Soho House & Co (SHCO) 10 Nov 232023 Q3 Earnings call transcript

Ladies and gentlemen, thank you for standing by. My name is Bhavesh, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Soho House & Co's Third Quarter 2023 Results Conference Call and Webcast. [Operator Instructions] I will now hand the call over to Thomas Allen, Soho House & Co's Chief Financial Officer.

You may begin your conference.

us financial discuss results. joining Co's House for quarter third you today Soho to & Thank My the Chief is Financial name Thomas Officer. Allen, and I'm forward-looking beliefs with that events. here Andrew our discussion I'm Carnie, represent expectations or contains our about future CEO. Today's statements risks statements that uncertainties to involve actual statements. could the materially from All forward-looking the results and forward-looking cause differ

section. assume represent now, of release, at sohohouseco.com no found views today, SEC filings. our News the described are in of any update Events factors the Some to have quarter be change. in as forward-looking obligation that to our statements forward-looking differences and our earnings only may third can our we you cause such if access views Any which statements should By &

quarter Additionally, can News our which the in have also site. Events found posted section our & third presentation, on be we

refer in today's also should not non-GAAP we release. measures or for be call, in our most are for comparable available in GAAP press the measures. measures as addition considered the to to and GAAP results. isolation These substitute non-GAAP Reconciliation earnings certain During from a financial

let Now it Andrew. to hand over me

and performance, an we've an through I'll Thanks, morning, by Q&A. on you going guidance then give our over everyone. to we the our hand sheet then made before through progress update provide financial quarter's update talk to Thomas, talking the the against our highlights, priorities. move start on I'm good and strategic balance to to Thomas on

and and delighted rise welcome Co in discuss year-on-year another overall, Soho membership be XXX,XXX growing with members a growth XX% announcing members XX% strong We're the X% also up the set House pleased membership & quarter-on-quarter. quarter, year-on-year to revenues Soho and Total growing a results increase let's quarter. further quarter-on-quarter. to of was X,XXX to Now of in over really We're House X% profitability.

XX% increase the which XX,XXX year-on-year by growth XX% the demonstrates year-on-year XX% year-on-year, up House grow, X% strong a to quarter XX,XXX, quarter-on-quarter. which Soho up revenues, grew appeal by second to million, and continued waitlist revenues from membership were of again recurring $XXX reaching in Our Total globally. and our in supported

it quarter revenue the warmer we overall did that in have of very the spaces performance, through calling the impact healthy, get houses' across that number was the the outdoor also had bad out worth strong traffic is an particularly weather on our we typically given While months. summer

with been revenue XXXX excluding mid-teens, and XX% like-for-like consistent adjusted compared quarter. We points basis managed EBITDA we expenses and well around to up was the but would it weather, by Our year-on-year second have in-house estimate XXX margins to QX million $XX led million despite EBITDA the again our high results or with adjusted adjusted have which increase These led inflation, XX% of us XXX% year. of to midpoint $XX for guidance margins, the year-on-year. increase EBITDA a grew

delivered that flow have cash we from the QX. operations We in after positive milestone also in quarter achieved

drive strategic profitability enhancing on Now let of membership growing cash to operational delivering the update an you and value the and priorities: making me we're against X our and excellence progress free flow. give

benefiting one simultaneously The Europe the for of in menu experience has local summer, the off natural and our In summer, this and very in demand The new the September, since and for saw the House formerly our restaurant. entirely key American more performance, our well we cabins the are the reimagined. roll Beach from had house in a first encouraging profits. all And that out member quarter, attractive options in of largest underground have I've and great showcases time. our refurbished been menu. opened An curve revenue restored great ahead by very as we've Barcelona since typical weather, music seasonal visiting been additional of vinyl before, private concept. that feedback we Malibu the launched. Little house as members doors from partially Rome benefiting the to and has summer is well and an we Farmhouse U.K. ramping been of first bars, at members. a has best very We America, City, our is dedicated a the a opened and Mexico grill the exceptional includes had Latin Scorpios outdoor of significant October, overlooked the XXXX forecast residence for changes our including ensuring Soho do several regional growth every offerings. In benefiting House heart brands. remains up a in the member gotten in to maturation America, which new London to As tequila room we during despite Sales electric Membership what Paris, focus. introduced high, including the high house and pool summer, we said glasshouse we that very and North continued of start. at membership and introduction menus. from location and refresh Soho occupancy dining how And

most House and location Paulo house Paulo's and house bedrooms, a The Soho home principal Sao have within property the It's of Matarazzo in a of heritage Sao and Sao first America. We culture Cidade located such XX institutions natural rooftop include one some with South to of multiple creative spa, given Sao this of become and and one in project, House significant share club opening contemporary Soho city's second site music of Brazilian art, Art. will pool The the and Paulo architecture, streets, choice the honor redevelopments. situated most as on the will of the restaurants fields spaces. gym, bar cultural influential Paulo is Museum around Portland year. end our city's America Latin and the

and Portland's city's Central The in the in neighborhood. laundry Portland side gym, rooftop will our historic two-story restaurant, a feature first music East House our and spaces and We've We will Northwest room these been for Troy members. with is for years, on working over and within X house creative pop-up feel houses' now members. membership potential. Soho programming building houses part the confident pool of the that dedicated our Pacific both house open events cities hosting community

us to at year-end XXXX. members openings, and XXX,XXX growth. end the we adjusted total membership XXXX earnings us continue are and new setting our strong these With With enable revenues of our a target houses given reaches XX, EBITDA since today, by over This to houses membership, members will XXX,XXX raising globally. over drive to target for XX

Turning excellence. our operational second priority, strategic to

year-over-year As consecutive in-house of allowing achieve basis leveraging you points Scorpios adjusted member time despite positive Club revenues, properties XXX to approximately leading whilst discipline as very over F&B scale inflation, on house continued concept occupancy insight deliver operations, with to third, data strategy hear with us properties we've to cash X revenues continued with versus grow. XXXX, year-over-year. Other XX% to second, was be expanding margins like-for-like having year. In-house flow for a pay a with well, X% up of by in versus Mykonos, we well EBITDA here of in from what strong, know, we on in QX. results performed centered XXX on level as margins our It's our quarter continued wages versus 'XX and basis second progress a million, well operational At another ADR having revenues drove year to efficiently; control $XX of QX contribution margins; most revenue We've up is higher Beach a basis of continued tough been driving delivering points double more improving last here, increasing great RevPAR at a of our quarter season third XXXX market. than points XXXX. percentage wages strong things: XXX the of basis. membership operate higher to first, the period and growing Combined and versus like-for-like these

in for to also properties to We be in original property Bodrum are will X next XX with the bedrooms similar D.C. club These Tulum. We'll be the as time and our Mykonos net large Washington, period. we areas in adding spaces, dining time. and fourth adding also excited at Scorpios a same be to ritual XX live months the will well but in as first the be opening

Director Lastly, has Tom of to Asia. Collins, of Managing announce Tom Europe spent U.K., the promotion at Soho Officer. I'm years delighted Chief and the most our as recently Operating XX House and last new

a broader in and thrilled As we've focused terms of in have Tom regions has to the been instrumental discussed that these been quarters, really driving initiatives stood past I'm our improved him results. we've giving delivering be out this. on change few role. the

me updated to more numbers on our guidance. let detail you the to on Now Thomas pass and give

X% Andrew. currency the Total or X% grew third quarter in-house for on respectively million XX%, Thanks, revenues year-on-year, a revenues and $XXX year-on-year rose X% house XX.X%. other constant XX% basis. and X% up We to year-over-year XX% Membership largest or up New to with be York, saw basis Other points level XX% margins XXX for X% is year-over-year, despite currency basis. approximately million. was XX%, third revenue. revenue the $XX in contribution on increased year-on-year markets, a House level we and with estimate points details constant approximately contribution some stats increasing XX.X%. Giving revenues quarter, our XXX%. million XXX from by climbing doubled between impact to $X on London, around weather. Highlighting negative continued margin more a than what strong weather X and ran more up more basis This growth L.A. to

led in development public were Soho has training offset growth growth $X pricing sales, in a revenues business $XX has live And Good drove especially strong growth our million. driven houses, in partially Europe, and outdoor U.K. a sales, membership space, increase by the a in-house other Home revenues offset that Membership million with and real We at restaurant by $X in lower a that stronger For million design up closures. increase weather. impact. in to Scorpios by saw in, and revenues.

EBITDA revenue we for profitability from quarter EBITDA have was We our consensus even benefit growth. to year-on-year noncash $XX $X $XX membership from adjusted up million, rent outlined of the adjusted XQ, benefit quarter third excluding beat we from of million. million XQ did million and Our $XX continued moving the and as initiatives

and approximately cash sheet. we had position, of million quarter generated of net had $XXX million cash discussing the third and interest debt. a million with our adjusted equivalents We of $X our balance cash $XX cash million cash noncash rent. in Supporting million Offsetting, net Now $XX and $XXX of of and the million quarter EBITDA ended CapEx. we $X million taxes of during $X expense,

On the at $X a of stock quarter financing side, the in million we repurchased share. $XX

for guidance to Moving fiscal XXXX.

the million from saw We are for including strong House members third guidance the range narrowed $X.XX Soho revenues, demand outperformance. to total On million. billion. from the total membership now have billion $XXX lowered benefiting now we exceed our and City quarter, we XXX,XXX have Mexico On year-end, the very to range the total to million midpoint raising to revenues, expecting at $X.XX in million $XXX slightly, to we $XXX narrowed $XXX

control cost our million million have our adjusted raising prior expectations. were a the on $XXX to $XXX our summer of million from discussed, mean guidance, the The by our profitability of we hurt Aviv progress continued house $XXX revenues in we're And closing on to wet strong range third impacts As and $XXX million. temporary midpoint to EBITDA, Tel of quarter weather. initiatives also moving

guidance Aviv by Tel in $X our impacting factored EBITDA adjusted have about We million.

early we guidance. operating XXXX, too give it's For believe to

membership However, will still in since we come from their members majority which opened Soho we growth, into The have our visibility the XXXX. ramp this XXX,XXX of phase. to house expect year-end. surpass They're clear growth House have by that

expectations to We development prudent next year, for the which remains still about X% been we houses, uncertain to while have be between our given new X% expect backdrop.

another strong record growth membership business quarter revenues good underpinned with been the and It's waitlist. our by for Thomas. Thanks, in

again. row, for to midpoint fourth drive EBITDA raise excellence Our helping our ahead adjusted quarter the in and operational profitability a guidance of initiatives the expectations of us continue EBITDA range our was

members flow great disciplined CapEx, remain driving make operations up and XXXX. as from value. remain further our to progress on delivering continue and flow cash focused We membership in will continue We we our cash ramp for in which on

quarter. And House to to this We open dedication our I'd around than teams are Co. we to more hard will questions. the first all Soho with opportunity opportunities for on their work confident world Operator, for the ahead like growth please. can take that, thank and in the take we ever question, and now

over them or As over either reminder, your a can submit you questions the the ask webcast. phone

Instructions]. [Operator

Sharon Zackfia of Our the William from first from Blair. comes question line

I your guess expectations was and a ahead margin. It contribution. end the my house has adjusted relative other than also on of like kind I looks question you'll which least expected, on on goal, profitability been much the level better because year EBITDA to it of XX% this think at

be I on XX that. an think had expansion about about a how of what mean year-over-year. pacing of bps do the think can I lot You've you'll leverage of ongoing ahead basis? we you

the of guys margin out kind normal annualized pandemic. internally? You've What's that on run obviously been a you rate of of coming expansion target like

delivering of Sharon, look, the greater then, ahead priorities: excellence Obviously, year set out X year. those. two, we're we've the we're to this operational pleased strategic last really both on one, performance And end margin with seen membership; we of growing at profitability. and drive

when percent a target, definitely expect We're improve to we margins future, XX-plus As year to and next to the will go-forward we basis. continue achieve we EBITDA medium- target think to margins. about the long-term committing in of a we not that on but growth margin have

the if a on doing year. -- guess house on consolidated level, you're all you've the kind in I of mid-XXs been basis,

up XXs. houses, mature more you're high house margins bumping how get? -- how on your those the I level actually Now mean can high

house Thomas going control where Like We membership, nearly houses ramp-up great we we they where on XXXX, their a what up cares sure. prepared delivered to comments, for maturity have costs. since to continue of increase ramp have opened as our hit in That's lot really -- experience. our higher, our contribution. We margins that's you're his we said see Sharon, can they and XX. a we're improved member our that

what that's So seeing. you're

our really would seeing also execute teams say. You're well, I

our delivering a and member think over run I last houses we've the significantly on margins. we improved great balancing, whilst improving year experience how those

for then And question last me.

curious in what well all of consumer. if just seeing with going was the any revenues. on explained U.S. pullback But kind You you're in-house at

look, No, we really quarter. good we -- a had

today. We we've And our membership. provided raised and are guidance guidance membership a also membership B, on club, our XX membership we've

who the shows Soho that in across membership we we are. So all strength had our that's and lumps that's the and some and bumps business, quarter. of We're for a regions club. Look, House

and in October, got bounced the what news has wouldn't The can revenues whether have all You weather about, is our we seeing. that we of had our were patterns were talk believe we Thomas QX. strike seeing sorts in good West entertainment that we also houses. stats to portfolio our in Coast back back

with we bumps and good experience. the feel think, weather. And we just our think call the really about today profits. did We what messages have So manage land I again, the is improved is lumps we on can't that. what of quarter I we one you member pleased heard we the our But in we want to is that can't manage, doubled I'm

that, and we're So get that weathers well really things for shows like me, boards when and strikes. operating curve [indiscernible]

of Our the next Kelley from of question Bank comes Shaun from line America.

on a or last point, the on pick to But unpack up here. Thomas, us be and it you at it? And that little look lot of bit that just I at I'm could best on you for your side, you've behavior saw I give visits wanted covers adjusted the or going or how a Andrew, sort shot sure consumer weather. appreciate you there's then

most proceeded spending look the on like-for-like how feel? kind of noise, importantly, And how sense if just quarter? you October as any member think So through moved through all we the does we maybe

question. Great Sure.

we of So and we a a of houses, think you pools. about houses, if -- have lot our roofs lot

all York. London cities, in say, July New and -- our would peak L.A., major August that's predominantly X across the our and So big I season,

of the that spent XX now the We've if New because seen, I what are through our like-for-like back first We time was menus. think that. House when We in when end out September. on weather -- time October or York it's where in and members about rolled of excited we're So we're houses York, rolled of just a them fire, experience QX. That's we it of that Dumbo saw lot What the improved back period. we've at Soho member up is of having Canadian to impacted And new out New which to we for the close, less. spend about, time we're XX% our the just in houses. is

back, spend is and job team come in So on great footfalls the houses. member a -- have which members shows which that is on doing delivering experience the

both were seeing look Andrew we the October, and Yes, to is Look, said just we second I'll what spend what visitation the at quarter. come in trends when echo per Shaun. have the visitor back that

There some the just That want since in throw storm California. us not quarter, There weekend, see. U.K. third in the out. stats in you hit the years July on XXXX rainiest exactly tropical we to a was had was XX to The -- first what

that performance line, And we but like our able control were cost the way. on so and delivered things to obviously by well negatively really impacted the top

what member account second of member those do for of Thomas, up then of be if second they think and you skewing you little comment half? just we about for bit we what a towards expect as can a seeing environment so could little XXXX, your if or to will. maybe you're terms on in impact comment, about that, possible from financing start Just cadence, just then would openings to line And we what time help cadence should the openings maybe forward end you just more as bit growth us look some the in or partners more that question on think Great. kind

Great question.

membership a membership we our hit we're club, and numbers. So all

achieving ahead is even us membership of most goals. us new the metric opening for So our important houses

confident partners interest a House, got have And in USP to new is of think our The -- got at high rates, membership. to high I feel on development. open very we super houses tough, we bit that lot great Development a We've inflation. partners good of a is news they we're -- So very, Soho willing partners. have we us. attractive with we've

pipeline really great excited attractive. We are super we've a terms, X X strong for highly to about. which got we're have that next And years the

X% especially end both X Paulo, changing when City. do coming what members. yet. got X% in are They amazing going our the Paulo Portland just and Mexico not to at new membership. year. Mexico we're Sao City fantastic We're our had So we to of houses Sao like large, the guide We've houses, that's and add really new we open we regions And in to

to So on at make the we'll moment, confident over lumps deliver and out I houses, them there's very But can call, we continue which the and houses sure, I last said but and we're new next achieving to like our that X open members. membership bumps, X delight our ride on years. sure think the some great for goals we

And I would Great. could last retention. if be sneak more in, just question, one

talked haven't I helpful. in just of the be deck, in retention, would this give know a latest you the a don't kind I so missed We or about might if us either percentage stat that But can if it. while, there have and was direction, on member

Great.

here. You've managed to in get X questions

X yes, like So strong. questions. -- you our remains look, driving really key it's revenues. Retention metrics one it. It's membership for only of recurring retention -- our had I

'XX for had but last years. our our levels, bit retention dropped previously a highest got we from still the As we we've retention highlighted, X

which strength our slightly trend It's actually it. continue nice for we're the is in focus members just our to shows to what delivering clubs. it a again. We And of see improving, on

really feel we moment, our retention. about good member the at So

just me add. let Shaun,

years. we've just we that -- retention prior were we XXXX, 'XX, dropped in COVID. back In XX.X%. at a from members been the to XX% in the is bit post XXXX, benefited coming it So or highest X level had

were they leave. less So to likely

our The look has had retention the than of other at new stay. member, curve, are you thing you're our is that more a if ever if at before. to more you total we've you lot we likely kind changed a just look the longer number And have members

But continues strong. down. And absolute So in to bring end look be at we on by very year at metric you disclosed the number it -- that would our very, we cohort, XX-K. it the if of that an basis, the typically

question line next comes the Zaccone Steven of from from Our Citi.

developments the in-house. question I this a but impact? questions And revenue. have just quarterly bit the it I being following I around up the of tougher. Did revenue follow-up on had you brief may the heard then on EBITDA, performance I Tel had on a about on missed just quantify, Aviv commentary

the within houses, like the X what's to margins business? were of EBITDA Do you Would to for enough grow? the you year, implications please. EBITDA the like power just see how profile margin that potential to you have the slow more openings drop still talk If per growth feel you that, for improve through run to your

Yes.

wouldn't So growth lowered with I'll impact and on If -- the thing in most house of part the that's start me an our question. important our second the we have growth it in let membership. openings, membership our

we've got over So years. it revenue our membership last opened because wouldn't X membership wouldn't growth, houses that new we've it many impact the so impact our

Our year, we we've the impact for because make you you membership first know a the EBITDA talked open the is part negative house as ramps. we a would of about this most go actually a up as lot when with all and

you on what revenues. but would see membership So real effect is EBITDA no enhancement,

if actually year. each So the our improve was margins, houses we case dropped less we would to that that

million And versus impact on prior expect Tel Aviv $X then, a the we said, EBITDA Steve, expectations. as about so we our question,

of obviously be fourth will All that quarter. the in

Aviv -- side, to On not not their We're the be the our higher, pay them. but But at staff members the -- house. will continuing a we've meaningfully existing bit to freeze We're we've Tel obviously charging little membership. higher. from all it allowed revenue a

obviously an impact. And so that has

about next different and architecture year, year? membership Can pricing to Understood. look do implemented This pricing growth? you that as pricing thinking How Yes. about different the just XXXX. to we for you new existing versus members, think you with shift members

on pricing. through working still We're

that. I'm don't what I answer going thinking So pricing. short to membership on we're on give you disclose to about want a really

goal always Our for members, value to every is deliver opportunity.

the working still that moment. at we're So through

Our ROTH the of line JP MKM. from next comes question Wollam from

one are of where we F&B out having for a houses, curious, terms think questions side. kind food kind know aren't of And meaningful for now then, bev just of of member ones ramp, couple improvement A, of this in and kind about Sharon's I of about the we following really as up of about there? of the in-house contribution you've some we legacy quarters improving I'm huge when the pointed Maybe what's B, think margin, on kind And the kind improving the that house margin margin. step the next on contribution

Great question.

in So U.K. we past over a in high inflationary been years, particular period the have in X very the

I think double running of was digit last for year. most the U.K.

elements. I a did you our job margins. We confident week a can grow can regions efficiencies those That's dropping, grow margins on brilliant as sharpening work And through our margins that our the will benefit on lot drops, all U.K. across improving our fantastic supply reports teams done So and in continue from that. on if up why we terrific we just feel we is which operators. that have procurers, a of the last inflation in to read think work now we being and lot the environment chain, of

in going confident very So and improvement performance into we XXXX. margin are our

are done offering over members. that just about members doing visit they want all as We're offering We how and drives for in spend our what to talked all the -- initiatives excellence right? seasonal and understand past is And our the question We're past. higher things new about second giving margins are that per drive more which going houses. menu we've a so It's really the we mature higher improving on members by few still, to rotations, hadn't operational more calls, then we other our serving profitability. to we're the keep better

any of And very there? number, squeeze then stock that's just kind be would I'll frozen you Yes, out the just capital then And can allocation X buyback, thoughts, point helpful. partly anything members The appreciated. others. Okay. that

Yes.

are still Just frozen our on to It's our below just flexible levels. super of just of members. members normalizing. with Frozen continues frozen. It We're member We're is normalize. business. part Most pre-COVID having of members. moving it's frozen worry changing lifestyle, to used part our city, pre-COVID. below just business -- and I see It's so It's about still what children. we wouldn't just

about of -- terms positive operations you and fourth the we've that in past cash as we've now capital in Then we allocation, the quarter. had flow continue few talked quarters, see as from to in expect

Our priority given to into the invest with see business we growth back opportunities is House. Soho long-term the

Next also even We on about summer. good new opening Scorpios' talked which Scorpios, X we investing confident results we're call. were year, in feel the this that more Mykonos in following how

We position also like flexibility. to have bolster a financial cash healthy to

to be see also Buybacks And have balance reducing opportunities, business the flexible. and are main we so investing our our sheet in leverage the when priorities. are not top we But priorities.

buyback at where the was discount the we're trading. a stock quarter our in so And to

good we it so a as saw opportunity. And

next from Our of the Grambling question line Morgan Stephen comes Stanley. from

any greater looks versus earlier looks customers specifics around made what spending membership? A And like comments it's the you color -- percentage there new now maybe about a that for been? quick also, of then members history. versus into folks like mix on question where several their just years new sorry, what -- who provide customers you one any in-house on or could Is of said, versus new are

members presentation. so so kind that cohort I stat our house, paying earnings new off net numbers, and give Steve, give can it net by members legacy, back into I of versus can you you the of don't but know of give guide. but percentage help you. can that based We a of have just we

based it's have a and off of factor. member per spend In pretty terms consistent. can the cycle, Age of life

per is, So a we the life based the it's side. more consistent they But the off spend. older -- cycle, visit on typically our pretty member

target more Do be or potentially of either And you then that thinking you efforts the a consumer impact of higher year profitable, person level do or next sign over of out certain a as to next health level membership spend in-house maybe per the couple we a health years? of and view spend you're the as of And are question. the it? in-house the to there as your look about going

Yes.

I probably So average one value. biggest spend, check is it's say would increasing of initiatives our member

I about lot over initiatives XX a We more before. XX you'll ever next got months. better our us whole more. of to from We've our delighting members think around know a that heap hear than members the

a spend to with to actually much our either how in members a more will we treat little are in bit then which We us. our our sophisticated drive house more houses members, they're when or

So being members drive us, understanding it's and the from what want it by use, member data, a combination right in that's to of way spend. going our inspired members to giving our more our

goals -- have we a quite to and about member more on big because March that for So probably it a be our lot will earnings strategic you'll it's sure be initiative we'll us. do for talk spend see going

time. There Allen, are I'll turn at no this back further Thomas call to questions the you. over

Thank you, Bhavesh.

look for soon. with to call, to catching we you just I'd So thank Thank everyone you. forward joining up the again like and

may conference call. for Thank now We disconnect. you participating, you. This does thank conclude today's and you