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Segment Reporting | 3 Months Ended
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Apr. 30, 2022
Segment Reporting |
Segment Reporting | NOTE 17—SEGMENT REPORTING We define reportable and operating segments on the same basis that we use to evaluate our performance internally by the Chief Operating Decision Maker (the “CODM”), which we have determined is our Chief Executive Officer. We have three operating segments: RH Segment, Waterworks and Real Estate Development. The RH Segment and Waterworks operating segments (the “retail operating segments”) include all sales channels accessed by our customers, including sales through retail locations and outlets, websites, Source Books, and the commercial channel. The Real Estate Development segment represents operations associated with our equity method investments (refer to Note 5—Equity Method Investments). The retail operating segments are strategic business units that offer products for the home furnishings customer. While RH Segment and Waterworks have a shared senior leadership team and customer base, we have determined that their results cannot be aggregated as they do not share similar economic characteristics, as well as due to other quantitative factors. Segment Information We use operating income to evaluate segment profitability for the retail operating segments and allocate resources. Operating income is defined as net income before interest expense—net, loss on extinguishment of debt, other income—net, income tax expense (benefit) and our share of equity method investments losses. Segment operating income excludes (i) employer payroll tax expense related to the option exercise by Mr. Friedman, (ii) asset impairments, (iii) non-cash compensation amortization related to the fully vested option grant made to Mr. Friedman in October 2020 and (iv) professional fee related to the 2023 Notes and 2024 Notes transactions (refer to Note 9—Convertible Senior Notes). These items are excluded from segment operating income in order to provide better transparency of segment operating results. Accordingly, these items are not presented by segment because they are excluded from the segment profitability measure that the CODM and our senior leadership team reviews. The following table presents segment operating income and income before income taxes: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | THREE MONTHS ENDED
​ | ​ | APRIL 30, | ​ | MAY 1,
​ |  | 2022 |  | 2021
​ | ​ | (in thousands)
Operating income: | ​ | ​ | ​ | ​ | ​ | ​
RH Segment | ​ | $ | 228,545 | ​ | $ | 188,010
Waterworks | ​ |  | 7,985 | ​ |  | 6,242
Employer payroll taxes on option exercise | ​ | ​ | (11,717) | ​ | ​ | —
Professional fee | ​ |  | (7,184) | ​ |  | —
Asset impairments | ​ |  | (5,923) | ​ |  | —
Non-cash compensation | ​ | ​ | (5,858) | ​ | ​ | (5,864)
Recall accrual | ​ |  | (560) | ​ |  | (500)
Income from operations | ​ |  | 205,288 | ​ |  | 187,888
Interest expense—net | ​ |  | 20,855 | ​ |  | 13,308
Loss on extinguishment of debt | ​ |  | 146,116 | ​ |  | 105
Other income—net | ​ | ​ | (343) | ​ | ​ | —
Income before income taxes | ​ | $ | 38,660 | ​ | $ | 174,475
​ The following table presents the statements of income metrics reviewed by the CODM to evaluate performance internally or as required under ASC 280—Segment Reporting: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | THREE MONTHS ENDED
​ | ​ | APRIL 30, | ​ | MAY 1,
​ | ​ | 2022 | ​ | 2021
​ |  | RH SEGMENT |  | WATERWORKS |  | TOTAL |  | RH SEGMENT |  | WATERWORKS |  | TOTAL
​ | ​ | (in thousands)
Net revenues | ​ | $ | 908,948 | ​ | $ | 48,344 | ​ | $ | 957,292 | ​ | $ | 819,823 | ​ | $ | 40,969 | ​ | $ | 860,792
Gross profit | ​ |  | 472,822 | ​ |  | 25,761 | ​ |  | 498,583 | ​ |  | 386,553 | ​ |  | 20,424 | ​ |  | 406,977
Depreciation and amortization | ​ |  | 23,524 | ​ | ​ | 1,234 | ​ |  | 24,758 | ​ |  | 22,680 | ​ |  | 1,206 | ​ |  | 23,886
​ In the three months ended April 30, 2022 and May 1, 2021, the Real Estate Development segment share of equity method investments losses were $1.4 million and $2.1 million, respectively. The following table presents the balance sheet metrics as required under ASC 280—Segment Reporting:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | APRIL 30, | ​ | JANUARY 29,
​ | ​ | 2022 | ​ | 2022
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | REAL ESTATE | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | REAL ESTATE | ​ | ​ | ​
​ |  | RH SEGMENT |  | WATERWORKS |  | DEVELOPMENT |  | TOTAL |  | RH SEGMENT |  | WATERWORKS |  | DEVELOPMENT |  | TOTAL
​ | ​ | (in thousands)
Goodwill(1) | ​ | $ | 141,092 | ​ | $ | — | ​ | $ | — | ​ | $ | 141,092 | ​ | $ | 141,100 | ​ | $ | — | ​ | $ | — | ​ | $ | 141,100
Tradenames, trademarks and other intangible assets(2) | ​ |  | 56,488 | ​ |  | 17,000 | ​ |  | — | ​ |  | 73,488 | ​ |  | 56,161 | ​ |  | 17,000 | ​ |  | — | ​ |  | 73,161
Equity method investments | ​ | ​ | — | ​ | ​ | 520 | ​ | ​ | 100,030 | ​ | ​ | 100,550 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 100,810 | ​ | ​ | 100,810
Total assets | ​ |  | 5,595,677 | ​ |  | 192,230 | ​ |  | 100,030 | ​ |  | 5,887,937 | ​ |  | 5,259,719 | ​ |  | 179,941 | ​ |  | 100,810 | ​ |  | 5,540,470
(1) | The Waterworks reporting unit goodwill of $51 million recognized upon acquisition in fiscal 2016 was fully impaired as of fiscal 2018.
(2) | Presented net of an impairment charge of $35 million recognized in previous fiscal years.
We classify our sales into furniture and non-furniture product lines. Furniture includes both indoor and outdoor furniture. Non-furniture includes lighting, textiles, fittings, fixtures, surfaces, accessories and home décor. Net revenues in each category were as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | THREE MONTHS ENDED
​ | ​ | APRIL 30, | ​ | MAY 1,
​ |  | 2022 |  | 2021
​ | ​ | (in thousands)
Furniture | ​ | $ | 662,520 | ​ | $ | 580,011
Non-furniture | ​ |  | 294,772 | ​ |  | 280,781
Total net revenues | ​ | $ | 957,292 | ​ | $ | 860,792
​ We are domiciled in the United States and primarily operate our retail locations and outlets in the United States. As of April 30, 2022, we operated 4 retail locations and 2 outlets in Canada, and 1 retail location in the U.K. Geographic revenues in Canada and the U.K. are based upon revenues recognized at the retail locations in the respective country and were not material in any fiscal period presented. Long-lived assets held internationally were not material in any fiscal period presented. No single customer accounted for 10% or more of our consolidated net revenues in the three months ended April 30, 2022 or May 1, 2021.

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 31 -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8924-108599 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 34 -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8981-108599 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 21 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8721-108599 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 40 -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e9031-108599 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (f) -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8933-108599 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (e) -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8933-108599 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 26 -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8844-108599 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 41 -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e9038-108599 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (d) -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8933-108599 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 22 -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8736-108599 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 42 -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e9054-108599 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8657-108599 Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 21 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8721-108599 Reference 14: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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