Good morning, and welcome to the Arhaus second quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal remarks. Please note that this conference is being recorded, and the reproduction of any part of this call is not permitted without written authorization from the company. I will now turn the call over to your host, Wendy Watson, Senior Vice President of Investor Relations. Good morning, and thank you for joining Arhaus's second quarter 2023 earnings call. On with me today are John Reed, Co-Founder, Chairman, and Chief Executive Officer; Jennifer Porter, Chief Marketing and E-commerce Officer; and Dawn Phillipson, Chief Financial Officer. John will start with a summary of the main points we made in this morning's press release, along with operational details. Jen will discuss Rooted, our most recent marketing campaign, and Dawn will cover our financial performance and outlook for the remainder of 2023. After these prepared remarks, we will open the call for questions. During Q&A, please limit to one question and one follow-up. If you have additional questions, please return to the queue. We issued our earnings press release and our 10-Q for the quarter ended June 30th, 2023, before market open today. Those documents are available on our investor relations website at ir.arhaus.com. A replay of the call will be available on our website within 24 hours. As a reminder, remarks today concerning future expectations, events, objectives, strategies, trends, or results constitute forward-looking statements. Actual results or events may differ materially due to a number of risks and uncertainties. For a summary of these risk factors and additional information, please refer to this morning's press release and the cautionary statements and risk factors described in our annual report on Form 10- K and Subsequent 10- Qs, as such factors may be updated from time to time in our filings with the SEC. The forward-looking statements are made as of today's date, and except as may be required by law, the company undertakes no obligation to update or revise these statements. We will also refer to certain non-GAAP financial measures, and this morning's press release includes the relevant non-GAAP reconciliations. I will now turn the call over to John. Thank you, Wendy. Good morning, everyone, and thank you for joining us today. It was another great quarter for Arhaus, and our business continues to be incredibly resilient. We continue to win with our clients, and in the second quarter, we again saw exceptional demand comp growth. It is notable that the 11.6% demand comp stacks on a 22.5% demand comp in the second quarter last year. In terms of cadence, we started the quarter in April with a flat demand comp, which accelerated with May and June, up mid-teens to low twenties. We are seeing strength in all categories and in all regions. We also have a strong start to the third quarter, with demand comp growth in July up high single digits. Turning to highlights for the second quarter, while continuing to execute our strategic initiatives and growth plan for the year, we delivered net revenue of $313 million, net and comprehensive income of $40 million, with a margin of 12.8%, and adjusted EBITDA of $64 million, with a margin of 20.4%. Note that revenue was below our expectations for the quarter, impacted by delivery delays, primarily focused on these three factors: First, slower deliveries out of the Dallas distribution center as we continue to optimize product assortment across the three distribution centers. Second, a temporary reduction in productivity as we implemented various new systems, including a new warehouse management system, to drive future efficient growth. Third, some clients are also asking us to delay deliveries as they complete home-related projects. As we have gone from one distribution center to three in the past two years, it is critical that we continue to implement the system capabilities, processes, and talents to enable us to move product through our supply chain more efficiently as we scale for growth. Some of the factors that slowed revenue in the second quarter will continue into the second half of this year, and as a result, some of that net revenue originally expected in 2023 will be pushed to 2024. This is offset by our stronger-than-anticipated demand growth. As a result, midpoint for our year net revenue outlook is unchanged. Dawn will discuss in more detail this later. Moving to profitability. We saw a nice earnings benefit from the impact of lower freight costs to our gross margin in the second quarter. This benefit is enabling us to pass through some of the lower pricing to our clients, with a particular focus on ensuring we remain top of mind competitively. It is also allowing us to optimize our assortment as we make way for new product launches in the fall and address areas where we need less inventory on hand. Additionally, with our stronger earnings in the second quarter, we are raising our full-year net income and adjusted EBITDA outlook. Turning to an update on our showroom growth for the year, we are successfully scaling our showroom footprint, along with executing our renovation, relocations, and expansion projects. To date, we have opened five new showrooms in 2023. Two new design studios, Asheville, North Carolina, and Naperville, Illinois. Two traditional showrooms, Topanga, California, Peabody, Massachusetts, and a new outlet location in Dallas. We are very pleased with the strong performance of our new showrooms and proud of how they showcase our incredible product. For the balance of the year, we expect to open 6 additional traditional format showrooms, a West Hartford, Connecticut, location in the third quarter, and 5 new showrooms in the fourth quarter. Coral Gables, Florida, Huntington Station, New York, and 3 new showrooms in California. An additional planned California showroom opening has been pushed to 2024. Our renovation, relocation, and expansion projects are all proceeding as expected. I encourage all of you to visit one of our showrooms and see the experience, our product for yourselves. We also continue to grow our in-home designer program. We are focused on the growth of this program, as the avarage order value we enjoy from our in-home designer-assisted sale is 4 times our company average order value. I founded Arhaus more than 35 years ago with the objective to source wood sustainably and to create an heirloom-quality furniture, with the hope that it'll be passed down from generations to generations and not end up in landfills. Now more than ever, we must do our part to help slow down global warming. I am proud tonight to announce a $10 million commitment to The Nature Conservancy to support their efforts to protect the critical rainforest in Borneo, Indonesia. Our donation will directly support The Nature Conservancy and their local Indonesian affiliate, YCAN, as they embark on an ambitious project to pilot solutions to drive more attractive and self-sustaining economics in forestry. We are proud to support these efforts, we hope others will join us. We know that the environment is critical to our business, our employees, and our clients, and certainly the planet. We know that we must take bold action now. We look forward to sharing this incredible journey with you, and we are confident that together, we'll make a difference. Finally, I want to thank my team for their continued focus on providing an incredible product assortment, an amazing omni-channel experience, and client-first service, as well as executing our showroom openings and enhancing strategic systems that will allow us to scale for long-term growth and success. It is their execution that makes me confident in our ability to capitalize on the significant opportunities ahead of us. Now I'll turn it over to Jen to discuss Rooted, our latest campaign, marketing campaign. Thank you, John, and good morning, everyone. I'd like to take a moment today to celebrate our latest campaign, Rooted, which launched yesterday across our channels. Last year, we sent a team of writers, videographers, and photographers to Mexico. The goal of our trip was unique: to visit artist and longtime Arhaus partner, Javier, and to capture the magic happening in his workshops. From the beginning of our partnership, Javier's handcrafted furniture has been different, distinctive. Working only with salvaged and sustainably sourced wood, he sees the specialness of every log and lets the organic imperfections drive his inventive designs. As our businesses have grown together over the years, so has our collaboration. Our senses of style evolved and refined. We've developed new collections and expanded our offerings into new spaces of the home. Rooted is a truly immersive campaign that tells Javier's story, his family, his process, and his passion for the trees. It is also volume one of a story of who we are. I encourage you to visit arhaus.com to experience the campaign for yourself. We are so proud to partner with Javier and with all of our artisan partners around the world to offer our clients the most beautiful and the most unique handcrafted furniture collections. We hope you enjoy the stories within Rooted as much as we enjoy telling them, and we look forward to continuing to share the stories which make Arhaus so very special. In addition to Rooted, we have some great marketing initiatives launching in Q3. Our new content experience on arhaus.com, entitled Unabridged, launched this week. Here, you will find the wonderful stories of our artisan partners alongside design inspiration, partnerships, and much, much more. We will also be launching our fall campaign in just a few weeks, offering hundreds of new products and expansions of some of our best collections. We cannot wait to hear client feedback and share more updates with you on upcoming calls. For now, I'll pass over to Dawn Phillipson. Thank you. Good morning. As John described, we are pleased with performance in the second quarter. Key items from our second quarter 2023 income statement include: net revenue of $313 million, up $7 million or 2.2%, with comp growth of -0.8% and demand comp growth of 11.6% on a 1-year basis and 102.3% on a 4-year stacked basis. Gross margin increased 5% to $140 million in the quarter, driven by our higher net revenue and lower product costs, partially offset by higher fixed showroom costs and higher credit card fees related to increased interest rates and demand. Gross margin as a percent of net revenue increased 140 basis points to 45%, primarily reflecting favorable product costs, partially offset by higher fixed showroom costs and credit card fees. Second quarter SG&A expense increased 4% to $86 million. The increase was primarily driven by higher corporate expenses to support the growth of our business and higher selling expenses related to new showrooms and strong demand, partially offset by lower product storage fees as we have expanded our warehouse capacity. Second quarter 2023 net income increased 10% to $40 million. Adjusted net income in the second quarter of 2023 increased 3% to $40 million, compared to adjusted net income of $39 million in the second quarter of 2022, primarily driven by the factors just described. Adjusted EBITDA in the quarter increased 5% to $64 million from $60 million in the second quarter of 2022. Second quarter 2023 net revenue of $313 million and adjusted EBITDA of $64 million resulted in a 20% adjusted EBITDA margin in the quarter, an increase of 70 basis points year-over-year. Let me now move to our outlook and how we are thinking about the second half of this year. As the midpoint of our narrowed net revenue range implies, we expect second half net revenue to be down mid-single digits versus the second half of 2022, with the higher than anticipated demand comp growth we are experiencing, offset by the factors John described earlier that affected our Q2 net revenue growth. We expect to see demand comps increase in a low to mid-single digit range in the second half of the year. On the profitability side, the freight benefits we are realizing enable us to increase our full year net income and adjusted EBITDA guidance, while also funding the pricing adjustments John described and our $10 million donation to The Nature Conservancy. We expect adjusted EBITDA margin to be down approximately 750-850 basis points in the second half of 2023 versus the second half of 2022, due to reduced leverage as compared to the second half of 2022, when we benefited from substantial backlog deliveries, higher showroom rent impacted by both the number of new showrooms and strong revenue, higher showroom staffing, investments to enhance omni-channel and technology capabilities, including information technology and warehouse management systems infrastructure, and the previously mentioned donation to The Nature Conservancy. Accordingly, as we announced this morning, for the full year 2023, we are narrowing our net revenue outlook with our midpoint unchanged and increasing our net income and adjusted EBITDA outlook. We expect full year net revenue of $1.25 billion-$1.29 billion, representing growth in the range of 2%-5%, full year comparable growth in the range of -2% to +1%, net income of $102.5 million-$112.5 million, and adjusted EBITDA of $187.5 million-$197.5 million. For all other details related to our results and our 2023 outlook, please refer to our press release. In closing, we are pleased with the first half of 2023. We believe our strong debt-free balance sheet, coupled with a strategic growth plan to build on our share gains in the highly fragmented $100 billion premium home furniture market, position us to weather any economic cycle and emerge in an even stronger position, poised to deliver on our longer-term growth plans and drive value for all stakeholders. Thank you for your attention. We would now like to open the call up for questions. Thank you. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. If at any time you wish to remove your question from the queue, please press star two. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Steven Forbes with Guggenheim. Hey, John, Dawn, this is Julio Marquez, actually, on for Steven Forbes. Just a quick question. Given the ongoing strength and underlying demand trends, I was hoping you could give us a brief preview on your real estate plans for 2024, as well as the new product pipeline. As a quick follow-up, how has the mix of in-stock or special order sales evolved over the past couple of years? What infrastructure-related investments are still outstanding over the, I guess, intermediate term to ensure the customer experience is where it needs to be? Thank you. Hey, good morning. Good morning. Thanks for the questions. Yeah, as far as new stores go for 2024, we're, you know, we're on track to, to stay with our plan, which is, which is, as we've been saying, 5 to 7 stores a year. We'll look at opportunities, you know, that may present themselves and maybe do a little more or may do a little less, depending on, on finding the right real estate and finding the right deals, of course. As far as you asked about the mix of special orders, it's right on track with what we're, what we're planning. It's been strong. We, we, we feel. It's one of our very unique parts of Arhaus that makes us very competitive is, is our, is our custom, especially in the upholstery business. Since we own our own upholstery factory, we're able to give consumers really, really great fabrics, different looks, very, very different than we see out there in the market. We can custom order it and make it very quickly for our clients. We're very, very happy with that part of the business. Is there a third part? Yeah. Thank you. Yeah, just very quickly, and if you can follow up with anything on, infrastructure-related investments over the short to more intermediate term? Thanks. You, you cut out there for a second. Was that a question about systems? Infrastructure? Okay. Yeah, you know, we're excited. We have a lot of opportunities to continue to enhance the systems infrastructure that we have in place. You know, as we've grown over the last several years, you know, we know that there are more efficient ways to do things, and we have a really strong management team here who's driving some change and some nice, is, is gonna facilitate some nice, strong, efficient growth. As we're thinking about the next several months, we have a warehouse management system that has been deployed in 1 of our distribution centers. We're working to deploy another one for our, our main Ohio facility here. Really excited to see how that's going to continue to progress over the next several months. You know, we have several smaller ones. I know we've talked in the past about planning software programs, and then just various other projects that we're working on to continue to drive efficient growth within the organization. Awesome. That is helpful. Thank you very much. Thank you. Our next question is from Jonathan Matuszewski with Jefferies. Hey, good morning, and thanks for taking my questions. The first question was just on the guidance framework for the second half. You know, historically, you've suggested the bulk of your demand is driven by, you know, light home refreshes and then also more complex contractor-assisted refreshes, and a, a smaller piece is driven by existing home sales. Just wanted to get your underlying assumptions for those three drivers in the second half. You know, curious how you're thinking about whether those, you know, stay consistent with recent trends, improve or worsen. That's my first question. Thanks. Hey, Jonathan, this is Wendy. Yes, I mean, those are the primary drivers. We never know exactly how they're gonna play out from time to time, but our assumptions are that they will continue, you know, those same factors will continue to be the primary purchase drivers related to housing for our clients. Understanding, too, you know, we have all of this incredible product that's coming in, but, but I would say our assumptions in general have not changed regarding those three factors. Okay, gotcha. My follow-up question is just on pricing. You know, you've done 3 rounds of hikes over the last couple of years. You know, relative to peers, you haven't been as aggressive. I saw John's comments about lower supply chain costs enabling lower price points for clients was interesting. Maybe if you could just expand upon, you know, the lower price points that you're passing along to customers, that would be helpful. Is it being driven by, you know, more promotionality in the industry, competitor actions, et cetera? Thanks so much. Sure, sure. Yeah, I mean, we, we've always, you know, ran our business in the belief of giving customers a great value for their money. You know, we, we, we have a little different business model than most people out there, and that is, you know, we buy direct from manufacturers. We cut out all the middlemen, the wholesalers, the salesmen, and all that kind of stuff that, that, you know, a lot of people build into their price. You know, we, we've always felt that if we can give our customers and clients a better value, if, if prices go down, we do. If prices go up, we raise prices. And, and, you know, we raised prices for, for quite a while there. The, the, better values we're getting now is really in, in the freight costs. It's, it's, you know, container costs that have come, come way down compared to certainly a year ago, a year and a half ago. You know, the, the things that, that were impacted with that, we're looking at every price. If we can take them down a little bit and still, still withhold our margins, which, which obviously is number one, we'll do it. You know, if that'll help our volume because prices have come down a little bit, you know, it's great. We're doing it very selectively, and, we're not, we're not trying to chase customers with lower prices or anything. You know, it seems to be working for us. That's it. We're gonna keep marching at that. I, I don't see container costs coming down more than they are now because they're very, very low. I would think in the future, prices will be more maintained. We're not gonna have to raise them more or lower them. That's kind of what the future look, looks, looks like. Jonathan, I have just 2 other points that you might find helpful. We implemented the price actions in the mid-June, so limited impact of those in the second quarter. Overall, on the full assortment, it's about a mid-single-digit price decline, but keep in mind that most of those are temporary as we're looking to right-size the inventory assortment, and, you know, as we're thinking about how to make way for newness within the assortment as, as, the newness season is coming up for us. Really excited for that, and, those are the 2 points. Thanks, Jonathan. Super helpful. Best of luck. Our next question is from Simeon Gutman with Morgan Stanley. Hey, guys, this is Jackie Sussman on for Simeon. Thanks so much for taking our question. Just on the timing of deliveries, I guess, how important is it for your business to be more consistent with that timing of deliveries? You know, do you think you're impacting the brand in any way? Kind of what's the path to marry up the demand and the actual comp? Thank you so much. Sure. For the, you know, delivered sales, like, like we mentioned, there have been 2 impacts in the second quarter that were impacting our ability to deliver the demand that's been written kind of to the level that we had anticipated originally. You know, we're working through the second half to be able to fulfill those orders, based off of client timelines as well. I would say more to come on the alignment of those 2. I, I think when you're looking at just the demand comp% and the comp%, keep in mind the base is gonna be very different looking at last year. You know, there's gonna be some noise until there's a lapping of normalization. We're, we're working pretty diligently to get product delivered into the clients' homes in the second half this year, particularly, you know, in advance of holiday season when folks really want their homes looking perfect. Jackie, just to, just to fill in, you, you had asked if this, this has any impact on anything. You know, we're selling handmade heirloom quality products, and they're, they're not, you know, this isn't a commodity. When folks order our product, and if it takes another couple of weeks to get to them, it's fine. You know, we've seen absolutely 0 cancellations in product or so forth because, you know, we're delayed or something like that. And, and that's very important to know, is, you know, our, our clients will wait for our product because they know they're gonna have it for many years. It's very unique. They can't find it anywhere else in the world, and they'll wait for it. You know, they may like it a couple of weeks earlier, but, if so be it, then they'll wait for it, and it's not a big deal for them. Gotcha. Thanks so much. Just a quick follow-up. I guess, on new store productivity, you know, can you remind us what year 1 productivity looks like in new space as a% of an average store, and how are new galleries tracking on that? Yeah. What we've said is that, you know, for traditional showrooms, we target a minimum revenue of $10 million and adjusted EBITDA contribution of 32%. We're you know, we, we feel really good about how our new showrooms are performing relative to those metrics, and, you know, they come out of the gate really strong. What we found is that we excel really well in, you know, any, any market that we enter. Whether it's, you know, urban, suburban, whether we're in a mall or a lifestyle center or standalone. You know, we feel pretty strongly in not only the showroom experience, but the marketing that we put behind it when we open a new location. Really proud of how our new locations are performing to date. Gotcha. Thanks so much. Our next question is from Peter Benedict with Baird. Hello, Mr. Benedict? Sorry about that. Hey, guys. Good morning. Dawn, can you talk a little more about maybe the second half outlook, help us understand your view on gross margin versus SG&A? Certainly, it looks like gross margin will be down or SG&A is gonna be up a bunch. Just trying to understand what the puts and takes are there, and any kind of call-out around three Q versus four Q, just as we set the expectation for the back half. That's my first question. Yeah. Good morning, Peter. You know, while we don't guide to gross margin or SG&A, I'd be happy to provide some clarity on some of the components. You know, within the gross margin line item, we did talk a bit about, you know, freight is coming down, and we're seeing that starting to roll through the P&L, so that's some nice relief there. We're offsetting that with pricing actions that we've taken for the inventory assortment. You know, other items rolling through there of particular note are the new showrooms. As we're opening 6 new showrooms in the back half, keep in mind that those are in more expensive locations, and have rent in advance of opening. We also, you know, within a couple of months prior to opening, we're starting to staff those locations as well, and there's no corresponding top-line revenue impact. That's important. It sets us up really well for 2024 and beyond, for these new showrooms, but, but does have a near-term impact this year. We're also seeing, you know, a little bit of, of compression still in credit card fees, as you can imagine, with the interest rates where they are and, and with demand accelerating, that, that impacts those line items. Within SG&A, you know, so staffing of the new showrooms rolls through SG&A, but we're also, you know, expecting some variable compensation increases. Keep in mind that our showrooms are commissioned based off of demand versus GAAP revenue, so a little bit of a disconnect there. As we're working to get the delivered revenue out the door, you know, there could be, could be some just variances there on a percentage basis. We're also investing in systems, right? As we've talked about the, the warehouse management system, the planning systems, we're talking about an order management system. A lot of those, you know, in advance of, of actually turning on the system, there's a lot of costs and implementation fees that go along with those. Yeah, so, you know, I think we're investing for growth. We're excited about where these systems are going to take us over the next kind of 12, 18, 24 months, and how we're going to be able to grow the business and support the growth that we've seen, but certainly come at kind of a near-term compression. Then just as we're thinking between quarters, you know, we, we don't really give quarterly guidance at this point. I, I don't know, Wendy, do you have maybe any additional context? No. I mean, other than, you know, we would hope that, you know, it's, it's a, it's a nice split. Obviously, in the third quarter, we have our, you know, the launch of our new products and the refresh in our showrooms and the, you know, the big fall marketing campaign that, that, that, that can give us a little bit of a lift in the fourth quarter, depending on delivery. In general, I would think about them as, you know, fair- fairly even. All right, great. That's, that's super helpful. Then I guess the next question would just be around the COO- Peter, Peter, one other note. Sorry, go ahead. Also, you know, in, in SG&A, we'll have the donation to TNC, and that's likely to be in the fourth quarter. Excellent. That's really helpful, guys. Thank you. My, my follow-up would be on the, the COO departure. Can you talk a little bit more about that? Give us some context. Obviously, given your drive to become more efficient around supply chain and logistics, just what the, what your plans are there from a management standpoint. Thank you. Yeah, we've got a great, great team, driving, you know, the back, back part of the business. The COO, you know, we mutually agreed it just wasn't a great fit, and, you know, to take us forward. We're going to keep moving on. We'll figure out what our plans are for the future. We've got a great, great team on, on the ground that can execute, and we'll, we'll move forward with them and keep things going. Got it. Thanks so much, guys. Good luck. Thank you. Our next question is from Seth Sigman with Barclays. Hey, good morning, everyone. I wanted to follow up on the price adjustment conversation. You know, it's really difficult to compare apples to apples versus your competitors, but do you have a feel for, you know, following some of these adjustments, what the price gaps look like? Maybe just any other commentary around what's happening competitively from a price and promotional perspective. Thank you. Yeah. You know, we're constantly evaluating where we're positioned within the competitive set, making sure that our value proposition is exactly where we would like it to be, making sure that we're kind of top of market with regards to that. You know, we feel really comfortable some of these price adjustments that we've taken that would not be temporary, that would be more permanent based on what we know today. We feel great about how those position us within the market. I think, you know, as we're, as we're looking across the assortment, we have really unique product with really great quality. You know, I, I think we're, we're really pleased with how we're positioned in the market, but we're constantly evaluating that as well. Jen, do you want to talk at all about the promotional cadence you've seen? Yeah. I mean, I think to, to touch specifically on promotions, you know, similarly to, you know, as I mentioned on prior calls, you know, we're continuing to see that heightened promotional activity. Our promo strategy remains unchanged. We continue to be really happy with it. I think the one thing to note, you know, our promotional strategy, so you know, we've always been running those promotions around those holiday weekends, those three-day weekends, and started talking towards the end of last year, right around that Black Friday time, about how we were seeing those sales periods lengthening. I think, you know, as we are in growth mode, we do want to be top of mind and part of the consideration set for those customers who are more promotionally driven. We have lengthened some of our promotional periods, so what might have been a 3-4 day promo around July fourth weekend, might now be a little over 1 week, in line with what we're seeing with trends in the market. Again, you know, that's really, we are in growth mode. We are trying to grow our brand awareness. We know that a subset of our clients are promotionally driven, and we want to be in that consideration set when they're out there in the market and shopping. But like I said, no, no changes to the strategy other than that, and we continue to be really happy with the performance. Just a reminder that those price, changes went into effect in mid-June, again. Is there specific you would point to, that you guys are doing, or do you think maybe that's the market? Just any more context there. Thank you. Seth, this is Wendy. You broke up a bit. Can you repeat the question? I'm sorry about that. Just the acceleration that you saw in demand throughout the quarter, it was a pretty acceleration, I think on a one-year basis and then on a multiyear basis as well. Is there anything or do you think maybe that's just the market? Seth, you're still breaking up, but I think your question is about the demand acceleration in the second quarter and what we saw and how impressive it is on a multiyear basis. Yeah. you know. Yeah. continuing to execute... Go ahead, Seth. No, sorry about that. Yeah, if there's anything specific that you did to drive that acceleration, or do you think it's the market? Thank you. Well, I, I certainly think we're driving some of that. I think there's probably a market component as well. You know, we're, we're continuing to execute on the strategies that we've outlined and talked about, you know, really for the last several years. You know, we feel great about our showrooms, the aesthetic. Our product is really resonating. It's on point. We've continued to introduce newness throughout, you know, the last several years, which is a little bit different than perhaps some other folks in the market. You know, we feel great about that. You know, we certainly are constantly looking at, you know, our marketing touchpoints and evaluating, you know, are there different ways to engage with the clients to drive, you know, responses? I, you know, I think we're executing on what we've laid out that we'll execute, and we'll continue to do that, and we're just really proud of the results and proud of our teams being able to, to drive the results. Thank you. Our next question is from Max Rakhlenko with TD Cowen. Great. Thanks a lot. First, gross margin was up nicely in the quarter, but just want to confirm that the lower prices will not result in gross margin pressure down the road. How much do you think the pricing impact will have on 2H? Just the elasticity that you've seen over the past handful of weeks. Yeah. So, you know, as we've mentioned, we're reinvesting the freight savings, or some of the freight savings as they're flowing through the P&L, into some of these price actions that we've taken. We feel now is the right time to really evaluate, dig into our inventory assortment and make sure that we are positioned how we want to be positioned, heading into the back half of this year, into next year, and then go forward, especially as there's renewed focus on, you know, our supply chain footprint with multiple DCs. So we're spending a lot of time reviewing and analyzing that, and think it's an opportunistic time to take some pricing action to drive those units, especially given that there's, you know, the ability to do so without margin impact, given the, the freight rolling through the P&L. We also said that those freight savings are enabling us to contribute to The Nature Conservancy, which we're really excited about and proud to partner with. We're feeling good about that. Sorry, was there a second part of your question? Just the, the elasticity that you're seeing. Are, are-- how are customers reacting to the price cuts? Yeah, I mean, I think, you know, as far as... I'll answer this maybe in a slightly different way, and tell me if this helps you. You know, the consumer response has been good. Price doesn't drive the client, however. As we're thinking about, there is a subset of the client base that will purchase. You know, maybe they were waiting for a promo, maybe they were waiting for the next sale over a holiday weekend, but our client wants the product that they want based on the aesthetic and based on the quality and based on their home and what fits their lifestyle. You know, we've seen, we've seen some great response to, to some of those products that we're showcasing, and, and we're showcasing them a little bit differently as well. It's, you know, as we're looking about driving that inventory through the supply chain to the clients, it's, it's about pricing a little bit, but it's also about how do we engage with the client and around those products as well. Things like changing how they're displayed on the website, in the navigation. You know, I, I think we're, I think we're looking at all kind of aspects, but the client is engaging with the product regardless of price point, which we're really excited and, and pleased with. Got it. Okay. Can you remind us how much newness are you gonna introduce second half of the year? Just what you're thinking for next year as well. I know that you typically have a cadence, but just curious if you're sticking to it or if we should expect maybe any changes. Just with that, how you're thinking about the timing of all of your the book rollouts. Yeah, I can answer that, Mac. you know, as you know, I think our, our demand sales are up, what, 33% over the last 24 months. Clearly, our product is resonating with our clients, and we've got great products. you know, during the pandemic, I, I had our merchants not slow down designing, developing, sampling new products. you know, when we came out of the pandemic, we could, we could pull the trigger on those, and they were ready to go, and we're seeing a lot of that. you know, we think that is, you know, a big part of why we're doing so great. I, I know it is, because we've got great, great products. you know, the future, we're, we're staying, staying, staying steady. You know, we, we shoot for about 20% newness a year. We're staying steady with that, with that point. We're, you know, we're looking at every single category that we carry and trying to just get better and better every day. We've got such a great merchant team, great design team, and they're very passionate and so talented that they love working on products, and so do I. We keep coming out with better and better things that we think are cutting edge, people I know have never seen anywhere else. Yeah, take a look at this Rooted campaign that Jen just alluded to, that, you know, one of our key partners that we did roll out some really cool new product with this fall, are rolling out right now, I should say, that we know is gonna be, be a home run. Yeah, we're staying, staying on course. Max, I would also add that that newness that's coming in, is coming in at really exciting margins. So- Sure. You know, we're, we're really proud of how we're able to price those pieces in the market. Can you maybe just elaborate on that, if you don't mind, just that last comment? ... I mean Max, I, you know, I think we don't want to go too much into detail, mostly for competitive reasons, right? I, I can tell you that, I guess, as you're looking at the overall assortment and the pricing, yeah, we've got newness that's coming in, really strong price points, really great margin. Then we have, you know, we mentioned the mid-single digit price adjustments that we've taken. I also would provide a little more clarity that in addition to, to most of those being temporary, that it also is contingent upon the stock levels, right? While it's mid-single digit across the assortment, as, as you're thinking about, you know, maybe we have more weak months of supply than in, in some categories than others, and we've taken higher pricing on those than in others. you know, I think, overall, I, I don't know that you can really model this out, but, just know that we're focused on margin management, and we feel really good about how we're positioned with the client, but also from a PNL perspective. Yeah, just, just to add on to that, you know, from, from a merchant side, you know, we, we work on new product and roll out new product that's going to be profitable. You know, we're not, I'm not interested in chasing, you know, cheaper products. Let's, let's, you know, let's cheapen the quality of the product so we can sell more, so we can hit a lower price point, or say we cheapen it so we can get a higher margin. That's absolutely not, not what we do. You know, we keep the quality as, as absolutely good as possible, great design, and then, and then we analyze the product. I mean, we go through hundreds of products that we pass on because maybe we can't get the margin on it. It's cool stuff, we feel like, you know, it's overpriced. Anything we do roll out, you know, to Dawn's point, is great product at, at a great value. And we're getting a good margin on it because that's number one, and that's just our philosophy on how we, how we merchandise products. Great. Thanks a lot. Our next question is from Jeremy Hamblin with Craig-Hallum. Thanks, and congrats on the strong results. You, you guys just posted, I think, your, your best gross margin rate. I think that your expectations are for that to come in a bit here in the second half of the year. You know, just, and not to belabor the point here in, in asking, more questions about the, the, the gross margin, but it, it, it seems as though you've had, a step up, a, a sustainable step up in terms of what the long-term, gross margin outlook picture is. Whether or not... I, I just wanted to see, like, clearly, scale is a part of this, you know, maybe scale also with the vendors, is playing a big part, in that. But the ability to, you know, offer those, you know, kind of the, the price adjustments, mid-single digit, it's still, you know, it, it sounds like you're still kind of targeting a gross margin that is sustaining at a higher level than, let's say, you know, kind of, a few years ago. You know, any additional comments that you can share on, on kind of that viewpoint and, and maybe the biggest key drivers of, of that sustainability on the gross margin? Yeah. So I think you articulated that nicely in that, you know, there's a lot of opportunity as we continue to scale the business. What we've said in the past is that, you know, we, we expect to grow adjusted EBITDA, but it may not be a linear path. As you're thinking about those margin rates, we're, you know, we're investing in our showroom footprint. Those are costly in advance, you know, 6-12 months in advance of actually opening the showroom. We're also lapping, particularly in the back half of this year, in Q4 in particular, we're lapping some really strong backlog delivery last year. You know, keep in mind that last year we saw great leverage on those fixed expenses that we're not going to have that same benefit this year. I think it's just important to keep in mind, you know, in 2022, the backlog was about $150 million, and what we've said is that the flow-through rate on that was between 35%-45%. Really strong flow-through on that. About $100 million in backlog delivery in 2023, 2024, depending on how the back half of this year plays out. You know, as you're thinking about longer term, backlog is certainly gonna play a role, a significant role in those, those rates. We are positioning the company really well to continue to grow as we're investing in talent, we're investing in systems, we're investing in processes, and certainly in products as we continue to work really closely with the vendors, around, you know, pricing those, those pieces. You know, I think more to come on that in the, from a larger perspective, but we're excited about where the company is heading, and we feel really good about how we're gonna be able to deliver over the near and medium term. Got it. Thanks. Then just a follow-up here on the, the new, the new showroom openings here. The upcoming markets are really kind of coastal markets, you know, slightly higher household income markets. In terms of expectations around that, you noted, you know, kind of that $10 million, million-dollar bogey. You know, are you seeing, are the expectations for the unit-level economics higher, given that likely, you know, rent costs are, are a little bit higher in those marketplaces as well? Do you have to set that bogey even a little bit higher to get the unit-level economics you want? ... Yeah, you're, you're exactly right. We're targeting a 32% adjusted EBITDA contribution in year 3 for all of our showrooms. Now, that's an average. You know, as we're thinking about some of these showrooms, particularly in California, you know, a California showroom, depending on the demographic, which location we're going into, is gonna perform better than perhaps like an Akron-Canton might in Ohio. You know, we're, we're very laser focused on the financials of each location. And, and we're, we're really pleased with the deals that we've been able to get, and the performance that we expect and anticipate coming out of, or entering some of these new markets and then adding new locations within existing markets. We're definitely focused on the financial performance of, of each location. Thanks for the call. Our Our best wishes. Thank you. Thank you. Our next question is from Peter Keith with Piper Sandler. Hey, good morning, everyone. Congrats on that demand acceleration. It's pretty impressive. Maybe if just first kick it off to Jen on the Rooted campaign. I, I did notice that earlier this week. It's a, it's a really impressive video. Maybe just give us the plan on h-how do you raise the awareness of that, push that out to customers to help, you know, increase that profile of the Acacius and Polanco collections, 'cause it, it does seem like it could drive quite a bit of interest. Yeah. Good morning, Peter. Thank you. We are thrilled with the campaign. As I mentioned, it launched earlier this week, and can be found on arhaus.com, our website, in our stores, on our social media channels. We're doing some advertising out in the market to prospect for new, new clients who might be getting introduced to Arhaus for the first time, working with some of our partners and influencers to get that message out as well. We're really excited to see how this plays out. I think what is so incredible about this particular campaign is it's really expanding on the stories and what is special about Arhaus and what we have known since the beginning. I think one of the great things that we hear from our design consultants and interior designers, is clients want to know the stories of the artisans behind the products that they are buying. They want to know where they come from, how they're made, how they're crafted, what materials they're made out of, any sustainability elements to that. So we've always loved telling these stories on a one-to-one basis in showrooms, but this is our ability to really do it, like you said, on a broader scale. We also have printed a limited edition, incredibly beautiful, book that will be going out to some of our top clients, will be available in our showrooms. It's just an absolutely stunning work of art. As I mentioned earlier on the call, we really sent some incredible artists and creators to Mexico to capture the story of some incredible artists and creators in Mexico. And it's just been a really incredible synergy of watching that all come together, and we're really excited to start seeing reactions from both our clients, from our internal employees, and then from new people who are getting to know us for the first time. I think, you know, the other two things I just want to note is, as I mentioned earlier in the call, this is volume one, so we have a lot of stories to tell, a lot of elements, a lot of partners, a lot of products that really combines to make Arhaus incredibly special. Looking forward to continuing this campaign in the future. Our fall campaign launches next in the next few weeks. As I mentioned, the fall catalogs will be hitting homes in about 2 weeks here. That is incredible. That is showcasing all of the products and the stories and the details. Just really excited for that sort of 1-2 punch there of layering this additional storytelling element onto our marketing initiative. Okay, that's great stuff. Thank you. My second question, I guess I'll ask specifically to, to Dawn. The increase in the EBITDA guide is particularly impressive if we adjust out that, that $10 million charitable donation. The midpoint of the sales guide, and there's some puts and takes, that midpoint sales guide is holding steady, so suggests something's kind of better on the margin front than what you were expecting. Could you give us a little more color on, you know, what's playing out to help the margin EBITDA growth? Yeah. You know, we've seen really nice flow-through on the freight front, primarily as we're, as we're thinking about gross margin. For us, even within the organization, we have a little bit of challenges in seeing in forecasting exactly how that freight impact is gonna flow through just because it's SKU dependent, and that's really contingent upon what client is purchasing, you know, at, at what volume. You know, we've been a little conservative in how we're thinking about freight flow-through in the PNL, I think. We saw some nice nice response there, and it's enabling us to do some other things. You know, I think we're, we're very thoughtful about how we're continuing to invest in the, in the organization, you know, from a talent front, especially with so much macro uncertainty, we wanna make sure that we're staffed appropriately, not overstaffed. As we're thinking about investments within the business, you know, just making sure that we're being really financially prudent and thoughtful about the timing of those as well. You know, I think it's some active management by our really strong management team and our, our fiscally minded management team, in combination with the freight flow-through. Okay, terrific. Thanks so much, guys. Thank you, Peter. Thank you, Peter. Our next question is from Curtis Nagle with Bank of America. Good morning. Thanks for the question. Just wanted to clarify a point, John, I think you made earlier in the call, calling out what sounds like customers asking to delay as they're completing home projects. Just, yeah, I guess a little surprised by that. Are, are we worried that we might see cancellations or just, you know, what, what, what's going on there? What's going on is our, our clients are still renovating their homes and building second homes and so forth. You know, I'm not a builder, but invariably, builders are delayed. Absolutely zero cancellations we're seeing on this. You know, the, the percentage is so small, it's not even worth, you know, talking about. Yeah, it's just, it's just, you know, the same old thing that, you know, clients are renovating. Like I said, a lot of new homes are still being built, you know, for at least our clients there. You know, they may be delayed 2 months, 2 or 3 months, on, on finishing up their homes, so obviously they can't take the furniture until the, the, the room or home is ready. Yeah, nothing, nothing different than, than has been in the, you know, in the future or the past. Obviously, COVID, there was even more delays because even more people were building and so forth. But no, we, we see it as a, as a, as a positive thing. It's just, just a timing issue. That's all it is. Absolutely, just a timing issue. Okay. Sounds like that'll all come through. Anything to think about in terms of carrying inventory, in terms of modeling? Sorry? Yeah. In terms... Are you going to be holding more inventory as a result, maybe just temporarily? Yeah, anything to think about in terms of modeling? Well, when, when, when clients purchase, you know, we, we get a deposit from them, and, and we hold their inventory for them. Absolutely. You know, we're buying inventory, you know, prudently according to our sales. You know, we look at it SKU by SKU, and, and we try to keep... You know, our concept is we try to keep inventory in stock, so if clients do want it right away, we can deliver it to them. You know, if they don't want it for 2 or 3 months, we'll still hold it, hold it in our warehouse for them, and we'll deliver it when they're ready. Okay. We're not adding inventory for any reason. No. Okay. Thanks, John. Appreciate it. Thanks, Curtis. Our next question is from Cristina Fernandez with Telsey Group. Hi, good morning. I wanted to ask about the demand assumptions for the back half of the year. Dawn, you said you're assuming low single digit to mid single digit increases, which is, you know, really good in this environment, but a deceleration to what you've seen in the first half and so far in July. Is it a function of the macro that's keeping you conservative or, I guess maybe your thought process behind those assumptions relatives to earlier in the year? Yeah. You know, Cristina, it's just my own personal conservative nature. You know, I feel, you know, we're executing, we're doing all the right things. We know that there are some, some things in the macro that we just can't control. I think, you know, we're trying to be mindful about the things we can't control. We're executing on the things we can. You know, I, I don't want to get out over my skis on, on the financials in particular. You know, I think that's a reasonable assumption, and honestly, we would be thrilled with that result. That's where our heads are at. On the performance by channel, just looking at your Q, in retail sales seemed like they were, you know, were flat for the quarter, e-commerce up double digits. Anything to note, are you seeing any divergence in demand trends by channel? No. You know, keep in mind that those are, those are based off of delivered sales. Just as you're thinking about, you know, sometimes e-com has a higher UPS component than showroom sales, so it's just a timing metric. Nothing to call out, nothing to be derived from that. It's, it's just a function of timing. Maybe one last clarification. On the delivery delays you saw this quarter because of the system upgrade, John, you mentioned that that will continue through the back half. Is it gonna be the same magnitude of delays, or, is the impact gonna be less as we move through the third and fourth quarter relative to what you saw in the second quarter? You know, so as we're moving through this year, we're learning a lot. We've had a lot of change in the last two years from, you know, systems perspective, from a supply chain perspective, shifting from one distribution center to two. We never expected those to go smoothly. True to form, they, you know, there have been some kinks in the plan. You know, we're learning a lot. We're figuring out how to implement and drive while continuing to execute. You know, I think we, we feel really confident in the guide that we put out there for this year. We'll continue to, to drive, to execute to that level, if not better. Thank you. Thanks, Cristina. Ladies and gentlemen, we have reached the end of the question- and- answer session, and I would like to turn the call back to Wendy Watson for closing remarks. Thank you, everybody, for your participation in our call and interest in Arhaus. We look forward to speaking to you again next quarter. Thank you. This concludes today's conference. Thank you for your participation. You may disconnect your lines at this time.