Slide 1: Investor Presentation August 2022
INVESTOR PRESENTATION AUGUST 2022
Slide 2: Note on Forward-Looking Statements
N O T E O N F O R W A R D - L O O K I N G S TAT E M E N T S : 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-looki
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 RO O T E D I N S US TA I N A B I L I T Y. B E A U T I F UL LY MA DE , S U S TA I NA B LY S O UR CE D. HA N DCR A F T E D I N NO RT H CA R O L I N A . 1 0 YE A RS , O NE MI L L I O N T RE E S . TO G E T HE R F O R A CL E A N O C E A N. E V E RY DO NAT I O N MA K E S A
Slide 5: Company Overview
COMPANY OVERVIEW OUR FINANCIAL OUR COMPANY 1 OUR MOMENTUM PROFILE 80 $797MM 56% SHOWROOMS FULL YEAR 2021 INCREASED NET REVENUE NET REVENUE YEAR-TO-DATE 2022 1 28 18% 53% OF 2021 NET REVENUE COMPARABLE GROWTH STATES THROUGH eCOMMERCE YEAR-TO-DATE 2022 1 CHANNEL 1,700+ $123MM 57% FULL YEAR 2021 INCREA
Slide 6: Our Recent Financial Momentum
OUR RECENT FINANCIAL MOMENTUM Arhaus experienced meaningful growth in net revenue, gross margin, adjusted EBITDA and eCommerce over recent years. NET REVENUE GROSS MARGIN / ADJUSTED EBITDA / eCOMMERCE $ in Millions MARGIN % MARGIN %1 NET REVENUE $ in Millions $ in Millions PENETRATION $797 $330 $123
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 U.S. PREMIUM HOME FURNITURE MARKET RAPIDLY GROWING & HIGHLY FRAGMENTED • Total addressable market of ~$60 billion • Highly fragmented and predominantly served by small local players • Arhaus has less than
Slide 8: Strong Industry Tailwinds Driving Post-COVID Growth
STRONG INDUSTRY TAILWINDS $200K+ INCOME SHARE OF TOTAL FURNITURE EXPENDITURES 1 DRIVING POST-COVID GROWTH 20.6% 16.8% • Growth of high-income households – disproportionately large share of wallet 2015 2020 • Pent up demand for renovation and remodeling • Increase in suburbanization – larger homes su
Slide 9: 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 9
Slide 10: Premium Lifestyle Brand With a Differentiated Concept
PREMIUM LIFESTYLE BRAND WITH A DIFFERENTIATED CONCEPT EXCLUSIVELY-DESIGNED, OMNI-CHANNEL RETAIL IS THEATER CLIENT-FIRST SERVICE PREMIUM PRODUCTS EXPERIENCE We focus on livable luxury with Our inspirational showrooms Our digital and catalog We are focused on clients first artisan-crafted, globally cu
Slide 11: Livable Luxury
LIVABLE LUXURY We believe in creating beautiful and comfortable furniture made to fit your life. P E RF O RMA N C E FA B R I C B UI LT TO L A S T S US TA I NA B L E MAT E RI A L S CO MFO RT E CL E CT I C S T YLE 11
Slide 12: 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 13: 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 14: Internal Manufacturing at Arhaus
INTERNAL MANUFACTURING AT ARHAUS >30% OF 2021 UPHOLSTERY In 2015, we acquired our second largest vendor, a high-end MERCHANDISE REVENUE upholstered furniture manufacturer, providing secure upholstery supply, differentiated customization, quality control and increased leverage with other suppliers. C
Slide 15: Omni-Channel Ecosystem
OMNI-CHANNEL ECOSYSTEM SHOWROOM eCOMMERCE CATALOG AND MARKETING IN-HOME DESIGNER SERVICES TRADE PROGRAM DIGITAL TOOLS 15
Slide 16: 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 17: 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 18: Omni-Channel Capabilities and Digital Tools
OMNI-CHANNEL eCOMMERCE CAPABILITIES AND DIGITAL IS OUR FASTEST GROWING REVENUE CHANNEL TOOLS 60% GROWTH IN 18% OF 2021 NET eCOMMERCE NET REVENUE WAS REVENUE IN 2021 eCOMMERCE BASED ~27M WEBSITE VIEWS >1.1M INSTAGRAM IN 2021 FOLLOWERS JANUARY AND SEPTEMBER CATALOGS ARE MAILED TO MILLIONS OF HOUSEHOLD
Slide 19: 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 LEVERAGE INVESTMENTS 4 TO ENHANCE MARGINS 19
Slide 20: Well Positioned to Expand Market Share in the Premium Home Furnishings Market
WE BELIEVE ARHAUS IS WELL POSITIONED TO EXPAND ITS MARKET SHARE IN THE PREMIUM HOME FURNISHINGS MARKET INDEPENDENT ONLINE RETAILERS OPERATORS PREMIUM OFFERING LIVABLE LUXURY OFFERS DIRECT SOURCING SOMEWHAT OFFERS PROPRIETARY MERCHANDISE N/A STRONG DIGITAL PRESENCE RETAIL SHOWROOMS IN-HOME DESIGNER S
Slide 21: 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 22: Brand Awareness Opportunity
BRAND AWARENESS OPPORTUNITY SHOWROOM DIGITAL DIRECT MAIL SOCIAL MEDIA BRANDING INITIATIVES PRODUCT 22
Slide 23: Tremendous Whitespace Opportunity
TREMENDOUS WHITESPACE OPPORTUNITY We select and develop new showrooms through analysis of specific market characteristics, NEW FORMAT STRATEGY client demographics and growth opportunities. In 2021, we opened 7 new locations in a wide array of markets including Boca Raton, FL, Salem, • As leases appr
Slide 24: In-Home Designer Program
IN-HOME DESIGNER PROGRAM We see significant opportunity 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 PLANNING REALITY NO
Slide 25: 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 43% Enhanced analytics AOV: Arhaus eCommerce AOV tra
Slide 26: Leverage Investments to Enhance Margins and Meet Strong Demand
LEVERAGE INVESTMENTS TO ENHANCE MARGINS AND MEET STRONG DEMAND VENDOR CAPACITY SUPPLY CHAIN CAPACITY • We have long-standing • New North Carolina facility direct sourcing adds 310,000 sq. ft. to partnerships distribution and 187,000 • We are often among the sq. ft. dedicated to most important custom
Slide 27: Appendix
ARHAUS APPENDIX
Slide 28: Reconciliation from Net Income to Adjusted EBITDA
RECONCILIATION FROM NET INCOME TO ADJUSTED EBITDA For the Year Ended December 31, December 31, December 31, ($ in thousands) 2021 2020 2019 Net income $ 36,932 $ 17,040 $ 15,842 (+) Interest expense 5,432 13,057 13,449 (+) State and local taxes (10,144) 783 368 (+) Depreciation and amortization 23,9