STOCK-BASED COMPENSATION

12 Months Ended

Feb. 01, 2025

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

NOTE 17—STOCK-BASED COMPENSATION

The Restoration Hardware 2012 Stock Incentive Plan (the “Stock Incentive Plan”) was adopted on November 1, 2012. The Stock Incentive Plan provides 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 and on such date 6,829,041 fully vested options were granted under this plan to certain of our employees and advisors. Aside from these options granted on November 1, 2012, no other awards were granted under the Option Plan.

On November 1, 2022, both the Stock Incentive Plan and Option Plan expired. Upon expiration of the Stock Incentive Plan, a total of 1,607,508 shares that were available for future issuance under the plan were cancelled and were no longer available for the grant of awards under the plan.

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.

The maximum number of shares that may be issued pursuant to all awards under the 2023 Stock Incentive Plan is (i) 3,000,000, plus (ii) any shares of our common stock covered by any outstanding award (or portion of any such award) that has been granted under the Stock Incentive Plan if such award (or a portion of such award) is forfeited, is canceled or expires (whether voluntarily or involuntarily) without the issuance of shares of our common stock or if the shares underlying such award (or a portion of such award) that are surrendered or withheld in payment of the award’s exercise or purchase price or in satisfaction of tax withholding obligations with respect to an award would be deemed not to have been issued for purposes of determining the maximum number of shares of our common stock that may be issued under the 2023 Stock Incentive Plan had such award been an award granted under the 2023 Stock Incentive Plan. The 2023 Stock Incentive Plan has a ten-year term.

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. As of February 1, 2025, a total of 2,235,091 shares were available for future issuance under the 2023 Stock Incentive Plan.

Stock Options Under the Plans

Stock option activity was as follows:

		WEIGHTED-AVERAGE
	OPTIONS	EXERCISE PRICE
Outstanding—February 3, 2024	3,576,556	$	192.94
Granted	546,850		277.64
Exercised	(356,453)		90.60
Cancelled	(114,839)		287.07
Outstanding—February 1, 2025	3,652,114	$	212.65

The fair value of stock options granted was estimated on the date of grant using the following weighted-average assumptions:

	YEAR ENDED
	FEBRUARY 1,		FEBRUARY 3,		JANUARY 28,
	2025		2024		2023
Expected volatility	56.8	%	54.3	%	62.4	%
Expected life (years)	7.2		7.3		7.3
Risk-free interest rate	4.5	%	3.9	%	3.8	%
Dividend yield	—		—		—

Additional information about stock options was as follows:

	YEAR ENDED
	FEBRUARY 1,		FEBRUARY 3,		JANUARY 28,
	2025		2024		2023
	(in thousands, except per share amounts)
Weighted-average fair value per share of stock options granted	$	172.87	$	160.57	$	171.78
Aggregate intrinsic value of stock options exercised		90,058		34,556		1,102,657
Fair value of stock options vested		27,063		19,113		18,071

Information about stock options outstanding, vested or expected to vest, and exercisable as of February 1, 2025 was as follows:

	OPTIONS OUTSTANDING				OPTIONS EXERCISABLE
		WEIGHTED-
		AVERAGE	WEIGHTED-			WEIGHTED-
		REMAINING	AVERAGE			AVERAGE
	NUMBER OF	CONTRACTUAL LIFE	EXERCISE		NUMBER OF	EXERCISE
RANGE OF EXERCISE PRICES	OPTIONS	(in years)	PRICE		OPTIONS	PRICE
$25.39 — $45.21	151,950	1.3	$	35.79	151,950	$	35.79
$50.00 — $50.00	1,000,000	2.3		50.00	1,000,000		50.00
$87.31 — $154.82	580,369	4.7		135.01	301,643		128.26
$159.00 — $267.09	804,615	8.5		260.75	66,510		221.46
$278.30 — $379.26	297,630	7.2		316.98	74,645		328.62
$385.30 — $385.30	700,000	5.7		385.30	700,000		385.30
$389.34 — $713.52	117,550	6.9		586.84	31,165		611.96
Total	3,652,114		$	212.65	2,325,913	$	181.51
Vested or expected to vest	3,332,168		$	206.51

Stock Options Under the Plans

Options outstanding, vested or expected to vest, and exercisable as of February 1, 2025 were as follows:

		WEIGHTED-		WEIGHTED-		AGGREGATE
		AVERAGE		AVERAGE		INTRINSIC
		EXERCISE		REMAINING TERM		VALUE
	SHARES	PRICE		(in years)		(in thousands)
Options outstanding	3,652,114	$	212.65		5.2	$	774,076
Options vested or expected to vest	3,332,168	$	206.51		4.9	$	725,915
Options exercisable	2,325,913	$	181.51		3.8	$	558,694

Stock-based compensation expense related to stock options, which is included in selling, general and administrative expenses on the consolidated statements of income, was as follows:

	YEAR ENDED
	FEBRUARY 1,		FEBRUARY 3,		JANUARY 28,
	2025		2024		2023
	(in thousands)
Stock-based compensation expense(1)	$	40,516	$	36,509	$	40,583

(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. Amounts presented include $4.5 million, $9.6 million and $18 million in fiscal 2024, fiscal 2023 and fiscal 2022, respectively, related to Mr. Friedman’s option.

As of February 1, 2025, the total unrecognized compensation expense related to unvested options was $128 million, which is expected to be recognized on a straight-line basis over a weighted-average period of 4.6 years. In addition, as of February 1, 2025, the total unrecognized compensation expense related to the fully vested option grant made to Mr. Friedman in October 2020 was $0.9 million, which will be recognized in the first quarter of fiscal 2025.

Restricted Stock Awards Under the Plans

We grant restricted stock awards, which include restricted stock and restricted stock units, to our employees and members of our Board of Directors. Restricted stock award activity was as follows:

		WEIGHTED-
		AVERAGE		INTRINSIC
		GRANT DATE FAIR		VALUE
	AWARDS	VALUE		(in thousands)
Outstanding—February 3, 2024	15,940	$	437.02
Granted	15,829		301.31
Released	(19,749)		335.72
Cancelled	(800)		300.98
Outstanding—February 1, 2025	11,220	$	433.56	$	4,702

Additional information about restricted stock awards was as follows:

	YEAR ENDED
	FEBRUARY 1,		FEBRUARY 3,		JANUARY 28,
	2025		2024		2023
Weighted-average fair value per share of awards granted	$	301.31	$	322.24	$	318.86
Grant date fair value of awards released (in thousands)		6,630		2,846		2,694

Stock-based compensation expense related to restricted stock awards, which is included in selling, general and administrative expenses on the consolidated statements of income, was as follows:

	YEAR ENDED
	FEBRUARY 1,		FEBRUARY 3,		JANUARY 28,
	2025		2024		2023
	(in thousands)
Stock-based compensation expense	$	3,669	$	2,874	$	2,962

As of February 1, 2025, the total unrecognized compensation expense related to unvested restricted stock awards was $6.8 million, which is expected to be recognized on a straight-line basis over a weighted-average period of 2.1 years.

Compensation Related to Consolidated VIEs

Refer to Note 7—Variable Interest Entities for details of non-cash compensation related to consolidated variable interest entities in fiscal 2022.