noodls browser compatibility check

The security settings of your browser are blocking the execution of scripts.

To use noodls, javascript support must be enabled. Please change your browser's security settings to enable javascript.

If you have changed your browser's security settings, you can click here.

related announcements

Company News

BuzzFeed Inc.

Statement of Changes in Beneficial Ownership (Form 4)
CPS - Consumer Portfolio Services Inc.

Statement of Changes in Beneficial Ownership (Form 4)
CPS - Consumer Portfolio Services Inc.

Statement of Changes in Beneficial Ownership (Form 4)

Financial Services

RH

09/11/2025 | Press release | Distributed by Public on 09/11/2025 15:16

Quarterly Report for Quarter Ending August 2, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and the results of our operations should be read together with the condensed consolidated financial statements and the related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and the related notes included in our 2024 Form 10-K.

Management's discussion and analysis of financial condition and results of operations ("MD&A") contains forward-looking statements that are subject to risks and uncertainties. Refer to "Special Note Regarding Forward-Looking Statements and Market Data" below and Item 1A-Risk Factorsin our 2024 Form 10-K for a discussion of the risks, uncertainties and assumptions associated with these statements. MD&A should be read in conjunction with our historical consolidated financial statements and related notes thereto and the other disclosures contained elsewhere in this Quarterly Report on Form 10-Q. The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods, and our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including, but not limited to, those listed in our 2024 Form 10-K.

The discussion of our financial condition and changes in our results of operations, liquidity and capital resources is presented in this section for the three and six months ended August 2, 2025, and a comparison to the three and six months ended August 3, 2024. The discussion related to cash flows for the six months ended August 3, 2024, has been omitted from this Quarterly Report on Form 10-Q, but is included in Item 2-Management's Discussion and Analysis of Financial Condition and Results of Operationson our Form 10-Q for the quarter ended August 3, 2024, filed with the Securities and Exchange Commission ("SEC") on September 12, 2024.

MD&A is a supplement to the condensed consolidated financial statements within Part I of this Quarterly Report on Form 10-Qand is provided to enhance an understanding of our results of operations and financial condition. Our MD&A is organized as follows:

Overview. This section provides a general description of our business, including our key value-driving strategies and an overview of certain known trends and uncertainties.

Basis of Presentation and Results of Operations. This section provides the condensed consolidated statements of income and other financial and operating data, including a comparison of our results of operations in the current period as compared to the prior year's comparative period, as well as non-GAAP measures we use for financial and operational decision-making and as a means to evaluate period-to-period comparisons.

Liquidity and Capital Resources. This section provides an overview of our sources and uses of cash and our financing arrangements, including our credit facilities and debt arrangements, in addition to the cash requirements for our business, such as our capital expenditures.

Critical Accounting Policies and Estimates. This section provides the accounting policies and estimates that involve a higher degree of judgment or complexity and are most significant to reporting our consolidated results of operations and financial position, including the significant estimates and judgments used in the preparation of the condensed consolidated financial statements.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND MARKET DATA

This quarterly report contains forward-looking statements that are subject to risks and uncertainties. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as "anticipate," "estimate," "expect," "project," "plan," "intend," "believe," "may," "will," "short-term," "non-recurring," "one-time," "unusual," "should," "likely" and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events.


PART I. FINANCIAL INFORMATION	2025 SECOND QUARTER FORM 10-Q \| 29

Forward-looking statements are subject to risk and uncertainties that may cause actual results to differ materially from those that we expected. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors and it is impossible for us to anticipate all factors that could affect our actual results. Matters that we identify as "short term," "non-recurring," "unusual," "one-time" or other words and terms of similar meaning may, in fact, not be short term and may recur in one or more future financial reporting periods. Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, are disclosed under the section entitled Risk Factors in our 2024 Form 10-K and Management's Discussion and Analysis of Financial Condition and Results of Operations in Part I of this quarterly report, in our Quarterly Report on Form 10-Q for the quarterly period ended May 3, 2025 and in our 2024 Form 10-K. All forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements, as well as other cautionary statements. You should evaluate all forward-looking statements made in this quarterly report in the context of these risks and uncertainties.

We cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect, or that future developments affecting us will be those that we have anticipated. The forward-looking statements included in this quarterly report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.

Overview

We are a leading retailer and luxury lifestyle brand operating primarily in the home furnishings market. Our curated and fully integrated assortments are presented consistently across our sales channels, including our retail locations, websites and Sourcebooks. We offer merchandise assortments across a number of categories, including furniture, lighting, textiles, bathware, décor, outdoor and garden, and baby, child and teen furnishings. Our retail business is fully integrated across our multiple channels of distribution. We position our Galleries as showrooms for our brand, while our websites and Sourcebooks act as virtual and print extensions of our physical spaces, respectively. We operate our retail locations throughout the United States and Canada as well as in the United Kingdom, Germany, Belgium and Spain and have an integrated RH Hospitality experience in 23 of our Design Gallery locations, which includes restaurants and wine bars.

We have recently undertaken efforts to introduce the most prolific collection of new products in our history, with a substantial number of new furniture and upholstery collections across RH Interiors, RH Modern, RH Outdoor, RH Baby & Child and RH TEEN. These new collections reflect a level of design and quality inaccessible in our current market and a value proposition that we believe will be disruptive across multiple markets.


30\| 2025 SECOND QUARTER FORM 10-Q	PART I. FINANCIAL INFORMATION

As of August 2, 2025, we operated the following number of locations:


		COUNT
RH
North America
Design Galleries		35
Legacy Galleries		27
Outdoor Galleries		2
Modern Gallery		1
Baby & Child and TEEN Gallery		1
Interior Design Office		1
Total RH retail locations-North America		67
Europe Design Galleries		5
Total RH retail locations		72
Outlets		43
Guesthouse		1
Waterworks Showrooms		14

Business Conditions

In recent years, our business has been negatively affected and limited by macroeconomic conditions, including high interest rates and mortgage rates, volatility in the global financial markets and the slowdown in the luxury home market, as well as other negative factors related to the effects of lingering higher inflation and increased costs, including higher construction expenses.

Since the majority of our product assortment is imported from vendors outside the U.S., we also face uncertainty and risks related to tariffs and other trade policies, which may increase the costs of securing products from our vendors. Tariffs and other non-tariff trade practices and policies may adversely affect our business in other ways beyond increased costs for our products. We have taken steps to move our supply chain away from countries with higher tariff rates in favor of other jurisdictions, but these countermeasures may prove to be ineffective and the ability to predict tariff rates in different countries may be difficult as policies may change on short notice. Uncertainty about trade policy, tariff rates, and other changes in practices affecting international trade might have an adverse effect on our business and results of operation and we may face challenges in implementing the optimal responses to changing trade conditions.

In addition, there is meaningful uncertainty related to the confluence of different macroeconomic factors that could influence business conditions in the U.S. While our expectation is that these different factors will moderate in the future, the timing and precise outlook for these improvements is uncertain. We also believe we have positioned the business to take advantage of any favorable progression in macroeconomic conditions.

Our decisions regarding the sources and uses of capital will continue to reflect and adapt to changes in market conditions and our business, including further developments with respect to macroeconomic factors.


PART I. FINANCIAL INFORMATION	2025 SECOND QUARTER FORM 10-Q \| 31

Strategic Initiatives

We are in the process of implementing a number of significant business initiatives that have had, and will continue to have, an impact on our results of operations. As a result, we have experienced in the past, and may experience in the future, significant period-to-period variability in our financial performance and results of operations. While we anticipate that these initiatives will support the growth of our business, costs and timing issues associated with pursuing these initiatives can negatively affect our growth rates in the short term and may amplify fluctuations in our growth rates from quarter to quarter. Delays in the rate of opening new Galleries and pursuit of our international expansion have resulted in delays in the corresponding increase in net revenues that we ordinarily experience as new Design Galleries are introduced. In addition, we anticipate that our net revenues, adjusted net income and other performance metrics will remain variable as our business model continues to emphasize high growth and numerous, concurrent and evolving business initiatives.

For more information, refer to the sections entitled Management's Discussion and Analysis of Financial Condition and Results of Operations and Risk Factors in our 2024 Form 10-K.

Key Value-Driving Strategies

In order to achieve our long-term strategies of product transformation, platform expansion and cash generation as well as drive growth across our business, we are focused on the following key strategies and business initiatives:

Product Elevation. We believe we have built the most comprehensive and compelling collection of luxury home furnishings under one brand in the world. Our products are presented across multiple collections, categories and channels that we control, and we believe their desirability and exclusivity have enabled us to achieve strong revenues and margins. Our customers know our brand concepts as RH Interiors, RH Modern, RH Outdoor, RH Beach House, RH Ski House, RH Baby & Child, RH TEEN and Waterworks. Our strategy is to continue to elevate the design and quality of our product. Beginning with the mailing of our RH Interiors Sourcebook in the fall of 2023 and with additional Sourcebook mailings throughout 2024 and in the beginning of 2025, we have introduced the most prolific collection of new products in our history. In addition, over the next few years, we plan to introduce RH Couture, RH Bespoke and RH Color.

Gallery Transformation. Our products are elevated and rendered more valuable by our architecturally inspiring Galleries. We believe our strategy to open new Design Galleries in every major market in North America will unlock the value of our vast assortment, generating an expected annual revenue opportunity for our business of $5 to $6 billion. We believe we can significantly increase our sales by transforming our real estate platform from our existing legacy retail footprint to a portfolio of Design Galleries sized to the potential of each market and the size of our assortment. In addition, we plan to incorporate hospitality into many of the new Design Galleries that we open in the future, which further elevates and renders our product and brand more valuable. We believe hospitality has created a unique new retail experience that cannot be replicated online and that the addition of hospitality drives incremental sales of home furnishings in these Galleries.

Brand Elevation. Our strategy is to move the brand beyond curating and selling product to conceptualizing and selling spaces by building an ecosystem of Products, Places, Services and Spaces that establishes the RH brand as a global thought leader, taste and place maker. We believe our seamlessly integrated ecosystem of immersive experiences inspires customers to dream, design, dine, travel and live in a world thoughtfully curated by RH, creating an impression and connection unlike any other brand in the world. Our hospitality efforts will continue to elevate the RH brand as we extend beyond the four walls of our Galleries into RH Guesthouses, where our goal is to create a new market for travelers seeking privacy and luxury in the $200 billion North American hotel industry. We entered this industry with the opening of the RH Guesthouse New York in September 2022 and are in the process of constructing our second RH Guesthouse in Aspen. In June 2023, we opened RH England, The Gallery at the Historic Aynho Park, a 400-year-old landmark estate representing the most inspiring and immersive physical expression of the brand to date. RH England marked the beginning of our global expansion beyond North America. Additionally, we offer bespoke experiences like RH Yountville, an integration of Food, Wine, Art & Design in the Napa Valley; RH One & RH Two, our private jets; and RH Three, our luxury yacht that is available for charter in the Caribbean and Mediterranean, where the wealthy and affluent visit and vacation. These immersive experiences expose both new and existing customers to our evolving authority in architecture, interior design and landscape architecture.


32\| 2025 SECOND QUARTER FORM 10-Q	PART I. FINANCIAL INFORMATION

Global Expansion. We believe that our luxury brand positioning and unique aesthetic have strong international appeal and that pursuit of global expansion will provide RH with a substantial opportunity to build over time a projected $20 to $25 billion global brand in terms of annual revenues. Our view is that the competitive environment globally is more fragmented and primed for disruption than the North American market, and there is no direct competitor of scale that possesses the product, operational platform and brand strength of RH. As such, we are actively pursuing the expansion of the RH brand globally, which began with the opening of RH England, RH Munich and RH Düsseldorf in 2023, followed by the opening of RH Brussels and RH Madrid in 2024. In September 2025, we opened RH Paris, The Gallery on the Champs Élysées, located just off the Avenue Montaigne, which stands at the global epicenter of fashion and luxury. The Gallery, spanning seven levels connected by a soaring atrium of floating cast medallion stairs, features a freestanding RH Interior Design Studio opposite the spectacular six-meter cast medallion bronze doors marking the entrance, and two restaurants. At Le Jardin RH, located on the second-floor terrace, dine under a spectacular curved glass and steel structure inspired by the Grand Palais. At Le Petit RH, dine in a jewel box of champagne lacquered walls with a sparkling ceiling of over 7,000 handblown glass polyhedrons, or atop one of the most spectacular garden rooftops in all of Paris with views of the Eiffel Tower, Grand Palais and the Louvre. We believe the opening of RH Paris marks a major step forward in the European expansion of our business. We are also under construction in London and Milan in inspiring spaces that will celebrate the heritage of the historic structures and will integrate full expressions of our hospitality experiences. In addition, we plan to open RH Sydney, The Gallery in Double Bay, in Australia in the coming years.

Digital Reimagination. Our strategy is to digitally reimagine the RH brand and business model both internally and externally. Internally, our multiyear effort began with the reimagination of our Center of Innovation to incorporate digitally integrated visuals and decision data designed to amplify the creative process from product ideation to product presentation. Externally, our strategy comes to life digitally through The World of RH, an online portal where customers can explore and be inspired by the depth and dimension of our brand. We expect to continue to elevate the customer experience on The World of RH with further enhancements to content, navigation and search functionality. We believe an opportunity exists to create similar strategic separation online as we have with our Galleries offline, reconceptualizing what a website can and should be. We are making meaningful investments to elevate and differentiate our online experience with plans to upgrade our website throughout 2025.


PART I. FINANCIAL INFORMATION	2025 SECOND QUARTER FORM 10-Q \| 33

Basis of Presentation and Results of Operations

The following table sets forth the condensed consolidated statements of income:


	THREE MONTHS ENDED								SIX MONTHS ENDED
	AUGUST 2,		% OF NET		AUGUST 3,		% OF NET		AUGUST 2,		% OF NET		AUGUST 3,		% OF NET
	2025		REVENUES		2024		REVENUES		2025		REVENUES		2024		REVENUES

	(dollars in thousands)
Net revenues	$	899,151	100.0	%	$	829,655	100.0	%	$	1,713,103	100.0	%	$	1,556,615	100.0	%
Cost of goods sold		489,892	54.5			454,898	54.8			948,511	55.4			865,820	55.6
Gross profit		409,259	45.5			374,757	45.2			764,592	44.6			690,795	44.4
Selling, general and administrative expenses		280,383	31.2			278,630	33.6			579,805	33.8			540,005	34.7
Operating income		128,876	14.3			96,127	11.6			184,787	10.8			150,790	9.7
Other expenses
Interest expense-net		57,358	6.4			59,262	7.2			113,961	6.6			116,034	7.5
Other (income) expense-net		(574)	(0.1)			(663)	(0.1)			(4,227)	(0.2)			502	-
Total other expenses		56,784	6.3			58,599	7.1			109,734	6.4			116,536	7.5
Income before taxes and equity method investments		72,092	8.0			37,528	4.5			75,053	4.4			34,254	2.2
Income tax expense		19,032	2.1			3,717	0.4			22,159	1.3			1,626	0.1
Income before equity method investments		53,060	5.9			33,811	4.1			52,894	3.1			32,628	2.1
Share of equity method investments (income) loss-net		1,352	0.1			4,859	0.6			(6,853)	(0.4)			7,301	0.5
Net income	$	51,708	5.8	%	$	28,952	3.5	%	$	59,747	3.5	%	$	25,327	1.6	%

How We Assess the Performance of Our Business

Demand

Demand is an operating metric that we use in reference to the dollar value of orders placed (orders convert to net revenue upon a customer obtaining control of the merchandise) and excludes exchanges, shipping fees and cancellations. Demand represents the demand generated from all of our businesses including RH Interiors, RH Modern, RH Contemporary, RH Outdoor, RH Baby & Child, RH TEEN, RH Contract, Membership, Dmitriy & Co, Joseph Jeup and Waterworks, as well as sales from RH Hospitality and RH Outlet.

Non-GAAP Financial Measures

To supplement the condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, we use non-GAAP financial measures, including adjusted operating income, adjusted net income, EBITDA, adjusted EBITDA, and adjusted capital expenditures (collectively, "non-GAAP financial measures"). We compute these measures by adjusting the applicable GAAP measures to remove the impact of certain recurring and non-recurring charges and gains and the tax effect of these adjustments. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe that they provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by senior leadership in its financial and operational decision-making. The non-GAAP financial measures used by us in this Quarterly Report on Form 10-Q may be different from the non-GAAP financial measures, including similarly titled measures, used by other companies.

For more information on the non-GAAP financial measures, please see the reconciliation of GAAP to non-GAAP financial measures tables outlined below. These accompanying tables include details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures.


34\| 2025 SECOND QUARTER FORM 10-Q	PART I. FINANCIAL INFORMATION

Adjusted Operating Income. Adjusted operating income is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. We define adjusted operating income as consolidated operating income, adjusted for the impact of certain non-recurring and other items that we do not consider representative of our underlying operating performance.

Reconciliation of GAAP Net Income to Operating Income and Adjusted Operating Income


	THREE MONTHS ENDED				SIX MONTHS ENDED
	AUGUST 2,		AUGUST 3,		AUGUST 2,		AUGUST 3,
	2025		2024		2025		2024

	(in thousands)
Net income	$	51,708	$	28,952	$	59,747	$	25,327
Interest expense-net⁽¹⁾		57,358		59,262		113,961		116,034
Other (income) expense-net⁽¹⁾		(574)		(663)		(4,227)		502
Income tax expense⁽¹⁾		19,032		3,717		22,159		1,626
Share of equity method investments (income) loss-net⁽¹⁾		1,352		4,859		(6,853)		7,301
Operating income		128,876		96,127		184,787		150,790
Asset impairments⁽²⁾		3,597		-		3,597		-
Product recall⁽³⁾		1,913		-		1,913		-
Reorganization related costs⁽⁴⁾		1,233		-		1,233		-
Non-cash compensation⁽⁵⁾		-		861		851		2,808
Legal settlements-net⁽⁶⁾		-		-		-		(9,375)
Adjusted operating income	$	135,619	$	96,988	$	192,381	$	144,223

(1)

Refer to discussion "Three Months Ended August 2, 2025 Compared to Three Months Ended August 3, 2024" and "Six Months Ended August 2, 2025 Compared to Six Months Ended August 3, 2024" below for a discussion of our results of operations for the three and six months ended August 2, 2025 and August 3, 2024.

(2)	Represents inventory impairment of $2.6 million and property and equipment impairment of $1.0 million, primarily related to Galleries under construction.

(3)	Represents costs and inventory charges associated with a product recall initiated in the second quarter of fiscal 2025.

(4)	Represents severance costs and related payroll taxes associated with a reorganization.

(5)	Represents the amortization of the non-cash compensation charge related to an option grant made to Mr. Friedman in October 2020.

(6)	Represents favorable legal settlements received of $10 million, partially offset by costs incurred in connection with one of the matters.


PART I. FINANCIAL INFORMATION	2025 SECOND QUARTER FORM 10-Q \| 35

Adjusted Net Income. Adjusted net income is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. We define adjusted net income as consolidated net income, adjusted for the impact of certain non-recurring and other items that we do not consider representative of our underlying operating performance.

Reconciliation of GAAP Net Income to Adjusted Net Income


	THREE MONTHS ENDED				SIX MONTHS ENDED
	AUGUST 2,		AUGUST 3,		AUGUST 2,		AUGUST 3,
	2025		2024		2025		2024

	(in thousands)
Net income	$	51,708	$	28,952	$	59,747	$	25,327
Adjustments pre-tax:
Asset impairments⁽¹⁾		3,597		-		3,597		-
Product recall⁽¹⁾		1,913		-		1,913		-
Reorganization related costs⁽¹⁾		1,233		-		1,233		-
Non-cash compensation⁽¹⁾		-		861		851		2,808
Legal settlements-net⁽¹⁾		-		-		-		(9,375)
Subtotal adjusted items		6,743		861		7,594		(6,567)
Impact of income tax items⁽²⁾		(1,991)		(1,204)		(84)		76
Share of equity method investments (income) loss-net⁽¹⁾		1,352		4,859		(6,853)		7,301
Adjusted net income	$	57,812	$	33,468	$	60,404	$	26,137

(1)	Refer to table titled "Reconciliation of GAAP Net Income to Operating Income and Adjusted Operating Income" and the related footnotes for additional information.

(2)

We exclude the GAAP tax provision and apply a non-GAAP tax provision based upon (i) adjusted pre-tax net income, (ii) the projected annual adjusted tax rate and (iii) the exclusion of material discrete tax items that are unusual or infrequent. The adjustments for the three months ended August 2, 2025 and August 3, 2024 are based on adjusted tax rates of 26.7% and 12.8%, respectively. The adjustments for the six months ended August 2, 2025 and August 3, 2024 are based on adjusted tax rates of 26.9% and 5.6%, respectively.


36\| 2025 SECOND QUARTER FORM 10-Q	PART I. FINANCIAL INFORMATION

EBITDA and Adjusted EBITDA. EBITDA and Adjusted EBITDA are supplemental measures of financial performance that are not required by, or presented in accordance with, GAAP. We define EBITDA as consolidated net income before depreciation and amortization, interest expense-net and income tax expense. Adjusted EBITDA reflects further adjustments to EBITDA to eliminate the impact of non-cash compensation, as well as certain non-recurring and other items that we do not consider representative of our underlying operating performance.

Reconciliation of GAAP Net Income to EBITDA and Adjusted EBITDA


	THREE MONTHS ENDED				SIX MONTHS ENDED
	AUGUST 2,		AUGUST 3,		AUGUST 2,		AUGUST 3,
	2025		2024		2025		2024

	(in thousands)
Net income	$	51,708	$	28,952	$	59,747	$	25,327
Depreciation and amortization		34,629		32,257		69,865		63,084
Interest expense-net		57,358		59,262		113,961		116,034
Income tax expense		19,032		3,717		22,159		1,626
EBITDA		162,727		124,188		265,732		206,071
Non-cash compensation⁽¹⁾		11,633		11,529		24,007		22,073
Capitalized cloud computing amortization⁽²⁾		3,240		2,694		6,156		5,165
Asset impairments⁽³⁾		3,597		-		3,597		-
Product recall⁽³⁾		1,913		-		1,913		-
Reorganization related costs⁽³⁾		1,233		-		1,233		-
Share of equity method investments (income) loss-net⁽³⁾		1,352		4,859		(6,853)		7,301
Other (income) expense-net⁽³⁾		(574)		(663)		(4,227)		502
Legal settlements-net⁽³⁾		-		-		-		(9,375)
Adjusted EBITDA	$	185,121	$	142,607	$	291,558	$	231,737

(1)	Represents non-cash compensation related to equity awards granted to employees, including the amortization of the non-cash compensation charge related to an option grant made to Mr. Friedman in October 2020.

(2)	Represents amortization associated with capitalized cloud computing costs.

(3)	Refer to table titled "Reconciliation of GAAP Net Income to Operating Income and Adjusted Operating Income" and the related footnotes for additional information.

Adjusted Capital Expenditures. We define adjusted capital expenditures as capital expenditures from investing activities and cash outflows of capital related to construction activities to design and build landlord-owned leased assets, net of tenant allowances received.

Reconciliation of Adjusted Capital Expenditures


	SIX MONTHS ENDED
	AUGUST 2,		AUGUST 3,
	2025		2024

	(in thousands)
Capital expenditures	$	109,565	$	115,340
Landlord assets under construction-net of tenant allowances		46,486		17,461
Adjusted capital expenditures	$	156,051	$	132,801


PART I. FINANCIAL INFORMATION	2025 SECOND QUARTER FORM 10-Q \| 37

In addition, we also received landlord tenant allowances under finance leases subsequent to lease commencement of $6.2 million in the six months ended August 2, 2025, which are reflected as a reduction to principal payments under finance leases-net of tenant allowanceswithin financing activities on the condensed consolidated statements of cash flows. We did not receive any such tenant allowances in the six months ended August 3, 2024.

Retail Metrics

Our retail location square footage metrics and activity were as follows:


	SIX MONTHS ENDED
	AUGUST 2,			AUGUST 3,
	2025			2024
		TOTAL			TOTAL
		SELLING SQUARE			SELLING SQUARE
	COUNT	FOOTAGE⁽¹⁾		COUNT	FOOTAGE⁽¹⁾

	(square footage in thousands)
Beginning of period	83		1,527	84		1,378
RH Design Galleries
Oklahoma City	1		31.1	-		-
Montreal	1		31.1	-		-
Cleveland	-		-	1		33.1
Palo Alto	-		-	1		32.5
Brussels	-		-	1		27.7
Madrid	-		-	1		8.3
RH Legacy Galleries
Cleveland	-		-	(1)		(7.1)
Palo Alto	-		-	(1)		(6.1)
RH Outdoor Galleries
Greenwich	1		4.2	-		-
East Hampton	1		2.6	-		-
RH Baby & Child and TEEN Gallery
Greenwich	(1)		(4.2)	-		-
Waterworks Showroom
Dallas (remodel)	-		2.4	-		-
End of period	86		1,594	86		1,466
Total square footage at end of period⁽²⁾			2,181			2,020

(1)

Represents retail space at our retail locations used to sell our products, as well as space for our restaurants and wine bars. Excludes backrooms at retail locations used for storage, office space, food preparation, kitchen space or similar purpose, as well as exterior sales space located outside a retail location, such as courtyards, gardens and rooftops.

Includes approximately 89,000 square feet related to three owned retail locations as of both August 2, 2025 and August 3, 2024,

(2)	Includes approximately 142,000 square feet related to three owned retail locations as of both August 2, 2025 and August 3, 2024.


38\| 2025 SECOND QUARTER FORM 10-Q	PART I. FINANCIAL INFORMATION

Weighted-average square footage and selling square footage are calculated based on the number of days a retail location was opened during the period divided by the total number of days in the period, and were as follows:

THREE MONTHS ENDED

SIX MONTHS ENDED

AUGUST 2,

AUGUST 3,

AUGUST 2,

AUGUST 3,

2025

2024

2025

2024

(in thousands)

Weighted-average square footage

2,123

2,003

2,111

1,969

Weighted-average selling square footage

1,548

1,455

1,538

1,429

Three Months Ended August 2, 2025 Compared to Three Months Ended August 3, 2024


	THREE MONTHS ENDED
	AUGUST 2,						AUGUST 3,
	2025						2024
	RH SEGMENT		WATERWORKS		TOTAL⁽¹⁾		RH SEGMENT		WATERWORKS		TOTAL⁽¹⁾

	(in thousands)
Net revenues⁽²⁾	$	846,717	$	52,434	$	899,151	$	780,925	$	48,730	$	829,655
Cost of goods sold		465,811		24,081		489,892		432,301		22,597		454,898
Gross profit		380,906		28,353		409,259		348,624		26,133		374,757
Selling, general and administrative expenses		258,899		21,484		280,383		258,958		19,672		278,630
Operating income	$	122,007	$	6,869	$	128,876	$	89,666	$	6,461	$	96,127

(1)

The results for the Real Estate segment were immaterial in the three months ended August 2, 2025 and August 3, 2024, thus, such results are presented within the RH Segment each period. Refer to Note 15-Segment Reportingin the condensed consolidated financial statements. Additionally, all intercompany transactions are immaterial and have been eliminated.

(2)	RH Segment net revenues include outlet revenues of $72 million and $64 million for the three months ended August 2, 2025 and August 3, 2024, respectively.

Net revenues

Consolidated net revenues increased $69 million, or 8.4%, to $899 million in the three months ended August 2, 2025 compared to $830 million in the three months ended August 3, 2024.

RH Segment net revenues

RH Segment net revenues increased $66 million, or 8.4%, to $847 million in the three months ended August 2, 2025 compared to $781 million in the three months ended August 3, 2024. The below discussion highlights the primary factors that impacted RH Segment net revenues, which are listed in order of magnitude.

RH Segment net revenues for the three months ended August 2, 2025 increased primarily due to higher revenue in our core business driven by our continued product transformation and platform expansion. In addition, hospitality revenue increased as a result of new Gallery openings and we had higher outlet revenue.

Waterworks net revenues

Waterworks net revenues increased $3.7 million, or 7.6%, to $52 million in the three months ended August 2, 2025 compared to $49 million in the three months ended August 3, 2024.

Gross profit

Consolidated gross profit increased $35 million, or 9.2%, to $409 million in the three months ended August 2, 2025 compared to $375 million in the three months ended August 3, 2024. As a percentage of net revenues, consolidated gross margin increased 30 basis points to 45.5% of net revenues in the three months ended August 2, 2025 from 45.2% of net revenues in the three months ended August 3, 2024.


PART I. FINANCIAL INFORMATION	2025 SECOND QUARTER FORM 10-Q \| 39

RH Segment gross profit

RH Segment gross profit increased $32 million, or 9.3%, to $381 million in the three months ended August 2, 2025 compared to $349 million in the three months ended August 3, 2024. As a percentage of net revenues, RH Segment gross margin increased 40 basis points to 45.0% of net revenues in the three months ended August 2, 2025 from 44.6% of net revenues in the three months ended August 3, 2024.

The increase in RH Segment gross margin was primarily attributable to increased margins in the RH core business year over year as well as leverage in shipping costs and occupancy costs. RH Segment gross margin in the three months ended August 2, 2025 was negatively impacted by $2.6 million of asset impairments and $1.4 million in costs related to a product recall. Excluding the $4.0 million of such costs, RH Segment gross margin would have been 50 basis points higher at 45.5% of net revenues for the three months ended August 2, 2025.

Waterworks gross profit

Waterworks gross profit increased $2.2 million, or 8.5%, to $28 million in the three months ended August 2, 2025 compared to $26 million in the three months ended August 3, 2024. As a percentage of net revenues, Waterworks gross margin increased 50 basis points to 54.1% of net revenues in the three months ended August 2, 2025 from 53.6% of net revenues in the three months ended August 3, 2024.

Selling, general and administrative expenses

Consolidated selling, general and administrative expenses increased $1.8 million, or 0.6%, to $280 million in the three months ended August 2, 2025 compared to $279 million in the three months ended August 3, 2024.

RH Segment selling, general and administrative expenses

RH Segment selling, general and administrative expenses was $259 million in both the three months ended August 2, 2025 and August 3, 2024. RH Segment selling, general and administrative expenses were 30.6% and 33.2% of net revenues for the three months ended August 2, 2025 and August 3, 2024, respectively.

The decrease in selling, general and administrative expenses as a percentage of net revenues was primarily driven by a decrease in advertising costs due to the timing of the 2025 RH Interiors Sourcebook circulation as well as reduction in our 2025 RH Modern Sourcebook costs. In addition, leverage in our occupancy costs year over year also contributed to the decrease. This decrease was partially offset by an increase in compensation costs, as well as pre-opening costs and other corporate costs. RH Segment selling, general and administrative expenses for the three months ended August 2, 2025 was negatively impacted by $1.2 million of reorganization related costs, $1.0 million of asset impairments and $0.5 million related to a product recall. RH Segment selling, general and administrative expenses for the three months ended August 3, 2024 included non-cash compensation of $0.9 million related to an option grant made to Mr. Friedman in October 2020. Excluding the $2.7 million and $0.9 million of such costs, RH Segment selling, general and administrative expenses would have decreased 270 basis points to 30.3% from 33.0% of net revenues for the three months ended August 2, 2025 and August 3, 2024, respectively.

Waterworks selling, general and administrative expenses

Waterworks selling, general and administrative expenses increased $1.8 million, or 9.2%, to $21 million in the three months ended August 2, 2025 compared to $20 million in the three months ended August 3, 2024. Waterworks selling, general and administrative expenses were 41.0% and 40.4% of net revenues for the three months ended August 2, 2025 and August 3, 2024, respectively.


40\| 2025 SECOND QUARTER FORM 10-Q	PART I. FINANCIAL INFORMATION

Interest expense-net

Interest expense-net consisted of the following:


	THREE MONTHS ENDED
	AUGUST 2,		AUGUST 3,
	2025		2024

	(in thousands)
Term loan interest expense	$	45,157	$	52,899
Finance lease interest expense		9,248		7,922
Asset based credit facility		2,997		152
Other interest expense		1,257		966
Capitalized interest for capital projects		(935)		(1,826)
Interest income		(366)		(851)
Interest expense-net	$	57,358	$	59,262

Other (income) expense-net

Other (income) expense-net consisted of the following:


	THREE MONTHS ENDED
	AUGUST 2,		AUGUST 3,
	2025		2024

	(in thousands)
Foreign exchange from transactions⁽¹⁾	$	(364)	$	190
Foreign exchange from remeasurement of intercompany loans⁽²⁾		(210)		(853)
Other (income) expense-net	$	(574)	$	(663)

(1)	Represents net foreign exchange gains and losses related to exchange rate changes affecting foreign currency denominated transactions, primarily between the U.S. dollar as compared to the euro and pound sterling.

(2)	Represents remeasurement of intercompany loans with subsidiaries in Switzerland and the United Kingdom.

Income tax expense


	THREE MONTHS ENDED
	AUGUST 2,			AUGUST 3,
	2025			2024

	(dollars in thousands)
Income tax expense	$	19,032		$	3,717
Effective tax rate		26.9	%		11.4	%

The increase in our effective tax rate for the three months ended August 2, 2025 compared to the three 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.

Share of equity method investments loss-net

Our share of equity method investments loss was $1.4 million and $4.9 million in the three months ended August 2, 2025 and August 3, 2024, respectively.


PART I. FINANCIAL INFORMATION	2025 SECOND QUARTER FORM 10-Q \| 41

Six Months Ended August 2, 2025 Compared to Six Months Ended August 3, 2024


	SIX MONTHS ENDED
	AUGUST 2,						AUGUST 3,
	2025						2024
	RH SEGMENT		WATERWORKS		TOTAL⁽¹⁾		RH SEGMENT		WATERWORKS		TOTAL⁽¹⁾

	(in thousands)
Net revenues⁽²⁾	$	1,611,715	$	101,388	$	1,713,103	$	1,457,991	$	98,624	$	1,556,615
Cost of goods sold		901,015		47,496		948,511		819,559		46,261		865,820
Gross profit		710,700		53,892		764,592		638,432		52,363		690,795
Selling, general and administrative expenses		538,089		41,716		579,805		503,107		36,898		540,005
Operating income	$	172,611	$	12,176	$	184,787	$	135,325	$	15,465	$	150,790

(1)	The results for the Real Estate segment were immaterial in both the six months ended August 2, 2025 and August 3, 2024, thus, such results are presented within the RH Segment in each period. Refer to Note 15-Segment Reportingin the condensed consolidated financial statements.

(2)	RH Segment net revenues include outlet revenues of $139 million and $126 million for the six months ended August 2, 2025 and August 3, 2024, respectively.

Net revenues

Consolidated net revenues increased $156 million, or 10.1%, to $1,713 million in the six months ended August 2, 2025 compared to $1,557 million in the six months ended August 3, 2024.

RH Segment net revenues

RH Segment net revenues increased $154 million, or 10.5%, to $1,612 million in the six months ended August 2, 2025 compared to $1,458 million in the six months ended August 3, 2024. The below discussion highlights several significant factors that impacted RH Segment net revenues, which are listed in order of magnitude.

RH Segment net revenues for the six months ended August 2, 2025 increased primarily due to higher revenue in our core business driven by our continued product transformation and platform expansion. In addition, hospitality revenue increased as a result of new Gallery openings and we had higher outlet revenue.

Waterworks net revenues

Waterworks net revenues increased $2.8 million, or 2.8%, to $101 million in the six months ended August 2, 2025 compared to $99 million in the six months ended August 3, 2024.

Gross profit

Consolidated gross profit increased $74 million, or 10.7%, to $765 million in the six months ended August 2, 2025 compared to $691 million in the six months ended August 3, 2024. As a percentage of net revenues, consolidated gross margin increased 20 basis points to 44.6% of net revenues in the six months ended August 2, 2025 from 44.4% of net revenues in the six months ended August 3, 2024.

RH Segment gross profit

RH Segment gross profit increased $72 million, or 11.3%, to $711 million in the six months ended August 2, 2025 from $638 million in the six months ended August 3, 2024. As a percentage of net revenues, RH Segment gross margin increased 30 basis points to 44.1% of net revenues in the six months ended August 2, 2025 from 43.8% of net revenues in the six months ended August 3, 2024.

The increase in RH Segment gross margin was primarily attributable to leverage in occupancy costs and shipping costs as well as increased margins in the RH core business year over year. This increase in gross margin was partially offset by an increase in other product costs. RH Segment gross profit for the six months ended August 2, 2025 was negatively impacted by $2.6 million of asset impairments and $1.4 million of costs related to a product recall. Excluding the $4.0 million of such costs, RH Segment gross margin would have been 20 basis points higher at 44.3% of net revenues for the six months ended August 2, 2025.


42\| 2025 SECOND QUARTER FORM 10-Q	PART I. FINANCIAL INFORMATION

Waterworks gross profit

Waterworks gross profit increased $1.5 million, or 2.9%, to $54 million in the six months ended August 2, 2025 compared to $52 million in the six months ended August 3, 2024. As a percentage of net revenues, Waterworks gross margin increased 10 basis points to 53.2% of net revenues in the six months ended August 2, 2025 from 53.1% of net revenues in the six months ended August 3, 2024.

Selling, general and administrative expenses

Consolidated selling, general and administrative expenses increased $40 million, or 7.4%, to $580 million in the six months ended August 2, 2025 compared to $540 million in the six months ended August 3, 2024.

RH Segment selling, general and administrative expenses

RH Segment selling, general and administrative expenses increased $35 million, or 7.0%, to $538 million in the six months ended August 2, 2025 compared to $503 million in the six months ended August 3, 2024. RH Segment selling, general and administrative expenses were 33.4% and 34.5% of net revenues for the six months ended August 2, 2025 and August 3, 2024, respectively.

The decrease in selling, general and administrative expenses as a percentage of net revenues was primarily driven by a decrease in advertising costs due to reduced Sourcebook circulation, as well as leverage in occupancy and corporate costs year over year. This decrease was partially offset by an increase in compensation costs. RH Segment selling, general and administrative expenses for the six months ended August 2, 2025 was negatively impacted by $1.2 million of reorganization related costs, $1.0 million of asset impairments, $0.9 million of non-cash compensation related to an option grant made to Mr. Friedman in October 2020 and $0.5 million related to a product recall. RH Segment selling, general and administrative expenses for the six months ended August 3, 2024 included favorable net legal settlements of $6.2 million and non-cash compensation of $2.8 million related to Mr. Friedman's 2020 option grant. Excluding the $3.6 million and $9.0 million of such costs, RH Segment selling, general and administrative expenses would have decreased 160 basis points to 33.1% from 34.7% of net revenues for the six months ended August 2, 2025 and August 3, 2024, respectively.

Waterworks selling, general and administrative expenses

Waterworks selling, general and administrative expenses increased $4.8 million, or 13.1%, to $42 million in the six months ended August 2, 2025 compared to $37 million in the six months ended August 3, 2024. Waterworks selling, general and administrative expenses were 41.1% and 37.4% of net revenues for the six months ended August 2, 2025 and August 3, 2024, respectively.

Waterworks selling, general and administrative expenses in the six months ended August 3, 2024 included $3.2 million related to a favorable legal settlement. Excluding the $3.2 million of such costs, Waterworks selling, general and administrative expenses would have been 330 basis points higher at 40.7% of net revenues for the six months ended August 3, 2024.

Interest expense-net

Interest expense-net consisted of the following:


	SIX MONTHS ENDED
	AUGUST 2,		AUGUST 3,
	2025		2024

	(in thousands)
Term loan interest expense	$	90,397	$	104,843
Finance lease interest expense		18,193		15,329
Asset based credit facility		6,861		152
Other interest expense		2,172		2,079
Interest income		(1,947)		(1,917)
Capitalized interest for capital projects		(1,715)		(4,452)
Interest expense-net	$	113,961	$	116,034


PART I. FINANCIAL INFORMATION	2025 SECOND QUARTER FORM 10-Q \| 43

Other (income) expense-net

Other (income) expense-net consisted of the following in each period:


	SIX MONTHS ENDED
	AUGUST 2,		AUGUST 3,
	2025		2024

	(in thousands)
Foreign exchange from transactions⁽¹⁾	$	(733)	$	1,138
Foreign exchange from remeasurement of intercompany loans⁽²⁾		(3,494)		(636)
Other (income) expense-net	$	(4,227)	$	502

(1)	Represents net foreign exchange gains and losses related to exchange rate changes affecting foreign currency denominated transactions, primarily between the U.S. dollar as compared to the euro and pound sterling.

(2)	Represents remeasurement of intercompany loans with subsidiaries in Switzerland and the United Kingdom.

Income tax expense


	SIX MONTHS ENDED
	AUGUST 2,			AUGUST 3,
	2025			2024

	(dollars in thousands)
Income tax expense	$	22,159		$	1,626
Effective tax rate		27.1	%		6.0	%

The increase in our effective tax rate for the six months ended August 2, 2025 compared to the 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.

Share of equity method investments (income) loss-net

Our share of equity method investments income of $6.9 million in the six months ended August 2, 2025 was primarily attributable to an Aspen LLC distribution in the first quarter of fiscal 2025 of $7.9 million (refer to Note 6-Variable Interest Entities in the condensed consolidated financial statements). Our share of equity method investments loss in the six months ended August 3, 2024 was $7.3 million.


44\| 2025 SECOND QUARTER FORM 10-Q	PART I. FINANCIAL INFORMATION

Liquidity and Capital Resources

Overview

Our principal sources of liquidity are cash flows generated from operations, our current balances of cash and cash equivalents, and amounts available under our ABL Credit Agreement.

Net debt and availability under the ABL Credit Agreement were as follows:


	AUGUST 2,		FEBRUARY 1,
	2025		2025

		(in thousands)
Asset based credit facility⁽¹⁾	$	135,000	$	200,000
Term loan B⁽¹⁾		1,925,000		1,935,000
Term loan B-2⁽¹⁾		486,250		488,750
Notes payable for share repurchases		315		315
Total debt	$	2,546,565	$	2,624,065
Cash and cash equivalents		(34,560)		(30,413)
Total net debt⁽²⁾	$	2,512,005	$	2,593,652
Availability under the asset based credit facility-net⁽³⁾	$	417,759	$	355,260

(1)	Amounts exclude discounts upon original issuance and third party offering and debt issuance costs.

(2)	Net debt as of August 2, 2025 and February 1, 2025 excludes non-recourse real estate loans of $18 million as of both periods. These loans are secured by specific real estate assets and the associated creditors do not have recourse against RH's general assets.

(3)	The amount available for borrowing under the revolving line of credit under the ABL Credit Agreement is presented net of $47 million and $45 million in outstanding letters of credit as of August 2, 2025 and February 1, 2025, respectively.

General

The primary cash needs of our business have historically been for merchandise inventories, payroll, rent for our retail and outlet locations, capital expenditures associated with opening new locations and related real estate investments, updating existing locations, as well as the development of our infrastructure and information technology, and Sourcebooks. We seek out and evaluate opportunities for effectively managing and deploying capital in ways that improve working capital and support and enhance our business initiatives and strategies. During fiscal 2022 and fiscal 2023, we invested $2,265 million of cash, inclusive of excise taxes paid, in the purchase of shares of our common stock pursuant to our Share Repurchase Program. We continuously evaluate our capital allocation strategy and may engage in future investments in connection with existing or new share repurchase programs (refer to "Share Repurchase Program" below), which may include investments in derivatives or other equity linked instruments. We have in the past been, and continue to be, opportunistic in responding to favorable market conditions regarding both sources and uses of capital. Capital raised from debt financing arrangements has enabled us to pursue various investments, including our investments in joint ventures. We expect to continue to take an opportunistic approach regarding both sources and uses of capital in connection with our business.

We believe our capital structure provides us with substantial optionality regarding capital allocation. Our near-term decisions regarding the sources and uses of capital will continue to reflect and adapt to changes in market conditions and our business, including further developments with respect to macroeconomic factors affecting business conditions, such as trends in luxury housing, increases in interest rates, equity market performance and inflation. We believe our existing cash balances and operating cash flows, in conjunction with available financing arrangements, will be sufficient to repay our debt obligations as they become due, meet working capital requirements and fulfill other capital needs for more than the next 12 months.

While we do not anticipate that we will require additional debt financing to fund our operations, our goal is to continue to be in a position to take advantage of the many opportunities that we identify in connection with our business and operations. We have pursued in the past, and may pursue in the future, additional strategies to generate capital to pursue opportunities and investments, including through the strategic sale of existing assets, utilization of our credit facilities, entry into various credit agreements and other new debt financing arrangements that present attractive terms. We expect to continue to use additional sources of debt financing in future periods as a source of additional capital to fund our various investments.


PART I. FINANCIAL INFORMATION	2025 SECOND QUARTER FORM 10-Q \| 45

To the extent we choose to secure additional sources of liquidity through incremental debt financing, there can be no assurances that we will be able to raise such financing on favorable terms, if at all, or that future financing requirements will not require us to raise money through an equity financing or by other means that could be dilutive to holders of our capital stock. Any adverse developments in the U.S. or global credit markets could affect our ability to manage our debt obligations and our ability to access future debt. In addition, agreements governing existing or new debt facilities may restrict our ability to operate our business in the manner we currently expect or to make required payments with respect to existing commitments, including the repayment of the principal amount of our convertible senior notes in cash, whether upon stated maturity, early conversion or otherwise of such convertible senior notes. To the extent we need to seek waivers from any provider of debt financing, or we fail to observe the covenants or other requirements of existing or new debt facilities, any such event could have an impact on our other commitments and obligations, including triggering cross defaults or other consequences with respect to other indebtedness. Our current level of indebtedness, and any additional indebtedness that we may incur, exposes us to certain risks with regards to interest rate increases and fluctuations. Our ability to make interest payments or to refinance any of our indebtedness to manage such interest rates may be limited or negatively affected by credit market conditions, macroeconomic trends and other risks.

Credit Facilities and Debt Arrangements

We amended and restated the ABL Credit Agreement in July 2025, which provides an asset based credit facility with an 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 to the ABL Credit Agreement 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 accordion feature may be added as a first-in, last-out term loan 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 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.

We entered into a $2,000 million term debt financing in October 2021 (the "Term Loan B") by means of a Term Loan Credit Agreement through RHI as the borrower, Bank of America, N.A. as administrative agent and collateral agent, and the various lenders party thereto (the "Term Loan Credit Agreement"). Term Loan B has a maturity date of October 20, 2028. We are required to make quarterly principal payments of $5.0 million with respect to Term Loan B.

In May 2022, we entered into an incremental term debt financing (the "Term Loan B-2") in an aggregate principal amount equal to $500 million by means of an amendment to the Term Loan Credit Agreement with RHI as the borrower, Bank of America, N.A. as administrative agent and the various lenders parties thereto (the "Amended Term Loan Credit Agreement"). Term Loan B-2 has a maturity date of October 20, 2028. Term Loan B-2 constitutes a separate class from the existing Term Loan B under the Term Loan Credit Agreement. We are required to make quarterly principal payments of $1.3 million with respect to Term Loan B-2.

Capital

We have invested significant capital expenditures in developing and opening new Design Galleries, and these capital expenditures have increased in the past, and may continue to increase in future periods, as we open additional Design Galleries, which may require us to undertake upgrades to historical buildings or construction of new buildings. Our adjusted capital expenditures include capital expenditures from investing activities and cash outflows of capital related to construction activities to design and build landlord-owned leased assets, net of tenant allowances received during the construction period. During the six months ended August 2, 2025, adjusted capital expenditures were $156 million in aggregate, net of cash received related to landlord tenant allowances of $4.1 million. In addition, we also received landlord tenant allowances under finance leases subsequent to lease commencement of $6.2 million during the six months ended August 2, 2025. We anticipate our adjusted capital expenditures to be $275 million to $325 million in fiscal 2025, primarily related to our growth and expansion, including construction of new Design Galleries and infrastructure investments. Nevertheless, we may elect to pursue additional capital expenditures beyond those that are anticipated during any given fiscal period inasmuch as our strategy is to be opportunistic with respect to our investments and we may choose to pursue certain capital transactions based on the availability and timing of unique opportunities. There are a number of macroeconomic factors and uncertainties affecting the overall business climate as well as our business, including increased inflation and higher interest rates, and we may make adjustments to our allocation of capital in fiscal 2025 or beyond in response to these changing or other circumstances. We may also invest in other uses of our liquidity such as share repurchases, acquisitions and growth initiatives, including through joint ventures and real estate investments.


46\| 2025 SECOND QUARTER FORM 10-Q	PART I. FINANCIAL INFORMATION

Certain lease arrangements require the landlord to fund a portion of the construction related costs through payments directly to us. As we develop new Galleries, as well as other potential strategic initiatives in the future like our integrated hospitality experience, we are exploring other models for our real estate activities, which include different terms and conditions for real estate transactions. These transactions may involve longer lease terms or further purchases of, or joint ventures or other forms of equity ownership in, real estate interests associated with new sites and buildings that we wish to develop for new Gallery locations or other aspects of our business. These approaches might require different levels of capital investment on our part than a traditional store lease with a landlord. We have also begun executing changes in our real estate strategy to transition some projects from a leasing model to a development model, where we buy and develop real estate for our Design Galleries either directly or through joint ventures and other structures with the ultimate objective of (i) recouping a majority of the investment through a sale-leaseback arrangement and (ii) resulting in lower capital investment and lower rent. For example, we have entered into arrangements with a third-party development partner to develop real estate for future RH Design Galleries. In the event that such capital and other expenditures require us to pursue additional funding sources, we can provide no assurance that we will be successful in securing additional funding on attractive terms or at all. In addition, our capital needs and uses of capital may change in the future due to changes in our business or new opportunities that we may pursue.

Cash Flow Analysis

Cash flows from operating, investing, and financing activities were as follows:


	SIX MONTHS ENDED
	AUGUST 2,		AUGUST 3,
	2025		2024

	(in thousands)
Net cash provided by operating activities	$	224,319	$	67,306
Net cash used in investing activities		(134,148)		(124,763)
Net cash provided by (used in) financing activities		(87,239)		11,862
Net increase (decrease) in cash and cash equivalents		4,147		(45,355)
Cash and cash equivalents at end of period		34,560		78,333

Net Cash Provided by Operating Activities

Operating activities consist primarily of net income adjusted for non-cash items, including depreciation and amortization, impairments, stock-based compensation and the effect of changes in working capital and other activities.

For the six months ended August 2, 2025, net cash provided by operating activities was $224 million and consisted of net income of $60 million and an increase in non-cash items of $169 million, partially offset by a change in working capital and other activities of $4.3 million. The use of cash from working capital was primarily driven by a decrease in operating lease liabilities of $50 million, an increase in landlord assets under construction, net of tenant allowances, of $46 million, a decrease in accounts payable and accrued expenses of $22 million, an increase in prepaid expense and other assets of $13 million and a decrease in other current and non-current liabilities of $2.9 million. These uses of cash from working capital were partially offset by a decrease in merchandise inventory of $74 million, an increase in deferred revenue and customer deposits of $55 million and a decrease in accounts receivable of $2.4 million.

Net Cash Used in Investing Activities

Investing activities consist primarily of investments in capital expenditures related to investments in retail stores, information technology and systems infrastructure, as well as supply chain investments. Investing activities also include our strategic investments.

For the six months ended August 2, 2025, net cash used in investing activities was $134 million and was comprised of investments in retail stores, information technology and systems infrastructure of $110 million, a business acquisition of $32 million and an acquisition of an intangible asset of $3.0 million. These cash outflows were partially offset by cash received from a distribution of return of equity method investments of $7.9 million and receipt of a promissory note repaid by our equity method investee of $1.8 million.


PART I. FINANCIAL INFORMATION	2025 SECOND QUARTER FORM 10-Q \| 47

Net Cash Used in Financing Activities

Financing activities consist primarily of borrowings and repayments related to convertible senior notes and other financing arrangements, and cash used in connection with such financing activities include investments in our share repurchase program, repayment of indebtedness, including principal payments under finance lease agreements and other equity related transactions.

For the six months ended August 2, 2025, net cash used in financing activities was $87 million, primarily due to net repayments under the asset based credit facility of $65 million, payments under term loans of $13 million, net payments under finance lease agreements of $8.0 million and debt issuance costs of $2.8 million associated with the ABL Credit Agreement amendment.

Non-Cash Transactions

Non-cash transactions consist of non-cash additions of property and equipment and landlord assets under construction and reclassification of assets from landlord assets under construction to finance lease right-of-use assets, as well as excise tax from share repurchases, included in accounts payable and accrued expenses at period-end.

Cash Requirements from Contractual Obligations

Leases

We lease nearly all of our retail and outlet locations, corporate headquarters, distribution centers and home delivery center locations, as well as other storage and office space. Refer to Note 8-Leases in the condensed consolidated financial statements for further information on our lease arrangements, including the maturities of our operating and finance lease liabilities.

Most lease arrangements provide us with the option to renew the leases at defined terms. The table presenting the maturities of our lease liabilities included in Note 8-Leases in the condensed consolidated financial statements includes future obligations for renewal options that are reasonably certain to be exercised and are included in the measurement of the lease liability. Amounts presented therein do not include future lease payments under leases that have not commenced or estimated contingent rent due under operating and finance leases.

Asset Based Credit Facility

Refer to Note 9-Credit Facilities in the condensed consolidated financial statements for further information on our asset based credit facility, including the amount available for borrowing under the revolving line of credit, net of outstanding letters of credit.

Term Loan

Refer to Note 9-Credit Facilities in the condensed consolidated financial statements for further information on our Term Loan.

Real Estate Loans

Refer to Note 6-Variable Interest Entities in the condensed consolidated financial statements for further information on the real estate loan held as part of our joint ventures with a third-party development partner.


48\| 2025 SECOND QUARTER FORM 10-Q	PART I. FINANCIAL INFORMATION

Share Repurchase Program

In 2018, our Board of Directors authorized a share repurchase program through open market purchases, privately negotiated transactions or other means, including through Rule 10b-18 open market repurchases, Rule 10b5-1 trading plans or through the use of other techniques such as the acquisition of other equity linked instruments, accelerated share repurchases, including through privately negotiated arrangements in which a portion of the share repurchase program is committed in advance through a financial intermediary and/or in transactions involving hedging or derivatives.

On June 2, 2022, the Board of Directors authorized an additional $2,000 million for the purchase of shares of our outstanding common stock, which increased 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 six months ended August 2, 2025. As of August 2, 2025, $201 million remains available for future share repurchases under the Share Repurchase Program.

We regularly review share repurchase activity and consider various factors in determining whether and when to execute investments in connection with our share repurchase program, including, among others, current cash needs, capacity for leverage, cost of borrowings, results of operations and the market price of our common stock. We believe that our share repurchase program will continue to be an excellent allocation of capital for the long-term benefit of our shareholders. We may undertake other repurchase programs in the future with respect to our securities. Since January 1, 2023, share repurchases under our Share Repurchase Program are subject to a 1% excise tax imposed under the Inflation Reduction Act.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires senior leadership to make estimates and assumptions that affect amounts reported in the condensed consolidated financial statements and related notes, as well as the related disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We evaluate our accounting policies, estimates, and judgments on an on-going basis. We base our estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions and conditions and such differences could be material to the condensed consolidated financial statements.

Our senior leadership team evaluates the development and selection of our critical accounting policies and estimates and believes that certain of our significant accounting policies involve a higher degree of judgment or complexity and are most significant to reporting our consolidated results of operations and financial position and are therefore discussed as critical:

Merchandise Inventories-Reserves

Impairment-Long-Lived Assets

Lease Accounting-Determination of the Classification of New Real Estate Lease Contracts

Reasonably Certain Lease Term

Incremental Borrowing Rate

Fair Value

Variable Interest Entities

There have been no material changes to the critical accounting policies and estimates listed above from the disclosures included in the 2024 Form 10-K. For further discussion regarding these policies, refer to Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates in the 2024 Form 10-K.

Recently Issued Accounting Pronouncements

Refer to Note 2-Recently Issued Accounting Standards in the condensed consolidated financial statements within Part I of this Quarterly Report on Form 10-Q.


PART I. FINANCIAL INFORMATION	2025 SECOND QUARTER FORM 10-Q \| 49

RH published this content on September 11, 2025, and is solely responsible for the information contained herein. Distributed via SEC EDGAR on September 11, 2025 at 21:16 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]

Back

View original format