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Restoration Hardware Holdings, Inc. Reports Record Second Quarter and Increases Earnings Guidance for Fiscal 2013

  Restoration Hardware Holdings, Inc. Reports Record Second Quarter and
  Increases Earnings Guidance for Fiscal 2013

  Q2 Net Revenues Increased 30%; Q2 Comparable Store Sales Increased 26%; Q2
                 Adjusted Diluted EPS Increased 48% to $0.49

Company Increases Fiscal 2013 Adjusted Diluted EPS Guidance to $1.65 to $1.70
                   from Previous Guidance of $1.41 to $1.47

Business Wire

CORTE MADERA, Calif. -- September 10, 2013

Restoration Hardware Holdings, Inc. (NYSE: RH) today announced financial
results for the second quarter ended August 3, 2013.

Second Quarter Highlights

  *Net revenues increased 30% on top of a 24% increase for the same period
    last year

       *Comparable store sales increased 26% on top of 31% growth for the
         same period last year
       *Direct revenues increased 33% on top of a 29% increase for the same
         period last year

  *Adjusted operating income increased 56% to $34.2 million from $21.9
    million for the same period last year; GAAP operating loss of $27.8
    million from operating income of $19.7 million for the same period last
    year
  *Adjusted net income increased 62% to $19.8 million from $12.2 million for
    the same period last year; GAAP net loss of $17.8 million from net income
    of $17.6 million for the same period last year
  *Adjusted diluted earnings per share increased 48% to $0.49 compared to
    $0.33 last year; GAAP diluted loss per share of $0.46

Gary Friedman, Chairman, Creator, Curator, and Co-Chief Executive Officer,
said, “We are pleased to announce record financial results for the second
quarter. Our industry-leading performance is a reflection of our ability to
innovate, curate and integrate new products and businesses offering an
unmatched customer experience. We continued to take market share during the
quarter, delivering 30% growth in net revenues driven by a comp store sales
increase of 26% on top of 31% comp growth last year and 17% percent in 2011.
We significantly expanded our operating margin and increased adjusted net
income by 62% while at the same time continued to invest in our infrastructure
and new businesses to support our future growth.”

Mr. Friedman continued, "Due to the current strength of our business, the
continued evolution of our Source Book model, and the enhanced ability to
connect with our customers through digital and electronic marketing, we are
moving to a once per year mailing of our Source Books. We believe this
decision will result in a step change effect in our earnings and cash flow
model, allowing us to reach double-digit operating margins and free cash flow
positive significantly ahead of our prior expectations. We are eliminating the
mailing of our Fall 2013 Source Books and plan to mail an annual edition each
Spring. Concurrently, we are raising our earnings estimates for the remainder
of 2013 to reflect our current business trends and the associated cost
savings."

Carlos Alberini, Co-Chief Executive Officer, commented, “Our business momentum
remains very strong and provides good visibility into the back half of the
year. Our expected top line growth, coupled with a more efficient cost
structure, positions us to drive a significant and sustainable expansion in
our operating margins, and over 60% growth in our adjusted EPS for this year.
This latest step change to our business gives us even more confidence in the
power of our model and in our ability to surpass the long-term financial goals
we have set for our Company, including adjusted earnings growth in the mid to
high twenties annually.”

Mr. Alberini concluded, “As we look forward, the transformation of our real
estate remains our top priority and the true key to unlocking the value of our
dominant assortment. Our existing Full Line Design Galleries continue to be
highly productive and are driving strong results in each market. Los Angeles
and Houston delivered comps in excess of 29% during the second quarter, ahead
of the rest of our chain. Also, our new locations in Scottsdale, Boston and
Indianapolis continue to perform ahead of expectations. We plan to open new
Full Line Design Galleries in Greenwich, Atlanta and Los Angeles in 2014 and
are currently in negotiations for more than 30 locations in other key markets.
We continue to believe we can open more than 10 locations a year, beginning in
2015. Our next generation Full Line Design Galleries will be larger and
showcase our dominant assortment and new businesses, and they will provide
opportunities for higher sales, increased earnings, lower capital investment
and higher ROIC in each market.”

Second Quarter Fiscal 2013 Financial Results

Revenue - Net revenues for the second quarter of fiscal 2013 increased 30% to
$382.1 million from $292.9 million for the second quarter of fiscal 2012. This
is on top of a 24% increase in net revenues for the second quarter of fiscal
2012.

  *Comparable store sales increased 26% for the second quarter of fiscal
    2013. This growth is on top of an increase of 31% in comparable store
    sales for the second quarter of fiscal 2012.
  *As of August 3, 2013, the Company operated a total of 70 retail stores,
    consisting of 62 Galleries, 5 Full Line Design Galleries and 3 Baby &
    Child Galleries, as well as 17 outlet stores throughout the United States
    and Canada. This compares to a total of 73 retail stores, consisting of 70
    Galleries, 2 Full Line Design Galleries and 2 Baby & Child Galleries, as
    well as 10 outlet stores open at the end of the second quarter of fiscal
    2012.
  *Direct revenues increased 33% in the second quarter of fiscal 2013. This
    growth is on top of the 29% increase in direct revenues for the second
    quarter of fiscal 2012.

Operating Income (Loss)* - Adjusted operating income for the second quarter of
fiscal 2013 increased 56% to $34.2 million compared to $21.9 million for the
second quarter of fiscal 2012. Including the impact of variable and one-time
non-cash stock-based compensation charges and costs related to the Company’s
follow-on offerings, the GAAP operating loss reached $27.8 million compared to
GAAP operating income of $19.7 million for the prior year fiscal quarter.

EBITDA* - Adjusted EBITDA for the second quarter of fiscal 2013 increased 42%
to $40.8 million compared to adjusted EBITDA of $28.7 million for the second
quarter of fiscal 2012. Including the impact of variable and one-time non-cash
stock-based compensation charges and costs related to the Company’s follow-on
offerings, EBITDA for the quarter was a loss of $21.2 million compared to
positive EBITDA of $26.1 million for the prior year fiscal quarter.

Net Income (Loss)* - Adjusted net income increased 62% to $19.8 million for
the second quarter of fiscal 2013 from $12.2 million for the second quarter of
fiscal 2012. Adjusted net income is calculated using a 40% effective tax rate.
GAAP net loss for the second quarter of fiscal 2013 was $17.8 million compared
to GAAP net income of $17.6 million for the second quarter of fiscal 2012.

Earnings Per Share* - Adjusted diluted EPS increased 48% to $0.49 for the
second quarter of fiscal 2013 from $0.33 for the second quarter of fiscal
2012. GAAP diluted EPS for the second quarter of fiscal 2013 was a loss of
$0.46.

First Half Fiscal 2013 Financial Results

Revenue - Net revenues for the six months ended August 3, 2013 increased 34%
to $683.4 million from $510.8 million for the first half of fiscal 2012. This
is on top of a 22% increase in net revenues for the first half of fiscal 2012.

  *Comparable store sales increased 33% for the first half of fiscal 2013.
    This growth compares to an increase of 29% in comparable store sales for
    the first half of fiscal 2012.
  *Direct revenues increased 35% in the first half of fiscal 2013. This
    growth is on top of the 25% increase in direct revenues for the first half
    of fiscal 2012.

Operating Income (Loss)* - Adjusted operating income for the first half of
fiscal 2013 increased 82% to $38.8 million compared to $21.3 million in the
first half of fiscal 2012. Including the impact of variable and one-time
non-cash stock-based compensation charges and costs related to the Company’s
follow-on offerings, GAAP operating loss was $27.3 million compared to GAAP
operating income of $17.6 million for the year ago period.

EBITDA* - Adjusted EBITDA for the first half of fiscal 2013 increased 49% to
$52.0 million compared to adjusted EBITDA of $34.9 million for the first half
of fiscal 2012. Including the impact of variable and one-time non-cash
stock-based compensation charges and costs related to the Company’s follow-on
offerings, EBITDA for the first half of 2013 was a loss of $14.0 million
compared to positive EBITDA of $30.5 million for the prior year period.

Net Income (Loss)* - Adjusted net income increased 102% to $22.1 million for
the first half of fiscal 2013 from $10.9 million for the first half of fiscal
2012. GAAP net loss for the first half of fiscal 2013 was $18.0 million
compared to GAAP net income of $13.9 million for the year ago period.

Earnings Per Share* - Adjusted diluted EPS increased 87% to $0.56 for the
first half of fiscal 2013 from $0.30 for the same period last year. GAAP
diluted EPS during the first half of fiscal 2013 was a loss of $0.47.

Outlook

The Company is providing the following guidance for the third quarter of
fiscal 2013:

  *Net revenues in the range of $385 million to $395 million
  *Adjusted net income in the range of $11.2 million to $12.0 million
  *Adjusted diluted EPS in the range of $0.27 to $0.29

The Company is providing the following guidance for the fourth quarter of
fiscal 2013:

  *Net revenues in the range of $490 million to $500 million
  *Adjusted net income in the range of $34.3 million to $35.5 million
  *Adjusted diluted EPS in the range of $0.81 to $0.84

The Company is increasing its guidance for the fiscal year ending February 1,
2014:

  *Net revenues in the range of $1.56 billion to $1.58 billion.
  *Adjusted net income in the range of $67.6 million to $69.5 million
  *Adjusted diluted EPS in the range of $1.65 to $1.70

Note: The Company’s adjusted net income and adjusted diluted earnings per
share guidance does not include charges and costs which are expected to be
similar to those charges and costs excluded from adjusted net income and
adjusted diluted earnings in prior quarters. The Company’s fiscal year 2013
will include 52 weeks compared to fiscal year 2012 which included 53 weeks.

Conference Call and Webcast Information

Restoration Hardware Holdings, Inc. will host a conference call at 2:00 p.m.
PT (5:00 p.m. ET) today to discuss the second quarter results. Interested
parties may access the call by dialing (866) 394-6658 (United States/Canada)
or (706) 679-9188 (International). A live broadcast of Restoration Hardware’s
quarterly conference call will also be available online at the Company’s
website www.restorationhardware.com under Investor Relations. A replay of the
conference call will be available through September 24, 2013 by dialing (855)
859-2056 or (404) 537-3406 and entering passcode 45774673 as well as on the
Company’s investor relations website.

About Restoration Hardware Holdings, Inc.

RH (Restoration Hardware Holdings, Inc. - NYSE:RH) is a curator of design,
taste and style in the luxury lifestyle market. The Company offers collections
through its retail galleries, source books, and online at RH.com.

*Non-GAAP Financial Measures

To supplement its consolidated financial statements, which are prepared and
presented in accordance with Generally Accepted Accounting Principles (GAAP),
the Company uses the following non-GAAP financial measures: adjusted operating
income, EBITDA, adjusted EBITDA, adjusted net income, pro forma EPS and
adjusted diluted EPS (collectively the “non-GAAP financial measures”). 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 these
non-GAAP financial measures for financial and operational decision making and
as a means to evaluate period-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. The non-GAAP financial measures
used by the Company in this press release may be different from the methods
used by other companies.

For more information on the non-GAAP financial measures, please see the
Reconciliation of GAAP to non-GAAP Financial Measures tables in this press
release. These accompanying tables include details on the GAAP financial
measures that are most directly comparable to non-GAAP financial measures and
the related reconciliations between these financial measures. With respect to
the Company’s adjusted net income and adjusted diluted EPS guidance for the
third fiscal quarter, the fourth fiscal quarter and the full year of fiscal
2013, the Company is not able to provide a reconciliation of these non-GAAP
financial measures to GAAP without unreasonable effort as our estimated
results are preliminary and may change as we complete the quarter close
process and management’s review of our financial statements.

Forward-Looking Statements

This release contains forward-looking statements within the meaning of the
federal securities laws including statements related to the expected benefits
to the Company’s earnings and cash flow model of moving to a once per year
mailing of Source Books, the Company’s ability to surpass long-term financial
goals, the Company’s plans to open Full Line Design Galleries in Greenwich,
Atlanta and Los Angeles in 2014, the Company’s belief that it can open more
than 10 locations a year beginning in 2015, the expectations that the next
generation of Full Line Design Galleries will be larger and provide
opportunities for higher sales, increased earnings, lower capital investment
and higher ROIC in each market, and the Company’s future financial guidance,
including for the third fiscal quarter of 2013, the fourth fiscal quarter of
2013 and the full year ending February 1, 2014. 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,
recent changes in general economic conditions and the impact on consumer
confidence and consumer spending, changes in customer demand for our products,
our ability to anticipate consumer preferences and buying trends, risks
related to the number of new business initiatives we are undertaking, risks in
the implementation or our real estate portfolio transformation, delays in
store openings, as well as those risks and uncertainties disclosed under the
sections entitled “Risk Factors” and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in Restoration Hardware
Holdings’ Form 10-K filed with the Securities and Exchange Commission on April
29, 2013, and similar disclosures in subsequent reports filed with the SEC,
which are available on our investor relations website at
ir.restorationhardware.com and on the SEC website at www.sec.gov. Any
forward-looking statement made by us in this press release speaks only as of
the date on which we make it. We undertake no obligation to publicly update
any forward-looking statement, whether as a result of new information, future
developments or otherwise, except as may be required by any applicable
securities laws.

RESTORATION HARDWARE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
                                                                                                                         
                       Three Months Ended                                                Six Months Ended
                       August 3,          % of Net     July 28,           % of Net       August 3,          % of Net     July 28,           % of Net
                                          Revenues                        Revenues                          Revenues                        Revenues
                       2013                            2012                              2013                            2012
Net revenues           $ 382,098          100.0  %     $ 292,906          100.0  %       $ 683,435          100.0  %     $ 510,820          100.0  %
Cost of goods           242,872         63.6   %      178,779         61.0   %        442,332         64.7   %      321,425         62.9   %
sold
Gross profit             139,226          36.4   %       114,127          39.0   %         241,103          35.3   %       189,395          37.1   %
Selling, general
and                     167,006         43.7   %      94,465          32.3   %        268,372         39.3   %      171,830         33.7   %
administrative
expenses
Income (loss)            (27,780    )     -7.3   %       19,662           6.7    %         (27,269    )     -4.0   %       17,565           3.4    %
from operations
Interest expense        (1,191     )     -0.2   %      (1,479     )     -0.5   %        (2,031     )     -0.3   %      (3,054     )     -0.6   %
Income (loss)
before income            (28,971    )     -7.5   %       18,183           6.2    %         (29,300    )     -4.3   %       14,511           2.8    %
taxes
Income tax
expense                 (11,136    )     -2.8   %      567             0.2    %        (11,304    )     -1.7   %      623             0.1    %
(benefit)
Net income             $ (17,835    )     -4.7   %     $ 17,616          6.0    %       $ (17,996    )     -2.6   %     $ 13,888          2.7    %
(loss)
                                                                                                                                            
Weighted-average
shares used in
computing basic          38,712,000                      1,000                             38,394,013                      1,000
and diluted net
income (loss)
per share
Basic and
diluted net            $ (0.46      )                  $ 17,616                          $ (0.47      )                  $ 13,888
income (loss)
per share
                                                                                                                                            
Pro forma
weighted-average
shares used in
computing pro                                            36,971,500                                                        36,971,500
forma basic and
diluted net
income per share
^[a]
Pro forma basic
and diluted net                                        $ 0.48                                                            $ 0.38
income per share

[a] On a pro forma basis, basic and diluted shares outstanding for the three
and six months ended July 28, 2012 include (1) the impact of the Company’s
reorganization, as further described in the Company’s final prospectus filed
with the Securities and Exchange Commission on November 5, 2012 (the
“Reorganization”), as well as (2) the 4,782,609 shares of common stock that
the Company issued and sold on November 7, 2012 in its initial public
offering, as if such events had been completed as of the beginning of the
respective periods and the common stock resulting therefrom was outstanding
for the respective periods.


RESTORATION HARDWARE HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
                                                             
                                                                     
                                       August 3,     February 2,     July 28,
                                                                
                                       2013          2013            2012
                                                                     
ASSETS
Cash and cash equivalents              $ 15,012      $  8,354        $ 10,102
Merchandise inventories                  406,676        353,329        275,485
Other current assets                    155,715       131,075       98,604
Total current assets                     577,403        492,758        384,191
Property and equipment—net               154,008        111,406        87,904
Goodwill and other intangibles           171,730        172,724        174,125
Other assets                            26,223        12,725        4,655
Total assets                           $ 929,364     $  789,613      $ 650,875
                                                                     
LIABILITIES AND STOCKHOLDERS’
EQUITY
Accounts payable and accrued           $ 205,551     $  145,353      $ 117,175
expenses
Other current liabilities               91,455        74,071        68,239
Total current liabilities                297,006        219,424        185,414
Revolving line of credit and             87,575         82,501         144,452
term loan
Other long term liabilities             45,410        36,077        55,885
Total liabilities                       429,991       338,002       385,751
                                                                     
Stockholders’ equity                    499,373       451,611       265,124
Total liabilities and                  $ 929,364     $  789,613      $ 650,875
stockholders’ equity
                                                                       

RESTORATION HARDWARE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
                                                          
                                                 Six Months Ended
                                                 August 3,         July 28,
                                                               
                                                 2013              2012
                                                                   
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)                                $ (17,996 )       $ 13,888
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
      Depreciation and amortization                13,228            12,892
      Stock-based compensation expense             64,282            738
      Other non-cash items                         (13,805 )         309
Change in assets and liabilities:
      Merchandise inventories                      (53,483 )         (29,639 )
      Accounts payable, accrued expenses,         39,203          (2,821  )
      and other
               Net cash provided by (used         31,429          (4,633  )
               in) operating activities
                                                                   
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures                               (30,616 )         (13,517 )
Purchases of trademarks                            —                (304    )
               Net cash used in investing         (30,616 )        (13,821 )
               activities
                                                                   
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under revolving line of             5,074             22,135
credit
Payments on capital leases                         (760    )         (2,104  )
Stock options exercised                            695               —
Excess tax benefit from exercise of stock          1,032             —
options
Tax witholdings related to issuance of            (178    )        —       
stock-based awards
               Net cash provided by               5,863           20,031  
               financing activities
Effects of foreign currency exchange rate         (18     )        13      
translation
               Net increase in cash and            6,658             1,590
               cash equivalents
Cash and cash equivalents
               Beginning of period                8,354           8,512   
               End of period                     $ 15,012         $ 10,102  
                                                                             

RESTORATION HARDWARE HOLDINGS, INC.
OPERATING METRICS AND OTHER DATA
(Unaudited)
                                                         
                         Three Months Ended           Six Months Ended
                         August 3,     July 28,       August 3,     July 28,
                                                               
                         2013          2012           2013          2012
Growth in net
revenues:
Stores ^[a]                28    %        21  %         33    %       19     %
Direct                     33    %        29  %         35    %       25     %
Total                      30    %        24  %         34    %       22     %
Retail ^[b]:
Comparable store           26    %        31  %         33    %       29     %
sales change ^[c]
Retail stores open
at beginning of            70             74            71            74
period
Stores opened              —              —             2             3
Stores closed              —              1             3             4
Retail stores open         70             73            70            73
at end of period
Retail sales per
leased selling           $ 353         $  281         $ 638         $ 481
square foot ^[d]
Total leased
square footage at          796            792           796           792
end of period (in
thousands)
Total leased
selling square
footage at end of          521            516           521           516
period (in
thousands) ^[e]
Direct:
Catalogs
circulated (in             7,995          225           7,995         15,131
thousands) ^[f]
Catalog pages
circulated (in             5,691          54            5,691         7,417
millions) ^[f]
Direct as a
percentage of net          47    %        46  %         47    %       46     %
revenues ^[g]

[a] Store data represents retail stores plus outlet stores. Net revenues for
outlet stores for the three months ended August 3, 2013 and July 28, 2012 were
$20.6 million and $13.4 million, respectively. Net revenues for outlet stores
for the six months ended August 3, 2013 and July 28, 2012 were $35.0 million
and $24.3 million, respectively.

[b] Retail data has been calculated based upon retail stores, which includes
our Baby & Child stores and excludes outlet stores.

[c] Comparable store sales have been calculated based upon retail stores that
were open at least fourteen full months as of the end of the reporting period
and did not change square footage by more than 20% between periods. If a store
is closed for seven days during a month, that month will be excluded from
comparable store sales. Comparable store net revenues exclude revenues from
outlet stores.

[d] Retail sales per leased selling square foot is calculated by dividing
total net revenues for all retail stores, comparable and non-comparable, by
the average leased selling square footage for the period.

[e] Leased selling square footage is retail space at our stores used to sell
our products. Leased selling square footage excludes backrooms at retail
stores used for storage, office space or similar matters. Leased selling
square footage excludes exterior sales space located outside a store, such as
courtyards, gardens and rooftops. Leased selling square footage includes
approximately 4,500 square feet related to one owned store location.

[f] The catalogs and catalog pages circulated from period to period do not
take into account different page sizes per catalog distributed. Page sizes and
page counts vary for different catalog mailings and we sometimes mail
different versions of a catalog at the same time. Accordingly, period to
period comparisons of catalogs circulated and catalog pages circulated do not
take these variations into account.

[g] Direct revenues include sales through our catalogs and websites.


RESTORATION HARDWARE HOLDINGS, INC.
RECONCILIATION OF ADJUSTED INCOME STATEMENT ITEMS
(In thousands, except share and per share amounts)
(Unaudited)
                                                                                                                           
                     Three Months Ended
                     Reported                           Adjusted                          Reported                        Adjusted
                                                                           % of Net                                                          % of Net
                     August 3,         Adjustments    August 3,         Revenues      July 28,       Adjustments    July 28,          Revenues

                     2013                               2013                              2012                            2012
Net revenues         $ 382,098          $ —             $ 382,098          100.0  %       $ 292,906       $  —            $ 292,906          100.0  %
Cost of goods         242,872          —             242,872         63.6   %        178,779        —            178,779         61.0   %
sold
Gross profit           139,226            —               139,226          36.4   %         114,127          —              114,127          39.0   %
Selling, general
and                   167,006          (61,960 )      105,046         27.5   %        94,465         (2,226 )      92,239          31.5   %
administrative
expenses ^[a]
Income (loss)          (27,780    )       61,960          34,180           8.9    %         19,662           2,226          21,888           7.5    %
from operations
Interest expense      (1,191     )      —             (1,191     )     -0.2   %        (1,479  )       —            (1,479     )     -0.5   %
Income (loss)
before income          (28,971    )       61,960          32,989           8.7    %         18,183           2,226          20,409           7.0    %
taxes
Income tax
expense               (11,136    )      24,332        13,196          3.5    %        567            7,597        8,164           2.8    %
(benefit) ^[b]
Net income           $ (17,835    )     $ 37,628       $ 19,793          5.2    %       $ 17,616       $  (5,371 )     $ 12,245          4.2    %
(loss) ^[c]
                                                                                                                                             
EBITDA ^[d]          $ (21,182    )                     $ 40,778                          $ 26,130                        $ 28,738
                                                                                                                                             
Weighted-average
shares used in
computing basic        38,712,000                         38,712,000                        1,000                           36,971,500
net income
(loss) per share
^[e]
Weighted-average
shares used in
computing              38,712,000                         40,696,706                        1,000                           36,971,500
diluted net
income (loss)
per share ^ [e]
                                                                                                                                             
Basic net income     $ (0.46      )                     $ 0.51                            $ 17,616                        $ 0.33
(loss) per share
Diluted net
income (loss)        $ (0.46      )                     $ 0.49                            $ 17,616                        $ 0.33
per share

[a] The adjustments for selling, general, and administrative expenses include
management and pre-initial public offering board fees, certain non-cash and
other one-time compensation, follow-on offering fees, lease termination costs
and special committee investigation and remediation costs. See table titled
“Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income” for
additional details.

[b] Assumes a normalized tax rate of 40% for all periods presented. See table
titled “Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income” for
additional details.

[c] Adjusted net income is a supplemental measure of financial performance
that is not required by, or presented in accordance with, GAAP. We define
adjusted net income as consolidated net income (loss) less non-recurring and
other items. Adjusted net income is included in this press release because
management believes that adjusted net income provides meaningful supplemental
information for investors regarding the performance of our business and
facilitates a meaningful evaluation of actual results on a comparable basis
with historical results. Our management uses this non-GAAP financial measure
in order to have comparable financial results to analyze changes in our
underlying business from quarter to quarter.

[d] EBITDA and Adjusted EBITDA are supplemental measures of financial
performance that are not required by, or presented in accordance with, GAAP.
We define EBITDA as consolidated net income (loss) before depreciation and
amortization, interest expense and provision for income taxes. Adjusted EBITDA
reflects further adjustments to EBITDA to eliminate the impact of certain
items including non-cash or other items that we do not consider representative
of our ongoing financial performance. EBITDA and Adjusted EBITDA are included
in this press release because they are key metrics used by management, our
Board of Directors and our principal shareholders to assess our financial
performance, and Adjusted EBITDA is used in connection with determining
incentive compensation under our Management Incentive Program (“MIP”).
Additionally, EBITDA is frequently used by analysts, investors and other
interested parties to evaluate companies in our industry. We believe that
Adjusted EBITDA provides useful information facilitating operating performance
comparisons from period to period and company to company. We use EBITDA and
Adjusted EBITDA, alongside other GAAP measures such as gross profit, operating
income (loss) and net income (loss), to measure profitability, as a key
profitability target in our annual and other budgets, and to compare our
performance against that of peer companies. Please see the table titled
“Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA” for
further information.

[e] On an adjusted basis for the three months ended July 28, 2012, basic and
diluted shares outstanding include (1) the impact of the Reorganization, as
well as (2) the 4,782,609 shares of common stock that the Company issued and
sold on November 7, 2012 in its initial public offering, as if such events had
been completed as of the beginning of the period and the common stock
resulting therefrom was outstanding for the period.


RESTORATION HARDWARE HOLDINGS, INC.
RECONCILIATION OF ADJUSTED INCOME STATEMENT ITEMS
(In thousands, except share and per share amounts)
(Unaudited)
                                                                                                                          
                     Six Months Ended
                     Reported                           Adjusted                          Reported                        Adjusted
                                                                           % of Net                                                        % of Net
                     August 3,         Adjustments     August 3,          Revenues      July 28,       Adjustments     July 28,        Revenues

                     2013                               2013                              2012                            2012
Net revenues         $ 683,435          $ —             $ 683,435          100.0  %       $ 510,820       $  —            $ 510,820        100.0  %
Cost of goods         442,332          —             442,332         64.7   %        321,425        —            321,425       62.9   %
sold
Gross profit           241,103            —               241,103          35.3   %         189,395          —              189,395        37.1   %
Selling, general
and                   268,372          (66,050 )      202,322         29.6   %        171,830        (3,690 )      168,140       32.9   %
administrative
expenses ^[a]
Income (loss)          (27,269    )       66,050          38,781           5.7    %         17,565           3,690          21,255         4.2    %
from operations
Interest expense      (2,031     )      —             (2,031     )     -0.3   %        (3,054  )       —            (3,054     )   -0.6   %
Income (loss)
before income          (29,300    )       66,050          36,750           5.4    %         14,511           3,690          18,201         3.6    %
taxes
Income tax
expense               (11,304    )      26,004        14,700          2.2    %        623            6,658        7,281         1.5    %
(benefit) ^[b]
Net income           $ (17,996    )     $ 40,046       $ 22,050          3.2    %       $ 13,888       $  (2,968 )     $ 10,920        2.1    %
(loss) ^[c]
                                                                                                                                           
EBITDA ^[d]          $ (14,041    )                     $ 52,009                          $ 30,457                        $ 34,897
                                                                                                                                           
Weighted-average
shares used in
computing basic        38,394,013                         38,394,013                        1,000                           36,971,500
net income
(loss) per share
^[e]
Weighted-average
shares used in
computing              38,394,013                         39,511,685                        1,000                           36,971,500
diluted net
income (loss)
per share ^ [e]
                                                                                                                                           
Basic net income     $ (0.47      )                     $ 0.57                            $ 13,888                        $ 0.30
(loss) per share
Diluted net
income (loss)        $ (0.47      )                     $ 0.56                            $ 13,888                        $ 0.30
per share

[a] The adjustments for selling, general, and administrative expenses include
management and pre-initial public offering board fees, certain non-cash and
other one-time compensation, follow-on offering fees, lease termination costs
and special committee investigation and remediation costs. See table titled
“Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income” for
additional details.

[b] Assumes a normalized tax rate of 40% for all periods presented. See table
titled “Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income” for
additional details.

[c] Adjusted net income is a supplemental measure of financial performance
that is not required by, or presented in accordance with, GAAP. We define
adjusted net income as consolidated net income (loss) less non-recurring and
other items. Adjusted net income is included in this press release because
management believes that adjusted net income provides meaningful supplemental
information for investors regarding the performance of our business and
facilitates a meaningful evaluation of actual results on a comparable basis
with historical results. Our management uses this non-GAAP financial measure
in order to have comparable financial results to analyze changes in our
underlying business from quarter to quarter.

[d] EBITDA and Adjusted EBITDA are supplemental measures of financial
performance that are not required by, or presented in accordance with, GAAP.
We define EBITDA as consolidated net income (loss) before depreciation and
amortization, interest expense and provision for income taxes. Adjusted EBITDA
reflects further adjustments to EBITDA to eliminate the impact of certain
items including non-cash or other items that we do not consider representative
of our ongoing financial performance. EBITDA and Adjusted EBITDA are included
in this press release because they are key metrics used by management, our
Board of Directors and our principal shareholders to assess our financial
performance, and Adjusted EBITDA is used in connection with determining
incentive compensation under our MIP. Additionally, EBITDA is frequently used
by analysts, investors and other interested parties to evaluate companies in
our industry. We believe that Adjusted EBITDA provides useful information
facilitating operating performance comparisons from period to period and
company to company. We use EBITDA and Adjusted EBITDA, alongside other GAAP
measures such as gross profit, operating income (loss) and net income (loss),
to measure profitability, as a key profitability target in our annual and
other budgets, and to compare our performance against that of peer companies.
Please see the table titled “Reconciliation of Net Income (Loss) to EBITDA and
Adjusted EBITDA” for further information.

[e] On an adjusted basis for the six months ended July 28, 2012, basic and
diluted shares outstanding include (1) the impact of the Reorganization, as
well as (2) the 4,782,609 shares of common stock that the Company issued and
sold on November 7, 2012 in its initial public offering, as if such events had
been completed as of the beginning of the period and the common stock
resulting therefrom was outstanding for the period.


RESTORATION HARDWARE HOLDINGS, INC.
RECONCILIATION OF NET INCOME (LOSS) TO OPERATING INCOME (LOSS)
AND ADJUSTED OPERATING INCOME
(In thousands)
(Unaudited)
                                                          
                                                                     
                    Three Months Ended               Six Months Ended
                    August 3,       July 28,         August 3,       July 28,
                                                                
                    2013            2012             2013            2012
Net income          $ (17,835 )     $ 17,616         $ (17,996 )     $ 13,888
(loss)
Interest              1,191           1,479            2,031           3,054
expense
Income tax
expense              (11,136 )      567            (11,304 )      623    
(benefit)
Operating             (27,780 )       19,662           (27,269 )       17,565
income (loss)
Management
and pre-IPO           —               1,198            —               2,087
board fees
^[a]
Non-cash
compensation          59,832          —                63,155          —
^[b]
Follow-on
offering fees         2,128           —                2,895           —
^[c]
Lease
termination           —               (961   )         —               (386   )
costs ^[d]
Special
committee
investigation        —             1,989          —             1,989  
and
remediation
^[e]
Adjusted
operating           $ 34,180       $ 21,888        $ 38,781       $ 21,255 
income

[a] Represents fees paid in accordance with our management services agreement
with Home Holdings, LLC (“Home Holdings”), as well as fees and expense
reimbursements paid to our Board of Directors prior to the initial public
offering. All management fees were paid in full at the time of the initial
public offering. Board fees and expenses subsequent to the initial public
offering are not included in the above adjustments and are included in both
the operating and adjusted operating income (loss) amounts.

[b] Includes non-cash compensation charges related to the performance-based
vesting of certain shares granted to Mr. Friedman, as well as the one-time,
fully vested option granted to Mr. Friedman upon his reappointment as Chairman
and Co-Chief Executive Officer in July 2013. All other equity related awards
granted to employees are not included in the above adjustments and are
included in both the operating and adjusted operating income (loss) amounts.

[c] Represents legal and other professional fees incurred in connection with
our follow-on offerings in May 2013 and July 2013.

[d] Includes lease termination costs for retail stores that were closed prior
to their respective lease termination dates. The amounts in the three and six
months ended July 28, 2012 relate to changes in estimates regarding
liabilities for future lease payments for closed stores.

[e] Represents legal and other professional fees, incurred in connection with
the investigation conducted by the special committee of the Board of Directors
relating to Mr. Friedman and our subsequent remedial actions.


RESTORATION HARDWARE HOLDINGS, INC.
RECONCILIATION OF NET INCOME (LOSS) TO EBITDA AND ADJUSTED EBITDA
(In thousands)
(Unaudited)
                                                          
                                                                     
                    Three Months Ended               Six Months Ended
                    August 3,       July 28,         August 3,       July 28,
                                                               
                    2013            2012             2013            2012
Net income          $ (17,835 )     $ 17,616         $ (17,996 )     $ 13,888
(loss)
Depreciation
and                   6,598           6,468            13,228          12,892
amortization
Interest              1,191           1,479            2,031           3,054
expense
Income tax
expense              (11,136 )      567            (11,304 )      623    
(benefit)
EBITDA ^[a]           (21,182 )       26,130           (14,041 )       30,457
Management
and pre-IPO           —               1,198            —               2,087
board fees
^[b]
Non-cash
compensation          59,832          351              63,155          738
^[c]
Follow-on
offering fees         2,128           —                2,895           —
^[d]
Lease
termination           —               (961   )         —               (386   )
costs ^[e]
Special
committee
investigation         —               1,989            —               1,989
and
remediation
^[f]
Other ^[g]           —             31             —             12     
Adjusted            $ 40,778       $ 28,738        $ 52,009       $ 34,897 
EBITDA ^[a]

[a] EBITDA and Adjusted EBITDA are supplemental measures of financial
performance that are not required by, or presented in accordance with, GAAP.
We define EBITDA as consolidated net income (loss) before depreciation and
amortization, interest expense and provision for income taxes. Adjusted EBITDA
reflects further adjustments to EBITDA to eliminate the impact of certain
items including non-cash or other items that we do not consider representative
of our ongoing financial performance. EBITDA and Adjusted EBITDA are included
in this press release because they are key metrics used by management, our
Board of Directors and our principal shareholders to assess our financial
performance, and Adjusted EBITDA is used in connection with determining
incentive compensation under our MIP. Additionally, EBITDA is frequently used
by analysts, investors and other interested parties to evaluate companies in
our industry. We believe that Adjusted EBITDA provides useful information
facilitating operating performance comparisons from period to period and
company to company. We use EBITDA and Adjusted EBITDA, alongside other GAAP
measures such as gross profit, operating income (loss) and net income (loss),
to measure profitability, as a key profitability target in our annual and
other budgets, and to compare our performance against that of peer companies.
EBITDA and Adjusted EBITDA are not GAAP measures of our financial performance
or liquidity and should not be considered as alternatives to net income
(loss), as a measure of financial performance, cash flows from operating
activities, as a measure of liquidity, or any other performance measure
derived in accordance with GAAP and they should not be construed as an
implication that our future results will be unaffected by non-recurring and
other items. Our measures of EBITDA and Adjusted EBITDA are not necessarily
comparable to other similarly titled captions for other companies due to
different methods of calculation.

[b] Represents fees paid in accordance with our management services agreement
with Home Holdings, as well as fees and expense reimbursements paid to our
Board of Directors prior to the initial public offering. All management fees
were paid in full at the time of the initial public offering. Board fees and
expenses subsequent to the initial public offering are not included in the
above adjustments and are included in both the EBITDA and Adjusted EBITDA
amounts.

[c] The three and six months ended August 3, 2013 include non-cash
compensation charges related to the performance-based vesting of certain
shares granted to Mr. Friedman, as well as the one-time, fully vested option
granted to Mr. Friedman upon his reappointment as Chairman and Co-Chief
Executive Officer in July 2013. The three and six months ended July 28, 2012
includes stock-based compensation expense incurred prior to the initial public
offering. All other equity related awards granted to employees subsequent to
the initial public offering are not included in the above adjustments and are
included in both the EBITDA and Adjusted EBITDA amounts.

[d] Represents legal and other professional fees incurred in connection with
our follow-on offerings in May 2013 and July 2013.

[e] Includes lease termination costs for retail stores that were closed prior
to their respective lease termination dates. The amounts in the three and six
months ended July 28, 2012 relate to changes in estimates regarding
liabilities for future lease payments for closed stores.

[f] Represents legal and other professional fees, incurred in connection with
the investigation conducted by the special committee of the Board of Directors
relating to Mr. Friedman and our subsequent remedial actions.

[g] Represents certain other items which management believes are not
indicative of our ongoing operating performance, which includes foreign
exchange gains and losses for the three and six months ended July 28, 2012.


RESTORATION HARDWARE HOLDINGS, INC.
RECONCILIATION OF GAAP NET INCOME (LOSS) TO ADJUSTED NET INCOME
(In thousands)
(Unaudited)
                                                          
                                                                     
                    Three Months Ended              Six Months Ended
                    August 3,       July 28,         August 3,       July 28,
                                                               
                    2013            2012             2013            2012
GAAP net            $ (17,835 )     $ 17,616        $ (17,996 )     $ 13,888 
income (loss)
Adjustments
(pre-tax):
Management
and pre-IPO         $ —             $ 1,198          $ —             $ 2,087
board fees
^[a]
Non-cash
compensation          59,832          —                63,155          —
^[b]
Follow-on
offering fees         2,128           —                2,895           —
^[c]
Lease
termination           —               (961   )         —               (386   )
costs ^[d]
Special
committee
investigation        —             1,989          —             1,989  
and
remediation
^[e]
Subtotal
adjusted              61,960          2,226            66,050          3,690
items
Impact of
income tax           (24,332 )      (7,597 )        (26,004 )      (6,658 )
items ^[f]
Adjusted net        $ 19,793       $ 12,245        $ 22,050       $ 10,920 
income ^[g]

[a] Represents fees paid in accordance with our management services agreement
with Home Holdings, as well as fees and expense reimbursements paid to our
Board of Directors prior to the initial public offering. All management fees
were paid in full at the time of the initial public offering. Board fees and
expenses subsequent to the initial public offering are not included in the
above adjustments and are included in both the GAAP and adjusted net income
(loss) amounts.

[b] Includes non-cash compensation charges related to the performance-based
vesting of certain shares granted to Mr. Friedman, as well as the one-time,
fully vested option granted to Mr. Friedman upon his reappointment as Chairman
and Co-Chief Executive Officer in July 2013. All other equity related awards
granted to employees are not included in the above adjustments and are
included in both the GAAP and adjusted net income (loss) amounts.

[c] Represents legal and other professional fees incurred in connection with
our follow-on offerings in May 2013 and July 2013.

[d] Includes lease termination costs for retail stores that were closed prior
to their respective lease termination dates. The amounts in the three and six
months ended July 28, 2012 relate to changes in estimates regarding
liabilities for future lease payments for closed stores.

[e] Represents legal and other professional fees, incurred in connection with
the investigation conducted by the special committee of the Board of Directors
relating to Mr. Friedman and our subsequent remedial actions.

[f] Assumes a normalized tax rate of 40% for all periods presented.

[g] Adjusted net income is a supplemental measure of financial performance
that is not required by, or presented in accordance with, GAAP. We define
adjusted net income as consolidated net income (loss) less non-recurring and
other items. Adjusted net income is included in this press release because
management believes that adjusted net income provides meaningful supplemental
information for investors regarding the performance of our business and
facilitates a meaningful evaluation of actual results on a comparable basis
with historical results. Our management uses this non-GAAP financial measure
in order to have comparable financial results to analyze changes in our
underlying business from quarter to quarter.


RESTORATION HARDWARE HOLDINGS, INC.
RECONCILIATION OF NET INCOME (LOSS) PER SHARE TO
ADJUSTED NET INCOME PER SHARE
(Unaudited)
                                                         
                                                                    
                       Three Months Ended             Six Months Ended
                       August 3,     July 28,         August 3,     July 28,
                                                                
                       2013          2012             2013          2012
                                                                    
GAAP diluted net       $ (0.46 )     $ 17,616        $ (0.47 )     $ 13,888 
loss per share
                                                                    
                                                                    
Pro forma
diluted net            $ (0.44 )     $ 0.48           $ (0.46 )     $ 0.38
income (loss)
per share ^[a]
                                                                    
EPS impact of
adjustments
(pre-tax):
Management and
pre-IPO board          $ —           $ 0.03           $ —           $ 0.06
fees ^[b]
Non-cash
compensation             1.47          —                1.60          —
^[c]
Follow-on
offering fees            0.05          —                0.07          —
^[d]
Lease
termination              —             (0.03  )         —             (0.01  )
costs ^[e]
Special
committee
investigation           —           0.05           —           0.05   
and remediation
^[f]
Subtotal                 1.52          0.05             1.67          0.10
adjusted items
Impact of income        (0.59 )      (0.20  )        (0.65 )      (0.18  )
tax items ^[g]
Adjusted diluted
net income per         $ 0.49       $ 0.33          $ 0.56       $ 0.30   
share ^[h]

[a] Pro forma diluted net loss per share for the three and six months ended
August 3, 2013 is calculated based on GAAP net loss and diluted
weighted-average shares of 40,696,706 and 39,511,685, respectively. Pro forma
diluted net income per share for the three and six months ended July 28, 2012
is calculated based on GAAP net income and the Company’s vested share count as
if (1) the Reorganization and (2) initial public offering had been completed
as of the beginning of the respective periods and the common stock resulting
therefrom was outstanding for the respective periods.

[b] Represents fees paid in accordance with our management services agreement
with Home Holdings, as well as fees and expense reimbursements paid to our
Board of Directors prior to the initial public offering. All management fees
were paid in full at the time of the initial public offering. Board fees and
expenses subsequent to the initial public offering are not included in the
above adjustments and are included in both the GAAP and adjusted net income
(loss) amounts.

[c] Includes non-cash compensation charges related to the performance-based
vesting of certain shares granted to Mr. Friedman, as well as the one-time,
fully vested option granted to Mr. Friedman upon his reappointment as Chairman
and Co-Chief Executive Officer in July 2013. All other equity related awards
granted to employees are not included in the above adjustments and are
included in both the GAAP and adjusted net income (loss) amounts.

[d] Represents legal and other professional fees incurred in connection with
our follow-on offerings in May 2013 and July 2013.

[e] Includes lease termination costs for retail stores that were closed prior
to their respective lease termination dates. The amounts in the three and six
months ended July 28, 2012 relate to changes in estimates regarding
liabilities for future lease payments for closed stores.

[f] Represents legal and other professional fees, incurred in connection with
the investigation conducted by the special committee of the Board of Directors
relating to Mr. Friedman and our subsequent remedial actions.

[g] Assumes a normalized tax rate of 40% for all periods presented.

[h] Adjusted diluted net income per share is a supplemental measure of
financial performance that is not required by, or presented in accordance with
GAAP. We define adjusted net income per share as consolidated net income
(loss) less non-recurring and other items divided by the Company’s
post-initial public offering share count. Adjusted net income per share is
included in this press release because management believes that adjusted net
income per share provides meaningful supplemental information for investors
regarding the performance of our business and facilitates a meaningful
evaluation of actual results on a comparable basis with historical results.
Our management uses this non-GAAP financial measure in order to have
comparable financial results to analyze changes in our underlying business
from quarter to quarter.

Contact:

Restoration Hardware Holdings, Inc.
Cammeron McLaughlin, 415-945-4998
VP, Investor Relations
cmclaughlin@restorationhardware.com