RH

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 RH, 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 Lee and Brands to support the launch of our new concept, our H 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 to 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 Duke, Formations, and Denison Lane to the trade brands. RH Estates will also include the introduction of RH Couture Upholstery by Dimitri and Co. Tailor-made sofas, sectionals, and chairs have 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 and 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.

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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 our H estates will include a dedicated source book 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. Thank you. Thank you. Thank you. We believe our investments in building completely unique, immersive experiences in Paris, Milan and London will set the stage for RH to become a truly global luxury brand. It's important to understand that there are several strategically significant businesses embedded in our galleries, including RH Interior Design, where we become the largest residential interior design firm in the world, with projects from San Francisco to Sydney, Los Angeles to London, Miami to Milan, and Dallas to Dubai. We offer design services including interior architecture, landscape architecture, art and antique curation, and turnkey installations. Another important business embedded in our galleries is RH To The Trade, a specialized team that calls on services and supports interior design firms assisting in the design, curation, delivery, and installation of many of their projects. RH Hospitality operates beautifully integrated restaurants, wine and barista bars in our galleries that generate significant traffic and brand awareness. While our galleries might see several hundred customers per week, our restaurants feed several thousand. With 26 restaurants in operation today and is scheduled to reach 40 by the end of 2027, RH is one of only seven globally owned and operated luxury restaurant brands with 20 or more locations worldwide. We believe our galleries create a unique competitive advantage that will likely never be duplicated in our lifetime, as the cost of construction at the luxury level has doubled post-COVID. To address that challenge, we've developed several immersive new gallery concepts that will enable us to scale in a faster and more capital-efficient manner. The first, the most revolutionary, is what we call an RH Design Compound, currently in development in Naples, Miami, and Walnut Creek. A compound is six to eight independent buildings connected by beautifully landscaped garden courtyards with a sun-filled atrium restaurant anchoring the project. Due to the absence of multiple stories that require steel structures, grand staircases, elevators, complex mechanical systems, and long development timelines, we believe we can build design compounds significantly faster and more capital efficient than our prior design galleries. Another new approach to deploying the RH brand in a faster and more capital efficient manner is what we call a design ecosystem. Currently under construction in Greenwich and Palm Desert, and in the development process in West Hollywood Design District. An ecosystem is a multi-building brand presence on a street, in a neighborhood, design district, or shopping center. Our first ecosystem will be in Greenwich, Connecticut, and includes our gallery at the Stork Post Office, Our new outdoor gallery opened last year and our new RH Estates gallery with an integrated restaurant opening in the former Ralph Lauren building this summer. We've also developed a new single-story gallery ranging from 15 to 20,000 square feet with a dramatic courtyard restaurant targeting secondary markets. We're currently under construction in Los Gatos, California, and are in design development for galleries in Richmond and Milwaukee. We've been extremely pleased with our performance of our first freestanding RH interior design office in Palm Desert, California, and have plans to open a second interior design office in Malibu this fall. In total, we have an opportunity to expand our presence in 27 existing markets and open one of our new design concepts in 48 new markets across North America, representing a $2 billion opportunity. Let me shift your attention to our business model and balance sheet. While we believe it's prudent to plan conservatively this year due to uncertainties around interest rates and inflation, and a planned revenue growth in the 4% to 8% range in 2026. We do expect growth to accelerate to 10% to 12% in 2027 and reach $5.4 to $5.8 billion by 2030. Adjusted EBITDA in the 14% to 16% range for 2026, reaching 25% to 28% by 2030. We expect cash flow of 300 to 400 million in 2026 and 500 to 600 million in 2027, inclusive of 200 to 250 million of asset sales each year. We expect cumulative cash flow of 3 billion by 2030, inclusive of the asset sales, and expect to be debt-free by 2029. While one might look at the current market discord and argue that RH has been in the wrong place at the wrong time, I would argue we've used this period to position our brand to be in the perfect place at the perfect time. Let me explain why. There are two important factors that will meaningfully expand the size of our market over the next 10 years. One is the exponential spending of high and ultra high net worth consumers on the home. Ultra high net worth consumers with a net worth above 20 million own on average 3.7 homes. Billionaires own 10. Ultra high net worth consumers spend 6.4 times more on home furnishings than a consumer with a single primary residence. Two, is the estimated 30 to 38 trillion dollar wealth transfer projected to take place over the next 10 years. which is more than double the past 10 years. Not only does the absolute dollar amount more than double, it's estimated that the dollars transfer from one to an average of seven people. It's possible over the next 10 years, our market will be multiple times larger than the past 10 years. When you combine that with our efforts to elevate and expand our product, globally expand our platform, generate significant revenues and brand awareness with our immersive hospitality venues, I would argue that the RH brand is in the perfect place at the perfect time. And we will emerge from this period of clutter, discord, and difficulty as one of the highest performing and most admired brands in the world.