ABOUT RH
RH (NYSE: RH) is a curator of design, taste and style in the luxury lifestyle market. The Company offers its collections through its retail galleries across North America, the Company’s multiple Source Books, and online at RH.com, RHModern.com, RHBabyandChild.com, RHTeen.com and Waterworks.com.
NON-GAAP FINANCIAL MEASURES
To supplement its condensed consolidated financial statements, which are prepared and presented in accordance with Generally Accepted Accounting Principles (“GAAP”), the Company uses the followingnon-GAAP financial measures: adjusted net revenue, adjusted operating income, adjusted net income or adjusted net earnings, adjusted net income margin, adjusted diluted earnings per share, normalized adjusted net income, normalized adjusted diluted net income per share, ROIC or return on invested capital, free cash flow, adjusted operating margin, adjusted gross margin, adjusted SG&A, EBITDA and Adjusted EBITDA (collectively,“non-GAAP financial measures”). We compute these measures by adjusting the applicable GAAP measures to remove the impact of certain recurring andnon-recurring charges and gains and the tax effect of these adjustments. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The Company uses thesenon-GAAP financial measures for financial and operational decision making and as a means to evaluateperiod-to-period comparisons. The Company believes that they provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. Thenon-GAAP financial measures used by the Company in this press release may be different from thenon-GAAP financial measures, including similarly titled measures, used by other companies.
The Company’s guidance on adjusted net revenues, adjusted diluted EPS, free cash flow and trailing twelve-month EBITDA contained in this press release does not include certain charges and costs. The adjustments to thesenon-GAAP financial measures in future periods are generally expected to be similar to the kinds of charges and costs excluded from suchnon-GAAP financial measures in prior periods, such as unusualnon-cash and other compensation expense; legal claim related expenses; recall accruals; reorganization costs including severance costs and related taxes; andnon-cash amortization of debt discount, among others. The exclusion of these charges and costs in future periods could have a significant impact on the Company’s adjusted diluted earnings guidance, free cash flow guidance and trailing twelve-month EBITDA. The Company is not able to provide a reconciliation of the Company’snon-GAAP financial guidance to the corresponding GAAP measures without unreasonable effort because of the uncertainty and variability of the nature and amount of these future charges and costs.
FORWARD-LOOKING STATEMENTS
This release contains forward-looking statements within the meaning of the federal securities laws, including without limitation, statements regarding: the Company’s updated outlook for the second quarter fiscal year 2019 and for the full fiscal year 2019; the Company’s future growth; the Company’s planned introduction of RH Ski House and other new collections; the Company’s prospects for the second half of 2019; the Company’s belief that the RH brand has the potential to reach $4 to $5 billion in North American revenues withmid-to-high teens operating margins and ROIC in excess of 50%; the Company’s belief that there is an opportunity to more than double those revenues as the Company begins to expand globally; and any statements or assumptions underlying any of the foregoing. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,” “should,” “likely” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future events. We cannot assure you that future developments affecting us will be those that we have anticipated. Important risks and uncertainties that could cause actual results to differ materially from our expectations include, among others, risks that the financial outlook provided for the second quarter of fiscal year 2019 and the full fiscal year 2019 does not represent actual financial results and is subject to change based upon the preparation of our financial statements; our dependence on key personnel and any changes in our ability to retain key personnel; successful implementation of our growth strategy; risks related to the number of new business initiatives we are undertaking; successful implementation of our growth strategy including our real estate transformation and the number of new gallery locations that we seek to open and the timing of
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