Ladies and gentlemen, you are currently on hold for the RH fourth quarter and fiscal year 2024 earnings call. At this time, we are admitting additional participants and will be underway shortly. Thank you for your patience, and please continue to stand by. Good day, everyone, and welcome to the RH fourth quarter and fiscal year 2024 earnings call. I would now like to turn the call over to Ms. Allison Malkin. Please go ahead, ma'am. Thank you. Good afternoon, everyone. Thank you for joining us for our fourth quarter and fiscal year 2024 earnings conference call. Joining me today are Gary Friedman, Chairman and Chief Executive Officer, and Jack Preston, Chief Financial Officer. Before we start, I would like to remind you of our legal disclaimer that we will make certain statements today that are forward-looking within the meaning of the federal securities laws, including statements about the outlook of our business and other matters referenced in our press release issued today. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially. Please refer to our SEC filings, as well as our press release issued today, for a more detailed description of the risk factors that may affect our results. Please also note that these forward-looking statements reflect our opinions only as of the date of this call, and we undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. Also, during this call, we may discuss Non-GAAP financial measures, which adjust our GAAP financial results to eliminate the impact of certain items. You will find additional information regarding these Non-GAAP financial measures and a reconciliation of these Non-GAAP to GAAP measures in today's financial results release. A live broadcast of this is also available on the investor relations section of our website at ir.rh.com. With that, I'll turn the call over to Gary. Thank you, everyone. Welcome to the new world when we're, at least at this moment, inventory is your friend. I was going to say maybe I just shouldn't read the letter, but heck, let's go through it and we'll kind of improvise, adapt, and overcome as we're reacting live time with all of you. To our people, partners, and shareholders, the important work and substantial investments we've made over the past two years are now resulting in meaningful share gains and significant strategic separation, positioning the RH brand to expand its leadership position across the luxury home market over the next decade. The positive inflection of our business continued to accelerate in the fourth quarter, with revenue up 18% and adjusted operating income increasing 57%, in each case on a comparable 13-week basis, outperforming other home furnishings businesses by a wide margin as the most prolific product transformation and platform expansion in the history of our industry continues to unfold. Our industry-leading growth in the quarter was driven by the RH brand, where fourth-quarter demand increased 21%, demonstrating the disruptive nature of our product transformation. While demand softened in December after mortgage rates spiked and mortgage applications fell 22% post the Fed signaling rates would remain largely unchanged this year, the RH brand demand stabilized at up 19% in January. While we expect a higher-risk business environment this year due to the uncertainty caused by tariffs, market volatility, and inflation risk, we believe it's important to separate the signal from the noise. The fact is, we've been operating in the worst housing market in almost 50 years. For context, in 1978, there were 4.09 million existing homes sold when the U.S. had a population of 223 million. Contrast that to 2024, where 4.06 million existing homes sold with a population of 341 million, and it illuminates just how depressed the housing market has been this past year. Despite that fact, we are performing at a level most would expect in a robust housing market. We believe it's a result of investing with a very narrow focus and a long-term view, or what we like to call an inch wide and a mile deep, elevating and expanding our platform by creating the most desired products presented in the most inspiring spaces in the world, with bespoke interior design services and beautiful restaurants that generate energy, engagement, and tremendous awareness of the RH brand, while also serving as a profitable customer acquisition vehicle. Our intentions and attention to detail in everything we do and in every house we turn into a home. While we ended the year with meaningful debt, mostly due to our stock repurchases of $2.2 billion, we also ended the year with incredible business momentum and meaningful assets. These assets include real estate that we believe has an estimated equity value of approximately $500 million, which we plan to monetize opportunistically as market conditions warrant, and excess inventory of $200 million-$300 million at cost that we plan to turn into cash as we optimize our assortments post our product transformation. Inclusive of our plans for significant and growing cash flow from operations, we remain confident in our ability to make the necessary investments to continue our industry-leading growth while paying down debt and lowering interest expense. Now, let's look at shift to our outlook. Based on our current plans and the uncertain macroeconomic environment, we're providing the following financial outlook for the full year and first quarter. For the fiscal year 2025, we're forecasting revenue growth of 10%-13%, adjusted operating margin of 14%-15%, adjusted EBITDA margin of 20%-21%. In the first quarter, we're forecasting revenue growth of 12.5%-13.5%, adjusted operating margin of 6.5%-7%, adjusted EBITDA margin of 12.5%-13%. The above outlook includes a -160 basis points-200 basis points of operating margin impact from investments and startup costs to support our international expansion. "Every act of creation is first an act of destruction," Pablo Picasso. We have worked hard to destroy the former version of ourselves and are in the process of unleashing what we believe is an exponentially more inspiring and disruptive RH brand. We believe the important investments we are making during this depressed housing cycle are creating a level of strategic separation in our industry that rivals the most important brands in the world. Our product transformation plans for 2025 include the introduction of our new RH Outdoor Sourcebook, featuring the most dominant assortment of high-quality outdoor furniture in the world, arrived in homes early February with eight new furniture collections and exciting new textiles offering, plus a significantly improved in-stock position to start the season versus a year ago. The introduction of our new RH Interior Sourcebook arrived in homes mid-February through early March, featuring 42 new collections across furniture, upholstery, lighting, rugs, and textiles, as well as an additional 15 new collections launched on rh.com. While we had planned a higher amount of new collections for this book, due to the rapidly changing economic outlook, we believed it was prudent to delay some of our introductions until later this year. The launch of a significant new brand extension in the fall of 2025 that we believe will meaningfully expand the market size and share of the RH brand. This new brand extension will include a new sourcebook, a significant website presence, and two freestanding galleries dedicated to the new concept. Our plan includes integrating RH Couture upholstery by Dmitriy & Co and RH Bespoke furniture by Joseph Jeup into this new brand extension, enabling greater exposure and market reach versus standalone concepts. We'll be sharing more details of this exciting new venture during our first quarter earnings call. As communicated last quarter, we do not expect a negative impact to results related to previously announced increased tariffs on products from China, Canada, or Mexico. As it relates to reciprocal and other tariffs that will be announced and have been announced today, as we've done with prior tariffs, we'll be working with our manufacturing partners to mitigate the impact to both our margins and cost to our customers. We believe it is also important to note that we have been manufacturing upholstered furniture in our own North Carolina factory for over 10 years and have recently expanded the facility, doubling our capacity. We are currently projecting that 48% of our upholstered furniture will be produced in the U.S., 21% of our upholstered furniture will be produced in Italy, and 14% of our total business will be produced in the U.S. at the end of this year. Now, let me shift your attention to the expansion of our platform. We continue to open the most inspiring and immersive physical experiences in our industry, and some would say the world, spaces that are a reflection of human design, a study of balance, symmetry, and perfect proportions, spaces that blur the lines between residential and retail, indoors and outdoors, home and hospitality, spaces with garden courtyards, rooftop restaurants, wine and barista bars, spaces that activate all of the senses, and spaces that cannot be replicated online. Our plan to expand the RH brand globally, address new markets locally, and transform our North American galleries represents a multi-billion dollar opportunity. Our platform expansion plans for 2025 include the opening of seven design galleries, two outdoor galleries, plus two new concept galleries. The seven new design galleries are RH Oklahoma City, the Gallery at the Oak, and RH Montreal, the Gallery at the Royal Mont, both opening in the first half of this year. RH Paris, the Gallery on the Champs-Élysées, RH Detroit, the Gallery in Birmingham, RH Manhasset, the Gallery at the Americana, RH San Diego, the Gallery at University Town Center, and RH Palm Desert, the Gallery on El Paseo, are all opening in the second half of this year. Additionally, we plan to expand our brand presence in Greenwich, Connecticut, by developing a multi-building RH design ecosystem, inclusive of the existing RH gallery at the Historic Post Office, a freestanding RH outdoor gallery that opened last month, plus a new concept gallery in the former Ralph Lauren building on Greenwich Avenue, opening in the second half of this year. We also plan to expand our brand presence in East Hampton this summer by opening a freestanding RH outdoor gallery and are exploring plans to further enhance our design ecosystem with a new concept gallery in the near future. As previously communicated, we anticipate an inflection of our business in Europe as we begin to open in the important brand and building markets of Paris in 2025, plus London and Milan in 2026, all with dramatic and brand-building hospitality experiences. We believe post each opening, we'll begin to have the scale to support the necessary advertising investments to accelerate our growth in Europe. Every moment has a lunatic fringe, quite appropriate for today. Theodore Roosevelt, America's first Nobel Prize winner, commander of the legendary Rough Riders, Medal of Honor recipient, promoter of the conservative movement, leader of the progressive movement, noted for his exuberant personality and ranked by scholars as one of our greatest presidents. Theodore Teddy Roosevelt proclaimed in his famous speech as a suborn, "It is not the critic who counts, not the man or woman who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man or woman who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again, because there is no effort without error or shortcoming. He or she who actually strives to do the deeds, who knows the great enthusiasms, the great devotions, who spends himself in a worthy cause, who at his best knows in the end the triumph of high achievement, and who at his worst, if he fails, at least fails while daring greatly, so his place shall never be with those cold, intimate souls who know neither victory nor defeat. While our ambitions are not political, maybe they should be, they are personal. We remain inspired by the progressive thinkers, unafraid to push forward new ideas and fresh perspectives. It is a culture of leadership versus followership, innovation versus duplication, enlightenment versus ego. It is believing none of us are smarter than all of us, that we need all the brains in the game and the egos out of the room. It's about thinking it till it hurts, until we can see what others can't see, so we can do what others can't do. That's how you transform a money-losing Restoration Hardware store in Aventura Mall in Miami that did $2 million in annual sales into an RH gallery that does $44 million in the exact same space with the exact same square footage. It's also how we'll transform that $44 million legacy gallery into a $100 million plus RH design compound, a yet-to-be-unveiled multi-building design resort of sorts, in the parking lot of the same shopping center. Over 20 years ago, we began this journey with a vision of transforming a nearly bankrupt business that had a $20 million market cap and a box of Oxydol laundry detergent on the cover of its catalog into the leading luxury home brand in the world. The lessons and learnings, the insights and intricacies, the sacrifices made and the scar tissue developed by getting knocked down 10x and getting up 11, leads to the development of the mental and moral qualities that build character in individuals and form cultures and organizations. Lessons that can't be learned in a classroom or by managing a business, lessons that must be earned by building one. Are we part of the lunatic fringe? If it means, as President Roosevelt said in his speech at the Sorbonne, that our place shall never be with those cold, intimate souls who know neither victory nor defeat and put us in that arena. Onward, team RH. [Foreign language]. Operator, I'll now open the call to questions. Thank you, sir. And ladies and gentlemen, if you have a question today, please press star one on your telephone keypad. We do ask that you limit yourselves to one question and one follow-up. We'll go first to Simeon Gutman, Morgan Stanley. Good afternoon. This is Pedro on for Simeon. Thanks for taking our question. My question is how you see the outlook for the consumer. It seems we've seen a slowdown in consumer sentiment year to date, and the housing market is not seeing a turn yet. Last year, we saw early signs of an inflection, but now it seems things have been delayed again. Could you give us a bit of an update on how you see things developing over the spring and the summer season? Related to that, how are legacy galleries doing? How much of demand growth is coming from the design galleries as opposed to the legacy galleries? Okay. Let me break that down. How do we see the consumer? I mean, unfortunately, we don't know those individuals exactly and don't talk to them on any kind of personal level about how they're doing. I'd say, look, everybody saw the recent news just as we were ready to break for this call. It's one of those times of uncertainty. It's one of those times where it's not so much, I think, what the consumer's going to do. I think it's how we're going to react to the consumer environment and what we're going to do. I think if you look at our history, which is this is my 25th year, going on 25 years in the company, we thought we saw it all until today. This is a new one. We have a history of really performing in times of crisis and thriving in those times and have the ability to improvise, adapt, and overcome. At our core, we are innovators. We're not duplicators. We're leaders. We're not managers. We're visionaries, and we're not victims. Whether it's a confused or conflicted consumer environment because of high interest rates or new tariffs or trade wars or military wars, I mean, there's always something. I mean, look, we feel confident no matter what the environment looks like. I just articulated in the letter that we just anniversaried really the worst housing market in 50 years since 1978. How did we do versus everybody else? Very different. What's our trend versus everybody else? Quite different. Maybe that's a better question for everybody else who maybe tries to talk to the consumer and see how they're feeling. We focus on our work and try to create the most desirable products presented in the most inspiring spaces, whether they're physical spaces, digital spaces, or print experiences. I think we do that better than anybody in the world. The game's changed somewhat, but I wouldn't want to compete with that in any environment. Legacy galleries versus design galleries, they're all performing well. Not that much different in the comps. I mean, there are some places that obviously might be doing better than others at different times for different reasons. Yeah, we're happy with all the galleries. We're opening more galleries. We have new kinds of galleries. We have design ecosystems, design compounds. We've got a lot of things coming. Tariffs or not. Here we come. We'll take the next question today from Steve Forbes, Guggenheim. Good evening, Gary, Jack. Gary, your initial comment, I think, was inventory is your friend. We'd love to sort of hear you expand on that initial thought, especially as all of us, right, sort of try to do the exposure math to Vietnam, Indonesia, and India. Just sort of what should be the parting message here on sort of RH's ability to sort of mitigate, migrate, and de-risk the situation that was just thrown at all retail operators? Sure. Let's start with the inventory is your friend. Going through this kind of massive product transformation we've been going through, when you're making big changes in your assortment, not normal newness, right? We introduced hundreds of collections over the last couple of years. You want to create the right bridge, right? You want to not sell out of legacy products before you understand what's happening in new products. You want to make sure in new products, in enough cases where you feel it's going to be in the top half of your assortment, you want to have that inventory, right? Because furniture, you can't respond to quickly. We knew we were going to make about a $100 million insurance bet on inventory on the front end of this. We expected trends to be better. We were expecting our comps and the housing market to kind of come back. I mean, I think everybody had a sense that inflation looked like it was coming under control and interest rates were easing and that 2025 would be the next upswing to the housing market. We were all wrong. I mean, and even at the Fed, they're almost always wrong. Being wrong is all part of invention and innovation and going somewhere you've never been and moving into the future, right? I think while today's tariff news was, yes, somewhat shocking, right? I think most of us were expecting, okay, maybe we'll get 25% tariffs, but it's all logical, right? If you're the current administration, if you're Trump, if you read The Art of the Deal, I mean, look, he knows how to use leverage and he has leverage. You don't have to do too much work to find out, well, where did all the manufacturing move to from China? It moved to Vietnam, Indonesia, Cambodia, and other countries. Those manufacturers moved and made investments and built up operations. It was devastating for people that invested big sums of money to relocate. The U.S. has leverage today. I mean, leverage is how you win negotiations, not blessing. I don't think these tariffs are going to completely stick. If you're these other countries, you're going to start playing the few cards you have. They might try to bluff. They might try to play a few cards. You're either going to implode as an economy in these countries or you're going to balance the trade economics. I think that's what the administration wants. It's just a little shocking because we've never seen an administration and a leader like Trump. I mean, it's impressive, quite frankly. Usually, governments move like glaciers. He's quite the opposite. Exactly how it's going to play out, I don't know. I don't think it's time to overreact. I think we all believe that China was going to be a long-term problem. Moving out of China was important. Now it looks like moving out of China did not make a difference, right? I guess it did because there was another tariff on China. Yeah. I think basically that the game has changed. Now it kind of does not matter where you go, I mean, except America, right, and the U.S., which we have been building our facility and expanding and doing other work and have other facilities in Los Angeles and things like that that we acquired through acquisitions. America can make furniture, and that might be part of it. Part of it might be these countries acquiesce to some of the demands, which are, by the way, all fair demands in a lot of ways, right? If you just look at the math and look at the numbers, it's kind of, I mean, everybody else has a bad hand because not only is there leverage, but the information says, "Hey, it's not fair." I'm not critical of any of it. I actually think long-term, it's going to be great for America, quite frankly. I think it's just caught the world off guard because no one's ever moved at this speed. I mean, we're seeing a new kind of leadership, which, again, in many ways, I think is impressive. Forget what anybody else's personal views are on form. I'd say look at the content. The content for America, the content of the decision for America is a really good thing long-term. From that point of view, I mean, is it going to be messy? Yeah, but it's messy for everybody, right? These are the times where we survive because I think we can outthink others. We can outsmart others. We can outcreate others. We can outinnovate others. Let's see what went on. I mean, quite frankly, I was on the phone to Jack, and I'm in my car, and he's telling me what happened. I just started laughing. I just thought, "Okay. Showtime. This is when we thrive. We're at our best in times like this." It's exciting times. You still have to compete. The playing field is the playing field. Nobody of any scale is not sourcing out of Asia except for maybe Ethan Allen. They have a smaller percentage. They don't really have our platform and capabilities. I'm not too worried about any of that. I mean, I'm more excited to get off this phone and get to work. It's exciting times, so. Thank you, Gary. And then just a quick follow-up for Jack. I think the company has sort of spoke to the return of positive free cash flow in 2025. Maybe all this is in flux a little bit, but any way to sort of help us frame up the free cash flow outlook inclusive of how to think about winding down that inventory excess? Yeah. I mean, we're just not going to have a lot of receipts coming in at really high prices, right? So start there. We've got a lot of inventory at really good prices. We've got to kind of rethink some of the newness. Maybe the new concept that I wrote about might get delayed until we have some clarity. Also the investments get delayed, and the complexity gets delayed. I do not think about that like that is going to hurt the business per se. I mean, we will just focus in other ways. I think a lot of the goods and development are coming from countries that have prohibitive tariffs. Again, it could all change in 30 days. Some of these countries could go from 45% - 25%, which is very manageable. 45% is much tougher. The administration knows that. I am actually glad this was not a death by a thousand cuts, right? I am glad it did not go, "Oh, it is 15%." "Oh, okay. Hey, just kidding. It is 25%. Hey, now it is 35%. Now it is 45%." Because you do not have clarity. I think, again, I applaud the clarity, the intention, and the logic. Again, I am just excited now to we are around here. We are not scared. We are smiling. We are kind of like, "Okay. Let's go. It's a new world. It's a new day. We're at our best in times like these. I wouldn't want to compete with us in times like these. No one is going to outwork us. No one is going to outthink us. No one is going to outcreate us, outinnovate us. Just in general, I'm not too worried about it. I don't think our business is going to collapse. I say inventory is our friend. I get $200 million-$300 million of inventory that my competitors don't. They might have to do some ordering at very expensive pricing. We can navigate through this really well in the short term. I feel pretty good about this year. I mean, we got to get into the details. There might be some holes here and there. Again, there's always another move, right? There's just always another move in times like these. I'm just excited about finding the other move way before any of our competitors do. Fun times. Thank you, Gary. Thanks, Jack. All right Steven. Up next is Michael Lasser, UBS. Good evening. Thank you so much for taking my question. Gary, have you already started to take price in reaction to some of the tariffs that have already been levied? When do you start to take price in reaction to what was just announced in the last couple of hours? Thank you. Oh, I don't think we're going to do anything right now. Like I said, we've got inventory. We're well-positioned. These are the times when you want to do less and think more so you can do more, right? This is not a time to panic. Not a time to react. It's a time to think, invent, innovate, and, yeah, develop compelling vision for times like these. I think, again, we saw we've seen tariffs go on, go off, go up, go down. It's going to move around. This is not just tariffs, right? This is what did they say in the movie Thirteen Days when he was talking to one of the advisors? This is the Cuban Missile Crisis. This is President Kennedy talking to Gorbachev, right? These are signals. These are moves. You got to kind of motor up and see the whole board right now. You got to kind of understand where everything might be going. Did we anticipate this? Not at this level, but that's okay. I have more of an edge now. I don't like being caught off guard. Now we're just going to kind of take some time. Don't move until you see it. We got to take some time to see it, and then we'll move. We have a lot of inventory that we own. That's at really good pricing. That's at really good margins. Our business has a good business trend. Is the consumer going to stop buying tomorrow? I mean, is this going to be like 2008, 2009 housing prices? Yeah. I don't think so because I don't think anybody really understands what's going on. At a very deep level, I think it's going to take a while to digest. The housing market was already bad. Is it going to get worse? I don't know. I mean, it's never been worse in my lifetime. Could it get worse? It might. Is that terrible? No. I mean, we can navigate through any situation. We're in a really good position. We gave guidance that was appropriate for the moment. Maybe we would have been even more conservative had we known. I do not know if we would have because I do not know how much impact this is going to have on us even if it stays in place all year. Not sure yet. I want to take some time to analyze it. That is it. Yeah. Got you. My follow-up question is, on your point about guidance, you might have been a bit more conservative had you had the full benefit of insight into all the policy announcements. With that being said, should we interpret that as a signal that we should go to the lower end of the guidance? If that is the case, how would you think about the need to raise capital or utilize some of the assets that you have at your disposal? Thank you very much. Yeah. I mean, I wouldn't go. I don't think I'd go below the guidance that we've given, not today. I think there's a lot of things that can be done and a lot of moves that are going to be made at the government level, right, around the world. A lot of things are going to be made at the strategic level with governments, countries, the strategic level, manufacturers, and retailers. People are going to get really creative. That's what they do in times like this. Humans, we're not the biggest or strongest, but we're the ones most adaptable to change, right? Change is kind of right up our alley, right? I mean, if I was someone who's managing some business that doesn't innovate or invent and they're kind of grinding the wheel and forecasting 2% for this or that, yeah, they're going to have a harder time figuring this stuff out. I think we're good. We don't need to raise any capital. I think we're in good shape. The cash flow is going to be strong this year. We'll see how the real estate market is. We've got real estate assets we can turn into cash. I mean, we just turned one of the buildings into cash. We had a building we had in Aspen that was purchased for $10.5 million or something like that. $10.5 million. We just sold for $27 million. Yeah. Yeah. We were going to build a house on it, and the construction costs in Aspen became prohibitive. It did not look like a good investment. Someone bought this old house for almost three times what we paid for it. Our JD partner and our side decided to monetize that. We have 32 properties, I think, in Aspen. 31 now, maybe. We have galleries that we own in different places in the United States. We have Cleveland, Detroit, and several others. RH England, we own the guest house in New York. We've got. Applesoda property. Yeah. It was an Applesoda property. We are fine. We have assets that we can turn into cash if it is appropriate. We are not in any kind of fire sale mode. This is not like a company that is doing 5%-8% operating margin going into something like this. I mean, we have a lot of levers. We can slow down spending. I mean, I guess I can talk about No, don't say it. Okay. Never mind. You turned on. You said the—yeah. No, don't go there. Okay. All right. It's got waved off anyway, Michael. It was nice talking to you. I knew it was nice talking to you. Thank you very much and good luck. Okay. Thank you. The next question is Max Rakhlenko, TD Cowen. Great. Thanks a lot. Maybe just following up on the guidance question, can you just walk us through what is embedded in your revenue and margin guidance as it's related to tariffs? And then just any one-time costs that we should be thinking about as you reposition your supply chain. Yeah. I mean, what's embedded is what we talked about, right? The China, Mexico, Canada tariffs, we— basically what we knew before today. Basically what we knew. I mean, we think our guidance is on the conservative side. What you should be modeling to re-architect supply chain, come on, Max, can you hear what I just said? The first 30 minutes, I said it's not a time to overreact. This is Donald Trump talking to every other president or prime minister around the world, right? This is high-level strategic negotiation. You got to think about who has the leverage here. The U.S. has been—yeah, you look at the numbers, you say the U.S. has been at a disadvantage, not really treated fairly. Does it have to go to a complete balance? No. Just because of the trade imbalances, I mean, it's like us funding the growth of other economies. I think that the administration's saying is, "We want to balance that out. We don't want to pay for everything. We don't want to be the only ones investing in military and protection. We want to have more fair and balanced trade policies." It's not, "This is the move he made and this is it." This is the first card he's played globally, new card. Mexico and China are neighbors. Yeah. Not Mexico and China. Mexico and Canada. And China, that has been the single place of tariffs. This is now a global negotiation. I don't know. I think I would predict that there will be concessions. I don't believe it's going to continue at this level. It may for longer than we think, but I mean, it can't be good for the other side, right? It really can't be good. I think we've got a very smart administration negotiating at a level we haven't seen any administration, at least in our lifetimes, negotiate. I think it's not a time—like I say to our team, I say, "Don't move until you see it. Take your time. This is a chess game, not a checkers game." Got it. That's helpful. Can you provide any color on the quarter-to-date demand and just given the volatility in the stock markets, just how we should think about the impact that you might be seeing? How should we think about the excess backlog and sort of the demand that's been quite strong that we've seen over the past couple of quarters flowing into revenues here? We said we were going to only give demand for last year. I wrote that pretty clearly in the earnings letter at this time last year because of the product transformation and the dislocation between demand and revenues. We have now anniversaried that. I gave you kind of a look at January, right, and from a demand point of view because that was still last year. Looking forward, we are no longer going to give demand. We will give revenue guidance, which is generally directionally in line with demand. It might change from quarter-to-quarter. You might have some things that ship across quarters somewhat differently, but it is usually not a big disconnect. Max, I would add as an example that at Q4, the gap narrowed. With Q4 revenues on a comparable 13-week basis up 18% and Q4 total demand growth up 17%. That, in essence, normalizes the backlog piece that we were talking about and supports the point that Gary just made. Yeah. Thank you, Jack. Awesome. Thanks a lot, guys. Best regards. Thanks, Max. We'll go to Andrew Carter, Stifel. Hey, thank you for taking my question. Good evening. Quick question on kind of looking at the controllable cost outlook here. You've got, I think, by my math here, I mean, you've got up 7%-8%. You've got revenue growth of 10%-13%. Is our product margin still inflecting? Is that going to be a majority in gross margin, or are we going to see a lot in SG&A because you've lapped the investments? The second question around the timing, there's more of a disconnect on cost growth in 1Q. Is there anything related to that? Is that timing around the advertising investments or something like that or delivery? Just anything. I'll stop there. I'll comment and I'll turn it over to Jack. If you want the level of detail you're looking for, I want you to come work on our SG&A team. And so you could help us with all the modeling. Let me talk about ad costs and some of the changes. I mean, I think, as Gary pointed out, we've mailed two books in Q1. Between the outdoor book and the interiors book, you have an expense there. Incremental over a year ago. Incremental over a year ago where you just sort of had the outdoor book. We always say that the quarter-to-quarter differences, there's a lot of that variability that's driven by the ad costs. You're seeing that. As far as whether it's happening in gross margin and SG&A, look, the guide speaks for itself at the operating income level. I think we don't guide those pieces, but there's obviously positive factors in both lines. We can't speak to the magnitude just based on how we're guiding in our approach. Fair enough. Just thinking about more of a high level, you kind of said it today, but do these tariff announcements against your competitors, where you're going premium, really create anybody that has an advantage? I know you mentioned Ethan Allen earlier that has some domestics. If you consider your true competitors, and you have a lot of people coming out of Europe, you have some niche here, are they really at any kind of cost advantage here today that you have or just any kind of help with that? Thanks. No, I don't think anybody's had a cost advantage from us. I mean, we're buying at the biggest scale at this quality in the world. We can do that because we have the biggest platform. When you think about a lot of the higher-end people in the business, I mean, they're relatively small because they don't have a platform, right? Many of them are selling wholesale. They don't control the platform. They may have a few stores. No one's got a platform like ours. No one has the buying power that we do or can take the risk that we can and negotiate the prices that we can. Yeah, again, the playing field is pretty level, right? At least in North America. For people that are European-based coming to America, that's not good, right? Especially if they're a manufacturing-based business because they're 100% tariff. We can just—there's a lot of moves we can make, right? We can move more upholstery. We could look at bringing up wood furniture operations. I think the most difficult one today is teak furniture out of Indonesia. Indonesia is the capital of premium teak, sustainably harvested teak in the world. Other countries, it's a little dicey, and it's definitely not the same quality. That's why, I mean, forever that I've—all my life in this business, the best quality, the biggest teak resource in the world is in Indonesia. That's a harder one to kind of navigate out of. Then again, we're kind of the biggest and the best. If you want real teak furniture and you don't want—some people are doing mahogany. Mahogany is not going to last outside. It's much cheaper wood. They're doing acacia wood. They're doing rubber wood, miara wood, eucalyptus wood. I mean, all nice trees, don't get me wrong. Just not great wood for outdoor furniture. If you want it for three years or maybe five years in a nice climate, three years in a rough climate, yeah, that's great. You're just going to keep buying new outdoor furniture. It's going to look like crap after a few years. That's why we don't sell any of that stuff. Again, I can't see anybody doing anything that's going to hurt our position in the market. I mean, it just may mean teak furniture is a little bit more expensive. What was the Indonesia number? The tariff? Yeah. Yeah. 32%. I mean, we've dealt with those kind of tariffs out of China. You figure out how to be more efficient. You figure out how to work better. I like to say humans without deadlines are useless, right? We're no good without deadlines. We're not good without pressure. It's why the great athletes perform in the playoffs, not necessarily their best in the regular season. Although Steph Curry did have 12 threes and 52 points last night, I was happy about that. It is getting close to the playoffs, and it was against one of their rivals, right? You see we're kind of one of those teams. We're great in the playoffs. We're great under pressure. Humans generally are better under pressure. You're going to see who's really good in times like these. We are excited. This is an exciting time. I'm not worried about, "God, are we going to be okay? Do we have to raise money?" No. We're good. I mean, I do not think this is going to be going to bring the whole economy down. I think there's going to be pain. I told everybody I know, and I think that when you kind of saw where this was going, that look, there may be pain for the next 12 to 18 months or 24 months. I think the second half of this administration's tenure here could be a booming American economy. I think the key is how do you position yourself for the other side of that? How do you navigate correctly now? How do you optimize your business and your sourcing structure? Just all aspects of the business. There will be better times and better days. There always are. Thanks. I'll pass it on. We'll take the next question today from Thomas Bradley, KeyBanc Capital Markets. Hi. Thanks, it's Brad Thomas. Gary, I want to ask just about the international side of the business and wondering what you're seeing in terms of trends there. Wonder the degree to which you worry about any backlash about American perceived brands and how you think about the openings that you have this year and what risk, if any, there might be inside the liaison. Thanks. Yeah. Those are all really good questions. I mean, I was just talking to my wife last night, like, "Hey, if this really goes sideways," or I mean, if he hits all of Europe, I'm sure we were going to go to Italy this summer. I don't know. If there's going to be some kind of weird backlash, we were all thinking the same things, like, "Okay." I mean, look what's happening to Tesla. It's crazy, right? I mean, you have a world that's alive on the internet, right, and tweets and messaging and social media and news. I'm sure this is going to create noise. I don't know. I think communication is really key right now. Messaging is really key right now. I thought it was interesting how Trump was holding up the big sign with, "This is how much we're getting tariffed," right? We're just trying to balance the thing out. I think hopefully that image and that sign will get to people in other countries, and they'll also put some pressure on their governments to kind of level the playing field. Again, I'm just thinking out loud with you. We've been thinking about this. I think we underestimated the size of this move. I'd rather have this happen than four moves to get there and a long, drawn-out thing. I think this is going to get us to a conclusion much faster, a much clearer conclusion. There is now kind of a—it is a global negotiation. It is not this country now and what is the next country and where are we going next. It is all laid out there, right? It is completely laid out there for everyone to see. So everyone in every country, I do not think they were making up those numbers. I do not think the administration's got a bunch of numbers that are not true. I mean, I hope not. I mean, that would be a whole different issue, right? Like, holy cow. I think the move is a well-played move. The information is out there. The logic is out there. The intention, the desire is clear. It is not that this administration wants tariffs. They want trade balance. I do not even think they are trying to get complete balance. It's just way out of whack. Will there be some backlash? I'm sure we're going to read about stuff in American businesses with picketers or somebody throws a firebomb through a window somewhere. I don't know. That's just the world we live in today. As it relates to us, construction delays, things like that, will they be any different than building the kind of buildings we have? We always have construction delays. I don't know. None of that is going to make a big deal. Those are all on the fringe, on the edges. I don't think the backlash is going to be a big deal. We're not doing that much volume out of Europe today anyway. I hope things—I hope things kind of get more clear and the world's kind of a more balanced place from trade and from conflict. By the time we open Paris, because we're all planning to open during the Maison&Objet, which is one of the biggest home shows in the world, there will be all the most influential designers and other people there. It is a time when everybody goes for all the antique markets and flea markets. We were going to open in Paris that week so the world could see—the design world could see RH Paris. I hope there's not picketers up front there. I hope by saying that, I didn't all of a sudden create picketers up front there. It is a long way off. It is not happening in the next couple of weeks. We are giving you our best insights here, right? I have no script in front of me. That is probably a firm grasp of the obvious. That's very helpful, Gary. If I could just ask a follow-up on the topic of clearance activity, that's been something going on as you've been transitioning the assortment. How should we think about clearance activity going forward here? Yeah. I think think about clearance in relationship to the economy, right? In good markets, you're going to see less clearance. In bad housing markets, you're going to see more clearance. Not just here, everywhere. We have another layer that just relates to the amount of new product that we're bringing in. We talk about the product in 1/3s, right? Top 1/3, middle 1/3, bottom 1/3. That's how we communicate here with each other. Is this collection going to be in the top 1/3? If it's in the top 1/3, it'll pull the whole company up, right? If it's going to be in the middle 1/3, if it's in the top and middle 1/3, it'll pull you up a little bit. Bottom middle 1/3 might pull you down a little bit. If it's in the bottom 1/3, it's going to pull you down. If you bring in 100 new collections, and they're going to be in 1/3s, right? There's going to be top 1/3, middle 1/3, bottom 1/3. Bottom 1/3, you're going to rank against all the other assortments, not just against all the newness. If you lift the whole—if you lift the whole thing up, if everything lifts, then there's going to be some of those things you would keep versus mark down. You're also just going to keep—I would have thought we would have been transitioning through more of our sales collections sooner. I thought the housing market was going to get better too. The housing market actually got kind of worse for a period there, right? When interest rates spiked and mortgage applications fell 20%. I think that it's probably a good chance the housing market slows a little bit from here as people digest this information. It'll be interesting. I don't know what kind of day we're having today. I can give you a live read of our business now. I'm getting thumbs up. It's a good day. Okay. That's not demand guidance, by the way. But it's a thumbs up. You got a thumbs up. My team gave us a thumbs up on the live read. Yeah, we're just really well-positioned right now. I think that's the headline. If you're going to bet on somebody in this race, and I don't know how ports are stocked now. I mean, I guess the stock went down based on some of the numbers we reported, and then it got killed because of—Oh, really? Oh, shit. Okay. I just looked at the screen. I hadn't looked at it. It got hit when I think the tariffs came out. Everybody can see in our 10-K where we're sourcing from. It is not a secret. We are not trying to disguise it by putting everything in an Asia bucket. You can kind of figure it out and do the math. I can tell you that anybody else that has scale in the home business, I don't know. Again, put someone like Ethan Allen or some of the domestic smaller players like Bassett or something like that. Put some of those people aside if they own more of the manufacturing. Not really, I'd say, that big of a competitor with us anyway. Anybody of scale in the home business has a high percentage of their content coming out of Asia. Anybody that says they don't, that would just shock me because I've looked at everybody's reporting, and I know most of the businesses pretty well. I've been studying them and watching them and hiring people from them. We're all in the same boat, right? We might be going at different percentages out of different countries. People move different places. I think the people really that I feel worse for right now is all the manufacturers in China or people who are invested there. Like that moved manufacturing, moved their lives, did things, moved out of China into other places, and spent a lot of capital, had a lot of disruption. It's cost them a lot of time and capital. Now all of a sudden, it's like, "Whoa, I'm not really going to be better off." Because they might have been better off in China with higher tariffs and more efficiency and less capital. I think this move is quite stunning, right? It's going to force everyone to just play a different game. Rather than sequential, "Let me hit Vietnam, and then I'm going to hit this one, and then I'm going to go here, and I'm going to put more tariffs in China, or I might do tariffs here, or I might do Europe." I mean, we have a long-term sourcing strategy that we think is a really good one. We haven't announced it. It's big and bold, and it probably seems like it might be the right thing for the rest of the world. I don't really know where this whole negotiation is going to end up. It might end up in a much better place than it appears to be today. Still, the long-term sourcing strategy, that vision that we have, I think, is like a leapfrog. We don't want to talk about it because we're trying to figure it out and how you do it. We believe it's doable, and we believe it's as big as a leapfrog as anything else we do when we focus on it. We're just going to play our game. We're going to keep narrowing our focus. As I said, around here, we talk about being an inch wide and a mile deep, right? In times like this, you might want to take the inch and turn it into a half an inch and go a mile and a half deep. Just be really, really clear. Be really intentional and allocate human and financial capital with great precision. Thank you, Gary. Thanks, Brad. Your next question comes from Jonathan Matuszewski, Jefferies. Good evening and thanks for all the perspective this evening. My first question was a follow-up on the clearance activity topic and was just hoping to better understand maybe how those markdowns have been fueling maybe the acquisition of new customers for RH versus incremental spend from existing customers. It looks like in the 10-K, the year ended with 265,000 members. They're down a bit versus the prior year. Just trying to kind of understand that relative to the increase in revenue. Thanks. I'm Member Kell. We'll stay on. Yeah. Again, I just think that at a high level, at a macro level, you're just going to have more markdowns than a down market. Not just because less people are buying, because you should have them or your sales will be lower. It's just kind of simple. People buy less things in a bad market, and they will buy more things on sale. It's really simple. In 2008 and 2009, the Great Recession, everybody in our category, sales went down 35%-40%. We promoted, we had more on promotion, and as we should, and we were able to stabilize the business to down 15%. You can go back and look at this because Ethan Allen used to be, I think, $1.2 billion, and they decided not to promote and were regular price, and they went down 40% comp. Their business shrunk to somewhere, I think, slightly below $600 million or somewhere around $600 million. They lost almost half the business or over like a two-year period. That was how many years ago? 18 years ago, 17 years ago. They've never recovered. Never recovered. 18 years later, they're not a billion-dollar company anymore. You got to really be careful and not be arrogant and think like, "Oh, I think you're a luxury fashion brand." That's not how the furniture market works. As far as the member count year-over-year, I mean, not a big variance in anything. It's not yeah. I mean, things generally track with our business, right? With our demand and revenue. Again, when you zoom out here and you look at where we're performing and where we're guiding versus everybody else, I like what we're doing better than anybody else. Yeah. That's really helpful, Gary. Thank you. Just a quick follow-up question. In terms of the sourcing diversification, it sounds like you're looking to bring half of your sourcing, near half of your sourcing to the U.S. by the end of the year, probably could drive some improvement in the consumer experience in terms of maybe delivery speed and maybe some other factors. Could you just kind of comment on that in terms of ancillary benefits for the consumer from what you're doing from a sourcing perspective? Yeah. That's the upholstery category. That's not our entire business, right? That is our upholstered furniture business, which is one of our biggest categories. That's what we're doing. That's what we're doing. Next up, we'll take a question from Seth Basham, Wedbush Securities. Thanks. Good evening. Just taking a quick step backwards looking at the fourth quarter, if you could give us some perspective on the margins in the quarter relative to your expectations. They came in a bit light where our sales were still at the low end of your guided range. Any perspective on what happened from a margin standpoint in the quarter would be great. You mean our operating margin coming in relative to the guidance? Correct. Any details you want to give? Yeah. No. Yeah. I mean, look, we're still, I'd say, product margin still up year-over-year on the quarter, and some expenses came in higher than expected. Other than what's called out in the MD&A stuff, we can look at that later. I don't have any specific comment at this time. Okay. Thanks. Just thinking about the timing of costs in 2025, you talked about higher advertising costs year-over-year in the first quarter with an extra source book. When we think about advertising for the balance of the year, should we be thinking about it being down relative to the last three quarters of last year or any other transitory costs that you would call out as we think about the quarterly cadence? Yeah. We're not guiding advertising, but I think I just look at the operating margin for the year and the adjusted operating margin, what that looks like. That incorporates our views of advertising. I think the first quarter is obviously, I think, the highest quarter from an ad cost point of view. Fair enough. All right. Thank you, guys. Yep. The next question is Brian Nagel, Oppenheimer. Hi. Good evening. Maybe just a simple question to start. I'd love to discuss. Did you talk at all about just the trend in your business through the fourth quarter and then maybe into Q1 here? Yeah. We said we were only giving kind of demand guidance for last year. We're not giving it this year, Brian, but. Gary in the 1/3 paragraph of his letter did talk about the trends inside the fourth quarter. Inside the fourth quarter. With demand ending up in the core business at 21, and he gave you some color because you had it from the December call where we were heading into the call and where it stabilized in January at 19. You can kind of read some of those trends in the quarter. We're not giving any further demand guidance as it relates to this quarter going forward. Okay. No, that's fair. I guess my follow-up question, bigger picture, and I know we've been discussing, obviously, tariffs a lot, but recognizing, I mean, this is an extraordinarily fluid environment. Okay? I think you may be the first company addressing this after the announcement from the White House. I guess philosophically, as you look at this and with sourcing costs presumably going somewhat higher, how do you think, where do you kind of shake out? Is it more you think you have more ability to kind of adjust prices here in the United States or do something on the sourcing side, either negotiate with your vendors or move sourcing around? All of the above. It's no different than navigating through the China tariffs and so on and so forth. Everybody's in the same boat. No one is not exposed to this. Will there be impact to the consumer? Of course, there will. Yeah. I mean, but there will be concessions on the manufacturing side. There will be some concessions on our end. We'll look for efficiency in our business. We may consolidate to fewer vendors to get more leverage in costing, all kinds of things that you do in these kind of situations to optimize, right? This is not again, no one's going to escape this. That's what I like. It's not like, "Oh, we hit this place, and now people move to that one, and then they hit that one, and then it's like it's crystal clear." That's what I love. There's real clarity right now. Now, is it going to change in the next week or two or three because there's going to be concessions? I think so. There's going to be ongoing things like that for several months, or we might be in a three-month negotiation period, six months. What I feel good about being us is the inventory we investment we made and the heavy inventory we have is at a good price. For the first time in my career, extra inventory is my friend. I think we might be the only one positioned the way we are because of the product transformation we are going through. I mean, we're going to have to work with our partners. There's things that are in flight that are being produced, and we'll have to take some inventory with tariffs. I would say as a percentage of other people, it's going to be much smaller. I think we start with an advantage. I like that. We've been doing this. I don't think there's anybody that's no, there is. Yeah. Guys from Ethan Allen might have been doing this longer than I have. Yeah, we have a lot of experience around the table here. We've been doing this a long time. Some of us have multiple companies similar to this one. We know the game as well as anybody. We know the countries as well as anybody. We have unbelievable partners around the world. We're all on the same team, right? This is a time of thought, reflection, collaboration. I don't know what else to say. I mean, it's a good time to be RH, even though it looks like a bad time. That would be the misview. Looking at other times of crisis and who's come out the other side really well, I think we have. We have when we had a lot less resources and a way less dynamic strategy than we have today. Yeah, it's also time to decide what's nice to do and need to do. You really want to focus on the need to do and be super disciplined about time and capital. Time's the most important thing we allocate. Just thinking about where we're going to focus in light of this new situation and understanding that the situation is going to change. We can't see it yet. It's a big, clear move. That's the best thing. It's crystal clear what the administration is trying to do. Crystal clear. I thank them for that. I thank them for not kind of playing a hodgepodge game all over the place and being really unfocused. This is a really clear and focused move. They've thought about this deeply and for a long time. I mean, that's what it looks like. I don't know anybody inside there. I'm not going to tell you which way I voted. It's a dangerous thing to do in this world today. Oh, it's dangerous to drive in a Tesla. Just kidding, Jack. But we're good at what we do here, and we're getting better all the time. This is just another one of those opportunities to learn and grow and invent and innovate and leapfrog to another better place that we can't even see yet. Thank you. I appreciate the color. Sure. Your next question is from Cristina Fernández, Telsey Advisory Group. Hi. Good afternoon. I wanted to ask a question about product newness. As you look at what's coming in for 2025 to drive demand, where do you see the most incrementality? I'm thinking the Interior Sourcebook that was mailed this year seemed like it had a lot of newness, but I know you also have some things planned for the back half. Can you share some thoughts, and where do you think would be the most significant ones? Yeah. Look, I think just start with what we have right now. We're nowhere near optimizing the assortment we have right now, right? Again, everything that any retailer buys, they buy it 100% wrong. Nobody buys it 100% right. I mean, there's some degree of wrong that you have with every buy. Nobody knows exactly what the best seller is going to be and how much to buy of it and so on and so forth. We have so much newness that we're optimizing, so much opportunity to get those products into our galleries presented right. We have so much opportunity to look at how we're presenting things and marketing things throughout the company on and on and on. I would say just at a global level, at a macro level in our industry, at our competitive set, you're going to see a lot less newness this year, or it's going to be really expensive newness. Yeah. That's why I say I'm really happy about the inventory position we're in because I think we can really cut back on receipts until we have clarity. We may, yeah, we'll probably still work from a development point of view because it's not going to be clear where the tariffs will really land long term. It's not like you want to just stop everything. I think there's some level of investment you still want to make from a product development point of view and be prepared. I think I just think that every business that's being affected by this has got to think differently. This is forced change. This isn't elective change. This isn't like, "Hey, work from home if you feel like it." There's no escaping what just happened. It's going to be the best people who are going to win in environments like these. Newness is just one aspect. Optimizing what we have, looking at other levers and what we're doing. We've got a lot of new galleries and new things coming. To say, is there a risk we push out the new concept? Maybe. Yeah. There's also a good chance that things resolve themselves in four to eight weeks, and you go, "Oh, nothing really changed that much," except for the framework of the global trading policies. I don't know. Wish I had a crystal ball, but it's more fun when you don't. Okay. My second question, the London store, it's being delayed to 2026. Can you talk about, I guess, what the reason for that is, and does that imply that some of the investments get pushed out to 2026? Yeah. It's doing big, complex development jobs. Yeah. I mean, if anybody here, if you've ever remodeled a home, nothing really goes right. Nothing's really on time. Everybody says, "If you build a house, it's twice as long and twice as much." There are people who tell you it's three times as long, three times as much. Imagine stringing together four buildings in London and creating one harmonious shopping experience and doing things at the level that we do right in the heart of Mayfair. There's just complexities. There's just things that don't go exactly to schedule no matter how hard you push and what you do. Yeah, just kind of some things get done a little faster. Some things come online faster. Some things take longer. Could we really rush and spend more money and try to get it open in December? I mean, could. I just don't think it's the best time to open in mid to late December. We'll probably open it sometime in early spring or something like that. We'll keep you posted. We're not stamping out mall stores where you just build a storefront and kind of fill up a windowless box with some fixtures. That's easy to do. When I was at my former company, we could stamp out a store in 12- 18 weeks. It was really simple. The storefront, it was 40 ft wide and 50 ft wide and 100 ft deep, 5,000 ft, or maybe you're doing 10,000 ft. I mean, these are really big, complex kind of investments and leapfrogs for the company. No one will ever build a—I don't believe anybody will build a platform anywhere comparable to what we're building. For sure, not in my lifetime. You might not see something like this for another 100 years, if then. The complexity, the cost, the investment. You've got to be able to perform in spaces like these. We've proven as we've kept expanding and dimensionalizing our physical platform and incorporating hospitality and incorporating interior design services and offices and all kinds of support, indoor/outdoor space, rooftops, gardens, courtyards, and all the things we do. No one builds anything like that. No one in the world builds anything close to what we do. It is more complex. Plus, we are constantly innovating. It is just—let's stamp things out. That is what happens. I have not seen anybody that has ever been on time with a kitchen remodel. Thank you. Everyone, at this time, there are no further questions. I would like to hand the call back to Mr. Gary Friedman for any additional or closing remarks. Great. Thank you, everyone, for your time. As I said at the beginning, welcome to a new world. My quote I use from Theodore Roosevelt, "Every movement has a lunatic fringe," I think is quite appropriate. Let us not let that just characterize what is happening in the external environment. It really is what is happening in the internal environment here, that we are the men and women in the arena, and we are the ones who will do the good deeds. We will err and come up short from time to time, but we will also do some extraordinary, remarkable, and amazing things. That is what we believe we are on the planet to do. We believe we will create one of the most admired brands in the world, if not the most admired. It is long-term thinking, and it is being an inch wide and a mile deep. You will see us get even more focused and more intentional in times like these. I want to thank our team members around the world, our partners around the world, all of our team members here at the Center of Innovation and our campus in Corte Madera, California. I think the work we have done this past year in 2024 is extraordinary. The strategic separation we have created is unlike anyone else in our marketplace. Our stock is going to go up and down. I've been here 25 years. I was here when it was $0.50 a share and adjusted for the number of shares we have. That was probably a nickel a share. When you think about it as a long term, you think about it like you're an owner and you own 100% of the company. You make the kind of decisions that allow you to do the kind of work we're doing for 25 years of your life. I feel privileged to be here, to be doing that. I feel privileged and proud to be doing it with the people and partners of team RH. As I like to say, never underestimate a few good people who don't know what can't be done, especially these people. [Foreign language], everyone. Once again, everyone, that does conclude today's conference. We would like to thank you all for your participation today. You may now disconnect.