10-Q 1 arhs-20240331.htm 10-Q arhs-20240331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 001-41009
Arhaus, Inc.
(Exact name of registrant as specified in its charter)
Delaware87-1729256
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
51 E. Hines Hill Road, Boston Heights, Ohio
(Address of Principal Executive Offices)
44236
(Zip Code)
(440) 439-7700
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A common stock, $0.001 par value per shareARHSThe Nasdaq Global Select Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes  No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  No
As of April 30, 2024 the registrant had 53,241,316 shares of Class A common stock and 87,115,600 shares of Class B common stock outstanding.


Table of Contents
Page

1


Part I - Financial Information
Item 1. Financial Statements of Arhaus, Inc. and Subsidiaries
Arhaus, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited, amounts in thousands, except share and per share data)
March 31,
2024
December 31,
2023
Assets
Current assets
Cash and cash equivalents$233,230 $223,098 
Restricted cash3,210 3,207 
Accounts receivable, net1,805 2,394 
Merchandise inventory, net268,410 254,292 
Prepaid and other current assets33,122 26,304 
Total current assets539,777 509,295 
Operating right-of-use assets322,905 302,157 
Financing right-of-use assets38,209 38,835 
Property, furniture and equipment, net
243,167 220,248 
Deferred tax assets18,953 19,127 
Goodwill10,961 10,961 
Other noncurrent assets2,407 4,525 
Total assets$1,176,379 $1,105,148 
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable$62,135 $63,699 
Dividends payable70,628  
Accrued taxes13,296 9,638 
Accrued wages11,156 15,185 
Accrued other expenses43,195 46,062 
Client deposits202,922 173,808 
Current portion of operating lease liabilities42,694 33,051 
Current portion of financing lease liabilities919 904 
Total current liabilities446,945 342,347 
Operating lease liabilities, long-term383,684 362,598 
Financing lease liabilities, long-term53,658 53,870 
Deferred rent and lease incentives1,871 1,952 
Other long-term liabilities4,574 4,143 
Total liabilities$890,732 $764,910 
Commitments and contingencies (Note 9)
Stockholders’ equity
Class A shares, par value $0.001 per share (600,000,000 shares authorized, 53,361,983 shares issued and 53,241,316 outstanding as of March 31, 2024; 53,254,088 shares issued and 53,169,711 outstanding as of December 31, 2023)
53 52 
Class B shares, par value $0.001 per share (100,000,000 shares authorized, 87,115,600 shares issued and outstanding as of March 31, 2024; 87,115,600 shares issued and outstanding as of December 31, 2023)
87 87 
Retained earnings89,206 145,292 
Additional paid-in capital196,301 194,807 
Total Arhaus, Inc. stockholders’ equity285,647 340,238 
Total liabilities and stockholders’ equity$1,176,379 $1,105,148 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2



Arhaus, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(Unaudited, amounts in thousands, except share and per share data)
Three months ended
March 31,
2024
2023
Net revenue$295,162 $304,568 
Cost of goods sold180,108 176,330 
Gross margin115,054 128,238 
Selling, general and administrative expenses96,693 82,782 
Income from operations$18,361 $45,456 
Interest expense (income), net(1,432)(173)
Other income(122)(572)
Income before taxes19,915 46,201 
Income tax expense4,816 12,102 
Net and comprehensive income$15,099 $34,099 
Net and comprehensive income per share, basic
Weighted-average number of common shares outstanding, basic139,816,792 139,072,756
Net and comprehensive income per share, basic$0.11 $0.25 
Net and comprehensive income per share, diluted
Weighted-average number of common shares outstanding, diluted140,556,031 139,939,543
Net and comprehensive income per share, diluted$0.11 $0.24 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3

Arhaus, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited, amounts in thousands)
Three Months Ended
Common StockTreasury StockTotal Stockholders’
Equity
Class AClass BClass A
SharesAmountSharesAmountSharesAmountRetained EarningsAdditional
Paid-in Capital
Total Stockholders’ Equity
Balances as of December 31, 202352,669 $52 87,116 $87 84 $ $145,292 $194,807 $340,238 
Net income— — — — — — 15,099 — 15,099 
Shareholder capital contribution— — — — — — — 11 11 
Equity based compensation129 1 — — — — — 2,023 2,024 
Shares withheld to cover employees’ withholding taxes for equity based compensation(37)— — — 37 — — (540)(540)
Dividends declared      (71,185) (71,185)
March 31, 202452,761 $53 87,116 $87 121 $ $89,206 $196,301 $285,647 
Three Months Ended
Common StockTreasury StockTotal Stockholders’
Equity
Class AClass BClass A
SharesAmountSharesAmountSharesAmountRetained Earnings Additional
Paid-in Capital
Total Stockholders’ Equity
Balances as of December 31, 202251,437 $51 87,116 $87  $ $20,053 $189,504 $209,695 
Net income— — — — — — 34,099 — 34,099 
Shareholder capital contribution— — — — — — — 17 17 
Equity based compensation804 1 — — — — — 1,629 1,630 
Shares withheld to cover employees’ withholding taxes for equity based compensation(25)— — — 25 — — (347)(347)
March 31, 202352,216 $52 87,116 $87 $25 $ $54,152 $190,803 $245,094 



The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4

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

Three months ended
March 31,
20242023
Cash flows from operating activities
Net income$15,099 $34,099 
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization8,603 6,740 
Amortization of operating lease right-of-use asset8,738 7,559 
Amortization of deferred financing fees, interest on finance lease in excess of principal paid and interest on operating leases6,233 4,640 
Equity based compensation2,024 1,630 
Deferred tax assets174 4,599 
Amortization of cloud computing arrangements310  
Amortization and write-off of lease incentives(80)(80)
Insurance proceeds 47 
Changes in operating assets and liabilities
Accounts receivable589 (173)
Merchandise inventory(14,118)(5,750)
Prepaid and other assets(5,758)(1,286)
Other noncurrent liabilities18 93 
Accounts payable(4,819)(12,625)
Accrued expenses(5,092)(13,346)
Operating lease liabilities(4,207)(10,628)
Client deposits29,114 (4,654)
Net cash provided by operating activities36,828 10,865 
Cash flows from investing activities
Purchases of property, furniture and equipment(25,932)(11,693)
Insurance proceeds 333 
Net cash used in investing activities(25,932)(11,360)
Cash flows from financing activities
Principal payments under finance leases(221)(65)
Repurchase of shares for payment of withholding taxes for equity based compensation(540)(347)
Net cash used in financing activities(761)(412)
Net increase (decrease) in cash, cash equivalents and restricted cash10,135 (907)
Cash, cash equivalents and restricted cash
Beginning of period226,305 152,527 
End of period$236,440 $151,620 
Supplemental disclosure of cash flow information
Interest paid in cash$840 $1,305 
Interest received in cash2,871 1,507 
Income taxes paid in cash991 1,246 
Noncash investing activities:
Purchase of property, furniture and equipment in current liabilities15,250 8,025 
Noncash financing activities:
Capital contributions11 17 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5

Arhaus, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1
1. 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 92 Showrooms as of March 31, 2024.
Basis of Presentation
The condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying condensed consolidated financial statements include our accounts and those of our wholly owned subsidiaries. Accordingly, all intercompany balances and transactions have been eliminated through the consolidation process.
The accompanying condensed consolidated balance sheets at March 31, 2024 and December 31, 2023, the condensed consolidated statements of comprehensive income, changes in stockholders’equity and cash flows for the three months ended March 31, 2024 and March 31, 2023 and the related interim condensed consolidated disclosures are unaudited and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.
In management’s opinion, the accompanying condensed consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the Company’s financial position at March 31, 2024, the results of operations, changes in stockholders’equity and cash flows for the three months ended March 31, 2024 and March 31, 2023. The condensed consolidated balance sheet as of December 31, 2023 included herein was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP.
The results for the three months ended March 31, 2024 and March 31, 2023 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, 2023.
Use of Estimates
The preparation of our condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The accounting estimates and other matters included within our condensed consolidated financial statements and notes to the condensed consolidated financial statements we have assessed include, but were not limited to, revenue recognition, including a reserve for merchandise returns, inventory reserves, impairment of long-lived assets and fair value of financial instruments which include, but are not limited to, accounts receivable, payables and lease obligations.
Client Deposits
Client deposits represent payments made by clients on orders. At the time of order, the Company collects deposits for all orders equivalent to at least 50 percent of the clients’ purchase price. Orders are recognized as revenue when the merchandise is delivered to the client and at the time of delivery the client deposit is no longer recorded as a liability. The Company expects substantially all client deposits as of March 31, 2024 will be recognized as net revenue within the next 12 months as the performance obligations are satisfied.
6

Arhaus, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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 at March 31, 2024 and December 31, 2023 of $0.4 million and $0.5 million, respectively, is recorded in the accrued other expenses line item of the condensed consolidated balance sheets. The Company recognizes income associated with breakage proportional to actual gift card redemptions. For the three months ended March 31, 2024 and March 31, 2023, breakage income was minimal.
Fair Values of Financial Instruments
The Company’s primary financial instruments are cash and cash equivalent investments, accounts receivable, payables, lease obligations and equity based compensation instruments. Due to the short-term maturities of cash and cash equivalent investments, accounts receivable and payables, the Company believes the fair values of these instruments approximate their respective carrying values at March 31, 2024 and December 31, 2023. See Note 5 Leases for discussion of our lease obligations and Note 6 Equity Based Compensation for discussion of our equity based compensation instruments.
The Company has established a hierarchy to measure our financial instruments at fair value, which requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs represent market data obtained from independent sources, whereas unobservable inputs reflect the Company’s own market assumptions, which are used if observable inputs are not reasonably available without undue cost and effort. The hierarchy defines three levels of inputs that may be used to measure fair value:
Level 1Unadjusted quoted prices in active markets for identical, unrestricted assets and liabilities that the reporting entity has the ability to access at the measurement date.
Level 2Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.
Level 3Unobservable inputs that reflect the entity’s own assumptions about the assumptions market participants would use in the pricing of the asset or liability and are consequently not based on market activity but rather through particular valuation techniques.
From time to time, the Company invests in Level 1 cash and cash equivalent investments such as money market funds and interest-bearing checking accounts. For the three months ended March 31, 2024, the Company earned $2.8 million in interest income. For the three months ended March 31, 2023, interest income was $1.5 million. Interest income is included within interest expense (income), net on our condensed consolidated statements of comprehensive income.
Revision to Previously Issued Consolidated Financial Statements and Interim Unaudited Condensed Consolidated Financial Statements
As previously disclosed, in preparation of the December 31, 2023 consolidated financial statements, the Company identified an error within the unaudited condensed consolidated balance sheets related to certain leasehold and landlord improvements prior to showroom completion being incorrectly included in prepaid and other current assets rather than property, furniture and equipment, net. The error resulted in inaccurate cash flows ascribed to operating and investing activities in the unaudited condensed consolidated statement of cash flows and the Company concluded to revise the consolidated financial statements and interim unaudited condensed consolidated financial statements as presented below in Adjustment No.1.
In preparation of the March 31, 2024 unaudited condensed consolidated financial statements, the Company identified an additional error within the unaudited condensed consolidated balance sheets related to certain cash receipts from landlord reimbursements prior to showroom completion being incorrectly included in property, furniture and equipment, net. The error resulted in inaccurate cash flows ascribed to operating and investing activities in the unaudited condensed consolidated statement of cash flows as presented below in Adjustment No. 2.
7

Arhaus, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The Company has evaluated the errors both quantitatively and qualitatively and concluded they were not material, individually or in the aggregate, to the prior period consolidated financial statements and interim unaudited condensed consolidated financial statements. The Company concluded to further revise: the unaudited condensed consolidated balance sheets and unaudited condensed consolidated statements of cash flows as of and for the three months ended March 31, 2023 and 2022, and as of and for the six months ended June 30, 2023 and 2022; the unaudited condensed consolidated balance sheet as of September 30, 2022; the consolidated balance sheets as of December 31, 2023 and 2022; and the consolidated statements of cash flows for the years ended December 31, 2023, 2022 and 2021.
In connection with the revisions, the Company determined it is appropriate to correct for certain other immaterial errors. The Company will effect the revisions of the consolidated financial statements for 2023 and 2022 within our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. The Company will effect the revision of the unaudited interim condensed consolidated financial statements for the second quarter of 2023 within our Quarterly Report on Form 10-Q for the fiscal period ended June 30, 2024.
The Company has also revised impacted amounts within the accompanying notes to the unaudited condensed consolidated financial statements, as applicable.
The following tables summarize the impact of these corrections for the periods presented (amounts in thousands):
December 31, 2023
Consolidated Balance SheetAs ReportedAdjustment No. 2As Revised
Prepaid and other current assets$45,260 $(18,956)$26,304 
Total current assets$528,251 $(18,956)$509,295 
Property, furniture and equipment, net$210,238 $10,010 $220,248 
Total assets$1,114,094 $(8,946)$1,105,148 
Accrued other expenses$42,502 $3,560 $46,062 
Current portion of operating lease liabilities45,557 (12,506)33,051 
Total current liabilities$351,293 $(8,946)$342,347 
Total liabilities$773,856 $(8,946)$764,910 
Total liabilities and stockholders' equity$1,114,094 $(8,946)$1,105,148 
8

Arhaus, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Year ended
December 31, 2023
Consolidated Statement of Cash FlowsAs ReportedAdjustment No. 2As Revised
Cash flows from operating activities
Changes in prepaid and other assets$(20,721)$9,612 $(11,109)
Changes in operating lease liabilities(25,794)(13,226)(39,020)
Net cash provided by operating activities$172,299 $(3,614)$168,685 
Cash flows from investing activities
Purchases of property, furniture and equipment$(97,055)$3,614 $(93,441)
Net cash used in investing activities$(96,722)$3,614 $(93,108)
Supplemental disclosure of cash flow information
Noncash investing activities:
     Purchase of property, furniture and equipment in current liabilities$6,726 $3,560 $10,286 
June 30, 2023
Condensed Consolidated Balance SheetAs Originally ReportedAdjustment No. 1As Previously DisclosedAdjustment No. 2As Revised
Prepaid and other current assets$43,084 $(13,274)$29,810 $(11,380)$18,430 
Total current assets$521,047 $(13,274)$507,773 $(11,380)$496,393 
Operating right-of-use assets$309,211 $(7,350)$301,861 $ $301,861 
Property, furniture and equipment, net149,515 13,274 162,789 15,160 177,949 
Total assets$1,045,279 $(7,350)$1,037,929 $3,780 $1,041,709 
Accrued other expenses$33,857 $ $33,857 $2,410 $36,267 
Current portion of operating lease liabilities41,483  41,483 1,370 42,853 
Total current liabilities$344,627 $ $344,627 $3,780 $348,407 
Operating lease liabilities, long-term$352,898 $(7,350)$345,548 $ $345,548 
Total liabilities$757,715 $(7,350)$750,365 $3,780 $754,145 
Total liabilities and stockholders' equity$1,045,279 $(7,350)$1,037,929 $3,780 $1,041,709 
9

Arhaus, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Six months ended
June 30, 2023
Condensed Consolidated Statement of Cash FlowsAs Originally ReportedAdjustment No. 1As Previously DisclosedAdjustment No. 2As Revised
Cash flows from operating activities
Changes in prepaid and other assets$(6,808)$5,391 $(1,417)$2,036 $619 
Changes in accounts payable(4,849)(5,676)(10,525) (10,525)
Changes in operating lease liabilities(17,903) (17,903)650 (17,253)
Net cash provided by operating activities$61,795 $(285)$61,510 $2,686 $64,196 
Cash flows from investing activities
Purchases of property, furniture and equipment$(32,815)$285 $(32,530)$(2,686)$(35,216)
Net cash used in investing activities$(32,482)$285 $(32,197)$(2,686)$(34,883)
Supplemental disclosure of cash flow information
Noncash operating activities
     Lease incentives$4,945 $(4,945)$ $ $ 
Noncash investing activities:
     Purchase of property, furniture and equipment in current liabilities$456 $5,676 $6,132 $2,410 $8,542 
March 31, 2023
Condensed Consolidated Balance SheetAs Originally ReportedAdjustment No. 1 As Previously DisclosedAdjustment No. 2As Revised
Prepaid and other current assets$44,122 $(10,221)$33,901 $(12,469)$21,432 
Total current assets$489,771 $(10,221)$479,550 $(12,469)$467,081 
Property, furniture and equipment, net$136,156 $7,908 $144,064 $16,636 $160,700 
Other noncurrent assets277 2,313 2,590  2,590 
Total assets$965,886 $ $965,886 $4,167 $970,053 
Accrued other expenses$33,174 $ $33,174 $1,804 $34,978 
Current portion of operating lease liabilities40,233  40,233 2,363 42,596 
Total current liabilities$346,816 $ $346,816 $4,167 $350,983 
Total liabilities$720,792 $ $720,792 $4,167 $724,959 
Total liabilities and stockholders' equity$965,886 $ $965,886 $4,167 $970,053 
10

Arhaus, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Three months ended
March 31, 2023
Condensed Consolidated Statement of Cash FlowsAs Originally ReportedAdjustment No. 1As Previously DisclosedAdjustment No. 2As Revised
Cash flows from operating activities
Changes in prepaid and other assets$(7,513)$3,102 $(4,411)$3,125 $(1,286)
Changes in accounts payable(7,943)(4,682)(12,625) (12,625)
Changes in operating lease liabilities(12,271) (12,271)1,643 (10,628)
Net cash provided by operating activities$7,677 $(1,580)$6,097 $4,768 $10,865 
Cash flows from investing activities
Purchases of property, furniture and equipment$(8,505)$1,580 $(6,925)$(4,768)$(11,693)
Net cash used in investing activities$(8,172)$1,580 $(6,592)$(4,768)$(11,360)
Supplemental disclosure of cash flow information
Noncash operating activities
       Lease incentives$741 $(741)$ $ $ 
Noncash investing activities:
       Purchase of property, furniture and equipment in current liabilities$1,539 $4,682 $6,221 $1,804 $8,025 
December 31, 2022
Consolidated Balance SheetAs Originally ReportedAdjustment No. 1As Previously ReportedAdjustment No. 2As Revised
Prepaid and other current assets$37,371 $(7,503)$29,868 $(9,344)$20,524 
Total current assets$478,051 $(7,503)$470,548 $(9,344)$461,204 
Operating right-of-use assets$252,055 $5,292 $257,347 $ $257,347 
Property, furniture and equipment, net135,066 5,547 140,613 11,655 152,268 
Other noncurrent assets296 1,956 2,252  2,252 
Total assets$931,792 $5,292 $937,084 $2,311 $939,395 
Accrued other expenses$35,169 $ $35,169 $1,591 $36,760 
Current portion of operating lease liabilities39,744 (494)39,250 720 39,970 
Total current liabilities$373,783 $(494)$373,289 $2,311 $375,600 
Operating lease liabilities, long-term$289,871 $5,786 $295,657 $ $295,657 
Total liabilities$722,097 $5,292 $727,389 $2,311 $729,700 
Total liabilities and stockholders' equity$931,792 $5,292 $937,084 $2,311 $939,395 
11

Arhaus, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Year ended
December 31, 2022
Consolidated Statement of Cash FlowsAs Originally ReportedAdjustment No. 1As Previously ReportedAdjustment No. 2As Revised
Cash flows from operating activities
Changes in prepaid and other assets$(9,329)$2,442 $(6,887)$(267)$(7,154)
Changes in accounts payable14,014 (3,718)10,296  10,296 
Changes in operating lease liabilities(33,682) (33,682)4,551 (29,131)
Net cash provided by operating activities$74,454 $(1,276)$73,178 $4,284 $77,462 
Cash flows from investing activities
Purchases of property, furniture and equipment$(52,658)$1,276 $(51,382)$(4,284)$(55,666)
Net cash used in investing activities$(52,658)$1,276 $(51,382)$(4,284)$(55,666)
Supplemental disclosure of cash flow information
Noncash operating activities
     Lease incentives$4,312 $(4,312)$ $ $ 
Noncash investing activities:
     Purchase of property, furniture and equipment in current liabilities$3,160 $3,718 $6,878 $1,591 $8,469 
    
September 30, 2022
Condensed Consolidated Balance SheetAs Originally ReportedAdjustment No. 1As Previously DisclosedAdjustment No. 2As Revised
Prepaid and other current assets$35,867 $(5,772)$30,095 $(11,298)$18,797 
Total current assets$482,298 $(5,772)$476,526 $(11,298)$465,228 
Operating right-of-use assets$224,921 $7,092 $232,013 $ $232,013 
Property, furniture and equipment, net128,783 4,249 133,032 7,246 140,278 
Other noncurrent assets235 1,523 1,758  1,758 
Total assets$907,208 $7,092 $914,300 $(4,052)$910,248 
Accrued other expenses$33,756 $ $33,756 $1,044 $34,800 
Current portion of operating lease liabilities39,248 680 39,928 (5,096)34,832 
Total current liabilities$423,986 $680 $424,666 $(4,052)$420,614 
Operating lease liabilities, long-term$263,753 $6,412 $270,165 $ $270,165 
Total liabilities$746,413 $7,092 $753,505 $(4,052)$749,453 
Total liabilities and stockholders' equity$907,208 $7,092 $914,300 $(4,052)$910,248 

12

Arhaus, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
June 30, 2022
Condensed Consolidated Balance SheetAs Originally ReportedAdjustment No. 1As Previously DisclosedAdjustment No. 2As Revised
Prepaid and other current assets$29,509 $(5,264)$24,245 $(10,390)$13,855 
Total current assets$455,100 $(5,264)$449,836 $(10,390)$439,446 
Property, furniture and equipment, net$116,620 $4,105 $120,725 $5,891 $126,616 
Other noncurrent assets249 1,159 1,408  1,408 
Total assets$877,032 $ $877,032 $(4,499)$872,533 
Accrued other expenses$26,718 $ $26,718 $777 $27,495 
Current portion of operating lease liabilities37,624  37,624 (5,276)32,348 
Total current liabilities$426,659 $ $426,659 $(4,499)$422,160 
Total liabilities$753,138 $ $753,138 $(4,499)$748,639 
Total liabilities and stockholders' equity$877,032 $ $877,032 $(4,499)$872,533 
Six months ended
June 30, 2022
Condensed Consolidated Statement of Cash FlowsAs Originally ReportedAdjustment No. 1As Previously DisclosedAdjustment No. 2As Revised
Cash flows from operating activities
Changes in prepaid and other assets$(5,095)$4,520 $(575)$779 $204 
Changes in accounts payable15,197 (321)14,876  14,876 
Changes in operating lease liabilities(15,401) (15,401)(1,445)(16,846)
Net cash provided by operating activities$41,110 $4,199 $45,309 $(666)$44,643 
Cash flows from investing activities
Purchases of property, furniture and equipment$(20,355)$(4,199)$(24,554)$666 $(23,888)
Net cash used in investing activities$(20,355)$(4,199)$(24,554)$666 $(23,888)
Supplemental disclosure of cash flow information
Noncash operating activities
     Lease incentives$4,494 $(4,494)$ $ $ 
Noncash investing activities:
     Purchase of property, furniture and equipment in current liabilities$1,673 $321 $1,994 $777 $2,771 
13

Arhaus, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
March 31, 2022
Condensed Consolidated Balance SheetAs Originally ReportedAdjustment No. 1As Previously DisclosedAdjustment No. 2As Revised
Prepaid and other current assets$31,013 $(5,060)$25,953 $(9,015)$16,938 
Total current assets$435,116 $(5,060)$430,056 $(9,015)$421,041 
Operating right-of-use assets$196,896 $3,071 $199,967 $ $199,967 
Property, furniture and equipment, net107,581 4,083 111,664 8,823 120,487 
Other noncurrent assets264 977 1,241  1,241 
Total assets$814,189 $3,071 $817,260 $(192)$817,068 
Accrued other expenses$20,946 $ $20,946 $717 $21,663 
Current portion of operating lease liabilities37,957 (138)37,819 (909)36,910 
Total current liabilities$444,885 $(138)$444,747 $(192)$444,555 
Operating lease liabilities, long-term$227,191 $3,209 $230,400 $ $230,400 
Total liabilities$727,645 $3,071 $730,716 $(192)$730,524 
Total liabilities and stockholders' equity$814,189 $3,071 $817,260 $(192)$817,068 
Three months ended
March 31, 2022
Condensed Consolidated Statement of Cash FlowsAs Originally ReportedAdjustment No. 1As Previously DisclosedAdjustment No. 2As Revised
Cash flows from operating activities
Changes in prepaid and other assets$(3,016)$1,628 $(1,388)$(596)$(1,984)
Changes in accounts payable8,680 (2,247)6,433  6,433 
Changes in operating lease liabilities(11,485) (11,485)2,922 (8,563)
Net cash provided by operating activities$35,219 $(619)$34,600 $2,326 $36,926 
Cash flows from investing activities
Purchases of property, furniture and equipment$(10,151)$619 $(9,532)$(2,326)$(11,858)
Net cash used in investing activities$(10,151)$619 $(9,532)$(2,326)$(11,858)
Supplemental disclosure of cash flow information
Noncash investing activities:
     Purchase of property, furniture and equipment in current liabilities$108 $2,247 $2,355 $717 $3,072 
14

Arhaus, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Year ended
December 31, 2021
Consolidated Statement of Cash FlowsAs Originally ReportedAdjustment No. 1As Previously ReportedAdjustment No. 2As Revised
Cash flows from operating activities
Changes in prepaid and other assets$(3,621)$(8,673)$(12,294)$3,590 $(8,704)
Changes in accounts payable17,595 (3,088)14,507  14,507 
Changes in deferred rent and lease incentives4,518 5,352 9,870 (2,074)7,796 
Net cash provided by operating activities$146,243 $(6,409)$139,834 $1,516 $141,350 
Cash flows from investing activities
Purchases of property, furniture and equipment$(47,870)$6,409 $(41,461)$(1,516)$(42,977)
Net cash used in investing activities$(47,870)$6,409 $(41,461)$(1,516)$(42,977)
Supplemental disclosure of cash flow information
Noncash operating activities
     Lease incentives$5,352 $(5,352)$ $ $ 
Noncash investing activities:
     Purchase of property, furniture and equipment in current liabilities$5,968 $3,088 $9,056 $363 $9,419 
As previously disclosed, these errors also resulted in the restatement of the unaudited condensed consolidated balance sheet and statement of cash flows as of and for the nine months ended September 30, 2023 and the revision of the unaudited condensed consolidated statement of cash flows for the nine months ended September 30, 2022.
2. Recently Issued Accounting Standards
New Accounting Standards Adopted in Fiscal 2024
The Company adopted Accounting Standards Updates (“ASU”) 2023-01 — Leases (Topic 842): Common Control Arrangements in the three months ended March 31, 2024. We believe the adoption of ASU 2023-01 did not have a material impact on our accounting policies or our condensed consolidated financial statements and related disclosures.

Accounting Standards Not Yet Adopted
The following table summarizes accounting pronouncements which we have not yet adopted but will be adopted in the upcoming fiscal year. ASU 2023-07 is effective for annual periods beginning after December 15, 2023. We believe the adoption will not have a material impact on our accounting policies, financial position or results of operations but could require additional disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. We believe the adoption will not have a material impact on our accounting policies, financial position or results of operations but could require additional disclosures.
ASUDescriptionAdoption Date
ASU 2023-07
Segment Reporting (Topic 280): Improvements
Fiscal Year 2024
ASU 2023-09
Income Taxes (Topic 740): Improvements to Income Tax Disclosures
Fiscal Year 2025
15

Arhaus, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
3. Merchandise Warranties
The Company warrants certain merchandise to be free of defects in both construction materials and workmanship from the date the performance obligation was fulfilled to the client for three to ten years depending on the merchandise category. The Company accounts for merchandise warranties by accruing an estimated liability when we recognize revenue on the sale of warrantied merchandise. We estimate future warranty claims based on claim experience which includes materials and labor costs to perform the repairs or replace products. We use judgment in making our estimates. We record differences between our estimated and actual costs when the differences are known.
A reconciliation of the changes in our limited merchandise warranty liability is as follows (amounts in thousands):
Three months ended
March 31,
20242023
Balance as of beginning of period$7,084 $6,375 
Accruals during the period3,080 3,381 
Settlements during the period(3,136)(3,291)
Balance as of end of the period(1)
$7,028 $6,465 
(1) $4.0 million and $3.7 million were recorded in accrued other expenses at March 31, 2024 and March 31, 2023, respectively. The remainder is recorded in other long-term liabilities on our condensed consolidated balance sheets.
We recorded accruals during the periods presented in the table above, primarily to reflect charges that relate to limited merchandise warranties issued during the respective periods.
4. Debt
On November 8, 2021, the Company entered into a revolving credit facility (the “2021 Credit Facility”). The 2021 Credit Facility provides for, among other things, (1) a revolving credit facility in an aggregate amount not to exceed at any time outstanding the amount of such lender’s commitment, (2) a letter of credit commitment in an amount equal to the lesser of (a) $10.0 million, and (b) the amount of the revolving credit facility as of such date, and (3) a swingline loan in an amount equal to the lesser of (a) $5.0 million, and (b) the amount of the revolving credit facility as of such date. The aggregate amount of all commitments of all lenders under the 2021 Credit Facility was initially $50.0 million. The 2021 Credit Facility contains restrictive covenants and has certain financial covenants, including a 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 March 31, 2024 and 1.50% at March 31, 2023), whereas the applicable margin is adjusted quarterly based on the Company’s consolidated rent-adjusted total leverage ratio.
On December 9, 2022, the Company amended the 2021 Credit Facility to increase the revolving credit commitment thereunder by $25.0 million. After giving effect to such increase, the aggregate amount of all commitments under the 2021 Credit Facility is $75.0 million. The 2021 Credit Facility expires on November 8, 2026.
At March 31, 2024 and December 31, 2023, we had no borrowings on the 2021 Credit Facility. Deferred financing costs related to the 2021 Credit Facility of $0.4 million and $0.4 million as of March 31, 2024 and December 31, 2023, respectively, are recorded in other noncurrent assets on the condensed consolidated balance sheets and will be amortized over the term of the 2021 Credit Facility on a straight-line basis. Accumulated amortization related to deferred financing costs for the 2021 Credit Facility was $0.2 million as of March 31, 2024 and $0.1 million as of December 31, 2023.
The Company was in compliance with all applicable debt covenants at March 31, 2024 and December 31, 2023, and expects to remain in compliance over the next 12 months.
5. Leases
The Company leases real estate and equipment under operating and finance leases, some of which are from related parties as discussed in Note 10 Related Party Transactions. The most significant obligati