Core Viewpoint - Bleichmar Fonti & Auld LLP is investigating Soho House & Co. Inc. for potential breaches of fiduciary duty by its board of directors and controlling stockholder, Ron Burkle, due to concerns over a third-party acquisition offer that may undermine minority stockholders' rights [1][4]. Group 1: Investigation Details - The investigation is prompted by Soho House being controlled by Ron Burkle and the Yucaipa Companies, which hold 62.3% of the voting power, allowing them to influence corporate actions without minority stockholder approval [2][3]. - A third-party consortium has offered to acquire all outstanding shares of Soho House for $9.00 per share, contingent on Burkle and Yucaipa rolling over their equity interests, raising concerns about conflicts of interest [3][4]. Group 2: Concerns for Minority Stockholders - There are serious concerns that the sales process may not yield fair value for minority stockholders, as the board may favor the interests of controlling stockholders [4]. - The lack of indication that the acquisition offer requires approval from a special committee or minority stockholders suggests that their rights may be overlooked in the transaction [3][4].

Core Viewpoint - Bleichmar Fonti & Auld LLP is investigating Soho House & Co. Inc. for potential breaches of fiduciary duty by its board of directors and controlling stockholder [1]. Group 1: Investigation Details - Soho House is primarily controlled by Ron Burkle and his affiliated companies, the Yucaipa Companies, which hold 62.3% of the total voting power of the Company's stock [2]. - A third-party consortium made an offer to acquire all outstanding shares of Soho House for $9.00 per share, contingent upon Burkle and Yucaipa rolling over their equity interests [3]. - Concerns have been raised regarding conflicts of interest that may undermine the rights of minority stockholders, as the offer does not appear to require approval from a special committee or minority stockholders [3]. Group 2: Potential Issues - BFA believes the sales process managed by the board may not ensure fair value for minority stockholders, potentially favoring the interests of controlling stockholders [4]. - The investigation aims to determine if the directors, officers, and controlling stockholders are breaching their fiduciary duties by conducting a sales process that disadvantages minority stockholders [4].

Group 1 - Soho House & Co (NYSE: SHCO) announced its quarterly results, which included confirmation of a buyout offer, leading to a nearly 50% increase in the company's share price in one day [1] - The significant appreciation in share price indicates strong market reaction to the buyout offer, reflecting investor confidence in the company's future prospects [1] Group 2 - The company operates with a focus on diversification across different investment portfolios, emphasizing the importance of having separate strategies for income, growth, and options plays [2] - The investment philosophy includes a long-only approach, avoiding short positions, and utilizing various options strategies such as covered calls and iron condors to manage risk and enhance returns [2] - The analysis and writing focus on stocks and funds that the company owns or plans to own, ensuring alignment with investment goals [2]

Financial Data and Key Metrics Changes - Total revenues for Q3 2024 grew 14% year-on-year to $333 million, accelerating from 3% growth in Q1 and 5% in Q2 [25] - Membership revenue rose 17% year-on-year to $107 million, while in-house revenues increased by 5% and other revenues grew by 22% [25] - Adjusted EBITDA for Q3 was $48 million, up 38% year-on-year, with margins increasing approximately 250 basis points year-over-year [28] - Net income was positive in the quarter, improving from a loss of $49 million in Q3 2023 [17] Business Line Data and Key Metrics Changes - Membership demand continued to grow, with 4,000 new members added, bringing the total to approximately 208,000 globally [12] - In-house revenues saw a slight year-on-year growth of 5%, with like-for-like sales growth in the UK, Europe, and the rest of the world, while North America lagged slightly [14][27] - House level contribution increased by $9 million or 17% year-on-year, with house level margins up approximately 150 basis points to 28% [26] Market Data and Key Metrics Changes - Like-for-like in-house revenues for the quarter improved slightly year-on-year, contrasting with flat growth in Q2 [27] - Europe and the rest of the world experienced the strongest like-for-like growth, followed by the UK, while the Americas saw a slight decline [27] Company Strategy and Development Direction - The company continues to focus on growing and enhancing membership and operational excellence to deliver greater profitability [11] - A strategic review was initiated to enhance shareholder value, with a third-party consortium offering $9 per share, which the Board is currently evaluating [8][9] - The company is investing in back-of-house operations and technology, including a new cloud-based ERP system to improve efficiency and scalability [30][31] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a choppy revenue environment but emphasized strong membership revenue as a stabilizing factor [16][40] - The company is tempering expectations for in-house and other revenue due to weaker demand trends observed in late 2024 [38] - Despite challenges, management remains optimistic about membership loyalty and growth, which are foundational to the business [40] Other Important Information - The company ended the quarter with $147 million in cash and cash equivalents and $686 million in net debt, with a net debt to adjusted EBITDA ratio of 5 times [36] - The company has revised its total revenue guidance to approximately $1.2 billion, down from a previous range of $1.2 billion to $1.25 billion [38] Q&A Session Summary Question: Can you discuss the guidance change and the $21 million reduction in EBITDA? - Management indicated that about half of the guidance change is due to one-time factors and does not expect to recur [47][51] Question: What were the notable differences in like-for-like sales by region? - Management noted a slowdown in the UK and US in October, with a bounce back in November, while Europe remained consistent [53] Question: Can you elaborate on the strategy behind the opening of Mews House? - The company is pleased with the success of Soho Mews House and is considering similar elevated houses in New York and Ibiza [54][56] Question: What is the timeline for clarity on the strategic alternatives? - Management refrained from commenting on the specifics of the offer and timeline for the review [61] Question: Have you seen an uptick in bookings post-election? - Management reported a positive trend in bookings for Q1 2025, particularly in Bodrum, indicating a recovery in demand [64] Question: Will 2025 be an investment year due to ERP initiatives? - Management confirmed that 2025 will involve continued investment in ERP, with expectations for improved efficiencies and flow-through thereafter [72][74]

Earnings Performance - Soho House reported break-even quarterly earnings per share, compared to the Zacks Consensus Estimate of a loss of $0.01 and a loss of $0.22 per share a year ago [1] - The quarterly report represents an earnings surprise of 100% [2] - Over the last four quarters, the company has surpassed consensus EPS estimates once [3] Revenue Performance - Soho House posted revenues of $333.37 million for the quarter ended September 2024, missing the Zacks Consensus Estimate by 0.37% [3] - Year-ago revenues were $300.96 million [3] - The company has topped consensus revenue estimates two times over the last four quarters [3] Stock Performance - Soho House shares have lost about 31% since the beginning of the year, compared to the S&P 500's gain of 23.1% [5] Earnings Outlook - The current consensus EPS estimate is $0.03 on $329.45 million in revenues for the coming quarter and -$0.38 on $1.23 billion in revenues for the current fiscal year [9] - The estimate revisions trend for Soho House is favorable, translating into a Zacks Rank 2 (Buy) [8] Industry Context - Soho House belongs to the Zacks Internet - Software industry, which is currently in the top 13% of the 250 plus Zacks industries [10] - The top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1 [10] Peer Comparison - Penguin Solutions, Inc (PENG) is expected to post quarterly earnings of $0.40 per share, representing a year-over-year change of +66.7% [11] - The consensus EPS estimate for Penguin Solutions has been revised 25.8% lower over the last 30 days [11] - Penguin Solutions' revenues are expected to be $317 million, up 15.6% from the year-ago quarter [12]

Financial Performance - Total revenues for Q3 2024 reached $333.4 million, representing a 13.6% year-over-year growth from Q3 2023[3]. - Adjusted EBITDA for Q3 2024 was $48.3 million, up $13.2 million from Q3 2023, with an adjusted EBITDA margin of 14%[3][5]. - Net income for the 13 weeks ended September 29, 2024, was $718, a significant improvement from a net loss of $(48,433) in the same period last year[20]. - Total revenues increased to $333,368, up 14% from $293,387 in the prior year[27]. - Adjusted EBITDA rose to $48,281, reflecting a 38% increase compared to $35,055 in the previous year[20]. - Operating income for the quarter was $37,884, compared to a loss of $(27,386) in the prior year[24]. - The company recognized $14 million in impairment losses on long-lived assets, primarily related to Soho Works North America[20]. - General and administrative expenses increased by 12% to $39,672, compared to $35,564 in the previous year[24]. Membership Growth - Membership revenues increased to $107.4 million, a 16.7% rise year-over-year, accounting for 32.2% of total revenues[3]. - Total members grew to 267,494, up 4.8% year-over-year, with Soho House members increasing to 208,078, a 13% year-over-year growth[3][6]. - The membership waitlist remains at approximately 111,000, indicating strong demand[3]. - The number of active users on the SH app increased to 212,993, up from 187,759 year-over-year[6]. Revenue Breakdown - In-House revenues increased to $120,658, up 5% from $115,223 in the previous year[27]. - Other revenues reached $105,316, a 22% increase compared to $86,115 in the same period last year[27]. - Membership revenues for the fiscal year were $272,809,000, unchanged from previous reports, indicating stable membership performance[41]. - In-house revenues increased to $427,209,000 after adjustments, showing a growth of 0.1%[41]. Financial Adjustments and Misstatements - The Company identified misstatements resulting in an understatement of net loss of $5 million in Fiscal 2022 and $7 million in Fiscal 2023, with additional impacts in Q1 and Q2 2024[31]. - Misstatements related to Soho Home sale transactions led to an understatement of net income by $2 million in Fiscal 2022 and less than $1 million in Fiscal 2023[32]. - The Company recognized an overstatement of Other revenues by $6 million in Q3 2023 and Fiscal 2023 due to incorrect revenue recognition practices[32]. - Adjustments to the income tax expense resulted in an overstatement of $4 million in Q1 2024 and $5 million in Q2 2024, cumulatively impacting net income by $9 million[32]. - The Company has determined that the misstatements did not result in material misstatements for previously presented financial statements but will impact the consolidated financial statements for the 52-week period ending December 29, 2024[34]. Operational Improvements - The company is implementing a new ERP system to enhance internal controls and support strategic growth initiatives[29]. - The ongoing remediation plan includes enhancing accounting staff skills and increasing the number of personnel in the finance department, particularly in the Americas[37]. - The Company will continue to engage with external consultants to strengthen internal controls and processes[37]. Market Expansion - As of September 29, 2024, Soho House & Co operates 45 Soho Houses and 8 Soho Works globally, indicating ongoing market expansion[48]. - The company emphasizes its unique position as the only company to have scaled a private membership network with a global presence since its inception in 1995[48]. - The company has a diverse portfolio that includes various hospitality and lifestyle brands, enhancing its market reach and member engagement[48].

Core Insights - Soho House & Co (SHCO) closed the last trading session at $5.34, reflecting a gain of 1.9% over the past four weeks [1] - Wall Street analysts have set a mean price target of $6.90 for the stock, indicating a potential upside of 29.2% from the current price [1]

Core Viewpoint - Soho House & Co (SHCO) is anticipated to report a year-over-year increase in earnings driven by higher revenues, with the actual results being a significant factor influencing its near-term stock price [1][2]. Financial Expectations - The upcoming earnings report is expected to show a quarterly loss of $0.01 per share, reflecting a year-over-year improvement of +95.5%. Revenues are projected to reach $334.62 million, marking an 11.2% increase from the previous year [3]. - The consensus EPS estimate has remained unchanged over the last 30 days, indicating a stable outlook from covering analysts [4]. Earnings Surprise Prediction - The Zacks Earnings ESP model indicates that the Most Accurate Estimate for Soho House is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -200%, suggesting a bearish sentiment among analysts regarding the company's earnings prospects [10]. - The stock currently holds a Zacks Rank of 3, complicating predictions of an earnings beat [11]. Historical Performance - In the last reported quarter, Soho House was expected to post a loss of $0.11 per share but actually reported a loss of $0.17, resulting in a surprise of -54.55%. The company has not surpassed consensus EPS estimates in any of the last four quarters [12][13]. Conclusion - Soho House does not appear to be a strong candidate for an earnings beat, and investors should consider additional factors when evaluating the stock ahead of its earnings release [16].

Financial Data and Key Metrics Changes - Membership revenues increased by 16% year-on-year to $104 million, and total revenues grew by 6% year-on-year to $305 million [6][9][12] - Adjusted EBITDA grew by $2 million year-on-year to $33 million, with house-level contribution up 12% year-on-year [5][10][12] - The company ended the quarter with $154 million in cash and cash equivalents, and net debt decreased to $665 million, with a net debt to adjusted EBITDA ratio of five times [11] Business Line Data and Key Metrics Changes - In-house revenues were up 2% year-on-year, showing improvement in footfall and spend per visit [6][9] - House-level margins increased by approximately 100 basis points to 27%, despite the impact of new house openings [9][10] - Other revenues decreased by 1% year-on-year, primarily due to initial impacts from new locations [9] Market Data and Key Metrics Changes - Membership demand remains strong, with a global waitlist of 111,000 and total membership reaching 204,000 [4][5] - The company reported consistent trends across major geographic regions, including the Americas, UK, and Europe [16] Company Strategy and Development Direction - The company plans to open new locations in Madrid, Milan, Barcelona, and Tokyo, enhancing membership demand [5][12] - Focus on operational excellence and member experience, including improved service and dining options [6][7] - Strategic initiatives have led to a 12% increase in house-level contribution, despite short-term impacts from new openings [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued membership growth and improved financial performance, raising year-end membership guidance to over 212,000 [12] - The company acknowledged ongoing challenges in the entertainment industry but noted improvements in member spend and satisfaction [20][23] Other Important Information - The company plans to hold an Investor Day in New York on December 5, 2024, to discuss long-term growth and profitability [13] - The company has initiated a $50 million share repurchase program, repurchasing $5 million of shares in the quarter [11] Q&A Session Summary Question: Insights on house revenue improvement by region - Management noted strong membership demand and improved footfall trends across all major geographies, with no significant regional variance [15][16] Question: Preliminary planning for 2025 membership count growth - Management indicated it is too early to provide guidance for 2025, with more details to be shared at the upcoming Investor Day [17] Question: Plans for new house openings - Management confirmed plans to open two to four new houses, with recent openings in Portland and Sao Paulo, and upcoming openings in Manchester and Barcelona [19] Question: Impact of the Hollywood strike on in-house revenues - Management acknowledged ongoing impacts from the entertainment industry but noted improvements in member spend across houses [20] Question: Cross-border travel trends - Management reported a good season in Europe, with increased occupancy and average daily rates, particularly benefiting from events like the Olympics in Paris [23] Question: Performance of new Bodrum location and future openings - Management expressed confidence in the Bodrum location's performance and indicated that Tulum is still under construction [27][28] Question: Member satisfaction and retention - Management highlighted that members desire unique experiences and great service, with no significant changes in member retention noted [29][30]

Revenue Performance - Total revenues for the 13 weeks ended June 30, 2024, increased to $305,146, up from $288,923 for the same period in 2023, representing a growth of 5.5%[8] - Membership revenues rose to $103,584 for the 13 weeks ended June 30, 2024, compared to $89,193 in the prior year, marking an increase of 16.0%[8] - For the 26 weeks ended June 30, 2024, Soho House reported a consolidated net loss of $81 million, compared to a net loss of $34 million for the 13 weeks[24] - The company’s consolidated revenue for the 26 weeks ended June 30, 2024, was $568.3 million, with total segment revenue of $518.8 million[96] - Total revenues for the 26 weeks ended June 30, 2024, were $568,292, reflecting a 4% increase compared to $544,132 in the prior year[176] Membership Growth - Membership revenues increased by 16% to $103,584 for the 13 weeks ended June 30, 2024, compared to $89,193 for the same period last year[200] - The number of Soho House Members reached 204,028, a 16% increase from 176,305 in the previous year[146] - Membership revenues in the Americas segment increased by $6,631, or 16%, driven by a 17% increase in Adult Paying Soho House members year-on-year[154] - The company had approximately 264,500 members, including about 204,000 Soho House Members[123] - The company has a global waitlist of approximately 111,000 applicants as of June 30, 2024, indicating strong demand for membership[124] Financial Losses - Net loss attributable to Soho House & Co Inc. for the 13 weeks ended June 30, 2024, was $(33,869), compared to a net loss of $(2,644) for the same period in 2023[9] - For the 26 weeks ended June 30, 2024, the company reported a net loss of $80,514,000, compared to a net loss of $18,303,000 for the same period in 2023, indicating a significant increase in losses[18] - The company experienced a comprehensive loss of $79,391,000 for the 26 weeks ended June 30, 2024, compared to a comprehensive loss of $41,562,000 for the same period in 2023[10] - The net loss for the 26 weeks ended June 30, 2024, was $34,175,000, reflecting various expenses including $5 million in impairment losses on intangible assets[100] Operating Expenses - General and Administrative Expenses increased by $1,483, or 4%, to $38,726 for the 13 weeks ended June 30, 2024, compared to $37,243 for the same period in 2023[167] - Total operating expenses increased by 16% to $604,743, primarily due to higher In-House operating expenses[176] - In-House operating expenses increased to $314,513 for the 26 weeks ended June 30, 2024, an increase of $18,188 or 6% year-on-year[184] - Pre-opening expenses rose by $1,446, or 34%, to $5,652 for the 13 weeks ended June 30, 2024, driven by costs associated with the opening of Scorpios Bodrum and Soho House Sao Paulo[169] Asset and Liability Changes - Total current assets increased to $405,612 as of June 30, 2024, from $395,045 as of December 31, 2023, reflecting a growth of 2.7%[5] - Total liabilities rose to $2,775,912 as of June 30, 2024, compared to $2,688,429 as of December 31, 2023, indicating an increase of 3.2%[6] - Total shareholders' deficit attributable to Soho House & Co Inc. increased to $(231,658) as of June 30, 2024, from $(158,367) as of December 31, 2023[6] - Cash and cash equivalents decreased to $151,195 as of June 30, 2024, from $161,656 as of December 31, 2023, a decline of 6.5%[5] Segment Performance - Total consolidated segment revenue for the 13 weeks ended June 30, 2024, was $305,146,000, with the Americas contributing $119,555,000, the UK $93,191,000, and Europe & RoW $52,696,000[100] - The total segment revenue for the UK was $95.1 million for the 13 weeks ended June 30, 2024[94] - The Americas accounted for $119,555 in total revenues, representing a 7% increase from $111,687 in the previous year[152] - The Europe/RoW segment saw a 23% increase in Other revenues, driven by the opening of Scorpios, Bodrum[160] Cash Flow and Investments - Cash flows from operating activities for the 26 weeks ended June 30, 2024, provided $44,992,000, a substantial increase from $8,281,000 in the prior year[18] - The net cash used in investing activities for the 26 weeks ended June 30, 2024, was $45,059,000, compared to $40,774,000 in the prior year[18] - The company incurred cash paid for interest of $17,875 thousand for the 26 weeks ended June 30, 2024, compared to $15,889 thousand for the same period in 2023[24] Shareholder Actions - The company completed a stock repurchase program of up to $50 million, which was fully utilized by December 2022[86] - The company repurchased a total of 891,045 shares of Class A common stock for $5 million during the 13 weeks and 26 weeks ended June 30, 2024, under the new stock repurchase program[87] - The company repurchased 2 million shares of Class A common stock for $12 million on September 20, 2023, and authorized a new stock repurchase program for up to $50 million[87] Future Outlook - The company is currently evaluating the impact of several new accounting standards, including ASU 2023-06 and ASU 2023-07, which may affect future disclosures[31][32] - The company has factored in global economic uncertainties, including inflationary pressures, into its cash flow forecasts for the next 12 months[26] - The company continues to adopt a going concern basis in preparing its financial statements, indicating confidence in its operational continuity[27] - The company expects to open new locations including Bangkok, Mexico City, Portland, and Sao Paulo, enhancing its global footprint[128]