Arhaus — Third Quarter 2026 Earnings Summary

Financial Performance:

• Net revenue increased 6.8% year-over-year to $368 million for the third quarter of 2026.
• Gross margin increased 8.2% year-over-year to $144 million.
• Selling, general and administrative expenses increased 14.8% year-over-year to $134 million.
• Net and comprehensive income decreased 36.0% year-over-year to $8 million.
• Adjusted EBITDA decreased 12.3% year-over-year to $27 million.
• Net cash provided by operating activities totaled $173 million for the nine months ended September 30, 2026.
• Net cash used in investing activities was $58 million for the nine months ended September 30, 2026.
• Company-funded capital expenditures were $46 million for the nine months ended September 30, 2026.
• Cash and cash equivalents totaled $318 million as of September 30, 2026, a 25.5% increase from December 31, 2025.
• Net merchandise inventory was $360 million as of September 30, 2026, a 6.4% increase from December 31, 2025.
• Client deposits were $325 million as of September 30, 2026, a 37.7% increase from December 31, 2025.
• The company reported no long-term debt as of September 30, 2026.

Guidance and Future Outlook:

• The company raised its full-year 2026 net revenue outlook to $1.465 billion to $1.485 billion (previously implied lower range) and comparable delivered sales outlook to 2.5% to 4%.
• Full-year 2026 net income outlook remains unchanged at $71 million to $80 million.
• Full-year 2026 Adjusted EBITDA outlook remains unchanged at $160 million to $171 million.
• Q4 2026 net revenue guidance is $398 million to $418 million.
• Q4 2026 comparable delivered sales guidance is 6% to 12%.
• Q4 2026 net income guidance is $21 million to $30 million.
• Q4 2026 Adjusted EBITDA guidance is $44 million to $55 million.
• Full-year 2026 company-funded capital expenditures guidance is $70 million to $90 million.
• Full-year 2026 depreciation and amortization guidance is $50 million to $55 million.
• Full-year 2026 showroom openings guidance is 4 to 6 new showrooms.
• Full-year 2026 total showroom projects guidance is 10 to 14.
• Full-year 2026 net unit growth is expected to be mid-single-digits.
• The company cited continued fuel and transportation cost pressures and strategic investment in expanded marketing initiatives as reasons for maintaining income and EBITDA guidance despite raising revenue and sales growth guidance.

Business Segments and Product Lines:

• Comparable written sales increased 13.9% in the third quarter of 2026.
• Comparable delivered sales increased 2.6% in the third quarter of 2026.
• Year-to-date comparable delivered sales were 1.8%.
• Year-to-date comparable written sales were 6.7%.
• The company completed 2 total showroom projects in the third quarter: 1 relocated showroom in Charlotte, North Carolina, and 1 renovated showroom in Atlanta, Georgia.
• The Charlotte showroom relocation is a 35,000-square-foot freestanding location, now the company's second-largest traditional showroom.
• The company operates 109 showrooms across 31 states as of September 30, 2026.
• Showroom portfolio includes 91 traditional showrooms, 9 design studios, and 9 lofts.
• 98 showrooms feature interior designers, with a total of 152 interior designers employed.
• The company maintains a vertically integrated model with domestic upholstery production at its North Carolina manufacturing facility.

Market and Competitive Landscape:

• The company operates in the premium home furnishing market, focusing on responsibly sourced, artisan-crafted products.
• The company's omni-channel model connects showroom, interior design, eCommerce, and catalog touchpoints.
• The company noted strength in client demand and momentum in comparable written sales as drivers for the raised outlook.

Risks and Challenges:

• The company faces fuel and transportation cost pressures impacting profitability.
• Forward-looking statements identify risks including supply chain constraints, geopolitical events, tariffs, cyberattacks, data privacy compliance, and changes in consumer spending.
• Risks include challenges with technology upgrades, specifically a new enterprise resource planning system, and distribution center integration.
• The company relies on third-party transportation carriers and faces risks associated with freight costs.
• Potential risks include loss of intellectual property, failure of vendors to meet quality standards, and inability to maintain showroom traffic and sales.

Management Commentary and Tone:

• John Reed, Co-Founder and CEO, stated that investments in new collections and expanded customization are resonating with clients, citing the 13.9% growth in comparable written sales.
• Management expressed excitement about the company's 40th anniversary and the opportunity to bring unique product offerings to more clients.
• Michael Lee, CFO, highlighted strong client demand, disciplined execution, and progress across strategic priorities.
• Management emphasized that investments in people, infrastructure, and technology are strengthening the foundation for sustainable, profitable long-term growth.
• The tone reflects confidence in the product offering and strategic execution despite margin pressures from expenses and costs.

Other Key Points:

• The company paid $49.59 million in cash dividends during the nine months ended September 30, 2026, compared to $340,000 in the same period of 2025.
• The company repurchased shares for $1.681 million for payment of withholding taxes for equity-based compensation during the nine months ended September 30, 2026.
• Equity-based compensation expense was $8.483 million for the nine months ended September 30, 2026.
• The company reported a gain on insurance claims of $2.675 million and insurance proceeds of $1.899 million included in operating activities for the nine months ended September 30, 2026.
• Free cash flow for the nine months ended September 30, 2026, was $114.8 million.
• The company's effective tax rate for full-year 2026 is expected to be approximately 29.0%.
• Fully diluted shares outstanding for full-year 2026 are expected to be approximately 142 million.