Earnings call transcript Q2 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

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 Incorporated Second Quarter 2023 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. Instructions] [Operator

hand to now Financial Allen, call Officer. the will Thomas over Chief I

your may conference. You begin

Thomas Allen

for us name you I’m second and Thank joining the here quarter & Soho I’m our financial Co’s with House Andrew results. CEO. Financial My Chief is Carnie, Allen, today Thomas Officer. to discuss

statements. the represent from Today’s statements uncertainties and involve that or actual to about materially our cause differ results discussion forward-looking contains forward-looking future expectations the risks that beliefs statements events. forward-looking could All

of may described Some that in our are factors such differences the cause SEC filings.

be views statements represent forward-looking News the as forward-looking change. we release, have Any section. found and Events our our and can assume if obligation our By at any only update sohohouseco.com to of should you earnings access to in today, now, views no QX statements which

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

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

hand it Andrew. Now let to me over

Andrew Carnie

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

growth in results of strong further to membership, with be profitability. pleased We’re another quarter set announcing revenues and this

than X% members House. quarter, over of half to we be ahead delighted still a particular, a we’ve past of rise our the are houses more more X,XXX to XXX,XXX, expectations. that the quarter-on-quarter, maturing. XXXX. which second We to increase was and have Soho few are year-on-year years in In in all and opened new since welcomed XX% added part regions have opened Remember, We growing members members of we in houses

Our X,XXX of increase waitlist reached approximately XX,XXX, an quarter-on-quarter.

really grew underpinned QX ‘XX, We’re revenues highly quarter-on-quarter. to appeal increase to which $XXX XX% Total of year-on-year sequential In demonstrates continued strong XX% House year-on-year recurring X% largest Soho growth globally. in and the million, our pleased they the revenues. by membership quarter, our grew since see

Our helped experience spend acceleration improved from initiatives visitation drive the an in-house benefited visit. better above we to member growth saw approximately first mid-teens per XXXX and levels. the sales like-for-like as XX% we in That’s drive from quarter

operational first profitability million. adjusted on we’ve the focus time excellence EBITDA drive in this continues Our to higher time is public, margins. XX% over reached we’ve $XX going EBITDA and million $XX the of first adjusted over QX EBITDA the quarter reached with also Since of

milestones, we results us the these from of deliver positive maintain to built. and operations expect to led flow the proud quarter. momentum we’ve in We’re These stronger cash

the raising performance. we our year in EBITDA reflect of we’re QX, to guidance this As did adjusted results full

metrics. raising our guidance that we membership our and strength performances, of for our midpoint the seeing are also Given house More are membership and revenue in the we later. on

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

continued across and seen in with we’re rolling the the on we’ve our second to pleased results quarter, improve out houses. focus Our initiatives experience member

the strongest growth approximately having both both per in-house our pandemic. to We As U.K. sales visit from and up accelerated spend saw Europe with mid-teens QX. I since quarter in the visitation improved XX% mentioned, XXXX growth the compared like-for-like quarter-on-quarter to and

newer it’s really houses both back. Rome, our great members. our recent All bouncing performance, houses Aviv, and strides Copenhagen, quarter, Europe to really delighting had the a Tel regions’ hitting We’re Paris, particular, Stockholm and and with see pleased their in nice

While data in again, the American these as worth fruit. that traveling approach also U.K. regions, and growth and we we business from initiatives overseas are said to Americans stable. is benefiting suggests were Europe quicker bearing new our noting introduce It’s checking last our remain quarter,

through We’re implementing digital a houses all of seasonal good now made quarter, across every and changes what’s our rhythm with local in channels. of menu all aware being members across new communication

introducing We’ve pop-up variety Mexican-California Scorpios residency at Shoreditch House changes and Beach of House Maya, food by at beverage portfolio also and increase the our breadth restaurant Ludlow experience and House to Little made House, in-house and Malibu. a like Soho Berlin by

increased have benefited sharing have positive been and choice from members Our feedback.

steadily House improving our helped which grow service. in XX,XXX our is core by we strong proposition, to year-on-year have Together, these We’ve to XX% and our uplift training see priority. which new Outside approximately to be sales introduced Soho completed memberships, and a Friends service an members. changes continue growth continue top all memberships driven in F&B profits, across in standards Houses, other

One is area been has openings. which challenging house more

We developers. are delivering time our in seeing projects on delays from

While X we houses, delays X of experiencing year we were after X would that deliver we construction now Soho House with beginning confident at expect the Manchester. to the to open

Soho House QX. Bangkok opened in

planned City open end of House Mexico year. month Soho Portland House and and next through opening Sao are the Soho to is Paulo the

but more year to membership development our adjusted and state mid- EBITDA. global we existing that full revenue than XX,XXX new openings, said, X and offset targets as a increased XXXX the our year-to-date houses still challenge to membership our X House Soho see by and for of remains We our houses new target have current raised That short-term of place. can long-term one for in

second operational Turning priority, excellence. strategic our to

‘XX. as QX quarter, with leveraging QX control discipline XXX teams is second, strategy member efficiently; X third, improving ‘XX of data and and centered basis our points operate here points percentage In basis well wages having scale As our insights approximately wages key in-house the revenues a XX by and as areas: second with a on compared margins; grow. reminder, versus expanding we and First, operational

to a we level points year-over-year that house strong, the going approximately points since margins like-for-like new XX%. seen Overall, This referenced XXX XXX despite be and ‘XX contribution earlier. our up us public, a we’ve versus basis F&B menus out basis quarterly basis our rolling quarter-over-quarter on continue in-house Our QX to testament a highest efforts. margins XXX level is improved to basis on

Our G&A were our with internal line expectations. expenses in

alluded driving to of Latin to will XX% ADR, regions of we G&A expect As to be new up the guided adjusted high we G&A like-for-like for growth America. the and on in significant our to higher deliver leading XXXX earnings year-over-year, business, like XX% leverage in at prior given versus quarter especially in calls, contributed the in our year. properties, We’ve RevPAR continued increasing XXXX. second occupancy EBITDA year-over-year margins to be

great against our quarter initiatives. another all So in operational delivering excellence all,

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

Thomas Allen

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

$XX well main higher We membership trading growth with pricing and Houses, continued on Scorpios in in-house drivers. drove as revenue in million to the sales Home a by growth Strong million, as management a were increase strong especially details Europe revenues in revenues. U.K. other in partnership led million $XX $X saw more growth revenue. Membership revenues. increasing revenue year-over-year, Giving $XX and driven in increase X up our by Soho And and fees. revenues strong million

Our in adjusted continued initiatives the year-on-year million membership up have outlined EBITDA we second was benefited and $XX.X revenue quarter from we million, $XX.X profitability as growth.

for be million. quarter EBITDA of consensus the adjusted $XX Our also

million Now net including We the of quarter cash discussing restricted and our and equivalents, debt. sheet. balance cash $XXX with million $XXX ended of cash

Our restricted Beach close a on hurricane Miami at the cash end of to refinance. our insurance portion QX our mortgage we House of to as self-insure higher had was

that this and given rates the risk, was which hurricane would to We prudent felt season in a have. continue weren’t rise, we do, they thing to interest the

We longer our and the have hurricane this bank cash is now no so incremental insurance secured restricted. back in

we adjusted $X million the $X $X noncash we of million quarter of rent. had taxes had net interest million Offsetting, during cash cash EBITDA and Supporting approximately position, $XX second and in our million of $XX expense, million generated of cash CapEx.

of guidance Moving to XQ to guidance results metrics. XXXX. our has The for confidence strength across us given all raise

least than at increase XXX,XXX expect House at end but the higher prior year-end, and XXX,XXX. members an of We compared over XX% guidance of XXXX from to of our Soho more total

record very seen flows shown application the as We our quarters, strong past have few waitlist. through over

that growth. houses houses Remember, more which their we very have are ramp the They have since of in XX of total XXXX. beginning or still supported has half opened than stronger-than-expected membership much our period, still

ranges midpoints narrowing guidance the We and the EBITDA XXXX revenue metrics. are and of raising our

For $X.X we’ve our million revenues adjusted $X.XX to million. to midpoint the at midpoint at guidance to million at to $X.XX the total $X by billion, $XXX to membership by Total million midpoint EBITDA billion the million. $XXX increased revenues, to million $XXX $XXX and by million $X

a are but by next not driven Manchester XQ. EBITDA on in adjusted XQ the primarily revenue offset benefiting adjusted of increases $X only delay impact guidance material year, does FX EBITDA. by The is stronger-than-expected by million have with Total results till that

second organic unchanged. our half expectations leaving generally we’re uncertainty, macro Given

that, pass to for go I’ll some With Q&A. it Andrew concluding we remarks back into before

Andrew Carnie

we a had by continued on member year. quarter We’ve growth and strong and targets We’ve waitlist. set delivering revenue growing second the underpinned seen the a strong Thomas. Thanks, for

continuing second guidance EBITDA year drive in the this year. a Leading expectations operational us quarter for to are EBITDA excellence ahead increase profitability, adjusted full for our to Our third of initiatives the row. time and was

more year. throughout teams ever our the business. We’ve on on further work and value, I’d thank to our ahead opportunities for than like our and cash We focused growth for globally delivering dedication remain progress driving for we and members confident flow. are all also this made membership hard great their in

that, We hand question, to the questions will take over to With now can first the operator. we please.

Operator

Zaccone comes line with Steven of question go question. your first Our Instructions] [Operator Please the ahead Citi. from from

Steven Zaccone

Great. to sounds is congrats America their of the little you Good best the talk because the improvement I North gave like on bit morning. guess about It and you was and Europe my could stable. quarters. Thank more some U.K. a had you question taking I business that Continental commentary for curious if here.

made in to America? the How you how still are work visit have you’ve there member houses particular by and changes that of And any have stuff in is like per some So feel do? North members? spend with received regarding menus trending where you been

Andrew Carnie

Andrew. it’s Steven,

overall think, demand. should I our of start, me Let I view you give an

really demand, all-time are and across F&B, seen high. waitlist bedrooms we’ve our So strong And events.

in mentioned I So continued footfall which to nicely prepared has comments. grow my spend, with

have Yes, Europe UK our It’s and good the see high initiatives nice been and a paying lot of off spend to new us. quarter. for very driving in

that seen in have We America. North

has and the America on North All menus the changes are saw improvements well. So in increased place. local

Service June we’re seeing was which June, traction, always July starting in QX. drives and If in I and regions the all strongest America. year-to-date talked as is about. to line across of And with our is we’ve improve month North member also that think gain spend, growth trends

is North But Malibu, like traction well. improving, Californian-Mexican putting concept, changes really America. houses. about in really the some the into much a North my Scorpios worked America feeling I we’re comments, Malibu we’ve is of nice on Maya positive in said general, We’ve in standouts had in more our put in few which So has done are

Steven Zaccone

Okay. Great.

topic on is hit the I Home business. wanted to other The

So discretionary expectations challenging. despite a exceeding the being spending for big-ticket it bit to still seems be backdrop

maybe how over us raised your just outlook give today where Soho this is think Home refresher and large you for can go have you a year? So it it time? And

Andrew Carnie

Steven. question, Good

It’s So in we’ve to past. year. it It you really than this particularly again RH Soho you – and in continue other expectations. nicely with does growing Home folks. much the hear obviously home other more of the is talked exceed folks what industry,

year within Soho and experience. are this member very on focused improving profits Home We

our where because kept they example, members bathrooms launched to could first our find bathrooms. For asking collection members, we’ve our just us our

exciting. talk big to super going that’s not how I’m is just So it yet. about

got year it’s business. growth think until I of start we another really articulating that

for strong and – really interiors it’s Soho it’s our House. yes, again, And by But us.

to So asking continues and members is everything Home to what and do nicely. us at our it on grow it’s Soho based do, them really are delight we

Steven Zaccone

detail. for Thanks the Great. all Take care.

Operator

you. Thank

the line from with Blair. Our next William comes go question from Sharon ahead question. Zackfia your of Please

Sharon Zackfia

can over breaking a the you as for kind talk years. others I there’s ‘XX that properties Thanks the the of Hi. like with regionally? taking well as looks by opening it House complexity question. down what appreciate for maybe pipeline you lot even few been ‘XX? about past But focus is for new of And and the where

Andrew Carnie

to great from you. Sharon, Sure. hear

it, important, X opening X is for houses So have if of membership the about to pipeline growth do But is to new us retention. future. great and most foreseeable you think and a what we matters

proud of the in we this quarter. existing really We’re houses welcomed our members

We’ve XX and houses seeing in fantastic what delivered since And revenues. their a maturation that really of increase they’re you’re We’ve lot now ahead are historical stride them is XX% of opened membership hitting XXXX. curve.

and think, our obviously, that. houses we of we I membership, business, focus are So on a are membership part

heard obviously on expensive supply labor other availability. today, from that environment. a issues, Regarding developers It’s are recently. chain And suffering earnings more you’ve finance

Granada prerecorded because built XXXXs, it’s as developers go work, an – and buildings. we my comments, because just you structural taking it’s got did building. longer a because expensive It the did I in to want the Manchester bit about in renovating it we bit studio are was historical a know, more in I talk little

We’re not new builds.

lumps sometimes, the we way have and And along on bumps that. some

It membership And impacted the applications. So hasn’t is key. well is progressing that the project now. again,

grow, So ahead Manchester. applications our of on expectations actually continue actually, our to membership

this the X locked continue that’s that’s get year. do we we at So to terms. to we X moving favorable only years, X about a have think the pipeline next one If

haven’t changed. terms our So

terms and We’re have. still asset light that we the favorable

and more some across the London in And growth like Asia. in U.K. in we Europe, regions growth here grow the continue North to further of outside key some America

So that lumps just we’re hasn’t and that managing. a changed. small few bumps There’s

Sharon Zackfia

most systematic you’ve know they anecdotally do there’s members there’s done guess Where either I a improve fashion. forward? member most think where lot experience. I going to improve And more do to the to think the been talk in you the members still when a or opportunity improvement?

Andrew Carnie

Yes.

improved And our one across our is things we of that So months the of wanted all we one recently food they’ve six did us is surveys do. in really last another noticed members. what the really they which to

food our in the on in on that our more app, houses noticed becoming noticed offers, communications, different more they’ve we’ve digital becoming improvements events. they’ve So channels, made local, offering our seasonal, there’s different in

events. We’ve got and Coachella a did lot recently our more choice members for in Festival. House We our

focus that So they continue to service. are The we that really one things we’re to on the seeing improve area focused is on. really

our we’ve going across next service, – of to So service, Member around service largest the improving the a speed introduced lot called of our service, X be of quality XX the based months improving and new a houses, is just role of friendliness service Host. of our

We enjoy, So we We them this But about notice I then come and and them members help really we’ve to a service. lot really better the member’s when our we get really a way. them a things next more houses. focus is definitely We of the our friendly for new lot table. next role can into talked months really, the greet them have a would them so is a six in houses, in on experience drink. know a that now say take about the

Sharon Zackfia

you. thank Okay,

Operator

you. Thank

of from next ahead Please Stephen with Morgan your go comes Our question question. the Grambling line from Stanley.

Stephen Grambling

guess, of inflection. why like actually accelerate? thanks. a build, like much kind more with house the on Maybe it growth house the optionality may Do operations you you’re even road? be the cash cadence I Hey, actually year, you providing positive follow-up from down seems this a balanced build. of hitting feel rate have It this having lower

Andrew Carnie

question, Stephen. Great

one. Let Thomas answer that

Thomas Allen

Stephen. Thanks,

to you if that these few are years. over think past about obviously, committed the pipeline, projects So our we’ve

A want being got locked couple couple really guidance in was our out quarters slowed what’s of trying of we really years we members be deals, delivered generate be and the ROI. And aggressively for to wanted could go highest because picky find to just historically. what the around new and we our and to ago, didn’t next in so for looking what best

have growth. on deliver Andrew to our We highlighted pipeline, as good to earlier, continue a

mean And deliver we that dealing pipeline broad have we’re going to construction embedded. macro we delays. so with the are I

we on impact year. an many having is how deliver that can this so And

Stephen Grambling

And quick a then clarification a as follow-up.

core your said is think, but caught the I think this I guidance, I in remarks, you unchanged.

about a you that than bit FX puts by it to like I can million in moved and maybe doesn’t a translation line? the which increase takes Is think it’s more the little – I in through there. that terms like kind EBITDA. color looks a of $XX saw of flow provide like just the bottom issue any fully And

Thomas Allen

Yes.

We the million. $XX from was when house a So FX, about year a almost million by directly that updated million about by the we $XX on range offset the for the think and $X from delays. had of we midpoint guidance, revenue benefit guidance impact

we’re million for And line. top upgrading by the on $X year so our guidance the

guidance that we about midpoint raised organic improved $X About that On $X was trading. $X EBITDA, of and million. by the of our million million was FX, of

seeing not terms big the year. performance of benefiting a for house in impact way our the from We’re

Stephen Grambling

Thank you. helpful. Super

Operator

you. Thank

Our ROTH the next ahead from George Kelly go question with comes from question. your Please of line MKM.

George Kelly

for congrats Hey, on my questions strong Thanks really and quarter. a taking everyone.

curious, or So of You really to topic sequentially and the prepared drivers? questions improvement bunch improvement? that margin in driving I but in I there contribution level remarks, most could two that was A, year-over-year. what whole the meaningful as there that. mentioned being biggest two you stuff margin, one first isolate your a on things I were are your is cover guess, house nice wanted just

yet initiatives excited play bring on out contribution you’re higher another And sort margin? of the same then question that those could second us And what is, about? to topic of have like

Andrew Carnie

a initiatives on the on membership to doing is team out, containing good the down our Look, improving you. falls we laid from ensuring F&B. hear profits, margins that job to costs, great George, delivering

week delivering very out, we at of which week consistent beginning been that in, the articulated on going just we’ve to do we were year. is what the So

The be on delivering because continuing our reducing costs those as margin, through improvements things excited that on within for consistent there’s for we look is months us. as I’m good about most on our we XX grow, managing there some next G&A to the F&B, really opportunities on

So our core on really very cost continuing the structure focused be of we’re to managing well. just

George Kelly

does pricing a Curious, then I’m waitlist, I tell it that growing And to for waitlist, broad you? other Or waitlist. give or know, future? does question. contemplated offerings don’t the curious, all on you guess, it question I the And your take you alternative – confidence ways monetize there? in second what Okay. are to like, that’s on that’s what it’s And lot more had. folks like just there the being through membership anything I

Andrew Carnie

Look, new we than do love nothing houses. welcoming we what our better into It’s members best.

We very regions. a most applications, over all in strong are our year across the seeing

Aviv. super gain They’re We’re some like and Rome local Paris with really of with Nashville the membership. starting really, pleased and and the Tel houses newer Austin and to momentum

really think if our So membership, that and our driving – we key recurring that’s delivering our for revenues metrics one growth. XX% that about retention of and strong, remains

exceptional. continue be Our levels to application

worked So hard on, that in we really that’s especially something obviously regions. our newer

So Soho there’s a joining lot appetite for of House.

not yet. this about We’re pricing year thinking

existing we increase members increase reminder, existing member at of year, higher than the did beginning new members. a As this inflation. below was for The pricing

thinking we’re not that waitlist. about really And monetizing

them just in our our really the when our they’re quarter. membership, obviously, on saw and grow, that retaining in we’re have numbers you some We growing focused houses. our delighting continues trends, members and But those trends to

Thomas Allen

we’ve price would add, X years, but years, for most the outsized past COVID, historically, during we just we’ve increases. then increased didn’t, I had prices

always year. we – the at increasing every have prices look always we So

make end the an assessment the at year. looking environment of so the it’s at And we’ll macro

George Kelly

you. Thank Gotcha.

Operator

Thank you.

the line Our your Joe ahead of next go with question. Please JPMorgan. question from Greff from comes

Joseph Greff

see know talked question Hello, delayed? in XXXX? House Would year I thinking similarly extensively that in I on originally you you planned the everyone. growth to that year? How are are XXXX the Or houses have pipeline, Andrew, on about an it. you above-average houses do had in delays also you open benefiting from you say a actually next and the

Andrew Carnie

X Manchester plan XXXX. moves Joe. All for the to In into and short no. year, the X current answer, still plan next is of right,

We have throughout There’s any not thus the nice that in pacing movement far. year. seen a

change So the right my is seeing Manchester. prepared now the comments, – in like only I we’re said

of out And years. that’s got year we’re there’s each macro working very have reiterating we’ve to why but X still our we’re and a challenges, X for X to fantastic planned with deliver the them. focused, And just next the we that team yes, lots partners

Joseph Greff

spiked up in question increases? it’s driving last by next margin over memberships is up up the what’s driving a function quarters. total annual Is percentage that? absolute and of terms, just a My count X wide Great. that Or also the and as dual frozen that? it’s of What’s member a

Andrew Carnie

Candidly, no, it’s actually normalizing.

So changes, part move, frozen from healthy of we members always it’s be we members. what their a our flexible super below have are us they It’s total do, member members. with X% of changes. It’s for situation it life to family

I that’s able it’s real value freeze. think membership add to being So of a

think you still if levels frozen. And we’re pre-COVID on below

not even to before COVID. where we’re used So be we

It’s frozen. our want our about concerned embrace not when were it we and members, always we freeze. a benefit members So to to

Thomas Allen

just percentage we add after the people of during a a members. be in freeze. there’s number saw in frozen remember, I’ll Obviously, going that spike to Joe, big COVID, pause

we’re we’re pre-COVID I point, X% – Andrew’s and think normalizing that we’re that sub-X% average. on still and then think to I happy so we’re very And around still we’re

Joseph Greff

you. Thank

Operator

you. Thank

comes the question of next Our with of ahead America. Please line Hoover Bank from go Julie question. from your

Julie Hoover

this my Other thank quarter. healthy revenues Hi, for taking you were really question.

on Home strength how is else And You can Scorpios Soho you’re But that you doing discuss segment? in where touched this summer? already. seeing specifically,

Andrew Carnie

Sure.

have me question. that Let answer Thomas

Thomas Allen

segment. than seeing revenue year. well, continue Remember, Neds X we’ve also focusing we good Management said, there. Soho performing on see have They’re in fees despite we’re profit to we strong as – So to there, continued continue growth at had have we organic to us and really Home that strong last more added even good growth Andrew growth grow.

Scorpios year-over-year. is growing

townhouses continue that bit with I’d performing trends. strong RevPAR then growth hotels are finally, very Mykonos heard softer, to We the but see we they’re are strong there. Remember, have our restaurants, those so is from highlight market anecdotally benefiting and a well. And really little that

Julie Hoover

Okay, great. Thank you very much.

Operator

at appear no Thank this you. I’ll remarks. Thomas Allen to for questions back time. to the further hand now concluding There call be

Thomas Allen

any to after you, you for Results Please again you today. Third Thank reach the forward follow-up if We call our all questions. everyone, out look Quarter talking joining to have

Operator

Thank you. you does call. This conclude conference participating. today’s for Thank

You may now disconnect.

Soho House & Co (SHCO) 11 Aug 232023 Q2 Earnings call transcript