STOCK-BASED COMPENSATION

3 Months Ended

May 04, 2024

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

NOTE 15—STOCK-BASED COMPENSATION

The Restoration Hardware 2012 Stock Incentive Plan (the “Stock Incentive Plan”) was adopted on November 1, 2012. The Stock Incentive Plan provided for the grant of incentive stock options to our employees, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, cash-based awards and any combination thereof to our employees, directors and consultants and our parent and subsidiary corporations’ employees, directors and consultants. The Restoration Hardware 2012 Stock Option Plan (the “Option Plan”) was adopted on November 1, 2012. On November 1, 2022, both the Stock Incentive Plan and Option Plan expired.

The RH 2023 Stock Incentive Plan (the “2023 Stock Incentive Plan”, together with the Stock Incentive Plan and Option Plan, “the Plans”) was approved by stockholders on April 4, 2023. The 2023 Stock Incentive Plan provides for the grant of incentive stock options to our employees and the grant of non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights and any combination thereof to our employees, directors and consultants and our parent and subsidiary corporations’ employees, directors and consultants.

As of May 4, 2024, there were a total of 2,200,469 shares issuable under the 2023 Stock Incentive Plan. Awards under the 2023 Stock Incentive Plan reduce the number of shares available for future issuance. Cancellations and forfeitures of awards previously granted under the Plans increase the number of shares available for future issuance. Shares issued as a result of award exercises under the 2023 Stock Incentive Plan will be funded with the issuance of new shares.

Stock Options Under the Plans

A summary of options outstanding, vested or expected to vest, and exercisable as of May 4, 2024 was as follows:

		WEIGHTED		WEIGHTED		AGGREGATE
		AVERAGE		AVERAGE		INTRINSIC
		EXERCISE		REMAINING TERM		VALUE
	SHARES	PRICE		(in years)		(in thousands)
Options outstanding	4,027,464	$	202.04		5.7	$	418
Options vested or expected to vest	3,622,750		194.67		5.3		408
Options exercisable	2,570,209		166.10		4.2		369

Stock-based compensation expense, which is included in selling, general and administrative expenses on the condensed consolidated statements of income (loss), was as follows:

	THREE MONTHS ENDED
	MAY 4,		APRIL 29,
	2024		2023
	(in thousands)
Stock-based compensation expense(1)	$	10,544	$	10,180

(1) On October 18, 2020, our Board of Directors granted Mr. Friedman an option to purchase 700,000 shares of our common stock with an exercise price equal to $385.30 per share under the Stock Incentive Plan. The option will result in aggregate non-cash stock compensation expense of $174 million, of which $1.9 million and $3.5 million was recognized during the three months ended May 4, 2024 and April 29, 2023, respectively.

No stock-based compensation cost has been capitalized in the accompanying condensed consolidated financial statements.

As of May 4, 2024, the total unrecognized compensation expense and weighted average remaining term was as follows:

	UNRECOGNIZED		WEIGHTED
	STOCK BASED		AVERAGE
	COMPENSATION		REMAINING TERM
	(in thousands)		(in years)
Unvested options(1)	$	147,683		5.2
Unvested restricted stock and restricted stock units		5,923		2.8
Total	$	153,606

(1) Excludes the remaining unrecognized compensation expense of $3.4 million related to the fully vested option grant made to Mr. Friedman in October 2020, which will be recognized on an accelerated basis through May 2025.