Soho House & (SHCO) - 2024 Q3 - Earnings Call Transcript

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]