What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-09-12 compared with 2024-06-13 · 205 added, 139 removed, 511 unchanged (40% of the section changed)

31 unchanged sentences

Stockholders’ deficit:

Preferred stock—$ 0.0001 par value per share, 10,000,000 shares authorized, no shares issued or outstanding as of May 4, 2024 and February 3, 2024

Common stock— $ 0.0001 par value per share, 180,000,000 shares authorized, 18,342,797 shares issued and outstanding as of May 4, 2024;

Preferred stock—$ 0.0001 par value per share, 10,000,000 shares authorized, no shares issued or outstanding as of August 3, 2024 and February 3, 2024

Common stock— $ 0.0001 par value per share, 180,000,000 shares authorized, 18,482,697 shares issued and outstanding as of August 3, 2024;

18,315,613 shares issued and outstanding as of February 3, 2024

Additional paid-in capital

Accumulated other comprehensive loss

Accumulated other comprehensive income (loss)

Accumulated deficit

3 unchanged sentences

FINANCIAL INFORMATION

2024 FIRST QUARTER FORM 10-Q | 3

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

2024 SECOND QUARTER FORM 10-Q | 3

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

THREE MONTHS ENDED

SIX MONTHS ENDED

(in thousands, except share and per share amounts)

6 unchanged sentences

Total other expenses

Income (loss) before income taxes and equity method investments

Income tax expense (benefit)

Income (loss) before equity method investments

Income before taxes and equity method investments

Income tax expense

Income before equity method investments

Share of equity method investments loss—net

Net income (loss)

Weighted-average shares used in computing basic net income (loss) per share

Basic net income (loss) per share

Weighted-average shares used in computing diluted net income (loss) per share

Diluted net income (loss) per share

Weighted-average shares used in computing basic net income per share

Basic net income per share

Weighted-average shares used in computing diluted net income per share

Diluted net income per share

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

4 | 2024 SECOND QUARTER FORM 10-Q

FINANCIAL INFORMATION

2024 FIRST QUARTER FORM 10-Q | 4

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

THREE MONTHS ENDED

SIX MONTHS ENDED

(in thousands)

Net income (loss)

Net gain (loss) from foreign currency translation

Comprehensive income (loss)

Net gain from foreign currency translation

Comprehensive income

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

FINANCIAL INFORMATION

2024 FIRST QUARTER FORM 10-Q | 5

2024 SECOND QUARTER FORM 10-Q | 5

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

THREE MONTHS ENDED

TREASURY STOCK

COMPREHENSIVE

3 unchanged sentences

(in thousands, except share amounts)

Balances—May 4, 2024

Stock-based compensation

Issuance of restricted stock

Exercise of stock options

Comprehensive income

Balances—August 3, 2024

Balances—April 29, 2023

Stock-based compensation

Issuance of restricted stock

Exercise of stock options

Settlement of convertible senior notes

Repurchase of common stock—including excise tax

( 3,698,887 )

( 1,216,635 )

Retirement of treasury stock

( 1,208,012 )

( 3,698,887 )

( 1,216,635 )

Comprehensive income

Balances—July 29, 2023

6 | 2024 SECOND QUARTER FORM 10-Q

FINANCIAL INFORMATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (continued)

SIX MONTHS ENDED

TREASURY STOCK

COMPREHENSIVE

STOCKHOLDERS'

INCOME (LOSS)

EQUITY (DEFICIT)

(in thousands, except share amounts)

Balances—February 3, 2024

3 unchanged sentences

Exercise of stock options

Net loss from foreign currency translation

Balances—May 4, 2024

Comprehensive income

Balances—August 3, 2024

Balances—January 28, 2023

Stock-based compensation

Issuance of restricted stock

Vested and delivered restricted stock units

1 unchanged sentence

Settlement of convertible senior notes

Net gain from foreign currency translation

Balances—April 29, 2023

Repurchase of common stock—including excise tax

( 3,698,887 )

( 1,216,635 )

Retirement of treasury stock

( 1,208,012 )

( 3,698,887 )

Comprehensive income

Balances—July 29, 2023

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

FINANCIAL INFORMATION

2024 FIRST QUARTER FORM 10-Q | 6

2024 SECOND QUARTER FORM 10-Q | 7

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED

SIX MONTHS ENDED

(in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

21 unchanged sentences

Net cash used in investing activities

8 | 2024 SECOND QUARTER FORM 10-Q

FINANCIAL INFORMATION

2024 FIRST QUARTER FORM 10-Q | 7

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

THREE MONTHS ENDED

SIX MONTHS ENDED

(in thousands)

CASH FLOWS FROM FINANCING ACTIVITIES

Borrowings under asset based credit facility

Repayments under term loans

2 unchanged sentences

Repayments of convertible senior notes

Principal payments under finance lease agreements

Principal payments under finance lease agreements—net of tenant allowances

Repurchases of common stock—inclusive of excise taxes paid

( 1,208,290 )

Proceeds from exercise of stock options

Tax withholdings related to issuance of stock-based awards

Net cash used in financing activities

Net cash provided by (used in) financing activities

( 1,224,481 )

Effects of foreign currency exchange rate translation on cash

Net increase (decrease) in cash and cash equivalents and restricted cash

Net decrease in cash and cash equivalents and restricted cash

( 1,091,178 )

Cash and cash equivalents and restricted cash

11 unchanged sentences

FINANCIAL INFORMATION

2024 FIRST QUARTER FORM 10-Q | 8

2024 SECOND QUARTER FORM 10-Q | 9

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

4 unchanged sentences

We offer merchandise assortments across a number of categories, including furniture, lighting, textiles, bathware, décor, outdoor and garden, and baby, child and teen furnishings.

As of May 4, 2024, we operated a total of 71 RH Galleries and 41 RH Outlet stores, one RH Guesthouse and 14 Waterworks Showrooms throughout the United States and Canada as well as in the United Kingdom, Germany and Belgium.

As of August 3, 2024, we operated a total of 72 RH Galleries and 39 RH Outlet stores, one RH Guesthouse and 14 Waterworks Showrooms throughout the United States and Canada as well as in the United Kingdom, Germany, Belgium and Spain.

We also have sourcing operations in Shanghai and Hong Kong.

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared from our records and, in our senior leadership team’s opinion, include all adjustments, consisting of normal recurring adjustments, necessary to fairly state our financial position as of May 4, 2024, and the results of operations for the three months ended May 4, 2024 and April 29, 2023.

The accompanying unaudited interim condensed consolidated financial statements have been prepared from our records and, in our senior leadership team’s opinion, include all adjustments, consisting of normal recurring adjustments, necessary to fairly state our financial position as of August 3, 2024, and the results of operations for the three and six months ended August 3, 2024 and July 29, 2023.

Our current fiscal year, which consists of 52 weeks, ends on February 1, 2025 (“fiscal 2024”).

6 unchanged sentences

The accounting estimates and other matters we have assessed include, but were not limited to, sales return reserve, inventory reserve, allowance for doubtful accounts, goodwill, and intangible and other long-lived assets.

Our current assessment of these estimates is included in our condensed consolidated financial statements as of and for the three months ended May 4, 2024.

Our current assessment of these estimates is included in our condensed consolidated financial statements as of and for the three and six months ended August 3, 2024.

As additional information becomes available to us, our future assessment of these estimates, as well as other factors, could change and the results of any such change could materially and adversely impact our condensed consolidated financial statements in future reporting periods.

These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended February 3, 2024 (the “2023 Form 10-K”).

The results of operations for the three months ended May 4, 2024, presented herein, are not necessarily indicative of the results to be expected for the full fiscal year.

The results of operations for the three and six months ended August 3, 2024, presented herein, are not necessarily indicative of the results to be expected for the full fiscal year.

10 | 2024 SECOND QUARTER FORM 10-Q

FINANCIAL INFORMATION

2024 FIRST QUARTER FORM 10-Q | 9

NOTE 2—RECENTLY ISSUED ACCOUNTING STANDARDS

6 unchanged sentences

Early adoption is permitted.

We are currently assessing the impact that adopting this new accounting standard will have on our condensed consolidated financial statements.

We are currently assessing the impact that adopting this ASU will have on our condensed consolidated financial statements.

Income Taxes:

5 unchanged sentences

Early adoption is permitted.

We are currently assessing the impact that adopting this new accounting standard will have on our condensed consolidated financial statements .

We are currently assessing the impact that adopting this ASU will have on our condensed consolidated financial statements.

NOTE 3—PREPAID EXPENSE AND OTHER ASSETS

1 unchanged sentence

(in thousands)

Vendor deposits

Prepaid expenses

Capitalized catalog costs

Vendor deposits

Tenant allowance receivable

Federal and state tax receivable

Value added tax (VAT) receivable

Tenant allowance receivable

Right of return asset for merchandise

2 unchanged sentences

Total prepaid expense and other current assets

(1) Refer to Note 12— Income Taxes.

(1) Represents promissory notes, including principal and accrued interest, due from an affiliate of the managing member of the Aspen LLCs (as defined below).

1 unchanged sentence

FINANCIAL INFORMATION

2024 FIRST QUARTER FORM 10-Q | 10

2024 SECOND QUARTER FORM 10-Q | 11

Other non-current assets consist of the following:

3 unchanged sentences

Capitalized cloud computing costs—net (1)

Vendor deposits—non-current

Other deposits

Vendor deposits—non-current

Deferred financing fees

1 unchanged sentence

Total other non-current assets

(1) Presented net of accumulated amortization of $ 21 million and $ 19 million as of May 4, 2024 and February 3, 2024, respectively.

(1) Presented net of accumulated amortization of $ 24 million and $ 19 million as of August 3, 2024 and February 3, 2024, respectively.

NOTE 4—GOODWILL, TRADENAMES, TRADEMARKS AND OTHER INTANGIBLE ASSETS

7 unchanged sentences

Foreign currency translation

August 3, 2024

(1) Waterworks reporting unit goodwill of $ 51 million recognized upon acquisition in fiscal 2016 was fully impaired as of fiscal 2018.

(2) Presented net of an impairment charge of $ 35 million recognized in previous fiscal years.

(2) Presented net of an impairment charge of $ 35 million recognized in prior fiscal years.

There are no goodwill, tradenames, trademarks and other intangible assets for the Real Estate segment.

12 | 2024 SECOND QUARTER FORM 10-Q

FINANCIAL INFORMATION

2024 FIRST QUARTER FORM 10-Q | 11

NOTE 5—VARIABLE INTEREST ENTITIES

14 unchanged sentences

Total liabilities

(1) Includes $ 49 million and $ 77 million of construction in progress as of May 4, 2024 and February 3, 2024, respectively.

(1) Includes $ 53 million and $ 77 million of construction in progress as of August 3, 2024 and February 3, 2024, respectively.

(2) Real estate loans are secured by the assets of each respective Member LLC and the associated creditors do not have recourse against RH’s general assets.

Excludes $ 0.2 million and $ 0.1 million of current obligations related to such loans that are included in other current liabilities on the condensed consolidated balance sheets as of May 4, 2024 and February 3, 2024, respectively.

Excludes $ 0.3 million and $ 0.1 million of current obligations related to such loans that are included in other current liabilities on the condensed consolidated balance sheets as of August 3, 2024 and February 3, 2024, respectively.

On August 3, 2022, a Member LLC as the borrower executed a Secured Promissory Note (the “Secured Promissory Note”) with a third-party in an aggregate principal amount equal to $ 2.0 million with a maturity date of August 1, 2032.

4 unchanged sentences

Equity method investments primarily represent our membership interests in three privately-held limited liability companies in Aspen, Colorado (each, an “Aspen LLC” and collectively, the “Aspen LLCs”) that were formed for the purpose of acquiring, developing, operating and selling certain real estate projects in Aspen, Colorado.

As of May 4, 2024, we have made capital contributions of approximately $ 140 million to the Aspen LLCs.

As of August 3, 2024, we have made capital contributions of approximately $ 146 million to the Aspen LLCs.

Additionally, Waterworks has membership interests in two European entities that are equity method investments.

FINANCIAL INFORMATION

2024 FIRST QUARTER FORM 10-Q | 12

Our maximum exposure to loss is the carrying value of each of the equity method investments as of May 4, 2024.

During the three months ended May 4, 2024 and April 29, 2023, we did no t receive any distributions or have any undistributed earnings of equity method investments.

2024 SECOND QUARTER FORM 10-Q | 13

Our maximum exposure to loss is the carrying value of each of the equity method investments as of August 3, 2024.

During the three and six months ended August 3, 2024 and July 29, 2023, we did no t receive any distributions or have any undistributed earnings of equity method investments.

NOTE 6—ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

3 unchanged sentences

Accrued compensation

Accrued sales and use tax

Accrued occupancy

Accrued sales and use tax

Accrued freight and duty

3 unchanged sentences

Accrued legal contingencies (1)

Accrued interest

Other accrued expenses

5 unchanged sentences

The reorganization was completed during the first quarter of fiscal 2023.

During the three months ended April 29, 2023, we incurred total charges relating to the reorganization of $ 7.6 million consisting primarily of severance costs and related taxes.

During the six months ended July 29, 2023, we incurred total charges relating to the reorganization of $ 7.6 million consisting primarily of severance costs and related taxes.

As of February 3, 2024, we had an immaterial amount accrued within accounts payable and accrued expenses on the condensed consolidated balance sheets related to the reorganization, all of which was paid during the first quarter of fiscal 2024.

14 | 2024 SECOND QUARTER FORM 10-Q

FINANCIAL INFORMATION

2024 FIRST QUARTER FORM 10-Q | 13

Other current liabilities consist of the following:

4 unchanged sentences

Finance lease liabilities

Federal tax payable

Other current liabilities

2 unchanged sentences

We defer revenue associated with merchandise delivered via the home-delivery channel.

We expect that substantially all of the deferred revenue and customer deposits as of May 4, 2024 will be recognized within the next six months as the performance obligations are satisfied.

We expect that substantially all of the deferred revenue and customer deposits as of August 3, 2024 will be recognized within the next six months as the performance obligations are satisfied.

In addition, we defer revenue when cash payments are received in advance of performance for unsatisfied obligations related to our gift cards.

During both the three months ended May 4, 2024 and April 29, 2023, we recognized $ 6.1 million of revenue related to previous deferrals related to our gift cards .

During the three months ended August 3, 2024 and July 29, 2023, we recognized $ 4.3 million and $ 5.3 million, respectively, of revenue related to previous deferrals related to our gift cards .

During the six months ended August 3, 2024 and July 29, 2023, we recognized $ 10 million and $ 11 million, respectively, of revenue related to previous deferrals related to our gift cards .

We expect that approximately 75 percent of the remaining gift card liabilities will be recognized when the gift cards are redeemed by customers.

1 unchanged sentence

We facilitate a voluntary supply chain financing program (the “Financing Program”) with a third-party financial institution (the “Bank”) to provide participating suppliers with the opportunity to receive early payment on invoices, net of a discount charged to the supplier by the Bank.

As of May 4, 2024 and February 3, 2024, supplier invoices that have been confirmed as valid under the Financing Program included in accounts payable and accrued expenses on the condensed consolidated balance sheets were $ 41 million and $ 28 million, respectively.

As of August 3, 2024 and February 3, 2024, supplier invoices that have been confirmed as valid under the Financing Program included in accounts payable and accrued expenses on the condensed consolidated balance sheets were $ 49 million and $ 28 million, respectively.

NOTE 7—OTHER NON-CURRENT OBLIGATIONS

5 unchanged sentences

FINANCIAL INFORMATION

2024 FIRST QUARTER FORM 10-Q | 14

2024 SECOND QUARTER FORM 10-Q | 15

NOTE 8—LEASES

1 unchanged sentence

THREE MONTHS ENDED

SIX MONTHS ENDED

(in thousands)

6 unchanged sentences

Total lease costs—net

(1) Operating lease costs and amortization of finance lease right-of-use assets are included in cost of goods sold or selling, general and administrative expenses on the condensed consolidated statements of income (loss) based on our accounting policy.

(2) Included in interest expense—net on the condensed consolidated statements of income (loss).

(3) Represents variable lease payments under operating and finance lease agreements, primarily associated with contingent rent based on a percentage of retail sales over contractual levels of $ 3.9 million for both the three months ended May 4, 2024 and April 29, 2023, as well as charges associated with common area maintenance of $ 2.7 million and $ 2.3 million for the three months ended May 4, 2024 and April 29, 2023, respectively.

Other variable costs, which include single lease cost related to variable lease payments based on an index or rate that were not included in the measurement of the initial lease liability and right-of-use asset, were not material in either period presented.

(4) Included in selling, general and administrative expenses on the condensed consolidated statements of income (loss).

(2) Included in interest expense—net on the condensed consolidated statements of income.

(3) Represents variable lease payments under operating and finance lease agreements, primarily associated with contingent rent based on a percentage of retail sales over contractual levels of $ 3.6 million and $ 3.7 million for the three months ended August 3, 2024 and July 29, 2023, respectively, and $ 7.5 million and $ 7.6 million for the six months ended August 3, 2024 and July 29, 2023, respectively, as well as charges associated with common area maintenance of $ 2.9 million and $ 2.3 million for the three months ended August 3, 2024 and July 29, 2023, respectively, and $ 5.6 million and $ 4.6 million for the six months ended August 3, 2024 and July 29, 2023, respectively.

(4) Included in selling, general and administrative expenses on the condensed consolidated statements of income .

16 | 2024 SECOND QUARTER FORM 10-Q

FINANCIAL INFORMATION

2024 FIRST QUARTER FORM 10-Q | 15

Lease right-of-use assets and lease liabilities consist of the following:

18 unchanged sentences

(1) Includes capitalized amounts related to our completed construction activities to design and build leased assets, which are reclassified from other non-current assets upon lease commencement.

(2) Recorded net of accumulated amortization of $ 281 million and $ 268 million as of May 4, 2024 and February 3, 2024, respectively.

(3) Includes $ 37 million as of both May 4, 2024 and February 3, 2024 related to an RH Design Gallery lease with a landlord that is an affiliate of the managing member of the Aspen LLCs.

(2) Recorded net of accumulated amortization of $ 293 million and $ 268 million as of August 3, 2024 and February 3, 2024, respectively.

(3) Includes $ 36 million and $ 37 million as of August 3, 2024 and February 3, 2024, respectively, related to an RH Design Gallery lease with a landlord that is an affiliate of the managing member of the Aspen LLCs.

Refer to Note 5— Variable Interest Entities .

1 unchanged sentence

FINANCIAL INFORMATION

2024 FIRST QUARTER FORM 10-Q | 16

The maturities of lease liabilities are as follows as of May 4, 2024:

2024 SECOND QUARTER FORM 10-Q | 17

The maturities of lease liabilities are as follows as of August 3, 2024:

(in thousands)

4 unchanged sentences

(1) Total lease payments include future obligations for renewal options that are reasonably certain to be exercised and are included in the measurement of the lease liability.

Total lease payments exclude $ 681 million of legally binding payments under the non-cancellable term for leases signed but not yet commenced under our accounting policy as of May 4, 2024, of which $ 21 million, $ 41 million, $ 38 million, $ 40 million, $ 41 million and $ 41 million will be paid in the remainder of fiscal 2024, fiscal 2025, fiscal 2026, fiscal 2027, fiscal 2028 and fiscal 2029, respectively, and $ 459 million will be paid subsequent to fiscal 2029.

Total lease payments exclude $ 727 million of legally binding payments under the non-cancellable term for leases signed but not yet commenced under our accounting policy as of August 3, 2024, of which $ 14 million, $ 40 million, $ 38 million, $ 40 million, $ 41 million and $ 44 million will be paid in the remainder of fiscal 2024, fiscal 2025, fiscal 2026, fiscal 2027, fiscal 2028 and fiscal 2029, respectively, and $ 510 million will be paid subsequent to fiscal 2029.

(2) Excludes an immaterial amount of future commitments under short-term lease agreements.

1 unchanged sentence

Supplemental information related to leases consists of the following:

THREE MONTHS ENDED

SIX MONTHS ENDED

Weighted-average remaining lease term (years)

4 unchanged sentences

Finance leases

18 | 2024 SECOND QUARTER FORM 10-Q

FINANCIAL INFORMATION

2024 FIRST QUARTER FORM 10-Q | 17

Other information related to leases consists of the following:

THREE MONTHS ENDED

SIX MONTHS ENDED

(in thousands)

2 unchanged sentences

Operating cash flows from finance leases

Financing cash flows from finance leases

Financing cash flows from finance leases—net (1)

Total cash outflows from leases

3 unchanged sentences

Finance leases

Reclassification from other non-current assets to finance lease right-of-use assets

(1) Represents the principal portion of lease payments, partially offset by tenant allowances received subsequent to lease commencement of $ 2.4 million for the six months ended July 29, 2023.

No such amounts were received from landlords during the six months ended August 3, 2024.

NOTE 9—CONVERTIBLE SENIOR NOTES

10 unchanged sentences

However, this condition was not met for the calendar quarter ended June 30, 2022 through the calendar quarter ended June 30, 2023, but was met for the calendar quarter ended September 30, 2023.

This condition was not met for the calendar quarters ended December 31, 2023 or March 31, 2024 and, as a result, the 2024 Notes were not convertible as of March 31, 2024.

This condition was not met for the calendar quarters ended December 31, 2023 or March 31, 2024.

On and after June 15, 2024 , until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or a portion of their 2024 Notes at any time, regardless of the foregoing circumstances.

There have been no conversions as of August 3, 2024.

FINANCIAL INFORMATION

2024 SECOND QUARTER FORM 10-Q | 19

Upon conversion, the 2024 Notes will be settled, at our election, in cash, shares of our common stock, or a combination of cash and shares of our common stock.

If the Company has not delivered a notice of its election of settlement method prior to the final conversion period, it will be deemed to have elected combination settlement with a dollar amount per note to be received upon conversion of $ 1,000 .

FINANCIAL INFORMATION

2024 FIRST QUARTER FORM 10-Q | 18

The remaining liability for the 2024 Notes is classified as a current obligation on our condensed consolidated balance sheets as of May 4, 2024 since the settlement date of the outstanding 2024 Notes is in September 2024.

The remaining liability for the 2024 Notes is classified as a current obligation on our condensed consolidated balance sheets as of August 3, 2024 since the settlement date of the outstanding 2024 Notes is in September 2024.

The settlement of the outstanding 2024 Notes will be made, at our election, in cash, shares of our common stock, or a combination of cash and shares of our common stock upon settlement.

6 unchanged sentences

Total credit facilities

(1) Represents the weighted-average interest rates as of May 4, 2024.

(2) Deferred financing fees associated with the asset based credit facility as of May 4, 2024 and February 3, 2024 were $ 2.3 million and $ 2.5 million, respectively, and are included in other non-current assets on the condensed consolidated balance sheets.

(1) Deferred financing fees associated with the asset based credit facility as of August 3, 2024 and February 3, 2024 were $ 2.0 million and $ 2.5 million, respectively, and are included in other non-current assets on the condensed consolidated balance sheets.

The deferred financing fees are amortized on a straight-line basis over the life of the revolving line of credit.

(3) Represents the Term Loan Credit Agreement (defined below), of which outstanding amounts of $ 1,930 million and $ 1,935 million were included in term loan—net on the condensed consolidated balance sheets as of May 4, 2024 and February 3, 2024, respectively, and $ 20 million was included in other current liabilities on the condensed consolidated balance sheets as of both May 4, 2024 and February 3, 2024.

(4) Represents the outstanding balance of the Term Loan B-2 (defined below) under the Term Loan Credit Agreement, of which outstanding amounts of $ 488 million and $ 489 million were included in term loan B-2—net on the condensed consolidated balance sheets as of May 4, 2024 and February 3, 2024, respectively, and $ 5.0 million was included in other current liabilities on the condensed consolidated balance sheets as of both May 4, 2024 and February 3, 2024.

Asset Based Credit Facility & Term Loan Facilities

(2) Represents the Term Loan Credit Agreement (defined below), of which outstanding amounts of $ 1,925 million and $ 1,935 million were included in term loan—net on the condensed consolidated balance sheets as of August 3, 2024 and February 3, 2024, respectively, and $ 20 million was included in other current liabilities on the condensed consolidated balance sheets as of both August 3, 2024 and February 3, 2024.

(3) Represents the outstanding balance of the Term Loan B-2 (defined below) under the Term Loan Credit Agreement, of which outstanding amounts of $ 486 million and $ 489 million were included in term loan B-2—net on the condensed consolidated balance sheets as of August 3, 2024 and February 3, 2024, respectively, and $ 5.0 million was included in other current liabilities on the condensed consolidated balance sheets as of both August 3, 2024 and February 3, 2024.

Asset Based Credit Facility

On August 3, 2011, Restoration Hardware, Inc.

1 unchanged sentence

On June 28, 2017, RHI entered into the Eleventh Amended and Restated Credit Agreement (as amended prior to July 29, 2021, the “11 th A&R Credit Agreement”) by and among RHI, Restoration Hardware Canada, Inc., certain other subsidiaries of RH named therein as borrowers or guarantors, the lenders party thereto and the ABL Agent, which amended and restated the Original Credit Agreement.

20 | 2024 SECOND QUARTER FORM 10-Q

FINANCIAL INFORMATION

2024 FIRST QUARTER FORM 10-Q | 19

On July 29, 2021, RHI entered into the Twelfth Amended and Restated Credit Agreement (as amended, the “ABL Credit Agreement”) by and among RHI, Restoration Hardware Canada, Inc., certain other subsidiaries of RH named therein as borrowers or guarantors, the lenders party thereto and the ABL Agent, which amended and restated the 11 th A&R Credit Agreement.

13 unchanged sentences

The FCCR Covenant ratio is set at 1.0 and measured on a trailing twelve-month basis.

As of May 4, 2024, RHI was in compliance with the FCCR Covenant.

As of August 3, 2024, RHI was in compliance with the FCCR Covenant.

The ABL Credit Agreement requires a daily sweep of all cash receipts and collections to prepay the loans under the agreement while (i) an event of default exists or (ii) when the unused availability under the ABL Credit Agreement drops below the greater of (A) $ 40 million and (B) an amount based on 10 % of the total borrowing availability at the time.

The ABL Credit Agreement contains customary representations and warranties, events of default and other customary terms and conditions for an asset based credit facility.

As of May 4, 2024, the amount available for borrowing under the revolving line of credit under the ABL Credit Agreement was $ 454 million, net of $ 46 million in outstanding letters of credit.

As of August 3, 2024, RHI had $ 25 million in outstanding borrowings and $ 499 million of availability under the revolving line of credit, net of $ 45 million in outstanding letters of credit.

As a result of the FCCR Covenant that limits the last 10 % of borrowing availability, actual incremental borrowing available to RHI and the other affiliated parties under the revolving line of credit would be $ 439 million as of August 3, 2024.

FINANCIAL INFORMATION

2024 FIRST QUARTER FORM 10-Q | 20

2024 SECOND QUARTER FORM 10-Q | 21

Term Loan Credit Agreement

19 unchanged sentences

The Term Loan Credit Agreement contains customary representations and warranties, events of default and other customary terms and conditions for a term loan credit agreement.

22 | 2024 SECOND QUARTER FORM 10-Q

FINANCIAL INFORMATION

2024 FIRST QUARTER FORM 10-Q | 21

NOTE 11—FAIR VALUE MEASUREMENTS

11 unchanged sentences

The fair value of the 2024 Notes was determined based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, including the trading price of our convertible notes, when available, our stock price and interest rates based on similar debt issued by parties with credit ratings similar to ours (Level 2).

As of May 4, 2024, the fair values of the Term Loan B and Term Loan B-2 were derived from observable bid prices (Level 1).

As of August 3, 2024, the fair values of the Term Loan B and Term Loan B-2 were derived from observable bid prices (Level 1).

As of February 3, 2024, the fair values of the Term Loan B and Term Loan B-2 were derived from discounted cash flows using risk-adjusted rates (Level 2).

1 unchanged sentence

NOTE 12—INCOME TAXES

Our income tax expense (benefit) and effective tax rates were as follows:

Our income tax expense and effective tax rates were as follows:

THREE MONTHS ENDED

SIX MONTHS ENDED

(dollars in thousands)

Income tax expense (benefit)

Income tax expense

Effective tax rate

The increase in our effective tax rate for the three months ended May 4, 2024 compared to the three months ended April 29, 2023 is primarily attributable to the net loss in the current period, as well as higher net excess tax benefits from stock-based compensation in the three months ended May 4, 2024 as compared to the three months ended April 29, 2023.

As of May 4, 2024, we had $ 3.2 million of unrecognized tax benefits, of which $ 2.5 million would reduce income tax expense and the effective tax rate, if recognized.

The decrease in our effective tax rates for the three and six months ended August 3, 2024 compared to the three and six months ended July 29, 2023 is primarily attributable to higher net excess tax benefits from stock-based compensation year over year.

As of August 3, 2024, we had $ 3.2 million of unrecognized tax benefits, of which $ 2.6 million would reduce income tax expense and the effective tax rate, if recognized.

The remaining unrecognized tax benefits would offset other deferred tax assets, if recognized.

As of May 4, 2024, we had $ 0.2 million of exposures related to unrecognized tax benefits that are expected to decrease in the next 12 months.

As of August 3, 2024, we had $ 0.2 million of exposures related to unrecognized tax benefits that are expected to decrease in the next 12 months.

FINANCIAL INFORMATION

2024 FIRST QUARTER FORM 10-Q | 22

2024 SECOND QUARTER FORM 10-Q | 23

In October 2017, we filed an amended federal tax return claiming a $ 5.4 million refund, however, no income tax benefit was recorded at the time due to the technical nature and amount of the refund claim.

As of May 4, 2024, we are no longer appealing this refund claim and have reversed the receivable and related reserve.

As of the first quarter of fiscal 2024, we are no longer appealing this refund claim and have reversed the receivable and related reserve.

The Organization for Economic Cooperation and Development (“OECD”) proposed model rules to ensure a minimal level of taxation (commonly referred to as Pillar II) and the European Union member states have agreed to implement Pillar II’s proposed global corporate minimum tax rate of 15%.

Many countries are actively considering, have proposed or have enacted, changes to their tax laws based upon the Pillar II proposals, which could increase our tax obligations in countries where we do business or cause us to change the way we operate our business.

To mitigate the administrative burden for multinational enterprises in complying with the OECD Global Anti-Base Erosion rules during the initial years of implementation, the OECD developed the temporary “Transitional Country-by-Country Safe Harbor.” We considered the applicable tax law changes from Pillar II implementation in the relevant countries in which we operate, and there is no material impact to our tax provision for the three months ended May 4, 2024.

We will continue to evaluate the impact of these tax law changes in future reporting periods.

NOTE 13—NET INCOME (LOSS) PER SHARE

The weighted-average shares used for net income (loss) per share are presented in the table below.

NOTE 13—NET INCOME PER SHARE

The weighted-average shares used for net income per share are presented in the table below.

THREE MONTHS ENDED

SIX MONTHS ENDED

Weighted-average shares—basic

2 unchanged sentences

Weighted-average shares—diluted

(1) As we reported a net loss for the three months ended May 4, 2024, the weighted-average shares outstanding for basic and diluted are the same for the corresponding period.

The following number of options and restricted stock units, as well as shares issuable under convertible senior notes prior to extinguishment, were excluded from the calculation of diluted net income (loss) per share because their inclusion would have been anti-dilutive:

The following number of options and restricted stock units, as well as shares issuable under convertible senior notes, were excluded from the calculation of diluted net income per share because their inclusion would have been anti-dilutive:

THREE MONTHS ENDED

SIX MONTHS ENDED

Restricted stock units

Convertible senior notes

FINANCIAL INFORMATION

2024 FIRST QUARTER FORM 10-Q | 23

NOTE 14—SHARE REPURCHASE PROGRAM

NOTE 14—SHARE REPURCHASE PROGRAM AND SHARE RETIREMENT

Share Repurchase Program

In 2018, our Board of Directors authorized a share repurchase program.

On June 2, 2022, the Board of Directors authorized an additional $ 2,000 million for the purchase of shares of our outstanding common stock, increasing the total authorized size of the share repurchase program to $ 2,450 million (the “Share Repurchase Program”).

We did not repurchase any shares of our common stock under the Share Repurchase Program during the three months ended May 4, 2024.

As of May 4, 2024, $ 201 million remains available for future share repurchases under this program.

We did not repurchase any shares of our common stock under the Share Repurchase Program during the three or six months ended August 3, 2024.

As of August 3, 2024, $ 201 million remains available for future share repurchases under this program.

24 | 2024 SECOND QUARTER FORM 10-Q

FINANCIAL INFORMATION

In the three and six months ended July 29, 2023, we repurchased 3,698,887 shares of our common stock under the Share Repurchase Program at an average price of $ 325.65 per share, for an aggregate repurchase amount of approximately $ 1,205 million.

In addition, we recorded $ 12 million of excise taxes payable related to the share repurchase activity during the three and six months ended July 29, 2023, which is recorded in accounts payable and accrued expenses on the condensed consolidated balance sheets.

We had $ 12 million of excise taxes payable as of both August 3, 2024 and February 3, 2024.

Share Retirement

In the three and six months ended July 29, 2023, we retired 3,698,887 shares of common stock related to shares we repurchased under the Share Repurchase Program.

As a result of this retirement, we reclassified a total of $ 8.6 million and $ 1,208 million from treasury stock to additional paid-in capital and retained earnings (accumulated deficit) , respectively, on the condensed consolidated statements of stockholders’ equity (deficit) as of and for the three and six months ended July 29, 2023.

NOTE 15—STOCK-BASED COMPENSATION

5 unchanged sentences

The 2023 Stock Incentive Plan provides for the grant of incentive stock options to our employees and the grant of non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights and any combination thereof to our employees, directors and consultants and our parent and subsidiary corporations’ employees, directors and consultants.

As of May 4, 2024, there were a total of 2,200,469 shares issuable under the 2023 Stock Incentive Plan.

As of August 3, 2024, there were a total of 2,206,463 shares issuable under the 2023 Stock Incentive Plan.

Awards under the 2023 Stock Incentive Plan reduce the number of shares available for future issuance.

2 unchanged sentences

Stock Options Under the Plans

A summary of options outstanding, vested or expected to vest, and exercisable as of May 4, 2024 was as follows:

A summary of options outstanding, vested or expected to vest, and exercisable as of August 3, 2024 was as follows:

REMAINING TERM

3 unchanged sentences

Options exercisable

Stock-based compensation expense, which is included in selling, general and administrative expenses on the condensed consolidated statements of income (loss), was as follows:

FINANCIAL INFORMATION

2024 SECOND QUARTER FORM 10-Q | 25

Stock-based compensation expense, which is included in selling, general and administrative expenses on the condensed consolidated statements of income, was as follows:

THREE MONTHS ENDED

SIX MONTHS ENDED

(in thousands)

2 unchanged sentences

Friedman an option to purchase 700,000 shares of our common stock with an exercise price equal to $ 385.30 per share under the Stock Incentive Plan.

The option will result in aggregate non-cash stock compensation expense of $ 174 million, of which $ 1.9 million and $ 3.5 million was recognized during the three months ended May 4, 2024 and April 29, 2023, respectively.

The option will result in aggregate non-cash stock compensation expense of $ 174 million.

Amounts presented include $ 0.9 million and $ 2.0 million in the three months ended August 3, 2024 and July 29, 2023, respectively, and $ 2.8 million and $ 5.6 million in the six months ended August 3, 2024 and July 29, 2023, respectively, related to Mr.

Friedman’s option.

No stock-based compensation cost has been capitalized in the accompanying condensed consolidated financial statements.

FINANCIAL INFORMATION

2024 FIRST QUARTER FORM 10-Q | 24

As of May 4, 2024, the total unrecognized compensation expense and weighted average remaining term was as follows:

As of August 3, 2024, the total unrecognized compensation expense and weighted average remaining term was as follows:

REMAINING TERM

5 unchanged sentences

NOTE 16—COMMITMENTS AND CONTINGENCIES

We had no material off-balance sheet commitments as of May 4, 2024.

We had no material off balance sheet commitments as of August 3, 2024.

Contingencies

2 unchanged sentences

In addition, we are subject to governmental and regulatory examinations, information requests, and investigations from time to time at the state and federal levels.

Certain legal proceedings that we currently face involve various class-action allegations, including cases related to our employment practices, the application of state wage-and-hour laws and other causes of action.

We have faced similar litigation in the past, including class action cases.

We have faced similar litigation in the past.

Due to the inherent difficulty of predicting the course of legal actions related to complex legal matters, including class-action allegations, such as the eventual scope, duration or outcome, we may be unable to estimate the amount or range of any potential loss that could result from an unfavorable outcome arising from such matters.

Our assessment of these legal proceedings, as well as other lawsuits, could change based upon the discovery of facts that are not presently known or developments during the course of the litigation.

We have settled certain class action cases but continue to defend a variety of legal actions and our estimates of our exposure in such cases may evolve over time.

We have settled certain class action and other cases, but continue to defend a variety of legal actions and our estimates of our exposure in such cases may evolve over time.

Accordingly, the ultimate costs to resolve litigation, including class action cases, may be substantially higher or lower than our estimates.

26 | 2024 SECOND QUARTER FORM 10-Q

FINANCIAL INFORMATION

With respect to such contingencies, we review the need for any loss contingency reserves and establish reserves when, in the opinion of our senior leadership team, it is probable that a matter would result in liability, and the amount of loss, if any, can be reasonably estimated.

4 unchanged sentences

Although we believe that the ultimate resolution of our current legal proceedings will not have a material adverse effect on the condensed consolidated financial statements, the outcome of legal matters is subject to inherent uncertainty.

FINANCIAL INFORMATION

2024 FIRST QUARTER FORM 10-Q | 25

Although we are self-insured or maintain deductibles in the United States for workers’ compensation, general liability and product liability up to predetermined amounts, above which third-party insurance applies, depending on the facts and circumstances of the underlying claims, coverage under our insurance policies may not be available.

We may elect not to renew certain insurance coverage or renewal of coverage may not be available or may be prohibitively expensive.

Even if we believe coverage does apply under our insurance programs, our insurance carriers may dispute coverage based on the underlying facts and circumstances.

As a result, the outcome of any matters in which we are involved could result in unexpected expenses and liability that could adversely affect our operations.

In addition, any claims against us, whether meritorious or not, could be time consuming, result in costly litigation, require significant amounts of our senior leadership team’s time, result in the diversion of significant operational resources, and require changes to our business operations, policies and practices.

Legal costs related to such claims are expensed as incurred.

The outcome of any contingencies, including lawsuits, claims, investigations and other legal proceedings, could result in unexpected expenses and liability that could adversely affect our operations.

In addition, any legal proceedings in which we are involved or claims against us, whether meritorious or not, could be time consuming, result in costly litigation, require significant amounts of our senior leadership team’s time, result in the diversion of significant operational resources, and require changes to our business operations, policies and practices.

Legal costs related to such matters are expensed as incurred.

NOTE 17—SEGMENT REPORTING

8 unchanged sentences

We use operating income to evaluate segment profitability for the retail operating segments and to allocate resources.

Operating income is defined as net income (loss) before interest expense—net, other income—net, income tax expense (benefit) and our share of equity method investments loss—net.

Segment operating income excludes (i) favorable legal settlements, (ii) non-cash compensation amortization related to an option grant made to Mr.

Operating income is defined as net income before interest expense—net, other (income) expense—net, income tax expense and our share of equity method investments loss—net.

Segment operating income excludes (i) legal settlements, (ii) non-cash compensation amortization related to an option grant made to Mr.

Friedman in October 2020 and (iii) severance costs associated with a reorganization.

2 unchanged sentences

FINANCIAL INFORMATION

2024 FIRST QUARTER FORM 10-Q | 26

The following table presents segment operating income and a reconciliation to income from operations and income (loss) before income taxes and equity method investments :

2024 SECOND QUARTER FORM 10-Q | 27

The following table presents segment operating income and a reconciliation to income from operations and income before income taxes and equity method investments :

THREE MONTHS ENDED

SIX MONTHS ENDED

(in thousands)

7 unchanged sentences

Other (income) expense—net

Income (loss) before income taxes and equity method investments

The following table presents selected statements of income (loss) metrics for our segments, including disaggregated net revenues:

Income before taxes and equity method investments

The following tables present selected statements of income metrics for our segments, including disaggregated net revenues:

THREE MONTHS ENDED

1 unchanged sentence

Depreciation and amortization

In the three months ended May 4, 2024 and April 29, 2023, the Real Estate segment share of equity method investments loss were $ 2.8 million and $ 1.6 million, respectively.

Our share of income from equity method investments for the Waterworks segment were immaterial in both fiscal periods presented.

SIX MONTHS ENDED

(in thousands)

Depreciation and amortization

In the three months ended August 3, 2024 and July 29, 2023, the Real Estate segment share of equity method investments loss was $ 3.9 million and $ 3.4 million, respectively.

In the six months ended August 3, 2024 and July 29, 2023, the Real Estate segment share of equity method investments loss was $ 6.7 million and $ 5.0 million, respectively.

Our share of income from equity method investments for the Waterworks segment was immaterial in all fiscal periods presented.

28 | 2024 SECOND QUARTER FORM 10-Q

FINANCIAL INFORMATION

2024 FIRST QUARTER FORM 10-Q | 27

The following table presents selected balance sheet metrics for our segments:

10 unchanged sentences

THREE MONTHS ENDED

SIX MONTHS ENDED

(in thousands)

2 unchanged sentences

We are domiciled in the United States and primarily operate our retail locations and outlets in the United States.

As of May 4, 2024, we operated four retail locations and one outlet in Canada, two retail locations and one outlet in the United Kingdom, two retail locations in Germany and one retail location in Belgium.

Geographic revenues in Canada, the United Kingdom, Germany and Belgium are based upon revenues recognized at the retail locations in the respective country and were not material in either fiscal period presented.

As of August 3, 2024, we operated four retail locations in Canada, two retail locations and one outlet in the United Kingdom, two retail locations in Germany, one retail location in Belgium and one retail location in Spain.

Geographic revenues generated outside of the United States were not material in any fiscal period presented.

FINANCIAL INFORMATION

2024 FIRST QUARTER FORM 10-Q | 28

2024 SECOND QUARTER FORM 10-Q | 29

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements