Soho House & (SHCO) - 2026 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements of Soho House & Co Inc. for the periods ended June 29, 2025, and December 29, 2024, including balance sheets, statements of operations, comprehensive income, changes in shareholders' deficit, and cash flows, along with detailed notes on business nature, accounting policies, variable interest entities, equity method investments, leases, revenue recognition, debt, share-based compensation, and related party transactions Unaudited Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (in thousands) | Metric | June 29, 2025 | December 29, 2024 | | :----------------------------------- | :-------------- | :------------------ | | Assets | | | | Total current assets | $406,603 | $388,401 | | Total non-current assets | $2,188,306 | $2,055,111 | | Total assets | $2,594,909 | $2,443,512 | | Liabilities | | | | Total current liabilities | $555,203 | $474,162 | | Total non-current liabilities | $2,385,963 | $2,298,808 | | Total liabilities | $2,941,166 | $2,772,970 | | Shareholders' Deficit | | | | Total shareholders' deficit | $(346,257) | $(329,458) | | Total liabilities and shareholders' deficit | $2,594,909 | $2,443,512 | Unaudited Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | 13 Weeks Ended June 29, 2025 | 13 Weeks Ended June 30, 2024 | 26 Weeks Ended June 29, 2025 | 26 Weeks Ended June 30, 2024 | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total revenues | $329,804 | $302,947 | $612,668 | $564,891 | | Total operating expenses | $(270,083) | $(315,889) | $(518,053) | $(602,160) | | Operating income (loss) | $59,721 | $(12,942) | $94,615 | $(37,269) | | Income (loss) before income taxes | $39,991 | $(31,308) | $54,246 | $(76,392) | | Net income (loss) | $24,128 | $(30,205) | $31,641 | $(72,063) | | Net income (loss) attributable to Soho House & Co Inc. | $24,885 | $(29,899) | $33,053 | $(71,458) | | Basic EPS | $0.13 | $(0.15) | $0.17 | $(0.36) | | Diluted EPS | $0.13 | $(0.15) | $0.17 | $(0.36) | - The company reported a significant turnaround from a net loss to net income for both the 13 and 26 weeks ended June 29, 2025, compared to the prior year periods. Operating income also improved substantially[18] Unaudited Condensed Consolidated Statements of Comprehensive Income / (Loss) Condensed Consolidated Statements of Comprehensive Income / (Loss) (in thousands) | Metric | 13 Weeks Ended June 29, 2025 | 13 Weeks Ended June 30, 2024 | 26 Weeks Ended June 29, 2025 | 26 Weeks Ended June 30, 2024 | | :--------------------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income (loss) | $24,128 | $(30,205) | $31,641 | $(72,063) | | Foreign currency translation adjustment | $(34,987) | $(4,018) | $(50,238) | $360 | | Comprehensive income (loss) | $(10,859) | $(34,223) | $(18,597) | $(71,703) | | Total comprehensive income (loss) attributable to Soho House & Co Inc. | $(10,472) | $(33,927) | $(17,736) | $(71,051) | - Despite reporting net income, the company experienced a significant negative foreign currency translation adjustment, leading to a comprehensive loss for both the 13 and 26 weeks ended June 29, 2025[19] Unaudited Condensed Consolidated Statements of Changes in Shareholders' Deficit Changes in Shareholders' Deficit (in thousands) | Metric | As of December 29, 2024 | As of June 29, 2025 | | :----------------------------------- | :---------------------- | :------------------ | | Total shareholders' deficit attributable to Soho House & Co Inc. | $(335,059) | $(348,639) | | Non-controlling interest | $5,601 | $2,382 | | Total shareholders' deficit | $(329,458) | $(346,257) | - The total shareholders' deficit increased from $(329,458) thousand as of December 29, 2024, to $(346,257) thousand as of June 29, 2025, primarily due to accumulated other comprehensive loss from foreign currency translation adjustments, despite net income[16][23] Unaudited Condensed Statements of Cash Flows Condensed Statements of Cash Flows (in thousands) | Metric | 26 Weeks Ended June 29, 2025 | 26 Weeks Ended June 30, 2024 | | :----------------------------------- | :--------------------------- | :--------------------------- | | Net cash provided by operating activities | $63,832 | $42,196 | | Net cash used in investing activities | $(63,023) | $(43,748) | | Net cash used in financing activities | $(8,814) | $(6,117) | | Effect of exchange rate changes on cash and cash equivalents, and restricted cash | $7,102 | $(1,779) | | Net (decrease) increase in cash and cash equivalents, and restricted cash | $(903) | $(9,448) | | Cash, cash equivalents and restricted cash, End of period | $155,415 | $151,658 | - Net cash provided by operating activities increased significantly to $63.8 million for the 26 weeks ended June 29, 2025, up from $42.2 million in the prior year, driven by net income and COVID business interruption insurance proceeds[25][355] - Cash used in investing activities increased to $63.0 million, primarily due to purchases of property and equipment, intangible assets, and an initial capital contribution for the LINE LA Hotel Joint Venture[25][358] Notes to Condensed Consolidated Financial Statements 1. Nature of the Business - Soho House & Co Inc. operates as a global membership platform connecting members through 46 Soho Houses, 8 Soho Works Clubs, The Ned hotel sites, The LINE and Saguaro hotels, Scorpios Beach Clubs, Soho Home, and digital channels[28] 2. Summary of Significant Accounting Policies - The financial statements are prepared in accordance with US GAAP and SEC rules for interim reporting, involving significant estimates for financial instruments, goodwill, intangible assets, contingent liabilities, income taxes, leases, and long-lived assets[30] - Management identified and corrected misstatements in prior period financial statements (Fiscal 2022-Q3 2024) related to manual processes and material weaknesses in internal controls, which were not material to prior periods but were revised in the Annual Report on Form 10-K[34][35][37][39] - The company continues to operate on a going concern basis, supported by projected cash flows, compliance with bank covenants, and an undrawn revolving credit facility of £75 million ($103 million)[40][44][45][46] - The company recognized $2 million of impairment losses on operating lease assets for legacy Chicken Shop Soho Restaurant sites in the UK during the 26 weeks ended June 29, 2025, as these sites are no longer operational and leases could not be reassigned[51][52] 3. Consolidated Variable Interest Entities - The company is the primary beneficiary of Ned-Soho House, LLP and Soho Works Limited (SWL) joint ventures, consolidating their financial results. SWL has four sites in the UK, with the company holding a 100% economic interest currently, which would reduce to 70% upon option exercise by unrelated individuals[62][63] Consolidated VIEs' Assets and Liabilities (in thousands) | Metric | June 29, 2025 | December 29, 2024 | | :----------------------- | :-------------- | :------------------ | | Total assets | $153,688 | $141,320 | | Total liabilities | $168,126 | $154,336 | | Net assets (liabilities) | $(14,438) | $(13,016) | 4. Equity Method Investments - The company holds equity method investments in entities like Toronto Joint Venture and Club Row Rooms (56-60 Redchurch Street, London), where it does not have primary beneficiary status but exercises significant influence[67][68][69] - During the 13 weeks ended June 29, 2025, the company acquired a new equity method investment in the LINE LA Hotel Joint Venture, contributing $15 million in capital and relinquishing a $9 million accounts receivable balance[66][70][71] Summarized Financial Information for Unconsolidated Equity Method Investees (in thousands) | Metric | 13 Weeks Ended June 29, 2025 | 13 Weeks Ended June 30, 2024 | 26 Weeks Ended June 29, 2025 | 26 Weeks Ended June 30, 2024 | | :----------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenues | $15,529 | $14,373 | $27,962 | $26,336 | | Operating income (loss) | $5,403 | $5,109 | $9,140 | $7,824 | | Net income (loss) | $4,563 | $3,223 | $7,323 | $3,876 | 5. Leases - As of June 29, 2025, the company recognized right-of-use assets and lease liabilities for 187 operating leases and 3 material finance leases, with reasonably assured lease terms ranging from 1 to 30 years for operating leases and 50 years for finance leases[76] Maturity of Lease Liabilities as of June 29, 2025 (in thousands) | Fiscal year ended | Operating Leases (Undiscounted) | Finance Leases (Undiscounted) | | :---------------- | :------------------------------ | :---------------------------- | | Remainder of 2025 | $85,527 | $3,259 | | 2026 | $170,058 | $6,516 | | 2027 | $161,616 | $6,494 | | 2028 | $160,924 | $6,447 | | 2029 | $162,182 | $6,447 | | Thereafter | $1,701,949 | $222,976 | | Total undiscounted lease payments | $2,442,256 | $252,139 | | Present value adjustment | $(1,041,118) | $(168,284) | | Total net lease liabilities | $1,401,138 | $83,855 | - The company has 11 signed but not yet commenced operating lease agreements, with estimated total undiscounted lease payments of $1.08 billion, expected to commence between fiscal years 2025 and 2028[86][87][88] 6. Revenue Recognition - Revenue from membership fees, legacy one-time registration fees, House Introduction Credits, and design & build-out contracts are recognized over time[89] Estimated Future Revenues from Unsatisfied Performance Obligations (in thousands) | Period | Revenue recognized over time | | :---------------------- | :--------------------------- | | Next twelve months from June 29, 2025 | $116,123 | | Future periods | $23,785 | | Total future revenues | $139,908 | Contract Balances (in thousands) | Metric | June 29, 2025 | December 29, 2024 | | :----------------- | :-------------- | :------------------ | | Contract receivables | $71,115 | $78,890 | | Contract assets | $1,261 | $3,257 | | Contract liabilities | $188,307 | $174,697 | 7. Inventories, Prepaid Expenses and Other Current Assets Components of Inventories (in thousands) | Metric | June 29, 2025 | December 29, 2024 | | :----------------------------------- | :-------------- | :------------------ | | Raw materials and service stock and supplies | $19,000 | $23,000 | | Finished goods | $39,000 | $31,000 | | Total Inventories | $58,000 | $54,000 | Components of Prepaid Expenses and Other Current Assets (in thousands) | Metric | June 29, 2025 | December 29, 2024 | | :----------------------------------- | :-------------- | :------------------ | | Amounts owed by equity method investees | $2,831 | $2,379 | | Prepayments and accrued income | $66,747 | $36,350 | | Contract assets | $1,261 | $3,257 | | Inventory supplier advances | $12,798 | $12,139 | | Other receivables | $38,479 | $44,649 | | Total prepaid expenses and other current assets | $122,116 | $98,774 | 8. Accrued Liabilities Components of Accrued Liabilities (in thousands) | Metric | June 29, 2025 | December 29, 2024 | | :----------------- | :-------------- | :------------------ | | Accrued interest | $6,046 | $7,113 | | Hotel deposits | $17,652 | $12,414 | | Trade and other accruals | $102,323 | $78,955 | | Total Accrued Liabilities | $126,021 | $98,482 | 9. Debt Debt Balances, Net of Debt Issuance Costs (in thousands) | Metric | June 29, 2025 | December 29, 2024 | | :----------------------------------- | :-------------- | :------------------ | | Senior Secured Notes | $682,783 | $644,002 | | Soho Works Limited loans | $31,886 | $27,369 | | Other loans | $15,145 | $20,115 | | Total long-term debt, net of current portion | $696,099 | $656,868 | Property Mortgage Loans, Net of Debt Issuance Costs (in thousands) | Metric | June 29, 2025 | December 29, 2024 | | :----------------------------------- | :-------------- | :------------------ | | Term Loan (Soho Beach House Miami Property) | $137,757 | $137,385 | | Total property mortgage loans | $137,757 | $137,385 | - The company has an undrawn revolving credit facility of £75 million ($103 million) as of June 29, 2025, with a maturity date extended to December 31, 2026[110] Future Principal Payments for Debt and Property Mortgage Loans (in thousands) | Fiscal year | Amount | | :------------ | :------- | | Remainder of 2025 | $32,658 | | 2026 | $1,648 | | 2027 | $688,581 | | 2028 | $941 | | 2029 | $916 | | Thereafter | $149,131 | | Total | $873,875 | 10. Fair Value Measurements - The carrying values of current financial instruments approximate fair value due to short-term maturities. Fair values of Senior Secured Notes, Term Loan, and other non-current debt are estimated using discounted cash flow analysis (Level 3 fair value measurements)[114][115] Estimated Fair Values of Debt Instruments (in thousands) | Metric | Carrying Value (June 29, 2025) | Fair Value (June 29, 2025) | Carrying Value (December 29, 2024) | Fair Value (December 29, 2024) | | :----------------- | :----------------------------- | :------------------------- | :------------------------------- | :----------------------------- | | Senior Secured Notes | $682,783 | $643,675 | $644,002 | $596,976 | | Term Loan | $137,757 | $103,187 | $137,385 | $99,283 | | Other loans | $15,145 | $14,941 | $20,115 | $19,853 | | Total | $835,685 | $761,803 | $801,502 | $716,112 | 11. Share-Based Compensation - The company operates the 2020 Equity and Incentive Plan (SARs, Growth Shares) and the 2021 Equity and Incentive Plan (non-qualified stock options, SARs, RSUs, PSUs) for employees and directors. As of June 29, 2025, 3,466,684 shares were available for future awards under the 2021 Plan[117][118] Share-Based Compensation Expense (in thousands) | Metric | 13 Weeks Ended June 29, 2025 | 13 Weeks Ended June 30, 2024 | 26 Weeks Ended June 29, 2025 | 26 Weeks Ended June 30, 2024 | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | SARs | $0 | $482 | $323 | $1,324 | | RSUs | $1,889 | $2,039 | $3,833 | $8,470 | | PSUs | $0 | $951 | $0 | $1,014 | | Employer-related payroll expense | $267 | $126 | $360 | $829 | | Total share-based compensation expense | $2,156 | $3,598 | $4,516 | $11,637 | - Total compensation expense not yet recognized for RSUs is approximately $2 million, expected to be recognized over a weighted-average period of 0.9 years[122] 12. Earnings Per Share and Shareholders' Equity - Holders of Class A and Class B common stock have identical liquidation and dividend rights, leading to the same basic and diluted profit per share. Class A has one vote per share, while Class B has 10 votes per share[121][128] Common Stock Shares Outstanding | Metric | As of December 29, 2024 | As of June 29, 2025 | | :----------------------- | :---------------------- | :------------------ | | Class A Common Stock | 52,731,922 | 53,202,889 | | Class B Common Stock | 141,500,385 | 141,500,385 | - The company did not repurchase any shares of its common stock during the 13 weeks and 26 weeks ended June 29, 2025, under its $50 million stock repurchase program authorized in February 2024[125][127][351] 13. Commitments and Contingencies - The company is not a party to any material litigation outside the ordinary course of business[130] - The company received $23 million in business interruption insurance proceeds related to COVID-19 impacts in the UK during the 26 weeks ended June 29, 2025, which is a full and final settlement for these claims[135] - Remaining contractual commitments for the ERP implementation program are £16 million ($22 million), expected to be settled in 2025 and 2026, with $5 million capitalized as intangible assets[137][363] - The company's subsidiary is contractually obligated to provide additional capital contributions to the LINE LA Hotel Joint Venture, capped at $37 million (inclusive of initial $15 million contribution), to cover liquidity shortfalls[141][365] 14. Income Taxes Effective Tax Rates | Period | Effective Tax Rate | | :--------------------------- | :----------------- | | 13 Weeks Ended June 29, 2025 | 39.7% | | 13 Weeks Ended June 30, 2024 | 3.5% | | 26 Weeks Ended June 29, 2025 | 41.7% | | 26 Weeks Ended June 30, 2024 | 5.7% | - The effective tax rate for the 13 and 26 weeks ended June 29, 2025, significantly increased from the prior year, primarily due to business interruption proceeds taxed at the UK rate, significant foreign exchange gains taxable in the UK, and the mix of earnings across jurisdictions[142] - Valuation allowances have been recorded against deferred tax assets for tax losses, share-based compensation, and excess interest, mainly in the U.K., U.S., and Hong Kong[143] 15. Segments - The company operates three reportable segments: UK, The Americas, and Europe and RoW, with 'All Other' encompassing Retail, Soho Works, Soho Restaurants, and Cities Without Houses[146][147][150] - Segment performance is assessed by Reportable segments EBITDA, which adjusts net income (loss) for non-cash and other items not considered in ongoing operating performance[149] Reportable Segments EBITDA (13 Weeks Ended June 29, 2025, in thousands) | Segment | Membership Revenues | In-House Revenues | Other Revenues | Reportable segments EBITDA | | :-------------- | :------------------ | :---------------- | :------------- | :------------------------- | | The Americas | $57,094 | $53,631 | $19,835 | $30,120 | | UK | $35,273 | $52,731 | $17,750 | $31,789 | | Europe & RoW | $15,344 | $34,231 | $15,931 | $40 | | All Other | $14,686 | - | $28,827 | $(2,818) | | Consolidated Segmental EBITDA | | | | $47,987 | Reportable Segments EBITDA (26 Weeks Ended June 29, 2025, in thousands) | Segment | Membership Revenues | In-House Revenues | Other Revenues | Reportable segments EBITDA | | :-------------- | :------------------ | :---------------- | :------------- | :------------------------- | | The Americas | $113,372 | $105,695 | $37,894 | $50,081 | | UK | $67,492 | $93,623 | $32,005 | $58,076 | | Europe & RoW | $29,363 | $58,702 | $17,554 | $(5,546) | | All Other | $28,568 | - | $56,362 | $(4,113) | | Consolidated Segmental EBITDA | | | | $76,250 | 16. Related Party Transactions and Balances Amounts Owed by (to) Equity Method Investees Due Within One Year (in thousands) | Equity Method Investee | June 29, 2025 | December 29, 2024 | | :----------------------- | :-------------- | :------------------ | | Soho House Toronto Partnership | $909 | $745 | | Raycliff Red LLP | $(8,352) | $(6,957) | | Mirador Barcel S.L. | $199 | $(1,081) | | Little Beach House Barcelona S.L. | $(599) | $(355) | | Mimea XXI S.L. | $1,078 | $961 | | Soho Beach House Canouan Limited | $645 | $673 | | StoreBerlin Limited | $2,344 | $1,470 | | Wilshire LA Hotel JV LLC | $189 | $0 | | Total | $(3,587) | $(4,544) | - The company leases four properties from related parties, with a combined right-of-use asset of $26 million and lease liabilities of $1 million (short-term) and $34 million (long-term) as of June 29, 2025[83][166][167][170][173] - Revenue from related party transactions totaled $3 million for the 13 weeks and $6 million for the 26 weeks ended June 29, 2025, reported within 'Other revenues'[95][183] 17. Subsequent Events - Subsequent to June 29, 2025, the company issued 401,845 shares of Class A common stock due to RSU awards vesting[185] - On July 28, 2025, SHCO signed a lease agreement for the LINE DC property, including an initial payment of approximately $11 million and an option to purchase the property[186] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of Soho House & Co Inc.'s business, key factors affecting its performance, and a detailed analysis of its financial condition and results of operations for the 13 and 26 weeks ended June 29, 2025, compared to the prior year. It highlights significant revenue growth, improved operating income, and the impact of strategic initiatives and macroeconomic factors Overview - Soho House & Co Inc. is a global membership platform with 46 Soho Houses, 8 Soho Works, Scorpios Beach Clubs, Soho Home, and digital channels, serving approximately 270,300 members as of June 29, 2025[189][190] - The company's membership model has shown resilience, with strong retention rates and a global waitlist of over 111,000 applicants as of June 29, 2025, indicating robust demand[192][193] - Membership Revenues are annual fees and one-time registration fees, while In-House Revenues include food, beverage, accommodation, and spa services within Houses. Other Revenues encompass Scorpios, Soho Works, stand-alone restaurants, Soho Home, and hotel management fees[195][196] Factors Affecting Our Business - Key growth drivers include expanding the number of Soho Houses, scaling existing membership brands (Cities Without Houses, Soho Friends, Soho Works), and launching new ones, leveraging the strong brand and interconnected offerings[200][205][211] - The company's ability to grow its member base, increase In-House Revenues, adjust membership pricing, and expand into new products and businesses are critical factors impacting future performance and profitability[211] - The company's operations are segmented into UK, The Americas, Europe and Rest of the World (RoW), and 'All Other' for non-reportable segments[206] Key Performance, Operating Metrics and Additional Financial Measures and Other Data Evaluated by Management Key Performance and Operating Metrics | Metric | As of June 29, 2025 | As of June 30, 2024 | | :-------------------------- | :------------------ | :------------------ | | Number of Soho Houses | 46 | 44 | | Number of Soho House Members | 213,621 | 204,028 | | Number of Other Members | 56,676 | 60,512 | | Number of Total Members | 270,297 | 264,540 | | Number of Active App Users | 216,687 | 209,732 | Key Financial Metrics (13 Weeks Ended) | Metric | June 29, 2025 (Actuals) | June 30, 2024 (Actuals) | June 30, 2024 (Constant Currency) | | :-------------------------- | :---------------------- | :---------------------- | :-------------------------------- | | Operating income (loss) | $59,721 | $(12,942) | $(22,065) | | Operating loss margin | 18% | (4)% | (4)% | | House-Level Contribution | $71,883 | $57,411 | $54,359 | | House-Level Contribution Margin | 30% | 26% | 26% | | Other Contribution | $14,058 | $14,646 | $14,427 | | Other Contribution Margin | 16% | 18% | 18% | | Adjusted EBITDA | $46,130 | $31,525 | $33,696 | | Percentage of total revenues | 14% | 10% | 10% | - Soho House Members increased by approximately 5% year-over-year, driven by new House openings and growth in existing locations[212][235][286] Results of Operations Comparison of the 13 weeks ended June 29, 2025 and June 30, 2024 Revenues (13 Weeks Ended) Total Revenues (13 Weeks Ended, in thousands) | Metric | June 29, 2025 | June 30, 2024 | Actual Change % | Constant Currency Change % | | :------------- | :------------ | :------------ | :-------------- | :------------------------- | | Total revenues | $329,804 | $302,947 | 9% | 5% | | Membership revenues | $118,626 | $102,347 | 16% | 12% | | In-House revenues | $132,504 | $127,285 | 4% | 0% | | Other revenues | $78,674 | $73,315 | 7% | 2% | - Membership revenues increased by 16% (12% in constant currency) due to a 5% increase in Adult Paying Members and high single-digit to low double-digit percentage price increases for membership fees[232][233][239] - In-House revenues increased by 4% (0% in constant currency), supported by two new House openings, but impacted by wildfires in Los Angeles[242][243][246] - Other revenues increased by 7% (2% in constant currency), predominantly driven by strong growth in Soho Home and Scorpios Bodrum, partially offset by reduced revenue from in-house design and build business and termination of The LINE San Francisco management fees[248][249][251][252] Operating Expenses (13 Weeks Ended) Operating Expenses and Contribution (13 Weeks Ended, in thousands) | Metric | June 29, 2025 | June 30, 2024 | Actual Change % | Constant Currency Change % | | :----------------------------------- | :------------ | :------------ | :-------------- | :------------------------- | | In-House operating expenses | $(170,044) | $(163,979) | (4)% | 3% | | House-Level Contribution | $71,883 | $57,411 | 25% | 32% | | House-Level Contribution Margin | 30% | 26% | 4% | | | Other operating expenses | $(73,819) | $(66,911) | (10)% | (3)% | | Other Contribution | $14,058 | $14,646 | (4)% | (3)% | | Other Contribution Margin | 16% | 18% | (2)% | | | General and Administrative Expenses | $40,269 | $38,726 | 4% | (3)% | | Pre-opening expenses | $3,191 | $5,651 | (44)% | (47)% | | Depreciation and amortization | $23,389 | $25,131 | (7)% | (13)% | | Share-based compensation | $2,156 | $3,598 | (40)% | (44)% | | Foreign exchange (gain) loss, net | $(47,405) | $5,173 | n/m | n/m | | Loss on impairment of long-lived assets and intangible assets | $0 | $4,710 | n/m | n/m | | Other, net | $4,620 | $2,010 | n/m | n/m | | Interest expense, net | $21,666 | $19,989 | 8% | 1% | | Adjusted EBITDA | $46,130 | $31,525 | 46% | 37% | - House-Level Contribution increased by 25% (32% in constant currency) due to higher membership and In-House revenues, despite increased operating expenses from new House openings and wage/rent inflation, partially offset by cost discipline and ERP program benefits[254][255][256] - Other Contribution decreased by 4% (3% in constant currency) due to higher operating costs related to increased Soho Home trade volume and Scorpios Bodrum, and reduced design/build revenue[259][260] - Adjusted EBITDA increased by 46% (37% in constant currency) to $46.1 million, driven by higher revenues, COVID business interruption proceeds, and inventory policy alignment, partially offset by increased operating expenses from new House openings[278] Comparison of the 26 weeks ended June 29, 2025 and June 30, 2024 Revenues (26 Weeks Ended) Total Revenues (26 Weeks Ended, in thousands) | Metric | June 29, 2025 | June 30, 2024 | Actual Change % | Constant Currency Change % | | :------------- | :------------ | :------------ | :-------------- | :------------------------- | | Total revenues | $612,668 | $564,891 | 8% | 6% | | Membership revenues | $231,537 | $201,296 | 15% | 13% | | In-House revenues | $244,923 | $237,555 | 3% | 1% | | Other revenues | $136,208 | $126,040 | 8% | 5% | - Membership revenues increased by 15% (13% in constant currency) driven by a 5% increase in Adult Paying Members and membership fee increases implemented in fiscal 2024 and 2025[283][284][290] - In-House revenues increased by 3% (1% in constant currency), supported by three new House openings and New Year's Eve events, but negatively impacted by wildfires in Los Angeles[292][293][295] - Other revenues increased by 8% (5% in constant currency), primarily due to strong growth in Soho Home and Scorpios Bodrum, partially offset by the termination of The LINE San Francisco management contract[297][299][301] Operating Expenses (26 Weeks Ended) Operating Expenses and Contribution (26 Weeks Ended, in thousands) | Metric | June 29, 2025 | June 30, 2024 | Actual Change % | Constant Currency Change % | | :----------------------------------- | :------------ | :------------ | :-------------- | :------------------------- | | In-House operating expenses | $(334,490) | $(315,450) | (6)% | (2)% | | House-Level Contribution | $124,203 | $106,882 | 16% | 20% | | House-Level Contribution Margin | 27% | 25% | 2% | | | Other operating expenses | $(131,797) | $(119,336) | (10)% | (7)% | | Other Contribution | $22,178 | $23,223 | (4)% | (3)% | | Other Contribution Margin | 14% | 16% | (2)% | 18% | | General and Administrative Expenses | $76,717 | $73,098 | 5% | 1% | | Pre-opening expenses | $5,226 | $11,397 | (54)% | (56)% | | Depreciation and amortization | $47,403 | $50,625 | (6)% | (10)% | | Share-based compensation | $4,516 | $11,637 | (61)% | (63)% | | Foreign exchange (gain) loss, net | $(68,926) | $10,654 | n/m | n/m | | Loss on impairment of long-lived assets and intangible assets | $2,102 | $4,710 | (55)% | (57)% | | Business interruption proceeds, net | $(22,899) | $0 | n/m | n/m | | Other, net | $7,627 | $5,253 | 45% | 40% | | Interest expense, net | $43,041 | $41,188 | 4% | 1% | | Adjusted EBITDA | $93,092 | $51,331 | 81% | 75% | - House-Level Contribution increased by 16% (20% in constant currency) due to higher revenues, partially offset by increased operating expenses from new House openings and wage/rent inflation[303][304][305] - Other Contribution decreased by 4% (3% in constant currency) due to losses at Scorpios Bodrum during its off-season, reduced in-house design revenue, and the removal of The LINE San Francisco management fees[308][309] - Adjusted EBITDA increased by 81% (75% in constant currency) to $93.1 million, driven by higher revenues, $22.9 million in COVID business interruption insurance proceeds, and inventory policy alignment benefits[327] Non-GAAP Financial Measures - The company uses non-GAAP financial measures such as Adjusted EBITDA, House-Level Contribution, House-Level Contribution Margin, Other Contribution, and Other Contribution Margin to evaluate operating performance, believing they are useful to investors[226] - Constant currency calculations are used to isolate the effect of currency changes, providing a more meaningful indication of year-over-year performance by applying current period exchange rates to prior period results[226] Liquidity and Capital Resources - As of June 29, 2025, the company had $150 million in cash and cash equivalents and $5 million in restricted cash, along with an undrawn £75 million ($103 million) Revolving Credit Facility[347][377] - Primary liquidity requirements include working capital, operating and finance lease obligations, capital expenditures for new Houses, refurbishments, and corporate technology infrastructure[348] - The company believes existing cash, marketable securities, and available credit will be sufficient to fund operations, lease obligations, capital expenditures, and working capital needs for at least the next 12 months[352] Critical Accounting Estimates and Judgments - The preparation of financial statements requires significant estimates and assumptions, including valuation of financial instruments, equity method investments, goodwill, intangible assets, contingent liabilities, income taxes, leases, and long-lived assets[366] - No significant changes in critical accounting policies and estimates were reported compared to the Annual Report on Form 10-K for fiscal year ended December 29, 2024[366] Emerging Growth Company Status - As an 'emerging growth company' under the JOBS Act, the company is eligible for exemptions from certain reporting requirements, such as presenting only two years of audited financial statements and reduced disclosure obligations[367] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section details the company's exposure to various market risks, including foreign exchange, credit, liquidity, interest rate, inflation, and commodity price risks. It outlines the potential impact of these risks on financial performance and the strategies in place to manage them - The company is exposed to foreign exchange risk, primarily in Pound sterling and Euros, but uses natural hedges (income and payments in local currencies) and keeps the situation under review[369][370] Estimated Impact of 10% USD/GBP Exchange Rate Fluctuation on Net Profit (in millions) | Period | USD Strengthened by 10% | USD Weakened by 10% | | :--------------------------- | :---------------------- | :-------------------- | | 13 Weeks Ended June 29, 2025 | $(1) | $1 | | 26 Weeks Ended June 29, 2025 | $(4) | $4 | - The company manages liquidity risk through operating cash flows, cash and cash equivalents, and an undrawn Revolving Credit Facility, with flexibility to control capital expenditure commitments[377] - Inflation on food, utilities, labor, and rent, as well as commodity price risks on foodstuffs, natural gas, and oil, could adversely impact the business if price adjustments cannot sufficiently offset cost increases[379][380] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were not effective as of June 29, 2025, due to identified material weaknesses in internal control over financial reporting. These weaknesses relate to insufficient personnel with appropriate GAAP knowledge and ineffective policies for reviewing accounting and reporting functions - Disclosure controls and procedures were not effective as of June 29, 2025, due to material weaknesses in internal control over financial reporting[382] - Material weaknesses include a lack of sufficient personnel with appropriate US GAAP knowledge and experience, and ineffective policies and procedures for reviewing, supervising, and monitoring accounting and reporting functions, including IT general controls[385] - No material changes in internal control over financial reporting occurred during the 26 weeks ended June 29, 2025[386] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently a party to any material legal proceedings outside the ordinary course of business, and management does not expect ongoing proceedings to have a material adverse effect on its financial statements - The company is not a party to any litigation other than in the ordinary course of business[389] - Management does not expect the ultimate outcome of any currently ongoing legal proceedings to have a material adverse effect on the company's unaudited condensed consolidated financial statements[130][389] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 29, 2024. Investors should carefully consider these risks, as well as any additional unknown or immaterial risks, which could materially affect the business - No material changes to the risk factors described in the Annual Report on Form 10-K for the fiscal year ended December 29, 2024[391] - Investors are cautioned that additional unknown or currently immaterial risks may arise and materially impact the business, results of operations, and financial condition[391] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company did not engage in any unregistered sales of equity securities or make any purchases of its own equity securities during the 13-week period ended June 29, 2025 - No unregistered sales of equity securities occurred[392] - The company did not purchase any shares of its common stock during the 13-week period ended June 29, 2025[394] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the reporting period - No defaults upon senior securities were reported[395] Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[396] Item 5. Other Information During the 13 weeks ended June 29, 2025, none of the company's directors or officers adopted, modified, or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - No directors or officers adopted, modified, or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the 13 weeks ended June 29, 2025[397] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications from the Principal Executive Officer and Principal Financial Officer, and Inline XBRL documents - Exhibits include certifications of Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[398] - Inline XBRL Instance Document, Taxonomy Extension Schema, and Cover page formatted as Inline XBRL are also filed[398]