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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 1, 2025

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-35720

(Exact name of registrant as specified in its charter)


Delaware		45-3052669
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

15 Koch Road Corte Madera, CA		94925
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (415) 924-1005

Securities registered pursuant to Section 12(b) of the Act:


Common Stock, $0.0001 par value		RH	New York Stock Exchange, Inc.
(Title of each class)		(Trading symbol)	(Name of each exchange on which registered)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of December 5, 2025, 18,777,699 shares of the registrant’s common stock were outstanding.

Table of Contents

INDEX TO FORM 10-Q


		Page

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets (Unaudited) as of November 1, 2025 and February 1, 2025	3
	Condensed Consolidated Statements of Income (Unaudited) for the three and nine months ended November 1, 2025 and November 2, 2024	4
	Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the three and nine months ended November 1, 2025 and November 2, 2024	5
	Condensed Consolidated Statements of Stockholders’ Equity (Deficit) (Unaudited) for the three and nine months ended November 1, 2025 and November 2, 2024	6
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended November 1, 2025 and November 2, 2024	8
	Notes to Condensed Consolidated Financial Statements (Unaudited)	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	51
Item 4.	Controls and Procedures	52

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	53
Item 1A.	Risk Factors	53
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54
Item 3.	Defaults Upon Senior Securities	54
Item 4.	Mine Safety Disclosures	54
Item 5.	Other Information	54
Item 6.	Exhibits	55
Signatures		56


2 \| 2025 THIRD QUARTER FORM 10-Q	TABLE OF CONTENTS

Table of Contents

PART I

ITEM 1. FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	NOVEMBER 1,		FEBRUARY 1,
	2025		2025

	(in thousands)
ASSETS
Cash and cash equivalents	$	43,086	$	30,413
Accounts receivable—net		63,138		63,484
Merchandise inventories		874,914		1,019,591
Prepaid expense and other current assets		143,262		177,843
Total current assets		1,124,400		1,291,331
Property and equipment—net		2,175,433		1,883,176
Operating lease right-of-use assets		726,556		617,103
Goodwill		143,755		140,943
Tradenames, trademarks and other intangible assets—net		79,708		76,118
Deferred tax assets		147,941		147,723
Equity method investments		121,404		126,909
Other non-current assets		274,544		271,386
Total assets	$	4,793,741	$	4,554,689
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Accounts payable and accrued expenses	$	376,628	$	413,406
Deferred revenue and customer deposits		348,932		291,815
Operating lease liabilities		107,011		100,944
Other current liabilities		113,676		98,961
Total current liabilities		946,247		905,126
Asset based credit facility		65,000		200,000
Term loan B—net		1,890,567		1,903,144
Term loan B-2—net		467,483		468,019
Real estate loans—net		15,280		15,524
Non-current operating lease liabilities		658,328		573,468
Non-current finance lease liabilities		721,613		630,655
Deferred tax liabilities		11,360		10,394
Other non-current liabilities		14,517		11,948
Total liabilities		4,790,395		4,718,278
Commitments and contingencies (Note 14)
Stockholders’ equity (deficit)
Preferred stock—$0.0001 par value per share, 10,000,000 shares authorized, no shares issued or outstanding as of November 1, 2025 and February 1, 2025		—		—
Common stock—$0.0001 par value per share, 180,000,000 shares authorized, 18,776,949 shares issued and outstanding as of November 1, 2025; 18,726,116 shares issued and outstanding as of February 1, 2025		2		2
Additional paid-in capital		399,809		362,348
Accumulated other comprehensive income (loss)		18,375		(15,087)
Accumulated deficit		(414,840)		(510,852)
Total stockholders’ equity (deficit)		3,346		(163,589)
Total liabilities and stockholders’ equity (deficit)	$	4,793,741	$	4,554,689

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


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CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	THREE MONTHS ENDED				NINE MONTHS ENDED
	NOVEMBER 1,		NOVEMBER 2,		NOVEMBER 1,		NOVEMBER 2,
	2025		2024		2025		2024

	(in thousands, except share and per share amounts)
Net revenues	$	883,810	$	811,732	$	2,596,913	$	2,368,347
Cost of goods sold		494,074		450,392		1,442,585		1,316,212
Gross profit		389,736		361,340		1,154,328		1,052,135
Selling, general and administrative expenses		283,806		259,872		863,611		799,877
Operating income		105,930		101,468		290,717		252,258
Other expenses
Interest expense—net		57,152		57,590		171,113		173,624
Other (income) expense—net		694		27		(3,533)		529
Total other expenses		57,846		57,617		167,580		174,153
Income before taxes and equity method investments		48,084		43,851		123,137		78,105
Income tax expense		11,625		9,256		33,784		10,882
Income before equity method investments		36,459		34,595		89,353		67,223
Share of equity method investments (income) loss—net		194		1,427		(6,659)		8,728
Net income	$	36,265	$	33,168	$	96,012	$	58,495
Weighted-average shares used in computing basic net income per share		18,760,088		18,534,815		18,742,109		18,439,159
Basic net income per share	$	1.93	$	1.79	$	5.12	$	3.17
Weighted-average shares used in computing diluted net income per share		19,807,541		19,981,011		19,819,369		19,960,108
Diluted net income per share	$	1.83	$	1.66	$	4.84	$	2.93

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


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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	THREE MONTHS ENDED				NINE MONTHS ENDED
	NOVEMBER 1,		NOVEMBER 2,		NOVEMBER 1,		NOVEMBER 2,
	2025		2024		2025		2024

	(in thousands)
Net income	$	36,265	$	33,168	$	96,012	$	58,495
Net gain (loss) from foreign currency translation		(4,246)		(862)		33,462		3,080
Comprehensive income	$	32,019	$	32,306	$	129,474	$	61,575

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


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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)


	THREE MONTHS ENDED
	COMMON STOCK
						ACCUMULATED
				ADDITIONAL		OTHER				TOTAL
				PAID-IN		COMPREHENSIVE		ACCUMULATED		STOCKHOLDERS'
	SHARES	AMOUNT		CAPITAL		INCOME (LOSS)		DEFICIT		EQUITY (DEFICIT)

	(in thousands, except share amounts)
Balances—August 2, 2025	18,744,120	$	2	$	387,582	$	22,621	$	(451,105)	$	(40,900)
Stock-based compensation	—		—		11,308		—		—		11,308
Vested and delivered restricted stock units	192		—		(24)		—		—		(24)
Exercise of stock options	32,637		—		943		—		—		943
Net income	—		—		—		—		36,265		36,265
Net loss from foreign currency translation	—		—		—		(4,246)		—		(4,246)
Balances—November 1, 2025	18,776,949	$	2	$	399,809	$	18,375	$	(414,840)	$	3,346

Balances—August 3, 2024	18,482,697	$	2	$	321,214	$	2,004	$	(557,937)	$	(234,717)
Stock-based compensation	—		—		11,684		—		—		11,684
Issuance of restricted stock	8,000		—		—		—		—		—
Vested and delivered restricted stock units	192		—		(37)		—		—		(37)
Exercise of stock options	70,281		—		7,755		—		—		7,755
Settlement of convertible senior notes	39,121		—		—		—		—		—
Net income	—		—		—		—		33,168		33,168
Net loss from foreign currency translation	—		—		—		(862)		—		(862)
Balances—November 2, 2024	18,600,291	$	2	$	340,616	$	1,142	$	(524,769)	$	(183,009)


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

(Unaudited)


	NINE MONTHS ENDED
	COMMON STOCK
						ACCUMULATED
				ADDITIONAL		OTHER				TOTAL
				PAID-IN		COMPREHENSIVE		ACCUMULATED		STOCKHOLDERS'
	SHARES	AMOUNT		CAPITAL		INCOME (LOSS)		DEFICIT		EQUITY (DEFICIT)

	(in thousands, except share amounts)
Balances—February 1, 2025	18,726,116	$	2	$	362,348	$	(15,087)	$	(510,852)	$	(163,589)
Stock-based compensation	—		—		35,315		—		—		35,315
Issuance of restricted stock	4,690		—		—		—		—		—
Vested and delivered restricted stock units	1,212		—		(55)		—		—		(55)
Exercise of stock options	44,931		—		2,201		—		—		2,201
Net income	—		—		—		—		96,012		96,012
Net gain from foreign currency translation	—		—		—		33,462		—		33,462
Balances—November 1, 2025	18,776,949	$	2	$	399,809	$	18,375	$	(414,840)	$	3,346

Balances—February 3, 2024	18,315,613	$	2	$	287,806	$	(1,938)	$	(583,264)	$	(297,394)
Stock-based compensation	—		—		33,757		—		—		33,757
Issuance of restricted stock	15,829		—		—		—		—		—
Vested and delivered restricted stock units	1,009		—		(188)		—		—		(188)
Exercise of stock options	228,719		—		19,241		—		—		19,241
Settlement of convertible senior notes	39,121		—		—		—		—		—
Net income	—		—		—		—		58,495		58,495
Net gain from foreign currency translation	—		—		—		3,080		—		3,080
Balances—November 2, 2024	18,600,291	$	2	$	340,616	$	1,142	$	(524,769)	$	(183,009)

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


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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	NINE MONTHS ENDED
	NOVEMBER 1,		NOVEMBER 2,
	2025		2024

	(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	96,012	$	58,495
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		108,241		96,082
Non-cash operating lease cost		78,050		72,211
Stock-based compensation expense		35,315		33,757
Asset impairments		5,883		20,535
Non-cash finance lease interest expense		28,883		23,223
Product recall		1,913		—
Deferred income taxes		—		5,399
Share of equity method investments (income) loss—net		(6,659)		8,728
Distribution of return on equity method investment		4,630		—
Other non-cash items		4,631		6,529
Change in assets and liabilities:
Accounts receivable		497		(7,917)
Merchandise inventories		155,251		(224,244)
Prepaid expense and other assets		(21,507)		13,084
Landlord assets under construction—net of tenant allowances		(64,691)		(33,032)
Accounts payable and accrued expenses		(30,070)		43,812
Deferred revenue and customer deposits		52,313		25,065
Other current liabilities		12,712		(9,974)
Current and non-current operating lease liabilities		(78,837)		(73,137)
Other non-current obligations		(26,392)		(22,747)
Net cash provided by operating activities		356,175		35,869
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(158,387)		(179,897)
Acquisition of business		(32,119)		—
Equity method investments		(374)		(9,620)
Acquisition of intangible asset		(3,171)		—
Receipt of promissory note repayment from equity method investee		1,750		—
Distribution of return of equity method investment		7,916		—
Proceeds from insurance recoveries		2,325		—
Net cash used in investing activities		(182,060)		(189,517)


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Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(Unaudited)


	NINE MONTHS ENDED
	NOVEMBER 1,		NOVEMBER 2,
	2025		2024
	(in thousands)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under asset based credit facility		290,000		190,000
Repayments under asset based credit facility		(425,000)		—
Repayments under term loans		(18,750)		(18,750)
Repayments under real estate loans		(254)		(44)
Repayments of convertible senior notes		—		(41,904)
Debt issuance costs		(2,997)		—
Principal payments under finance lease agreements—net of tenant allowances		(7,789)		(19,609)
Repurchases of common stock—inclusive of excise taxes paid		—		(11,988)
Proceeds from exercise of stock options		2,201		19,241
Tax withholdings related to issuance of stock-based awards		(55)		(188)
Net cash provided by (used in) financing activities		(162,644)		116,758
Effects of foreign currency exchange rate translation on cash		1,202		214
Net increase (decrease) in cash and cash equivalents		12,673		(36,676)
Cash and cash equivalents
Beginning of period		30,413		123,688
End of period	$	43,086	$	87,012
Non-cash transactions
Property and equipment additions in accounts payable and accrued expenses at period-end	$	29,140	$	48,186
Landlord asset additions in accounts payable and accrued expenses at period-end		18,243		9,792

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


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1—THE COMPANY

Nature of Business

RH, a Delaware corporation, together with its subsidiaries (collectively, “we,” “us,” “our” or the “Company”), is 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.

As of November 1, 2025, we operated a total of 73 RH Galleries and 43 RH Outlet stores, one RH Guesthouse, one RH Interior Design Office and 14 Waterworks Showrooms throughout the United States, Canada and Europe. 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 November 1, 2025, and the results of operations for the three and nine months ended November 1, 2025 and November 2, 2024. Our current fiscal year, which consists of 52 weeks, ends on January 31, 2026 (“fiscal 2025”).

The condensed consolidated financial statements include our accounts and those of our wholly-owned subsidiaries, as well as the financial information of variable interest entities (“VIEs”) where we represent the primary beneficiary and have the power to direct the activities that most significantly impact the entity’s performance (refer to Note 6—Variable Interest Entities). Accordingly, all intercompany balances and transactions have been eliminated through the consolidation process.

Certain information and disclosures normally included in the notes to annual consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been condensed or omitted for purposes of these interim condensed consolidated financial statements.

The preparation of the condensed consolidated financial statements, in conformity with GAAP, requires our senior leadership team to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and such differences could be material to the condensed consolidated financial statements.

We have assessed various accounting estimates and other matters, including those that require consideration of forecasted financial information, using information that is reasonably available to us at this time. 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 and nine months ended November 1, 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 and nine months ended November 1, 2025, presented herein, are not necessarily indicative of the results to be expected for the full fiscal year.


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

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NOTE 2—RECENTLY ISSUED ACCOUNTING STANDARDS

New Accounting Standards or Updates Adopted

Joint Venture Formations: Recognition and Initial Measurement

In August 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-05—Business Combinations—Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement (“ASU 2023-05”). ASU 2023-05 applies to the formation of a “joint venture” or a “corporate joint venture” and requires a joint venture to initially measure all contributions received upon its formation at fair value. The guidance does not impact accounting by the venturers. We adopted this new guidance in the first quarter of fiscal 2025 on a prospective basis. While ASU 2023-05 is not currently applicable to us because our existing arrangements in variable interest entities do not meet the definition of joint ventures in the updated standard, we will apply this guidance to any future arrangements we enter into that meet the definition of a joint venture.

New Accounting Standards or Updates Not Yet Adopted

Income Taxes: Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU 2023-09—Improvements to Income Tax Disclosures (“ASU 2023-09”). This new guidance is designed to enhance the transparency and decision usefulness of income tax disclosures. The amendments of this update are related to the rate reconciliation and income taxes paid, requiring consistent categories and greater disaggregation of information in the rate reconciliation as well as income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. We expect to include additional disclosures within the annual financial statements for the fiscal year ended January 31, 2026 to comply with the requirements of ASU 2023-09.

Income Statement: Disaggregation of Income Statement Expenses

In November 2024, the FASB issued ASU 2024-03—Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40). This new guidance is designed to improve financial reporting by requiring public business entities to disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods, including amounts and qualitative descriptions of inventory purchases, employee compensation, depreciation and intangible asset amortization, among other requirements. In January 2025, the FASB issued ASU 2025-01—Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, which clarifies that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. The guidance is required to be adopted on a prospective basis and early adoption is permitted. 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 the condensed consolidated financial statements.

Intangibles—Goodwill and Other—Internal-Use Software: Improvements to Accounting for Internal-Use Software

In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”). This new guidance amends guidance related to accounting for internal-use software development costs and clarifies the criteria for capitalization. ASU 2025-06 is effective for fiscal years beginning after December 15, 2027. We are currently assessing the impact that adopting this ASU will have on the condensed consolidated financial statements.


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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 Accounting Standards Codification (“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 nine months ended November 1, 2025, we incurred $2.3 million 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:


	PURCHASE
	PRICE
	ALLOCATION
	(in thousands)
Merchandise inventories	$	5,451
Property and equipment		27,461
Operating lease right-of-use assets		4,443
Goodwill⁽¹⁾		2,770
Other assets		981
Deferred revenue and customer deposits		(3,471)
Operating lease liabilities		(4,273)
Other liabilities		(1,243)
Total	$	32,119

(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.


12 \| 2025 THIRD QUARTER FORM 10-Q	PART I. FINANCIAL INFORMATION

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NOTE 4—PREPAID EXPENSE AND OTHER ASSETS

Prepaid expense and other current assets consisted of the following:


	NOVEMBER 1,		FEBRUARY 1,
	2025		2025

	(in thousands)
Value added tax (VAT) receivable	$	32,252	$	9,866
Prepaid expenses		21,371		29,595
Vendor deposits		19,637		20,441
Capitalized cloud computing costs		11,419		9,851
Capitalized catalog costs		7,921		30,162
Tenant allowance receivable		6,744		12,668
Right of return asset for merchandise		6,548		6,237
Federal and state tax receivable⁽¹⁾		4,106		24,729
Promissory notes receivable, including interest⁽²⁾		1,154		3,674
Other current assets		32,110		30,620
Total prepaid expense and other current assets	$	143,262	$	177,843

(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. Refer to Note 6—Variable Interest Entities.

Other non-current assets consisted of the following:


	NOVEMBER 1,		FEBRUARY 1,
	2025		2025

	(in thousands)
Landlord assets under construction—net of tenant allowances	$	113,423	$	138,701
Initial direct costs prior to lease commencement		82,503		80,897
Capitalized cloud computing costs—net⁽¹⁾		29,304		22,738
Federal tax receivable—non-current⁽²⁾		19,483		—
Other deposits		8,354		7,754
Deferred financing fees		3,732		1,512
Vendor deposits—non-current		3,285		2,684
Other non-current assets		14,460		17,100
Total other non-current assets	$	274,544	$	271,386

(1)	Presented net of accumulated amortization of $40 million and $30 million as of November 1, 2025 and February 1, 2025, respectively.

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


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

Goodwill, tradenames, trademarks and other intangible assets for the RH Segment and Waterworks consisted of the following:


	RH SEGMENT				WATERWORKS
			TRADENAMES,				TRADENAMES,
			TRADEMARKS AND				TRADEMARKS AND
			OTHER INTANGIBLE				OTHER INTANGIBLE
	GOODWILL		ASSETS		GOODWILL⁽¹⁾		ASSETS⁽²⁾

	(in thousands)
February 1, 2025	$	140,943	$	59,118	$	—	$	17,000
Additions		2,770		3,872		—		—
Other⁽³⁾		—		(282)		—		—
Foreign currency translation		42		—		—		—
November 1, 2025	$	143,755	$	62,708	$	—	$	17,000

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

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

(3)	Represents disposals and amortization of patents.

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


14 \| 2025 THIRD QUARTER FORM 10-Q	PART I. FINANCIAL INFORMATION

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NOTE 6—VARIABLE INTEREST ENTITIES

Consolidated Variable Interest Entities and Noncontrolling Interests

In fiscal 2022, we formed eight privately-held limited liability companies (each, a “Member LLC” and collectively, the “Member LLCs” or the “consolidated variable interest entities”) for real estate development activities related to our Gallery transformation and global expansion strategies.

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

As of November 1, 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.

The carrying amounts and classification of the VIEs’ assets and liabilities included in the condensed consolidated balance sheets were as follows:


	NOVEMBER 1,		FEBRUARY 1,
	2025		2025

	(in thousands)
ASSETS
Cash and cash equivalents	$	1,597	$	2,177
Prepaid expense and other current assets		1,073		980
Total current assets		2,670		3,157
Property and equipment—net⁽¹⁾		286,631		259,057
Other non-current assets		7		6
Total assets	$	289,308	$	262,220
LIABILITIES
Accounts payable and accrued expenses	$	3,984	$	4,867
Other current liabilities		368		333
Total current liabilities		4,352		5,200
Real estate loan—net⁽²⁾		15,280		15,524
Other non-current liabilities		986		929
Total liabilities	$	20,618	$	21,653

(1)	Includes $76 million and $54 million of construction in progress as of November 1, 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. The Promissory Note bears interest at a fixed rate per annum equal to 5.37% until September 15, 2027, on which date the interest rate will reset based on the five-year treasury rate plus 2.00%, subject to a total interest rate floor of 3.00%. The Promissory Note is secured by the assets of the Member LLC and the creditor does not have recourse against RH’s general assets.

Equity Method Investments

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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In March 2025, the Aspen LLC in which we hold a 70 percent interest sold its sole real estate property. Subsequent to the property sale, we received $15 million from the Aspen LLC, which consisted of $2.9 million for the repayment of its outstanding promissory note to us, including accrued interest, and a capital distribution of $13 million. The capital distribution of $13 million represented a return of our contributed capital of $7.9 million and a return on investment of $4.6 million, which are included within cash flows from investing activities and cash flows from operating activities, respectively, on the condensed consolidated statements of cash flows. Following this capital distribution, the remaining net assets in this Aspen LLC are immaterial.

Other than as described above, we did not receive any distributions or have any undistributed earnings of equity method investments during the three or nine months ended November 1, 2025 and November 2, 2024.

Our maximum exposure to loss is the carrying value of each of the equity method investments as of November 1, 2025.

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

Accounts payable and accrued expenses consisted of the following:


	NOVEMBER 1,		FEBRUARY 1,
	2025		2025

	(in thousands)
Accounts payable	$	178,672	$	245,260
Accrued compensation		60,951		50,689
Accrued sales and use tax		35,215		27,685
Accrued occupancy		29,142		24,992
Accrued freight and duty		23,845		18,030
Accrued professional fees		13,536		5,281
Accrued legal contingencies⁽¹⁾		2,570		3,029
Other accrued expenses		32,697		38,440
Total accounts payable and accrued expenses	$	376,628	$	413,406

(1)	Refer to Note 14¾Commitments and Contingencies.

Other current liabilities consisted of the following:


	NOVEMBER 1,		FEBRUARY 1,
	2025		2025

	(in thousands)
Allowance for sales returns	$	25,730	$	23,512
Current portion of term loans		25,000		25,000
Finance lease liabilities		20,737		21,135
Unredeemed gift card and merchandise credit liability		20,104		19,546
Federal tax payable		14,876		3,242
Foreign tax payable		1,790		1,980
Other current liabilities		5,439		4,546
Total other current liabilities	$	113,676	$	98,961


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Supplier Finance Program

We facilitate a voluntary supply chain financing program (the “Financing Program”) with a third-party financial institution (the “Bank”) to provide participating suppliers with the opportunity to receive early payment on invoices, net of a discount charged to the supplier by the Bank. As of November 1, 2025 and February 1, 2025, we had $21 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 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 nine months ended November 1, 2025, we incurred total charges relating to the reorganization of $1.2 million, consisting primarily of severance costs and related taxes. As of November 1, 2025 and February 1, 2025, we had accruals of $0.8 million and $3.4 million, respectively, included within accounts payable and accrued expenses on the condensed consolidated balance sheets related to the reorganizations.

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 November 1, 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 November 1, 2025 and November 2, 2024, we recognized $4.5 million and $4.6 million, respectively, of revenue related to previous deferrals related to our gift cards. During the nine months ended November 1, 2025 and November 2, 2024, we recognized $16 million and $15 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.

NOTE 8—LEASES

Lease costs—net consisted of the following:


	THREE MONTHS ENDED				NINE MONTHS ENDED
	NOVEMBER 1,		NOVEMBER 2,		NOVEMBER 1,		NOVEMBER 2,
	2025		2024		2025		2024

	(in thousands)
Operating lease costs⁽¹⁾	$	38,184	$	32,891	$	110,077	$	99,129
Finance lease costs
Amortization of leased assets⁽¹⁾		15,605		13,264		45,153		38,582
Interest on lease liabilities⁽²⁾		10,690		7,894		28,883		23,223
Variable lease costs⁽³⁾		5,764		4,748		19,393		17,869
Sublease income⁽⁴⁾		(1,187)		(1,195)		(3,558)		(3,528)
Total lease costs—net	$	69,056	$	57,602	$	199,948	$	175,275

(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 based on our accounting policy.

(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.


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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 $3.5 million and $2.2 million for the three months ended November 1, 2025 and November 2, 2024, respectively, and $12 million and $9.7 million for the nine months ended November 1, 2025 and November 2, 2024, respectively, as well as charges associated with common area maintenance of $2.2 million and $2.6 million for the three months ended November 1, 2025 and November 2, 2024, respectively, and $7.7 million and $8.2 million for the nine months ended November 1, 2025 and November 2, 2024, respectively. Other variable costs, which include single lease cost related to variable lease payments based on an index or rate that were not included in the measurement of the initial lease liability and right-of-use asset, were not material in any period presented.

(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:


		NOVEMBER 1,		FEBRUARY 1,
		2025		2025

		(in thousands)
	Balance Sheet Classification
Assets
Operating leases	Operating lease right-of-use assets	$	726,556	$	617,103
Finance leases^(1)(2)(3)	Property and equipment—net		1,191,150		1,007,088
Total lease right-of-use assets		$	1,917,706	$	1,624,191
Liabilities
Current⁽⁴⁾
Operating leases	Operating lease liabilities	$	107,011	$	100,944
Finance leases	Other current liabilities		20,737		21,135
Total lease liabilities—current			127,748		122,079
Non-current
Operating leases	Non-current operating lease liabilities		658,328		573,468
Finance leases	Non-current finance lease liabilities		721,613		630,655
Total lease liabilities—non-current			1,379,941		1,204,123
Total lease liabilities		$	1,507,689	$	1,326,202

(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 $366 million and $320 million as of November 1, 2025 and February 1, 2025, respectively.

(3)	Includes $33 million and $35 million as of November 1, 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.

(4)	Current portion of lease liabilities represents the reduction of the related lease liability over the next 12 months.


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The maturities of lease liabilities were as follows as of November 1, 2025:


	OPERATING		FINANCE
FISCAL YEAR	LEASES		LEASES		TOTAL

	(in thousands)
Remainder of fiscal 2025	$	35,744	$	15,264	$	51,008
2026		147,829		61,431		209,260
2027		136,246		63,085		199,331
2028		105,390		62,237		167,627
2029		94,067		61,931		155,998
2030		85,165		62,966		148,131
Thereafter		470,030		1,186,003		1,656,033
Total lease payments⁽¹⁾⁽²⁾		1,074,471		1,512,917		2,587,388
Less—imputed interest⁽³⁾		(309,132)		(770,567)		(1,079,699)
Present value of lease liabilities	$	765,339	$	742,350	$	1,507,689

(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 $696 million of legally binding payments under the non-cancellable term for leases signed but not yet commenced under our accounting policy as of November 1, 2025, of which $5.6 million, $29 million, $36 million, $38 million, $41 million and $41 million will be paid in the remainder of fiscal 2025, fiscal 2026, fiscal 2027, fiscal 2028, fiscal 2029 and fiscal 2030, respectively, and $505 million will be paid subsequent to fiscal 2030.

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

(3)	Calculated using the discount rate for each lease at lease commencement.

Supplemental information related to leases consisted of the following:


	NINE MONTHS ENDED
	NOVEMBER 1,			NOVEMBER 2,
	2025			2024
Weighted-average remaining lease term (years)
Operating leases		9.7		8.9
Finance leases		21.8		19.5
Weighted-average discount rate
Operating leases		6.2	%	5.6	%
Finance leases		6.5	%	5.3	%


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Other information related to leases consisted of the following:


	NINE MONTHS ENDED
	NOVEMBER 1,		NOVEMBER 2,
	2025		2024

	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	(109,076)	$	(97,068)
Operating cash flows from finance leases		(28,883)		(23,223)
Financing cash flows from finance leases—net⁽¹⁾		(7,789)		(19,609)
Total cash outflows from leases	$	(145,748)	$	(139,900)
Non-cash transactions
Lease right-of-use assets obtained in exchange for lease obligations—net of lease terminations
Operating leases⁽²⁾	$	161,674	$	58,382
Finance leases		106,331		37,751
Reclassification from other non-current assets to finance lease right-of-use assets		129,337		71,874

(1)	Presented net of tenant allowances received subsequent to lease commencement of $15 million in the nine months ended November 1, 2025. We did not receive any such tenant allowances in the nine months ended November 2, 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 nine months ended November 1, 2025. Refer to Note 3—Business Combinations.

Long-Lived Asset Impairment

During the three months ended November 2, 2024, we recognized long-lived asset impairment charges of $19 million for our two Design Galleries in Germany due to the asset carrying value of each location exceeding the estimated fair market value of the long-lived assets over their respective remaining lease terms, both of which end in 2027. These impairment charges were comprised of lease right-of-use asset impairment of $13 million and property and equipment impairment of $5.6 million.

NOTE 9—CREDIT FACILITIES AND CONVERTIBLE SENIOR NOTES

The outstanding balances under our credit facilities were as follows:


	NOVEMBER 1,							FEBRUARY 1,
	2025							2025
				UNAMORTIZED						UNAMORTIZED
				DEBT		NET				DEBT		NET
	INTEREST	OUTSTANDING		ISSUANCE		CARRYING		OUTSTANDING		ISSUANCE		CARRYING
	RATE	AMOUNT		COSTS		AMOUNT		AMOUNT		COSTS		AMOUNT

	(dollars in thousands)
Asset based credit facility⁽¹⁾	5.83%	$	65,000	$	—	$	65,000	$	200,000	$	—	$	200,000
Term loan B⁽²⁾	6.58%		1,920,000		(9,433)		1,910,567		1,935,000		(11,856)		1,923,144
Term loan B-2⁽³⁾	7.31%		485,000		(12,517)		472,483		488,750		(15,731)		473,019
Total credit facilities		$	2,470,000	$	(21,950)	$	2,448,050	$	2,623,750	$	(27,587)	$	2,596,163

(1)

Deferred financing fees associated with the asset based credit facility as of November 1, 2025 and February 1, 2025 were $3.7 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. 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.


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(2)

Represents the Term Loan Credit Agreement (defined below), of which outstanding amounts of $1,900 million and $1,915 million were included in term loan B—net on the condensed consolidated balance sheets as of November 1, 2025 and February 1, 2025, respectively, and $20 million was included in other current liabilities on the condensed consolidated balance sheets as of both November 1, 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 $480 million and $484 million were included in term loan B-2—net on the condensed consolidated balance sheets as of November 1, 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 November 1, 2025 and February 1, 2025.

Asset Based Credit Facility

On August 3, 2011, Restoration Hardware, Inc. (“RHI”), a wholly-owned subsidiary of RH, along with its Canadian subsidiary, Restoration Hardware Canada, Inc., entered into the Ninth Amended and Restated Credit Agreement (as amended prior to June 28, 2017, the “Original 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 Bank of America, N.A., as administrative agent and collateral agent (the “ABL Agent”).

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

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.

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 Global Holdings, Inc. 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. As a result, actual borrowing availability under the revolving line of credit could be less than the stated amount of the revolving line of credit (as reduced by the actual borrowings and outstanding letters of credit under the revolving line of credit).

Borrowings under the revolving line of credit (other than swing line loans, which are subject to interest at the base rate) bear interest, at the borrower’s option, at either the base rate or the Secured Overnight Financing Rate (“SOFR”), subject to a 0.00% SOFR floor (or, in the case of the Canadian borrowings, the “BA Rate” or the “Canadian Prime Rate”, as such terms are defined in the ABL Credit Agreement, for the Canadian borrowings denominated in Canadian dollars, or the “U.S. Index Rate”, as such term is defined in the ABL Credit Agreement, or SOFR for Canadian borrowings denominated in United States dollars) plus an applicable interest rate margin, in each case.


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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.

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”). The FCCR Covenant only applies in certain limited circumstances, including 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 FCCR Covenant ratio is set at 1.0 and measured on a trailing twelve-month basis. As of November 1, 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 November 1, 2025, RHI had $65 million in outstanding borrowings and $428 million of availability under the revolving line of credit, net of $48 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 $368 million as of November 1, 2025.

Term Loan Credit Agreement

On October 20, 2021, RHI entered into a Term Loan Credit Agreement (the “Term Loan Credit Agreement”) by and among RHI as the borrower, the lenders party thereto and Bank of America, N.A. as administrative agent and collateral agent (in such capacities, the “Term Agent”) with respect to an initial term loan (the “Term Loan B”) in an aggregate principal amount equal to $2,000 million with a maturity date of October 20, 2028.

Through July 31, 2023, the Term Loan B bore interest at an annual rate based on LIBOR subject to a 0.50% LIBOR floor plus an interest rate margin of 2.50% (with a stepdown of the interest rate margin if RHI achieves a specified public corporate family rating). LIBOR is a floating interest rate that reset periodically during the life of the Term Loan B. At the date of borrowing, the interest rate was set at the LIBOR floor of 0.50% plus 2.50% and the Term Loan B was issued at a discount of 0.50% to face value. Effective August 1, 2023, the Term Loan B bears interest at an annual rate based on SOFR subject to a 0.50% SOFR floor plus an interest rate margin of 2.50% plus a credit spread adjustment.

On May 13, 2022, RHI entered into a 2022 Incremental Amendment (the “2022 Incremental Amendment”) with Bank of America, N.A., as administrative agent, amending the Term Loan Credit Agreement (the Term Loan Credit Agreement as amended by the 2022 Incremental Amendment, the “Amended Term Loan Credit Agreement”). Pursuant to the terms of the 2022 Incremental Amendment, RHI incurred incremental term loans (the “Term Loan B-2”) in an aggregate principal amount equal to $500 million with a maturity date of October 20, 2028. The Term Loan B-2 constitutes a separate class from the Term Loan B under the Term Loan Credit Agreement.

The Term Loan B-2 bears interest at an annual rate based on SOFR subject to a 0.50% SOFR floor plus an interest rate margin of 3.25% plus a credit spread adjustment of 0.10%. Other than the terms relating to the Term Loan B-2, the terms of the Amended Term Loan Credit Agreement remain substantially the same as the terms of the existing Term Loan Credit Agreement, including representations and warranties, covenants and events of default.


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All obligations under the Term Loan B are guaranteed by certain domestic subsidiaries of RHI. Further, RHI and such subsidiaries have granted a security interest in substantially all of their assets (subject to customary and other exceptions) to secure the Term Loan B. Substantially all of the collateral securing the Term Loan B also secures the loans and other credit extensions under the ABL Credit Agreement. On October 20, 2021, in connection with the Term Loan Credit Agreement, RHI and certain other subsidiaries of RH party to the Term Loan Credit Agreement and the ABL Credit Agreement, as the case may be, entered into an Intercreditor Agreement (the “Intercreditor Agreement”) with the Term Agent and the ABL Agent. 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.

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.

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

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

$350 million 0.00% Convertible Senior Notes due 2024

In September 2019, we issued in a private offering $350 million principal amount of 0.00% convertible senior notes due 2024 (the “2024 Notes”).

In September 2024, upon the maturity of the 2024 Notes, the $42 million in aggregate principal amount of the 2024 Notes settled for $42 million in cash and were no longer outstanding as of February 1, 2025. During the nine months ended November 2, 2024 through the maturity of the 2024 Notes, we issued in aggregate 39,121 shares of common stock at a par value of $0.0001 per share and, as a result, recognized $0 in additional paid-in capital on the condensed consolidated statements of stockholders’ equity (deficit) upon settlement of the 2024 Notes.


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NOTE 10—FAIR VALUE MEASUREMENTS

Fair Value Measurements—Recurring

Amounts reported as cash and equivalents, receivables, and accounts payable and accrued expenses approximate fair value due to the short-term nature of activity within these accounts. The estimated fair value of the asset based credit facility approximates cost as the interest rate associated with the facility is variable and resets frequently (Level 2).

The estimated fair value and carrying value of the Term Loan Credit Agreement and the real estate loans were as follows:


	NOVEMBER 1,				FEBRUARY 1,
	2025				2025
			PRINCIPAL				PRINCIPAL
	FAIR		CARRYING		FAIR		CARRYING
	VALUE		VALUE⁽¹⁾		VALUE		VALUE⁽¹⁾

	(in thousands)
Term loan B	$	1,860,000	$	1,920,000	$	1,920,488	$	1,935,000
Term loan B-2		472,875		485,000		487,528		488,750
Real estate loans		17,392		17,583		17,118		17,838

(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 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). The fair values of the real estate loans were derived from discounted cash flows using risk-adjusted rates (Level 2).

NOTE 11—INCOME TAXES

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


	THREE MONTHS ENDED						NINE MONTHS ENDED
	NOVEMBER 1,			NOVEMBER 2,			NOVEMBER 1,			NOVEMBER 2,
	2025			2024			2025			2024

	(dollars in thousands)
Income tax expense	$	11,625		$	9,256		$	33,784		$	10,882
Effective tax rate		24.3	%		21.8	%		26.0	%		15.7	%

The increase in our effective tax rates for the three and nine months ended November 1, 2025 compared to the three and nine months ended November 2, 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 and nine months ended November 1, 2025. We will continue to evaluate the impact of these tax law changes in future reporting periods.


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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 will continue to monitor any future changes in our business or interpretations of the new tax law that could affect our tax position in subsequent periods.

NOTE 12—NET INCOME PER SHARE

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


	THREE MONTHS ENDED			NINE MONTHS ENDED
	NOVEMBER 1,		NOVEMBER 2,	NOVEMBER 1,		NOVEMBER 2,
	2025		2024	2025		2024
Weighted-average shares—basic		18,760,088	18,534,815		18,742,109		18,439,159
Effect of dilutive stock-based awards		1,047,453	1,359,065		1,077,260		1,359,757
Effect of dilutive convertible senior notes⁽¹⁾		—	87,131		—		161,192
Weighted-average shares—diluted		19,807,541	19,981,011		19,819,369		19,960,108

(1)

The dilutive effect of the 2024 Notes is calculated under the if-converted method, which assumes share settlement of the entire convertible debt instrument. The 2024 Notes matured in September 2024 and did not have an impact on our diluted share count post-maturity. Refer to Note 9—Credit Facilities and Convertible Senior Notes.

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			NINE MONTHS ENDED
	NOVEMBER 1,		NOVEMBER 2,	NOVEMBER 1,		NOVEMBER 2,
	2025		2024	2025		2024
Options		2,150,940	1,938,194		2,107,573		1,830,068
Restricted stock units		7,550	11,176		8,551		11,904

NOTE 13—STOCK-BASED COMPENSATION

The Restoration Hardware 2012 Stock Incentive Plan (the “Stock Incentive Plan”) was adopted on November 1, 2012. The Stock Incentive Plan provided for the grant of incentive stock options to our employees, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, cash-based awards and any combination thereof to our employees, directors and consultants and our parent and subsidiary corporations’ employees, directors and consultants. The Restoration Hardware 2012 Stock Option Plan (the “Option Plan”) was adopted on November 1, 2012. On November 1, 2022, both the Stock Incentive Plan and Option Plan expired.

The RH 2023 Stock Incentive Plan (the “2023 Stock Incentive Plan”, together with the Stock Incentive Plan and Option Plan, “the Plans”) was approved by stockholders on April 4, 2023. The 2023 Stock Incentive Plan provides for the grant of incentive stock options to our employees and the grant of non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights and any combination thereof to our employees, directors and consultants and our parent and subsidiary corporations’ employees, directors and consultants.

As of November 1, 2025, there were a total of 1,958,647 shares issuable under the 2023 Stock Incentive Plan. Awards under the 2023 Stock Incentive Plan reduce the number of shares available for future issuance. Cancellations and forfeitures of awards previously granted under the Plans increase the number of shares available for future issuance. Shares issued as a result of award exercises under the 2023 Stock Incentive Plan will be funded with the issuance of new shares.


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Equity Awards Under the Plans

Options outstanding, vested or expected to vest, and exercisable as of November 1, 2025 were as follows:


		WEIGHTED-		WEIGHTED-		AGGREGATE
		AVERAGE		AVERAGE		INTRINSIC
		EXERCISE		REMAINING TERM		VALUE
	SHARES	PRICE		(in years)		(in thousands)
Options outstanding	3,859,775	$	210.08		4.9	$	161,462
Options vested or expected to vest	3,594,434		206.74		4.6		160,728
Options exercisable	2,505,720		189.03		3.3		154,493

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				NINE MONTHS ENDED
	NOVEMBER 1,		NOVEMBER 2,		NOVEMBER 1,		NOVEMBER 2,
	2025		2024		2025		2024

	(in thousands)
Stock-based compensation expense⁽¹⁾	$	11,308	$	11,684	$	35,315	$	33,757

(1)

On October 18, 2020, our Board of Directors granted Mr. 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 $3.7 million was recognized during the nine months ended November 1, 2025 and November 2, 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 November 1, 2025, the total unrecognized compensation expense and weighted average remaining term of equity awards were as follows:


	UNRECOGNIZED		WEIGHTED-
	STOCK BASED		AVERAGE
	COMPENSATION		REMAINING TERM
	(in thousands)		(in years)
Unvested options	$	136,340		4.6
Unvested restricted stock and restricted stock units		7,759		1.9
Total	$	144,099

NOTE 14—COMMITMENTS AND CONTINGENCIES

Commitments

We had no material off-balance sheet commitments as of November 1, 2025.

Contingencies

We are subject to contingencies, including in connection with lawsuits, claims, investigations and other legal proceedings incident to the ordinary course of our business. These disputes are increasing in number as we expand our business and provide new product and service offerings, such as restaurants and hospitality, and as we enter new markets and legal jurisdictions and face increased complexity related to compliance and regulatory requirements. In addition, we are subject to governmental and regulatory examinations, information requests, and investigations from time to time at the state and federal levels.


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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 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. We have settled certain class action and other cases but continue to defend a variety of legal actions and our estimates of our exposure in such cases may evolve over time. Accordingly, the ultimate costs to resolve litigation, including class action cases, may be substantially higher or lower than our estimates.

With respect to such contingencies, we review the need for any loss contingency reserves and establish reserves when, in the opinion of our senior leadership team, it is probable that a matter would result in liability, and the amount of loss, if any, can be reasonably estimated. Loss contingencies determined to be probable and estimable are recorded in accounts payable and accrued expenses on the condensed consolidated balance sheets (refer to Note 7—Accounts Payable, Accrued Expenses and Other Current Liabilities). These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to each matter. In view of the inherent difficulty of predicting the outcome of certain matters, particularly in cases in which claimants seek substantial or indeterminate damages, it may not be possible to determine whether a liability has been incurred or to reasonably estimate the ultimate or minimum amount of that liability until the case is close to resolution, in which case no reserve is established until that time. When and to the extent that we do establish a reserve, there can be no assurance that any such recorded liability for estimated losses will be for the appropriate amount, and actual losses could be higher or lower than what we accrue from time to time. Although we believe that the ultimate resolution of our current legal proceedings will not have a material adverse effect on the condensed consolidated financial statements, the outcome of legal matters is subject to inherent uncertainty.

Although we are self-insured or maintain deductibles in the United States for workers’ compensation, general liability and product liability up to predetermined amounts, above which third-party insurance applies, depending on the facts and circumstances of the underlying claims, coverage under these or other of our insurance policies may not be available. We may elect not to renew certain insurance coverage or renewal of coverage may not be available or may be prohibitively expensive. Even if we believe coverage does apply under our insurance programs, our insurance carriers may dispute coverage based on the underlying facts and circumstances.

The outcome of any contingencies, including lawsuits, claims, investigations and other legal proceedings, could result in unexpected expenses and liability that could adversely affect our operations. In addition, any legal proceedings in which we are involved or claims against us, whether meritorious or not, could be time consuming, result in costly litigation, require significant amounts of our senior leadership team’s time, result in the diversion of significant operational resources, and require changes to our business operations, policies and practices. Legal costs related to such matters are expensed as incurred.

NOTE 15—SEGMENT REPORTING

We define reportable and operating segments on the same basis that we use to evaluate our performance internally by the chief operating decision maker (“CODM”), which we have determined is our Chief Executive Officer. We have three operating segments: RH Segment, Waterworks and Real Estate. The RH Segment and Waterworks operating segments (the “retail operating segments”) include all sales channels accessed by our customers, including sales through retail locations and outlets, including hospitality, websites, Sourcebooks, and the Trade and Contract channels. 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.

The retail operating segments are strategic business units that offer products for the home furnishings customer. While RH Segment and Waterworks have a shared senior leadership team and customer base, we have determined that their results cannot be aggregated as they do not share similar economic characteristics, as well as due to other quantitative factors.


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Segment Information

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 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, (v) contract termination settlement—net and (vi) legal settlements—net. 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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Segment net revenues, which represent our disaggregated net revenues in accordance with ASC 606, significant segment expenses and segment adjusted operating income, by reportable segment, were as follows:


	THREE MONTHS ENDED												NINE MONTHS ENDED
	NOVEMBER 1,						NOVEMBER 2,						NOVEMBER 1,						NOVEMBER 2,
	2025						2024						2025						2024
	RH SEGMENT		WATERWORKS		TOTAL⁽¹⁾		RH SEGMENT		WATERWORKS		TOTAL⁽¹⁾		RH SEGMENT		WATERWORKS		TOTAL⁽¹⁾		RH SEGMENT		WATERWORKS		TOTAL⁽¹⁾

	(in thousands)
Net revenues	$	835,821	$	47,989	$	883,810	$	768,063	$	43,669	$	811,732	$	2,447,536	$	149,377	$	2,596,913	$	2,226,054	$	142,293	$	2,368,347
Cost of goods sold		472,171		21,903		494,074		429,121		21,271		450,392		1,373,186		69,399		1,442,585		1,248,680		67,532		1,316,212
Advertising expense		35,976		775		36,751		16,040		852		16,892		99,064		2,433		101,497		93,770		2,564		96,334
Other segment expenses⁽²⁾		230,525		19,905		250,430		204,112		18,462		222,574		697,932		59,963		757,895		632,856		56,848		689,704
Segment adjusted operating income⁽¹⁾		97,149		5,406		102,555		118,790		3,084		121,874		277,354		17,582		294,936		250,748		15,349		266,097
Asset impairments

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

RH 10-Q