Soho House & Co Inc. Announces Second Quarter 2023 Results

LONDON–(BUSINESS WIRE)–$SHCO #sohohouse–Soho House & Co Inc. (NYSE: SHCO) (“SHCO,” “Company,” “we” or “our”), a global membership platform that connects a vibrant, diverse, and global group of members, today announced results for the second quarter ended July 2, 2023.

Second Quarter 2023 Highlights

• Total Members in the second quarter 2023 grew to 248,071 from 237,961 in first quarter 2023 and by 28.3% year-over-year
  • Soho House Members grew to 176,305 from 168,685 in first quarter 2023, and 23.9% year-over-year
• SHCO Membership waitlist now sits at an all-time high of approximately 95,000 and retention rates continue around pre-pandemic levels
• Total revenues of $288.9 million, 18.5% year-over-year growth
• Membership revenues of $89.2 million increased by 35.4% year-over-year, accounting for 30.9% of Total revenues
• In-House revenues grew to $125.5 million up 14.4% year-over-year
  • Revenue Per Available Room (“RevPAR”) was 13% higher year-over-year on a Like-for-Like basis
• Net loss attributable to Soho House & Co Inc. was $2.6 million or $0.01 per share
• Adjusted EBITDA was $31.8 million, up $16.4 million from second quarter 2022
• Plan to open new Soho Houses in Mexico City, Portland and Sao Paulo through the end of the year, Manchester delayed until 2024

“We delivered another strong quarter of results with good membership growth and the highest quarter on quarter increase in our waitlist since Q1 2022, demonstrating the continued appeal of our membership. Total revenues grew by 19% year-on-year, underpinned by growth in recurring membership revenues, and Adjusted EBITDA more than doubled, supported by 11% margins,” said Andrew Carnie, CEO of Soho House & Co.

“These second quarter results, as well as confidence in the outlook, lead us to increase our annual guidance for membership, Total revenues and Adjusted EBITDA. I couldn’t be prouder of our teams as they continue to grow and enhance the experience for our members, whilst operating efficiently and leading us towards greater profitability.”

Summary of Financial Results for the Quarter Ending July 2, 2023

The following selected expenses listed below are not added back in Adjusted EBITDA:

We delivered the following highlights against our strategic priorities in the second quarter

1. Grow and Enhance Membership
   • Membership continues to reach new highs benefiting from a record waitlist and continued high retention rates
   • Soho House members grew to 176,305 from 168,685 in first quarter 2023, and 23.9% YoY
   • Focused rollout of new initiatives has improved member experience leading to elevated performance across Houses
   • Expect to deliver 4 new Soho Houses in 2023, in Bangkok (opened in February 2023), Mexico City, Portland, and Sao Paulo
2. Operational Excellence to Drive Profitability
   • We achieved second quarter 2023 Adjusted EBITDA of $31.8 million, an increase of $16.4 million compared to second quarter 2022
   • In-House revenues grew to $125.5 million in second quarter 2023, up from $109.7 million in second quarter 2022
   • Like-for-like F&B margins at our Houses rose 240bps vs. second quarter 2019
   • Focus on driving accommodations performance resulted in 13% RevPAR growth in second quarter 2023 vs. second quarter 2022 on a Like-for-Like basis

Membership Summary for the Quarter Ending July 2, 2023

Memberships

• Total Members grew to 248,071 from 237,961 in first quarter 2023 and by 28.3% year-over-year
• Total Soho House Members grew to 176,305 from 168,685 in first quarter 2023, as retention rates remained strong, alongside membership intakes in both new and existing Houses
• Frozen Members was 3,411 at the end of second quarter 2023. Frozen members as a % of total membership is below pre-pandemic levels
• Other Memberships including Soho Friends and Soho Works increased to 71,766 members, an increase of 2,490 from the end of first quarter 2023 and a 40% increase year-on-year. In August 2022, we merged our HOME+ members into Friends members to enhance the value for HOME+ members while increasing our share of wallet

Financing

• Soho House & Co Inc. ended second quarter 2023 with Cash and cash equivalents and Restricted cash of $177 million
• In second quarter 2023, the Company closed on a new $140 million mortgage on its Soho Beach House property in Miami at 6.99% and paid down its existing $117 million loan outstanding on the property

Updated Fiscal 2023 Guidance

The following forward-looking statements reflect our current expectations as of today, August 11, 2023:

Conference Call and Webcast:

A conference call and live webcast will be hosted to discuss these results on Friday, August 11, 2023, at 9am EDT / 2pm BST.

A live broadcast and accompanying presentation will be available at www.sohohouseco.com.

To listen to the live conference call via telephone, please dial:

USA

New York (646) 307 1963

USA & Canada Toll-Free (800) 715 9871

UK

London +44 (0)20 3481 4247

UK Toll-Free +44 (0)800 260 6466

Conference ID 7726968

A replay of the webcast will be available on our website following the call for up to 90 days.

Non-GAAP Financial Measures

This presentation contains certain financial measures, including Adjusted EBITDA, House-Level Contribution and Margin, Other Contribution and Margin and certain financial measures presented on a Constant Currency basis that are not required by, or presented in accordance with, accounting principles generally accepted in the United States of America (‘GAAP’). We refer to these measures as ‘non-GAAP financial measures.’ We use these non-GAAP financial measures when planning, monitoring and evaluating our performance. While we believe that these non-GAAP financial measures are useful in evaluating our business, this information should be considered as supplemental in nature and is not meant as a substitute for revenues or net income (loss), in each case as recognized in accordance with GAAP. In addition, other companies may calculate one or more of these measures differently, which reduces the usefulness of any such measure as a comparative measure. See below for a definition of these non-GAAP financial measures and a reconciliation to the most directly comparable GAAP financial measures.

We provide earnings guidance using both GAAP and non-GAAP financial measures. A reconciliation of the Company’s Adjusted EBITDA guidance to the most directly comparable GAAP financial measure cannot be provided without unreasonable efforts and is not provided herein because of the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations, including adjustments that are made for future changes in foreign exchange and the other adjustments reflected in our reconciliation of historical non-GAAP financial measures, the amounts of which, could be material.

The information in this presentation should be read in conjunction with our Annual and Quarterly Reports on Form 10-K and Form 10-Q and other information that we file with the SEC. The reconciliations of non-GAAP financial measures are an integral part of the information presented herein. You can access these documents on our website, www.sohohouseco.com, free of charge, as well as any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. The information contained on our website is not incorporated by reference into, and should not be considered a part of, this presentation.

In addition, the SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers, including the Company, that file electronically with the SEC at www.sec.gov.

The non-GAAP financial measures we use herein are defined by us as follows:

ADJUSTED EBITDA. Adjusted EBITDA is a supplemental measure of our performance. Adjusted EBITDA is defined as Net income (loss) before Depreciation and amortization, Interest expense, net, Income tax (expense) benefit, adjusted to take account of the impact of certain non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These other items include, but are not limited to, Gain (loss) on sale of property and other, net, Share of loss (profit) from equity method investments, Foreign exchange, Share of equity method investments adjusted EBITDA and Share-based compensation expense. We believe that Adjusted EBITDA is an appropriate measure of operating performance because it eliminates the impact of expenses (income) that do not relate to ongoing business performance.

HOUSE-LEVEL CONTRIBUTION AND MARGIN. House-Level Contribution is defined as House Revenues less In-House operating expenses, which includes expense items such as food and beverage costs, labor costs, variable overheads and fixed costs, such as rent. It does not reflect the impact of depreciation, amortization, impairment, gain or loss on sale of property, or general and administrative expenses. House-Level Contribution Margin is defined as House-Level Contribution as a percentage of our House Revenues and is a key determinant of our performance and profitability and our return on the investment we make in each of our Houses. Given that all costs associated with providing our members with the Soho House experience, including the costs associated with maintaining our Houses and providing services to members while in the Houses, are included in In-House operating expenses, we use House Revenues (inclusive of House Membership Revenues) in calculating House-Level Contribution and House-Level Contribution Margin to assess the overall profitability of our Houses. Accordingly, our management considers House-Level Contribution and House-Level Contribution Margin to be an important management measure to evaluate the performance of each House, and growth in aggregate House-Level Contribution allows us to leverage our general and administrative costs and improve overall profitability.

OTHER CONTRIBUTION AND MARGIN. Other Contribution is defined as Other revenues plus Non-House Membership Revenues less Other operating expenses, which includes expense items not related to the operation of Houses, such as labor costs, variable overheads and fixed costs, such as rent. It does not reflect the impact of depreciation, amortization, impairment, gain or loss on sale of property, or general and administrative expenses. Other Contribution Margin defined as Other Contribution as a percentage of our Other revenues and is a key determinant of our performance and profitability and our return on the investment in our non-House business. Our management considers Other Contribution and Contribution Margin to be an important management measure.

CONSTANT CURRENCY. Some of our financial and operational data that we disclose in this release is presented on a ‘constant currency’ basis to isolate the effect of currency changes during the period. Where we refer to a measure being calculated in ‘constant currency,’ we are calculating the dollar change and the percentage change as if the exchange rate that is being used in the current period was in effect for all prior periods presented. We believe that this calculation provides a more meaningful indication of actual year over year performance and eliminates any fluctuations from currency exchange rates.

While we believe that these non-GAAP financial measures are useful in evaluating our business, this information should be considered as supplemental in nature and is not meant as a substitute for revenues or net income (loss), in each case as recognized in accordance with GAAP. In addition, other companies may calculate one or more of these measures differently, which reduces the usefulness of any such measure as a comparative measure.

A reconciliation of Net loss to Adjusted EBITDA for the 13 weeks ending July 2, 2023 and July 3, 2022 is set forth below:

1. See “Non-GAAP Financial Measures” for an explanation of our constant currency results.
2. Primarily driven by an increase in non-USD denominated working capital as a result our foreign growth, foreign exchange volatility impacting our non-USD debt and working capital.
3. Beginning on March 14, 2020, due to the COVID-19 pandemic, we issued membership credits to active members of our closed Houses to be redeemed for certain Soho Home products and services. Membership credits were a one-time goodwill gesture, issued as a marketing offer to active members. The expense represents our best estimate of the cost in fulfilling the membership credits.
4. Represents an out-of-period adjustment correcting an error with respect to the estimation of the operating lease liability identified during the 13 week period ended July 3, 2022 but relating to the 13 week period ended April 3, 2022 and fiscal years 2022, 2020 and 2019. There is no material impact from the correction of this error to previously reported periods.

A Reconciliation of Operating loss to House-Level Contribution & Other Contribution for the 13 weeks ending July 2, 2023 and July 3, 2022 is set forth below:

Condensed Consolidated Statements of Operations for the 13 weeks ended July 2, 2023 and July 3, 2022:

Key Performance and Operating Metrics Evaluated by Management

In assessing the performance of our business, we consider a variety of operating and financial measures. These key measures include:

HOUSE MEMBERSHIP REVENUES. House Membership Revenues are comprised primarily of annual membership fees and one-time legacy registration fees from Soho House members which are amortized over 20 years. The one-time registration fee is no longer applicable to new members admitted from April 4, 2022, see House Introduction Credits below.

HOUSE INTRODUCTION CREDITS. New members admitted from April 4, 2022 have been required to purchase House Introduction Credits as part of their membership, per the House rules. House Introduction Credits are credits of an equivalent value to cash within Houses and are redeemable to purchase food and beverage items, and bedroom stays, at the Houses. House Introduction Credits expire after the first three months from the date of issuance, where legally permitted in the regions we operate, if not utilized or if the Company terminates a member’s House membership. House Introduction Credits are recognized upon issuance as deferred revenue on our consolidated balance sheets. Revenue from House Introduction Credits are recognized as In-House revenues when redeemed by members, and as breakage revenue within Membership revenues upon expiration or in the period that we are able to reliably estimate expected breakage to the extent that they are unredeemed, are recognized.

IN-HOUSE REVENUES. In-House revenues include all revenues realized within our Houses, including food and beverage, accommodation and spa products and treatments.

HOUSE REVENUES. House Revenues is defined as House Membership Revenues plus In-House revenues, less Non-House Membership Revenues. Our management views House Membership Revenues and In-House revenues as interrelated and their aggregation as important in tracking House performance. Although there is no minimum spend for any member on In-House offerings, nevertheless in practice most members consume food and beverage, accommodations and other offerings at our Houses. The pricing of our In-House offerings is reflective of the fact that the significant majority of In-House offerings that generate In-House revenues are consumed by members who also pay a membership fee in relation to that House, with pricing of such In-House offerings being identical for both members and non-members.

NUMBER OF SOHO HOUSES. The number of Soho Houses reflects the total number of Soho Houses in operation in any period, irrespective of whether each House is (i) controlled by us, (ii) operated through a non-controlling interest in a joint venture or (iii) operated through a management contract.

We review the number of members from all Houses to assess new member growth, total House Revenues, and House-Level Contribution.

TOTAL MEMBERS. Total members is defined as Soho House members plus Other members.

NUMBER OF SOHO HOUSE MEMBERS. Our Soho House membership model is an integral part of our business and has a significant impact on our profitability and financial performance.

Contacts

Investor Relations
ir@sohohouseco.com

Media and Press
press@sohohouseco.com

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