SHCO - Earnings call 1 2023 | Soho House & Co Inc.

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Operator

Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Soho House & Co Inc.

First Quarter 2023 Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Thomas Allen, Chief Financial Officer. ahead. go Please

Thomas Allen

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

our are factors in statements Some may as assume forward-looking of the views that views if to our SEC cause of forward-looking change. such Any obligation differences and we any no described filings. today, only our update represent statements

should QX By be News have which can in our at section. & Events access release, to found earnings sohohouseco.com the now, you

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

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

Now hand over let me to Andrew. it

Andrew Carnie

before X guidance through to ESG to on our update and priorities. hello, and Thomas an with our performance, everyone. we've I'll 'XX by sheet Thomas, to provide Thanks, our financial made then over talk I'm start strategic progress highlights progress on give through against initiatives. our our made and going hand balance QX talking update the our we've an finishing on

on year-on-year first members, to all full House to the Co's quarter-on-quarter, We've our new House hit target of X% with year-on-year of leaving and Soho we resonate had track quarter, a a which XX% shows continue Total high us quarter-on-quarter, membership of rise a grew year. In our a start to the memberships than X% XXX,XXX & members. well XXX,XXX increase hit more members. XX% year Soho and strong

growth, all-time high of remained with X,XXX. while of line nice demand approximately waitlist membership strong, In membership over a quarter-on-quarter growth XX,XXX, hit an

focus the adjusted of guidance up of We have raising Today, EBITDA quarter operational the we led results $XX expectations, for $XX the EBITDA company. our on our to excellences, full delivering we first million beating the million, profits to continue year-on-year. which initiatives implemented across are reflect year

revenues underpinned and up Total membership XX% growth revenues, by year-on-year grew in million, XX% $XXX quarter-on-quarter. year-on-year recurring to continued X%

that us quarter is You QX the seasonally, track performance $X.X guidance slowest for billion. $X.X of our to our total said QX remember, typically quarter revenue the year last to so leaves we firmly billion on deliver

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

all with unique standards and We've across our at atmospheres improving offerings, on Houses. member Creating feedback, off are of food and our focused great everything the seasonal introduced we clubs Based heart service events. do. House we members menus is

X new Our updated House on X with dishes now months Regulars are approximately X every based seasonal ingredients. high-quality to

as pop-ups and smoothies Only bowls, Tuesdays. and as nights, themed times. have to Superfood Night swaps for such pots, new members including more more offerings foodie events choice shops. our Houses breakfast, food We've local at Every visit increased introduced Press their One offerings Juice Our provide Taco who become House healthy and such yogurt dining multiple And with regular more added we've

improved improve service staff is for being the to Our through incentivized service standards our are which leading increased training, Houses are retention. and within improved all management members, to

the new menus UX for we experience. communicate and better and improved will this, to changes are to starting and have of the easier deliver more it regularly teams members results. are make The all highly added engaged to app Finally, clearly discover on

of the focus food throughout service year. this improving continue on We to rest

our Soho to membership, than Outside by House grow Friends core XX% memberships growth continued proposition, our other more we in XX,XXX to members. see year-on-year helped which strong our

our And opening continued House Soho House in really Sukhumvit new pool vibrant in February. the House Located tropical this new terrace neighborhood, in finally, program a with lovely the a XX-meter features the setting. outdoor Bangkok and

this seen intake our for membership and initial great House, goals. have demand outperforming it's We new

remaining ] half year. the continue the in to to Houses place We year X to aiming of take this the target X [ second with we're

Turning to second our strategic excellence. priority, operational

to having areas: operational margins; insights operate strategy and we leveraging discipline and first, key second, data centered Our our efficiently; grow. as around scale member expanding in-House is X third, and

In the of revenues wages points improved a basis QX well. control points first QX percent XXXX. quarter, XXXX basis XXX and Wages as versus by XXX our versus teams

F&B margins be a earlier. by out which us rolling new XXX lot items, basis XXXX to despite versus continue I referenced strong, increasing points QX menu of

operate expected we at how business. of continued the ADR, we focus quarter that and than RevPAR year-over-year to driving through occupancy Our XX% made G&A increasing like-for-like XXXX. XX% properties better and to first expenses changes the came the higher on leading our We've in in versus

stronger, a front runway forward. confident more in consistent good long We're of have that this help us, making will We us earnings we're and progress. generate going

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

Thomas Allen

the X up basis. XX% House-level XX% XX%. margin House-level XX% XX%. currency or up to to first Membership, and margins and XX%, XX% with on the a or XX% to quarter year-on-year year-on-year, XX% on XX% other contribution revenue X rose points currency and points XX% year-on-year for contribution in-House constant million XX%, $XXX climbing Total respectively, with constant increased Andrew. Other a revenues Thanks, basis. was grew

revenue part by in sales Home. revenues. Membership saw an drove by in our driven revenue. the And approximately in $XX in a Soho strong million other in revenue XX% growth increase $XX with Houses, key to up more increase increase $XX pricing were led million increasing million Strong especially We year-over-year, revenues Giving U.K., continued in at $XX.X on a in-House membership and details trading drivers. revenues. million X growth

first we about $XX have quarters initiatives and year-on-year from million continued Our talking the for growth. million, was X profitability EBITDA adjusted the up and past been membership revenue as quarter benefited $XX we

Our adjusted beat quarter EBITDA million. consensus at $XX also for the

our balance sheet. discussing Now

We the sheet our past few have great balance improving made over months. progress on

remember in great extended we may liquidity You remains a if needed. revolving our which of November, source but credit facility, ever undrawn

points we time credit refinanced million. market Miami of conditions in property the points week, extremely refinanced rate the mortgage. loan rate coming tough Fed were the mortgage despite us than period, current XX secure $XXX prior and This February recent mortgage loan, higher the a due which XXX our This last X%, we XXXX. able to We approximately basis XXXX is approximately was that at size funds basis failures the million following and $XXX rising the bank to from of approximately over increasing in

investments also This properties markets before. as more have attractive that highlights XXXX. today It than until see our no we means maturities major credit how

Moving to guidance for XXXX.

We of more continue year-end, XXXX. higher members XX% end expect XXX,XXX least total to of the compared than Soho House to at at

$XXX We our of are to reiterating billion of and membership to billion. revenues $X.X $X.X guidance $XXX million of revenues total total million

XXXX. next midpoint due quarters, X X growth consistent benefited be from to we a the should of quarter The approximately our achieved comp XX% which relatively quarters. more of first guidance first the quarter a revenue year-over-year across favorable Omicron As for XX% impacting the the implies the in reminder, revenue growth

to our strong target the to On increase range $XXX adjusted $XXX is leading XXXX EBITDA, by our million year million adjusted to to start us $X EBITDA between million.

months the to coming year-to-date encouraged our and well-placed So believe deliver performance we plans our for we're by are for XXXX. on

our of With pass discuss give progress it we then that, remarks Q&A. I'll before Andrew back some concluding into ESG to some go and to

Andrew Carnie

work we social responsibility doing on on and ESG XXXX our which Thanks, Thomas. provides governance. Today, sustainability, detail published report, we're the

food emissions our business of is nonfood X We're us better. Highlights manage We're Climate-Related globally reporting Disclosures, with progress line collection focus towards as environmental voluntary understand our TCFD, include helping opportunities X making Financial XXXX waste a risks our in on of to as and well Task proportion Scope data and now on also in climate us allowing and large on goals. change portfolio. the a and in our Force the disclosure carbon

materiality help care strategy. ESG employees an assessment better to and what and members conducted our Foundation our also House about guide We've understand

strong the launch and more now young our X,XXX than from global through underrepresented We've and people our Mentorship on had supported backgrounds the with Fellowship year Soho of social Soho impact creative another Foundation. charity, access programs, House

waitlist. a start So we've underpinned growing to to a great and growth revenue the by member conclude, and strong further had delivering year,

full EBITDA are leading initiatives and to excellence expectations for for operational bearing increase guidance adjusted a second year. our row, quarter ahead was in the fruit, profit Our us the of

on value. opportunities focused for in business, dedication for that are than result this Soho I We membership we driving positive House more hard regions would remain thank in. in our and ahead cash for and like teams will we further their to growth the year. in which all the flow generating ever our members free operate all work this confident And delivering

first With that, Instructions] take please. open questions. the we question, we Operator, can now [Operator will to

Operator

line Shaun Kelley Our Instructions] come with from of of America. will [Operator first question the Bank

Shaun Kelley

trends RevPAR I And far saw commentary a How Are across maybe kind maybe was talk bookings you of member rate, in steady? exit second the into so is the and kind well. Andrew, things a little bit Thomas, there? quarter, holding if wondering out as little little what of the just bit about about you the on spending quarter. could March behavior a

Thomas Allen

Thanks, Sean.

saw was when for impact revenue that the quarter, we bit slightly There about the lower it a in about like-for-like of at increased growth look So fourth a the quarter. than timing we That's there. in-House our XX% mid-teens.

impacted So rest closer New the January of the the Year's similar quarter, to of the that And teens high the was quarter. the beginning of it in the very then day fourth to year. hit week the

the visitor consumer, be been we and think When like strong split We visitation, of that could spend holding in there to macro steady. really impact but per the visitation. we generally, on that, it's lagging trends some think see continue feels about it has

to of our highlight, and add members One hotels, because quarter. is which restaurants for -- membership we versus us business which kind great of every the traditional key is we have things

So spending. definitely could be of consumer could decline that kind in any -- offset

other and some per efforts that we've that The there, initiatives is put XXX Dean Street properties visitor. Greek to at really and of we key there gave Strand XX that growth Street in we of we important initiatives trend highlight the thing really the year, look we strong when is new introduced into bucked saw examples last large that the and spend and

And so continue can that drive our higher. to internal initiatives

Shaun Kelley

of bit as a in the there. anything follow-up, then U.S.? into drill weakness? a that spending get that callout, That's a Europe trying that particularly relative it kind U.K., any geographic Just Was And -- seasonality, to like maybe tied little great. to -- the down maybe Thomas, or of

Andrew Carnie

To to Europe. looking it's we of Europe call. give U.K. market back, of earnings you a is our by very Europe by good quicker a summer we how on We back color, those bit Both lot ahead has, come it benefited forward strongest taken from and of strong followed we're if would anything, say surprise QX little Europe. and a laid regions. the got of out initiatives in our that in U.K. us

and more behind, the out That's slightly menu standard menus. improvements, of a the we're local is that's new America of month. happening lot this lot of a all changes, rolling lot service around the a North

U.K. expecting will across the and great we saw up a we're is what So because of our little America Europe. from bit reaction jump North members that

We've up Bangkok. massively fabulous we with pleased And would plans members. has broadly Hong last our in I Asia start. exceeded closed actually Bangkok We're obviously House say, our super off steady, And year got very, team good to, very the got remains versus Kong. were Bangkok. some around because we've And in a internal

So Asia. we feel good in

Shaun Kelley

material give And going? of but can Because little impact Kong, House question just ball year-over-year pretty on of longer Hong hog -- last the was? on and be, was sorry its just what the latest us size. the believe would maybe a given And the both is how I relative sort reopening, to it maybe bit, that you it's plans the

Thomas Allen

Yes, Shaun.

there. between and visitation membership, XQ So Kong we see in came improve performance. than internal continue budgets. members quarter-over-quarter EBITDA now higher We total X,XXX have to Hong overall over

we're so We're progression. performance, though, giving but not seeing definitely performance. And property individual improved seeing we're

Andrew Carnie

had with there. obviously, are recently member and restrictions. great where Soho for team through a more influx We're Hong were Art to Basel in House we've got event is, a got members, up a We potential now The profits key closed significantly no back the we Yes. revenues lot March showcased because COVID. that. There's doing great We've intakes. a Kong and of we good applications

Kong. pretty feeling we're Hong So good about

Operator

MKM. Your line next with George Kelly ROTH question from of the will come

George Kelly

one more such year-over-year was I first improvement year, a member sure like bit the this there the -- margin. kind it was you you're and will what But what's wondering, you was a this EBITDA look curious in expansion. curious of a just margin. from about margin left? of could And I your I'm there fruit sense you low-hanging opportunity? past on this of doing margin took kind opportunity year, what's there's So year, is -- My talk a if lot of remaining remaining lot pricing. is there if the slow

Thomas Allen

So George. thanks,

flow-through. increasing That high It's to by business think model, a continue you driven number in members pricing. strong increasing and we our when about of be really should membership So see very mix revenues. growth of

significant this as X% think This through to put few revenue. margins expect to about expansion. margins. benefits year, you see guiding so to point, very we're your to flow-through we're membership year, Last But the years, XX%. guiding of high EBITDA continue the as we And that we a margin grow year, to up next we

George Kelly

may I targets? do you margin kind have have any And Okay. medium-term of this, missed

Thomas Allen

the the on there's that then beyond IPO, XX% And about talked think opportunity keep around working we to to term. over around long margins getting to So EBITDA that. we an medium

George Kelly

your And Okay. question Great. me last balance then is for on sheet.

significant now on Is -- the there Any refinancing. sheet? now other what, something Is -- or think, else ones. talked that's saw then? I your the know for I XXXX year the balance to goals between you maturities So anything I do there Miami I had. to, this for and and And are, your all

Thomas Allen

Thanks, George.

to get When we to good our that to then wanted we was going revolving was in facility mortgage February got credit due a to Miami the balance a sheet. on And we had look, had place end. So coming this that company, I XXXX.

extended now the -- we And our revolving to and mortgage so credit facility, XXXX. the X out we've extended

to macro to conservative We be. wanted have cash going know the be on a have balance sheet. to We We the position. where don't is environment conservative and significant like

And I priorities would been so say main had. have and -- our

flow have no this and until cash to we we Andrew this should about year, just of right, turn free about mean to an raise, stress, balance I million the after made revolver. $XX undrawn expect have on $XXX XXXX. sheet, million point cash maturities positive the we'll major

Operator

Steven question Our Zaccone will come from line with Citi. of next the

Steven Zaccone

I member up in Thomas, hand of Great. to seeing commentary from you're wanted you've Could a the of talk lagging that, with the the what that Is that that? on certain upon could just follow bit. just and had, heard you U.K. about hand strength you've visitation changes and offering like food that some some in that regions expand about of spending kind you And activity? beverage members? seen, feedback to the you

Andrew Carnie

I'll I'll take one. on that that -- start

lot of We've nice use more Houses we've a join. often got our seen when new new footfall. members historically increase members. they really in a So The

was have is Houses, our of saying great we seen of is thing. up our Thomas visitations lot go across kind what a that which So a

kind It's is not one was. lower that kind in spend line on static. region with It's stands The out a where of spend. it of

One of increase is spend. that goals to our big

Houses. actually in So need increase we necessarily member footfall. We hold spend our don't to more and footfall actually want

York offerings, like especially bigger a spoke events, which that beverage and the lot doing in our we're and more L.A. our New I why the that's about, our cities London. we So of we've up. Houses on that Houses in seen food And changes, work, member operate on making offerings, what focused done good that we've in plan across we're is our what that's we significant we're -- pretty go And we've made seen spend is Houses. the that all have progress those local, where

based local because We're but would offering. increased on get I feels if happens So more different members the and also New because much in different good. Houses see on a say we we that see have Houses what spend, L.A. focused the menus very visiting demographic, different London is you member now York they

very focused we're that's on. So what

our our -- things as we top because right focused we're that a as about we progress it's quite go we forward spend now. more company as X when on we'll be member in a bit talking So on initiatives, probably

Thomas Allen

quarter. Yes. a with of my follow on our interpret degradation properties. And to the per activity events a was is lot around in people just let want visit. lot the comments don't up we've general, of of me We on there that, just We seen a in going a the fourth saw spend I quarter. In fourth that it strengthening put in

look as past things strong fourth have gone similar to wasn't more as quite It I levels. weeks, the back the X quarter to When quarter. at fourth

I are too deviation to been trend So early and trends. not significant it's of seeing. a These think things had any the kind and macro there's volatile, into try read we around that

Steven Zaccone

Okay. the about should That's the dollars or to to better helpful. of just G&A If expense through continue expected. that. trajectory us we side, help the than so it think for like in balance like the came line that we leverage? think ability to drive year, How of sounds Just shift

Thomas Allen

was we So that yes, seasonally slower quarter, quarter. in the it first knew a

macro really we hirings on environment. teams around We travel, push want on back all company. really as so new held to the expenses the we on watch And the

the Given in businesses and open up should good, has environment so ramp macro XQ, to pretty as seasonally stayed XQ Houses we more G&A.

G&A definitely as as quarter. of be to in be it year. down year was we to remember, percentage the But higher So this revenue, versus quarters this it few would a expect past expect next I just last

Steven Zaccone

is on milestone? that is reach free you'd cash that to a clarification then Okay. just this last flow year, quarter expect Great. certain And there the positive

Thomas Allen

Yes.

about the year, the quarter the generally outdoor our events. more how to benefits The gets EBITDA a through fourth So lot from we've better summer being of what Steve, talked seasonally similar months benefit past utilized. spaces in of from

in fourth business well quarter. Home really Soho the does Our

I to should said be specific free say cash generally quarter reiterated would think expect that a we cash free we this But we the to quarter. and flow I we last flow but haven't follow committed that would path. for year, quarter,

Operator

of from with next William Your comes Sharon line Instructions] the Blair. question [Operator Zackfia

Sharon Zackfia

prior would merge what Soho hoping Friends was that on if decision any that uptick could they're Home Home the Soho touch members Friends program. I and Soho in of the to into now the results in you kind Soho be paying in

Andrew Carnie

Good question.

to think simplify Home. membership you on had Soho was back realized year, HOME+, last SOHO if a So realized, SOHO what valuable, to those our membership. which we and quickly wanted we is called just were we highly members HOME+ And

and So in our into in is Soho decided category our about bedrooms it roll Friends Friends to stay bedrooms. and in the if at really because we is our can membership best-selling because go Soho in and stay good bedrooms basically, they we're think House House, Soho you Home

logical So it them. seemed merge to

Soho highest-value They And engaged. we've business. in now a what members They're high members and Friends they And Home. seen the our travel equate of now Soho really the is Houses. our in are stay and percentage really to our highest-spending can

Friends that's benefited was move it the logical Soho and actually just member. a So us benefited

Sharon Zackfia

change just seeing younger in members. question or And or Are on House that joins then membership demographic? any visitation among members for patterns a spend the you

Andrew Carnie

not No, change. seeing much we're

members And on our other to the to XX continues behave all have. strong our age they all still and program, our new Under regions. through are -- like through members adding very, which be very focused Our demographics young we're just continuing across

within membership. we seen in haven't any our we really what So see normally change

Operator

the I'll And further back remarks. closing this questions over we at time. for have no turn call

Thomas Allen

to everyone, like call. thank just for joining say you, I'd the

you follow-up forward to quarter. any questions, Look reach out. have next to talking you please If

Operator

conclude Ladies for Thank gentlemen, today's call. joining. that you and does all

now may You disconnect.

Soho House & Co (SHCO) 12 May 232023 Q1 Earnings call transcript