Group 1 - Soho House & Co Inc. (NYSE: SHCO) is highlighted as a unique company in the current market [1] - The focus of Crude Value Insights is on cash flow and companies in the oil and natural gas sector, emphasizing value and growth prospects [1] - Subscribers have access to a stock model account, cash flow analyses of exploration and production firms, and live discussions about the sector [2]

Market Overview - The U.S. stock market is experiencing significant volatility, leading to a pause in major M&A deals and IPOs [1] Industry Insights - Gary Alexander has extensive experience in covering technology companies and has worked in Silicon Valley, providing insights into current industry themes [1] Contributions and Influence - Gary Alexander has been a contributor to Seeking Alpha since 2017 and has been quoted in various web publications, with his articles reaching popular trading apps like Robinhood [1]

Company Performance - Soho House & Co reported a quarterly loss of $0.10 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.07, and the same as the loss reported a year ago [1] - The earnings surprise for this quarter was -42.86%, and the company had previously delivered a surprise of 100% by reporting break-even earnings when a loss of $0.01 was expected [2] - Revenues for the quarter were $305.56 million, missing the Zacks Consensus Estimate by 2.42%, but showing an increase from $290.79 million in the same quarter last year [3] Stock Performance - Since the beginning of the year, Soho House shares have declined by approximately 16.2%, compared to a decline of 5.1% for the S&P 500 [4] - The current Zacks Rank for Soho House is 3 (Hold), indicating that the shares are expected to perform in line with the market in the near future [7] Future Outlook - The consensus EPS estimate for the upcoming quarter is -$0.14 on revenues of $284.34 million, and for the current fiscal year, it is -$0.26 on revenues of $1.3 billion [8] - The estimate revisions trend for Soho House is mixed, and changes in earnings expectations could impact stock performance [5][6] Industry Context - The Internet - Software industry, to which Soho House belongs, is currently in the top 30% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% [9]

Financial Performance - Total revenues for Q4 2024 were $305.6 million, representing a 5.4% year-over-year growth[4] - Total revenues for fiscal year 2024 reached $1,203.8 million, a 7.0% year-over-year increase[4] - Membership revenues increased to $109.3 million, a 15.6% year-over-year increase[4] - Membership revenues for fiscal year 2024 were $418.0 million, up 17.2% year-over-year[4] - Net loss attributable to Soho House & Co Inc. was $91.7 million, or $0.47 per share, including $51.6 million in non-cash FX losses[4] - Net loss for the fiscal year ended December 29, 2024, was $163,568 thousand, compared to a loss of $129,678 thousand for December 31, 2023, representing a 26% increase[28] - Net loss attributable to Soho House & Co Inc. was $91,685, compared to a loss of $61,360 in the previous year, reflecting a 49.3% increase in losses[33] - Operating loss for the fiscal year ended December 29, 2024, was $70,041 thousand, a significant increase of 97% compared to a loss of $35,593 thousand for December 31, 2023[29] Adjusted EBITDA - Adjusted EBITDA for Q4 2024 was $32.3 million, with an adjusted EBITDA margin of 11%[11] - Adjusted EBITDA increased by 14% to $131,904 thousand for the fiscal year ended December 29, 2024, from $115,605 thousand in the previous year[28] - Adjusted EBITDA for the 13 weeks ended December 29, 2024, was $32,292, a slight decrease of 1% from $32,525 in 2023[24] Membership and Expansion - Total Soho House members grew to 212,447, a 9.6% increase year-over-year[11] - Three new Soho Houses were successfully opened in 2024: Portland, Sao Paulo, and Mews House[4] - House Membership Revenues are primarily derived from annual membership fees and one-time legacy registration fees, with the latter amortized over 20 years[38] - The total number of Soho Houses in operation reflects the company's expansion strategy, with a focus on increasing membership and revenue[42] - Membership revenues are influenced by the number of members, membership mix, and pricing, with higher prices generally in North America compared to the UK and Europe[50] - The company reported strong member retention rates, indicating robust demand and loyalty among members[45] Expenses and Losses - House-Level Contribution for the 13 weeks ended December 29, 2024, was $60,725, a decrease of 5% compared to $64,113 for the same period in 2023[25] - House-Level Contribution Margin decreased to 27% from 30% year-over-year[25] - In-House operating expenses increased by 11% to $164,102 for the 13 weeks ended December 29, 2024, compared to $147,817 in 2023[27] - General and administrative expenses rose by 7% to $152,922 thousand in the fiscal year ended December 29, 2024, compared to $143,583 thousand in the previous year[29] - Total operating expenses rose to $376,211, an increase of 18.5% from $317,506 in the prior year[33] Cash and Debt - The company ended Q4 2024 with cash and cash equivalents of $156 million[13] - Net debt increased by 5% to $672,553 thousand as of December 29, 2024, compared to $640,859 thousand as of December 31, 2023[32] - The current portion of debt increased by 18% to $34,618 thousand as of December 29, 2024, from $29,290 thousand as of December 31, 2023[32] - Cash and cash equivalents decreased to $152,716 from $159,155, a decline of 4.3%[35] Foreign Exchange and Impairment - Foreign exchange gain for the 13 weeks ended December 29, 2024, was $51,645, compared to a loss of $(32,297) in 2023[27] - The company recognized impairment losses of $13,567 on long-lived assets and intangible assets for the 13 weeks ended December 29, 2024, a 72% decrease from $47,772 in 2023[27] - The company recognized impairment losses of $32,345 thousand on long-lived assets for the fiscal year ended December 29, 2024, down 32% from $47,772 thousand in the previous year[29] - The company recognized a loss of $6,204 thousand on goodwill related to certain reporting units during the fiscal year ended December 29, 2024[28] Shareholder Activities - A third-party consortium has made an offer to take the company private for $9.00 per share, currently under assessment[8] - The company incurred expenses related to shareholder activism amounting to $1,885 thousand during the fiscal year ended December 29, 2024[28] Digital Engagement - Active App Users are defined as unique users who have logged into membership Apps within the last three months, highlighting engagement with digital platforms[53] Forward-Looking Statements - Forward-looking statements indicate expectations for financial performance in fiscal 2024, subject to risks and uncertainties that may affect actual results[55]

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]