What changed in this filing

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Item 1. Financial Statements

2025-09-11 compared with 2025-06-12 · 203 added, 139 removed, 487 unchanged (41% of the section changed)

30 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 3, 2025 and February 1, 2025

Common stock— $ 0.0001 par value per share, 180,000,000 shares authorized, 18,732,265 shares issued and outstanding as of May 3, 2025;

Preferred stock—$ 0.0001 par value per share, 10,000,000 shares authorized, no shares issued or outstanding as of August 2, 2025 and February 1, 2025

Common stock— $ 0.0001 par value per share, 180,000,000 shares authorized, 18,744,120 shares issued and outstanding as of August 2, 2025;

18,726,116 shares issued and outstanding as of February 1, 2025

6 unchanged sentences

FINANCIAL INFORMATION

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

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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)

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 (income) 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.

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FINANCIAL INFORMATION

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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

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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

4 unchanged sentences

(in thousands, except share amounts)

Balances—May 3, 2025

Stock-based compensation

Issuance of restricted stock

Exercise of stock options

Net gain from foreign currency translation

Balances—August 2, 2025

Balances—May 4, 2024

Stock-based compensation

Issuance of restricted stock

Exercise of stock options

Net gain from foreign currency translation

Balances—August 3, 2024

SIX MONTHS ENDED

COMPREHENSIVE

STOCKHOLDERS'

INCOME (LOSS)

(in thousands, except share amounts)

Balances—February 1, 2025

Stock-based compensation

Issuance of restricted stock

Vested and delivered restricted stock units

1 unchanged sentence

Net gain from foreign currency translation

Balances—May 3, 2025

Balances—August 2, 2025

Balances—February 3, 2024

3 unchanged sentences

Exercise of stock options

Net loss from foreign currency translation

Balances—May 4, 2024

Net gain from foreign currency translation

Balances—August 3, 2024

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

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FINANCIAL INFORMATION

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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

1 unchanged sentence

Stock-based compensation expense

Asset impairments

Non-cash finance lease interest expense

Product recall

Share of equity method investments (income) loss—net

14 unchanged sentences

Capital expenditures

Acquisition of business

Equity method investments

5 unchanged sentences

FINANCIAL INFORMATION

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

THREE MONTHS ENDED

SIX MONTHS ENDED

(in thousands)

4 unchanged sentences

Repayments under real estate loans

Debt issuance costs

Principal payments under finance lease agreements—net of tenant allowances

1 unchanged sentence

Tax withholdings related to issuance of stock-based awards

Net cash used in financing activities

Net cash provided by (used in) financing activities

Effects of foreign currency exchange rate translation on cash

8 unchanged sentences

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

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FINANCIAL INFORMATION

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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 3, 2025, we operated a total of 68 RH Galleries and 42 RH Outlet stores, one RH Guesthouse, one RH Interior Design Office and 14 Waterworks Showrooms throughout the United States, Canada, the United Kingdom, Germany, Belgium and Spain.

As of August 2, 2025, we operated a total of 71 RH Galleries and 43 RH Outlet stores, one RH Guesthouse, one RH Interior Design Office and 14 Waterworks Showrooms throughout the United States, Canada, the United Kingdom, Germany, Belgium and Spain.

We also have sourcing operations in Shanghai.

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 3, 2025, and the results of operations for the three months ended May 3, 2025 and May 4, 2024.

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 2, 2025, and the results of operations for the three and six months ended August 2, 2025 and August 3, 2024.

Our current fiscal year, which consists of 52 weeks, ends on January 31, 2026 (“fiscal 2025”).

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 the condensed consolidated financial statements as of and for the three months ended May 3, 2025.

Our current assessment of these estimates is included in the condensed consolidated financial statements as of and for the three and six months ended August 2, 2025.

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 the 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 1, 2025 (the “2024 Form 10-K”).

The results of operations for the three months ended May 3, 2025, 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 2, 2025, presented herein, are not necessarily indicative of the results to be expected for the full fiscal year.

FINANCIAL INFORMATION

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NOTE 2—RECENTLY ISSUED ACCOUNTING STANDARDS

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

Financial Instruments:

Measurement of Credit Losses for Accounts Receivable and Contract Assets

In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses for Accounts Receivable and Contract Assets .

This new guidance provides all entities with a practical expedient to assume that current conditions as of the balance sheet date do not change for the remaining life of the assets.

ASU 2025-05 is effective for fiscal years beginning after December 15, 2025.

We are currently assessing the impact that adopting this ASU will have on our fiscal 2025 annual consolidated financial statements.

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FINANCIAL INFORMATION

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NOTE 3—BUSINESS COMBINATION

On July 8, 2025, we acquired a home furnishings business operating under the brand names of Formations and Dennis & Leen for total consideration of $ 32 million, funded through available cash.

The transaction was accounted for as a business combination under ASC 805— Business Combinations .

We believe that this addition to the RH platform further positions us as a leader in the luxury design market as we continue to enhance the RH product assortment.

During the three and six months ended August 2, 2025, we incurred $ 1.5 million and $ 2.2 million, respectively, of acquisition-related costs associated with the transaction.

These costs include fees associated with financial, legal and accounting advisors, and are included in selling, general and administrative expenses on the condensed consolidated statements of income.

The following table summarizes the preliminary purchase price allocation based on the fair value of the assets acquired and liabilities assumed as of July 8, 2025:

(in thousands)

Merchandise inventories

Property and equipment

Operating lease right-of-use assets

Deferred revenue and customer deposits

Operating lease liabilities

Other liabilities

(1) Goodwill of $ 2.8 million, included in the RH Segment, represents the expected synergies from integrating the acquired business into our operations and is expected to be deductible for tax purposes.

The fair values assigned to assets acquired and liabilities assumed are preliminary based on our best estimates and assumptions as of the reporting date and may be subject to change as additional information is obtained within the measurement period (not to exceed 12 months from the acquisition date).

Results of operations of the acquired company have been included in our condensed consolidated statements of income since July 8, 2025, the acquisition date.

Pro forma results of the acquired business have not been presented as the results were not considered material to our condensed consolidated financial statements for all periods presented and would not have been material had the acquisition occurred at the beginning of fiscal 2024.

FINANCIAL INFORMATION

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NOTE 4—PREPAID EXPENSE AND OTHER ASSETS

1 unchanged sentence

(in thousands)

Value added tax (VAT) receivable

Prepaid expenses

Federal and state tax receivable (1)

Vendor deposits

Value added tax (VAT) receivable

Capitalized catalog costs

2 unchanged sentences

Right of return asset for merchandise

Federal and state tax receivable (1)

Promissory notes receivable, including interest (2)

1 unchanged sentence

Total prepaid expense and other current assets

(1) Includes $ 19 million as of both periods related to a federal tax receivable from a carryback claim .

(1) As of February 1, 2025, includes $ 19 million related to a federal tax receivable from a carryback claim.

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

5 unchanged sentences

Capitalized cloud computing costs—net (1)

Federal tax receivable—non-current (2)

Other deposits

Vendor deposits—non-current

Deferred financing fees

1 unchanged sentence

Total other non-current assets

(1) Presented net of accumulated amortization of $ 33 million and $ 30 million as of May 3, 2025 and February 1, 2025, respectively.

(1) Presented net of accumulated amortization of $ 36 million and $ 30 million as of August 2, 2025 and February 1, 2025, respectively.

(2) Represents a federal tax receivable from a carryback claim.

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FINANCIAL INFORMATION

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NOTE 5—GOODWILL, TRADENAMES, TRADEMARKS AND OTHER INTANGIBLE ASSETS

7 unchanged sentences

Foreign currency translation

August 2, 2025

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

3 unchanged sentences

FINANCIAL INFORMATION

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NOTE 6—VARIABLE INTEREST ENTITIES

2 unchanged sentences

In fiscal 2024, one Member LLC became a wholly-owned subsidiary and is no longer a VIE.

As of May 3, 2025 and February 1, 2025, of the remaining seven Member LLCs, we hold a 50 percent membership interest in six of the Member LLCs, and the remaining noncontrolling interest of 50 percent in each Member LLC is held by the same development partner.

As of August 2, 2025 and February 1, 2025, of the remaining seven Member LLCs, we hold a 50 percent membership interest in six of the Member LLCs, and the remaining noncontrolling interest of 50 percent in each Member LLC is held by the same development partner.

In one Member LLC, we hold approximately 75 percent membership interest with the remaining noncontrolling interest of approximately 25 percent held by the same development partner.

10 unchanged sentences

Real estate loan—net (2)

Other non-current obligations

Other non-current liabilities

Total liabilities

(1) Includes $ 57 million and $ 54 million of construction in progress as of May 3, 2025 and February 1, 2025, respectively.

(1) Includes $ 69 million and $ 54 million of construction in progress as of August 2, 2025 and February 1, 2025, respectively.

(2) On September 9, 2022, a Member LLC as the borrower executed a Promissory Note (the “Promissory Note”) with a third-party bank in an aggregate principal amount equal to $ 16 million with a maturity date of September 9, 2032.

3 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.

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

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FINANCIAL INFORMATION

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In March 2025, the Aspen LLC in which we hold a 70 percent interest sold its sole real estate property.

2 unchanged sentences

Following this capital distribution, the remaining net assets in this Aspen LLC are immaterial.

As of May 3, 2025, we have made capital contributions of approximately $ 138 million to the two remaining Aspen LLCs.

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

Our maximum exposure to loss is the carrying value of each of the equity method investments as of May 3, 2025.

During the three months ended May 3, 2025, we did not receive any distributions or have any undistributed earnings of equity method investments related to the two remaining Aspen LLCs or the Waterworks equity method investments.

During the three months ended May 4, 2024, we did not receive any distributions or have any undistributed earnings of equity method investments.

Other than as described above, we did no t receive any distributions or have any undistributed earnings of equity method investments during the three or six months ended August 2, 2025 and August 3, 2024.

Our maximum exposure to loss is the carrying value of each of the equity method investments as of August 2, 2025.

NOTE 7—ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

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(1) Refer to Note 14 ¾ Commitments and Contingencies .

FINANCIAL INFORMATION

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Other current liabilities consisted of the following:

(in thousands)

Current portion of term loans

Allowance for sales returns

Unredeemed gift card and merchandise credit liability

Current portion of term loans

Finance lease liabilities

Unredeemed gift card and merchandise credit liability

Federal tax payable

2 unchanged sentences

Total other current liabilities

FINANCIAL INFORMATION

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Contract Liabilities

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 3, 2025 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 2, 2025 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 the three months ended May 3, 2025 and May 4, 2024, we recognized $ 6.5 million and $ 6.1 million, respectively, of revenue related to previous deferrals related to our gift cards .

During the three months ended August 2, 2025 and August 3, 2024, we recognized $ 5.2 million and $ 4.3 million, respectively, of revenue related to previous deferrals related to our gift cards .

During the six months ended August 2, 2025 and August 3, 2024, we recognized $ 12 million and $ 10 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.

Liabilities under the Financing Program are included in accounts payable and accrued expenses on the condensed consolidated balance sheets.

Our confirmed obligations and activity under the Financing Program consisted of the following:

THREE MONTHS ENDED

(in thousands)

Outstanding at beginning of fiscal period

Invoices confirmed

Invoices paid

Outstanding at end of fiscal period

As of August 2, 2025 and February 1, 2025, we had $ 20 million and $ 35 million, respectively, of payment obligations outstanding under the Financing Program included in accounts payable and accrued expenses on the condensed consolidated balance sheets.

Reorganization

We implemented and completed a restructuring in the fourth quarter of fiscal 2024 that included workforce and expense reductions in order to improve and simplify our organizational structure, streamline certain aspects of our business operations and better position us for further growth.

The workforce reduction associated with the initiative included the elimination of numerous leadership and other positions throughout the organization.

As of May 3, 2025 and February 1, 2025, we had accruals of $ 2.0 million and $ 3.4 million, respectively, included within accounts payable and accrued expenses on the condensed consolidated balance sheets related to the reorganization.

FINANCIAL INFORMATION

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We implemented and completed a restructuring in the fourth quarter of fiscal 2024 and in the second quarter of fiscal 2025 that included workforce and expense reductions in order to improve and simplify our organizational structure, streamline certain aspects of our business operations and better position us for further growth.

The workforce reduction associated with these initiatives included the elimination of numerous leadership and other positions throughout the organization.

During the three and six months ended August 2, 2025, we incurred total charges relating to the reorganization of $ 1.2 million, consisting primarily of severance costs and related taxes.

As of August 2, 2025 and February 1, 2025, we had accruals of $ 1.3 million and $ 3.4 million, respectively, included within accounts payable and accrued expenses on the condensed consolidated balance sheets related to the reorganizations.

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).

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

Amounts include 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 for finance leases, which were not material in either period presented.

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 for operating leases, were not material in either period presented.

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

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(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 $ 4.0 million and $ 3.6 million for the three months ended August 2, 2025 and August 3, 2024, respectively, and $ 8.1 million and $ 7.5 million for the six months ended August 2, 2025 and August 3, 2024, respectively, as well as charges associated with common area maintenance of $ 2.4 million and $ 2.9 million for the three months ended August 2, 2025 and August 3, 2024, respectively, and $ 5.5 million and $ 5.6 million for the six months ended August 2, 2025 and August 3, 2024, respectively.

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

Lease right-of-use assets and lease liabilities consisted 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 $ 335 million and $ 320 million as of May 3, 2025 and February 1, 2025, respectively.

(3) Includes $ 34 million and $ 35 million as of May 3, 2025 and February 1, 2025, respectively, 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 $ 350 million and $ 320 million as of August 2, 2025 and February 1, 2025, respectively.

(3) Includes $ 34 million and $ 35 million as of August 2, 2025 and February 1, 2025, 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 6— Variable Interest Entities .

1 unchanged sentence

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The maturities of lease liabilities were as follows as of May 3, 2025:

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The maturities of lease liabilities were as follows as of August 2, 2025:

(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 $ 843 million of legally binding payments under the non-cancellable term for leases signed but not yet commenced under our accounting policy as of May 3, 2025, of which $ 28 million, $ 38 million, $ 47 million, $ 48 million, $ 51 million and $ 51 million will be paid in the remainder of fiscal 2025, fiscal 2026, fiscal 2027, fiscal 2028, fiscal 2029 and fiscal 2030, respectively, and $ 580 million will be paid subsequent to fiscal 2030.

Total lease payments exclude $ 789 million of legally binding payments under the non-cancellable term for leases signed but not yet commenced under our accounting policy as of August 2, 2025, of which $ 15 million, $ 35 million, $ 44 million, $ 46 million, $ 48 million and $ 49 million will be paid in the remainder of fiscal 2025, fiscal 2026, fiscal 2027, fiscal 2028, fiscal 2029 and fiscal 2030, respectively, and $ 552 million will be paid subsequent to fiscal 2030.

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

1 unchanged sentence

Supplemental information related to leases consisted of the following:

THREE MONTHS ENDED

SIX MONTHS ENDED

Weighted-average remaining lease term (years)

4 unchanged sentences

Finance leases

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Other information related to leases consisted of the following:

THREE MONTHS ENDED

SIX MONTHS ENDED

(in thousands)

8 unchanged sentences

Finance leases

(1) Presented net of tenant allowances received subsequent to lease commencement of $ 1.4 million in the three months ended May 3, 2025.

No such amounts were received from landlords in the three months ended May 4, 2024.

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

(1) Presented net of tenant allowances received subsequent to lease commencement of $ 6.2 million in the six months ended August 2, 2025.

No such payments were received in the six months ended August 3, 2024.

(2) Right-of-use assets obtained in exchange for new operating lease liabilities exclude the impact from acquisitions of $ 4.3 million for the six months ended August 2, 2025.

Refer to Note 3— Business Combinations .

NOTE 9—CREDIT FACILITIES

5 unchanged sentences

Total credit facilities

(1) Deferred financing fees associated with the asset based credit facility as of May 3, 2025 and February 1, 2025 were $ 1.3 million and $ 1.5 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 2, 2025 and February 1, 2025 were $ 3.9 million and $ 1.5 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.

(2) Represents the Term Loan Credit Agreement (defined below), of which outstanding amounts of $ 1,910 million and $ 1,915 million were included in term loan—net on the condensed consolidated balance sheets as of May 3, 2025 and February 1, 2025, respectively, and $ 20 million was included in other current liabilities on the condensed consolidated balance sheets as of both May 3, 2025 and February 1, 2025.

(3) Represents the outstanding balance of the Term Loan B-2 (defined below) under the Term Loan Credit Agreement, of which outstanding amounts of $ 483 million and $ 484 million were included in term loan B-2—net on the condensed consolidated balance sheets as of May 3, 2025 and February 1, 2025, respectively, and $ 5.0 million was included in other current liabilities on the condensed consolidated balance sheets as of both May 3, 2025 and February 1, 2025.

In July 2025, Restoration Hardware, Inc.

entered into an amendment to the ABL Credit Agreement (defined below), which extended the maturity date of the revolving line of credit from July 29, 2026 to the earlier of (a) July 31, 2030 and (b) the date which is 91 days prior to the final stated maturity of the Term Loan Credit Agreement and any refinancing thereof.

(2) Represents the Term Loan Credit Agreement (defined below), of which outstanding amounts of $ 1,905 million and $ 1,915 million were included in term loan B—net on the condensed consolidated balance sheets as of August 2, 2025 and February 1, 2025, respectively, and $ 20 million was included in other current liabilities on the condensed consolidated balance sheets as of both August 2, 2025 and February 1, 2025.

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(3) Represents the outstanding balance of the Term Loan B-2 (defined below) under the Term Loan Credit Agreement, of which outstanding amounts of $ 481 million and $ 484 million were included in term loan B-2—net on the condensed consolidated balance sheets as of August 2, 2025 and February 1, 2025, respectively, and $ 5.0 million was included in other current liabilities on the condensed consolidated balance sheets as of both August 2, 2025 and February 1, 2025.

Asset Based Credit Facility

3 unchanged sentences

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.

The ABL Credit Agreement has a revolving line of credit with initial availability of up to $ 600 million, of which $ 10 million is available to Restoration Hardware Canada, Inc., and includes a $ 300 million accordion feature under which the revolving line of credit may be expanded by agreement of the parties from $ 600 million to up to $ 900 million if and to the extent the lenders revise their credit commitments to encompass a larger facility.

On July 31, 2025, RHI entered into an Amendment (the “Amendment”) to the Twelfth Amended and Restated Credit Agreement, (as amended prior to the Amendment, the “Existing ABL Credit Agreement” and as amended by the Amendment, the “ABL Credit Agreement”).

The Amendment, among other things, amends the ABL Credit Agreement to extend the maturity date of the ABL Credit Agreement to be the earlier of (a) July 31, 2030 and (b) the date which is 91 days prior to the final stated maturity of the Term Loan Credit Agreement and any refinancing thereof.

Under the ABL Credit Agreement, RHI has a revolving line of credit with initial availability of up to $ 600 million, of which (i) $ 10 million is available to the RH subsidiary, Restoration Hardware Canada, Inc., and (ii) $ 100 million is available to the RH subsidiary, RH Geneva Sàrl.

The ABL Credit Agreement includes a $ 300 million accordion feature under which the revolving line of credit may be expanded by agreement of the parties from $ 600 million to up to $ 900 million if and to the extent the lenders revise their credit commitments to encompass a larger facility.

The ABL Credit Agreement provides that the $ 300 million accordion, or a portion thereof, may be added as a first-in, last-out term loan facility if and to the extent the lenders revise their credit commitments for such facility.

The ABL Credit Agreement further provides that the borrowers may request a European sub-credit facility under the revolving line of credit or under the accordion feature for borrowing by certain European subsidiaries of RH if certain conditions set out in the ABL Credit Agreement are met.

The maturity date of the ABL Credit Agreement is July 29, 2026.

The availability of credit at any given time under the ABL Credit Agreement will be constrained by the terms and conditions of the ABL Credit Agreement, including the amount of collateral available, a borrowing base formula based upon numerous factors, including the value of eligible inventory and eligible accounts receivable, and other restrictions contained in the ABL Credit Agreement.

if certain conditions set out in the ABL Credit Agreement are met.

The availability of credit at any given time under the ABL Credit Agreement will be constrained by its terms and conditions, including the amount of collateral available, a borrowing base formula based upon numerous factors, including the value of eligible inventory and eligible accounts receivable, and other restrictions contained in the ABL Credit Agreement.

All obligations under the ABL Credit Agreement are secured by substantial assets of the loan parties, including inventory, receivables and certain types of intellectual property.

3 unchanged sentences

The ABL Credit Agreement contains various restrictive and affirmative covenants, including required financial reporting, limitations on granting certain liens, limitations on making certain loans or investments, limitations on incurring additional debt, restricted payment limitations limiting the payment of dividends and certain other transactions and distributions, limitations on transactions with affiliates, along with other restrictions and limitations similar to those frequently found in credit agreements of a similar type and size.

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FINANCIAL INFORMATION

The ABL Credit Agreement does not contain any significant financial ratio covenants or coverage ratio covenants other than a consolidated fixed charge coverage ratio (“FCCR”) covenant based on the ratio of (i) consolidated EBITDA to the amount of (ii) debt service costs plus certain other amounts, including dividends and distributions and prepayments of debt as defined in the ABL Credit Agreement (the “FCCR Covenant”).

1 unchanged sentence

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

As of May 3, 2025, RHI was in compliance with the FCCR Covenant.

FINANCIAL INFORMATION

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As of August 2, 2025, 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 3, 2025, RHI had $ 185 million in outstanding borrowings and $ 368 million of availability under the revolving line of credit, net of $ 47 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 $ 308 million as of May 3, 2025.

As of August 2, 2025, RHI had $ 135 million in outstanding borrowings and $ 418 million of availability under the revolving line of credit, net of $ 47 million in outstanding letters of credit.

Term Loan Credit Agreement

15 unchanged sentences

The Intercreditor Agreement establishes various customary inter-lender terms, including, without limitation, with respect to priority of liens, permitted actions by each party, application of proceeds, exercise of remedies in case of default, releases of liens and certain limitations on the amendment of the ABL Credit Agreement and the Term Loan Credit Agreement without the consent of the other parties.

FINANCIAL INFORMATION

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The borrowings under the Term Loan Credit Agreement may be prepaid in whole or in part at any time, subject to a prepayment premium of 1.0 % in connection with any repricing transaction within the six months following the closing date of the Term Loan Credit Agreement.

The Term Loan Credit Agreement contains various restrictive and affirmative covenants, including required financial reporting, limitations on granting certain liens, limitations on making certain loans or investments, limitations on incurring additional debt, restricted payment limitations limiting the payment of dividends and certain other transactions and distributions, limitations on transactions with affiliates, along with other restrictions and limitations similar to those frequently found in credit agreements of a similar type and size, but provides for unlimited exceptions in the case of incurring indebtedness, granting of liens and making investments, dividend payments, and payments of material junior indebtedness, subject to satisfying specified leverage ratio tests.

FINANCIAL INFORMATION

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The Term Loan Credit Agreement does not contain a financial maintenance covenant.

9 unchanged sentences

(1) The principal carrying values of the Term Loan B and Term Loan B-2 represent the outstanding amount under each class and exclude discounts upon original issuance and third-party offering costs.

The real estate loans represent the outstanding principal balance and exclude debt issuance costs.

The principal carrying value of the real estate loans represents the outstanding principal balance and exclude debt issuance costs.

The fair values of the Term Loan B and Term Loan B-2 were derived from observable bid prices (Level 1).

1 unchanged sentence

NOTE 11—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 decrease in our effective tax rate for the three months ended May 3, 2025 compared to the three months ended May 4, 2024 is primarily attributable to pre-tax net income in the current fiscal period compared to pre-tax net loss in the prior fiscal period.

The three months ended May 3, 2025 was also impacted by a net tax shortfall from stock-based compensation as compared to a net tax benefit in the three months ended May 4, 2024.

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FINANCIAL INFORMATION

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The increase in our effective tax rates for the three and six months ended August 2, 2025 compared to the three and six months ended August 3, 2024 is primarily attributable to reporting higher net income in the current year and the impact of higher net excess tax benefits from stock-based compensation in fiscal 2024.

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 3, 2025.

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

NOTE 11—NET INCOME (LOSS) PER SHARE

The weighted-average shares used for net income (loss) per share were as follows:

On July 4, 2025, the United States enacted tax legislation through the H.R.1 Reconciliation Act, commonly referred to as the One Big Beautiful Bill Act (the “OBBBA”), which implemented several corporate tax law changes, including, but not limited to, (1) limitations on deductions for interest expense, (2) changes to the taxation of foreign activity and (3) reinstatement of one hundred percent bonus depreciation for eligible property.

A number of other provisions of the OBBBA will not take effect until the 2026 tax year, including various changes to existing international tax provisions.

We did not identify any material discrete tax impacts related to our beginning-of-the-year deferred tax assets and liabilities or valuation allowances due to the enactment of the OBBBA.

We are currently assessing the impact the OBBBA may have on our financial condition, results of operations, cash flows and effective tax rate, and will continue to evaluate any potential impact as additional guidance becomes available.

NOTE 12—NET INCOME PER SHARE

The weighted-average shares used for net income per share were as follows:

THREE MONTHS ENDED

SIX MONTHS ENDED

Weighted-average shares—basic

Effect of dilutive stock-based awards

Effect of dilutive convertible senior notes

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 period.

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 (loss) per share because their inclusion would have been anti-dilutive:

The following number of options and restricted stock units 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

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NOTE 13—STOCK-BASED COMPENSATION

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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.

FINANCIAL INFORMATION

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As of May 3, 2025, there were a total of 1,968,676 shares issuable under the 2023 Stock Incentive Plan.

As of August 2, 2025, there were a total of 1,909,819 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

Equity Awards Under the Plans

Options outstanding, vested or expected to vest, and exercisable as of May 3, 2025 were as follows:

Options outstanding, vested or expected to vest, and exercisable as of August 2, 2025 were 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:

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 resulted in aggregate non-cash stock compensation expense of $ 174 million, of which $ 0.9 million and $ 1.9 million was recognized during the three months ended May 3, 2025 and May 4, 2024, respectively.

As of May 3, 2025, compensation expense for this award has been fully recognized.

The option resulted in aggregate non-cash stock compensation expense of $ 174 million, of which $ 0.9 million and $ 2.8 million was recognized during the six months ended August 2, 2025 and August 3, 2024, respectively .

Compensation expense for this award was fully recognized as of the first quarter of fiscal 2025.

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

As of May 3, 2025, the total unrecognized compensation expense and weighted average remaining term of unvested awards were as follows:

As of August 2, 2025, the total unrecognized compensation expense and weighted average remaining term of equity awards were as follows:

REMAINING TERM

2 unchanged sentences

Unvested restricted stock and restricted stock units

NOTE 13—COMMITMENTS AND CONTINGENCIES

We had no material off-balance sheet commitments as of May 3, 2025.

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FINANCIAL INFORMATION

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NOTE 14—COMMITMENTS AND CONTINGENCIES

We had no material off-balance sheet commitments as of August 2, 2025.

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, product liability and other causes of action.

We currently face legal proceedings that involve complex litigation, including class action cases, matters related to our employment practices, the application of state wage and hour laws, product liability and other causes of action.

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.

Due to the inherent difficulty of predicting the course of complex legal actions, 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.

13 unchanged sentences

Legal costs related to such matters are expensed as incurred.

FINANCIAL INFORMATION

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NOTE 15—SEGMENT REPORTING

4 unchanged sentences

The Real Estate segment represents operations associated with certain of our equity method investments and consolidated VIEs that have operations, which are not directly related to the activities of the retail operating segments.

FINANCIAL INFORMATION

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The retail operating segments are strategic business units that offer products for the home furnishings customer.

2 unchanged sentences

The CODM uses segment adjusted operating income to evaluate segment profitability for the retail operating segments and to allocate resources and analyze variances of actual performance to our forecasts when making decisions.

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

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

Friedman in October 2020 and (ii) legal settlements.

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 (income) loss—net.

Segment adjusted operating income excludes (i) certain asset impairments, (ii) product recall, (iii) severance costs associated with a reorganization, (iv) non-cash compensation amortization related to an option grant made to Mr.

Friedman in October 2020 and (v) legal settlements.

These items are excluded from segment adjusted operating income in order to provide better transparency of segment operating results.

Accordingly, these items are not presented by segment because they are excluded from the segment profitability measure that the CODM and our senior leadership team review.

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FINANCIAL INFORMATION

Segment net revenues, which represent our disaggregated net revenues in accordance with Accounting Standards Codification 606, significant segment expenses and segment adjusted operating income, by reportable segment, were as follows:

THREE MONTHS ENDED

SIX MONTHS ENDED

(in thousands)

3 unchanged sentences

Segment adjusted operating income (1)

Asset impairments

Product recall

Reorganization related costs

Non-cash compensation

3 unchanged sentences

Other (income) expense—net

Income (loss) before income taxes and equity method investments

Income before taxes and equity method investments

(1) All intercompany transactions are immaterial and have been eliminated.

(2) Other segment expenses primarily include compensation and occupancy costs classified as selling, general and administrative expenses, and other general and administrative expenses.

In the three months ended May 3, 2025 and May 4, 2024, the Real Estate segment share of equity method investments, which is the measure of segment profitability reviewed by the CODM to evaluate performance internally for the Real Estate segment, was income of $ 8.3 million and loss of $ 2.8 million, respectively.

The share of loss from equity method investments for the Waterworks segment was immaterial in both fiscal periods presented.

FINANCIAL INFORMATION

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In the three months ended August 2, 2025 and August 3, 2024, the Real Estate segment share of equity method investments loss, which is the measure of segment profitability reviewed by the CODM to evaluate performance internally for the Real Estate segment, was $ 1.7 million and $ 3.9 million, respectively.

In the six months ended August 2, 2025 and August 3, 2024, the Real Estate segment share of equity method investment operations was income of $ 6.5 million and loss of $ 6.7 million, respectively.

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

Depreciation and amortization for our segments was as follows:

THREE MONTHS ENDED

SIX MONTHS ENDED

(in thousands)

1 unchanged sentence

Total depreciation and amortization

(1) There is no expense for the Real Estate segment since all assets represent construction in progress.

(1) There is no depreciation and amortization for the Real Estate segment since all assets represent construction in progress.

Balance sheet information for our segments consisted of the following:

4 unchanged sentences

(2) The Waterworks reporting unit tradename is presented net of an impairment charge of $ 35 million recognized in prior fiscal years.

(3) The Waterworks segment balance represents membership interests in two European entities, one entity in which we hold a 50 percent membership interest and another entity in which we increased our membership interest from approximately 25 percent as of February 1, 2025 to approximately 28 percent as of May 3, 2025.

We are not the primary beneficiary of either of these VIEs.

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

As of May 3, 2025, we operated the following number of retail locations and outlets outside the United States:

As of August 2, 2025, we operated the following number of retail locations and outlets outside the United States:

United Kingdom

(1) Geographic revenues generated outside of the United States did not exceed 10% of total consolidated net revenues in either fiscal period presented.

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FINANCIAL INFORMATION

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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