and in our internally developed forecasts. Valuations using the market approach are derived from metrics of publicly traded companies that are deemed sufficiently similar to the Company. Estimating the fair value of reporting units requires the use of estimates and significant judgments that are based on a number of factors including actual operating results. It is reasonably possible that the judgments and estimates described above could change in future periods. |
Long-Lived Assets | Long-Lived Assets The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of those assets may not be recoverable. Circumstances that may indicate impairment include, but are not limited to: • A significant decrease in the market price of a long-lived asset or asset group; • A significant adverse change in the extent or manner in which a long-lived asset or asset group is being used or in its physical condition; • A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset or asset group, including an adverse action or assessment by a regulator; • an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset or asset group; • A current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group; • A current expectation that, more likely than not, a long-lived asset or asset group will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. An asset group is defined as the lowest level for which identifiable cash flows are available and largely independent of the cash flows of other groups of assets, which for our Showrooms is the individual Showroom level. In those circumstances, the Company performs an undiscounted cash flow analysis to determine if an impairment exists. If the sum of the estimated undiscounted future cash flows over the remaining life of the asset are less than the carrying value, the Company will recognize an impairment charge equal to the difference between the carrying value and the fair value, usually determined by the estimated discounted future cash flows associated with the asset. |
Deferred Rent and Lease Incentives | Deferred Rent and Lease Incentives For leases that contain fixed escalations of the minimum annual lease payment during the original term of the lease, the Company recognizes rental expense on a straight-line basis over the lease term and records the difference between rent expense and the amount currently payable as deferred rent. The Company records rental expense during the construction period, as the expected lease term begins the date the Company takes possession for construction or other purposes. Deferred lease incentives include construction allowances received from landlords, which are amortized on a straight-line basis over the initial lease term, including the construction period. |
Merchandise Warranties | 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 |
Income Taxes | Income Taxes We account for income taxes under an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. In estimating future tax consequences, we generally take into account all expected future events then known to us, other than changes in the tax law or rates which have not yet been enacted and which are not permitted to be considered. We may record a valuation allowance to reduce our net deferred tax assets to the amount that is more-likely-than-not to be realized. The determination as to whether a deferred tax asset will be realized is made on a jurisdictional basis and is based upon the weight of available evidence. Future taxable income of the appropriate character in either the carryback or carryforward period under the tax law and ongoing prudent and feasible tax planning are considered in determining the amount of the valuation allowance, and the amount of the allowance is subject to adjustment in the future. Specifically, in the event we were to determine that it is not more-likely-than-not that we would be able to realize our net deferred tax assets in the future, an adjustment to the valuation allowance would decrease net income in the period such determination is made. This allowance does not alter our ability to utilize the underlying tax net operating loss and credit carryforwards in the future, the utilization of which requires future taxable income. The accounting standard for uncertainty in income taxes prescribes a recognition threshold that a tax position is required to meet before being recognized in the financial statements and provides guidance on subsequent recognition, derecognition, and measurement based on management’s best judgement given the facts, circumstances, and information available at the reporting date. Differences between tax positions taken in a tax return and amounts recognized in the financial statements generally result in an increase in liability for income taxes payable or a reduction of an income tax refund receivable, or a reduction in a deferred tax asset or an increase in a deferred tax liability, or both. At December 31, 2021 and 2020, the Company assessed its income tax positions and concluded that it had no unrecognized tax benefits. We recognize interest and penalties related to unrecognized tax benefits in income tax expense on the consolidated statements of comprehensive income. No such interest and penalties were recorded for the years ended December 31, 2021, 2020 or 2019. Prior to the Reorganization, the Company was a limited liability company under the Internal Revenue Code that had elected to be taxed as a partnership and did not pay federal or most state corporate income taxes on its taxable income, but rather its members were liable for their respective portions of the taxable income (loss) of Arhaus, LLC. Therefore, no provision for federal income taxes are included in these consolidated financial statements prior to the Reorganization. Subsequent to the Reorganization, Arhaus, LLC’s taxable income flows through to FS Arhaus and Homeworks who are subject to U.S. federal and state corporate income taxes. |
Cost of Goods Sold | Cost of Goods Sold Cost of goods sold includes, but is not limite d to, the direct cost of purchased merchandise, inventory shrinkage, inbound freight, all freight costs to get merchandise to our Showrooms, design, buying and allocation costs, credit card fees, occupancy costs related to Showroom operations and supply chain such as rent, property tax and common area maintenance for our leases, depreciation and amortization of leasehold improvements, equipment and other assets in our S howrooms and distribution centers, sourcing related costs, and all logistics costs associated with shipping merchandise to clients. |
Selling, General and Administrative Expenses | Selling, General and Administrative ExpensesSelling, general and administrative expenses include all operating costs not included in cost of goods sold. These expenses include payroll and payroll related expenses, Showroom expenses other than occupancy,and expenses related to many of our operations at our corporate headquarters, including utilities, depreciation and amortization and marketing expense, which primarily includes catalog production, mailing and print advertising costs. Payroll includes both fixed compensation and variable compensation. Variable compensation includes Showroom commissions and Showroom bonus compensation related to demand, likely before the client obtains control of the merchandise. Variable compensation is primarily received by Showroom employees and is not significant in our eCommerce channel. All new Showroom opening expense other than occupancy are included in selling, general and administrative expenses and are expensed as incurred. |
Loyalty Reward Program | Loyalty Reward ProgramIn January of 2019, the Company established a loyalty reward program for clients who use the Company’s private label credit card to receive rewards based on the client’s merchandise purchases. The liabilities associated with the rewards are established on the consolidated balance sheets when the rewards are issued and are removed from the consolidated balance sheets, either when used by the client or upon expiration (3 months from when the reward is issued). |
Self Insurance Reserve | Self-InsuranceWe maintain insurance coverage for significant exposures as well as those risks that, by law, must be insured. In the case of health care coverage for employees, we have a managed self-insurance program related to claims filed. Expenses related to this self-insured program are computed on an actuarial basis, based on claims experience, regulatory requirements, an estimate of claims incurred but not yet reported (“IBNR”) and other relevant factors. The projections involved in this process are subject to uncertainty related to the timing and number of claims filed, levels of IBNR, fluctuations in health care costs and changes to regulatory requirements. |
Fair Value of Financial Instruments | Fair Values of Financial Instruments The Company’s primary financial instruments are accounts receivable, payables, lease obligations, derivatives, and equity based compensation instruments. Due to the short-term maturities of accounts receivable and payables, the Company believes the fair values of these instruments approximate their respective carrying values at December 31, 2021 and 2020. See Note 5 for discussion of our derivative, Note 6 for discussion of our lease obligations and Note 9 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 1 Unadjusted 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 2 Inputs 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 3 Unobservable 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. |
Deferred Financing Fees | Deferred Financing Fees Debt issuance costs were recorded as part of the establishment of the Company’s financing arrangements (see Note 5). The debt issuance costs were recorded within the other noncurrent assets line item on the consolidated balance sheets and were amortized as interest expense over the contractual life of the debt structure using the straight-line method, which approximates the effective interest rate method. |
Equity Based Compensation | Equity Based Compensation In connection with the Reorganization, the Company adopted the 2021 Equity Incentive Plan (the “2021 Equity Plan”), which authorized the Company to grant stock options (either incentive or non-qualified), stock appreciation rights or SARs, restricted stock, restricted stock units or RSUs, performance shares, performance share units and other stock-based awards with respect to our Class A common stock. As of December 31, 2021, the Company has not granted any awards to employees under the 2021 Equity Plan. Prior to the Reorganization, the Company granted incentive units to employees and computes the costs arising from the grants at fair value and recognizes such costs as expense over the vesting period for the units. The Company uses the Black-Scholes valuation model which requires the input of assumptions regarding the expected term, expected volatility, dividend yield and risk-free interest rate to estimate the fair value of its incentive unit arrangements. The Company accounts for forfeitures as they occur. See Note 9 for further discussion of the incentive unit arrangements. |
Net and comprehensive income (loss) per share | Net and comprehensive income (loss) per share Basic net and comprehensive income (loss) per share is computed as net income (loss) attributable to Arhaus, Inc. divided by the weighted-average number of common shares outstanding for the period. Diluted net and comprehensive income (loss) per share is computed as net income (loss) attributable to Arhaus, Inc. divided by the weighted-average number of common shares outstanding for the period and common share equivalents under equity plans using the treasury stock method. Potential dilutive securities are excluded from the computation of diluted net income per share if their effect is anti-dilutive. |
New Accounting Standards or Updates Adopted and Not Yet Adopted | New Accounting Standard or Updates Adopted In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill by removing the second step of the two-step impairment test. The amendment requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. A goodwill impairment will be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The standard is effective for the Company for interim and annual reporting periods beginning after December 15, 2022; early adoption is permitted. The Company adopted the standard effective January 1, 2020, with no impact to our financial statements. New Accounting Standards or Updates Not Yet Adopted In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases which, for operating leases, requires a lessee to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in its balance sheets. While it will still be necessary for lessees to distinguish between “operating” and “financing” (formerly known as “capital”) leases, these distinctions will primarily affect how a lessee must recognize expense in its income statement. The new guidance is effective for financial statements issued for annual periods beginning after December 15, 2021. Early adoption is permitted. The adoption of this ASU will result in a material increase on the Company’s consolidated balance sheets for lease liabilities and right-of-use assets. While the Company is continuing to evaluate all potential impacts of the standard, the Company does not expect adoption to have a material impact on the Company’s consolidated net earnings or cash flows. We will adopt the new standard using the modified retrospective approach, which requires application of the new guidance at our application date of January 1, 2022 with a cumulative-effect adjustment to retained earnings. Comparative periods will continue to be presented in accordance with ASC 840. The Company elected the package of practical expedients which allows the Company to not reassess its previous conclusions about lease identification, lease classification and initial direct costs. The Company elected the “Short-Term Leases” practical expedient and therefore will not recognize a lease liability and right-of-use asset for leases with a term of 12 months or less. The Company has decided not to elect the “Land Easements” or “Hindsight” practical expedients. As a result, the Company will measure the right-of-use asset and lease liability for operating leases upon adoption using the remaining portion of the lease term that was determined under ASC 840. A cross-functional implementation team is finalizing the discount rate to be used based on January 1, 2022 data, and business processes and controls to support recognition and disclosure under the new standard. The primary impact upon adoption will be the recognition of right-of-use assets and lease liabilities, on a discounted basis, of our minimum lease obligations, and the derecognition of existing assets and liabilities for certain assets under construction in build-to-suit lease arrangements that the Company will lease when construction is complete, as disclosed in Note 6. The Company has substantially completed the process of assessing the impact the adoption of this ASU will have on our consolidated financial statements. We estimate the impact to be $227.7 million to $246.7 million re cognized as total right-of-use assets and $310.6 million to $336.5 million recognized as total lease liabilities on our consolidated balance sheet as of January 1, 2022. As part of the adoption, the Company will also derecognize existing assets and liabilities for certain assets under construction in build-to-suit arrangements of $31.0 million. We currently do not expect ASU 2016-12 to have a material effect on our consolidated statements of comprehensive income. In October 2020, the FASB issued ASU 2020-10, “Codification Improvements.” The amendments in this Update represent changes to clarify the Codification or correct unintended application of guidance that are not expected to have a significant effect on current accounting practice. The amendments in this Update affect a wide variety of Topics in the Codification and apply to all reporting entities within the scope of the affected accounting guidance. ASU 2020-10 is effective for annual periods beginning after December 15, 2021 for non-public business entities. Early application is permitted. The amendments in this Update should be applied retrospectively. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements. |
Basis of Presentation and Sum_3
Basis of Presentation and Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Accounting Policies [Abstract] | |
Property, Furniture, and Equipment, Useful Life | Property, furniture and equipment is stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization is calculated using the straight-line method generally using the following useful lives: Asset class/ type Useful Life-Years Leased property under capital lease Term of the underlying lease Leasehold improvements Lesser of 10 years or lease term Landlord improvements Lesser of 10 years or lease term Furniture and fixtures 3 to 5 years Computers and equipment 3 to 10 years Vehicles 5 to 10 years |
Merchandise Warranty Liability | A reconciliation of the changes in our limited merchandise warranty liability were as follows (amounts in thousands): 2021 2020 Balance as of beginning of year $ 3,326 $ 3,164 Accruals during the year 7,903 4,548 Settlements during the year (6,505) (4,386) Balance as of end of the year (1) $ 4,724 $ 3,326 (1) $2.7 million and $1.8 million were recorded in accrued other expenses at December 31, 2021 and 2020 , respectively. The remainder is recorded in other long-term liabilities. |
Property, Furniture, and Equi_2
Property, Furniture, and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment | Property, furniture and equipment, net consists of the following at December 31, 2021 and 2020 (amounts in thousands): 2021 2020 Leased property under capital lease $ 48,303 $ 45,205 Leasehold improvements 42,418 39,704 Landlord improvements 137,106 126,245 Furniture and fixtures 5,411 4,598 Computer and equipment 25,124 17,965 Vehicles 9,229 78 Build-to-suit properties 31,017 — Construction in process 10,457 638 309,065 234,433 Less: Accumulated depreciation (54,054) (46,759) Less: Landlord improvement accumulated depreciation (75,380) (69,978) Property, furniture and equipment, net $ 179,631 $ 117,696 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Debt Disclosure [Abstract] | |
Schedule of Fair Value Assumptions for Long-Term Debt | The key assumptions used within the valuation as December 31, 2020 were as follows: Term . . . . . . . . . . . . 10 years Risk-free rate of return 0.90% Volatility . . . . . . . . 40.00% Dividend yield . . . . 0% |
Leases (Tables)
Leases (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Leases [Abstract] | |
Schedule of Future Minimum Lease Payments Under Capital Leases | Future minimum lease payments for the capital lease related to the Company’s corporate headquarters and distribution center at December 31, 2021, are as follows (amounts in thousands): Year Ending December 31, 2022 $ 4,673 2023 4,673 2024 4,673 2025 4,673 2026 5,132 Thereafter 120,390 144,214 Less: Amounts representing interest (94,064) $ 50,150 |
Schedule of Future Minimum Rental Payments Under Operating Leases | Future minimum rental payments required under operating leases with initial or remaining noncancelable lease terms in excess of one year at December 31, 2021, are as follows (amounts in thousands): Year Ending December 31, Third Party Related Party Total 2022 $ 43,540 $ 2,352 $ 45,892 2023 41,145 2,362 43,507 2024 37,191 1,468 38,659 2025 32,159 966 33,125 2026 29,105 798 29,903 Thereafter 125,252 4,246 129,498 $ 308,392 $ 12,192 $ 320,584 |
Equity Based Compensation (Tabl
Equity Based Compensation (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Share-based Payment Arrangement [Abstract] | |
Fair Value Assumptions | The key assumptions used for the January 31, 2019 and September 30, 2019 Class F/F-1 incentive unit grants within the Black-Scholes model were as follows: September 30, 2019 January 31, 2019 Term 5 years 5 years Risk-free rate of return 1.90% 2.60% Volatility 36.10% 73.40% Dividend yield 0% 0% 2021 Awards Term 10 years Risk-free rate of return 1.50% Volatility 40.00% Dividend yield 0% |
Incentive Unit Activity | Prior to the Reorganization in November 2021, the Incentive Unit activity for the period prior to the Reorganization in 2021 and the year ended December 31, 2020, was as follows: Incentive Units Class C Class D Class F/F-1 Class G Units Weighted Units Weighted Units Weighted Units Weighted December 31, 2019 1,868,913 $ 0.57 96,318 $ 0.83 4,984,390 $ 0.63 — $ — Purchased — — (36,638) 0.36 — Forfeited — — (566,722) 0.61 — December 31, 2020 1,868,913 0.57 96,318 0.83 4,381,030 0.63 — — Granted 701,965 18.10 Forfeited — — (109,916) 0.77 November 7, 2021 1,868,913 $ 0.57 96,318 $ 0.83 4,271,114 $ 0.63 701,965 $ 18.10 (1) - For each Class F Unit a corresponding Class F-1 Unit is authorized, issued and outstanding. The Class F Units and Class F-1 Units are aggregated for purposes of valuation The Exchanged Stock activity from the Reorganization to December 31, 2021 , is as follows: Common Stock Restricted Stock Class A Class B Class A Class B Shares Weighted Shares Weighted Shares Weighted Shares Weighted November 8, 2021 — — — — — — — — Issued 5,836,278 $ 16.28 6,148,146 $ 0.13 2,520,227 $ 16.28 596,598 $ 0.13 December 31, 2021 5,836,278 $ 16.28 6,148,146 $ 0.13 2,520,227 $ 16.28 596,598 $ 0.13 |
Incentive Units Vested | Vested Incentive Units prior to the Reorganization in 2021 and the year-ended December 31, 2020, was as follows: Incentive Units Class C Class D Class F/F-1 Class G December 31, 2020 1,653,476 96,318 2,167,547 — November 7, 2021 1,868,913 96,318 2,982,442 — |
Segment Reporting (Tables)
Segment Reporting (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Segment Reporting [Abstract] | |
Net Revenue by Segment | The following table shows revenue by merchandise sales channel for the years ended December 31, 2021, 2020 and 2019 (amounts in thousands): 2021 2020 2019 Retail $ 652,790 $ 417,426 $ 439,660 eCommerce 144,132 90,003 54,878 Total Net revenue $ 796,922 $ 507,429 $ 494,538 |
Net and Comprehensive Income _2
Net and Comprehensive Income per Share (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Earnings Per Share [Abstract] | |
Calculation of Basic and Diluted Earnings Per Share | Basic and diluted net and comprehensive income per share for the years ended December 31, 2021, 2020 and 2019, is as follows (amounts in thousands except unit and per unit data): 2021 2020 2019 Numerator Net and comprehensive income $ 36,932 $ 17,040 $ 15,842 Less: Preferred unit dividend unpaid $ — $ 2,847 $ 2,511 Less: Net and comprehensive income attributable to noncontrolling interest 15,815 10,958 8,315 Net and comprehensive income attributable to Arhaus, Inc. $ 21,117 $ 3,235 $ 5,016 Denominator—Weighted Average Shares Outstanding Weighted-average number of common shares outstanding, basic 116,013,492 112,058,742 112,058,742 Effect of dilutive restricted stock 3,507,950 — — Weighted-average number of common shares outstanding, diluted 119,521,442 112,058,742 112,058,742 Net and Comprehensive Income Per Share Net and comprehensive income per share, basic $ 0.18 $ 0.03 $ 0.04 Net and comprehensive income per share, diluted $ 0.18 $ 0.03 $ 0.04 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Income Tax Disclosure [Abstract] | |
Schedule of Income (Loss) Before Provision for (Benefit from) Income Taxes | Components of income (loss) before provision for (benefit from) income taxes include (in thousands): 2021 2020 Domestic $ 26,788 $ 17,823 Foreign — — Income (loss) before taxes $ 26,788 $ 17,823 |
Schedule of Components of the Provision for (Benefit from) Income Taxes | The components of the provision for (benefit from) income taxes include (in thousands): 2021 2020 Current Federal $ 112 $ — State 218 783 Total current expense (benefit) 330 783 Deferred Federal (1) (7,754) State (1) (2,720) Total deferred expense (benefit) (10,474) — Income tax expense (benefit) $ (10,144) $ 783 |
Schedule of Effective Income Tax Rate Reconciliation | The difference between income taxes expected at the U.S. federal statutory income tax rate of 21% and the provision (benefit) for income taxes is summarized as follows: 2021 2020 Federal statutory income tax rate $ 5,625 $ 3,743 State taxes 101 783 Nontaxable partnership (a) (6,999) (3,743) FS Arhaus and Homeworks investment in LLC (a) (9,137) — Other 266 — Provision (benefit) for income taxes $ (10,144) 783 (a) Prior to the Reorganization, the Company was not subject to corporate income taxes. After the Reorganization, a deferred tax benefit related to Homeworks investment in the Arhaus, LLC partnership was recognized through income tax expense because Homeworks lost its nontaxable status through the Reorganization. The deferred tax benefit related to FS Arhaus, Inc.’s investment in Arhaus, LLC was recognized as a capital contribution to additional paid-in-capital for $17.4 million. |
Schedule of Deferred Tax Assets and Liabilities | Components of our deferred tax assets and liabilities include (in thousands): 2021 2020 Deferred tax assets Interest expense carryforwards $ 7,465 $ — Net operating loss carryforwards 1,768 — FS Arhaus investment in LLC 13,034 — Homeworks investment in LLC 5,417 — Total deferred tax assets 27,684 — Less: valuation allowance — — Total deferred tax assets, net of valuation allowance $ 27,684 $ — |
Nature of Business (Details)
Nature of Business (Details) | Nov. 08, 2021$ / sharesshares | Nov. 04, 2021USD ($)$ / sharesshares | Dec. 31, 2021USD ($)stores$ / sharesshares | Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($) |
Nature of Business [Line Items] | |||||
Number of showrooms | stores | 79 | ||||
Proceeds from sale of stock under IPO | $ 157,258,000 | $ 0 | $ 0 | ||
Payments of offering costs | 5,907,000 | 0 | $ 0 | ||
Cash and cash equivalents | 123,777,000 | 57,093,000 | |||
Noncontrolling interest | $ 0 | (7,689,000) | |||
Common stock , shares authorized (in shares) | shares | 750,000,000 | ||||
Preferred stock, shares authorized (in shares) | shares | 50,000,000 | ||||
Homeworks | |||||
Nature of Business [Line Items] | |||||
Cash and cash equivalents | 6,400,000 | ||||
Deferred compensation liability | 5,000,000 | ||||
Noncontrolling interest | $ (7,700,000) | ||||
Restricted Stock | |||||
Nature of Business [Line Items] | |||||
Stock issued in Reorganization (in shares) | shares | 127,159,991 | ||||
Loan Payable | Term Loan | |||||
Nature of Business [Line Items] | |||||
Loan, exit fee, payment | $ 64,100,000 | ||||
Class A | |||||
Nature of Business [Line Items] | |||||
Common stock , shares authorized (in shares) | shares | 600,000,000 | 600,000,000 | |||
Common stock, par value (in dollars per share) | $ / shares | $ 0.001 | ||||
Stock issued in Reorganization (in shares) | shares | 39,623,041 | ||||
Class A | Restricted Stock | |||||
Nature of Business [Line Items] | |||||
Stock issued in Reorganization (in shares) | shares | 2,520,227 | ||||
Class A | IPO | |||||
Nature of Business [Line Items] | |||||
Sale of stock, shares sold (in shares) | shares | 12,903,226 | ||||
Sale of stock, price per share (in dollars per share) | $ / shares | $ 13 | ||||
Proceeds from sale of stock under IPO | $ 151,400,000 | ||||
Common stock, discount on shares | 10,400,000 | ||||
Payments of offering costs | $ 5,900,000 | ||||
Class B | |||||
Nature of Business [Line Items] | |||||
Common stock , shares authorized (in shares) | shares | 100,000,000 | 100,000,000 | |||
Common stock, par value (in dollars per share) | $ / shares | $ 0.001 | $ 0.001 | |||
Stock issued in Reorganization (in shares) | shares | 87,536,950 | ||||
Class B | Restricted Stock | |||||
Nature of Business [Line Items] | |||||
Stock issued in Reorganization (in shares) | shares | 596,598 | ||||
Preferred Stock | |||||
Nature of Business [Line Items] | |||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.001 |
Basis of Presentation and Sum_4
Basis of Presentation and Summary of Significant Accounting Policies - Narrative (Details) $ in Thousands | 12 Months Ended | |||||||
Dec. 31, 2021USD ($) | Dec. 31, 2021USD ($) | Dec. 31, 2021USD ($) | Dec. 31, 2021USD ($)stores | Dec. 31, 2021USD ($)segment | Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($) | Jan. 01, 2022USD ($) | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||||
Cash and cash equivalents | $ 123,777 | $ 123,777 | $ 123,777 | $ 123,777 | $ 123,777 | $ 57,093 | ||
Accounts receivable, net | 228 | 228 | 228 | 228 | 228 | 600 | ||
Allowance for doubtful accounts | 200 | 200 | 200 | 200 | 200 | 300 | ||
Allowance for sales returns | 5,600 | 5,600 | $ 5,600 | 5,600 | 5,600 | 5,100 | ||
Client deposits, percentage collected (at least) | 50.00% | |||||||
Merchandise inventory reserve | 4,200 | 4,200 | $ 4,200 | 4,200 | 4,200 | 2,700 | ||
Prepaid capital costs | 11,500 | 11,500 | 11,500 | 11,500 | 11,500 | 10,200 | ||
Advertising costs | 35,900 | 24,400 | $ 23,400 | |||||
Depreciation and amortization | 23,922 | 16,957 | 15,964 | |||||
Unrecognized tax benefits | 0 | 0 | 0 | 0 | 0 | 0 | ||
Unrecognized tax benefits, penalties and interest expense | 0 | 0 | $ 0 | |||||
Other accrued expenses, loyalty program | 1,300 | 1,300 | 1,300 | 1,300 | 1,300 | 900 | ||
Self insurance liability | 900 | 900 | 900 | 900 | 900 | 600 | ||
Workers' compensation liability | 200 | 200 | 200 | 200 | 200 | $ 400 | ||
Construction costs | 31,000 | 31,000 | $ 31,000 | $ 31,000 | $ 31,000 | |||
Number of operating segments (in segments) | 1 | 1 | ||||||
Number of reporting units | stores | 1 | |||||||
Immaterial error correction, unrecorded | 3,000 | |||||||
Vendor 1 | Accounts Payable | Product Concentration Risk | ||||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||||
Concentration risk (percent) | 18.00% | 25.00% | ||||||
Other Accrued Expenses | ||||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||||
Other accrued expenses, gift cards | $ 900 | 900 | $ 900 | $ 900 | $ 900 | $ 800 | ||
Minimum | ||||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||||
Merchandise warranty, term | 3 years | |||||||
Minimum | Subsequent Event | Accounting Standards Update 2016-02 | ||||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||||
Operating lease right-of-use assets | $ 227,700 | |||||||
Operating lease liabilities | 310,600 | |||||||
Minimum | Software and Software Development Costs | ||||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||||
Estimated useful life | 3 years | |||||||
Maximum | ||||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||||
Merchandise warranty, term | 10 years | |||||||
Maximum | Subsequent Event | Accounting Standards Update 2016-02 | ||||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||||
Operating lease right-of-use assets | 246,700 | |||||||
Operating lease liabilities | $ 336,500 | |||||||
In-Transit from Credit Card Companies | ||||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||||
Cash and cash equivalents | $ 9,100 | $ 9,100 | $ 9,100 | $ 9,100 | $ 9,100 | $ 5,700 |
Basis of Presentation and Sum_5
Basis of Presentation and Summary of Significant Accounting Policies - Property, Furniture, and Equipment, Useful Life (Details) | 12 Months Ended |
Dec. 31, 2021 | |
Maximum | Leasehold improvements | |
Property, Plant and Equipment [Line Items] | |
Property, Plant and Equipment, Useful Life | 10 years |
Maximum | Landlord improvements | |
Property, Plant and Equipment [Line Items] | |
Property, Plant and Equipment, Useful Life | 10 years |
Maximum | Furniture and fixtures | |
Property, Plant and Equipment [Line Items] | |
Property, Plant and Equipment, Useful Life | 5 years |
Maximum | Computer and equipment | |
Property, Plant and Equipment [Line Items] | |
Property, Plant and Equipment, Useful Life | 10 years |
Maximum | Vehicles | |
Property, Plant and Equipment [Line Items] | |
Property, Plant and Equipment, Useful Life | 10 years |
Minimum | Furniture and fixtures | |
Property, Plant and Equipment [Line Items] | |
Property, Plant and Equipment, Useful Life | 3 years |
Minimum | Computer and equipment | |
Property, Plant and Equipment [Line Items] | |
Property, Plant and Equipment, Useful Life | 3 years |
Minimum | Vehicles | |
Property, Plant and Equipment [Line Items] | |
Property, Plant and Equipment, Useful Life | 5 years |
Basis of Presentation and Sum_6
Basis of Presentation and Summary of Significant Accounting Policies - Merchandise Warranty Liability (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Movement in Standard Product Warranty Accrual [Roll Forward] | ||
Balance as of beginning of year | $ 3,326 | $ 3,164 |
Accruals during the year | 7,903 | 4,548 |
Settlements during the year | (6,505) | (4,386) |
Balance as of the end of the period | 4,724 | 3,326 |
Accrued other expenses | $ 2,700 | $ 1,800 |
Property, Furniture, and Equi_3
Property, Furniture, and Equipment (Details) - USD ($) $ in Thousands | Dec. 31, 2021 | Dec. 31, 2020 |
Property, Plant and Equipment [Line Items] | ||
Property, furniture and equipment, gross | $ 309,065 | $ 234,433 |
Less: Accumulated depreciation | (54,054) | (46,759) |
Less: Landlord improvement accumulated depreciation | (75,380) | (69,978) |
Property, furniture and equipment, net | 179,631 | 117,696 |
Leased property under capital lease | ||
Property, Plant and Equipment [Line Items] | ||
Property, furniture and equipment, gross | 48,303 | 45,205 |
Leasehold improvements | ||
Property, Plant and Equipment [Line Items] | ||
Property, furniture and equipment, gross | 42,418 | 39,704 |
Landlord improvements | ||
Property, Plant and Equipment [Line Items] | ||
Property, furniture and equipment, gross | 137,106 | 126,245 |
Furniture and fixtures | ||
Property, Plant and Equipment [Line Items] | ||
Property, furniture and equipment, gross | 5,411 | 4,598 |
Computer and equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property, furniture and equipment, gross | 25,124 | 17,965 |
Vehicles | ||
Property, Plant and Equipment [Line Items] | ||
Property, furniture and equipment, gross | 9,229 | 78 |
Build-to-suit properties | ||
Property, Plant and Equipment [Line Items] | ||
Property, furniture and equipment, gross | 31,017 | 0 |
Construction in process | ||
Property, Plant and Equipment [Line Items] | ||
Property, furniture and equipment, gross | $ 10,457 | $ 638 |
Long-Term Debt - Narrative (Det
Long-Term Debt - Narrative (Details) - USD ($) | Dec. 31, 2021 | Nov. 04, 2021 | Dec. 31, 2020 | Jun. 24, 2020 | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | Nov. 30, 2021 | Nov. 08, 2021 | Dec. 28, 2020 | Jun. 25, 2020 |
Debt Instrument [Line Items] | |||||||||||
Unamortized financing costs | $ 700,000 | ||||||||||
Derivative expense associated with Term Loan exit fee | $ 44,544,000 | $ 17,928,000 | $ 0 | ||||||||
Loss on extinguishment of debt | (1,450,000) | 0 | 0 | ||||||||
Loan Payable | Term Loan | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Credit facility, face amount | $ 40,000,000 | ||||||||||
Amortization of loan costs | 600,000 | 600,000 | |||||||||
Stated interest rate | 16.00% | ||||||||||
Loan prepayment (not less than) | 50.00% | ||||||||||
Loan prepayment premium | 1.00% | ||||||||||
Loan, exit fee, face amount | $ 3,000,000 | ||||||||||
Loan, exit fee clause, percentage of total equity | 4.00% | ||||||||||
Loan, derivative liability | $ 19,600,000 | 19,600,000 | |||||||||
Debt Instrument, Exit Fee Clause, Fair Value | $ 64,100,000 | ||||||||||
Derivative expense associated with Term Loan exit fee | 44,500,000 | 17,900,000 | |||||||||
Loan Payable | Term Loan | Cash | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Stated interest rate | 12.00% | ||||||||||
Loan Payable | Term Loan | Paid In Kind | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Stated interest rate | 4.00% | ||||||||||
Promissory Note | Homeworks | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Interest expense, debt | 400,000 | 400,000 | |||||||||
Revolving Credit Facility | 2021 Credit Facility | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Credit facility, face amount | $ 50,000,000 | ||||||||||
Credit facility, basis spread on variable rate | 1.75% | ||||||||||
Loan costs, net | $ 300,000 | 300,000 | |||||||||
Credit facility borrowings | 0 | $ 0 | |||||||||
Revolving Credit Facility | Credit Agreement | Credit Agreement - Revolver | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Credit facility, face amount | $ 30,000,000 | ||||||||||
Credit facility, basis spread on variable rate | 5.50% | ||||||||||
Credit facility, available borrowing capacity | $ 3,100,000 | 3,100,000 | |||||||||
Credit facility, unused capacity, non-use fee | 0.50% | ||||||||||
Loan costs, net | $ 1,500,000 | $ 1,500,000 | |||||||||
Amortization of loan costs | $ 400,000 | 200,000 | |||||||||
Write off of unamortized loan costs | $ 800,000 | ||||||||||
Credit facility, early termination fee | 600,000 | ||||||||||
Loss on extinguishment of debt | $ 1,400,000 | ||||||||||
Revolving Credit Facility | Credit Agreement | Credit Agreement - Prior Revolver | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Credit facility, unused capacity, non-use fee | 0.50% | ||||||||||
Loan costs, net | $ 600,000 | ||||||||||
Amortization of loan costs | $ 200,000 | $ 500,000 | |||||||||
Revolving Credit Facility | Credit Agreement | Credit Agreement - Prior Revolver | Fed Funds Rate | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Credit facility, basis spread on variable rate | 0.50% | ||||||||||
Revolving Credit Facility | Credit Agreement | Credit Agreement - Prior Revolver | LIBOR | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Credit facility, basis spread on variable rate | 1.00% | 6.25% | |||||||||
Revolving Credit Facility | Credit Agreement | Credit Agreement - Prior Revolver | Base Rate | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Credit facility, basis spread on variable rate | 4.00% | ||||||||||
Revolving Credit Facility | Letter of Credit | 2021 Credit Facility | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Credit facility, face amount | 10,000,000 | ||||||||||
Revolving Credit Facility | Swingline Loan | 2021 Credit Facility | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Credit facility, face amount | $ 5,000,000 |
Long-Term Debt - Fair Value Ass
Long-Term Debt - Fair Value Assumptions (Details) - Level 3 - Discounted Cash Flow | Dec. 31, 2020yr |
Term | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Derivative liability, measurement input | 10 |
Risk-free rate of return | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Derivative liability, measurement input | 0.0090 |
Volatility | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Derivative liability, measurement input | 0.4000 |
Dividend yield | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Derivative liability, measurement input | 0 |
Leases - Narrative (Details)
Leases - Narrative (Details) $ in Thousands | 1 Months Ended | 12 Months Ended | ||||||
Sep. 30, 2021USD ($) | Sep. 30, 2014USD ($) | Dec. 31, 2021USD ($) | Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($) | Jun. 30, 2021 | Dec. 31, 2016USD ($) | Dec. 31, 2014lease_renewal | |
Operating Leased Assets [Line Items] | ||||||||
Rent expense | $ 66,500 | $ 58,600 | $ 57,300 | |||||
Percentage rent expense | 6,100 | 1,000 | 1,500 | |||||
Deferred rent and lease incentives | 63,037 | 71,213 | ||||||
Operating lease, term | 12 years | |||||||
Construction costs | 31,000 | |||||||
Related Party | ||||||||
Operating Leased Assets [Line Items] | ||||||||
Operating lease, term | 17 years | |||||||
Capital lease obligations | 2,400 | $ 45,000 | ||||||
Capital leases, accumulated amortization | 9,900 | 5,300 | ||||||
Renewal Term, Five Years | Related Party | ||||||||
Operating Leased Assets [Line Items] | ||||||||
Operating lease, renewal term | 5 years | |||||||
Number of additional renewal options | lease_renewal | 2 | |||||||
Minimum | ||||||||
Operating Leased Assets [Line Items] | ||||||||
Operating lease, renewal term | 5 years | |||||||
Minimum | Base term, 17 years | Related Party | ||||||||
Operating Leased Assets [Line Items] | ||||||||
Rent expense | $ 200 | |||||||
Minimum | Base term, 12 years | ||||||||
Operating Leased Assets [Line Items] | ||||||||
Rent expense | 200 | |||||||
Minimum | Renewal term, 10 years | ||||||||
Operating Leased Assets [Line Items] | ||||||||
Rent expense | 400 | |||||||
Minimum | Renewal term, 10 years | Related Party | ||||||||
Operating Leased Assets [Line Items] | ||||||||
Rent expense | $ 600 | 500 | ||||||
Maximum | ||||||||
Operating Leased Assets [Line Items] | ||||||||
Operating lease, renewal term | 10 years | |||||||
Maximum | Related Party | ||||||||
Operating Leased Assets [Line Items] | ||||||||
Operating lease, renewal term | 10 years | |||||||
Maximum | Base term, 17 years | Related Party | ||||||||
Operating Leased Assets [Line Items] | ||||||||
Rent expense | 500 | |||||||
Maximum | Base term, 12 years | ||||||||
Operating Leased Assets [Line Items] | ||||||||
Rent expense | 300 | |||||||
Maximum | Renewal term, 10 years | ||||||||
Operating Leased Assets [Line Items] | ||||||||
Rent expense | 500 | |||||||
Maximum | Renewal term, 10 years | Related Party | ||||||||
Operating Leased Assets [Line Items] | ||||||||
Rent expense | $ 600 | |||||||
Leasehold improvements | ||||||||
Operating Leased Assets [Line Items] | ||||||||
Amortization | $ 13,500 | $ 10,400 | $ 8,700 |
Leases - Future Minimum Lease P
Leases - Future Minimum Lease Payments, Capital Leases (Details) $ in Thousands | Dec. 31, 2021USD ($) |
Capital Leases, Future Minimum Payments [Abstract] | |
2022 | $ 4,673 |
2023 | 4,673 |
2024 | 4,673 |
2025 | 4,673 |
2026 | 5,132 |
Thereafter | 120,390 |
Finance lease liability, payment, due | 144,214 |
Less: Amounts representing interest | (94,064) |
Finance lease liability | $ 50,150 |
Leases - Future Minimum Rental
Leases - Future Minimum Rental Payments, Operating Leases (Details) $ in Thousands | Dec. 31, 2021USD ($) |
Operating Leases, Future Minimum Payments [Abstract] | |
2022 | $ 45,892 |
2023 | 43,507 |
2024 | 38,659 |
2025 | 33,125 |
2026 | 29,903 |
Thereafter | 129,498 |
Future minimum rental payments | 320,584 |
Third Party | |
Operating Leases, Future Minimum Payments [Abstract] | |
2022 | 43,540 |
2023 | 41,145 |
2024 | 37,191 |
2025 | 32,159 |
2026 | 29,105 |
Thereafter | 125,252 |
Future minimum rental payments | 308,392 |
Related Party | |
Operating Leases, Future Minimum Payments [Abstract] | |
2022 | 2,352 |
2023 | 2,362 |
2024 | 1,468 |
2025 | 966 |
2026 | 798 |
Thereafter | 4,246 |
Future minimum rental payments | $ 12,192 |
Employee Benefit Plans (Details
Employee Benefit Plans (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Retirement Benefits [Abstract] | |||
Defined contribution plan costs | $ 2.2 | $ 0.5 | $ 1.1 |
Mezzanine Equity and Stockhol_2
Mezzanine Equity and Stockholders'/Members' Equity (Deficit) - (Details) $ in Thousands | Dec. 29, 2020USD ($) | Jun. 26, 2017USD ($)shares | Nov. 03, 2021USD ($)shares | Dec. 31, 2021USD ($)vote | Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($) | May 31, 2021shares |
Class of Stock [Line Items] | |||||||
Number of voting shares (in shares) | 645 | ||||||
Number of non-voting shares (in shares) | 4,158 | ||||||
Distributions to noncontrolling interest holders | $ | $ (61,915) | $ 0 | $ 0 | ||||
Proceeds from issuance of mezzanine equity | $ | $ 25,000 | ||||||
Mezzanine equity, dividend rate (in dollars per share) | 16.00% | ||||||
Payments of preferred units dividends | $ | 0 | (8,553) | 0 | ||||
Payments of tax distributions | $ | $ (7,900) | $ (10,900) | $ (5,100) | ||||
Payments of pre-IPO dividend to noncontrolling interests of Arhaus, LLC | $ | $ (100,000) | ||||||
Noncontrolling interests | |||||||
Class of Stock [Line Items] | |||||||
Payments of pre-IPO dividend to noncontrolling interests of Arhaus, LLC | $ | (50,700) | ||||||
Owners | |||||||
Class of Stock [Line Items] | |||||||
Payments of pre-IPO dividend to noncontrolling interests of Arhaus, LLC | $ | $ (49,300) | ||||||
Preferred Units | |||||||
Class of Stock [Line Items] | |||||||
Payments of preferred units dividends | $ | $ (8,600) | ||||||
Class A Preferred Units | |||||||
Class of Stock [Line Items] | |||||||
Issuance of mezzanine equity (in shares) | 1,250,000 | ||||||
Class B Preferred Units | |||||||
Class of Stock [Line Items] | |||||||
Issuance of mezzanine equity (in shares) | 1,250,000 | ||||||
Class A Units | |||||||
Class of Stock [Line Items] | |||||||
Issuance of mezzanine equity (in shares) | 20,938,265 | ||||||
Class B Units | |||||||
Class of Stock [Line Items] | |||||||
Issuance of mezzanine equity (in shares) | 7,488,248 | ||||||
Class C | |||||||
Class of Stock [Line Items] | |||||||
Issuance of mezzanine equity (in shares) | 3,185,435 | ||||||
Class D | |||||||
Class of Stock [Line Items] | |||||||
Issuance of mezzanine equity (in shares) | 285,387 | ||||||
Class F | |||||||
Class of Stock [Line Items] | |||||||
Issuance of mezzanine equity (in shares) | 3,158,501 | ||||||
Class F | Incentive Units | |||||||
Class of Stock [Line Items] | |||||||
Number of shares authorized (in shares) | 2,190,514 | ||||||
Class F1 | |||||||
Class of Stock [Line Items] | |||||||
Issuance of mezzanine equity (in shares) | 3,158,501 | ||||||
Class F1 | Incentive Units | |||||||
Class of Stock [Line Items] | |||||||
Number of shares authorized (in shares) | 2,190,514 | ||||||
Class A | |||||||
Class of Stock [Line Items] | |||||||
Number of votes per share | vote | 1 | ||||||
Class B | |||||||
Class of Stock [Line Items] | |||||||
Number of votes per share | vote | 10 |
Equity Based Compensation - Nar
Equity Based Compensation - Narrative (Details) - USD ($) $ in Thousands | Dec. 31, 2021 | Jul. 31, 2021 | Nov. 08, 2021 | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | May 31, 2021 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Deferred compensation liability, current | $ 1,100 | ||||||
Deferred compensation liability, noncurrent | 3,900 | ||||||
Shareholder capital contribution | $ 3,900 | $ 3,872 | |||||
Incentive Units | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Unit compensation expense | $ 1,800 | 400 | $ 300 | ||||
Unrecognized compensation cost | $ 11,600 | $ 11,600 | |||||
Unrecognized compensation cost, period for recognition | 4 years 3 months 21 days | ||||||
Dividend yield | 0.00% | ||||||
Grant date fair value for units vested during period | $ 300 | $ 400 | |||||
Incentive Units | Class G | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Number of shares authorized (in shares) | 967,987 | ||||||
Award vesting period | 5 years | ||||||
Incentive Units | Class C, D, F and F-1 | Minimum | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Award vesting period | 3 years | ||||||
Incentive Units | Class C, D, F and F-1 | Maximum | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Award vesting period | 5 years | ||||||
Common Stock | Class A | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Unit compensation expense | 4,600 | ||||||
Share-based payment arrangement, expense, tax benefit | $ 2,800 |
Equity Based Compensation - Fai
Equity Based Compensation - Fair Value Assumptions (Details) - Incentive Units | Sep. 30, 2019 | Jan. 31, 2019 | Dec. 31, 2021 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Term | 10 years | ||
Risk-free rate of return | 1.50% | ||
Volatility | 40.00% | ||
Dividend yield | 0.00% | ||
Class F/F-1 | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Term | 5 years | 5 years | |
Risk-free rate of return | 1.90% | 2.60% | |
Volatility | 36.10% | 73.40% | |
Dividend yield | 0.00% | 0.00% |
Equity Based Compensation - Inc
Equity Based Compensation - Incentive Unit Activity (Details) - $ / shares | Nov. 08, 2021 | Dec. 31, 2021 | Jul. 31, 2021 | Dec. 31, 2021 | Dec. 31, 2020 |
Class C | Incentive Units | |||||
Units | |||||
Outstanding, beginning of period (in shares) | 1,868,913 | 1,868,913 | |||
Purchased (in shares) | 0 | ||||
Granted (in shares) | |||||
Forfeited (in shares) | 0 | 0 | |||
Outstanding, end of period (in shares) | 1,868,913 | 1,868,913 | 1,868,913 | ||
Weighted Average Grant Date Fair Value | |||||
Outstanding, beginning of period (in dollars per share) | $ 0.57 | $ 0.57 | |||
Purchased (in dollars per share) | |||||
Granted (in dollars per share) | |||||
Forfeited (in dollars per share) | |||||
Outstanding, end of period (in dollars per share) | $ 0.57 | $ 0.57 | $ 0.57 | ||
Class D | Incentive Units | |||||
Units | |||||
Outstanding, beginning of period (in shares) | 96,318 | 96,318 | |||
Purchased (in shares) | 0 | ||||
Granted (in shares) | |||||
Forfeited (in shares) | 0 | 0 | |||
Outstanding, end of period (in shares) | 96,318 | 96,318 | 96,318 | ||
Weighted Average Grant Date Fair Value | |||||
Outstanding, beginning of period (in dollars per share) | $ 0.83 | $ 0.83 | |||
Purchased (in dollars per share) | |||||
Granted (in dollars per share) | |||||
Forfeited (in dollars per share) | |||||
Outstanding, end of period (in dollars per share) | $ 0.83 | $ 0.83 | $ 0.83 | ||
Class F/F-1 | Incentive Units | |||||
Units | |||||
Outstanding, beginning of period (in shares) | 4,381,030 | 4,984,390 | |||
Purchased (in shares) | (36,638) | ||||
Granted (in shares) | |||||
Forfeited (in shares) | (109,916) | (566,722) | |||
Outstanding, end of period (in shares) | 4,271,114 | 4,271,114 | 4,381,030 | ||
Weighted Average Grant Date Fair Value | |||||
Outstanding, beginning of period (in dollars per share) | $ 0.63 | $ 0.63 | |||
Purchased (in dollars per share) | 0.36 | ||||
Granted (in dollars per share) | |||||
Forfeited (in dollars per share) | 0.77 | 0.61 | |||
Outstanding, end of period (in dollars per share) | $ 0.63 | $ 0.63 | $ 0.63 | ||
Class G | Incentive Units | |||||
Units | |||||
Outstanding, beginning of period (in shares) | 0 | 0 | |||
Purchased (in shares) | 0 | ||||
Granted (in shares) | 701,965 | 701,965 | |||
Forfeited (in shares) | 0 | ||||
Outstanding, end of period (in shares) | 701,965 | 701,965 | 0 | ||
Weighted Average Grant Date Fair Value | |||||
Outstanding, beginning of period (in dollars per share) | $ 0 | $ 0 | |||
Purchased (in dollars per share) | |||||
Granted (in dollars per share) | 18.10 | ||||
Forfeited (in dollars per share) | |||||
Outstanding, end of period (in dollars per share) | $ 18.10 | $ 18.10 | $ 0 | ||
Class A | Common Stock | |||||
Units | |||||
Outstanding, beginning of period (in shares) | 0 | ||||
Granted (in shares) | 5,836,278 | ||||
Outstanding, end of period (in shares) | 0 | 5,836,278 | 5,836,278 | ||
Weighted Average Grant Date Fair Value | |||||
Outstanding, beginning of period (in dollars per share) | $ 0 | ||||
Granted (in dollars per share) | 16.28 | ||||
Outstanding, end of period (in dollars per share) | $ 0 | $ 16.28 | $ 16.28 | ||
Class A | Restricted Stock | |||||
Units | |||||
Outstanding, beginning of period (in shares) | 0 | ||||
Outstanding, end of period (in shares) | 0 | 2,520,227 | 2,520,227 | ||
Weighted Average Grant Date Fair Value | |||||
Outstanding, beginning of period (in dollars per share) | $ 0 | ||||
Granted (in dollars per share) | $ 16.28 | ||||
Outstanding, end of period (in dollars per share) | $ 0 | $ 16.28 | $ 16.28 | ||
Class B | Common Stock | |||||
Units | |||||
Outstanding, beginning of period (in shares) | 0 | ||||
Granted (in shares) | 6,148,146 | ||||
Outstanding, end of period (in shares) | 0 | 6,148,146 | 6,148,146 | ||
Weighted Average Grant Date Fair Value | |||||
Outstanding, beginning of period (in dollars per share) | $ 0 | ||||
Granted (in dollars per share) | 0.13 | ||||
Outstanding, end of period (in dollars per share) | $ 0 | $ 0.13 | $ 0.13 | ||
Class B | Restricted Stock | |||||
Units | |||||
Outstanding, beginning of period (in shares) | 0 | ||||
Outstanding, end of period (in shares) | 0 | 596,598 | 596,598 | ||
Weighted Average Grant Date Fair Value | |||||
Outstanding, beginning of period (in dollars per share) | $ 0 | ||||
Granted (in dollars per share) | $ 0.13 | ||||
Outstanding, end of period (in dollars per share) | $ 0 | $ 0.13 | $ 0.13 |
Equity Based Compensation - I_2
Equity Based Compensation - Incentive Units Vested (Details) - Incentive Units - shares | Nov. 07, 2021 | Dec. 31, 2020 |
Class C | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Vested incentive units (in shares) | 1,868,913 | 1,653,476 |
Class D | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Vested incentive units (in shares) | 96,318 | 96,318 |
Class F/F-1 | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Vested incentive units (in shares) | 2,982,442 | 2,167,547 |
Class G | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Vested incentive units (in shares) | 0 | 0 |
Segment Reporting (Details)
Segment Reporting (Details) $ in Thousands | 12 Months Ended | ||||
Dec. 31, 2021USD ($) | Dec. 31, 2021stores | Dec. 31, 2021segment | Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($) | |
Segment Reporting [Abstract] | |||||
Number of operating segments (in segments) | 1 | 1 | |||
Number of reportable segments (in segments) | segment | 1 | ||||
Segment Reporting Information [Line Items] | |||||
Net revenue | $ 796,922 | $ 507,429 | $ 494,538 | ||
Retail | |||||
Segment Reporting Information [Line Items] | |||||
Net revenue | 652,790 | 417,426 | 439,660 | ||
eCommerce | |||||
Segment Reporting Information [Line Items] | |||||
Net revenue | $ 144,132 | $ 90,003 | $ 54,878 |
Net and Comprehensive Income _3
Net and Comprehensive Income per Share - Narrative (Details) | 12 Months Ended |
Dec. 31, 2021shares | |
Class B | |
Class of Stock [Line Items] | |
Shares issued (in shares) | 80,792,206 |
Class A | |
Class of Stock [Line Items] | |
Shares issued (in shares) | 31,266,536 |
Net and Comprehensive Income _4
Net and Comprehensive Income per Share - Calculation of EPS (Details) - USD ($) $ / shares in Units, $ in Thousands | 2 Months Ended | 10 Months Ended | 12 Months Ended | ||
Dec. 31, 2021 | Nov. 08, 2021 | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Numerator | |||||
Net income | $ 13,089 | $ 23,843 | $ 36,932 | $ 17,040 | $ 15,842 |
Comprehensive income | 36,932 | 17,040 | 15,842 | ||
Less: Preferred unit dividend unpaid | 0 | 2,847 | 2,511 | ||
Less: Comprehensive income attributable to noncontrolling interest | 15,815 | 10,958 | 8,315 | ||
Less: Net income attributable to noncontrolling interest | 15,815 | 10,958 | 8,315 | ||
Net and comprehensive income attributable to Arhaus, Inc. | 21,117 | 3,235 | 5,016 | ||
Comprehensive income (loss) attributable to Arhaus, Inc. | $ 21,117 | $ 3,235 | $ 5,016 | ||
Denominator - Basic and Diluted | |||||
Weighted-average number of common shares outstanding, basic (in shares) | 116,013,492 | 112,058,742 | 112,058,742 | ||
Effect of dilutive restricted stock (in shares) | 3,507,950 | 0 | 0 | ||
Weighted-average number of common shares outstanding, diluted (in shares) | 119,521,442 | 112,058,742 | 112,058,742 | ||
Net and comprehensive income (loss) per unit, basic (in dollars per share) | $ 0.18 | $ 0.03 | $ 0.04 | ||
Net and comprehensive income (loss) per unit, diluted (in dollars per share) | $ 0.18 | $ 0.03 | $ 0.04 |
Commitments and Contingencies (
Commitments and Contingencies (Details) - USD ($) $ in Millions | Dec. 31, 2021 | Dec. 31, 2020 |
Commitments and Contingencies Disclosure [Abstract] | ||
Loss contingency accrual | $ 1.2 | $ 1.2 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ in Millions | Dec. 31, 2021 | Jan. 31, 2021 | Dec. 31, 2020 |
Related Party Transaction [Line Items] | |||
Accounts receivable, related parties | $ 0.1 | ||
Accounts payable, related parties | $ 2.9 | ||
Reed | |||
Related Party Transaction [Line Items] | |||
Related party, note receivable | $ 1 |
Income Taxes - Income (Loss) Be
Income Taxes - Income (Loss) Before Taxes (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |||
Domestic | $ 26,788 | $ 17,823 | |
Foreign | 0 | 0 | |
Income before taxes | $ 26,788 | $ 17,823 | $ 16,210 |
Income Taxes - Current and Defe
Income Taxes - Current and Deferred Taxes (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |||
Federal | $ 112 | $ 0 | |
State | 218 | 783 | |
Total current expense (benefit) | 330 | 783 | |
Federal | (7,754) | ||
State | (2,720) | ||
Total deferred expense (benefit) | (10,474) | 0 | |
Provision (benefit) for income taxes | $ (10,144) | $ 783 | $ 368 |
Income Taxes - Provision (Benef
Income Taxes - Provision (Benefit) for Income Taxes (Details) - USD ($) $ in Thousands | 2 Months Ended | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Income Tax Examination [Line Items] | ||||
Federal statutory income tax rate | $ 5,625 | $ 3,743 | ||
State taxes | 101 | 783 | ||
Nontaxable partnership | (6,999) | (3,743) | ||
FS Arhaus and Homeworks investment in LLC | (9,137) | 0 | ||
Other | 266 | 0 | ||
Provision (benefit) for income taxes | (10,144) | $ 783 | $ 368 | |
Deferred tax impact of Reorganization from partnership to a corporation | $ 17,436 | |||
Homeworks | ||||
Income Tax Examination [Line Items] | ||||
Deferred tax impact of Reorganization from partnership to a corporation | $ 17,400 |
Income Taxes - Deferred Tax Ass
Income Taxes - Deferred Tax Assets (Details) - USD ($) $ in Thousands | Dec. 31, 2021 | Dec. 31, 2020 |
Valuation Allowance [Line Items] | ||
Interest expense carryforwards | $ 7,465 | $ 0 |
Net operating loss carryforwards | 1,768 | 0 |
Total deferred tax assets | 27,684 | 0 |
Less: valuation allowance | 0 | 0 |
Total deferred tax assets, net of valuation allowance | 27,684 | 0 |
FS Arhaus | ||
Valuation Allowance [Line Items] | ||
Investment in LLC | 13,034 | 0 |
Homeworks | ||
Valuation Allowance [Line Items] | ||
Investment in LLC | $ 5,417 | $ 0 |
Income Taxes - Narrative (Detai
Income Taxes - Narrative (Details) $ in Millions | Dec. 31, 2021USD ($) |
Domestic Tax Authority | |
Operating Loss Carryforwards [Line Items] | |
NOL carryforward | $ 1.7 |
State and Local Jurisdiction | |
Operating Loss Carryforwards [Line Items] | |
NOL carryforward | 0.1 |
Foreign Tax Authority | |
Operating Loss Carryforwards [Line Items] | |
NOL carryforward | $ 7.5 |