Membership and Growth - As of December 29, 2024, Soho House & Co has approximately 271,500 members, including around 212,400 Soho House members[18]. - The global waitlist for membership stands at over 112,000 applicants as of December 29, 2024[22]. - Soho House membership fees are approximately $5,200 annually, providing access to all Houses globally[33]. - The Cities Without Houses membership has 12,518 members across 84 cities as of December 29, 2024, with planned openings in Portland, USA (March 2024) and Sao Paulo, Brazil (June 2024)[34]. - Soho Friends membership reached 53,110 members as of December 29, 2024, with an annual fee of approximately $130[34]. - Soho Works has 5,984 members as of December 29, 2024, with membership fees ranging from $200 to $750 per month for Soho House members[36]. - The company increased its total House count to 45 in fiscal 2024, up from 42 in fiscal 2023, with plans for two to three new openings in 2025[42]. - In fiscal 2024, over one million non-member guests visited the Houses, with a goal to convert them into members[45]. - The company plans to expand its presence in new and existing markets, focusing on establishing Houses in key cultural cities and integrating complementary products and services[105]. Financial Performance - The company incurred net losses of $164 million, $130 million, and $223 million in fiscal years 2024, 2023, and 2022, respectively, with an accumulated deficit of $1,540 million as of December 29, 2024[80]. - The company incurred a consolidated net loss of $164 million during fiscal 2024, despite generating positive cash flows from operations of $90 million[103]. - The company is dependent on distributions from subsidiaries to cover taxes and operating expenses, which may be restricted by existing credit facilities[115]. - Inflation could adversely affect the company's financial condition and results of operations, as it may not be able to adjust member pricing accordingly[120]. - The company has an outstanding debt balance of $983 million as of December 29, 2024, which includes Senior Secured Notes and other loans[124]. Operational Strategy - The company has adopted an asset-light development model for new House openings, significantly reducing initial investment costs to $2 million to $8 million[26]. - For openings not following the asset-light model, initial investments are expected to be in the $10 million to $20 million range[26]. - The company continues to explore new openings on a case-by-case basis to balance member experience and optimize returns[25]. - The company has historically invested significantly in opening new Houses and enhancing membership experiences, which may continue to incur higher expenses than anticipated[80]. - The company is exposed to foreign currency exchange rate risk due to operations in non-US countries, particularly the UK, with no current hedging arrangements in place[109]. Market and Competitive Position - The company believes it has a first-mover advantage in the private membership club sector, creating significant barriers to entry for competitors[63]. - The company faces challenges in maintaining and expanding its international operations due to risks such as exchange rate fluctuations and differing protection of intellectual property rights[108]. - The company has experienced significant growth in its business activities, which places demands on its administrative and operational resources[83]. Regulatory and Compliance Risks - The company is subject to extensive environmental, health, and safety regulations across all operating regions, which may impact operational costs and compliance efforts[70]. - The company is subject to regulatory scrutiny regarding data privacy, which may necessitate changes in business operations and incur additional compliance costs[169]. - The company may incur substantial costs due to compliance with privacy laws and potential litigation from privacy-related claims[176]. - The company faces risks related to compliance with the US Foreign Corrupt Practices Act and the UK Bribery Act, which could result in severe penalties if violated[190]. Brand and Reputation - The company’s brand value is critical to attracting and retaining members, and any incidents that damage its reputation could adversely affect its business[86]. - The company has faced brand squatting issues in regions like South America and Asia, complicating trademark registration efforts[93]. - The company has not been able to protect its trademarks in significant jurisdictions such as China and Mexico, which may lead to brand dilution and customer confusion[94]. Technology and Cybersecurity - The reliance on information technology systems is critical, and any failure could harm business operations and reputation[155]. - Cybersecurity risks are a significant concern, with potential for data breaches that could lead to negative publicity and financial impact[159]. - The implementation of new technology systems, such as the Enterprise Resource Planning (ERP), may cause operational disruptions and increased costs[158]. - The complexity of IT systems increases vulnerability to security breaches, which could disrupt business operations and damage customer relationships[168]. Labor and Employment - The company faces risks from unionization efforts, particularly in regions with strong labor rights focus[183]. - The company is subject to various employment laws and may face claims related to employment discrimination and wage-hour issues[184]. - The company may face challenges in hiring qualified employees necessary for compliance with financial reporting regulations, impacting its operational effectiveness[199]. Governance and Control - The Voting Group controls approximately 96.6% of the combined voting power of the outstanding common stock, significantly limiting other stockholders' influence on corporate matters[204]. - The company qualifies as a 'controlled company' under NYSE rules, allowing it to rely on exemptions from certain corporate governance requirements[210]. - Certain directors have affiliations with Yucaipa, which may lead to conflicts of interest affecting the company's business decisions[211].

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]