Transcript • Mar. 31, 2026 9:00 PM • RH (RH)
Transcript
Mar. 31, 2026 9:00 PM
RH (RH)
Gary Friedman: There are pieces that furnish a home and those that define it. There are places you visit and those you remember. There are spaces you move through and those that move you. Welcome to The World of RH. Albert Einstein's three rules of work, out of clutter find simplicity, from discord find harmony, in the middle of difficulty lies opportunity, seem especially relevant at this moment. We're compounding clutter from tariffs. global discord as a result of war, and the most dire housing market in decades can make it difficult to separate the signal from the noise. It's important to remember necessity is the mother of invention, and our most important innovations were birthed during the most uncertain times. Transforming a nearly bankrupt restoration hardware into our age, the leading luxury home brand in North America was not a feat for the faint of heart. While the external challenges are somewhat familiar, our internal opportunities are massively different. We're not closing stores and fighting to survive. We're building a never-seen-before brand that's positioned to thrive. Before we get into the details of our strategy, let's start with a few facts that should quiet some of the noise. In 2025, RH achieved revenue growth of 8% and two-year growth of 15%, far outpacing our furniture industry peers by 8 to 30 points. Adjusted EBITDA reached $597 million. or 17.3% of revenues versus $539 million or 16.9% of revenues in 2024. Free cash flow of $252 million versus negative free cash flow of $214 million in 2024, an increase of $466 million year over year. Those results were despite 2025 being our peak investment year, with $289 million of adjusted CapEx to support our global expansion, plus an additional $37 million to purchase the Michael Taylor Formations and Denison Lean brands to support the launch of our new concept, RH Estates. A strong performance considering the unusual circumstances. Let me shift your focus to our strategy and how we expect our growth to accelerate over the next several years. We believe there are those with taste and no scale, and those with scale and no taste. And the idea of scaling taste is large and far-reaching. We believe our goal to position RH as the arbiter of taste for the home will prove to be both disruptive and lucrative as we continue our quest of building one of the most admired brands in the world. We like to use a simple question to frame our significant opportunity. Who is the home brand for the luxury customer? The LVMH, Hermes, Cartier, or Cuccinelli customer? RH has curated the most compelling collection presented in the most inspiring spaces in the world. Our brand attracts the leading designers, artisans, and manufacturers. scaling and rendering their work more valuable across our growing global platform. Our product is both categorically and stylistically dominant, enabling RH to address the largest market of any brand of its kind. We curate across the seven major product categories, furniture, upholstery, outdoor, lighting, linens, rugs, and decor, and we integrate across the three dominant product styles, traditional, contemporary, and modern, which we refer to as RH Estates, RH Interiors, and RH Modern. RH Estates, our newest brand extension launching this spring, will address the traditional market where the RH brand is currently under-penetrated. 60% of luxury homes feature classic or traditional architecture, which influences the majority of furniture purchasing behavior. RH Estates will feature the introduction of RH bespoke furniture, customizable collections from our recently acquired Michael Taylor, Joseph Jupe, Formations, and Denison Lean to the trade brands. RH Estates will also include the introduction of RH Couture upholstery by Dimitri & Co. Tailor-made sofas, sectionals, and chairs of arguably the highest quality upholstery available anywhere in the world. Designers will be able to order custom-made sizes and finishes, plus specify COM fabrics. RH Bespoke Furniture and RH Couture Upholstery will enable interior design firms to now specify RH for their most discerning clients in custom projects. RH Estates will also include collections from many of the most talented designers and artisans in our industry. Let's take a look at some of their work. Thank you. Thank you. Thank you. Thank you. RH Estates will premiere at the opening of RH Milan, the gallery on the courts of Venezia, a 70,000-square-foot former palace during Salone, the largest design show in the world, with an estimated 500,000 visitors descending on the city that week. The launch of RH Estates will include a dedicated sourcebook mailing mid-May, an international advertising campaign, and freestanding estates galleries in Greenwich, Connecticut, and the San Francisco Design District opening early summer, and the West Hollywood Design District opening in 2027. We believe RH Estates will become our largest and highest margin brand extension, driving significant growth over the next several years. Let me shift your attention to our multi-dimensional, physical-first global ecosystem, the world of RH, that goes far beyond a typical multi-channel approach, inspiring customers to dream, design, Dine. Travel. and live in a world thoughtfully curated by our age, creating an emotional connection unlike any other brand in our industry. The question we often are asked is why physical first in a digital world? Let me explain. Furniture remains the least digitized large retail category with an 80-20 store-to-online split, with luxury furniture estimated to be as high as 95-5. Why do stores still dominate? Comfort, scale, finish, and quality are hard to judge online. Even when customers purchase on a website, most experience the product in a store. We believe the physical manifestation of a brand will continue to be significantly more valuable than an invisible online one. We also believe most retail stores are archaic windowless boxes that lack any sense of humanity. That's why we don't build retail stores. We create inspiring spaces. Spaces that are a reflection of human design, a study of balance and symmetry that creates harmony. Spaces that blur the lines between residential and retail, indoors and outdoors, home and hospitality. Spaces with garden courtyards, rooftop restaurants, wine and barista bars. Spaces that activate all of the senses and spaces that cannot be replicated online. While most have been closing or shrinking the size of their stores, we've been building some of the largest and most immersive spaces in the history of our industry. Let's take a look at our most recent work. We believe our investments in building completely unique, immersive experiences
