Cover
Cover - shares | 6 Months Ended | |
Jun. 30, 2022 | Aug. 04, 2022 | |
Document Information [Line Items] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Jun. 30, 2022 | |
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, $0.001 par value per share | |
Trading Symbol | ARHS | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Entity Central Index Key | 0001875444 | |
Document Fiscal Year Focus | 2022 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Common, Class A | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 52,947,617 | |
Common, Class B | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 87,115,600 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Jun. 30, 2022 | Dec. 31, 2021 |
Current assets | ||
Cash and cash equivalents | $ 144,628 | $ 123,777 |
Restricted cash equivalents | 6,985 | 7,131 |
Accounts receivable, net | 1,500 | 228 |
Merchandise inventory, net | 272,478 | 208,343 |
Prepaid and other current assets | 29,509 | 28,517 |
Total current assets | 455,100 | 367,996 |
Operating right-of-use assets | 231,667 | 0 |
Financing right-of-use assets | 39,602 | 0 |
Property, furniture and equipment, net | 116,620 | 179,631 |
Deferred tax asset | 22,833 | 27,684 |
Goodwill | 10,961 | 10,961 |
Other noncurrent assets | 249 | 278 |
Total assets | 877,032 | 586,550 |
Current liabilities | ||
Accounts payable | 62,331 | 51,429 |
Accrued taxes | 8,594 | 7,302 |
Accrued wages | 13,911 | 16,524 |
Accrued other expenses | 26,718 | 61,047 |
Client deposits | 276,968 | 264,929 |
Current portion of operating lease liabilities | 37,624 | 0 |
Current portion of financing lease liabilities | 513 | 0 |
Total current liabilities | 426,659 | 401,231 |
Operating lease liabilities, long-term | 268,061 | 0 |
Financing lease liabilities, long-term | 51,981 | 0 |
Capital lease obligation | 0 | 50,525 |
Deferred rent and lease incentives | 2,433 | 63,037 |
Other long-term liabilities | 4,004 | 1,992 |
Total liabilities | 753,138 | 516,785 |
Commitments and contingencies (Note 9) | ||
Stockholders' equity | ||
Accumulated Deficit | (63,884) | (116,581) |
Additional Paid-in Capital | 187,640 | 186,209 |
Total Arhaus, Inc. stockholders' equity | 123,894 | 69,765 |
Total liabilities and stockholders' equity | 877,032 | 586,550 |
Common, Class A | ||
Stockholders' equity | ||
Stock issued | 51 | 50 |
Common, Class B | ||
Stockholders' equity | ||
Stock issued | $ 87 | $ 87 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Jun. 30, 2022 | Dec. 31, 2021 |
Common, Class A | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock , shares authorized (in shares) | 600,000,000 | 600,000,000 |
Common stock, shares issued (in shares) | 51,360,235 | 50,427,390 |
Common stock, shares outstanding (in shares) | 51,360,235 | 50,427,390 |
Common, Class B | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock , shares authorized (in shares) | 100,000,000 | 100,000,000 |
Common stock, shares issued (in shares) | 87,115,600 | 86,519,002 |
Common stock, shares outstanding (in shares) | 87,115,600 | 86,519,002 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Income Statement [Abstract] | ||||
Net revenue | $ 306,265 | $ 184,043 | $ 552,565 | $ 355,357 |
Cost of goods sold | 173,239 | 106,209 | 321,822 | 207,188 |
Gross margin | 133,026 | 77,834 | 230,743 | 148,169 |
Selling, general and administrative expenses | 82,774 | 69,139 | 157,622 | 128,177 |
Loss on disposal of assets | 0 | 0 | 0 | 14 |
Income from operations | 50,252 | 8,695 | 73,121 | 19,978 |
Interest expense | 1,316 | 1,359 | 2,616 | 2,726 |
Other income | (117) | 0 | (475) | 0 |
Income before taxes | 49,053 | 7,336 | 70,980 | 17,252 |
Income tax expense | 12,414 | 500 | 18,283 | 1,204 |
Net and comprehensive income | 36,639 | 6,836 | 52,697 | 16,048 |
Less: Net income attributable to noncontrolling interest | 0 | 3,951 | 0 | 9,268 |
Net and comprehensive income attributable to Arhaus, Inc. | $ 36,639 | $ 2,885 | $ 52,697 | $ 6,780 |
Net and comprehensive income per share, basic | ||||
Weighted-average number of common shares outstanding, basic (in shares) | 137,840,691 | 112,058,742 | 137,662,601 | 112,058,742 |
Net and comprehensive income per unit, basic (in dollars per share) | $ 0.27 | $ 0.03 | $ 0.38 | $ 0.06 |
Net and comprehensive income per share, diluted | ||||
Weighted-average number of common shares outstanding, diluted (in shares) | 139,454,109 | 112,058,742 | 139,394,055 | 112,058,742 |
Net and comprehensive income per unit, diluted (in dollars per share) | $ 0.26 | $ 0.03 | $ 0.38 | $ 0.06 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Changes in Stockholders'/Members' Equity (Deficit) (Unaudited) - USD ($) $ in Thousands | Total | Member Units Capital Unit, Class A | Member Units Capital Unit, Class B | Common Stock Common, Class A | Common Stock Common, Class B | Retained Earnings (Accumulated Deficit) | Additional Paid-in Capital | Noncontrolling Interest |
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 | 16,048 | 6,780 | 9,268 | |||||
Tax distribution | (7,865) | (7,865) | ||||||
Shareholder distribution | (12,350) | (12,350) | ||||||
Equity based compensation | 427 | 427 | ||||||
Ending Balance (in shares) at Jun. 30, 2021 | 645,000 | 4,158,000 | ||||||
Ending Balance at Jun. 30, 2021 | (38,181) | (33,992) | 2,097 | (6,286) | ||||
Beginning Balance (in shares) at Mar. 31, 2021 | 645,000 | 4,158,000 | ||||||
Beginning Balance at Mar. 31, 2021 | (29,796) | (24,527) | 1,746 | (7,015) | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net income | 6,836 | 2,885 | 3,951 | |||||
Shareholder capital contribution | (3,222) | |||||||
Tax distribution | (3,222) | |||||||
Shareholder distribution | (12,350) | (12,350) | ||||||
Equity based compensation | 351 | 351 | ||||||
Ending Balance (in shares) at Jun. 30, 2021 | 645,000 | 4,158,000 | ||||||
Ending Balance at Jun. 30, 2021 | (38,181) | (33,992) | 2,097 | $ (6,286) | ||||
Beginning Balance (in shares) at Dec. 31, 2021 | 50,428,000 | 86,519,000 | ||||||
Beginning Balance at Dec. 31, 2021 | 69,765 | $ 50 | $ 87 | (116,581) | 186,209 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net income | 52,697 | 52,697 | ||||||
Shareholder capital contribution | 43 | 43 | ||||||
Equity based compensation (in shares) | 932,000 | 597,000 | ||||||
Equity based compensation | 1,389 | $ 1 | 1,388 | |||||
Ending Balance (in shares) at Jun. 30, 2022 | 51,360,000 | 87,116,000 | ||||||
Ending Balance at Jun. 30, 2022 | 123,894 | $ 51 | $ 87 | (63,884) | 187,640 | |||
Beginning Balance (in shares) at Mar. 31, 2022 | 51,232,000 | 86,519,000 | ||||||
Beginning Balance at Mar. 31, 2022 | 86,544 | $ 51 | $ 87 | (100,523) | 186,929 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net income | 36,639 | 36,639 | ||||||
Shareholder capital contribution | 19 | 19 | ||||||
Equity based compensation (in shares) | 128,000 | 597,000 | ||||||
Equity based compensation | 692 | 692 | ||||||
Ending Balance (in shares) at Jun. 30, 2022 | 51,360,000 | 87,116,000 | ||||||
Ending Balance at Jun. 30, 2022 | $ 123,894 | $ 51 | $ 87 | $ (63,884) | $ 187,640 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2022 | Jun. 30, 2021 | |
Cash flows from operating activities | ||
Net income | $ 52,697 | $ 16,048 |
Adjustments to reconcile net income to net cash provided by operating activities | ||
Depreciation and amortization | 11,995 | 8,909 |
Amortization of operating lease right-of-use asset | 14,508 | 0 |
Amortization of deferred financing fees and interest on finance lease in excess of principal paid | 5,489 | 825 |
Equity based compensation | 1,389 | 427 |
Deferred tax assets | 4,851 | 0 |
Derivative expense | 0 | 29,805 |
Loss on disposal of assets | 0 | 14 |
Amortization and write-off of lease incentives | (144) | (3,801) |
Changes in operating assets and liabilities | ||
Accounts receivable | (1,272) | 132 |
Merchandise inventory | (64,135) | (28,077) |
Prepaid and other current assets | (5,095) | 4,112 |
Other noncurrent liabilities | 264 | (890) |
Accounts payable | 15,197 | 616 |
Accrued expenses | 8,728 | 3,852 |
Operating lease liabilities | (15,401) | 0 |
Deferred rent and lease incentives | 0 | 5,415 |
Client deposits | 12,039 | 72,116 |
Net cash provided by operating activities | 41,110 | 109,503 |
Cash flows from investing activities | ||
Purchases of property, furniture and equipment | (20,355) | (13,691) |
Net cash used in investing activities | (20,355) | (13,691) |
Cash flows from financing activities | ||
Issuance of related party notes | 0 | (1,000) |
Proceeds from related party notes | 0 | 1,000 |
Principal payments under capital leases | 0 | (127) |
Principal payments under capital leases | (50) | 0 |
Shareholder distributions | 0 | (12,350) |
Distributions to noncontrolling interest holders | 0 | (7,865) |
Net cash used in financing activities | (50) | (20,342) |
Net increase in cash, cash equivalents and restricted cash equivalents | 20,705 | 75,470 |
Cash, cash equivalents and restricted cash equivalents | ||
Beginning of period | 130,908 | 64,002 |
End of period | 151,613 | 139,472 |
Supplemental Cash Flow Information [Abstract] | ||
Interest paid in cash | 2,155 | 2,799 |
Income taxes paid in cash | 15,342 | 1,257 |
Lease incentives | 4,494 | 665 |
Purchase of property, furniture and equipment in accounts payable | 1,673 | 241 |
Derecognition of build-to-suit assets as a result of ASC 842 adoption | (31,017) | 0 |
Capital contributions | $ 43 | $ 0 |
Nature of Business and Basis of
Nature of Business and Basis of Presentation | 6 Months Ended |
Jun. 30, 2022 | |
Accounting Policies [Abstract] | |
Nature of Business and Basis of Presentation | Nature of Business and Basis of Presentation Nature of Business Arhaus, Inc. (the “Company,” “we” or “Arhaus”) 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 80 Showrooms at June 30, 2022. 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. In connection with the IPO, the Company reorganized its ownership structure from a limited liability company to a corporation. 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 condensed consolidated financial statements for periods prior to the Reorganization have been adjusted to retrospectively combine the previously separate entities for presentation purposes. Basis of Presentation The condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying condensed consolidated financial statements include our accounts and those of our wholly owned subsidiaries. Accordingly, all intercompany balances and transactions have been eliminated through the consolidation process. Certain reclassifications have been made to prior years' condensed consolidated financial statements to conform to the current year's presentation. The accompanying condensed consolidated balance sheets at June 30, 2022 and December 31, 2021, the condensed consolidated statements of comprehensive income and changes in stockholders’equity (deficit) for the six and three months ended June 30, 2022 and 2021, the condensed consolidated statements of cash flows for the six months ended June 30, 2022 and 2021 and the related interim condensed consolidated disclosures are unaudited and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In management’s opinion, the accompanying condensed consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the Company’s financial position at June 30, 2022; the results of operations and changes in stockholders’equity (deficit) for the six and three months ended June 30, 2022 and 2021 and the condensed consolidated statements of cash flows for the six months ended June 30, 2022 and 2021. The condensed consolidated balance sheet as of December 31, 2021 included herein was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. The results for the six and three months ended June 30, 2022 and 2021 are not necessarily indicative of the operating results to be expected for the full fiscal year or any future period. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021. Use of Estimates The preparation of our condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The accounting estimates and other matters included within our condensed consolidated financial statements and notes to the condensed consolidated financial statements are revenue recognition, including a reserve for merchandise returns, goodwill and fair value of financial instruments which include, but are not limited to, accounts receivable, payables, lease obligations, derivative and equity based compensation instruments. Client Deposits 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 clients’ purchase price. Orders are recognized as revenue when the merchandise is delivered to the client and at the time of delivery the client deposit is no longer recorded as a liability. The Company expects substantially all client deposits as of June 30, 2022 will be recognized as net revenue within the next 12 months as the performance obligations are satisfied. Gift Cards The Company sells gift cards to clients in our Showrooms 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 $0.9 million at June 30, 2022 and December 31, 2021, respectively, is recorded in the accrued other expenses line item of the condensed consolidated balance sheets. The Company recognizes income associated with breakage proportional to actual gift card redemptions. Fair Values of Financial Instruments The Company’s primary financial ins truments are cash and cash equivalents, accounts receivable, payables, lease obligations, derivative and equity based compensation instruments. Due to the shor t-term maturities of cash and cash equivalents, accounts receivable and payables, the Company believes the fair values of these instruments approximate their respective carrying values at June 30, 2022 and December 31, 2021. See Note 4 for discussion of our derivative, Note 5 for discussion of our lease obligations and Note 6 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. |
Recently Issued Accounting Stan
Recently Issued Accounting Standards | 6 Months Ended |
Jun. 30, 2022 | |
Accounting Policies [Abstract] | |
Recently Issued Accounting Standards | Recently Issued Accounting Standards New Accounting Standards 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. The Company adopted ASC 842 as of January 1, 2022, using the modified retrospective approach by applying the transition provisions at the beginning of the period of adoption. Comparative periods will continue to be presented in accordance with ASC 840. The Company elected the package of practical expedients permitted under the transition guidance, which allowed the Company to carryforward the historical lease classification, lease identification and initial direct costs. The Company did not elect the “Land Easements” or “Hindsight” practical expedients. Additionally, the Company made the following accounting policy elections in connection with the adoption: • Exclude short-term leases from our consolidated balance sheets; and • Include both the lease and non-lease components as a single component and account for it as a lease. As a result, the Company measured the right-of-use asset and lease liability for operating and finance leases as of January 1, 2022, using the remaining portion of the lease term that was determined under ASC 840. The adoption resulted in $242.0 million recognized as total right-of-use assets and $326.5 million recognized as total lease liabilities on our consolidated balance sheets as of January 1, 2022. For certain previous operating and capital leases, we qualified 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. As part of our adoption of ASC 842, we derecognized the cost of these construction projects of $31.0 million, which were previously recorded in property, furniture and equipment, net with an offsetting obligation in accrued other expenses on our consolidated balance sheets at December 31, 2021. See Note 5 — Leases for additional information. |
Merchandise Warranties
Merchandise Warranties | 6 Months Ended |
Jun. 30, 2022 | |
Product Warranties Disclosures [Abstract] | |
Merchandise Warranties | Merchandise Warranties The Co mpany 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 is as follows (amounts in thousands): Six months ended June 30, Three months ended June 30, 2022 2021 2022 2021 Balance as of beginning of period $ 4,724 $ 3,326 $ 4,963 $ 3,577 Accruals during the period 5,104 3,514 2,908 1,922 Settlements during the period (4,416) (2,972) (2,459) (1,631) Balance as of end of the period (1) $ 5,412 $ 3,868 $ 5,412 $ 3,868 (1) $3.2 million and $2.7 million were recorded in accrued other expenses at June 30, 2022 and December 31, 2021, respectively. The remainder is recorded in other long-term liabilities on our condensed consolidated balance sheets. We recorded accruals during the periods presented in the table above, primarily to reflect charges that relate to limited merchandise warranties issued during the respective periods. |
Long-Term Debt
Long-Term Debt | 6 Months Ended |
Jun. 30, 2022 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | Long-Term Debt On June 25, 2020, the Company entered into a credit agreement (“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 rates at the LIBOR index rate (“LIBOR”) plus the applicable margin (5.5% at June 30, 2021). In the event LIBOR ceased to be available during the term of the Revolver, the Revolver provided procedures to determine an Alternate Base Rate. The Revolver was to expire on June 25, 2023. Loan costs related to the Revolver of $1.5 million 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 $0.3 million and $0.2 million for the six and three months ended June 30, 2021, respectively, and was included in interest expense within the condensed consolidated statements of comprehensive income. On November 4, 2021, the Company terminated the Revolver of which there were no borrowings drawn. 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) $10.0 million, and (b) the amount of the revolving credit facility as of such date, and (3) a swingline loan in an amount equal to the lesser of (a) $5.0 million, and (b) the amount of the revolving credit facility as of such date. The aggregate amount of all commitments of all lenders under the 2021 Credit Facility is $50.0 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 a 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 (1.50% at June 30, 2022), whereas the applicable margin is adjusted quarterly based on the Company’s consolidated rent-adjusted total leverage ratio. The 2021 Credit Facility expires on November 8, 2026. At June 30, 2022 and 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. Prior to the Company entering into the Revolver and 2021 Credit Facility, the debt structure (“Prior Credit Facilities”) included a revolving credit facility (the “Prior Revolver”) and a term loan (the “Term Loan”). The Prior Revolver was terminated on June 25, 2020 and Term Loan was paid in full on December 28, 2020. 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 of the Company. The exit fee was treated as a derivative and adjusted to fair value each reporting period. The Company recorded derivative expense of $29.8 million and $18.3 million for the six and three months ended June 30, 2021, respectively, which was included in selling, general and administrative expense within the condensed consolidated statements of comprehensive income. The Company used a portion of the net proceeds from the IPO to pay the derivative liability on November 8, 2021. At June 30, 2021 , the Company’s valuation of the derivative liability was measured using the probability-weighted expected return model (“PWERM”). The PWERM is a scenario-based methodology that estimates the fair value of the derivative 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 method (“OPM”) and applied a discount for lack of marketability (“DLOM”). The OPM estimated the value using the Black-Scholes OPM. The fair value of the exit fee was determined utilizing unobservable inputs and therefore is a Level 3 measurement under the fair value hierarchy. The key assumptions used within the Black-Scholes OPM as of June 30, 2021 were as follows: June 30, Term 10 years Risk-free rate of return 1.50 % Volatility 40.00 % Dividend yield 0.00 % DLOM 24.70 % The assumed volatility assumption is based on that of an identified group of comparable public companies. The fair value of the exit fee has been determined utilizing unobservable inputs and therefore is a Level 3 measurement under the fair value hierarchy. The Company was in compliance with all applicable debt covenants at June 30, 2022 and December 31, 2021. |
Leases
Leases | 6 Months Ended |
Jun. 30, 2022 | |
Leases [Abstract] | |
Leases | Leases The Company leases real estate and equipment under operating and finance leases, some of which are from related parties as discussed in Note 10 — Related Party Transactions . The most significant obligati ons under these lease agreements require the payments of periodic rentals, real estate taxes, insurance and maintenance costs. Depending on particular Showroom leases, the Company can also owe a percentage rent payment if particular Showrooms meet certain sales figures. The following table summarizes the amounts recognized in our condensed consolidated balance sheets related to leases as of June 30, 2022 (amounts in thousands): Condensed Consolidated Balance Sheet Classification June 30, 2022 Assets Operating lease assets Operating right-of-use assets $ 231,667 Finance lease assets Financing right-of-use assets 39,602 Total leased assets $ 271,269 Liabilities Current operating leases Current portion of operating lease liabilities $ 37,624 Non-current operating leases Operating lease liabilities, long-term 268,061 Total operating lease liabilities 305,685 Current finance leases Current portion of financing lease liabilities 513 Non-current finance leases Financing lease liabilities, long-term 51,981 Total finance lease liabilities 52,494 Total lease liabilities $ 358,179 The components of lease cost recognized within our condensed consolidated statements of comprehensive income for the six and three months ended June 30, 2022 are as follows (amounts in thousands): Six months ended June 30, Three months ended June 30, Condensed Consolidated Income Statement Classification 2022 2022 Lease costs: Operating lease costs Cost of goods sold $ 17,082 $ 8,677 Operating lease costs Selling, general and administrative expenses 2,788 1,701 Finance lease costs Amortization of right-of-use assets Selling, general and administrative expenses 976 518 Interest expense on lease liabilities Interest expense 2,488 1,257 Other lease costs (1) Cost of goods sold 16,803 8,885 Other lease costs (1) Selling, general and administrative expenses 337 249 Total lease costs $ 40,474 $ 21,287 (1) Other lease costs includes short-term lease costs and variable lease costs. Rent expense, amortization of landlord improvements and percentage rent expense calculated under ASC 840 were $31.3 million, $5.6 million and $1.2 million for the six months ended June 30, 2021, respectively. Rent expense, amortization of landlord improvements and percentage rent expense calculated under ASC 840 were $15.6 million, $2.8 million and $0.7 million for the three months ended June 30, 2021 , respectively. We often have options to renew lease terms for Showrooms and other assets. The exercise of lease renewal options is generally at our sole discretion. In addition, certain lease agreements may be terminated prior to their original expiration date at our discretion. We evaluate each renewal and termination options at the lease commencement date to determine if we are reasonably certain to exercise the option on the basis of economic factors. The table below summarizes the weighted average remaining lease terms as of June 30, 2022. Weighted Average Remaining Lease Term (In Years) June 30, 2022 Operating leases 8.74 Finance leases 22.87 The discount rate implicit within our finance leases was determined at the time of lease commencement. However, the discount rate implicit within our operating leases is generally not determinable at the time of lease commencement and therefore the Company determines the discount rate based on its incremental borrowing rate. For all operating leases, the Company utilized a market-based approach to estimate the incremental borrowing rate (“IBR”), which required significant judgment. The Company estimated the base IBR based on an analysis of (i) yields on the Company’s 2021 Credit Facility, as well as comparable companies and (ii) unsecured yields and discount rates. The Company applied adjustments to the base IBRs to account for full collateralization and lease term. The table below summarizes the weighted average discount rate used to measure our lease liabilities as of June 30, 2022. Weighted Average Discount Rate June 30, 2022 Operating leases 4.32 % Finance leases 9.72 % Future lease liabilities at June 30, 2022 are as follows (amounts in thousands): Year Ending December 31, Operating Lease Liabilities (1) Finance Lease Liabilities Total Lease Liabilities Remainder of 2022 $ 24,016 $ 2,666 $ 26,682 2023 50,355 5,333 55,688 2024 45,518 5,153 50,671 2025 39,776 5,153 44,929 2026 37,153 5,612 42,765 2027 33,633 5,423 39,056 Thereafter 143,388 115,168 258,556 Total lease payments 373,839 144,508 518,347 Less: Amounts representing interest (68,154) (92,014) (160,168) Total $ 305,685 $ 52,494 $ 358,179 (1) Includes leases with related parties. See Note 10 — Related Party Transactions for amounts leased from related parties. At June 30, 2022, the Company has entered into leases for the expansion of our Boston Heights distribution center and Showrooms which have not yet commenced with expected lease terms ranging from 10 to 24 years. The aggregate minimum rental payments over the term of the leases of approximately $148.4 million are not included in the above table. Future minimum lease payments for operating and capital leases under ASC 840 at December 31, 2021, were as follows (amounts in thousands): Year Ending December 31, Operating Leases (1) Capital Leases Total Future Lease Payments 2022 $ 45,892 $ 4,673 $ 50,565 2023 43,507 4,673 48,180 2024 38,659 4,673 43,332 2025 33,125 4,673 37,798 2026 29,903 5,132 35,035 Thereafter 129,498 120,390 249,888 320,584 144,214 464,798 Less: Amounts representing interest — (94,064) (94,064) Total $ 320,584 $ 50,150 $ 370,734 (1) Includes leases with related parties. See Note 10 — Related Party Transactions for amounts leased from related parties. Supplemental cash flow information related to leases for the six months ended June 30, 2022, is as follows (amounts in thousands): Six months ended June 30, 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows for operating leases $ 23,501 Operating cash flows for finance leases 2,488 Financing cash flows for finance leases 50 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 42,001 Finance leases 2,018 |
Leases | Leases The Company leases real estate and equipment under operating and finance leases, some of which are from related parties as discussed in Note 10 — Related Party Transactions . The most significant obligati ons under these lease agreements require the payments of periodic rentals, real estate taxes, insurance and maintenance costs. Depending on particular Showroom leases, the Company can also owe a percentage rent payment if particular Showrooms meet certain sales figures. The following table summarizes the amounts recognized in our condensed consolidated balance sheets related to leases as of June 30, 2022 (amounts in thousands): Condensed Consolidated Balance Sheet Classification June 30, 2022 Assets Operating lease assets Operating right-of-use assets $ 231,667 Finance lease assets Financing right-of-use assets 39,602 Total leased assets $ 271,269 Liabilities Current operating leases Current portion of operating lease liabilities $ 37,624 Non-current operating leases Operating lease liabilities, long-term 268,061 Total operating lease liabilities 305,685 Current finance leases Current portion of financing lease liabilities 513 Non-current finance leases Financing lease liabilities, long-term 51,981 Total finance lease liabilities 52,494 Total lease liabilities $ 358,179 The components of lease cost recognized within our condensed consolidated statements of comprehensive income for the six and three months ended June 30, 2022 are as follows (amounts in thousands): Six months ended June 30, Three months ended June 30, Condensed Consolidated Income Statement Classification 2022 2022 Lease costs: Operating lease costs Cost of goods sold $ 17,082 $ 8,677 Operating lease costs Selling, general and administrative expenses 2,788 1,701 Finance lease costs Amortization of right-of-use assets Selling, general and administrative expenses 976 518 Interest expense on lease liabilities Interest expense 2,488 1,257 Other lease costs (1) Cost of goods sold 16,803 8,885 Other lease costs (1) Selling, general and administrative expenses 337 249 Total lease costs $ 40,474 $ 21,287 (1) Other lease costs includes short-term lease costs and variable lease costs. Rent expense, amortization of landlord improvements and percentage rent expense calculated under ASC 840 were $31.3 million, $5.6 million and $1.2 million for the six months ended June 30, 2021, respectively. Rent expense, amortization of landlord improvements and percentage rent expense calculated under ASC 840 were $15.6 million, $2.8 million and $0.7 million for the three months ended June 30, 2021 , respectively. We often have options to renew lease terms for Showrooms and other assets. The exercise of lease renewal options is generally at our sole discretion. In addition, certain lease agreements may be terminated prior to their original expiration date at our discretion. We evaluate each renewal and termination options at the lease commencement date to determine if we are reasonably certain to exercise the option on the basis of economic factors. The table below summarizes the weighted average remaining lease terms as of June 30, 2022. Weighted Average Remaining Lease Term (In Years) June 30, 2022 Operating leases 8.74 Finance leases 22.87 The discount rate implicit within our finance leases was determined at the time of lease commencement. However, the discount rate implicit within our operating leases is generally not determinable at the time of lease commencement and therefore the Company determines the discount rate based on its incremental borrowing rate. For all operating leases, the Company utilized a market-based approach to estimate the incremental borrowing rate (“IBR”), which required significant judgment. The Company estimated the base IBR based on an analysis of (i) yields on the Company’s 2021 Credit Facility, as well as comparable companies and (ii) unsecured yields and discount rates. The Company applied adjustments to the base IBRs to account for full collateralization and lease term. The table below summarizes the weighted average discount rate used to measure our lease liabilities as of June 30, 2022. Weighted Average Discount Rate June 30, 2022 Operating leases 4.32 % Finance leases 9.72 % Future lease liabilities at June 30, 2022 are as follows (amounts in thousands): Year Ending December 31, Operating Lease Liabilities (1) Finance Lease Liabilities Total Lease Liabilities Remainder of 2022 $ 24,016 $ 2,666 $ 26,682 2023 50,355 5,333 55,688 2024 45,518 5,153 50,671 2025 39,776 5,153 44,929 2026 37,153 5,612 42,765 2027 33,633 5,423 39,056 Thereafter 143,388 115,168 258,556 Total lease payments 373,839 144,508 518,347 Less: Amounts representing interest (68,154) (92,014) (160,168) Total $ 305,685 $ 52,494 $ 358,179 (1) Includes leases with related parties. See Note 10 — Related Party Transactions for amounts leased from related parties. At June 30, 2022, the Company has entered into leases for the expansion of our Boston Heights distribution center and Showrooms which have not yet commenced with expected lease terms ranging from 10 to 24 years. The aggregate minimum rental payments over the term of the leases of approximately $148.4 million are not included in the above table. Future minimum lease payments for operating and capital leases under ASC 840 at December 31, 2021, were as follows (amounts in thousands): Year Ending December 31, Operating Leases (1) Capital Leases Total Future Lease Payments 2022 $ 45,892 $ 4,673 $ 50,565 2023 43,507 4,673 48,180 2024 38,659 4,673 43,332 2025 33,125 4,673 37,798 2026 29,903 5,132 35,035 Thereafter 129,498 120,390 249,888 320,584 144,214 464,798 Less: Amounts representing interest — (94,064) (94,064) Total $ 320,584 $ 50,150 $ 370,734 (1) Includes leases with related parties. See Note 10 — Related Party Transactions for amounts leased from related parties. Supplemental cash flow information related to leases for the six months ended June 30, 2022, is as follows (amounts in thousands): Six months ended June 30, 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows for operating leases $ 23,501 Operating cash flows for finance leases 2,488 Financing cash flows for finance leases 50 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 42,001 Finance leases 2,018 |
Equity Based Compensation
Equity Based Compensation | 6 Months Ended |
Jun. 30, 2022 | |
Share-based Payment Arrangement [Abstract] | |
Equity Based Compensation | Equity Based Compensation The Company recorded equity based compensation expense of $1.4 million and $0.4 million for the six months ended June 30, 2022 and 2021, respectively. Equity based compensation expense was $0.7 million and $0.3 million for the three months ended June 30, 2022 and 2021, respectively. Equity based compensation expense is recorded within the selling, general and administrative expenses line item of the condensed consolidated statements of comprehensive income . Total unrecognized compensation cost for equity based compensation to be recognized in future periods is $10.2 million at June 30, 2022, and will be recognized over a weighted average period of 3.84 years. Class A Class B Shares Weighted Average Grant Date Fair Value Shares Weighted Average Grant Date Fair Value Unvested at December 31, 2021 2,520,229 $ 16.28 596,598 $ 0.13 Granted — — — — Forfeited — — — — Vested (932,847) 18.02 (596,598) 0.10 Unvested at June 30, 2022 1,587,382 $ 17.93 — $ — |
Segment Reporting
Segment Reporting | 6 Months Ended |
Jun. 30, 2022 | |
Segment Reporting [Abstract] | |
Segment Reporting | Segment Reporting Our chief operating decision maker is our Chief Executive Officer (“CEO”), who reviews financial information presented on a consolidated basis for purposes of making decisions, assessing financial performance and allocating resources. We operate our business as one operating segment and therefore we have one reportable segment that offers an assortment of merchandise across a number of categories, including furniture, outdoor, lighting, textiles, and décor. The assortment of merchandise can be purchased through our retail and eCommerce sales channels. The majority of our net 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 net revenue by merchandise sales channel for the six and three months ended June 30, 2022 and 2021, respectively (amounts in thousands): Six months ended June 30, Three months ended June 30, 2022 2021 2022 2021 Retail $ 458,965 $ 290,511 $ 256,395 $ 151,719 eCommerce 93,600 64,846 49,870 32,324 Total net revenue $ 552,565 $ 355,357 $ 306,265 $ 184,043 |
Net and Comprehensive Income pe
Net and Comprehensive Income per Share | 6 Months Ended |
Jun. 30, 2022 | |
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 LLC were issued Class B and Class A common stock in the Company, respectively. 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 condensed 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 six and three months ended June 30, 2022 and 2021, was calculated by adjusting net and comprehensive income attributable to Arhaus, Inc. for net and comprehensive income attributable to noncontrolling interest, and dividing by basic and diluted weighted-average number of common shares outstanding. Management Incentive Unitholders did not participate in the earnings or losses of the Company as of June 30, 2021 and therefore were not participating securities. As such, they were not included within the calculation of basic or diluted earnings per share as of June 30, 2021. Basic and diluted net and comprehensive income per share for the six and three months ended June 30, 2022 and 2021 , is as follows (amounts in thousands except share and per share data): Six months ended June 30, Three months ended June 30, 2022 2021 2022 2021 Numerator Net and comprehensive income $ 52,697 $ 16,048 $ 36,639 $ 6,836 Less: Net and comprehensive income attributable to noncontrolling interest — 9,268 — 3,951 Net and comprehensive income attributable to Arhaus, Inc. $ 52,697 $ 6,780 $ 36,639 $ 2,885 Denominator—Weighted Average Shares Outstanding Weighted-average number of common shares outstanding, basic 137,662,601 112,058,742 137,840,691 112,058,742 Effect of dilutive restricted stock (1) 1,731,454 — 1,613,418 — Weighted-average number of common shares outstanding, diluted 139,394,055 112,058,742 139,454,109 112,058,742 Net and Comprehensive Income Per Share Net and comprehensive income per share, basic $ 0.38 $ 0.06 $ 0.27 $ 0.03 Net and comprehensive income per share, diluted $ 0.38 $ 0.06 $ 0.26 $ 0.03 (1) During the six and three months ended June 30, 2022, 618,387 and 554,070 shares of unvested restricted stock were excluded from the computation of diluted earnings per share because their effect would have been anti-dilutive. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies The Company is involved in litigation and claims that are incidental to its business. Although the outcome of these matters cannot be determined at the present time, 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 June 30, 2022 and December 31, 2021, we recorded liabilities of $1.2 million and $1.2 million, respectively, in accrued taxes on the condensed consolidated balance sheets for non-income tax matters that were probable and reasonably estimable. |
Related Party Transactions
Related Party Transactions | 6 Months Ended |
Jun. 30, 2022 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions Leasing transactions In November 2000, the Company entered into a lease agreement with Pagoda Partners, LLC, a company of which John Reed, our CEO, indirectly owns 50%, for our warehouse in Walton Hills, Ohio. The base lease term was 17 years with a 5-year renewal option. In August 2020, the Company amended the lease agreement to extend the lease term to April 2024 with the ability to extend the lease in 12-month increments thereafter. The monthly rental payments are $0.1 million. Rent expense w as $0.7 million and $0.7 million for the six months ended June 30, 2022 and 2021, respectively. Rent expense was $0.4 million and $0.4 million for the three months ended June 30, 2022 and 2021, respectively. In July 2010, the Company entered into a lease agreement with Brooklyn Arhaus, a company of which our CEO and Mr. Beargie, a Director of the Company, own 85% and 15%, respectively, for our Outlet in Brooklyn, Ohio. The base lease term is 15 years with no lease renewal options. The monthly rental payments are $20 thousand. Rent expense was $0.2 million and $0.2 million for the six months ended June 30, 2022 and 2021, respectively. Rent expense was $0.1 million and $0.1 million for the three months ended June 30, 2022 and 2021, respectively. In September 2014, the Company entered into a lease agreement with Premier Arhaus, LLC, a company of which our CEO indirectly owned 50% during 2021, 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, and with two additional 5-year renewal options at fair market rent. 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. In September 2021, the Company amended the existing finance lease agreement to extend the lease term for an additional three years, which included monthly rental payments of $0.6 million. Further, the amended lease agreement provides for the expansion of the Company’s distribution center and monthly rental payments range from $0.1 million to $0.2 million. During the fourth quarter of 2021, the lessor sold its interest in the leased assets to a third party. As a result, the lease is no longer with a related party of the Company. Rent expense was $2.9 million and $1.5 million for the six and three months ended June 30, 2021, respectively. In March 2021, the Company entered into a lease agreement with Premier Conover, LLC, a company of which our CEO indirectly owned 10%, for a distribution center and manufacturing building, for which construction was completed in the fourth quarter of 2021. The base lease term is for 12 years, with a 10-year renewal option and two additional 5-year renewal options at the higher of the minimum base rent or the fair market rent at the time of renewal execution. The monthly rental payments range from $0.2 million to $0.3 million during the 12-year base lease term and from $0.4 million to $0.5 million during the 10-year renewal period . Rent expense was $1.8 million and $0.9 million for the six and three months ended June 30, 2022, respectively. Other transactions In accordance with the change in reporting entity, the Company’s condensed consolidated statements of cash flows include the payment and receipt of a related-party receivable and a related-party note receivable between Homeworks and our CEO for $0.1 million and $1.0 million, respectively for the six months ended June 30, 2021. The receivable and the full principal on the note receivable, including accrued interest, were paid back to the Company by the CEO in May 2021. In accordance with the Reorganization, the Company has accounts payable due to 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 were $0.2 million and $2.9 million at June 30, 2022 and December 31, 2021, respectively, and are included within accounts payable on the condensed consolidated balance sheets . |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2022 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income TaxesIncome taxes were $18.3 million and $1.2 million in the six months ended June 30, 2022 and 2021, respectively. Income taxes were $12.4 million and $0.5 million in the three months ended June 30, 2022 and 2021, respectively. The effective tax rate was 25.8% and 7.0% for the six months ended June 30, 2022 and 2021, respectively. The effective tax rate was 25.3% and 6.8% for the three months ended June 30, 2022 and 2021, respectively. 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 LLC. The income tax provision included state and local tax in certain jurisdictions prior to the Reorganization. Subsequent to the Reorganization, LLC’s taxable income flows through to FS Arhaus and Homeworks who are subject to U.S. federal and state corporate income taxes.As of June 30, 2022, no unrecognized tax benefits have been recognized. The Company files income tax returns in the U.S. and various state and local jurisdictions. The tax years after 2017 remain open to examination by the state taxing jurisdictions in which the Company is subject to tax. As of June 30, 2022, the Company was not under examination by the Internal Revenue Service or any state tax jurisdiction. |
Nature of Business and Basis _2
Nature of Business and Basis of Presentation (Policies) | 6 Months Ended |
Jun. 30, 2022 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying condensed consolidated financial statements include our accounts and those of our wholly owned subsidiaries. Accordingly, all intercompany balances and transactions have been eliminated through the consolidation process. Certain reclassifications have been made to prior years' condensed consolidated financial statements to conform to the current year's presentation. The accompanying condensed consolidated balance sheets at June 30, 2022 and December 31, 2021, the condensed consolidated statements of comprehensive income and changes in stockholders’equity (deficit) for the six and three months ended June 30, 2022 and 2021, the condensed consolidated statements of cash flows for the six months ended June 30, 2022 and 2021 and the related interim condensed consolidated disclosures are unaudited and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In management’s opinion, the accompanying condensed consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the Company’s financial position at June 30, 2022; the results of operations and changes in stockholders’equity (deficit) for the six and three months ended June 30, 2022 and 2021 and the condensed consolidated statements of cash flows for the six months ended June 30, 2022 and 2021. The condensed consolidated balance sheet as of December 31, 2021 included herein was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. The results for the six and three months ended June 30, 2022 and 2021 are not necessarily indicative of the operating results to be expected for the full fiscal year or any future period. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021. |
Use of Estimates | Use of Estimates The preparation of our condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The accounting estimates and other matters included within our condensed consolidated financial statements and notes to the condensed consolidated financial statements are revenue recognition, including a reserve for merchandise returns, goodwill and fair value of financial instruments which include, but are not limited to, accounts receivable, payables, lease obligations, derivative and equity based compensation instruments. |
Client Deposits and Gift Cards | Client Deposits 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 clients’ purchase price. Orders are recognized as revenue when the merchandise is delivered to the client and at the time of delivery the client deposit is no longer recorded as a liability. The Company expects substantially all client deposits as of June 30, 2022 will be recognized as net revenue within the next 12 months as the performance obligations are satisfied. Gift Cards The Company sells gift cards to clients in our Showrooms 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 |
Fair Value of Financial Instruments | Fair Values of Financial Instruments The Company’s primary financial ins truments are cash and cash equivalents, accounts receivable, payables, lease obligations, derivative and equity based compensation instruments. Due to the shor t-term maturities of cash and cash equivalents, accounts receivable and payables, the Company believes the fair values of these instruments approximate their respective carrying values at June 30, 2022 and December 31, 2021. See Note 4 for discussion of our derivative, Note 5 for discussion of our lease obligations and Note 6 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. |
New Accounting Standards Adopted | New Accounting Standards 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. The Company adopted ASC 842 as of January 1, 2022, using the modified retrospective approach by applying the transition provisions at the beginning of the period of adoption. Comparative periods will continue to be presented in accordance with ASC 840. The Company elected the package of practical expedients permitted under the transition guidance, which allowed the Company to carryforward the historical lease classification, lease identification and initial direct costs. The Company did not elect the “Land Easements” or “Hindsight” practical expedients. Additionally, the Company made the following accounting policy elections in connection with the adoption: • Exclude short-term leases from our consolidated balance sheets; and • Include both the lease and non-lease components as a single component and account for it as a lease. As a result, the Company measured the right-of-use asset and lease liability for operating and finance leases as of January 1, 2022, using the remaining portion of the lease term that was determined under ASC 840. The adoption resulted in $242.0 million recognized as total right-of-use assets and $326.5 million recognized as total lease liabilities on our consolidated balance sheets as of January 1, 2022. For certain previous operating and capital leases, we qualified 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. As part of our adoption of ASC 842, we derecognized the cost of these construction projects of $31.0 million, which were previously recorded in property, furniture and equipment, net with an offsetting obligation in accrued other expenses on our consolidated balance sheets at December 31, 2021. See Note 5 — Leases for additional information. |
Merchandise Warranties (Tables)
Merchandise Warranties (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
Product Warranties Disclosures [Abstract] | |
Merchandise Warranty Liability | A reconciliation of the changes in our limited merchandise warranty liability is as follows (amounts in thousands): Six months ended June 30, Three months ended June 30, 2022 2021 2022 2021 Balance as of beginning of period $ 4,724 $ 3,326 $ 4,963 $ 3,577 Accruals during the period 5,104 3,514 2,908 1,922 Settlements during the period (4,416) (2,972) (2,459) (1,631) Balance as of end of the period (1) $ 5,412 $ 3,868 $ 5,412 $ 3,868 (1) $3.2 million and $2.7 million were recorded in accrued other expenses at June 30, 2022 and December 31, 2021, respectively. The remainder is recorded in other long-term liabilities on our condensed consolidated balance sheets. |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
Debt Disclosure [Abstract] | |
Schedule of Fair Value Assumptions for Long-Term Debt | The key assumptions used within the Black-Scholes OPM as of June 30, 2021 were as follows: June 30, Term 10 years Risk-free rate of return 1.50 % Volatility 40.00 % Dividend yield 0.00 % DLOM 24.70 % |
Leases (Tables)
Leases (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
Leases [Abstract] | |
Liability for Operating and Finance Leases | The following table summarizes the amounts recognized in our condensed consolidated balance sheets related to leases as of June 30, 2022 (amounts in thousands): Condensed Consolidated Balance Sheet Classification June 30, 2022 Assets Operating lease assets Operating right-of-use assets $ 231,667 Finance lease assets Financing right-of-use assets 39,602 Total leased assets $ 271,269 Liabilities Current operating leases Current portion of operating lease liabilities $ 37,624 Non-current operating leases Operating lease liabilities, long-term 268,061 Total operating lease liabilities 305,685 Current finance leases Current portion of financing lease liabilities 513 Non-current finance leases Financing lease liabilities, long-term 51,981 Total finance lease liabilities 52,494 Total lease liabilities $ 358,179 |
Components of Lease Expense | The components of lease cost recognized within our condensed consolidated statements of comprehensive income for the six and three months ended June 30, 2022 are as follows (amounts in thousands): Six months ended June 30, Three months ended June 30, Condensed Consolidated Income Statement Classification 2022 2022 Lease costs: Operating lease costs Cost of goods sold $ 17,082 $ 8,677 Operating lease costs Selling, general and administrative expenses 2,788 1,701 Finance lease costs Amortization of right-of-use assets Selling, general and administrative expenses 976 518 Interest expense on lease liabilities Interest expense 2,488 1,257 Other lease costs (1) Cost of goods sold 16,803 8,885 Other lease costs (1) Selling, general and administrative expenses 337 249 Total lease costs $ 40,474 $ 21,287 (1) Other lease costs includes short-term lease costs and variable lease costs. Weighted Average Remaining Lease Term (In Years) June 30, 2022 Operating leases 8.74 Finance leases 22.87 Weighted Average Discount Rate June 30, 2022 Operating leases 4.32 % Finance leases 9.72 % |
Lessee, Operating Lease, Liability, Maturity | Future lease liabilities at June 30, 2022 are as follows (amounts in thousands): Year Ending December 31, Operating Lease Liabilities (1) Finance Lease Liabilities Total Lease Liabilities Remainder of 2022 $ 24,016 $ 2,666 $ 26,682 2023 50,355 5,333 55,688 2024 45,518 5,153 50,671 2025 39,776 5,153 44,929 2026 37,153 5,612 42,765 2027 33,633 5,423 39,056 Thereafter 143,388 115,168 258,556 Total lease payments 373,839 144,508 518,347 Less: Amounts representing interest (68,154) (92,014) (160,168) Total $ 305,685 $ 52,494 $ 358,179 |
Finance Lease, Liability, Fiscal Year Maturity | Future lease liabilities at June 30, 2022 are as follows (amounts in thousands): Year Ending December 31, Operating Lease Liabilities (1) Finance Lease Liabilities Total Lease Liabilities Remainder of 2022 $ 24,016 $ 2,666 $ 26,682 2023 50,355 5,333 55,688 2024 45,518 5,153 50,671 2025 39,776 5,153 44,929 2026 37,153 5,612 42,765 2027 33,633 5,423 39,056 Thereafter 143,388 115,168 258,556 Total lease payments 373,839 144,508 518,347 Less: Amounts representing interest (68,154) (92,014) (160,168) Total $ 305,685 $ 52,494 $ 358,179 |
Schedule of Future Minimum Lease Payments Under Capital Leases | Future minimum lease payments for operating and capital leases under ASC 840 at December 31, 2021, were as follows (amounts in thousands): Year Ending December 31, Operating Leases (1) Capital Leases Total Future Lease Payments 2022 $ 45,892 $ 4,673 $ 50,565 2023 43,507 4,673 48,180 2024 38,659 4,673 43,332 2025 33,125 4,673 37,798 2026 29,903 5,132 35,035 Thereafter 129,498 120,390 249,888 320,584 144,214 464,798 Less: Amounts representing interest — (94,064) (94,064) Total $ 320,584 $ 50,150 $ 370,734 (1) Includes leases with related parties. See Note 10 — Related Party Transactions for amounts leased from related parties. |
Supplemental Cash Flow from Leases | Supplemental cash flow information related to leases for the six months ended June 30, 2022, is as follows (amounts in thousands): Six months ended June 30, 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows for operating leases $ 23,501 Operating cash flows for finance leases 2,488 Financing cash flows for finance leases 50 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 42,001 Finance leases 2,018 |
Equity Based Compensation (Tabl
Equity Based Compensation (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
Share-based Payment Arrangement [Abstract] | |
Restricted Stock Activity | Class A Class B Shares Weighted Average Grant Date Fair Value Shares Weighted Average Grant Date Fair Value Unvested at December 31, 2021 2,520,229 $ 16.28 596,598 $ 0.13 Granted — — — — Forfeited — — — — Vested (932,847) 18.02 (596,598) 0.10 Unvested at June 30, 2022 1,587,382 $ 17.93 — $ — |
Segment Reporting (Tables)
Segment Reporting (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
Segment Reporting [Abstract] | |
Net Revenue by Segment | The following table shows net revenue by merchandise sales channel for the six and three months ended June 30, 2022 and 2021, respectively (amounts in thousands): Six months ended June 30, Three months ended June 30, 2022 2021 2022 2021 Retail $ 458,965 $ 290,511 $ 256,395 $ 151,719 eCommerce 93,600 64,846 49,870 32,324 Total net revenue $ 552,565 $ 355,357 $ 306,265 $ 184,043 |
Net and Comprehensive Income _2
Net and Comprehensive Income per Share (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
Earnings Per Share [Abstract] | |
Calculation of Basic and Diluted Earnings Per Share | Basic and diluted net and comprehensive income per share for the six and three months ended June 30, 2022 and 2021 , is as follows (amounts in thousands except share and per share data): Six months ended June 30, Three months ended June 30, 2022 2021 2022 2021 Numerator Net and comprehensive income $ 52,697 $ 16,048 $ 36,639 $ 6,836 Less: Net and comprehensive income attributable to noncontrolling interest — 9,268 — 3,951 Net and comprehensive income attributable to Arhaus, Inc. $ 52,697 $ 6,780 $ 36,639 $ 2,885 Denominator—Weighted Average Shares Outstanding Weighted-average number of common shares outstanding, basic 137,662,601 112,058,742 137,840,691 112,058,742 Effect of dilutive restricted stock (1) 1,731,454 — 1,613,418 — Weighted-average number of common shares outstanding, diluted 139,394,055 112,058,742 139,454,109 112,058,742 Net and Comprehensive Income Per Share Net and comprehensive income per share, basic $ 0.38 $ 0.06 $ 0.27 $ 0.03 Net and comprehensive income per share, diluted $ 0.38 $ 0.06 $ 0.26 $ 0.03 (1) During the six and three months ended June 30, 2022, 618,387 and 554,070 shares of unvested restricted stock were excluded from the computation of diluted earnings per share because their effect would have been anti-dilutive. |
Nature of Business and Basis _3
Nature of Business and Basis of Presentation (Details) $ in Thousands | 6 Months Ended | |
Jun. 30, 2022 USD ($) stores | Dec. 31, 2021 USD ($) | |
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||
Number of stores | stores | 80 | |
Client deposits, percentage collected at least (as a percent) | 50% | |
Client deposits | $ (276,968) | $ (264,929) |
Other Accrued Expenses | ||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||
Client deposits | $ (900) | $ (900) |
Recently Issued Accounting St_2
Recently Issued Accounting Standards (Details) - USD ($) $ in Thousands | Jun. 30, 2022 | Jan. 01, 2022 | Dec. 31, 2021 |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Operating right-of-use assets | $ 231,667 | $ 0 | |
Total operating lease liabilities | $ 305,685 | ||
Construction costs | $ 31,000 | ||
Accounting Standards Update 2016-02 | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Operating right-of-use assets | $ 242,000 | ||
Total operating lease liabilities | $ 326,500 |
Merchandise Warranties - Narrat
Merchandise Warranties - Narrative (Details) | 6 Months Ended |
Jun. 30, 2022 | |
Minimum | |
Product Warranty Liability [Line Items] | |
Warranty, performance obligation period | 3 years |
Maximum | |
Product Warranty Liability [Line Items] | |
Warranty, performance obligation period | 10 years |
Merchandise Warranties - Change
Merchandise Warranties - Change in Liability (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Movement in Standard Product Warranty Accrual [Roll Forward] | ||||
Balance as of beginning of period | $ 4,963 | $ 3,577 | $ 4,724 | $ 3,326 |
Accruals during the period | 2,908 | 1,922 | 5,104 | 3,514 |
Settlements during the period | (2,459) | (1,631) | (4,416) | (2,972) |
Balance as of the end of the period | 5,412 | 3,868 | 5,412 | 3,868 |
Standard product warranty accrual | 5,412 | $ 3,868 | 5,412 | $ 3,868 |
Accrued Other Expenses | ||||
Movement in Standard Product Warranty Accrual [Roll Forward] | ||||
Balance as of beginning of period | 2,700 | |||
Balance as of the end of the period | 3,200 | 3,200 | ||
Standard product warranty accrual | $ 3,200 | $ 3,200 |
Long-Term Debt - Narrative (Det
Long-Term Debt - Narrative (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||||
Jun. 30, 2021 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | Dec. 31, 2021 | Nov. 08, 2021 | Jun. 25, 2020 | |
Debt Instrument [Line Items] | |||||||
Derivative expense | $ 0 | $ 29,805,000 | |||||
Term Loan | Loan Payable | |||||||
Debt Instrument [Line Items] | |||||||
Loan, exit fee, face amount | $ 3,000,000 | ||||||
Loan, exit fee clause, percentage of total equity | 4% | ||||||
Derivative expense | $ 18,300,000 | 29,800,000 | |||||
Revolving Credit Facility | Credit Agreement - Revolver | Credit Agreement | |||||||
Debt Instrument [Line Items] | |||||||
Credit facility, face amount | $ 30,000,000 | ||||||
Credit facility, basis spread on variable rate | 5.50% | ||||||
Loan costs, net | $ 1,500,000 | ||||||
Amortization of loan costs | $ 200,000 | $ 300,000 | |||||
Revolving Credit Facility | 2021 Credit Facility | |||||||
Debt Instrument [Line Items] | |||||||
Credit facility, face amount | $ 50,000,000 | ||||||
Credit facility, basis spread on variable rate | 1.50% | ||||||
Borrowings on credit facility | $ 0 | $ 0 | |||||
Deferred financing costs | $ 300,000 | ||||||
Revolving Credit Facility | 2021 Credit Facility | Letter of Credit | |||||||
Debt Instrument [Line Items] | |||||||
Credit facility, face amount | 10,000,000 | ||||||
Revolving Credit Facility | 2021 Credit Facility | Swingline Loan | |||||||
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 | Jun. 30, 2021 yr |
Term | Discounted Cash Flow | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Derivative liability, measurement input | 10 |
Risk-free rate of return | Black-Scholes OPM | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Derivative liability, measurement input | 0.0150 |
Volatility | Black-Scholes OPM | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Derivative liability, measurement input | 0.4000 |
Dividend yield | Black-Scholes OPM | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Derivative liability, measurement input | 0 |
DLOM | Black-Scholes OPM | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Derivative liability, measurement input | 0.2470 |
Leases - Liability for Operatin
Leases - Liability for Operating and Finance Leases (Details) - USD ($) $ in Thousands | Jun. 30, 2022 | Dec. 31, 2021 |
Leases [Abstract] | ||
Operating right-of-use assets | $ 231,667 | $ 0 |
Financing right-of-use assets | 39,602 | 0 |
Total leased assets | 271,269 | |
Current portion of operating lease liabilities | 37,624 | 0 |
Operating lease liabilities, long-term | 268,061 | 0 |
Total operating lease liabilities | 305,685 | |
Current portion of financing lease liabilities | 513 | 0 |
Financing lease liabilities, long-term | 51,981 | $ 0 |
Total finance lease liabilities | 52,494 | |
Total lease liability | $ 358,179 |
Leases - Components of Lease Co
Leases - Components of Lease Cost (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended |
Jun. 30, 2022 | Jun. 30, 2022 | |
Lease Cost [Line Items] | ||
Total lease costs | $ 21,287 | $ 40,474 |
Cost of goods sold | ||
Lease Cost [Line Items] | ||
Operating lease costs | 8,677 | 17,082 |
Other lease costs | 8,885 | 16,803 |
Selling, general and administrative expenses | ||
Lease Cost [Line Items] | ||
Operating lease costs | 1,701 | 2,788 |
Amortization of right-of-use assets | 518 | 976 |
Other lease costs | 249 | 337 |
Interest expense | ||
Lease Cost [Line Items] | ||
Interest expense on lease liabilities | $ 1,257 | $ 2,488 |
Leases - Schedule of Weighted A
Leases - Schedule of Weighted Average Lease Term (Details) | Jun. 30, 2022 |
Leases [Abstract] | |
Operating Lease, Weighted Average Remaining Lease Term | 8 years 8 months 26 days |
Finance Lease, Weighted Average Remaining Lease Term | 22 years 10 months 13 days |
Leases - Schedule of Weighted_2
Leases - Schedule of Weighted Average Discount Rate (Details) | Jun. 30, 2022 |
Leases [Abstract] | |
Operating leases | 4.32% |
Finance leases | 9.72% |
Leases - Narrative (Details)
Leases - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |
Jun. 30, 2021 | Jun. 30, 2021 | Jun. 30, 2022 | |
Lease Cost [Line Items] | |||
Rent expense | $ 15.6 | $ 31.3 | |
Percentage rent expense | 0.7 | 1.2 | |
Aggregate minimum rental payments, not yet commenced | $ 148.4 | ||
Minimum | |||
Lease Cost [Line Items] | |||
Lease term, not yet commenced | 10 years | ||
Maximum | |||
Lease Cost [Line Items] | |||
Lease term, not yet commenced | 24 years | ||
Leasehold Improvements | |||
Lease Cost [Line Items] | |||
Amortization | $ 2.8 | $ 5.6 |
Leases - Future Minimum Lease P
Leases - Future Minimum Lease Payments (Details) $ in Thousands | Jun. 30, 2022 USD ($) |
Operating Lease Liabilities | |
Remainder of 2022 | $ 24,016 |
2023 | 50,355 |
2024 | 45,518 |
2025 | 39,776 |
2026 | 37,153 |
2027 | 33,633 |
Thereafter | 143,388 |
Total lease payments | 373,839 |
Less: Amounts representing interest | (68,154) |
Total operating lease liabilities | 305,685 |
Finance Lease Liabilities | |
Remainder of 2022 | 2,666 |
2023 | 5,333 |
2024 | 5,153 |
2025 | 5,153 |
2026 | 5,612 |
2027 | 5,423 |
Thereafter | 115,168 |
Total lease payments | 144,508 |
Less: Amounts representing interest | (92,014) |
Total finance lease liabilities | 52,494 |
Total Lease Liabilities | |
Remainder of 2022 | 26,682 |
2023 | 55,688 |
2024 | 50,671 |
2025 | 44,929 |
2026 | 42,765 |
2027 | 39,056 |
Total lease payments | 258,556 |
Thereafter | 518,347 |
Less: Amounts representing interest | (160,168) |
Total | $ 358,179 |
Leases - Future Minimum Lease_2
Leases - Future Minimum Lease Payments, Operating and Capital (Details) $ in Thousands | Dec. 31, 2021 USD ($) |
Operating Leases | |
2022 | $ 45,892 |
2023 | 43,507 |
2024 | 38,659 |
2025 | 33,125 |
2026 | 29,903 |
Thereafter | 129,498 |
Total lease payments | 320,584 |
Less: Amounts representing interest | 0 |
Total | 320,584 |
Capital Leases | |
2022 | 4,673 |
2023 | 4,673 |
2024 | 4,673 |
2025 | 4,673 |
2026 | 5,132 |
Thereafter | 120,390 |
Total lease payments | 144,214 |
Less: Amounts representing interest | (94,064) |
Total | 50,150 |
Leases, Operating and Capital [Abstract] | |
2022 | 50,565 |
2023 | 48,180 |
2024 | 43,332 |
2025 | 37,798 |
2026 | 35,035 |
Thereafter | 249,888 |
Total lease payments | 464,798 |
Less: Amounts representing interest | (94,064) |
Total | $ 370,734 |
Leases - Supplemental Cash Flow
Leases - Supplemental Cash Flow (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2022 | Jun. 30, 2021 | |
Leases [Abstract] | ||
Operating cash flows for operating leases | $ 23,501 | |
Operating cash flows for finance leases | 2,488 | |
Financing cash flows for finance leases | 50 | $ 0 |
Right-of-use assets obtained in exchange for lease obligations: | ||
Operating leases | 42,001 | |
Finance leases | $ 2,018 |
Equity Based Compensation - Nar
Equity Based Compensation - Narrative (Details) - Incentive Units - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Unit compensation expense | $ 0.7 | $ 0.3 | $ 1.4 | $ 0.4 |
Unrecognized compensation cost | $ 10.2 | $ 10.2 | ||
Unrecognized compensation cost, period for recognition | 3 years 10 months 2 days |
Equity Based Compensation - Unv
Equity Based Compensation - Unvested Restricted Stock Activity (Details) - Restricted Stock | 6 Months Ended |
Jun. 30, 2022 $ / shares shares | |
Class A | |
Shares | |
Outstanding, beginning of period (in shares) | shares | 2,520,229 |
Granted (in shares) | shares | 0 |
Forfeited (in shares) | shares | 0 |
Vested (in shares) | shares | (932,847) |
Outstanding, end of period (in shares) | shares | 1,587,382 |
Weighted Average Grant Date Fair Value | |
Outstanding, beginning of period (in dollars per share) | $ / shares | $ 16.28 |
Granted (in dollars per share) | $ / shares | 0 |
Forfeited (in dollars per share) | $ / shares | 0 |
Vested (in shares) | $ / shares | 18.02 |
Outstanding, end of period (in dollars per share) | $ / shares | $ 17.93 |
Class B | |
Shares | |
Outstanding, beginning of period (in shares) | shares | 596,598 |
Granted (in shares) | shares | 0 |
Forfeited (in shares) | shares | 0 |
Vested (in shares) | shares | (596,598) |
Outstanding, end of period (in shares) | shares | 0 |
Weighted Average Grant Date Fair Value | |
Outstanding, beginning of period (in dollars per share) | $ / shares | $ 0.13 |
Granted (in dollars per share) | $ / shares | 0 |
Forfeited (in dollars per share) | $ / shares | 0 |
Vested (in shares) | $ / shares | 0.10 |
Outstanding, end of period (in dollars per share) | $ / shares | $ 0 |
Segment Reporting (Details)
Segment Reporting (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2022 USD ($) | Jun. 30, 2021 USD ($) | Jun. 30, 2022 USD ($) segment | Jun. 30, 2021 USD ($) | |
Segment Reporting [Abstract] | ||||
Number of operating segments (in segments) | segment | 1 | |||
Number of reportable segments (in segments) | segment | 1 | |||
Segment Reporting Information [Line Items] | ||||
Net revenue | $ 306,265 | $ 184,043 | $ 552,565 | $ 355,357 |
Retail | ||||
Segment Reporting Information [Line Items] | ||||
Net revenue | 256,395 | 151,719 | 458,965 | 290,511 |
eCommerce | ||||
Segment Reporting Information [Line Items] | ||||
Net revenue | $ 49,870 | $ 32,324 | $ 93,600 | $ 64,846 |
Net and Comprehensive Income _3
Net and Comprehensive Income per Share - Narrative (Details) | Nov. 08, 2021 shares |
Common, Class B | |
Class of Stock [Line Items] | |
Shares issued (in shares) | 80,792,206 |
Common, 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 | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Numerator | ||||
Net income | $ 36,639 | $ 6,836 | $ 52,697 | $ 16,048 |
Less: Net income attributable to noncontrolling interest | 0 | 3,951 | 0 | 9,268 |
Net income (loss) attributable to the shareholders, basic | 36,639 | 2,885 | 52,697 | 6,780 |
Net income (loss) attributable to the shareholders, diluted | $ 36,639 | $ 2,885 | $ 52,697 | $ 6,780 |
Denominator—Weighted Average Shares Outstanding | ||||
Weighted-average number of common shares outstanding, basic (in shares) | 137,840,691 | 112,058,742 | 137,662,601 | 112,058,742 |
Effect of dilutive restricted stock (in shares) | 1,613,418 | 0 | 1,731,454 | 0 |
Weighted-average number of common shares outstanding, diluted (in shares) | 139,454,109 | 112,058,742 | 139,394,055 | 112,058,742 |
Net and comprehensive income per unit, basic (in dollars per share) | $ 0.27 | $ 0.03 | $ 0.38 | $ 0.06 |
Net and comprehensive income per unit, diluted (in dollars per share) | $ 0.26 | $ 0.03 | $ 0.38 | $ 0.06 |
Restricted Stock | ||||
Denominator—Weighted Average Shares Outstanding | ||||
Antidilutive securities excluded from computation of earnings per hare (in shares) | 554,070 | 618,387 |
Commitment and Contingencies (D
Commitment and Contingencies (Details) - USD ($) $ in Millions | Jun. 30, 2022 | Dec. 31, 2021 |
Commitments and Contingencies Disclosure [Abstract] | ||
Loss contingency accrual | $ 1.2 | $ 1.2 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 6 Months Ended | ||||||||
Sep. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | Dec. 31, 2021 | Mar. 31, 2021 | Aug. 31, 2020 | Sep. 30, 2014 | Jul. 31, 2010 | Nov. 30, 2000 | |
Related Party Transaction [Line Items] | |||||||||||
Operating lease, term (in years) | 12 years | 12 years | |||||||||
Rent expense | $ 15,600 | $ 31,300 | |||||||||
Walton Hills, Ohio | Warehouse | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Lease monthly payment | $ 100 | ||||||||||
Brooklyn, Ohio | Outlet | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Lease monthly payment | 20 | ||||||||||
Minimum | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Operating lease, renewal term (in years) | 5 years | 5 years | |||||||||
Minimum | Renewal term, 10 years | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Rent expense | $ 400 | ||||||||||
Minimum | Base term, 12 years | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Rent expense | 200 | ||||||||||
Maximum | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Operating lease, renewal term (in years) | 10 years | 10 years | |||||||||
Maximum | Renewal term, 10 years | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Rent expense | 500 | ||||||||||
Maximum | Base term, 12 years | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Rent expense | 300 | ||||||||||
Affiliated Entity | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Operating lease, term (in years) | 3 years | 17 years | |||||||||
Rent expense | 900 | $ 1,500 | 1,800 | $ 2,900 | |||||||
Due to related parties | 200 | 200 | $ 2,900 | ||||||||
Affiliated Entity | Chief Executive Officer | Premier Arhaus, LLC | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Ownership percentage by noncontrolling owners | 50% | ||||||||||
Affiliated Entity | Chief Executive Officer | Premier Canover, LLC | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Ownership percentage by noncontrolling owners | 10% | ||||||||||
Affiliated Entity | Walton Hills, Ohio | Chief Executive Officer | Pagoda Partners, LLC | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Ownership percentage by noncontrolling owners | 50% | ||||||||||
Affiliated Entity | Walton Hills, Ohio | Warehouse | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Operating lease, term (in years) | 17 years | ||||||||||
Rent expense | 400 | 400 | 700 | 700 | |||||||
Affiliated Entity | Brooklyn, Ohio | Chief Executive Officer | Brooklyn Arhaus | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Ownership percentage by parent | 85% | ||||||||||
Affiliated Entity | Brooklyn, Ohio | Director | Brooklyn Arhaus | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Ownership percentage by noncontrolling owners | 15% | ||||||||||
Affiliated Entity | Brooklyn, Ohio | Outlet | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Operating lease, term (in years) | 15 years | ||||||||||
Rent expense | 100 | $ 100 | 200 | $ 200 | |||||||
Affiliated Entity | Minimum | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Operating lease, renewal term (in years) | 5 years | ||||||||||
Affiliated Entity | Minimum | Base term, 17 years | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Rent expense | 200 | ||||||||||
Affiliated Entity | Minimum | Renewal term, 10 years | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Rent expense | $ 100 | 500 | |||||||||
Affiliated Entity | Maximum | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Operating lease, renewal term (in years) | 10 years | ||||||||||
Affiliated Entity | Maximum | Base term, 17 years | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Rent expense | 500 | ||||||||||
Affiliated Entity | Maximum | Renewal term, 10 years | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Rent expense | $ 200 | 600 | |||||||||
Affiliated Entity | Maximum | Walton Hills, Ohio | Warehouse | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Operating lease, renewal term (in years) | 12 months | 5 years | |||||||||
Homeworks and Founder | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Related-party receivable | 100 | 100 | |||||||||
Related-party note receivable | $ 1,000 | $ 1,000 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Income Tax Disclosure [Abstract] | ||||
Income tax expense | $ 12,414 | $ 500 | $ 18,283 | $ 1,204 |
Effective income tax rate | 25.30% | 6.80% | 25.80% | 7% |