ARHS

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q for the three months ended June 30, 2026 (“Form 10-Q”) and our Annual Report on Form 10-K for the year ended December 31, 2025. This Form 10-Q contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they do not fully materialize or are proven incorrect, could cause our business and results of operations to differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements can generally be identified by the use of forward-looking terminology, including, but not limited to, “may,” “could,” “seek,” “guidance,” “predict,” “potential,” “likely,” “believe,” “will,” “expect,” “anticipate,” “estimate,” “plan,” “intend,” “forecast,” or variations of these terms and similar expressions, or the negative of these terms or similar expressions. Past performance is not a guarantee of future results or returns and no representation or warranty is made regarding future performance. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond our control that could cause our actual results, performance or achievements to be materially different from the expected results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to, the following: •Our ability to manage and maintain the growth rate of our business; •Our ability to obtain quality merchandise in sufficient quantities; •Challenges with the planning or implementation of our technology upgrades, including a new enterprise resource planning system; •Disruption in our receiving and distribution system, including delays in the integration of our distribution centers and the possibility that we may not realize the anticipated benefits of multiple distribution centers; •Effects of new or proposed tariffs and changes to international trade policies and agreements; •The possibility of cyberattacks and our ability to maintain adequate cybersecurity systems and procedures; •Loss, corruption and misappropriation of data and information relating to clients and employees; •Changes in and compliance with applicable data privacy rules and regulations; •Risks as a result of constraints in our supply chain or disruptions due to geopolitical events such as acts of war and/or terrorism or other hostilities; •A failure of our vendors to meet our quality standards; •Declines in general economic conditions that affect consumer confidence and consumer spending that could adversely affect our revenue; •Our ability to anticipate changes in consumer preferences; •Risks related to maintaining and increasing Showroom traffic and sales; •Our ability to compete in our market; •Our ability to adequately protect our intellectual property; •Compliance with applicable governmental regulations; •Effectively managing our eCommerce sales channel and digital marketing efforts; •Our reliance on third-party transportation carriers and risks associated with freight and transportation costs; and •Compliance with SEC rules and regulations as a public reporting company. The risks, uncertainties and assumptions referred to above that could cause our results to differ materially from the results expressed or implied by such forward-looking statements include, but are not limited to, those discussed under Item 1A. Risk Factors, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2025. All forward-looking statements included in this document are based on information available to us as of the date hereof, and we assume no obligation to update these forward-looking statements. These statements are based on information available to us as of the date of this Form 10-Q. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements. The following discussion contains references to the three months ended June 30, 2026 and June 30, 2025, which represents the condensed consolidated financial results of Arhaus, Inc. and subsidiaries for the three months ended June 30, 2026 and June 30, 2025, respectively. 19 Table of Contents Overview Founded in 1986 by John Reed, our CEO, and his father, Arhaus is a premium home furnishings brand built on a simple idea: furniture and décor should be responsibly sourced, lovingly made, and built to last. We operate a vertically integrated model, designing and sourcing products directly from skilled artisans and carefully selected manufacturing vendors around the world, including domestic upholstery production at our own North Carolina manufacturing facility. This approach enables us to offer a highly exclusive and customizable assortment of heirloom-quality furniture and décor designed to be used and enjoyed for generations. Design is at the core of everything Arhaus does. With more than 100 Showroom locations across the United States, our integrated omni-channel model connects every client touchpoint, from Showroom and interior design to eCommerce and catalog, allowing us to meet clients wherever and however they choose to shop while delivering a highly personalized client-first experience from discovery through delivery. Our vertically integrated model, inclusive of design and product development teams, upholstery manufacturing capabilities, direct vendor sourcing, direct-to-consumer and direct-to-trade selling, allows Arhaus to maintain greater control over product quality, design integrity, and value. We offer merchandise across a broad range of categories, including furniture, outdoor, bath, lighting, textiles and décor. Our curated assortments are presented across our sales channels in sophisticated, family-friendly and lifestyle-oriented settings. Based on third-party reports, publicly available data, and our internal research, we believe the United States premium home furnishings market is approximately $100 billion. This highly fragmented market is served by a large number of independent retailers, which we believe provides us a meaningful opportunity to increase market share over time. We believe that we are well positioned to grow market share through our differentiated brand positioning, scale, and strong resonance with affluent clients who value quality, craftsmanship, and design. Products are designed for use throughout the home and are sourced directly from a global network of nearly 400 vendors. Through close collaboration with Arhaus product development teams and sourcing relationships, and supported by our vertically integrated model, we believe we are able to deliver high-quality products at a compelling value. Arhaus strives to deliver a welcoming and inspirational experience across both Showrooms and eCommerce, guided by our belief that retail is theater. Showrooms are immersive, design-forward spaces that serve as an important driver of brand awareness and client engagement, while our eCommerce channel functions as a seamless extension of the physical Showroom experience. Our experienced design consultants and interior designers provide expert guidance and personalized service, supporting clients throughout their shopping journey. The table below represents the composition of our Showrooms by format and operating footprint as of each period presented: June 30, 2026 December 31, 2025 Traditional Showrooms 91 90 Design Studios 9 9 Lofts 9 8 Total Showrooms 109 107 Total gross square footage (in thousands) 1,897 1,836 Showrooms with interior designers 97 97 Total interior designers 152 142 States where we operate 31 31 For the six months ended June 30, 2026, we generated $699.2 million of net revenue, $286.5 million of gross margin and $41.9 million of net and comprehensive income. For the three months ended June 30, 2026, we generated $384.9 million of net revenue, $172.1 million of gross margin, and $39.6 million of net and comprehensive income. How We Assess the Performance of Our Business In addition to U.S. GAAP results, this Form 10-Q contains references to the non-GAAP financial measures below. We use these non-GAAP measures to help assess the performance of our business, identify trends affecting our business, formulate 20 Table of Contents business plans and make strategic decisions. In addition to our results determined in accordance with U.S. GAAP, we believe that providing these non-GAAP financial measures is useful to our investors as they present an informative supplemental view of our results from period-to-period by removing the effect of non-recurring items. The non-GAAP financial measures presented herein are specific to us and may not be comparable to similar measures disclosed by other companies because of differing methods used by other companies in calculating them. These measures are also not intended to be measures of free cash flow for management’s discretionary use, as they do not reflect tax payments, debt service requirements and certain other cash costs that may recur in the future, including, among other things, cash requirements for working capital needs. Management compensates for these limitations by relying on our U.S. GAAP results in addition to using these non-GAAP financial measures. The non-GAAP financial measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. We consider the following financial and operating measures that affect our results of operations: Net Revenue and Written Sales (Formerly “Demand”). Net revenue is recognized when a client obtains control of the merchandise. We also track written sales in our business which is a key performance indicator linked to the level of client orders placed. Written sales is an operating metric that we use to measure the dollar value of orders (based on purchase price) at the time the order is placed, net of the dollar value of cancellations and returns (based on unpaid purchase price and amount credited to client). These orders are recognized as net revenue when a client obtains control of the merchandise. Because written sales is measured net of cancellations, all written sales will eventually become net revenue, with appropriate reserves, when delivered to the client. Comparable Delivered Sales (Formerly “Comparable Growth”). Comparable Delivered Sales is the year-over-year percentage change of the dollar value of orders delivered (based on purchase price), net of the dollar value of returns (based on amount credited to client), from comparable Showrooms and eCommerce, including through our catalogs and other mailings. This metric is a key performance indicator used by management to evaluate Showroom performance for locations that have been opened for at least 15 consecutive months, which enables management to view the performance of those Showrooms without the dollar value of orders delivered for new Showrooms being included. Comparable Showrooms are defined as permanent Showrooms open for at least 15 consecutive months, including relocations in the same market. Showrooms record written sales immediately upon opening, while orders delivered take additional time because product must be delivered to the client. The dollar value of orders delivered for Loft comparable locations is included. Comparable Delivered Sales provides management insight into business performance for a particular period by comparing the dollar value of orders delivered (based on purchase price) in a period compared to the prior comparable period. Since delivery generally coincides with recognition of net revenue, with appropriate reserves, Comparable Delivered Sales trends will more closely track trends in reported net revenue than Comparable Written Sales. Comparable Written Sales (Formerly “Demand Comparable Growth”). Comparable Written Sales is the year-over-year percentage change in written sales from our comparable Showrooms and eCommerce, including through our catalogs and other mailings. This metric is a key performance indicator used by management to evaluate Showroom performance for locations that have been opened for at least 13 consecutive months, which enables management to view the performance of those Showrooms without new Showroom written sales. For Comparable Written Sales, comparable Showrooms are defined as permanent Showrooms open for at least 13 consecutive months, including relocations in the same market. The dollar value of orders written for Loft comparable locations is included. Comparable Written Sales provides insight into business performance in a particular period by comparing the dollar value of orders (based on purchase price) placed in that period to the prior comparable period. Although these orders do not result in net revenue until the order is delivered at a later point in time, management utilizes this metric to evaluate core performance. While the underlying written sales that support this metric will generally translate into delivered sales over time, the Comparable Written Sales and Comparable Delivered Sales measures may not correlate in any specific period partially due the lag effects in both the numerator and denominator that occur between order placement and delivery, which tend to vary based on natural variations in the supply chain. Notwithstanding these limitations, management considers it useful to evaluate both measures together to assess overall performance trends and believes investors may find them useful when reviewed alongside reported results and other key metrics. Gross Margin. Gross margin is equal to our net revenue less cost of goods sold. Cost of goods sold includes the direct cost of purchased merchandise, inventory reserves, inbound freight, all freight costs to get merchandise to our Showrooms, credit card fees, design, buying and allocation costs, our supply chain, such as product development and sourcing, occupancy costs related to Showroom operations, such as rent and common area maintenance for our leases, depreciation and amortization of leasehold improvements, equipment and other assets in our Showrooms. In addition, cost of goods sold 21 Table of Contents includes all logistics costs associated with shipping product to our clients, partially offset by delivery fees collected from clients (recorded in net revenue on the condensed consolidated statements of comprehensive income). Selling, General and Administrative Expenses. Selling, general and administrative (“SG&A”) expenses include all operating costs not included in cost of goods sold. These expenses include payroll and payroll related expenses, Showroom expenses other than occupancy and expenses related to many of our operations at our distribution centers and corporate headquarters, including marketing, information technology, legal, human resources, utilities and depreciation and amortization expense. Payroll includes both fixed compensation and variable compensation. Variable compensation includes Showroom commissions and Showroom bonus compensation related to written sales, likely before the client obtains control of the merchandise. Variable compensation is not significant in our eCommerce sales channel. All new Showroom opening expenses, other than occupancy, are included in SG&A expenses and are expensed as incurred. We expect certain of these expenses to continue to increase as we open new Showrooms, develop new product categories and otherwise pursue our current business initiatives. SG&A expenses as a percentage of net revenue are usually higher in lower-volume quarters and lower in higher-volume quarters because a significant portion of the costs are fixed. EBITDA. We define EBITDA as consolidated net income before depreciation and amortization, interest income, net and income tax expense. Adjusted EBITDA. We believe that adjusted EBITDA is a useful measure of operating performance as the adjustments eliminate items that we believe are not reflective of underlying operating performance in a particular period. Adjusted EBITDA facilitates a comparison of our operating performance on a consistent basis from period-to-period and provides for a more complete understanding of factors and trends affecting our business. Because adjusted EBITDA omits certain non-cash items and items that we believe are not reflective of underlying operating performance in a particular period, we feel that it is less susceptible to variances in actual performance resulting from depreciation, amortization and other non-cash charges and can be more reflective of our operating performance in a particular period. We also use adjusted EBITDA as a method for planning and forecasting overall expected performance and for evaluating, on a quarterly and annual basis, actual results against such expectations. The following is a reconciliation of our net and comprehensive income to EBITDA and adjusted EBITDA for the periods presented (in thousands): Six months ended Three months ended June 30, June 30, 2026 2025 2026 2025 Net and comprehensive income $ 41,869 $ 39,948 $ 39,646 $ 35,066 Interest income, net (1,518) (1,317) (1,064) (744) Income tax expense 16,943 13,791 15,729 12,593 Depreciation and amortization 25,114 22,959 12,744 11,597 EBITDA 82,408 75,381 67,055 58,512 Equity based compensation 6,058 3,390 3,413 1,795 Other expenses (1) — 108 — — Adjusted EBITDA $ 88,466 $ 78,879 $ 70,468 $ 60,307 (1)Other expenses represent costs and investments not indicative of ongoing business performance, such as loss on disposal of assets. Free Cash Flow. We define Free Cash Flow as net cash provided by operating activities less net cash used in investing activities. We believe that Free Cash Flow is a useful measure that is helpful in understanding the strength of our liquidity and how our business generates cash. Management uses Free Cash Flow to evaluate our overall liquidity needs and determine appropriate capital allocation strategies. Free Cash Flow should not be considered in isolation or as an alternative to net cash from operating activities calculated in accordance with U.S. GAAP and should be viewed together with our other U.S. GAAP results. Factors Affecting the Comparability of our Results of Operations Our results over the past two years have been affected by the following events, which must be understood in order to assess the comparability of our period-to-period financial performance and condition. 22 Table of Contents Tariffs In February 2026, the U.S. Supreme Court issued a ruling invalidating certain tariffs previously imposed under the IEEPA. Subsequently, the U.S. Court of International Trade ruled that tariffs paid under the IEEPA must be refunded in accordance with the law. As a result, the U.S. Customs and Border Protection Agency launched a special tariff refund program to facilitate such refunds. The Company has requested refunds of $37.8 million for IEEPA tariffs previously paid and believes recovery is probable. As of June 30, 2026, the Company recognized a receivable of $32.7 million, which is included in prepaid and other current assets within the condensed consolidated balance sheets. As of June 30, 2026, the Company received $5.1 million in cash for the refunds. During the six and three months ended June 30, 2026, the Company recognized a benefit of $23.8 million for the recovery of IEEPA tariffs paid, of which $15.5 million related to inventory sold prior to April 2026 and $8.3 million related to inventory sold during the quarter, in cost of goods sold within the condensed consolidated statements of comprehensive income. As of June 30, 2026, the Company recorded $14.0 million primarily related to the reductions in inventory costs in merchandise inventory, net within the condensed consolidated balance sheets. As of August 6, 2026, the Company has received $37.8 million in tariff refunds and $1.3 million in interest. Showroom Openings and Closings New Showrooms contribute incremental expense, new Showroom opening expense and net revenue to the Company. Our recent Showroom growth from January 1, 2025 to June 30, 2026 is summarized in the following table: June 30, 2026 December 31, 2025 Showrooms open at beginning of period 107 103 Showrooms opened (1) 3 12 Showrooms closed for relocations (1) (7) Showrooms closed permanently — (1) Showrooms open at end of period 109 107 (1) Showrooms opened during the respective periods includes both new and relocated Showrooms. Results of Operations The following tables summarize key components of our results of operations for the periods indicated and should be read together with our condensed consolidated financial statements and related notes. 23 Table of Contents Condensed Consolidated Statements of Comprehensive Income Data (in thousands): Six months ended Three months ended June 30, June 30, 2026 2025 2026 2025 Net revenue $ 699,173 $ 669,807 $ 384,897 $ 358,435 Cost of goods sold 412,665 405,993 212,824 210,208 Gross margin 286,508 263,814 172,073 148,227 Selling, general and administrative expenses 230,002 211,520 117,807 101,462 Loss on disposal of assets 104 108 — — Income from operations $ 56,402 $ 52,186 $ 54,266 $ 46,765 Interest income, net (1,518) (1,317) (1,064) (744) Other income (892) (236) (45) (150) Income before taxes 58,812 53,739 55,375 47,659 Income tax expense 16,943 13,791 15,729 12,593 Net and comprehensive income $ 41,869 $ 39,948 $ 39,646 $ 35,066 Other Operational Data (dollars in thousands): Six months ended Three months ended June 30, June 30, 2026 2025 2026 2025 Net revenue $ 699,173 $ 669,807 $ 384,897 $ 358,435 Comparable delivered sales 1.4 % 4.7 % 4.0 % 10.5 % Comparable written sales 2.8 % 0.4 % 12.5 % (3.6) % Gross margin as a % of net revenue 41.0 % 39.4 % 44.7 % 41.4 % Selling, general and administrative expenses as a % of net revenue 32.9 % 31.6 % 30.6 % 28.3 % Income from operations as a % of net revenue 8.1 % 7.8 % 14.1 % 13.0 % Net and comprehensive income $ 41,869 $ 39,948 $ 39,646 $ 35,066 Net and comprehensive income as a % of net revenue 6.0 % 6.0 % 10.3 % 9.8 % Adjusted EBITDA(1) $ 88,466 $ 78,879 $ 70,468 $ 60,307 Adjusted EBITDA as a % of net revenue 12.7 % 11.8 % 18.3 % 16.8 % Total Showrooms at end of period 109 103 109 103 (1) See “How We Assess the Performance of Our Business,” for a definition of adjusted EBITDA and a reconciliation of adjusted EBITDA to net and comprehensive income. Comparison of the six months ended June 30, 2026 and June 30, 2025 Net Revenue Net revenue increased $29.4 million, or 4.4%, to $699.2 million in the six months ended June 30, 2026 compared to $669.8 million in the six months ended June 30, 2025. The increase was driven primarily by $20.2 million of revenue growth related to new Showrooms opened in 2026 and 2025, with the remainder due to increased demand for our products. Gross Margin Gross margin increased $22.7 million, or 8.6%, to $286.5 million in the six months ended June 30, 2026 compared to $263.8 million in the six months ended June 30, 2025. The increase was primarily driven by higher net revenue and the benefit related to recoveries of IEEPA tariffs of $23.8 million, partially offset by increased product costs of $20.5 million, higher Showroom occupancy costs of $5.3 million, higher fuel costs of $3.9 million, and higher credit card fees of $1.6 million. 24 Table of Contents As a percentage of net revenue, gross margin increased 160 basis points to 41.0% of net revenue in the six months ended June 30, 2026 compared to 39.4% of net revenue in the six months ended June 30, 2025. The gross margin increase was primarily driven by the benefit related to recoveries of IEEPA tariffs, which contributed 340 basis points, partially offset by higher product costs, which increased by 140 basis points, higher fuel costs, which increased by 50 basis points, Showroom occupancy costs, which increased by 40 basis points, and credit card fees, which increased by 10 basis points. Selling, General and Administrative Expenses SG&A expenses increased $18.5 million, or 8.7%, to $230.0 million in the six months ended June 30, 2026 compared to $211.5 million in the six months ended June 30, 2025. The increase was primarily due to a $10.3 million increase in general and administrative costs related to strategic investments to support and drive the growth of the business, including technology improvements, and other corporate expenses and a $8.2 million increase in selling expenses primarily related to new Showrooms and increased demand for our products. As a percentage of net revenue, SG&A expenses increased 130 basis points to 32.9% of net revenue in the six months ended June 30, 2026 compared to 31.6% of net revenue in the six months ended June 30, 2025. Interest Income, net Interest income, net increased to $1.5 million, of which $1.0 million related to interest earned on IEEPA refunds, in the six months ended June 30, 2026 compared to $1.3 million in the six months ended June 30, 2025. Income Taxes Income tax expense was $16.9 million in the six months ended June 30, 2026 compared to $13.8 million in the six months ended June 30, 2025. Our effective tax rate was 28.8% and 25.7% for the six months ended June 30, 2026 and June 30, 2025, respectively. The increase in the effective tax rate was primarily driven by the section 162(m) limitation on the deductibility of certain employee compensation that has a disproportionate impact on the quarterly tax rate. Net and Comprehensive Income Net and comprehensive income increased $2.0 million to $41.9 million in the six months ended June 30, 2026 compared to $39.9 million in the six months ended June 30, 2025. The increase was driven by the factors described above. Comparison of the three months ended June 30, 2026 and June 30, 2025 Net Revenue Net revenue increased $26.5 million, or 7.4%, to $384.9 million in the three months ended June 30, 2026 compared to $358.4 million in the three months ended June 30, 2025. The increase was driven primarily by increased demand for our products and $10.7 million of revenue growth related to new Showrooms opened in 2026 and 2025. Gross Margin Gross margin increased $23.9 million, or 16.1%, to $172.1 million in the three months ended June 30, 2026 compared to $148.2 million in the three months ended June 30, 2025. The increase was primarily due to higher net revenue, the benefit related to recoveries of IEEPA tariffs of $23.8 million, partially offset by increased product costs of $16.4 million, higher Showroom occupancy costs of $3.8 million, and higher fuel costs of $2.8 million. As a percentage of net revenue, gross margin increased 330 basis points to 44.7% of net revenue in the three months ended June 30, 2026 compared to 41.4% of net revenue in the three months ended June 30, 2025. The gross margin increase as a percentage of net revenue was primarily driven by the benefit related to recoveries of IEEPA tariffs, which contributed 620 basis points, partially offset by higher product costs, which increased 190 basis points, higher fuel costs, which increased by 70 basis points, and Showroom occupancy costs, which increased 40 basis points. Selling, General and Administrative Expenses SG&A expenses increased $16.3 million, or 16.1%, to $117.8 million in the three months ended June 30, 2026 compared to $101.5 million in the three months ended June 30, 2025. The increase was primarily due to an $8.4 million increase in general and administrative costs, primarily related to strategic investments to support and drive the growth of the business, 25 Table of Contents including technology improvements, and other corporate expenses, and a $7.9 million increase in selling expenses primarily related to new Showrooms and increased demand for our products. As a percentage of net revenue, SG&A expenses increased 230 basis points to 30.6% of net revenue in the three months ended June 30, 2026 compared to 28.3% of net revenue in the three months ended June 30, 2025. Interest Income, net Interest income, net increased to $1.1 million, of which $1.0 million related to interest earned on IEEPA refunds, in the three months ended June 30, 2026 compared to $0.7 million in the three months ended June 30, 2025. Income Taxes Income taxes were $15.7 million in the three months ended June 30, 2026 compared to $12.6 million in the three months ended June 30, 2025. Our effective tax rate was 28.4% and 26.4% for the three months ended June 30, 2026 and June 30, 2025, respectively. Net and Comprehensive Income Net and comprehensive income increased $4.5 million to $39.6 million in the three months ended June 30, 2026 compared to $35.1 million in the three months ended June 30, 2025. The increase was driven by the factors described above. Liquidity and Capital Resources Liquidity Outlook Our primary cash needs have historically been for merchandise inventories, payroll, marketing, Showroom rent, capital expenditures associated with opening new Showrooms and renovating existing Showrooms, as well as the development of our infrastructure and information technology. We seek out and evaluate opportunities for effectively managing and deploying capital in ways that improve working capital and support and enhance our business initiatives and strategies. As of June 30, 2026, we had cash and cash equivalents of $226.4 million. Our principal sources of liquidity are primarily cash flows from operations. We believe our operating cash flows will be sufficient to meet working capital requirements and fulfill other capital needs for at least the next 12 months, although we may enter into borrowing arrangements in the future. While we do not require debt to fund our operations, our goal continues to be to position the Company to take advantage of the many opportunities that we may identify in connection with our business and operations. We have pursued in the past, and may pursue in the future, additional strategies to generate capital to pursue opportunities and investments, including new debt financing arrangements. In addition to funding the normal operations of our business, we have used our liquidity to fund investments and strategies related to growth initiatives, including supply chain and technology improvements. Our needs and uses of capital may change in the future due to changes in our business or new opportunities that we choose to pursue. As of June 30, 2026, we have no material off-balance sheet arrangements. On February 29, 2024, the Board of Directors of the Company declared a special cash dividend on the Company’s Class A and Class B common stock of $0.50 per share, payable April 4, 2024, to shareholders of record at the close of business on March 21, 2024. The Company paid $0.1 million and $0.3 million of the aforementioned special cash dividend on its Class A common stock related to dividend equivalents on equity awards that vested during the six months ended June 30, 2026 and June 30, 2025, respectively. On February 17, 2026, the Board of Directors of the Company declared a special cash dividend on the Company’s Class A and Class B common stock of $0.35 per share, payable March 31, 2026, to shareholders of record at the close of business on March 18, 2026. The Company paid $49.5 million of the aforementioned dividend on its Class A and Class B common stock to shareholders as of the Record Date during the six months ended June 30, 2026. We have begun a multi-year transformation that will replace certain of our existing systems with a modern and integrated platform encompassing a new enterprise resource planning system (“ERP”), an order management system, a transportation management system and a point of sale system. The total incremental investment in connection with these technology upgrades is expected to be approximately $50 million, including implementation and project staffing costs as well as licensing fees through 2030. Cash outflows were approximately $5 million during the six months ended June 30, 2026, and 26 Table of Contents we anticipate approximately $20 million in 2026 and $12 million in 2027, with cash outflows tapering in early 2028 as we transition to annual licensing and maintenance costs of approximately $6 million per year through 2030. Credit Facility In November 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 maximum rent-adjusted total leverage ratio and a minimum fixed charge ratio. The 2021 Credit Facility initially bore variable interest rates at the prevailing Bloomberg Short-Term Bank Yield index rate plus the applicable margin, whereas the applicable margin is adjusted quarterly based on the Company’s consolidated rent-adjusted total leverage ratio. In December 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 was $75.0 million. In August 2024, the Company amended the 2021 Credit Facility to adjust the index rate from the Bloomberg Short-Term Bank Yield Index to Term Secured Overnight Financing Rate. The 2021 Credit Facility bears variable interest rates at the prevailing Term Secured Overnight Financing Rate plus the applicable margin (1.75% at June 30, 2025). In May 2025, the Company issued an irrevocable standby letter of credit under the 2021 Credit Facility in the amount of $5.1 million in connection with a lease, which remained outstanding at June 30, 2026. In October 2025, the Company entered into the Third Amendment to Credit Agreement and Amendment to Security and Pledge Agreement (the “Amendment”). The Amendment further amends the 2021 Credit Facility to, among other things, (1) extend the maturity date of the revolving credit facility from November 8, 2026 to October 17, 2030, and (2) increase the letter of credit commitment to an amount equal to the lesser of (a) $15 million, and (b) the amount of the revolving credit facility as of such date. After giving effect to the Amendment, the aggregate amount of revolving credit commitments under the Credit Agreement remains $75 million. The Company has the option to increase the revolving credit commitment thereunder by an additional $25 million. In connection with the Amendment, the Company has incurred approximately $0.2 million in debt issuance costs. The 2021 Credit Facility bears variable interest rates at the prevailing Term Secured Overnight Financing Rate plus the applicable margin (1.75% at June 30, 2026). At June 30, 2026 and December 31, 2025, we had no borrowings on the 2021 Credit Facility and the available borrowing capacity was $69.9 million and $69.9 million, respectively. Refer to Note 4 — Debt to our condensed consolidated financial statements for further information on our 2021 Credit Facility. Cash Flow Analysis The following table provides a summary of our cash provided by operating, investing and financing activities (amounts in thousands): Six months ended June 30, 2026 2025 Net cash provided by operating activities $ 59,784 $ 81,428 Net cash used in investing activities (36,900) (41,622) Net cash used in financing activities (51,679) (2,316) Net (decrease) increase in cash, cash equivalents and restricted cash $ (28,795) $ 37,490 27 Table of Contents Net cash provided by operating activities Comparison of the six months ended June 30, 2026 and June 30, 2025 Operating activities consist primarily of net income adjusted for non-cash items including depreciation and amortization, operating lease amortization, deferred income taxes, equity based compensation and the effect of changes in working capital and other activities. For the six months ended June 30, 2026, net cash provided by operating activities was $59.8 million and consisted of net income of $41.9 million adjusted for non-cash items of $76.6 million, which were partially offset by a decrease in working capital and other activities of $58.7 million. The use of cash from working capital was primarily driven by an increase in prepaid and other current assets of $38.2 million primarily due to the IEEPA tariff receivable, a decrease in operating lease liabilities of $35.2 million primarily due to payments made under the related lease agreements, an increase in merchandise inventory of $14.7 million, and a decrease in accounts payable $8.3 million, which was partially offset by an increase in client deposits of $27.8 million and a increase in accrued expenses of $8.1 million in the six months ended June 30, 2026. For the six months ended June 30, 2025, net cash provided by operating activities was $81.4 million and consisted of net income of $39.9 million adjusted for non-cash items of $60.3 million, which were partially offset by a change in working capital and other activities of $18.8 million. The use of cash from working capital was primarily driven by a decrease in operating lease liabilities of $28.0 million primarily due to payments made under the related lease agreements and an increase in merchandise inventory of $14.1 million, which was partially offset by an increase in client deposits of $12.2 million, an increase in accrued expenses of $4.7 million, a decrease in prepaid and other assets of $4.4 million and an increase in accounts payable of $1.8 million in the six months ended June 30, 2025. Net cash used in investing activities Comparison of the six months ended June 30, 2026 and June 30, 2025 Investing activities consist primarily of capital expenditures related to investments in Showrooms, vehicles, information technology and systems infrastructure, as well as supply chain investments. For the six months ended June 30, 2026, net cash used in investing activities was $36.9 million primarily due to investments in Showrooms, investments in our supply chain, and information technology and systems infrastructure, which was partially offset by insurance proceeds for property, furniture, and equipment. For the six months ended June 30, 2025, net cash used in investing activities was $41.6 million primarily due to investments in Showrooms, vehicles, investments in our supply chain, and information technology and systems infrastructure. Capital Expenditures Historically, we have invested significant capital expenditures in opening new Showrooms. These capital expenditures have increased in the past and may continue to increase in future periods as we open additional Showrooms. Our capital expenditures include expenditures related to investing activities and outflows of capital related to construction activities to design and build leasehold improvement assets. Certain lease arrangements require the landlord to fund a portion of the construction related costs through tenant improvement allowance payments directly to us. New Showrooms may require different levels of company-funded capital investment in the future. Historical capital expenditures are summarized as follows (amounts in thousands): Six months ended June 30, 2026 2025 Net cash used in investing activities $ 36,900 $ 41,622 Less: Landlord contributions 7,859 11,149 Total capital expenditures, net of landlord contributions $ 29,041 $ 30,473 28 Table of Contents Total capital expenditures, net of landlord contributions decreased by $1.4 million in the six months ended June 30, 2026 compared to the six months ended June 30, 2025. We anticipate our total capital expenditures, net of landlord contributions to be between $70 million and $90 million in fiscal year 2026, primarily related to new Showrooms and information technology and systems infrastructure. Net cash used in financing activities Comparison of the six months ended June 30, 2026 and June 30, 2025 For the six months ended June 30, 2026, net cash used in financing activities was $51.7 million primarily due to the payment of the special dividend on our Class A and Class B common stock. For the six months ended June 30, 2025, net cash used in financing activities was $2.3 million primarily due to the repurchase of shares for payment of withholding taxes for equity based compensation. These shares were not repurchased in connection with any publicly announced share repurchase programs. Critical Accounting Policies and Estimates Accounting policies and estimates are considered critical when they require management to make subjective and complex judgments, estimates and assumptions about matters that have a material impact on the presentation of our financial statements and accompanying notes. For a description of our critical accounting policies and estimates, see Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2025. Recent Accounting Pronouncements See Note 2 — Recently Issued Accounting Standards to our condensed consolidated financial statements.