December 7, 2023 - 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 28, 2023

☐	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 1, 2023, 18,219,414 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 28, 2023 and January 28, 2023	3
	Condensed Consolidated Statements of Income (Loss) (Unaudited) for the three and nine months ended October 28, 2023 and October 29, 2022	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the three and nine months ended October 28, 2023 and October 29, 2022	5
	Condensed Consolidated Statements of Stockholders’ Equity (Deficit) (Unaudited) for the three and nine months ended October 28, 2023 and October 29, 2022	6
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended October 28, 2023 and October 29, 2022	8
	Notes to Condensed Consolidated Financial Statements (Unaudited)	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	56
Item 4.	Controls and Procedures	57

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	58
Item 1A.	Risk Factors	58
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 3.	Defaults Upon Senior Securities	59
Item 4.	Mine Safety Disclosures	59
Item 5.	Other Information	59
Item 6.	Exhibits	60
Signatures		61


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Table of Contents

PART I

ITEM 1. FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	OCTOBER 28,		JANUARY 28,
	2023		2023

	(in thousands)
ASSETS
Cash and cash equivalents	$	380,695	$	1,508,101
Restricted cash		1,960		3,662
Accounts receivable—net		56,053		59,763
Merchandise inventories		718,959		801,841
Prepaid expense and other current assets		129,213		139,297
Total current assets		1,286,880		2,512,664
Property and equipment—net		1,665,483		1,635,984
Operating lease right-of-use assets		616,571		527,246
Goodwill		140,997		141,048
Tradenames, trademarks and other intangible assets		75,746		74,633
Deferred tax assets		126,094		167,039
Equity method investments		128,112		101,468
Other non-current assets		200,736		149,207
Total assets	$	4,240,619	$	5,309,289
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Accounts payable and accrued expenses	$	399,727	$	374,949
Deferred revenue and customer deposits		302,976		325,754
Convertible senior notes due 2023		—		1,696
Convertible senior notes due 2024—net		41,807		—
Operating lease liabilities		89,492		80,384
Other current liabilities		100,972		103,190
Total current liabilities		934,974		885,973
Asset based credit facility		—		—
Term loan B—net		1,924,002		1,936,529
Term loan B-2—net		468,775		469,245
Real estate loans		17,844		17,909
Convertible senior notes due 2024—net		—		41,724
Non-current operating lease liabilities		570,073		505,809
Non-current finance lease liabilities		642,726		653,050
Deferred tax liabilities		6,139		6,315
Other non-current obligations		9,300		8,074
Total liabilities		4,573,833		4,524,628
Commitments and contingencies (Note 16)
Stockholders’ equity (deficit):
Preferred stock—$0.0001 par value per share, 10,000,000 shares authorized, no shares issued or outstanding as of October 28, 2023 and January 28, 2023		—		—
Common stock—$0.0001 par value per share, 180,000,000 shares authorized, 18,218,397 shares issued and outstanding as of October 28, 2023; 22,045,385 shares issued and outstanding as of January 28, 2023		2		2
Additional paid-in capital		270,928		247,076
Accumulated other comprehensive income (loss)		(8,996)		(2,403)
Retained earnings (accumulated deficit)		(595,148)		539,986
Total stockholders’ equity (deficit)		(333,214)		784,661
Total liabilities and stockholders’ equity (deficit)	$	4,240,619	$	5,309,289

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


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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(Unaudited)


	THREE MONTHS ENDED				NINE MONTHS ENDED
	OCTOBER 28,		OCTOBER 29,		OCTOBER 28,		OCTOBER 29,
	2023		2022		2023		2022

	(in thousands, except share and per share amounts)
Net revenues	$	751,225	$	869,066	$	2,290,866	$	2,817,978
Cost of goods sold		410,775		448,288		1,222,798		1,375,399
Gross profit		340,450		420,778		1,068,068		1,442,579
Selling, general and administrative expenses		289,214		250,528		766,252		832,627
Income from operations		51,236		170,250		301,816		609,952
Other expenses
Interest expense—net		54,640		31,417		138,878		78,536
Loss on extinguishment of debt		—		—		—		169,578
Other expense—net		5,305		1,989		4,466		4,841
Total other expenses		59,945		33,406		143,344		252,955
Income (loss) before income taxes and equity method investments		(8,709)		136,844		158,472		356,997
Income tax expense (benefit)		(9,215)		36,162		34,615		(70,867)
Income before equity method investments		506		100,682		123,857		427,864
Share of equity method investments loss		2,693		1,922		7,677		6,118
Net income (loss)	$	(2,187)	$	98,760	$	116,180	$	421,746
Weighted-average shares used in computing basic net income (loss) per share		18,371,545		23,681,482		20,459,241		23,588,464
Basic net income (loss) per share	$	(0.12)	$	4.17	$	5.68	$	17.88
Weighted-average shares used in computing diluted net income (loss) per share		18,371,545		26,098,265		22,207,813		26,947,087
Diluted net income (loss) per share	$	(0.12)	$	3.78	$	5.23	$	15.65

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


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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	THREE MONTHS ENDED				NINE MONTHS ENDED
	OCTOBER 28,		OCTOBER 29,		OCTOBER 28,		OCTOBER 29,
	2023		2022		2023		2022

	(in thousands)
Net income (loss)	$	(2,187)	$	98,760	$	116,180	$	421,746
Net loss from foreign currency translation		(12,268)		(4,890)		(6,593)		(11,275)
Comprehensive income (loss)	$	(14,455)	$	93,870	$	109,587	$	410,471

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									TREASURY STOCK
						ACCUMULATED		RETAINED
				ADDITIONAL		OTHER		EARNINGS					TOTAL
				PAID-IN		COMPREHENSIVE		(ACCUMULATED					STOCKHOLDERS'
	SHARES	AMOUNT		CAPITAL		INCOME (LOSS)		DEFICIT)		SHARES	AMOUNT		EQUITY (DEFICIT)

	(in thousands, except share amounts)
Balances—July 29, 2023	18,397,853	$	2	$	261,803	$	3,272	$	(549,659)	—	$	—	$	(284,582)
Stock-based compensation	—		—		9,820		—		—	—		—		9,820
Vested and delivered restricted stock units	196		—		(30)		—		—	—		—		(30)
Exercise of stock options	9,426		—		1,088		—		—	—		—		1,088
Repurchase of common stock—including excise tax	(189,078)		—		—		—		—	189,078		(45,055)		(45,055)
Retirement of treasury stock	—		—		(1,753)		—		(43,302)	(189,078)		45,055		—
Net loss	—		—		—		—		(2,187)	—		—		(2,187)
Net loss from foreign currency translation	—		—		—		(12,268)		—	—		—		(12,268)
Balances—October 28, 2023	18,218,397	$	2	$	270,928	$	(8,996)	$	(595,148)	—	$	—	$	(333,214)

Balances—July 30, 2022	23,715,191	$	2	$	334,054	$	(7,795)	$	893,983	—	$	—	$	1,220,244
Stock-based compensation	—		—		10,187		—		—	—		—		10,187
Vested and delivered restricted stock units	1,119		—		(171)		—		—	—		—		(171)
Exercise of stock options	20,777		—		1,527		—		—	—		—		1,527
Settlement of convertible senior notes	6		—		—		—		—	—		—		—
Repurchase of common stock	(127,557)		—		—		—		—	127,557		(31,710)		(31,710)
Retirement of treasury stock	—		—		(31,710)		—		—	(127,557)		31,710		—
Net income	—		—		—		—		98,760	—		—		98,760
Net loss from foreign currency translation	—		—		—		(4,890)		—	—		—		(4,890)
Balances—October 29, 2022	23,609,536	$	2	$	313,887	$	(12,685)	$	992,743	—	$	—	$	1,293,947


6 \| 2023 THIRD QUARTER FORM 10-Q	PART I. FINANCIAL INFORMATION

Table of Contents

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

(Unaudited)


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

	(in thousands, except share amounts)
Balances—January 28, 2023	22,045,385	$	2	$	247,076	$	(2,403)	$	539,986	—	$	—	$	784,661
Stock-based compensation	—		—		28,538		—		—	—		—		28,538
Issuance of restricted stock	2,961		—		—		—		—	—		—		—
Vested and delivered restricted stock units	1,043		—		(126)		—		—	—		—		(126)
Exercise of stock options	55,042		—		5,816		—		—	—		—		5,816
Settlement of convertible senior notes	1,931		—		—		—		—	—		—		—
Repurchase of common stock—including excise tax	(3,887,965)		—		—		—		—	3,887,965		(1,261,690)		(1,261,690)
Retirement of treasury stock	—		—		(10,376)		—		(1,251,314)	(3,887,965)		1,261,690		—
Net income	—		—		—		—		116,180	—		—		116,180
Net loss from foreign currency translation	—		—		—		(6,593)		—	—		—		(6,593)
Balances—October 28, 2023	18,218,397	$	2	$	270,928	$	(8,996)	$	(595,148)	—	$	—	$	(333,214)

Balances—January 29, 2022	21,506,967	$	2	$	620,577	$	(1,410)	$	551,108	—	$	—	$	1,170,277
Stock-based compensation	—		—		33,725		—		—	—		—		33,725
Issuance of restricted stock	3,577		—		—		—		—	—		—		—
Vested and delivered restricted stock units	2,985		—		(494)		—		—	—		—		(494)
Exercise of stock options	3,223,552		—		153,568		—		—	—		—		153,568
Repurchase of common stock	(1,127,557)		—		—		—		—	1,127,557		(286,441)		(286,441)
Retirement of treasury stock	—		—		(286,441)		—		—	(1,127,557)		286,441		—
Exercise of call option under bond hedge upon settlement of convertible senior notes	(36,968)		—		14,705		—		—	36,968		(14,705)		—
Settlement of convertible senior notes	36,980		—		(14,705)		—		—	(36,968)		14,705		—
Termination of common stock warrants	—		—		(386,708)		—		—	—		—		(386,708)
Termination of convertible note hedge	—		—		236,050		—		—	—		—		236,050
Impact of ASU 2020-06 adoption	—		—		(56,390)		—		19,889	—		—		(36,501)
Net income	—		—		—		—		421,746	—		—		421,746
Net loss from foreign currency translation	—		—		—		(11,275)		—	—		—		(11,275)
Balances—October 29, 2022	23,609,536	$	2	$	313,887	$	(12,685)	$	992,743	—	$	—	$	1,293,947

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


PART I. FINANCIAL INFORMATION	2023 THIRD QUARTER FORM 10-Q \| 7

Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	NINE MONTHS ENDED
	OCTOBER 28,		OCTOBER 29,
	2023		2022

	(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	116,180	$	421,746
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		84,360		79,760
Non-cash operating lease cost		62,938		55,912
Asset impairments		7,165		19,080
Gain on sale of building and land		—		(775)
Stock-based compensation expense		28,538		33,725
Non-cash finance lease interest expense		25,920		23,526
Product recalls		(1,576)		560
Deferred income taxes		40,884		5,627
Loss on extinguishment of debt		—		169,578
Gain on derivative instruments—net		—		(1,724)
Share of equity method investments loss		7,677		6,118
Other non-cash items		6,601		5,542
Change in assets and liabilities:
Accounts receivable		3,676		(675)
Merchandise inventories		81,166		(96,598)
Prepaid expense and other assets		(12,788)		(152,892)
Landlord assets under construction—net of tenant allowances		(18,617)		(43,380)
Accounts payable and accrued expenses		(2,859)		(44,999)
Deferred revenue and customer deposits		(22,735)		(26,604)
Other current liabilities		(541)		(36,596)
Current and non-current operating lease liabilities		(65,021)		(56,936)
Other non-current obligations		(24,796)		(23,974)
Net cash provided by operating activities		316,172		336,021


8 \| 2023 THIRD QUARTER FORM 10-Q	PART I. FINANCIAL INFORMATION

Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(Unaudited)


	NINE MONTHS ENDED
	OCTOBER 28,		OCTOBER 29,
	2023		2022
	(in thousands)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(131,840)		(109,675)
Equity method investments		(34,321)		(2,313)
Proceeds from sale of asset		—		5,287
Net cash used in investing activities		(166,161)		(106,701)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under term loans		—		500,000
Repayments under term loans		(18,750)		(15,000)
Borrowings under real estate loans		—		16,000
Repayments under real estate loans		(20)		(4)
Repayments under promissory and equipment security notes		(1,160)		(13,157)
Repayments of convertible senior notes		(1,696)		(13,053)
Repayment under convertible senior notes repurchase obligation		—		(395,372)
Debt extinguishment costs		—		(8,059)
Debt issuance costs		—		(27,733)
Principal payments under finance lease agreements—net of tenant allowances		(9,551)		(6,798)
Proceeds from termination of convertible senior note hedges		—		231,796
Payments for termination of common stock warrants		—		(390,934)
Repurchases of common stock—inclusive of excise taxes paid		(1,252,899)		(286,441)
Proceeds from exercise of stock options		5,816		153,568
Tax withholdings related to issuance of stock-based awards		(126)		(494)
Net cash used in financing activities		(1,278,386)		(255,681)
Effects of foreign currency exchange rate translation		(733)		(1,155)
Net decrease in cash and cash equivalents, restricted cash and restricted cash equivalents		(1,129,108)		(27,516)


PART I. FINANCIAL INFORMATION	2023 THIRD QUARTER FORM 10-Q \| 9

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(Unaudited)


		NINE MONTHS ENDED
		OCTOBER 28,			OCTOBER 29,
		2023

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company