Slide 1: Investor Presentation | March 2023
INVESTOR PRESENTATION | MARCH 2023
Slide 2: Note on Forward-Looking Statements
NOTE ON FORWARD-LOOKING STATEMENTS: Certain statements contained herein are not based on historical fact and are “forward-looking statements” within the meaning of applicable securities laws. Forward-looking statements can generally be identified by the use of forward-looking terminology, including,
Slide 3: Our Mission
OUR MISSION We were founded in 1986 on a simple idea: furniture should be responsibly sourced, lovingly made and built to last. Today, we partner directly with artisans around the world who share our vision, creating premium and heirloom-quality home furnishings that clients can use for generations.
Slide 4: Commitment to Being Responsible
COMMITMENT TO BEING RESPONSIBLE ROOTED IN SUSTAINABILITY. BEAUTIFULLY MADE, SUSTAINABLY SOURCED. HANDCRAFTED IN NORTH CAROLINA. 10 YEARS, ONE MILLION TREES. TOGETHER FOR A CLEAN OCEAN. EVERY DONATION MAKES A DIFFERENCE. 4
Slide 5: Company Overview
COMPANY OVERVIEW OUR FINANCIAL OUR COMPANY 1 OUR MOMENTUM PROFILE 82 $1,229MM SHOWROOMS FULL YEAR 2022 NET REVENUE ~54% INCREASED FULL YEAR 2022 NET REVENUE 29 $223MM STATES FULL YEAR 2022 ADJUSTED EBITDA 2 ~52% FULL YEAR 2022 STRONG 2,100+ DEBT-FREE 1 COMPARABLE GROWTH EMPLOYEES BALANCE SHEET 1 As
Slide 6: Recent Financial Performance
RECENT FINANCIAL PERFORMANCE Arhaus experienced meaningful growth in net revenue, gross margin, adjusted EBITDA and eCommerce over recent years, while maintaining a debt-free balance sheet. NET REVENUE GROSS MARGIN / ADJUSTED EBITDA / eCOMMERCE DEMAND $ in Millions MARGIN % MARGIN % 1 NET REVENUE CO
Slide 7: The Premium Home Furnishings Market Is Highly Fragmented With a Large and Rapidly Growing TAM
THE PREMIUM HOME FURNISHINGS MARKET 1 IS HIGHLY FRAGMENTED WITH A LARGE AND RAPIDLY GROWING TAM 2022 U.S. PREMIUM HOME FURNITURE MARKET1 RAPIDLY GROWING & HIGHLY FRAGMENTED • Total addressable market of ~$100 billion • Highly fragmented and predominantly served by small local players • Premiumizatio
Slide 8: Strong Industry and Market Tailwinds Driving Growth
STRONG INDUSTRY AND MARKET $200K+ INCOME SHARE OF TOTAL FURNITURE EXPENDITURES 2 TAILWINDS DRIVING GROWTH 24.6% 17.1% • Three primary drivers of furniture and decor purchases1: 1. In-home refresh and replacement 2. Remodeling 3. Home turnover 2016 2021 • High income households growing – disproportio
Slide 9: Investment Highlights
INVESTMENT HIGHLIGHTS 9
Slide 10: Investment Highlights
INVESTMENT HIGHLIGHTS 1 2 3 4 Strong Product A Differentiated Highly Experiential Design and Direct Multiple Avenues for Concept Delivering Omni-Channel Global Sourcing Sustainable Growth Livable Luxury Approach Partnerships 10
Slide 11: Arhaus Differentiation
ARHAUS DIFFERENTIATION
Slide 12: Premium Lifestyle Brand With a Differentiated Concept
PREMIUM LIFESTYLE BRAND WITH A DIFFERENTIATED CONCEPT EXCLUSIVELY-DESIGNED, OMNI-CHANNEL PREMIUM PRODUCTS RETAIL IS THEATER EXPERIENCE CLIENT-FIRST SERVICE We focus on livable luxury with Our inspirational showrooms Our digital and catalog We are focused on clients first artisan-crafted, globally ar
Slide 13: Livable Luxury
LIVABLE LUXURY We believe in creating beautiful and comfortable furniture made to fit your life. PERFORMANCE FABRIC BUILT TO LAST SUSTAINABLE MATERIALS COMFORT ECLECTIC STYLE 13
Slide 14: Exclusive Product Design and Direct Sourcing
EXCLUSIVE PRODUCT DESIGN AND DIRECT SOURCING 14
Slide 15: Artisan-Quality Product Offering
ARTISAN-QUALITY PRODUCT OFFERING Arhaus is known for heirloom-quality, unique, artisan-crafted furniture and décor. Our product is designed to be beautiful and made for everyday life. We believe that furniture should withstand kids, pets, and dinner parties and be enjoyed for generations. THE BELL’A
Slide 16: Direct Sourcing Drives Competitive Advantage
DIRECT SOURCING DRIVES COMPETITIVE ADVANTAGE Our direct sourcing model allows us to scale artisan production to meet increasing demand and bypass wholesaler markups. DEEP ROOTED RELATIONSHIPS COMPETITIVE ADVANTAGE • Over 400 vendors QUALITY AND AESTHETIC • Direct sourcing relationships – no wholesal
Slide 17: Internal Manufacturing at Arhaus
INTERNAL MANUFACTURING AT ARHAUS In 2015, we acquired our second largest vendor, a high-end upholstered ~12% furniture manufacturer, providing secure upholstery supply, differentiated OF 2022 NET REVENUE customization, quality control and increased leverage with other suppliers. Customization allows
Slide 18: Omni-Channel Approach
ARHAUS OMNI-CHANNEL APPROACH
Slide 19: Omni-Channel Ecosystem
OMNI-CHANNEL ECOSYSTEM SHOWROOM eCOMMERCE CATALOG AND MARKETING IN-HOME DESIGNER SERVICES TRADE PROGRAM DIGITAL TOOLS 19
Slide 20: Theater-Like Showrooms
THEATER-LIKE SHOWROOMS Our visually captivating, theater-like showrooms drive brand awareness and create meaningful marketing buzz and revenue uplift when opened in new markets. • Showrooms drive in-showroom revenue as well as eCommerce revenue • Theater-like and inspirational atmosphere that helps
Slide 21: Adept and Knowledgeable Showroom Team
ADEPT AND KNOWLEDGEABLE SHOWROOM TEAM Visual Managers work to create the “wow” showroom experience. Design Consultants are expertly trained to meet the clients’ needs and are highly knowledgeable about all products offered in-showroom. Weekly meetings and routine training enable the showroom team to
Slide 22: Omni-Channel Capabilities and Digital Tools: eCommerce
eCOMMERCE OMNI-CHANNEL CAPABILITIES IS OUR FASTEST GROWING REVENUE CHANNEL AND DIGITAL TOOLS 43% 17% GROWTH IN OF 2022 NET eCOMMERCE NET REVENUE WAS REVENUE IN 2022 eCOMMERCE BASED >28M >1.2M WEBSITE VIEWS INSTAGRAM IN 2022 FOLLOWERS JANUARY AND SEPTEMBER CATALOGS ARE MAILED TO MILLIONS OF HOUSEHOLD
Slide 23: Growth Strategies
ARHAUS GROWTH STRATEGIES
Slide 24: Our Growth Strategies
OUR GROWTH STRATEGIES INCREASE BRAND AWARENESS 1 TO DRIVE SALES EXPAND OUR SHOWROOM BASE 2 AND CAPTURE MARKET SHARE ENHANCE OMNI-CHANNEL CAPABILITIES 3 AND TECHNOLOGY TO DRIVE GROWTH INVEST IN GROWTH TO BUILD SCALE 4 AND ENHANCE MARGINS 24
Slide 25: Increase Brand Awareness to Drive Sales: Opportunity
INCREASE BRAND AWARENESS TO DRIVE SALES: OPPORTUNITY We believe Arhaus has an incredible brand awareness opportunity as compared to competitors in the U.S. Premium Home Furnishings Market. 1 As we continue to grow our showroom footprint and to invest in our digital, catalog and other marketing chann
Slide 26: Brand Awareness Opportunity
BRAND AWARENESS OPPORTUNITY SHOWROOM DIGITAL DIRECT MAIL SOCIAL MEDIA BRANDING INITIATIVES PRODUCT 26
Slide 27: Traditional Showroom Footprint: Tremendous Whitespace Opportunity
TRADITIONAL SHOWROOM FOOTPRINT: TREMENDOUS WHITESPACE OPPORTUNITY We select and develop new showrooms through analysis of specific market characteristics, client demographics and growth opportunities. In 2021, we opened 3 new traditional showroom locations in a wide array of markets including Boca F
Slide 28: Concept: Design Studio Opportunity
CONCEPT: DESIGN STUDIO OPPORTUNITY We are expanding our exciting smaller format concept, perfect for second home markets and locations where a lower square footage format is preferred. These stores are staffed with in-home designers and the latest high tech design tools to assist clients in imaginin
Slide 29: Strong Showroom Economic Model
STRONG SHOWROOM ECONOMIC MODEL YEAR 3 NEW TRADITIONAL SHOWROOM TARGET ($Millions) • New showrooms have historically ramped quickly and generated strong returns on $10.0+ investment. When evaluating new traditional 32%+ showrooms (~17,000 sq ft), we target Target New Traditional Showroom Average mini
Slide 30: In-Home Designer Program
IN-HOME DESIGNER PROGRAM We see significant opportunity to continue to expand our in-home designer program, expanding our coverage both in showrooms and virtually. Our differentiated in-home and online designers resonate with clients and drive AOV uplift. TOTAL AOV YTD 2022 1 >3X INSPIRATION PLANNIN
Slide 31: Enhance Omni-Channel Capabilities and Technology to Drive Growth
ENHANCE OMNI-CHANNEL CAPABILITIES AND TECHNOLOGY TO DRIVE GROWTH NEW SITE EXPERIENCE LAUNCHED Q4 2021 BENCHMARKING VS. PEERS IMPLIES ROBUST ECOMMERCE OPPORTUNITY Optimized UX eCOMMERCE % AI assisted product discovery OF NET REVENUE AOV AND TRAFFIC Enhanced analytics AOV: Arhaus eCommerce AOV tracks
Slide 32: Investing in Growth to Meet Demand, Build Scale and Enhance Margins
INVESTING IN GROWTH TO MEET DEMAND, BUILD SCALE AND ENHANCE MARGINS VENDOR CAPACITY SUPPLY CHAIN CAPACITY • We have long-standing • New North Carolina facility direct sourcing partnerships opened in 2021 adds • We are often among the ~310,000 sq. ft. to most important customers distribution and ~190
Slide 33: Our Long Term Growth Goals
OUR LONG TERM GROWTH GOALS 1 LONG TERM GOALS 2 Total Revenue Growth HIGH SINGLE DIGIT Comparable Sales Growth MID SINGLE DIGIT Showroom Growth3 MID-TO-HIGH SINGLE DIGIT Traditional Showroom Opportunity 165+ Adjusted EBITDA Growth LOW DOUBLE DIGIT 1These are not projections or predictions of actual r
Slide 34: Appendix
APPENDIX 34
Slide 35: Reconciliation from Net Income to Adjusted EBITDA
RECONCILIATION FROM NET INCOME TO ADJUSTED EBITDA For the Year Ended December 31, December 31, December 31, December 31, ($ in thousands) 2022 2021 2020 2019 Net income $ 136,634 $ 36,932 $ 17,040 $ 15,842 (+) Interest expense 3,387 5,432 13,057 13,449 (+) Income tax expense (benefit) 45,944 (10,144