December 9, 2021 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

Form: 10-Q

Documents

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 October 30, 2021

☐	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 3, 2021, 21,468,715 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 October 30, 2021 and January 30, 2021	3
	Condensed Consolidated Statements of Income (Unaudited) for the three and nine months ended October 30, 2021 and October 31, 2020	4
	Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the three and nine months ended October 30, 2021 and October 31, 2020	5
	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) for the three and nine months ended October 30, 2021 and October 31, 2020	6
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended October 30, 2021 and October 31, 2020	8
	Notes to Condensed Consolidated Financial Statements (Unaudited)	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	57
Item 4.	Controls and Procedures	58

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	59
Item 1A.	Risk Factors	59
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	62
Item 3.	Defaults Upon Senior Securities	63
Item 4.	Mine Safety Disclosures	63
Item 5.	Other Information	63
Item 6.	Exhibits	64
Signatures		65


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PART I

ITEM 1. FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts) (Unaudited)


	OCTOBER 30,		JANUARY 30,
	2021		2021
ASSETS
Current assets:
Cash and cash equivalents	$	2,198,961	$	100,446
Accounts receivable—net		60,621		59,474
Merchandise inventories		633,591		544,227
Prepaid expense and other current assets		120,666		97,337
Total current assets		3,013,839		801,484
Property and equipment—net		1,196,335		1,077,198
Operating lease right-of-use assets		551,731		456,164
Goodwill		141,141		141,100
Tradenames, trademarks and other intangible assets		72,907		71,663
Deferred tax assets		49,870		49,924
Equity method investments		97,976		100,603
Other non-current assets		296,226		200,177
Total assets	$	5,420,025	$	2,898,313
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	395,148	$	424,422
Deferred revenue and customer deposits		385,070		280,641
Convertible senior notes due 2023—net		53,242		2,354
Convertible senior notes due 2024—net		56,365		—
Operating lease liabilities		74,706		71,524
Other current liabilities		131,779		142,691
Total current liabilities		1,096,310		921,632
Asset based credit facility		—		—
Term loan—net		1,957,366		—
Equipment promissory notes—net		1,625		14,614
Convertible senior notes due 2023—net		62,214		282,956
Convertible senior notes due 2024—net		181,805		281,454
Non-current operating lease liabilities		538,886		448,169
Non-current finance lease liabilities		549,098		485,481
Other non-current obligations		11,346		16,981
Total liabilities		4,398,650		2,451,287
Commitments and contingencies (Note 16)
Mezzanine equity—convertible senior notes (Note 9)		13,571		—
Stockholders’ equity:
Preferred stock—$0.0001 par value per share, 10,000,000 shares authorized, no shares issued or outstanding as of October 30, 2021 and January 30, 2021		—		—
Common stock—$0.0001 par value per share, 180,000,000 shares authorized, 21,465,133 shares issued and outstanding as of October 30, 2021; 20,995,387 shares issued and outstanding as of January 30, 2021		2		2
Additional paid-in capital		602,571		581,897
Accumulated other comprehensive income (loss)		1,168		2,565
Retained earnings (accumulated deficit)		404,063		(137,438)
Total stockholders’ equity		1,007,804		447,026
Total liabilities, mezzanine equity and stockholders’ equity	$	5,420,025	$	2,898,313

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


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CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share and per share amounts) (Unaudited)


	THREE MONTHS ENDED				NINE MONTHS ENDED
	OCTOBER 30,		OCTOBER 31,		OCTOBER 30,		OCTOBER 31,
	2021		2020		2021		2020
Net revenues	$	1,006,428	$	844,013	$	2,856,079	$	2,036,190
Cost of goods sold		501,174		435,683		1,456,172		1,095,787
Gross profit		505,254		408,330		1,399,907		940,403
Selling, general and administrative expenses		232,715		297,109		690,492		657,161
Income from operations		272,539		111,221		709,415		283,242
Other expenses
Interest expense—net		13,223		15,656		40,112		54,703
Tradename impairment		—		—		—		20,459
(Gain) loss on extinguishment of debt		18,513		—		21,784		(152)
Total other expenses		31,736		15,656		61,896		75,010
Income before income taxes		240,803		95,565		647,519		208,232
Income tax expense		54,391		49,154		99,124		66,610
Income before equity method investments		186,412		46,411		548,395		141,622
Share of equity method investments losses		(2,313)		—		(6,894)		—
Net income	$	184,099	$	46,411	$	541,501	$	141,622
Weighted-average shares used in computing basic net income per share		21,430,557		19,552,836		21,200,146		19,393,931
Basic net income per share	$	8.59	$	2.37	$	25.54	$	7.30
Weighted-average shares used in computing diluted net income per share		31,291,079		28,286,124		31,493,396		26,351,194
Diluted net income per share	$	5.88	$	1.64	$	17.19	$	5.37

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


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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands) (Unaudited)


	THREE MONTHS ENDED				NINE MONTHS ENDED
	OCTOBER 30,		OCTOBER 31,		OCTOBER 30,		OCTOBER 31,
	2021		2020		2021		2020
Net income	$	184,099	$	46,411	$	541,501	$	141,622
Net gains (losses) from foreign currency translation		(2,097)		(96)		(1,397)		822
Total comprehensive income	$	182,002	$	46,315	$	540,104	$	142,444

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


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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share amounts) (Unaudited)


	THREE MONTHS ENDED
			COMMON STOCK									TREASURY STOCK
								ACCUMULATED		RETAINED
						ADDITIONAL		OTHER		EARNINGS					TOTAL
	MEZZANINE					PAID-IN		COMPREHENSIVE		(ACCUMULATED					STOCKHOLDERS'
	EQUITY		SHARES	AMOUNT		CAPITAL		INCOME (LOSS)		DEFICIT)		SHARES	AMOUNT		EQUITY
Balances—July 31, 2021	$	30,515	21,407,717	$	2	$	583,112	$	3,265	$	219,964	—	$	—	$	806,343
Stock-based compensation		—	—		—		11,995		—		—	—		—		11,995
Vested and delivered restricted stock units		—	1,981		—		(706)		—		—	—		—		(706)
Exercise of stock options		—	55,419		—		4,101		—		—	—		—		4,101
Settlement of convertible senior notes		—	864,090		—		(592,414)		—		—	(864,074)		579,539		(12,875)
Exercise of call option under bond hedge upon settlement of convertible senior notes		—	(864,074)		—		579,539		—		—	864,074		(579,539)		—
Reclassification of equity component to mezzanine equity related to early converted senior notes outstanding―net		(16,944)	—		—		16,944		—		—	—		—		16,944
Net income		—	—		—		—		—		184,099	—		—		184,099
Net losses from foreign currency translation		—	—		—		—		(2,097)		—	—		—		(2,097)
Balances—October 30, 2021	$	13,571	21,465,133	$	2	$	602,571	$	1,168	$	404,063	—	$	—	$	1,007,804

Balances—August 1, 2020	$	—	19,485,826	$	2	$	444,378	$	(1,842)	$	(314,042)	17	$	(5)	$	128,491
Stock-based compensation		—	—		—		118,677		—		—	—		—		118,677
Vested and delivered restricted stock units		—	2,814		—		(610)		—		—	—		—		(610)
Exercise of stock options		—	64,848		—		3,996		—		—	—		—		3,996
Shares issued in connection with warrant agreements		—	290,967		—		—		—		—	—		—		—
Retirement of treasury stock		—	—		—		(5)		—		—	(17)		5		—
Net income		—	—		—		—		—		46,411	—		—		46,411
Net losses from foreign currency translation		—	—		—		—		(96)		—	—		—		(96)
Balances—October 31, 2020	$	—	19,844,455	$	2	$	566,436	$	(1,938)	$	(267,631)	—	$	—	$	296,869


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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (continued)

(In thousands) (Unaudited)


	NINE MONTHS ENDED
			COMMON STOCK									TREASURY STOCK
								ACCUMULATED		RETAINED
						ADDITIONAL		OTHER		EARNINGS					TOTAL
	MEZZANINE					PAID-IN		COMPREHENSIVE		(ACCUMULATED					STOCKHOLDERS'
	EQUITY		SHARES	AMOUNT		CAPITAL		INCOME (LOSS)		DEFICIT)		SHARES	AMOUNT		EQUITY
Balances—January 30, 2021	$	—	20,995,387	$	2		581,897	$	2,565	$	(137,438)	—	$	—	$	447,026
Stock-based compensation		—	—		—		37,284		—		—	—		—		37,284
Issuance of restricted stock		—	1,260		—		—		—		—	—		—		—
Vested and delivered restricted stock units		—	39,679		—		(19,354)		—		—	—		—		(19,354)
Exercise of stock options		—	428,788		—		30,080		—		—	—		—		30,080
Settlement of convertible senior notes		—	983,694		—		(674,549)		—		—	(983,675)		660,784		(13,765)
Exercise of call option under bond hedge upon settlement of convertible senior notes		—	(983,675)		—		660,784		—		—	983,675		(660,784)		—
Reclassification of equity component to mezzanine equity related to early converted senior notes outstanding―net		13,571	—		—		(13,571)		—		—	—		—		(13,571)
Net income		—	—		—		—		—		541,501	—		—		541,501
Net losses from foreign currency translation		—	—		—		—		(1,397)		—	—		—		(1,397)
Balances—October 30, 2021	$	13,571	21,465,133	$	2	$	602,571	$	1,168	$	404,063	—	$	—	$	1,007,804

Balances—February 1, 2020	$	—	19,236,681	$	2	$	430,662	$	(2,760)	$	(409,253)	—	$	—		18,651
Stock-based compensation		—	—		—		131,153		—		—	—		—		131,153
Issuance of restricted stock		—	3,192		—		—		—		—	—		—		—
Vested and delivered restricted stock units		—	73,106		—		(7,428)		—		—	—		—		(7,428)
Exercise of stock options		—	241,126		—		12,121		—		—	—		—		12,121
Repurchases of common stock		—	(600)		—		—		—		—	600		(72)		(72)
Retirement of treasury stock		—	—		—		(77)		—		—	(617)		77		—
Shares issued in connection with warrant agreements		—	290,967		—		—		—		—	—		—		—
Settlement of convertible senior notes		—	1,131,645		—		(315,708)		—		—	(1,131,645)		315,708		—
Exercise of call option under bond hedge upon settlement of convertible senior notes		—	(1,131,662)		—		315,713		—		—	1,131,662		(315,713)		—
Net income		—	—		—		—		—		141,622	—		—		141,622
Net gains from foreign currency translation		—	—		—		—		822		—	—		—		822
Balances—October 31, 2020	$	—	19,844,455	$	2	$	566,436	$	(1,938)	$	(267,631)	—	$	—	$	296,869

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


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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) (Unaudited)


	NINE MONTHS ENDED
	OCTOBER 30,		OCTOBER 31,
	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	541,501	$	141,622
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		71,375		76,688
Non-cash operating lease cost		54,084		47,069
Tradename impairment		—		20,459
Asset impairments		7,354		4,783
Loss on sale leaseback transaction		—		9,352
Amortization of debt discount		24,236		33,810
Stock-based compensation expense		37,426		131,472
Non-cash finance lease interest expense		19,468		17,887
Product recalls		840		5,561
Deferred income taxes		(122)		117
(Gain) loss on extinguishment of debt		21,784		(152)
Share of equity method investments losses		6,894		—
Other non-cash items		(6,030)		3,274
Cash paid attributable to accretion of debt discount upon settlement of debt		(39,078)		(84,003)
Change in assets and liabilities:
Accounts receivable		(1,131)		(6,070)
Merchandise inventories		(89,225)		(57,781)
Prepaid expense and other assets		(39,168)		(47,288)
Landlord assets under construction—net of tenant allowances		(50,351)		(44,921)
Accounts payable and accrued expenses		(17,980)		10,844
Deferred revenue and customer deposits		104,419		111,436
Other current liabilities		(28,106)		29,153
Current and non-current operating lease liabilities		(59,194)		(36,810)
Other non-current obligations		(25,314)		(19,239)
Net cash provided by operating activities		533,682		347,263


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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(In thousands) (Unaudited)


	NINE MONTHS ENDED
	OCTOBER 30,		OCTOBER 31,
	2021		2020
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(153,774)		(71,755)
Equity method investments		(4,816)		(7,500)
Acquisition of business and assets		—		(13,052)
Proceeds from sale of assets		—		25,006
Net cash used in investing activities		(158,590)		(67,301)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under asset based credit facility		—		359,400
Repayments under asset based credit facility		—		(359,400)
Borrowings under term loan		2,000,000		—
Repayments under promissory and equipment security notes		(17,164)		(10,872)
Debt issuance costs		(26,411)		—
Repayments of convertible senior notes		(235,126)		(215,846)
Principal payments under finance leases		(10,511)		(8,801)
Proceeds from exercise of stock options		30,080		12,121
Tax withholdings related to issuance of stock-based awards		(19,354)		(7,428)
Net cash provided by (used in) financing activities		1,721,514		(230,826)
Effects of foreign currency exchange rate translation		34		(10)
Net increase in cash and cash equivalents and restricted cash equivalents		2,096,640		49,126
Cash and cash equivalents and restricted cash equivalents

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company