UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from |
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to |
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Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
Registrant’s telephone number, including area code: +44 (0)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of August 15, 2022, the registrant had
Table of Contents
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Page |
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PART I. |
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2 |
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Item 1. |
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2 |
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Condensed Consolidated Balance Sheets as of July 3, 2022 (Unaudited) and January 2, 2022 |
2 |
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4 |
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5 |
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6 |
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7 |
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Unaudited Condensed Statements of Cash Flows for the 26 weeks ended July 3, 2022 and July 4, 2021 |
8 |
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10 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
33 |
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Item 3. |
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61 |
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Item 4. |
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62 |
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PART II. |
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63 |
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Item 1. |
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63 |
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Item 1A. |
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63 |
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Item 2. |
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63 |
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Item 3. |
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64 |
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Item 4. |
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64 |
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Item 5. |
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64 |
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Item 6. |
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64 |
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65 |
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i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are based on our beliefs and assumptions and on information currently available to us. Forward-looking statements include information concerning our possible or assumed future results of operations and expenses, business strategies and plans, trends, market sizing, competitive position, industry environment, potential growth opportunities and product capabilities, among other things. Forward-looking statements include all statements that are not historical facts and, in some cases, can be identified by terms such as “aim,” “anticipates,” “believes,” “could,” “estimates,” “expects,” “goal,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “strive,” “will,” “would,” or similar expressions and the negatives of those terms.
As used in this report, any reference to ‘Membership Collective Group,’ ‘MCG,’ ‘our company,’ ‘the company,’ ‘us,’ ‘we’ and ‘our’ refers to: (i) if prior to the exchange of equity interests by equity holders in Soho House Holdings Limited for shares of Class A common stock or Class B common stock (as applicable) in Membership Collective Group Inc. as described in this report, to Soho House Holdings Limited and its consolidated subsidiaries, and (ii) if following such exchange, to Membership Collective Group Inc., together with its consolidated subsidiaries.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including those described in “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this report. Given these uncertainties, you should not place undue reliance on these forward-looking statements.
1
PART I-FINANCIAL INFORMATION
Item 1. Financial Statements.
Membership Collective Group Inc.
Condensed Consolidated Balance Sheets
As of July 3, 2022 (Unaudited) and January 2, 2022
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As of |
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(in thousands, except for par value and share data) |
July 3, 2022 |
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January 2, 2022 |
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Assets |
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Current assets |
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Cash and cash equivalents |
$ |
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$ |
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Restricted cash |
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Accounts receivable, net |
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Inventories |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease assets |
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Goodwill |
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Other intangible assets, net |
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Equity method investments |
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Deferred tax assets |
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Other non-current assets |
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Total non-current assets |
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Total assets |
$ |
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$ |
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Liabilities and Shareholders’ Equity |
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Current liabilities |
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Accounts payable |
$ |
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$ |
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Accrued liabilities |
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Current portion of deferred revenue |
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Indirect and employee taxes payable |
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Current portion of debt, net of debt issuance costs |
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Current portion of related party loans |
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Current portion of operating lease liabilities—sites trading less than one year |
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Current portion of operating lease liabilities—sites trading more than one year |
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Other current liabilities |
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Total current liabilities |
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Debt, net of current portion and debt issuance costs |
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Property mortgage loans, net of debt issuance costs |
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Related party loans, net of current portion and imputed interest |
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Operating lease liabilities, net of current portion - sites trading less than one year |
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Operating lease liabilities, net of current portion - sites trading more than one year |
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Finance lease liabilities |
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Financing obligation |
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Deferred revenue, net of current portion |
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Deferred tax liabilities |
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Other non-current liabilities |
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Total non-current liabilities |
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Total liabilities |
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(Note 16) |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
Membership Collective Group Inc.
Condensed Consolidated Balance Sheets
As of July 3, 2022 (Unaudited) and January 2, 2022
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As of |
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(in thousands, except for par value and share data) |
July 3, 2022 |
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January 2, 2022 |
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Shareholders’ equity |
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Class A common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
) |
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( |
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Accumulated other comprehensive income |
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Treasury stock, at cost; |
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( |
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Total shareholders’ equity attributable to Membership Collective Group Inc. |
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Noncontrolling interest |
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Total shareholders’ equity |
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Total liabilities and shareholders’ equity |
$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
Membership Collective Group Inc.
Condensed Consolidated Statements of Operations (Unaudited)
For the 13 weeks and 26 weeks ended July 3, 2022 and July 4, 2021
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For the 13 Weeks Ended |
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For the 26 Weeks Ended |
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(in thousands except for per share data) |
July 3, 2022 |
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July 4, 2021 |
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July 3, 2022 |
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July 4, 2021 |
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Revenues |
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Membership revenues |
$ |
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$ |
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$ |
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$ |
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In-House revenues |
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Other revenues |
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Total revenues |
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Operating expenses |
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In-House operating expenses (exclusive of depreciation and amortization of $ |
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( |
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( |
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( |
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( |
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Other operating expenses (exclusive of depreciation and amortization of $ |
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( |
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( |
) |
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( |
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( |
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General and administrative expenses |
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( |
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( |
) |
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( |
) |
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( |
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Pre-opening expenses |
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( |
) |
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( |
) |
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( |
) |
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( |
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Depreciation and amortization |
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( |
) |
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( |
) |
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( |
) |
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( |
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Share-based compensation |
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( |
) |
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( |
) |
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( |
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( |
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Foreign exchange loss, net |
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( |
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( |
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( |
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( |
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Other |
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( |
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( |
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( |
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( |
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Total operating expenses |
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( |
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( |
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( |
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( |
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Operating loss |
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( |
) |
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( |
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( |
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( |
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Other (expense) income |
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Interest expense, net |
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( |
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( |
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( |
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( |
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(Loss) Gain on sale of property and other, net |
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( |
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Share of income (loss) of equity method investments |
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( |
) |
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( |
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Total other expense, net |
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( |
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( |
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( |
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( |
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Loss before income taxes |
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( |
) |
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( |
) |
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( |
) |
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( |
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Income tax (expense) benefit |
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( |
) |
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( |
) |
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( |
) |
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Net loss |
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( |
) |
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( |
) |
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( |
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( |
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Net loss attributable to noncontrolling interests |
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Net loss attributable to Membership Collective Group Inc. |
$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
Net loss per share attributable to Class A and Class B common stock: |
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Basic and diluted (Note 15) |
$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
Weighted average shares outstanding: |
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Basic and diluted (Note 15) |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
Membership Collective Group Inc.
Condensed Consolidated Statements of Comprehensive Loss (Unaudited)
For the 13 weeks and 26 weeks ended July 3, 2022 and July 4, 2021
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For the 13 Weeks Ended |
For the 26 Weeks Ended |
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(in thousands) |
July 3, 2022 |
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July 4, 2021 |
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July 3, 2022 |
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July 4, 2021 |
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Net loss |
$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Other comprehensive income |
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Foreign currency translation adjustment |
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( |
) |
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Comprehensive loss |
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( |
) |
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( |
) |
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( |
) |
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( |
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Loss attributable to noncontrolling interest |
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Foreign currency translation adjustment attributable to noncontrolling interest |
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( |
) |
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( |
) |
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Total comprehensive loss attributable to Membership Collective Group Inc. |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
Condensed Consolidated Statements of Changes in Redeemable Shares and Shareholders’ Deficit (Unaudited)
For the 13 weeks and 26 weeks ended July 4, 2021
(in thousands except for share data) |
Soho House Holdings Limited Redeemable Preferred Shares |
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Soho House Holdings Limited Redeemable C Ordinary Shares |
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Soho House Holdings Limited Ordinary Shares |
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Additional |
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Accumulated |
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Accumulated |
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Total Shareholders’ Deficit Attributable to Soho House Holdings Limited |
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Noncontrolling |
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Total |
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As of January 3, 2021 |
$ |
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$ |
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$ |
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$ |
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$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
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$ |
( |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
|
— |
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( |
) |
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( |
) |
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( |
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Distributions to noncontrolling interest |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
|
( |
) |
Contributions from noncontrolling interest |
|
— |
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— |
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— |
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— |
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— |
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— |
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— |
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Issuance of SHHL senior convertible preference shares (Note 14) |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Senior convertible preference shares issuance costs |
|
( |
) |
|
— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
|
Proceeds from issuance of SHHL redeemable C ordinary shares (Note 14) |
|
— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Share-based compensation (Note 13) |
|
— |
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— |
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— |
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— |
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— |
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— |
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Net change in cumulative translation adjustment |
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— |
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— |
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— |
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— |
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— |
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As of April 4, 2021 |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
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$ |
( |
) |
$ |
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$ |
( |
) |
||||||
Net loss |
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— |
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— |
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— |
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— |
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( |
) |
|
— |
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( |
) |
|
( |
) |
|
( |
) |
Distributions to noncontrolling interest |
|
— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
|
( |
) |
Non-cash dividends on senior convertible preference shares |
|
|
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— |
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— |
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( |
) |
|
— |
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— |
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|
( |
) |
|
— |
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( |
) |
|
SHHL C2 ordinary shares issued in connection with the Cipura Acquisition |
|
— |
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— |
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— |
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— |
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— |
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SHHL C2 ordinary shares issued in connection with the Mandolin Acquisition |
|
— |
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— |
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— |
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— |
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— |
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Purchase of Soho Works North America noncontrolling interests |
|
— |
|
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— |
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— |
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— |
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( |
) |
|
— |
|
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Purchase of Scorpios noncontrolling interests |
|
— |
|
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— |
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— |
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— |
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|
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( |
) |
|
( |
) |
|||
SHHL C2 ordinary shares issued in connection with the LINE and Saguaro Acquisition |
|
— |
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— |
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— |
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— |
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— |
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Accretion of redeemable preferred shares to redemption value, net of foreign currency remeasurement gain |
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|
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— |
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— |
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( |
) |
|
|
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— |
|
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( |
) |
|
— |
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( |
) |
||
Share-based compensation (Note 13) |
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— |
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|
— |
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|
— |
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— |
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— |
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— |
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Net change in cumulative transition adjustment |
|
— |
|
|
— |
|
|
— |
|
|
— |
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|
— |
|
|
( |
) |
|
( |
) |
|
|
|
( |
) |
|
As of July 4, 2021 |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
( |
) |
$ |
|
$ |
( |
) |
||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)
For the 13 weeks and 26 weeks ended July 3, 2022
(in thousands) |
Common Stock |
|
Additional |
|
Accumulated |
|
Accumulated |
|
Treasury Stock |
|
Total Shareholders’ Equity Attributable to Membership Collective Group Inc. |
|
Noncontrolling |
|
Total |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
As of January 2, 2022 |
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||
Net loss |
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
|
( |
) |
Purchase of noncontrolling interests in connection with the Soho Restaurants Acquisition (Note 3) |
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
|
|
— |
|
|
Shares repurchased (Note 15) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
|
— |
|
|
( |
) |
Non-cash share-based compensation (Note 13) |
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|||
Net change in cumulative translation adjustment |
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|||
As of April 3, 2022 |
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
( |
) |
$ |
|
$ |
|
$ |
|
||||||
Net loss |
|
— |
|
|
— |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
( |
) |
|
( |
) |
||
Distributions to noncontrolling interest |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
Shares repurchased (Note 15) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
|
— |
|
|
( |
) |
Non-cash share-based compensation (Note 13) |
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|||
Additional IPO costs |
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
Net change in cumulative translation adjustment |
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|||
As of July 3, 2022 |
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
( |
) |
$ |
|
$ |
|
$ |
|
||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7
Membership Collective Group Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
For the 26 weeks ended July 3, 2022 and July 4, 2021
|
For the 26 Weeks Ended |
|
|||||
(in thousands) |
July 3, 2022 |
|
|
July 4, 2021 |
|
||
Cash flows from operating activities |
|
|
|
|
|
||
Net loss |
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash used in operating activities |
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
||
Non-cash share-based compensation (Note 13) |
|
|
|
|
|
||
Deferred tax benefit |
|
( |
) |
|
|
( |
) |
Gain on sale of property and other, net |
|
( |
) |
|
|
( |
) |
Share of (profit) loss of equity method investments |
|
( |
) |
|
|
|
|
Amortization of debt issuance costs |
|
|
|
|
|
||
Loss on debt extinguishment |
|
|
|
|
|
||
PIK interest (settled), net of non-cash interest |
|
|
|
|
( |
) |
|
Distributions from equity method investees |
|
|
|
|
|
||
Foreign exchange loss, net |
|
|
|
|
|
||
Changes in assets and liabilities: |
|
|
|
|
|
||
Accounts receivable |
|
( |
) |
|
|
( |
) |
Inventories |
|
( |
) |
|
|
( |
) |
Operating leases, net |
|
|
|
|
|
||
Other operating assets |
|
( |
) |
|
|
( |
) |
Deferred revenue |
|
|
|
|
( |
) |
|
Accounts payable and accrued and other liabilities |
|
|
|
|
|
||
Net cash provided by (used in) operating activities |
|
|
|
|
( |
) |
|
Cash flows from investing activities |
|
|
|
|
|
||
Purchase of property and equipment |
|
( |
) |
|
|
( |
) |
Proceeds from sale of assets |
|
|
|
|
|
||
Purchase of intangible assets |
|
( |
) |
|
|
( |
) |
Cash acquired in the Cipura Acquisition |
|
|
|
|
|
||
Acquisition of noncontrolling interests |
|
|
|
|
( |
) |
|
Net cash used in investing activities |
|
( |
) |
|
|
( |
) |
Cash flows from financing activities |
|
|
|
|
|
||
Repayment of borrowings (Note 11) |
|
( |
) |
|
|
( |
) |
Payment for debt extinguishment costs (Note 11) |
|
|
|
|
( |
) |
|
Issuance of related party loans |
|
|
|
|
|
||
Proceeds from borrowings (Note 11) |
|
|
|
|
|
||
Payments for debt issuance costs |
|
( |
) |
|
|
( |
) |
Principal payments on finance leases |
|
( |
) |
|
|
( |
) |
Principal payments on financing obligation |
|
( |
) |
|
|
( |
) |
Distributions to noncontrolling interest |
|
( |
) |
|
|
( |
) |
Contributions from noncontrolling interest |
|
|
|
|
|
||
Senior convertible preference shares issued, net of issuance costs (Note 14) |
|
|
|
|
|
||
Purchase of treasury stock (Note 15) |
|
( |
) |
|
|
|
|
Proceeds from issuance of SHHL redeemable C ordinary shares, net of issuance costs (Note 14) |
|
|
|
|
|
||
Additional IPO costs |
|
( |
) |
|
|
|
|
Net cash provided by financing activities |
|
|
|
|
|
||
Effect of exchange rate changes on cash and cash equivalents, and restricted cash |
|
( |
) |
|
|
|
|
Net increase (decrease) in cash and cash equivalents, and restricted cash |
|
|
|
|
( |
) |
|
Cash, cash equivalents and restricted cash |
|
|
|
|
|
||
Beginning of period |
|
|
|
|
|
||
End of period |
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8
Membership Collective Group Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
For the 26 weeks ended July 3, 2022 and July 4, 2021
|
For the 26 Weeks Ended |
|
|||||
(in thousands) |
July 3, 2022 |
|
|
July 4, 2021 |
|
||
Cash, cash equivalents and restricted cash are comprised of: |
|
|
|
|
|
||
Cash and cash equivalents |
|
|
|
|
|
||
Restricted cash |
|
|
|
|
|
||
Cash, cash equivalents and restricted cash as of July 3, 2022 and July 4, 2021 |
$ |
|
|
$ |
|
||
Supplemental disclosures: |
|
|
|
|
|
||
Cash paid for interest (including settlement of paid-in-kind interest for the 26 weeks ended July 4, 2021) |
$ |
|
|
$ |
|
||
Cash paid for income taxes |
|
|
|
|
|
||
Supplemental disclosures of non-cash investing and financing activities: |
|
|
|
|
|
||
C2 ordinary shares issued in exchange for acquisitions of businesses and noncontrolling interests |
$ |
|
|
$ |
|
||
Operating lease assets obtained in exchange for new operating lease liabilities |
|
|
|
|
|
||
Non-cash dividends on senior convertible preference shares (Note 14) |
|
|
|
|
|
||
Accrued capital expenditures as of July 3, 2022 and July 4, 2021 |
|
|
|
|
|
||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
9
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 3, 2022 and January 2, 2022 and for the 13 weeks and 26 weeks ended July 3, 2022 and July 4, 2021
Membership Collective Group Inc. (“MCG”) is a global membership platform of physical and digital spaces that connects a vibrant, diverse group of members from across the world. These members use the MCG platform to both work and socialize, to connect, create, have fun and drive a positive change. Our members engage with us through our global portfolio of 36 Soho Houses, 9 Soho Works Clubs, The Ned in London and New York, Scorpios Beach Club in Mykonos, Soho Home, our interiors and lifestyle retail brand, and our digital channels.
MCG was incorporated on February 10, 2021 under the laws of the State of Delaware. On July 19, 2021, we completed the initial public offering (“IPO”) of our Class A common stock pursuant to a Registration Statement on Form S-1 (File No. 333-257206). Immediately prior to the closing of the IPO, we completed the following reorganization transactions (the “Reorganization Transactions”) which resulted in changes to our common stock and issued and outstanding shares:
In the IPO, we sold
During periods preceding the IPO that are presented in these unaudited interim condensed consolidated financial statements, our business was conducted through SHHL, a Jersey, Channel Islands private limited company, and its subsidiaries and joint ventures. As a result of the Reorganization Transactions, SHHL became a wholly-owned subsidiary of MCG. Such transactions were accounted for as a reorganization and, therefore, the consolidated financial statements of MCG in periods after the IPO recognize the assets and liabilities received in the Reorganization Transactions at their historical carrying amounts, as reflected in the historical financial statements of SHHL.
The consolidated entity presented is referred to herein as “MCG”, “we”, “us”, “our”, or the “Company”, as the context requires and unless otherwise noted.
Basis of Presentation
The unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for reporting interim information on Form 10-Q. The preparation of the financial statements in conformity with US GAAP requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the periods presented. In preparing these unaudited condensed consolidated financial statements, we consistently applied the accounting policies described in our consolidated financial statements as of and for the year ended January 2, 2022 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 16, 2022, with the exception of the Revenue Recognition policy which has been updated to reflect the launch of the House Introduction Credits, as explained in further detail below.
We operate on a fiscal year calendar consisting of a 52-or 53-week period ending on the last Sunday in December or the first Sunday in January of the next calendar year. In a 52-week fiscal year, each quarter contains 13 weeks of operations; in a 53-week fiscal year, each of the first, second and third quarters includes 13 weeks of operations and the fourth quarter includes 14 weeks of operations.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been omitted in accordance with the rules and regulations of the SEC. The year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by US GAAP. The unaudited condensed consolidated financial statements include normal recurring adjustments, which in the opinion of management are necessary for the fair presentation of the unaudited condensed consolidated balance sheets, unaudited condensed consolidated statements of operations, of comprehensive loss, of changes in redeemable shares and shareholders’ equity (deficit), and of cash flows for the periods presented. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto, included in the Company’s Annual Report on Form 10-K as of and for the fiscal year ended January 2, 2022.
10
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 3, 2022 and January 2, 2022 and for the 13 Weeks and 26 Weeks Ended July 3, 2022 and July 4, 2021
The results of operations for the 13- and 26-week periods ended July 3, 2022 and July 4, 2021 are not necessarily indicative of the operating results for the full fiscal year or any future periods.
The unaudited condensed consolidated statement of operations for the 13 weeks and 26 weeks ended July 3, 2022 and the unaudited condensed consolidated balance sheet as of July 3, 2022 include the correction of an error related to the Company’s unaudited condensed consolidated financial statements as of and for the 13 weeks ended April 3, 2022 ("Q1 2022"), and the consolidated financial statements as of and for the 52 weeks ended January 2, 2022 ("Fiscal 2021"), 53 weeks ended January 3, 2021 ("Fiscal 2020"), and 52 weeks ended December 29, 2019 ("Fiscal 2019"). The error relates to the correction of the estimation of the historical operating lease liabilities which resulted in the overstatement of historical operating lease liability and assets by $
Certain prior period amounts have been reclassified to conform to the current period presentation with no impact on previously reported net loss or cash flows, and no material impact on financial position.
Revenue Recognition
House Introduction Credits
New members admitted on or after April 4, 2022 are required to purchase House Introduction Credits ("House Introduction Credits") as part of their membership, per the House rules. House Introduction Credits are credits of an equivalent value to cash within Houses and are redeemable against purchases of food and beverage items and bedroom stays at the Houses. House Introduction Credits expire after three months from the date of issuance, where legally permitted in the regions we operate, if not utilized or if the Company terminates a member's House membership. House Introduction Credits are recognized upon issuance as deferred revenue on our unaudited condensed consolidated balance sheets. Revenue from House Introduction Credits are recognized as In-House revenues when redeemed by members, and as breakage revenue within Membership revenues upon expiration or in the period when we are able to reliably estimate expected breakage and further redemption is deemed remote.
Going Concern
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared assuming the Company will continue as a going concern. The going concern basis of presentation assumes that we will continue in operation for at least a period of 12 months after the date these financial statements are issued, and contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
We have experienced net losses and significant cash outflows from cash used in operating activities over the past years as we develop our Houses. During the 13 weeks and 26 weeks ended July 3, 2022, the Company incurred a consolidated net loss of $
In addition, we have had to temporarily close some of our Houses, hotels and public restaurants, at different times in prior periods due to continued effects of the COVID-19 pandemic, which has and may continue to have an impact on our revenues. At the date of issuance of these unaudited condensed consolidated financial statements, all of our Houses are open (with some limited short-term exceptions unrelated to the COVID-19 pandemic).
In assessing the going concern basis of preparation of the unaudited condensed consolidated financial statements for the 13 weeks and 26 weeks ended July 3, 2022, we have taken into consideration detailed cash flow forecasts for the Company, the Company’s forecast compliance with bank covenants, and the continued availability of committed and accessible working capital to the Company.
We have considered the current global economic and political uncertainties, specifically including inflationary pressures on consumables purchased and wages, as well as any further possible impacts from the COVID-19 pandemic and the Company has factored these in when it undertook an assessment of the cash flow forecasts covering a period of at least 12 months from the date these financial statements are issued. Cash flow forecasts have been prepared based on a range of scenarios including, but not limited to, no further debt or equity funding, macro-economic dynamics, possible temporary closures of our properties from any further impact of the COVID-19 pandemic (which impacts the Company’s ability to keep open Houses and maintain a level of operations consistent with pre COVID-19 times), cost reductions, both limited and extensive, and a combination of these different scenarios.
We believe that our projected cash flows and the actions available to management to further control expenditure, as necessary, provide the Company with sufficient working capital (including cash and cash equivalents) to achieve its plans of continued recovery from the impact of the pandemic and mitigating the impacts of inflationary pressures and consumer confidences, subject to the following key factors:
11
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 3, 2022 and January 2, 2022 and for the 13 Weeks and 26 Weeks Ended July 3, 2022 and July 4, 2021
• the continued access to Houses in a manner that is compliant with local laws and regulations, including the relaxing of mandatory capacity constraints, as well as anticipated demand;
• the level of in-House sales activity (primarily sales of food and beverage) that, even after opening, may be subject to reduced capacity as a result of any future restrictions;
• the continued high level of membership retention and renewals, together with members continuing their current spending patterns; and
• the implementation of cost containment and reductions measures that are aligned with the anticipated levels of capacity.
Furthermore, available cash as a result of completed financing events, includes the exercising of an option on March 9, 2022 for issued additional notes under the existing senior secured notes for $
This, together with the Company’s wider sufficient financial resources, an established business model, access to capital and the measures that have been put in place to control costs, mean that we believe that the Company is able to continue in operational existence, meet its liabilities as they fall due, operate within its existing facilities, and meet all of its covenant requirements for a period of at least 12 months from the date these financial statements are issued.
Based on the above, the unaudited condensed consolidated financial statements have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, we continue to adopt the going concern basis in preparing the unaudited condensed consolidated financial statements for the 13 weeks and 26 weeks ended July 3, 2022.
12
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 3, 2022 and January 2, 2022 and for the 13 Weeks and 26 Weeks Ended July 3, 2022 and July 4, 2021
Comprehensive Loss
The entire balance of accumulated other comprehensive loss, net of income taxes, is related to the cumulative translation adjustment in each of the periods presented.
The Company determined that it is the primary beneficiary of the following material variable interest entities (“VIEs”): Soho Restaurants Limited; Ned-Soho House, LLP; Soho Works Limited; and Soho Works North America, LLC.
Soho Restaurants Limited
Soho Restaurants Limited (“Soho Restaurants”) is a casual fast-dining business that operates various restaurants throughout the UK. Prior to the August 2020 reorganization of Soho Restaurants (as further described below), the Company provided unsecured non-interest-bearing loan notes (“Soho Restaurants Loan Notes”) to Soho Restaurants from time to time and guaranteed the obligations of Soho Restaurants under certain property leases with respect to any required rental and other payments.
On August 18, 2020, Soho Restaurants underwent a series of reorganization steps, through which Quentin Partners Limited (“Quentin Partners”), an affiliate of the Company, became the sole equity holder of Soho Restaurants. As a result of the reorganization and the Company’s variable interest in Soho Restaurants (consisting primarily of the Soho Restaurants Loan Note that remained outstanding after the reorganization and certain lease guarantees), the Company determined that it is the primary beneficiary of Soho Restaurants due to its related party affiliation with Quentin Partners and its funding of the majority of Soho Restaurants’ operations. As such, the Company began consolidating Soho Restaurants on August 18, 2020 and accounted for the Soho Restaurants reorganization using the acquisition method of accounting.
On March 29, 2022, the Company acquired all of the outstanding equity interests of Soho Restaurants for nominal consideration (the “Soho Restaurants Acquisition”) from Quentin Partners. Because the Company consolidated Soho Restaurants prior to the Soho Restaurants Acquisition, the Company accounted for the Soho Restaurants Acquisition as a transaction with a noncontrolling interest holder that did not result in a change of control. The Company derecognized a noncontrolling deficit of $
Also, on March 29, 2022, Soho Restaurants also entered into a Trademark Assignment with Chick’n Limited, pursuant to which Soho Restaurants has agreed to transfer the rights to certain intangible assets to Chick’n Limited in exchange for three separate cash payments over a one-year period, commencing on March 29, 2022, totaling £
Concurrently, on March 29, 2022, Soho Restaurants entered into a royalty-free Product License Agreement with Chick’n Limited, pursuant to which Chick’n Limited has agreed to grant the Company a non-exclusive, royalty-free license to produce and sell certain burgers at certain Soho Restaurant properties for a term of two years. Other than with respect to this limited license, Soho Restaurants has no legal right to the product.
Ned-Soho House, LLP
The Ned-Soho House, LLP joint venture maintains a management agreement to operate The Ned, which is owned by unconsolidated related parties to the Company. Management fees are recognized in other revenues in the unaudited condensed consolidated statements of operations.
Soho Works Limited and Soho Works North America, LLC
The following table summarizes the carrying amounts and classification of the consolidated VIEs’ assets and liabilities included in the unaudited condensed consolidated balance sheets. The obligations of the consolidated VIEs other than Soho Restaurants are non-recourse to the Company, and the assets of the VIEs can be used only to settle those obligations.
13
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 3, 2022 and January 2, 2022 and for the 13 Weeks and 26 Weeks Ended July 3, 2022 and July 4, 2021
|
|
As of |
|
|||||
(in thousands) |
|
July 3, 2022 |
|
|
January 2, 2022 |
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Accounts receivable |
|
|
|
|
|
|
||
Inventories |
|
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
|
|
|
|
||
Total current assets |
|
|
|
|
|
|
||
Property and equipment, net |
|
|
|
|
|
|
||
Operating lease assets |
|
|
|
|
|
|
||
Other intangible assets, net |
|
|
|
|
|
|
||
Other non-current assets |
|
|
|
|
|
|
||
Total assets |
|
|
|
|
|
|
||
Accounts payable |
|
|
|
|
|
|
||
Accrued liabilities |
|
|
|
|
|
|
||
Indirect and employee taxes payable |
|
|
|
|
|
|
||
Current portion of debt |
|
|
|
|
|
|
||
Current portion of operating lease liabilities - sites trading more than one year |
|
|
|
|
|
|
||
Other current liabilities |
|
|
|
|
|
|
||
Total current liabilities |
|
|
|
|
|
|
||
Related party loans, net of current portion and imputed interest |
|
|
|
|
|
|
||
Operating lease liabilities, net of current portion - sites trading more than one year |
|
|
|
|
|
|
||
Other non-current liabilities |
|
|
|
|
|
|
||
Total liabilities |
|
|
|
|
|
|
||
Net (liabilities) assets |
|
$ |
( |
) |
|
$ |
|
|
The Company maintains a portfolio of equity method investments owned through noncontrolling interests in investments with one or more partners. There have been no changes in the Company’s equity method investment ownership interests in existing entities and
Toronto Joint Venture
On March 28, 2012, the Company and two unrelated investors (“Toronto Partners”) formed Soho House Toronto to establish and operate a House in Toronto, Canada. The Company is responsible for managing the development and operations of the property with key operating decisions requiring joint approval with the Toronto Partners.
56-60 Redchurch Street, London Joint Venture
On July 6, 2015, the Company and a related party investor (“Raycliff Partner”) formed Raycliff Red LLP (“Club Row Rooms”) to develop and operate a hotel at 58-60 Redchurch Street intended to provide additional members’ accommodation to the nearby Shoreditch House in London. This was later extended to include 56 Redchurch Street under the same terms. The Company is responsible for managing the operations of the property and the Raycliff Partner is responsible for managing the building.
The Company concluded that it is not the primary beneficiary of the Soho House Toronto or 56-60 Redchurch Street, London VIEs in any of the periods presented, as its joint venture partners have the power to participate in making decisions related to the majority of significant activities of each investee. Accordingly, the Company concluded that application of the equity method of accounting is appropriate for these investees.
Summarized Financial Information
The following tables present summarized financial information for all unconsolidated equity method investees. The Company’s maximum exposure to losses related to its equity method investments is limited to its ownership interests, as well as certain guarantees.
14
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 3, 2022 and January 2, 2022 and for the 13 Weeks and 26 Weeks Ended July 3, 2022 and July 4, 2021
|
|
For the 13 Weeks Ended |
|
|
For the 26 Weeks Ended |
|
||||||||||
(in thousands) |
|
July 3, 2022 |
|
|
July 4, 2021⁽¹⁾ |
|
|
July 3, 2022 |
|
|
July 4, 2021⁽¹⁾ |
|
||||
Revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Operating income (loss) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Net income (loss)(2) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
|
|
As of |
|
|||||
(in thousands) |
|
July 3, 2022 |
|
|
January 2, 2022 |
|
||
Current assets |
|
$ |
|
|
$ |
|
||
Non-current assets |
|
|
|
|
|
|
||
Total assets |
|
|
|
|
|
|
||
Current liabilities |
|
|
|
|
|
|
||
Non-current liabilities |
|
|
|
|
|
|
||
Total liabilities |
|
|
|
|
|
|
||
Net assets |
|
$ |
|
|
$ |
|
||
The Company’s equity method investees have not yet adopted ASC 842, Leases (“Topic 842”); therefore, the balance sheets of equity method investees do not include operating right-of-use assets and liabilities.
The Company has entered into various lease agreements for its Houses, hotels, restaurants, spas and other properties across North America, Europe, and Asia. The Company’s material leases have reasonably assured lease terms ranging from
As part of our overall plan to improve liquidity during the COVID-19 pandemic, the Company negotiated with certain lessors to defer or waive certain rent payments on leased buildings. Cash payment deferrals and waivers have been separately recorded in the period arrangements occurred, and therefore, there have been no remeasurements to the lease liabilities and right-of-use assets associated with the sites that received concessions. The Company accounted for the deferrals of lease payments as if there are no changes in the lease contract. Deferred amounts have been recognized in accounts payable and subsequent reversals will occur once the payments are made. As of July 3, 2022 and January 2, 2022, $
15
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 3, 2022 and January 2, 2022 and for the 13 Weeks and 26 Weeks Ended July 3, 2022 and July 4, 2021
The maturity of the Company’s operating and finance lease liabilities as of July 3, 2022 is as follows:
(in thousands) |
|
Operating |
|
|
Finance |
|
||
Undiscounted lease payments |
|
|
|
|
|
|
||
Remainder of 2022 |
|
$ |
|
|
$ |
|
||
2023 |
|
|
|
|
|
|
||
2024 |
|
|
|
|
|
|
||
2025 |
|
|
|
|
|
|
||
2026 |
|
|
|
|
|
|
||
Thereafter |
|
|
|
|
|
|
||
Total undiscounted lease payments |
|
|
|
|
|
|
||
Present value adjustment |
|
|
|
|
|
|
||
Total net lease liabilities |
|
$ |
|
|
$ |
|
||
As of July 3, 2022 and January 2, 2022, the long-term liabilities for finance leases were $
Certain lease agreements include variable lease payments that, in the future, will vary based on changes in the local inflation rates, market rate rents, or business revenues of the leased premises. Leases that contain market rate rents generally reset every
Straight-line rent expense recognized for operating leases was $
For the 13 weeks ended July 3, 2022 and July 4, 2021, the Company recognized amortization expense related to the right-of-use asset for finance leases of less than $
New Houses typically have a maturation profile that commences sometime after the lease commencement date used in the determination of the lease accounting in accordance with Topic 842. The unaudited condensed consolidated balance sheets set out the operating lease liabilities split between sites trading less than one year and sites trading more than one year. “Sites trading less than one year” and “sites trading more than one year” reference sites that have been open (as measured from the date the site first accepted a paying guest) for a period less than one year from the balance sheet date and those that have been open for a period longer than one year from the balance sheet date.
The following information represents supplemental disclosure for the statement of cash flows related to operating and finance leases:
|
|
For the 26 Weeks Ended |
|
|||||
(in thousands) |
|
July 3, 2022 |
|
|
July 4, 2021 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
||
Operating cash flows from operating leases |
|
$ |
( |
) |
|
$ |
( |
) |
Interest payments for finance leases |
|
|
( |
) |
|
|
( |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
||
Principal payments for finance leases |
|
$ |
( |
) |
|
$ |
( |
) |
Supplemental disclosures of non-cash investing and financing activities: |
|
|
|
|
|
|
||
Operating lease assets obtained in exchange for new operating lease liabilities |
|
$ |
|
|
$ |
|
||
16
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 3, 2022 and January 2, 2022 and for the 13 Weeks and 26 Weeks Ended July 3, 2022 and July 4, 2021
The following summarizes additional information related to operating and finance leases:
|
|
As of |
||
|
|
July 3, 2022 |
|
January 2, 2022 |
Weighted-average remaining lease term |
|
|
|
|
Finance leases |
|
|
||
Operating leases |
|
|
||
Weighted-average discount rate |
|
|
|
|
Finance leases |
|
|
||
Operating leases |
|
|
||
As of July 3, 2022, the Company has entered into 13 lease agreements for Houses, hotels, restaurants, and other properties that are in various stages of construction by the landlord. The Company will determine the classification as of the lease commencement date, but currently expects these under construction leases to be operating leases. Soho House Design (“SHD”) is involved to varying degrees in the design of these leased properties under construction. For certain of these leases, the SHD team is acting as the construction manager on behalf of the landlord. Pending significant completion of all landlord improvements and final execution of the related lease, the Company expects these leases to commence in fiscal years ending 2022, 2023, 2024, and 2025. The Company estimates the total undiscounted lease payments for the leases commencing in fiscal years ended 2022, 2023, 2024, and 2025 will be $
The following summarizes the Company’s estimated future undiscounted lease payments for current leases under construction, including properties where the SHD team is acting as the construction manager:
(in thousands) |
|
Operating |
|
|
Fiscal year ended |
|
Construction |
|
|
Estimated total undiscounted lease payments |
|
|
|
|
Remainder of 2022 |
|
$ |
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
Thereafter |
|
|
|
|
Total undiscounted lease payments expected to be capitalized |
|
$ |
|
|
The Company’s revenues consist primarily of annual membership fees, and initial registration fees paid by members historically; food and beverage, accommodation and spa revenues generated in the Company’s Houses; and revenues that are not generated within the Houses, such as revenues from Scorpios Beach Club, Soho Works sites and our stand-alone restaurants, procurement fees from SHD, Soho Home and Cowshed retail products, and other revenues from products and services that we provide outside of our Houses, as well as management fees from The Ned and The LINE and Saguaro hotels. Disaggregated revenue disclosures by reportable segments for the 13 weeks and 26 weeks ended July 3, 2022 and July 4, 2021 are included in Note 18, Segments.
The following table includes estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period ended July 3, 2022.
(in thousands) |
Next twelve |
|
|
Future periods |
|
||
Membership, registration fees, and House Introduction Credits |
$ |
|
|
$ |
|
||
Total future revenues |
$ |
|
|
$ |
|
||
All consideration from contracts with customers is included in the amounts presented above.
The following table provides information about contract receivables, contract assets and contract liabilities from contracts with customers:
17
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 3, 2022 and January 2, 2022 and for the 13 Weeks and 26 Weeks Ended July 3, 2022 and July 4, 2021
|
|
As of |
|
|||||
(in thousands) |
|
July 3, 2022 |
|
|
January 2, 2022 |
|
||
Contract receivables |
|
$ |
|
|
$ |
|
||
Contract assets |
|
|
|
|
|
|
||
Contract liabilities |
|
|
|
|
|
|
||
Contract assets consist of accrued unbilled income related to build-out contracts and are recognized in prepaid expenses and other current assets on the unaudited condensed consolidated balance sheets.
Contract liabilities include deferred membership revenue, hotel deposits (which are presented in accrued liabilities on the unaudited condensed consolidated balance sheets), and gift vouchers. Revenue recognized that was included in the contract liabilities balance as of the beginning of the period was $
Inventories consist of raw materials, service stock and supplies (primarily food and beverage) and finished goods which are externally sourced. Raw materials and service stock and supplies totaled $
The table below presents the components of prepaid expenses and other current assets.
|
|
As of |
|
|||||
(in thousands) |
|
July 3, 2022 |
|
|
January 2, 2022 |
|
||
Amounts owed by equity method investees |
|
$ |
|
|
$ |
|
||
Prepayments and accrued income |
|
|
|
|
|
|
||
Contract assets |
|
|
|
|
|
|
||
Other receivables |
|
|
|
|
|
|
||
Total prepaid expenses and other current assets |
|
$ |
|
|
$ |
|
||
Additions totaled $
A summary of goodwill for each of the Company’s applicable reportable segments from January 2, 2022 to July 3, 2022 is as follows:
(in thousands) |
|
UK |
|
|
North America |
|
|
Europe and |
|
|
Total |
|
||||
January 2, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Foreign currency translation adjustment |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
July 3, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
18
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 3, 2022 and January 2, 2022 and for the 13 Weeks and 26 Weeks Ended July 3, 2022 and July 4, 2021
The table below presents the components of accrued liabilities.
|
|
As of |
|
|||||
(in thousands) |
|
July 3, 2022 |
|
|
January 2, 2022 |
|
||
Accrued interest |
|
$ |
|
|
$ |
|
||
Hotel deposits |
|
|
|
|
|
|
||
Trade, capital and other accruals |
|
|
|
|
|
|
||
Total accrued liabilities |
|
$ |
|
|
$ |
|
||
Debt balances, net of debt issuance costs, are as follows:
|
|
As of |
|
|||||
(in thousands) |
|
July 3, 2022 |
|
|
January 2, 2022 |
|
||
Senior Secured Notes, interest at |
|
$ |
|
|
$ |
|
||
Other loans (see additional description below) |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Less: Current portion of long-term debt |
|
|
( |
) |
|
|
( |
) |
Total long-term debt, net of current portion |
|
$ |
|
|
$ |
|
||
Property mortgage loans, net of debt issuance costs, are as follows:
|
|
As of |
|
|||||
(in thousands) |
|
July 3, 2022 |
|
|
January 2, 2022 |
|
||
Term loan, interest at |
|
$ |
|
|
$ |
|
||
Mezzanine loan, interest at |
|
|
|
|
|
|
||
Total property mortgage loans |
|
$ |
|
|
$ |
|
||
Related party loans, net of current portion and imputed interest, are as follows:
|
|
As of |
|
|||||
(in thousands) |
|
July 3, 2022 |
|
|
January 2, 2022 |
|
||
Related party loans, unsecured, |
|
$ |
|
|
$ |
|
||
Related party loans, unsecured, |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Less: Current portion of related party loans |
|
|
( |
) |
|
|
( |
) |
Total related party loans, net of current portion |
|
$ |
|
|
$ |
|
||
The weighted-average interest rate on fixed rate borrowings was
Debt
The descriptions below show the financial instrument amounts in the currency of denomination with the United States dollar (“USD”) equivalent in parentheses, where applicable, translated using the exchange rates in effect at the time of the respective transaction.
On December 5, 2019, the Company entered into a £
19
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 3, 2022 and January 2, 2022 and for the 13 Weeks and 26 Weeks Ended July 3, 2022 and July 4, 2021
changed the reference rate under the Revolving Credit Facility for borrowings denominated in British pound sterling (“GBP”) from a LIBOR-based rate to a SONIA-based rate and to transition reporting from accounting principles generally accepted in the United Kingdom to US GAAP. On February 11, 2022, the Company amended the Revolving Credit Facility to extend the maturity date to January 25, 2024. During the fiscal year ended January 2, 2022, the Company repaid the entire outstanding balance of the facility with proceeds from the IPO. As of July 3, 2022 and January 2, 2022, £
In April 2017, the Company entered into the Permira Senior Facility, which consisted of a £
On April 24, 2020, the Company entered into an unsecured promissory note under the Paycheck Protection Program (the “PPP”), with a principal amount of $
On March 31, 2021, Soho House Bond Limited, a wholly-owned subsidiary of the Company, issued senior secured notes pursuant to a Notes Purchase Agreement, which were subscribed for by certain funds managed, sponsored or advised by Goldman Sachs & Co. LLC or its affiliates, in aggregate amounts equal to $
The remaining loans consist of the following:
|
|
Currency |
|
Maturity date |
|
Principal |
|
|
Applicable |
|
||
Greek Street loan |
|
£ |
|
|
$ |
|
|
|
% |
|||
Farmhouse loan |
|
£ |
|
|
|
|
|
|
% |
|||
Compagnie de Phalsbourg credit facility |
|
€ |
|
|
|
|
|
|
% |
|||
Greek government loan |
|
€ |
|
|
|
|
|
|
% |
|||
Property Mortgage Loans
In February 2019, the Company refinanced an existing term loan and mezzanine loan associated with a March 2014 corporate acquisition of Soho Beach House Miami with a new term loan and mezzanine loan. The new term loan of $
20
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 3, 2022 and January 2, 2022 and for the 13 Weeks and 26 Weeks Ended July 3, 2022 and July 4, 2021
Related Party Loans
In 2017, SWL entered into a £
In August 2020, the Company entered into a non-interest bearing loan agreement with a noncontrolling interest shareholder of certain of its subsidiaries in Greece for a principal amount of less than €
Future Principal Payments
The following table presents future principal payments for the Company’s debt, property mortgage loans, and related party loans as of July 3, 2022:
(in thousands) |
|
|
|
|
Remainder of 2022 |
|
$ |
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
Thereafter |
|
|
|
|
|
|
$ |
|
|
Recurring and Non-recurring Fair Value Measurements
There were
Fair Value of Financial Instruments
The Company believes the carrying values of its financial instruments related to current assets and liabilities approximate fair value due to short-term maturities.
The Company has estimated the fair value of the debt as of July 3, 2022 and the fair value of the Senior Secured Notes as of January 2, 2022 using a discounted cash flow analysis. The fair value of the property mortgage loans and other non-current debt as of January 2, 2022 is estimated to be equal to the current carrying value of each instrument based on a comparison of each instrument’s contractual terms to current market terms. The Company does not believe that the use of different market inputs would have resulted in a materially different fair value of debt as of July 3, 2022 and January 2, 2022.
The following table presents the estimated fair values (all of which are Level 3 fair value measurements) of the Company’s debt instruments with maturity dates in 2023 and thereafter:
(in thousands) |
|
Carrying Value |
|
|
Fair Value |
|
||
July 3, 2022 |
|
|
|
|
|
|
||
Senior Secured Notes |
|
$ |
|
|
$ |
|
||
Property mortgage loans |
|
|
|
|
|
|
||
Other non-current debt |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
(in thousands) |
|
Carrying Value |
|
|
Fair Value |
|
||
January 2, 2022 |
|
|
|
|
|
|
||
Senior Secured Notes |
|
$ |
|
|
$ |
|
||
Property mortgage loans |
|
|
|
|
|
|
||
Other non-current debt |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
21
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 3, 2022 and January 2, 2022 and for the 13 Weeks and 26 Weeks Ended July 3, 2022 and July 4, 2021
The carrying values of the Company’s other non-current liabilities and non-current assets approximate their fair values.
In August 2020, the Company established the 2020 Equity and Incentive Plan (the “2020 Plan”) under which SHHL Share Appreciation Rights (“SARs”) and SHHL Growth Shares were issued to certain employees. The awards are settled in ordinary D shares of SHHL and the Company can grant up to
In December 2021, the Company granted
In July 2021, the Company established its 2021 Equity and Incentive Plan (the “2021 Plan”). The 2021 Plan allows for grants of nonqualified stock options, SARs, and restricted stock units (“RSUs”), or performance awards. There were
Share-based compensation during the 13 weeks and 26 weeks ended July 3, 2022 and July 4, 2021 was recorded in the unaudited condensed consolidated statements of operations within a separate line item as shown in the following table:
|
|
For the 13 Weeks Ended |
|
|
For the 26 Weeks Ended |
|
||||||||||
(in thousands) |
|
July 3, 2022 |
|
|
July 4, 2021 |
|
|
July 3, 2022 |
|
|
July 4, 2021 |
|
||||
SARs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Restricted stock awards (Growth Shares) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
RSUs |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Employer-related payroll expense(1) |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Total share-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Tax benefit for share-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Share-based compensation expense, net of tax |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
As of July 3, 2022, total compensation expense not yet recognized is as follows:
On March 31, 2021, the Company issued
22
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 3, 2022 and January 2, 2022 and for the 13 Weeks and 26 Weeks Ended July 3, 2022 and July 4, 2021
In March 2021, the Company issued
Prior to the IPO, SHHL had five classes of ordinary shares: A ordinary shares , B ordinary shares, C ordinary shares (a portion of which had certain redemption rights), C2 ordinary shares and D ordinary shares. Immediately prior to the closing of the IPO, affiliates of The Yucaipa Companies, LLC, and Messrs. Ron Burkle, Nick Jones, and Richard Caring exchanged their SHHL A ordinary shares, B ordinary shares, C ordinary shares and D ordinary shares for
Holders of Class A common stock and Class B common stock are entitled to receive dividends out of legally available funds on a pari passu basis. Holders of Class A common stock are entitled to
The tables below present changes in each class of the Company’s redeemable preferred shares, ordinary shares and common stock, as applicable:
|
|
|
|
|
|
SHHL Ordinary Shares |
|
|||||||||||||||
|
SHHL Redeemable Preferred Shares |
|
SHHL Redeemable C Ordinary Shares |
|
|
A |
|
B |
|
C |
|
C2 |
|
D |
|
|||||||
As of January 3, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Issuance of SHHL senior convertible preference shares (Note 14) |
|
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Issuance of SHHL redeemable C ordinary shares (Note 14) |
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
As of April 4, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
SHHL C2 ordinary shares issued in connection with the Cipura Acquisition |
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
SHHL C2 ordinary shares issued in connection with the Mandolin Acquisition |
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
Purchase of Soho Works North America noncontrolling interests |
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
Purchase of Scorpios noncontrolling interests |
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
SHHL C2 ordinary shares issued in connection with the LINE and Saguaro Acquisition |
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
As of July 4, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
MCG Common Stock |
|
||||
|
|
Class A |
|
Class B |
|
||
As of January 2, 2022 |
|
|
|
|
|
||
Shares repurchased |
|
|
( |
) |
|
|
|
RSUs vested |
|
|
|
|
|
||
As of April 3, 2022 |
|
|
|
|
|
||
Shares repurchased |
|
|
( |
) |
|
|
|
As of July 3, 2022 |
|
|
|
|
|
||
Stock Repurchase Program
On March 18, 2022, the Company’s board of directors and a relevant sub-committee thereof authorized and approved a stock repurchase program for up to $
23
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 3, 2022 and January 2, 2022 and for the 13 Weeks and 26 Weeks Ended July 3, 2022 and July 4, 2021
stock held in treasury at average cost. During the 13 weeks and 26 weeks ended July 3, 2022, the Company repurchased a total of
Loss per Share
The Company computes loss per share using the two-class method. As the liquidation and dividend rights are identical, the undistributed earnings or losses are allocated on a proportionate basis to each class of common stock, and the resulting basic and diluted loss per share attributable to common stockholders are therefore the same for Class A and Class B common stock.
As discussed in Note 1, Nature of the Business, immediately prior to the IPO, the Company completed certain Reorganization Transactions which resulted in changes to our common stock and issued and outstanding shares but no change in relative shareholder rights, rank, or value before and after the Reorganization Transactions. As such, the Reorganization Transactions were considered to have an equivalent effect to a stock split and require retrospective treatment for purposes of computing loss per share. All share and per share information has been retroactively adjusted to reflect the impact of the Reorganization Transactions for all periods presented.
The table below illustrates the reconciliation of the loss and the number of shares used in the calculations of basic and diluted loss per share:
|
|
For the 13 Weeks Ended |
|
|
For the 26 Weeks Ended |
|
||||||||||
(in thousands except share and per share amounts) |
|
July 3, 2022 |
|
|
July 4, 2021 |
|
|
July 3, 2022 |
|
|
July 4, 2021 |
|
||||
Net loss attributable to Membership Collective Group Inc. |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Less: Cumulative SHHL preferred shares undeclared dividends |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Less: Incremental accretion of SHHL preferred shares to |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Add: Foreign currency remeasurement of SHHL preferred shares |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Less: Non-cash dividends on the SHHL senior convertible preference shares |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Adjusted net loss attributable to Class A and Class B common stockholders |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Weighted average shares outstanding for basic and diluted loss per share for Class A and Class B common stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic and diluted loss per share |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
The net loss attributable to the Company in calculating basic and diluted loss per share for the 13 weeks and 26 weeks ended July 4, 2021 is adjusted for cumulative undeclared dividends on certain SHHL preferred shares, which were redeemed for cash in July 2021. The loss per share calculations for the 13 weeks and 26 weeks ended July 4, 2021 exclude additional shares that would be issuable to the holders of SHHL redeemable C ordinary shares in the event of a public listing that resulted in the value of the SHHL redeemable C ordinary shares being less than the investor’s initial subscription price, because the impact of including such additional shares would be anti-dilutive. In addition, the loss per share calculations for the 13 weeks and 26 weeks ended July 3, 2022 and July 4, 2021 exclude the impact of unvested SHHL Growth Shares (which were exchanged into restricted stock awards in connection with the IPO) because the inclusion of such shares in diluted loss per share would be anti-dilutive.
Litigation Matters
The Company is not a party to any litigation other than litigation in the ordinary course of business. The Company’s management and legal counsel do not expect that the ultimate outcome of any of its currently ongoing legal proceedings, individually or collectively, will have a material adverse effect on the Company’s unaudited condensed consolidated financial statements.
Commitments and Contingencies
In connection with the closure of Houses across the world beginning on March 14, 2020, the Company in its sole discretion issued membership credits to Soho House members to be redeemed for certain Soho House products and services. Membership credits were issued by the Company as a one-time goodwill gesture deemed to be a marketing offer to Soho House members, and were initially set to expire on December 31, 2020. The liability associated with the membership credits was derecognized based on the usage of credits and the cost of the inventory or services to fulfill the Company’s obligation to its Soho House members and was classified within other current liabilities on the Company’s unaudited condensed consolidated balance sheet. In March 2021, the Company decided in its discretion to extend the expiration date of the membership credits to September 30, 2021. The Company simultaneously adjusted its obligation based on its best estimate of the cost to be incurred. The redemption rate used to estimate the obligation associated with the membership credits was based on the Company’s cumulative experience to-date. The Company recognized marketing expenses of $
24
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 3, 2022 and January 2, 2022 and for the 13 Weeks and 26 Weeks Ended July 3, 2022 and July 4, 2021
and $
Capital Commitments
As of July 3, 2022, capital expenditure commitments contracted for but not yet incurred total $
Business Interruption and Property Insurance
The Company maintains insurance policies to cover business interruption with terms that management believes to be adequate and appropriate. These policies may be subject to applicable deductible or retention amounts, coverage limitations and exclusions and may not be sufficient to cover all of the losses incurred. The Company did not incur any losses during the 13 weeks and 26 weeks ended July 4, 2021.
In February 2022, there was a fire at Little Beach House Malibu which resulted in full House closure until April 2022. As a result of the fire damage, the Company recorded business interruption insurance proceeds totaling less than $
In addition, the Company recognized recoveries totaling less than $
The Company has recognized a receivable in connection with outstanding insurance recoveries, which is included in prepaid expenses and other current assets on the unaudited condensed consolidated balance sheets. Collection of the receivable is deemed to be probable.
In July 2021, the Company carried out a legal entity restructuring which resulted in the formation of Membership Collective Group Inc., a US domiciled corporation, as the parent entity of the Company. Prior to July 2021, the parent entity of the Company was a UK domiciled entity.
For the 13 weeks and 26 weeks ended July 3, 2022, there have been no material changes in the Company’s estimates or provisions for income taxes recorded in the unaudited condensed consolidated balance sheet. The Company has generated incremental deferred tax assets relating to tax losses, share-based compensation, and excess interest of $
The effective tax rate for the 13 weeks ended July 3, 2022 was (
The Company’s core operations comprise of Houses and restaurants across a number of territories, which are managed on a geographical basis. In addition to Houses and restaurants, the Company offers other products and services, such as retail, home & beauty products and services, which comprise its Retail operating segment; access to Soho Works collaboration spaces across the UK and North America, which comprise its Soho Works operating segment; and memberships for people who live in cities where physical Houses do not exist, which comprise its Cities Without Houses operating segment.
The Company has identified the following three reportable segments:
The manner in which the Company’s Chief Operating Decision Maker (“CODM”) assesses information for decision-making purposes changed during the fourth quarter of the fiscal year ended January 2, 2022. SHD, which was previously a separate reportable segment, is no longer a separate operating segment or reportable segment since the CODM does not review discrete financial information for the business. In addition, Soho Restaurants, which was previously not a separate operating or reportable segment, became a separate operating segment since the CODM reviews discrete financial information for the business. The Company restated segment information for the historical periods presented herein to conform to the current
25
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 3, 2022 and January 2, 2022 and for the 13 Weeks and 26 Weeks Ended July 3, 2022 and July 4, 2021
presentation. This change in segment presentation does not affect the Company’s unaudited condensed consolidated statements of operations, balance sheets or statements of cash flows.
The Company analyzed the results of the Retail, Soho Works, Soho Restaurants, and Cities Without Houses operating segments and concluded that they did not warrant separate presentation as reportable segments as they do not provide additional useful information to the readers of the financial statements. Therefore, these segments are included as part of an “All Other” category.
The Company manages and assesses the performance of the reportable segments by adjusted EBITDA, which is defined as net income (loss) before depreciation and amortization, interest expense, net, provision (benefit) for income taxes, adjusted to take account of the impact of certain non-cash and other items that the Company does not consider in its evaluation of ongoing operating performance. These other items include, but are not limited to, loss (gain) on sale of property and other, net, share of loss (profit) of equity method investments, foreign exchange, pre-opening expenses, non-cash rent, deferred registration fees, net, deferred revenue from House Introduction Credits, share of equity method investments adjusted EBITDA, share-based compensation expense, and certain other expenses.
The following tables present disaggregated revenue for the 13 weeks and 26 weeks ended July 3, 2022 and July 4, 2021 and the key financial metrics reviewed by the CODM for the Company’s reportable segments:
|
|
For the 13 Weeks Ended July 3, 2022 |
|
|||||||||||||||||||||
(in thousands) |
|
North |
|
|
UK |
|
|
Europe |
|
|
Reportable |
|
|
All |
|
|
Total |
|
||||||
Membership revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
In-House revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total segment revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Elimination of equity accounted revenue |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Consolidated revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
|
|
For the 13 Weeks Ended July 4, 2021 |
|
|||||||||||||||||||||
(in thousands) |
|
North |
|
|
UK |
|
|
Europe & |
|
|
Reportable |
|
|
All |
|
|
Total |
|
||||||
Membership revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
In-House revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total segment revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Elimination of equity accounted revenue |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Consolidated revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
|
|
For the 26 Weeks Ended July 3, 2022 |
|
|||||||||||||||||||||
(in thousands) |
|
North |
|
|
UK |
|
|
Europe |
|
|
Reportable |
|
|
All |
|
|
Total |
|
||||||
Membership revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
In-House revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total segment revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Elimination of equity accounted revenue |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Consolidated revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
26
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 3, 2022 and January 2, 2022 and for the 13 Weeks and 26 Weeks Ended July 3, 2022 and July 4, 2021
|
|
For the 26 Weeks Ended July 4, 2021 |
|
|||||||||||||||||||||
(in thousands) |
|
North |
|
|
UK |
|
|
Europe & |
|
|
Reportable |
|
|
All |
|
|
Total |
|
||||||
Membership revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
In-House revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total segment revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Elimination of equity accounted revenue |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Consolidated revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
The following tables present the reconciliation of reportable segment adjusted EBITDA to total consolidated segment revenue and the reconciliation of net loss to adjusted EBITDA:
|
|
For the 13 Weeks Ended July 3, 2022 |
|
|||||||||||||||||||||
(in thousands) |
|
North |
|
|
UK |
|
|
Europe & |
|
|
Reportable |
|
|
All |
|
|
Total |
|
||||||
Total consolidated segment revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Total segment operating expenses |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Share of equity method investments adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Reportable segments adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Unallocated corporate overhead |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Consolidated adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Loss on sale of property and other, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Share of profit of equity method investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Foreign exchange |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Pre-opening expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Non-cash rent(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Deferred registration fees, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Share of equity method investments adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Share-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Other expenses, net(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
( |
) |
|||||
27
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 3, 2022 and January 2, 2022 and for the 13 Weeks and 26 Weeks Ended July 3, 2022 and July 4, 2021
|
|
For 13 Weeks Ended July 4, 2021 |
|
|||||||||||||||||||||
(in thousands) |
|
North |
|
|
UK |
|
|
Europe & |
|
|
Reportable |
|
|
All |
|
|
Total |
|
||||||
Total consolidated segment revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Total segment operating expenses |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Share of equity method investments adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Reportable segments adjusted EBITDA |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|||
Unallocated corporate overhead |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Consolidated adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Gain on sale of property and other, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Share of loss of equity method investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Foreign exchange |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Pre-opening expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Non-cash rent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Deferred registration fees, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Share of equity method investments adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Share-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Other expenses, net(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
( |
) |
|||||
(1) Includes membership credits expense, COVID-19 related charges and corporate financing and restructuring costs.
28
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 3, 2022 and January 2, 2022 and for the 13 Weeks and 26 Weeks Ended July 3, 2022 and July 4, 2021
|
|
For the 26 Weeks Ended July 3, 2022 |
|
|||||||||||||||||||||
(in thousands) |
|
North |
|
|
UK |
|
|
Europe & |
|
|
Reportable |
|
|
All |
|
|
Total |
|
||||||
Total consolidated segment revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Total segment operating expenses |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Share of equity method investments adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Reportable segments adjusted EBITDA |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||||
Unallocated corporate overhead |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Consolidated adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Gain on sale of property and other, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Share of profit of equity method investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Foreign exchange |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Pre-opening expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Non-cash rent(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Deferred registration fees, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Share of equity method investments adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Share-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Other expenses, net(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
( |
) |
|||||
29
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 3, 2022 and January 2, 2022 and for the 13 Weeks and 26 Weeks Ended July 3, 2022 and July 4, 2021
|
|
For 26 Weeks Ended July 4, 2021 |
|
|||||||||||||||||||||
(in thousands) |
|
North |
|
|
UK |
|
|
Europe & |
|
|
Reportable |
|
|
All |
|
|
Total |
|
||||||
Total consolidated segment revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Total segment operating expenses |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Share of equity method investments adjusted EBITDA |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Reportable segments adjusted EBITDA |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|||
Unallocated corporate overhead |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Consolidated adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Income tax benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Gain on sale of property and other, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Share of loss of equity method investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Foreign exchange |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Pre-opening expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Non-cash rent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Deferred registration fees, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Share of equity method investments adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Share-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Other expenses, net(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
( |
) |
|||||
|
|
For the 13 Weeks Ended |
|
|
For the 26 Weeks Ended |
|
||||||||||
(in thousands) |
|
July 3, 2022 |
|
|
July 4, 2021 |
|
|
July 3, 2022 |
|
|
July 4, 2021 |
|
||||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income tax expense (benefit) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
EBITDA |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Loss (gain) on sale of property and other, net |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Share of (profit) loss of equity method investments |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Foreign exchange(1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pre-opening expenses (2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Non-cash rent(1) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
||
Deferred registration fees, net |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
Share of equity method investments adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Share-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other expenses, net (3) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjusted EBITDA |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
30
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 3, 2022 and January 2, 2022 and for the 13 Weeks and 26 Weeks Ended July 3, 2022 and July 4, 2021
The following table presents long-lived asset information (which includes property and equipment, net, operating lease right-of-use assets and equity method investments) by geographic area as of July 3, 2022 and January 2, 2022. Asset information by segment is not reported internally or otherwise regularly reviewed by the CODM.
|
|
As of |
|
|||||
(in thousands) |
|
July 3, 2022 |
|
|
January 2, 2022 |
|
||
Long-lived assets by geography |
|
|
|
|
|
|
||
North America |
|
$ |
|
|
$ |
|
||
United Kingdom |
|
|
|
|
|
|
||
Europe |
|
|
|
|
|
|
||
Asia |
|
|
|
|
|
|
||
Total long-lived assets |
|
$ |
|
|
$ |
|
||
In 2017, SWL entered into a term loan facility agreement with two individuals who are related parties of the Company. For additional information, refer to Note 11, Debt.
The amounts owed by (to) equity method investees due within one year are as follows:
|
|
As of |
|
|||||
(in thousands) |
|
July 3, 2022 |
|
|
January 2, 2022 |
|
||
Soho House Toronto Partnership |
|
$ |
( |
) |
|
$ |
( |
) |
Raycliff Red LLP |
|
|
( |
) |
|
|
( |
) |
Mirador Barcel S.L. |
|
|
|
|
|
|
||
Little Beach House Barcelona S.L. |
|
|
( |
) |
|
|
( |
) |
Mimea XXI S.L. |
|
|
|
|
|
|
||
|
|
$ |
( |
) |
|
$ |
( |
) |
Amounts owed by equity method investees due within one year are included in prepaid expenses and other current assets on the unaudited condensed consolidated balance sheets. Amounts owed to equity method investees due within one year are included in other current liabilities on the unaudited condensed consolidated balance sheets.
In 2016, SWL, a consolidated VIE, entered into an agreement to lease a property under construction by the landlord with Store Holding Group Ltd, a wholly-owned subsidiary of the noncontrolling interest holders of SWL. The handover of six floors of the leased property occurred on a floor-by-floor basis upon substantial completion of landlord improvements, resulting in
The Company is party to a property lease arrangement with The Yucaipa Companies LLC. This lease runs for a term of
Through Soho-Ludlow Tenant LLC, the Company is a party to a property lease agreement dated May 3, 2019 for 137 Ludlow Street, New York with Ludlow 137 Holdings LLC, an affiliate of The Yucaipa Companies LLC. This lease runs for a term of
The Company leases the Ludlow property from 139 Ludlow Acquisition LLC, an equity method investee. This is a
The Company leases the Tel Aviv House from an affiliate of Raycliff Capital, LLC which held a portion of the SHHL redeemable C ordinary shares prior to the IPO and continues to hold Class A common stock of MCG. This lease commenced on June 1, 2021. This lease runs for a term of
31
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 3, 2022 and January 2, 2022 and for the 13 Weeks and 26 Weeks Ended July 3, 2022 and July 4, 2021
of July 3, 2022 and $
The Company leases a property from GHPSI, LLC in order to operate the Le Vallauris restaurant in Palm Springs, California. GHPSI’s ultimate parent entity is GHREP, LLC, an affiliate of The Yucaipa Companies LLC. This lease commenced on February 2, 2022. This lease runs for a term of
In return for arranging, and providing financial and transaction advisory services in connection with, the issuance of the Senior Secured Notes and the Senior Preference Shares as described in Note 11, Debt, and Note 14, SHHL Redeemable Preferred Shares and SHHL Redeemable C Ordinary Shares, respectively, an affiliate of Yucaipa Companies LLC received a fee in an aggregate amount of $
In return for its role as sponsor in connection with our IPO, an affiliate of Yucaipa Companies LLC received a fee of $
The Company received management fees under our hotel management contract for the operation of the LINE and Saguaro hotels from an affiliate of Yucaipa Companies LLC. These fees amounted to $
Fees from the provision of Soho House Design services were received from affiliates of the Company totaled $
Shares repurchased
Since July 3, 2022, the Company has repurchased a total of
Shares issued
During July 2022, the Company issued a total of
Shares sold
Since July 3, 2022, the Company has sold a total of
32
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
Management’s discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes and other financial information included elsewhere in this Quarterly Report on Form10-Q and our audited consolidated financial statements and notes thereto and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended January 2, 2022.
In addition to historical financial information, this discussion and other parts of this report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, based upon current expectations that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the “Risk Factors” section in this Quarterly Report on Form 10-Q, and under Part II, Item 1A below. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results and events to differ from those anticipated. These statements are based upon information currently available to us, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements, like all statements in this report, speak only as of their date, and we undertake no obligation to update or revise these statements in light of future developments. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.
Overview
Our Membership Platform
The Membership Collective Group (“MCG”) is a global membership platform of physical and digital spaces that connects a vibrant, diverse group of members from across the world. These members use the MCG platform to both work and socialize, to connect, create, have fun and drive a positive change.
We began with the opening of the first Soho House in 1995 and remain the only company to have scaled a private membership platform with a global presence. Over the last 27 years, we have expanded our membership expertise and diversified our offerings—both physically and digitally. As of July 3, 2022, we have approximately 193,400 members (including approximately 142,300 Soho House members) who engage with MCG through our global portfolio of 36 Soho Houses, 9 Soho Works, The Ned in London and New York, Scorpios Beach Club in Mykonos, Soho Home, our interiors and lifestyle retail brand, and our digital channels.
The central pillar of MCG is Soho House, which drives the majority of our membership and revenue today. Since the opening of our first House in the Soho district of London in 1995, we have successfully identified the demand for a premium membership offering that caters to a progressive, creative and diverse global audience. Today, we believe our membership offering, consistently high standards of service, and our global footprint remain unparalleled. A Soho House membership offers access to a network of distinctive and carefully curated Houses, across North America, the United Kingdom, Europe and Asia, which serve as the cornerstone of our member experience. We enhance our member experience through our digital channels, including the SH.APP and our website. Our vision for the SH.APP has always been for it to be like having a House in your pocket. It’s our central destination for members to make bookings and payments, to connect with each other and access video content and podcasts — made for our members, by our members. Annually, we host thousands of physical and digital member events worldwide, spanning film, fashion, art, food and drink, well-being, work and music—and help our members forge connections to bring them closer together.
Our membership expertise, honed through the growth of Soho House, has led to our evolution into the Membership Collective Group, a home to numerous memberships including Cities Without Houses, Soho Works, Soho Friends, Soho House Digital, SOHO HOME+ and Ned’s Club. By designing, curating and growing our membership offering, our membership platform can quickly and easily respond to shifting lifestyle trends and the evolution of our members’ needs. Our memberships work together, allowing us to reach new audiences with a set of interconnected offerings.
Everything we do across these memberships begins and ends with our members. The foundation of our member experience has been crafted over our 27-year history and is built on the following pillars:
33
Our membership has remained resilient through multiple economic cycles and the COVID-19 pandemic. When our physical sites were forced to close as a result of the COVID-19 pandemic, there was minimal impact on the retention of Soho House members. The power of our model is driven by the important role we believe that we play in our members’ lives and the value we consistently provide them for their membership fees. We believe our retention compares very favorably to leading consumer subscriptions or memberships—across music, media, fitness, entertainment and commerce—despite, in many cases, their significantly lower price points.
The demand for our membership is also demonstrated by our large and growing MCG global wait list, which as of July 3, 2022 stands at over 81,500 applicants. Awareness of our distinct membership offerings and their scarcity is spread by our members organically through word of mouth, social media and press coverage.
There are multiple consumer forces at play that have increased the relevance of our memberships. We have observed a secular shift in the ways that people live and work—with less time spent in traditional corporate offices and more time in social spaces that encourage creativity and mutual engagement. We believe that these trends will only accelerate, and that the freedom to be able to choose where to live and work—particularly in light of the COVID-19 pandemic—will likely have a significant impact on our target market. We believe this will create an even greater demand for curated communities that can grow and thrive in a more deliberate environment.
For the 26 weeks ended July 3, 2022, of our $436 million in revenue, $125 million (29%) was attributable to Membership Revenues, $197 million (45%) to In-House Revenues, and $114 million (26%) to Other Revenues. For the 26 weeks ended July 4, 2021, of our $196 million in revenue, $85 million (43%) was attributable to Membership Revenues, $62 million (32%) to In-House Revenues, and $49 million (25%) to Other Revenues.
Membership Revenues are comprised of annual membership fees and one-time legacy initial registration fees paid by members prior to April 4, 2022. From April 4, 2022, new admitted members will be required to purchase House Introduction Credits which will be redeemable against purchases of food and beverage items and bedroom stays at the Houses which will be recorded as In-House Revenues. Any unused amounts will be recognized as Membership Revenues. Refer to Note 2, Summary of Significant Accounting Policies—Basis of Presentation in this Quarterly Report on Form 10-Q for further information on House Introduction Credits.
In-House Revenues include all revenues realized within our Houses, including food and beverage, accommodation, and spa products and treatments. We view Membership Revenues and In-House Revenues as interrelated, insofar as although there is no minimum spend for any member on our In-House offerings that generate In-House Revenues. In practice the significant majority of In-House Revenues are generated by our members, and the pricing of our In-House offerings reflects that accordingly, with pricing of such In-House offerings being identical for both members and non-members.
Other Revenues include all revenues not realized within our Houses, including Scorpios, Soho Works and standalone restaurants, design and procurement fees from SHD and Soho Home among others.
Our Membership Platform
All of our memberships have been built to enrich the lives of their members, as well as expand our membership offering to a broader audience.
Soho House
Soho House remains at the core of our membership platform by creating a foundation upon which additional membership businesses can be built and scaled. While our physical Houses provide our foundation, the people inside them are the soul of Soho House. As a membership founded for the creative industries, we are proud to have championed members who have gone on to shape our cultural landscape as world class writers, artists, performers, directors, founders, designers, and producers – all reflecting the spirit and energy of Soho House.
The membership of each House is assembled by a select committee of influential creatives and innovators that represent the local area in which the membership is founded. Our members actively engage in creating the culture of each House, helping to shape and localize it by participating in member events and contributing to editorial and digital content. We believe this adds to the value of each House, enriching the membership and enhancing the attractiveness of membership to prospective members worldwide. With a current US Every House annual membership fee of approximately $4,000 providing access to all of our Houses globally, we believe our membership offering provides compelling value to our members that increases as we add new Houses and more members to our global community. Our Houses attract members from every demographic, with members from “Generation Z” (25 years old and younger) and “Millennials” (26- to 41-year-olds) constituting the fastest-growing cohorts. We also believe that the pricing of our In-House offerings represents great value to our members because of the level of quality provided, reinforcing the overall membership experience, rewarding their brand loyalty and creating opportunities for future and recurring revenues.
We created the following types of membership under Soho House to reach a broader audience and enhance the experience of our existing members:
34
In 2017, we introduced a new type of Soho House membership known as Cities Without Houses (“CWH”), which opens up the Soho House membership to people who live in cities where we do not yet have a physical House. This membership allows us to welcome members to our global community in new geographies, generates additional revenues on our existing base of Houses and provides intelligence for future growth, which we have employed to open new Houses in certain locations, including Nashville (February 2022), and Brighton (March 2022). For the 26 weeks ended July 3, 2022, we have over 5,800 CWH members across 58 cities.
The ambition for Soho House has always been to create a truly global membership that brings creative people together, from all over the world. We believe that we will be able to achieve this through the introduction of Soho House Digital Membership—a new, paid digital-only membership that we are now actively working on. Not limited by our physical footprint, Soho House Digital Membership will expand our global reach, allowing us to move further into Asia, Africa and South America, adding fascinating creatives from dynamic cities to our membership.
Soho House Digital Membership will be subject to the same application and approval process as Soho House membership, allowing like-minded individuals to connect, communicate and collaborate with each other, in a purely digital space through the SH.APP. It will make our membership truly diverse, and will enable the best creatives from all over the world to make meaningful connections with each other. In the same way that we’ve grown Cities Without Houses membership around the world, we will use our connections and liaisons on the ground in new cities to build awareness of digital membership, growing it organically through existing creative communities.
By leveraging our digital platforms in this way, and removing the reliance on physical spaces to experience the benefits of our membership, we have created a gateway to previously untapped growth opportunities. We believe this new membership type will be attractive to potential members who are already used to socializing, networking and working digitally. Existing Soho House members will also receive the full functionalities of the Soho House Digital Membership, and therefore, the introduction of the Soho House Digital Membership only serves to improve the richness of their membership experience, making it more valuable – with new opportunities to connect with and consume content from a truly global and diverse membership base.
There are a significant number of people who enjoy the Soho House way of living and who have already visited our Houses as guests, stayed in our bedrooms, or visited our public restaurants and spas, but do not currently have a Soho House membership. To respond to this audience, we launched Soho Friends in November 2020 for an annual subscription cost of $130. We offer access to physical spaces, including Soho House bedrooms, and Soho Studios (our new social spaces for Soho Friends and Soho House members) that host curated programs of events and screenings, with additional benefits from our restaurants, spas and online retail brands, although Soho Friends do not have full access to our Houses. As of July 3, 2022, we had 37,839 Soho Friends members. We intend to grow this membership brand in a measured way so that our Soho House members continue to account for the majority of visitors to our Houses and restaurants.
Soho Home
Soho Home was created as a result of the constant requests from our members to recreate the look and feel of the Houses in their own homes. Soho Home is an interiors and lifestyle retail brand that offers handcrafted furniture, lighting, textiles, tableware and accessories through ecommerce. Over the past few years, we have transformed Soho Home into a high growth retail business, and in October 2020, we launched SOHO HOME+, which is a subscription-based membership platform with 6,839 members as of July 3, 2022, that offers price discounts, free delivery, and expert design advice plus early access to new collections and seasonal sales for an annual price of $95. Starting August 2022, SOHO HOME+ will merge into Soho Friends.
Soho Works
First launched in 2015, Soho Works provides its members with the space and resources to work alongside other like-minded individuals and businesses—facilitating connections and providing the tools to flourish. Aimed at existing Soho House and Soho Friends members, Soho Works draws on the same design principles and membership ethos as Soho House, but is a space purposed entirely for work and creative collaboration.
Beginning with one location in London, we have since opened eight additional sites in London, New York and Los Angeles over the last two years and as of July 3, 2022, we had 6,442 members. Soho Works membership rates vary by location and Soho House membership status. For Soho House members, a US Soho Works membership ranges from $200—$650 per month, depending on membership type.
Scorpios Beach Club
Set in a cove on the southern tip of Mykonos, Scorpios offers a one of a kind beach experience with a well-established globally recognized brand. With a restaurant, terraces and daybeds, and a distinctive wellness offering, Scorpios enriches the lives of its guests who are looking to escape from their daily lives. We believe the Scorpios concept has significant potential to expand into additional locations as a key part of our platform and we expect to open our second site in Tulum, Mexico in 2023.
The Ned
The Ned has created a new space in the heart of the City of London for its members to meet, eat, drink and socialize. The Ned brand seeks to embody a “city within a city” full-service destination, by playing host to multiple restaurants, bedrooms, a range of grooming services, spa, gym and a full service members’ club. The membership offered by The Ned (“Ned’s Club”) is aimed at a broader group of professional people. As of July 3, 2022, Ned’s Club London has just over 2,800 members. Ned Friends was recently launched – a more accessible membership similar to Soho Friends for frequent visitors and customers of The
35
Ned. In June 2022, we opened The Ned NoMad in New York. Located in the Johnston Building, The Ned NoMad covers 117,000 sq ft and includes a Ned’s Club, Cecconi's restaurant, as well as 167 bedrooms. We plan to open another location, The Ned Doha, in 2022. We receive management fees under our hotel management contract for each of the operations of The Ned.
The LINE
On June 22, 2021, we acquired the operating agreements relating to the ‘The LINE’ and ‘Saguaro’ hotels. The hotels that are currently operational are located in Los Angeles, Washington, Austin, Scottsdale and Palm Springs, and among them offer a variety of food and beverage offerings together with approximately 1,470 hotel rooms. A further hotel is under development in San Francisco and is scheduled to open this fiscal year. We receive management fees under our hotel management contract for the operation of these hotels. We believe the transaction will broaden our geographic reach in North America.
Factors Affecting Our Business
We believe the coveted lifestyle brand we have created has significant and proven growth potential. This potential, combined with the stability of our membership base, we believe will enable us to maintain our position as an industry leader in the future. We expect to grow our member base by growing the number of Soho Houses, continuing to scale our existing membership brands and launching and growing new membership brands. We believe our track record in expanding and growing our platform will position us to achieve significant and sustained growth.
A significant portion of our revenues is derived from House Revenues which consist of Membership Revenues and In-House Revenues. Our Membership Revenues, which are reflective of our steady and growing global brand, help to provide us with a recurring revenue base that limits the impact of fluctuations in regional economic conditions.
Our business and future performance is also affected by a variety of factors, including:
Reportable Segments
Our operations consist of three reportable segments (United Kingdom, North America, and Europe and Rest of the World (“ROW”)) and one non-reportable segment that we present as “All Other”. Each of our segments includes all operations in that region including our Houses and all associated facilities, spas and stand-alone restaurants. Refer to Note 18—Segments in this Quarterly Report on Form 10-Q for more information on reportable segments.
Key Performance and Operating Metrics Evaluated by Management
In assessing the performance of our business, we consider a variety of operating and financial measures. These key measures include:
NUMBER OF SOHO HOUSES. The number of Soho Houses reflects the total number of Soho Houses in operation in any period, irrespective of whether each House is (i) controlled by us, (ii) operated through a non-controlling interest in a joint venture or (iii) operated through a management contract.
We review the number of members from all Houses to assess new member growth, total House Revenues, and House-Level Contribution.
NUMBER OF SOHO HOUSE MEMBERS. Our Soho House membership model is an integral part of our business and has a significant impact on our profitability and financial performance. Typically, members hold an Every House membership or a Local House membership. Member count is the primary
36
driver of Membership Revenues and is also a critical factor in In-House Revenues as members utilize the offerings that are provided within the Houses. Soho House members include all active, frozen and non-paying members.
The extent to which we achieve growth in our membership base, retain existing members and periodically increase our membership fee rates will impact our profitability. We have historically enjoyed strong member loyalty, reflected by very high retention rates. Robust demand for our memberships is also evidenced by considerable wait lists for our Houses.
The year-over-year increase in our total number of Soho House members is driven by a combination of increases in membership at existing Houses and members from new Houses.
NUMBER OF OTHER MEMBERS. Other members include members of Soho Works, Soho Friends and SOHO HOME+ and are key to our growth strategy and enhancing our Soho House member experience. Like Soho House members, other memberships are an integral part of our business and we believe will have a significant impact on our profitability and financial performance in the future.
FROZEN MEMBERS. Frozen Members refers to Soho House members who have elected to suspend their membership payments on a six, nine- or twelve-month basis during which period the member is not able to gain access to a Soho House site as a member, access our membership Apps, or book bedrooms or Cowshed treatments or products on discounted member rates. Frozen Members are not included in Adult Paying Members, but are included in the total number of Soho House members.
MEMBERSHIP REVENUES. Membership Revenues are comprised of House Membership Revenues (as defined below) and Non-House Membership Revenues (as defined below). House Membership Revenues and Non-House Membership Revenues are each comprised primarily of annual membership fees and one-time legacy registration fees which are amortized over 20 years. The one-time registration fee is no longer applicable to new members admitted from April 4, 2022, see House Introduction Credits below. Membership Revenues are a function of the number of members, membership mix, and membership pricing. For GAAP, we report Membership Revenues only from Houses and sites in which we own a controlling interest. Our membership pricing varies by geographic segment and membership offering and, as such, our mix of House and Soho Works club openings can affect our revenue growth and profitability over time. Prices are generally higher in North America and the ROW compared with the UK and Europe. Membership Revenues provide a stable and recurring source of revenues which have few direct costs and, as such, is a reliable and predictable source of cash flow.
HOUSE INTRODUCTION CREDITS. New members admitted from April 4, 2022 are required to purchase House Introduction Credits as part of their membership, per the House rules. House Introduction Credits are credits of an equivalent value to cash within Houses and are redeemable against purchases of food and beverage items, and bedroom stays, at the Houses. House Introduction Credits expire after the first three months from the date of issuance, where legally permitted in the regions we operate, if not utilized or if the Company terminates a member’s House membership. House Introduction Credits are recognized upon issuance as deferred revenue on our unaudited condensed consolidated balance sheets. Revenue from House Introduction Credits are recognized as In-House revenues when redeemed by members, and as breakage revenue within Membership revenues upon expiration or in the period that we are able to reliably estimate expected breakage. House Introduction Credits expire three months from the date of issue.
HOUSE MEMBERSHIP REVENUES. House Membership Revenues are comprised primarily of annual membership fees and one-time legacy registration fees from Soho House members which are amortized over 20 years. The one-time registration fee is no longer applicable to new members admitted from April 4, 2022, see House Introduction Credits above.
IN-HOUSE REVENUES. In-House Revenues refer to all revenues realized within our Houses, and primarily includes revenues from food and beverage, accommodation, and spa products and treatments.
HOUSE REVENUES. House Revenues is defined as House Membership Revenues plus In-House Revenues, less Non-House Membership Revenues. Our management views House Membership Revenues and In-House Revenues as interrelated and their aggregation as important in tracking House performance. Although there is no minimum spend for any member on In-House offerings, nevertheless in practice most members consume food and beverage, accommodations and other offerings at our Houses. The pricing of our In-House offerings is reflective of the fact that the significant majority of In-House offerings that generate In-House revenues are consumed by members who also pay a membership fee in relation to that House, with pricing of such In-House offerings being identical for both members and non-members.
OTHER REVENUES. Other Revenues are defined as total revenues that are not realized within our Houses, including revenues from Scorpios, Soho Works and our stand-alone restaurants, procurement fees from SHD, Soho Home and Cowshed retail products and other revenues from products and services that we provide outside of our Houses, as well as management fees from The Ned.
NON-HOUSE MEMBERSHIP REVENUES. Non-House Membership Revenues are comprised of Soho Works membership revenue, Soho Friends membership revenue and SOHO HOME+ membership revenue.
ACTIVE APP USERS. Active App Users is defined as unique users who have logged into any of our membership Apps within the last three months.
Non-GAAP Financial Measures
We refer to Adjusted EBITDA, House-Level Contribution, House-Level Contribution Margin, Other Contribution and Other Contribution Margin throughout this Quarterly Report on Form 10-Q,as we use these measures to evaluate our operating performance and each of these measures is defined in “Non-GAAP Financial Measures.” We believe these measures are useful to investors in evaluating our operating performance. Adjusted EBITDA, House-Level Contribution, House-Level Contribution Margin, Other Contribution and Other Contribution Margin are all supplemental measures of our performance that are
37
neither required by, nor presented in accordance with, GAAP. Adjusted EBITDA, House-Level Contribution, House-Level Contribution Margin, Other Contribution and Other Contribution Margin should not be considered as substitutes for GAAP metrics such as Operating Loss and Net Loss or any other performance measure derived in accordance with GAAP. Some of our financial and operational data that we disclose in this Quarterly Report on Form 10-Q are presented on a ‘constant currency’ basis to isolate the effect of currency changes during the period. Where we refer to a measure being calculated in ‘constant currency’, we are calculating the USD change and the percentage change as if the exchange rate that is being used in the current period was in effect for the prior period presented. We believe that this calculation provides a more meaningful indication of actual year over year performance and eliminates the fluctuations from currency exchange rates.
38
KEY PERFORMANCE AND OPERATING METRICS
|
|
As of |
|
|||||
|
|
July 3, |
|
|
July 4, |
|
||
|
|
(Unaudited) |
|
|||||
Number of Soho Houses |
|
|
36 |
|
|
|
30 |
|
North America |
|
|
13 |
|
|
|
11 |
|
United Kingdom |
|
|
12 |
|
|
|
11 |
|
Europe/ROW |
|
|
11 |
|
|
|
8 |
|
Number of Soho House Members |
|
|
142,250 |
|
|
|
111,910 |
|
North America |
|
|
53,879 |
|
|
|
42,296 |
|
United Kingdom |
|
|
54,764 |
|
|
|
45,277 |
|
Europe/ROW |
|
|
27,755 |
|
|
|
19,750 |
|
All Other |
|
|
5,852 |
|
|
|
4,587 |
|
Number of Other Members |
|
|
51,120 |
|
|
|
15,930 |
|
North America |
|
|
13,421 |
|
|
|
3,268 |
|
United Kingdom |
|
|
32,013 |
|
|
|
12,012 |
|
Europe/ROW |
|
|
5,686 |
|
|
|
650 |
|
Number of Active App Users |
|
|
150,259 |
|
|
|
94,678 |
|
|
|
For the 13 Weeks Ended |
|
|
For the 13 Weeks Ended |
|
|
For the 26 Weeks Ended |
|
|
For the 26 Weeks Ended |
|
||||||||||||||||||||
|
|
July 3, |
|
|
July 4, |
|
|
July 3, |
|
|
July 4, |
|
|
July 3, |
|
|
July 4, |
|
|
July 3, |
|
|
July 4, |
|
||||||||
|
|
Actuals |
|
|
Constant Currency(1) |
|
|
Actuals |
|
|
Constant Currency(1) |
|
||||||||||||||||||||
|
(Unaudited, dollar amounts in thousands, except percentages) |
|
(Unaudited, dollar amounts in thousands, except percentages) |
|
||||||||||||||||||||||||||||
Operating loss |
|
$ |
(65,488 |
) |
|
$ |
(46,860 |
) |
|
$ |
(65,488 |
) |
|
$ |
(41,694 |
) |
|
$ |
(112,910 |
) |
|
$ |
(110,420 |
) |
|
$ |
(112,910 |
) |
|
$ |
(102,218 |
) |
Operating loss margin |
|
|
(27 |
)% |
|
|
(38 |
)% |
|
|
(27 |
)% |
|
|
(38 |
)% |
|
|
(26 |
)% |
|
|
(56 |
)% |
|
|
(26 |
)% |
|
|
(56 |
)% |
House-Level Contribution |
|
|
36,632 |
|
|
|
16,743 |
|
|
|
36,632 |
|
|
|
14,897 |
|
|
|
66,378 |
|
|
|
26,866 |
|
|
|
66,378 |
|
|
|
24,870 |
|
House-Level Contribution Margin |
|
|
22 |
% |
|
|
19 |
% |
|
|
22 |
% |
|
|
19 |
% |
|
|
22 |
% |
|
|
19 |
% |
|
|
22 |
% |
|
|
19 |
% |
Other Contribution |
|
|
12,707 |
|
|
|
(3,779 |
) |
|
|
12,707 |
|
|
|
(3,362 |
) |
|
|
17,341 |
|
|
|
(15,503 |
) |
|
|
17,341 |
|
|
|
(14,351 |
) |
Other Contribution Margin |
|
|
17 |
% |
|
|
(10 |
)% |
|
|
17 |
% |
|
|
(10 |
)% |
|
|
14 |
% |
|
|
(29 |
)% |
|
|
14 |
% |
|
|
(29 |
)% |
Adjusted EBITDA |
|
|
15,385 |
|
|
|
(12,556 |
) |
|
|
15,385 |
|
|
|
(11,172 |
) |
|
|
17,578 |
|
|
|
(35,348 |
) |
|
|
17,578 |
|
|
|
(32,722 |
) |
Percentage of total revenues |
|
|
6 |
% |
|
|
(10 |
)% |
|
|
6 |
% |
|
|
(10 |
)% |
|
|
4 |
% |
|
|
(18 |
)% |
|
|
4 |
% |
|
|
(18 |
)% |
39
Results of Operations
Comparison of the 13 weeks ended July 3, 2022 and July 4, 2021
The following table summarizes our results of operations for the 13 weeks ended July 3, 2022 and July 4, 2021 (in thousands, except percentages):
|
|
For the 13 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
July 3, |
|
|
July 4, |
|
|
|
|
|
July 4, |
|
|
|
|
|||||
|
|
Actuals |
|
|
|
|
|
Currency(1) |
|
|
|
|
||||||||
|
|
(Dollar amounts in thousands) |
|
|
Change % |
|
|
(Dollar amounts in thousands) |
|
|
Constant |
|
||||||||
|
(Unaudited) |
|
||||||||||||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Membership revenues |
|
$ |
65,889 |
|
|
$ |
44,863 |
|
|
|
47 |
% |
|
$ |
39,917 |
|
|
|
65 |
% |
In-House revenues |
|
|
109,685 |
|
|
|
45,793 |
|
|
n/m |
|
|
|
40,745 |
|
|
n/m |
|
||
Other revenues |
|
|
68,196 |
|
|
|
33,423 |
|
|
n/m |
|
|
|
29,738 |
|
|
n/m |
|
||
Total revenues |
|
|
243,770 |
|
|
|
124,079 |
|
|
|
96 |
% |
|
|
110,400 |
|
|
n/m |
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
In-House operating expenses (exclusive of depreciation and amortization) |
|
|
(131,673 |
) |
|
|
(70,430 |
) |
|
|
(87 |
)% |
|
|
(62,666 |
) |
|
n/m |
|
|
Other operating expenses (exclusive of depreciation and amortization) |
|
|
(62,758 |
) |
|
|
(40,685 |
) |
|
|
(54 |
)% |
|
|
(36,200 |
) |
|
|
(73 |
)% |
General and administrative expenses |
|
|
(26,647 |
) |
|
|
(19,500 |
) |
|
|
(37 |
)% |
|
|
(17,350 |
) |
|
|
(54 |
)% |
Pre-opening expenses |
|
|
(3,741 |
) |
|
|
(6,493 |
) |
|
|
42 |
% |
|
|
(5,777 |
) |
|
|
35 |
% |
Depreciation and amortization |
|
|
(22,688 |
) |
|
|
(21,905 |
) |
|
|
(4 |
)% |
|
|
(19,490 |
) |
|
|
(16 |
)% |
Share-based compensation |
|
|
(4,274 |
) |
|
|
(2,548 |
) |
|
|
(68 |
)% |
|
|
(2,267 |
) |
|
|
(89 |
)% |
Foreign exchange loss, net |
|
|
(57,176 |
) |
|
|
(1,055 |
) |
|
n/m |
|
|
|
(939 |
) |
|
n/m |
|
||
Other |
|
|
(301 |
) |
|
|
(8,323 |
) |
|
|
96 |
% |
|
|
(7,405 |
) |
|
|
96 |
% |
Total operating expenses |
|
|
(309,258 |
) |
|
|
(170,939 |
) |
|
|
(81 |
)% |
|
|
(152,094 |
) |
|
n/m |
|
|
Operating loss |
|
|
(65,488 |
) |
|
|
(46,860 |
) |
|
|
(40 |
)% |
|
|
(41,694 |
) |
|
|
(57 |
)% |
Other (expense) income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest expense, net |
|
|
(18,778 |
) |
|
|
(17,018 |
) |
|
|
(10 |
)% |
|
|
(15,142 |
) |
|
|
(24 |
)% |
(Loss) gain on sale of property and other, net |
|
|
(122 |
) |
|
|
6,903 |
|
|
n/m |
|
|
|
6,142 |
|
|
n/m |
|
||
Share of income (loss) of equity method investments |
|
|
1,342 |
|
|
|
(130 |
) |
|
n/m |
|
|
|
(116 |
) |
|
n/m |
|
||
Total other expense, net |
|
|
(17,558 |
) |
|
|
(10,245 |
) |
|
|
(71 |
)% |
|
|
(9,116 |
) |
|
|
(93 |
)% |
Loss before income taxes |
|
|
(83,046 |
) |
|
|
(57,105 |
) |
|
|
(45 |
)% |
|
|
(50,810 |
) |
|
|
(63 |
)% |
Income tax expense |
|
|
(509 |
) |
|
|
(3 |
) |
|
n/m |
|
|
|
(3 |
) |
|
n/m |
|
||
Net loss |
|
|
(83,555 |
) |
|
|
(57,108 |
) |
|
|
(46 |
)% |
|
|
(50,813 |
) |
|
|
(64 |
)% |
Net loss attributable to noncontrolling interest |
|
|
1,596 |
|
|
|
1,121 |
|
|
|
42 |
% |
|
|
997 |
|
|
|
60 |
% |
Net loss attributable to Membership Collective Group Inc. |
|
$ |
(81,959 |
) |
|
$ |
(55,987 |
) |
|
|
(46 |
)% |
|
$ |
(49,816 |
) |
|
|
(65 |
)% |
Components of Operating Results
Revenues
Total Revenue
|
|
For the 13 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 3, |
|
|
July 4, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Total revenues |
|
$ |
243,770 |
|
|
$ |
124,079 |
|
|
|
96 |
% |
|
n/m |
|
|
North America |
|
|
99,583 |
|
|
$ |
53,833 |
|
|
|
85 |
% |
|
|
85 |
% |
United Kingdom |
|
|
72,148 |
|
|
$ |
37,238 |
|
|
|
94 |
% |
|
n/m |
|
|
Europe/RoW |
|
|
36,060 |
|
|
$ |
12,649 |
|
|
n/m |
|
|
n/m |
|
||
All Other |
|
|
35,979 |
|
|
$ |
20,359 |
|
|
|
77 |
% |
|
|
99 |
% |
40
|
|
For the 13 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 3, |
|
|
July 4, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Membership revenues |
|
$ |
65,889 |
|
|
$ |
44,863 |
|
|
|
47 |
% |
|
|
65 |
% |
North America |
|
|
32,310 |
|
|
|
21,365 |
|
|
|
51 |
% |
|
|
51 |
% |
United Kingdom |
|
|
18,465 |
|
|
|
14,423 |
|
|
|
28 |
% |
|
|
44 |
% |
Europe/RoW |
|
|
6,099 |
|
|
|
4,032 |
|
|
|
51 |
% |
|
|
70 |
% |
All Other |
|
|
9,015 |
|
|
|
5,043 |
|
|
|
79 |
% |
|
n/m |
|
|
Membership revenues increased by 47% to $65,889 for the 13 weeks ended July 3, 2022. This increase was predominantly driven by an additional approximately 32,600 Adult Paying Soho House members at the end of the second quarter of fiscal 2022 versus the comparative period driven by new House openings, intakes at existing Houses and the unfreeze of members following the reduction in COVID-19 restrictions versus second quarter fiscal 2021. Additionally, the Soho House membership fee was increased by 10-13% at the start of fiscal 2022. This increase will impact new members on the date they join and existing members on their renewal date, and will not have had a significant material impact at the end of second quarter fiscal 2022.
There was also an increase in Non-House Membership revenues, following the increase in the number of Soho Friends, Soho Works and HOME+ members, with approximately 35,000 additional members in these categories in comparison to the end of the second quarter of fiscal 2021.
Our United Kingdom segment saw an increase in Membership revenues of $4,042, or 28% (44% constant currency), due to the opening of 180 House, London, in April 2021 and Brighton Beach House in March 2022, as well as membership intakes across all existing Houses, which resulted in an increase in Adult paying members of over 10,800 versus second quarter of fiscal 2021.
North America segment saw an increase in revenues of $10,945, or 51% (51% constant currency), due to an increase of over 13,500 Adult paying members during the second quarter of fiscal 2022 versus second quarter 2021, helped by the opening of Soho House Austin in May 2021, Soho House Nashville in February 2022 and the opening of Holloway House, West Hollywood in May 2022.
The Europe/ROW segment saw an increase in Membership revenues of $2,067, or 51% (70% constant currency), due to an increase of over 6,300 Adult paying members, predominantly from the opening of three new Houses after second quarter 2021: Tel Aviv (August 2021), Paris (September 2021) and Rome (October 2021).
Membership revenues reported under All Other above saw an increase predominantly driven by growth in CWH Adult Paying members as well as over 3,300 additional Soho Works paying members and 28,400 Soho Friends members in comparison to the second quarter of fiscal 2021.
In constant currency, Membership revenues would have increased by $25,971, or 65%.
|
|
For the 13 Weeks Ended |
|
|
Percent Change |
|||||||
|
|
July 3, |
|
|
July 4, |
|
|
Actuals |
|
Constant |
||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|||||
|
|
(Unaudited) |
||||||||||
In-House revenues |
|
$ |
109,685 |
|
|
$ |
45,793 |
|
|
n/m |
|
n/m |
North America |
|
|
48,765 |
|
|
|
24,147 |
|
|
n/m |
|
n/m |
United Kingdom |
|
|
41,652 |
|
|
|
17,831 |
|
|
n/m |
|
n/m |
Europe/RoW |
|
|
19,268 |
|
|
|
3,815 |
|
|
n/m |
|
n/m |
In-House revenues were $109,685 for the 13 weeks ended July 3, 2022, an increase of $63,892 versus the comparative period in 2021. The increase was predominantly driven by Houses being back at full trading capacity in comparison to second quarter fiscal 2021 where a number of sites were still impacted by local social distancing restrictions. Revenues were further increased due to new Soho Houses opening in the second half of fiscal 2021 and then first half of fiscal 2022 and well as selective price increases across our food and beverage offerings.
North America In-House revenues increased significantly versus second quarter fiscal 2021, predominantly due to the reduction in social distancing measures across states, where some had only been operating at 50% capacity in second quarter 2021. The increase was further boosted by the opening of Soho House Nashville and Holloway House, West Hollywood in February 2022 and May 2022, respectively.
In-House revenues in the United Kingdom segment saw a significant increase year on year due to removal of COVID-19 related social distancing restrictions and increase in operating capacity present in fiscal 2021, as well as additional revenues from Brighton Beach House which opened in March 2022.
Europe/RoW In-House revenues segment saw a large increase year on year following reduced social distancing restrictions in Berlin and Amsterdam in comparison to second quarter fiscal 2021, as well as revenues from three additional Houses that opened in the second half of fiscal 2021.
41
In constant currency, In-House Revenues would have increased by $68,941.
|
|
For the 13 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 3, |
|
|
July 4, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Other revenues |
|
$ |
68,196 |
|
|
$ |
33,423 |
|
|
n/m |
|
|
n/m |
|
||
North America |
|
|
18,510 |
|
|
|
8,322 |
|
|
n/m |
|
|
n/m |
|
||
United Kingdom |
|
|
12,031 |
|
|
|
4,985 |
|
|
n/m |
|
|
n/m |
|
||
Europe/RoW |
|
|
10,691 |
|
|
|
4,801 |
|
|
n/m |
|
|
n/m |
|
||
All Other |
|
|
26,964 |
|
|
|
15,315 |
|
|
|
76 |
% |
|
|
98 |
% |
Other revenues were $68,196 for the 13 weeks ended July 3, 2022, compared to $33,423 for the 13 weeks ended July 4, 2021, an increase of $34,773. The increase is predominantly driven by increased sales volumes at our public restaurants in North America and the United Kingdom, as well as at Scorpios, Mykonos in second quarter of fiscal 2022 following fewer COVID-19 related restrictions and increased footfall, in comparison to second quarter fiscal 2021.
The increase in Other revenues in the North America segment in second quarter of fiscal 2022 is predominantly driven by a reduction in social distancing measures in comparison to second quarter of fiscal 2021, as well as the agreement to manage and operate the Le Vallauris restaurant, Palm Springs in the first quarter of fiscal 2022, which has also contributed to the increase in Other revenues.
Similarly, the increase in Other revenues in the United Kingdom segment are predominantly driven by increased footfall at our restaurants following the reduction in social distancing restrictions versus second quarter 2021, coupled with selective price increases across our food and beverage offerings, as well as a stronger average daily rate at the two London townhouses.
The Europe/RoW Other revenues segment has increased compared to second quarter fiscal 2021 due to Scorpios Beach Club, which opened for the season on May 8, 2022, operating with less restrictions versus last year as well as opening two weeks earlier, meaning increased revenue year on year.
Other revenues reported under All Other above have increased due to increased revenues from our Soho Home offering which increased 105% vs the second quarter of fiscal 2021, and improved management fees from The Ned following the reduction of COVID-19 restrictions in UK, in contrast to second quarter 2021 when the UK indoor dining was prohibited until May 17, 2021.
In constant currency, Other Revenues have increased by $38,457.
In-House Operating Expenses and House-Level Contribution
|
|
For the 13 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 3, |
|
|
July 4, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
In-House operating expenses |
|
$ |
(131,673 |
) |
|
$ |
(70,430 |
) |
|
|
(87 |
)% |
|
n/m |
|
|
Percentage of total House revenues |
|
|
(78 |
)% |
|
|
(81 |
)% |
|
|
|
|
|
|
||
Operating loss |
|
$ |
(65,488 |
) |
|
$ |
(46,860 |
) |
|
|
(40 |
)% |
|
|
(57 |
)% |
Operating loss margin |
|
|
(27 |
)% |
|
|
(38 |
)% |
|
|
|
|
|
|
||
House-Level Contribution |
|
$ |
36,632 |
|
|
$ |
16,743 |
|
|
n/m |
|
|
n/m |
|
||
House-Level Contribution Margin |
|
|
22 |
% |
|
|
19 |
% |
|
|
3 |
% |
|
|
|
|
House-Level Contribution by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
$ |
23,126 |
|
|
$ |
11,116 |
|
|
n/m |
|
|
n/m |
|
||
United Kingdom |
|
|
11,180 |
|
|
|
1,655 |
|
|
n/m |
|
|
n/m |
|
||
Europe/RoW |
|
|
845 |
|
|
|
(1,382 |
) |
|
n/m |
|
|
n/m |
|
||
All Other |
|
|
1,481 |
|
|
|
5,354 |
|
|
|
(72 |
)% |
|
|
(69 |
)% |
House-Level Contribution Margin by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
|
29 |
% |
|
|
24 |
% |
|
|
|
|
|
|
||
United Kingdom |
|
|
19 |
% |
|
|
5 |
% |
|
|
|
|
|
|
||
Europe/RoW |
|
|
3 |
% |
|
|
(18 |
)% |
|
|
|
|
|
|
||
All Other |
|
|
58 |
% |
|
n/m |
|
|
|
|
|
|
|
|||
42
In-House Operating Expenses were $131,673 for the 13 weeks ended July 3, 2022, an increase of $61,243. The increase is primarily a result of fewer capacity restrictions in second quarter 2022 in comparison to second quarter 2021, where the majority of Houses were operating at reduced capacity, and the associated increase in volumes. The increase year on year is also driven by six additional Houses opened since second quarter 2021 offset by an out-of-period adjustment correcting an error with respect to the estimation of the operating lease liability identified during the 13 week period ended July 3, 2022 but relating to the 13 week period ended April 3, 2022 and fiscal years 2022, 2020 and 2019. Refer to Note 2, Summary of Significant Accounting Policies—Basis of Presentation for further information.
In constant currency, In-House Operating Expenses would have increased by $69,007.
House-Level Contribution, which is defined as House Revenues less In-House Operating Expenses, was $36,632 for the 13 weeks ended July 3, 2022, compared to $16,743 for the 13 weeks ended July 4, 2021, an increase of $19,889. The increase in House-Level Contribution partly relates to the impact of COVID-19 related restrictions in second quarter 2021 and the return of trading volumes in second quarter 2022, as well as increased Soho House membership revenues and higher pricing.
House-Level Contribution Margin was 22% for the 13 weeks ended July 3, 2022, increased by 3% from the prior period due to increased membership revenues and higher trading in the quarter compared to the prior period.
Other Operating Expenses and Other Contribution
|
|
For the 13 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 3, |
|
|
July 4, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Other operating expenses |
|
$ |
(62,758 |
) |
|
$ |
(40,685 |
) |
|
|
(54 |
)% |
|
|
(73 |
)% |
Percentage of total other revenues |
|
|
(83 |
)% |
|
n/m |
|
|
|
|
|
|
|
|||
Operating loss |
|
$ |
(65,488 |
) |
|
$ |
(46,860 |
) |
|
|
(40 |
)% |
|
|
(57 |
)% |
Operating loss margin |
|
|
(27 |
)% |
|
|
(38 |
)% |
|
|
|
|
|
|
||
Other Contribution |
|
$ |
12,707 |
|
|
$ |
(3,779 |
) |
|
n/m |
|
|
n/m |
|
||
Other Contribution Margin |
|
|
17 |
% |
|
|
(10 |
)% |
|
|
27 |
% |
|
|
|
|
Other Contribution by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
$ |
2,298 |
|
|
$ |
2,093 |
|
|
|
10 |
% |
|
|
10 |
% |
United Kingdom |
|
|
3,481 |
|
|
|
(1,270 |
) |
|
n/m |
|
|
n/m |
|
||
Europe/RoW |
|
|
3,170 |
|
|
|
1,514 |
|
|
n/m |
|
|
n/m |
|
||
All Other |
|
|
3,758 |
|
|
|
(6,116 |
) |
|
n/m |
|
|
n/m |
|
||
Other Contribution Margin by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
|
12 |
% |
|
|
25 |
% |
|
|
|
|
|
|
||
United Kingdom |
|
|
28 |
% |
|
|
(25 |
)% |
|
|
|
|
|
|
||
Europe/RoW |
|
|
29 |
% |
|
|
32 |
% |
|
|
|
|
|
|
||
All Other |
|
|
11 |
% |
|
|
(33 |
)% |
|
|
|
|
|
|
||
Other Operating Expenses were $62,758 for the 13 weeks ended July 3, 2022, compared with $40,685 for the 13 weeks ended July 4, 2021, an increase of $22,073, or 54%. This increase is primarily driven by reduced COVID-19 related trading restrictions in second quarter 2022 compared to second quarter 2021, thus resulting in higher trading volumes, additional expenses in relation to the Le Vallauris restaurants as well as the Coachella event in April 2022. In constant currency, Other Operating Expenses would have increased $26,558, or 73%.
Other Contribution, which we define as Other Revenues plus Non-House Membership Revenues less Other Operating Expenses, was $12,707 for the 13 weeks ended July 3, 2022, compared to a loss of $3,779 for the comparative period, an increase of $16,486. This was predominantly driven by higher Non-House Membership Revenues, increased contribution from public restaurants following removal of COVID-19 related trading restrictions and a stronger performance year on year from Scorpios, Mykonos which opened earlier versus the second quarter fiscal 2021.
The improvement in Other Contribution in the North America segment was driven by the strong performance of North America restaurants, and the benefit from the agreement to manage and operate the Le Vallauris restaurant, Palm Springs.
Other Contribution Margin was 17% for the 13 weeks ended July 3, 2022, an increase of 27% compared to the prior period driven by margin improvement at Scorpios, Mykonos as well increased Non-House Membership Revenue following an additional approximately 35,000 members year on year.
43
44
General and Administrative Expenses
|
|
For the 13 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 3, |
|
|
July 4, |
|
|
Actual |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
General and administrative expenses |
|
$ |
26,647 |
|
|
$ |
19,500 |
|
|
|
37 |
% |
|
|
54 |
% |
Percentage of total revenues |
|
|
11 |
% |
|
|
16 |
% |
|
|
|
|
|
|
||
General and Administrative Expenses were $26,647 for the 13 weeks ended July 3, 2022, compared with $19,500 for the 13 weeks ended July 4, 2021, an increase of $7,147, or 37%. The increase year on year was primarily driven by increased headcount at support offices as a result of removal of many COVID-19 restrictions across the various regions and the associated increase in business activity, coupled with additional headcount to support the Soho House expansion in the last 12 months and to support our public company compliance requirements in comparison to the 13 weeks ended July 3, 2022.
In constant currency, General and Administrative Expenses would have an increase of $9,297, or 54%.
Pre-Opening Expenses
|
|
For the 13 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 3, |
|
|
July 4, |
|
|
Actual |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Pre-opening expenses |
|
$ |
3,741 |
|
|
$ |
6,493 |
|
|
|
(42 |
)% |
|
|
(35 |
)% |
Percentage of total revenues |
|
|
2 |
% |
|
|
5 |
% |
|
|
|
|
|
|
||
Pre-Opening expenses were $3,741 for the 13 weeks ended July 3, 2022, driven by the opening of Holloway House during the quarter as well as costs for House openings later in fiscal 2022. This is a decrease of 42% compared with the 13 weeks ended July 4, 2021, driven by better cost control and fewer Houses opened in the quarter compared to second quarter fiscal 2021. In constant currency, Pre-Opening expenses would have decreased by 35%.
Depreciation and Amortization
|
|
For the 13 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 3, |
|
|
July 4, |
|
|
Actual |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Depreciation and amortization |
|
$ |
22,688 |
|
|
$ |
21,905 |
|
|
|
4 |
% |
|
|
16 |
% |
Percentage of total revenues |
|
|
9 |
% |
|
|
18 |
% |
|
|
|
|
|
|
||
Depreciation and amortization was $22,688 for the 13 weeks ended July 3, 2022, an increase of $783, or 4%, from the 13 weeks ended July 4, 2021. This increase was primarily driven by amortization of capitalized IT development costs, as well as depreciation associated with six new Soho Houses that have opened since second quarter fiscal 2021, including Soho House Nashville and Holloway House, West Hollywood, which both opened in fiscal 2022. In constant currency, depreciation and amortization expenses would have increased by $3,198, or 16%.
45
Other Expenses
|
|
For the 13 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 3, |
|
|
July 4, |
|
|
Actual |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Share-based compensation |
|
$ |
4,274 |
|
|
$ |
2,548 |
|
|
|
68 |
% |
|
|
89 |
% |
Percentage of total revenues |
|
|
2 |
% |
|
|
2 |
% |
|
|
|
|
|
|
||
Foreign exchange loss, net |
|
$ |
57,176 |
|
|
$ |
1,055 |
|
|
n/m |
|
|
n/m |
|
||
Percentage of total revenues |
|
|
23 |
% |
|
|
1 |
% |
|
|
|
|
|
|
||
Other |
|
$ |
301 |
|
|
$ |
8,323 |
|
|
|
(96 |
)% |
|
|
(96 |
)% |
Percentage of total revenues |
|
n/m |
|
|
|
7 |
% |
|
|
|
|
|
|
|||
Share-based compensation expense increased by $1,726 to $4,274 for the 13 weeks ended July 3, 2022, primarily driven by the grant of Restricted Stock Units on July 19, 2021 (IPO completion) and hence were not vesting in the 13 weeks ended July 4, 2021. In both periods presented the pre-fiscal 2021 awards (Share Appreciation Rights and Growth Shares) continued to vest.
Foreign exchange loss, net, which is unrealized and non-cash in nature, increased by $56,121 to $57,176 for the 13 weeks ended July 3, 2022, primarily driven by foreign exchange revaluation of our borrowings. The significant increase is a function of the relative volatility, period on period, of foreign exchange markets and the impact that this has had, most notably, on the revaluation of dollar borrowings held by non-dollar Group undertakings. Whilst the majority of our external borrowings are denominated in dollars, the foreign exchange impact primarily reflects the revaluation of our non-dollar denominated intra-group debt where we have lent dollars to non-dollar operating companies outside of the United States as well as our dollar denominated external borrowing held in non-dollar companies in our Group.
When we consolidate our non- United States companies and present a dollar view of the MCG Group, this intra-group debt is revalued from local currencies (pounds, euros etc.) to dollars and it is this non-cash revaluation that causes us to have this foreign exchange volatility.
Other expenses decreased by $8,022 to $301 for the 13 weeks ended July 3, 2022, primarily driven by non-recurring IPO related expenses of $6 million and the non-cash member credit expense of $1 million in the prior period as a result of the pandemic related closures.
Interest Expense, Net
|
|
For the 13 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 3, |
|
|
July 4, |
|
|
Actual |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Interest expense, net |
|
$ |
18,778 |
|
|
$ |
17,018 |
|
|
|
10 |
% |
|
|
24 |
% |
Percentage of total revenues |
|
|
8 |
% |
|
|
14 |
% |
|
|
|
|
|
|
||
Net Interest Expense was $18,778 for the 13 weeks ended July 3, 2022, an increase of $1,760, or 10%, on the comparative period in 2021. This increase is primarily due to the incremental interest expense incurred following issuance of $100 million of additional notes in March 2022 under the Goldman Sachs Senior Secured Note facility. This was not in existence during the 13 week period ended July 4, 2021. In constant currency, net interest would have increased by $3,636, or 24%.
Adjusted EBITDA
|
|
For the 13 Weeks Ended |
|
|
Percent Change |
|||||||
|
|
July 3, |
|
|
July 4, |
|
|
Actual |
|
Constant |
||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|||||
|
|
(Unaudited) |
||||||||||
Adjusted EBITDA |
|
$ |
15,385 |
|
|
$ |
(12,556 |
) |
|
n/m |
|
n/m |
Percentage of total revenues |
|
|
6 |
% |
|
|
(10 |
)% |
|
|
|
|
46
Adjusted EBITDA was $15,385 for the 13 weeks ended July 3, 2022, in comparison to a loss of $(12,556) for the 13 weeks ended July 4, 2021, an increase of $27,941. The increase is driven by increased operations following the removal of COVID-19 related restrictions in comparison to the 13 weeks ended July 4, 2021 as well as increased membership revenues from both Soho House and Non-House members. These increases were partially offset by an increases in General and administrative expenses year on year. In constant currency, Adjusted EBITDA would have increased by $26,557 compared to the comparative period in fiscal 2021.
Comparison of the 26 weeks ended July 3, 2022 and July 4, 2021
The following table summarizes our results of operations for the 26 weeks ended July 3, 2022 and July 4, 2021 (in thousands, except percentages):
|
|
For the 26 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
July 3, |
|
|
July 4, |
|
|
|
|
|
July 4, |
|
|
|
|
|||||
|
|
Actuals |
|
|
|
|
|
Currency(1) |
|
|
|
|
||||||||
|
|
(Dollar amounts in thousands) |
|
|
Change % |
|
|
(Dollar amounts in thousands) |
|
|
Constant |
|
||||||||
|
|
(Unaudited) |
|
|||||||||||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Membership revenues |
|
$ |
124,662 |
|
|
$ |
85,356 |
|
|
|
46 |
% |
|
$ |
79,014 |
|
|
|
58 |
% |
In-House revenues |
|
|
197,440 |
|
|
|
62,052 |
|
|
n/m |
|
|
|
57,442 |
|
|
n/m |
|
||
Other revenues |
|
|
113,676 |
|
|
|
49,072 |
|
|
n/m |
|
|
|
45,426 |
|
|
n/m |
|
||
Total revenues |
|
|
435,778 |
|
|
|
196,480 |
|
|
n/m |
|
|
|
181,882 |
|
|
n/m |
|
||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
In-House operating expenses (exclusive of depreciation and amortization) |
|
|
(241,668 |
) |
|
|
(116,239 |
) |
|
n/m |
|
|
|
(107,603 |
) |
|
n/m |
|
||
Other operating expenses (exclusive of depreciation and amortization) |
|
|
(110,391 |
) |
|
|
(68,878 |
) |
|
|
(60 |
)% |
|
|
(63,761 |
) |
|
|
(73 |
)% |
General and administrative expenses |
|
|
(55,933 |
) |
|
|
(36,005 |
) |
|
|
(55 |
)% |
|
|
(33,330 |
) |
|
|
(68 |
)% |
Pre-opening expenses |
|
|
(7,773 |
) |
|
|
(11,318 |
) |
|
|
31 |
% |
|
|
(10,477 |
) |
|
|
26 |
% |
Depreciation and amortization |
|
|
(45,519 |
) |
|
|
(39,750 |
) |
|
|
(15 |
)% |
|
|
(36,797 |
) |
|
|
(24 |
)% |
Share-based compensation |
|
|
(12,077 |
) |
|
|
(4,677 |
) |
|
n/m |
|
|
|
(4,330 |
) |
|
n/m |
|
||
Foreign exchange loss, net |
|
|
(74,250 |
) |
|
|
(15,922 |
) |
|
n/m |
|
|
|
(14,739 |
) |
|
n/m |
|
||
Other |
|
|
(1,077 |
) |
|
|
(14,111 |
) |
|
|
92 |
% |
|
|
(13,063 |
) |
|
|
92 |
% |
Total operating expenses |
|
|
(548,688 |
) |
|
|
(306,900 |
) |
|
|
(79 |
)% |
|
|
(284,100 |
) |
|
|
(93 |
)% |
Operating loss |
|
|
(112,910 |
) |
|
|
(110,420 |
) |
|
|
(2 |
)% |
|
|
(102,218 |
) |
|
|
(10 |
)% |
Other (expense) income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest expense, net |
|
|
(34,495 |
) |
|
|
(46,622 |
) |
|
|
26 |
% |
|
|
(43,158 |
) |
|
|
20 |
% |
Gain on sale of property and other, net |
|
|
1,541 |
|
|
|
6,903 |
|
|
|
(78 |
)% |
|
|
6,390 |
|
|
|
(76 |
)% |
Share of loss of equity method investments |
|
|
1,740 |
|
|
|
(826 |
) |
|
n/m |
|
|
|
(765 |
) |
|
n/m |
|
||
Total other expense, net |
|
|
(31,214 |
) |
|
|
(40,545 |
) |
|
|
23 |
% |
|
|
(37,533 |
) |
|
|
17 |
% |
Loss before income taxes |
|
|
(144,124 |
) |
|
|
(150,965 |
) |
|
|
5 |
% |
|
|
(139,751 |
) |
|
|
(3 |
)% |
Income tax (expense) benefit |
|
|
(57 |
) |
|
|
820 |
|
|
n/m |
|
|
|
759 |
|
|
n/m |
|
||
Net loss |
|
|
(144,181 |
) |
|
|
(150,145 |
) |
|
|
4 |
% |
|
|
(138,992 |
) |
|
|
(4 |
)% |
Net loss attributable to noncontrolling interest |
|
|
1,743 |
|
|
|
3,679 |
|
|
|
(53 |
)% |
|
|
3,406 |
|
|
|
(49 |
)% |
Net loss attributable to Membership Collective Group Inc. |
|
$ |
(142,438 |
) |
|
$ |
(146,466 |
) |
|
|
3 |
% |
|
$ |
(135,586 |
) |
|
|
(5 |
)% |
Components of Operating Results
Revenues
Total Revenue
47
|
|
For the 26 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 3, |
|
|
July 4, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
Unaudited |
|
|||||||||||||
Total revenues |
|
$ |
435,778 |
|
|
$ |
196,480 |
|
|
n/m |
|
|
n/m |
|
||
North America |
|
|
182,076 |
|
|
|
92,265 |
|
|
|
97 |
% |
|
|
97 |
% |
United Kingdom |
|
|
137,824 |
|
|
|
51,431 |
|
|
n/m |
|
|
n/m |
|
||
Europe/ROW |
|
|
51,584 |
|
|
|
18,645 |
|
|
n/m |
|
|
n/m |
|
||
All Other |
|
|
64,294 |
|
|
|
34,139 |
|
|
|
88 |
% |
|
n/m |
|
|
Membership Revenues
|
|
For the 26 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 3, |
|
|
July 4, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
Unaudited |
|
|||||||||||||
Membership revenues |
|
$ |
124,662 |
|
|
$ |
85,356 |
|
|
|
46 |
% |
|
|
58 |
% |
North America |
|
|
60,326 |
|
|
|
41,672 |
|
|
|
45 |
% |
|
|
45 |
% |
United Kingdom |
|
|
35,636 |
|
|
|
28,054 |
|
|
|
27 |
% |
|
|
37 |
% |
Europe/ROW |
|
|
11,827 |
|
|
|
8,086 |
|
|
|
46 |
% |
|
|
58 |
% |
All Other |
|
|
16,873 |
|
|
|
7,544 |
|
|
n/m |
|
|
n/m |
|
||
Membership revenues increased by 46% (58% constant currency) to $124,662 for the 26 weeks ended July 3, 2022. This increase was predominantly driven by an additional approximately 32,600 Adult Paying Soho House members at the end of the first half of fiscal 2022 versus the comparative period driven by new members as well as the unfreezing of existing memberships as COVID-19 restrictions lifted in the second half of fiscal 2021. Additionally Soho House Every House membership fees were increased in February 2022 and again in April 2022, impacting all new members at the time of initial membership and existing members on renewal, which further increased membership revenue year on year.
There was also an increase in Non-House Membership revenues, following the increase in the number of Soho Friends, Soho Works and SOHO HOME+ members, with approximately 35,000 additional members in comparison to the end of the first half of fiscal 2021.
Our United Kingdom segment saw an increase in Membership revenues of $7,582, or 27% (37% constant currency), due to the opening of 180 House, London, in April 2021 and Brighton Beach House in March 2022, as well as membership intakes and unfreezing memberships across all existing Houses following the lifting of COVID-19 restrictions, meaning an increase in Adult paying members versus half of fiscal 2021.
North America segment saw an increase in revenues of $18,654, or 45% (45% constant currency), due to an increase in Adult paying members during the first half of fiscal 2022 versus first half 2021, including the opening of Soho House Austin in May 2021, Nashville in February 2022 and Holloway House, West Hollywood. in May 2022 as well as increased intakes in existing Houses versus the first half of fiscal 2021 where intakes were limited due to COVID-19 restrictions.
The Europe/ROW segment saw an increase in Membership revenues of $3,741, or 46% (58% constant currency), due to an increase in Adult paying members, predominantly from the opening of three new Houses after first half of fiscal 2021; Tel Aviv (August 2021), Paris (September 2021) and Rome (October 2021).
Membership revenue reported under All Other above saw an increase predominantly driven by growth in CWH Adult Paying members as well as over 3,300 additional Soho Works paying members and approximately 28,400 additional Soho Friends members in comparison to the first half of fiscal 2021.
In constant currency, Membership revenues would have increased by $45,647, or 58%.
In-House Revenues
|
|
For the 26 Weeks Ended |
|
|
Percent Change |
|||||||
|
|
July 3, |
|
|
July 4, |
|
|
Actuals |
|
Constant |
||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|||||
|
|
(Unaudited) |
||||||||||
In-House revenues |
|
$ |
197,440 |
|
|
$ |
62,052 |
|
|
n/m |
|
n/m |
North America |
|
|
89,334 |
|
|
|
38,403 |
|
|
n/m |
|
n/m |
United Kingdom |
|
|
79,690 |
|
|
|
17,891 |
|
|
n/m |
|
n/m |
Europe/ROW |
|
|
28,416 |
|
|
|
5,758 |
|
|
n/m |
|
n/m |
48
In-House revenues were $197,440 for the 26 weeks ended July 3, 2022, an increase of $135,388 versus the comparative period in 2021. The increase was predominantly driven by an easing of social distancing restrictions as a number of our Houses were either not open in first half of fiscal 2021 or operating at reduced capacity, such as outdoor dining only in our North America and London Houses. Revenues were further increased due to new Soho Houses opening in 2021 and in first half 2022, as well as select price increases across our In-House offering.
In constant currency, In-House Revenues would have increased by $139,998.
Other Revenues
|
|
For the 26 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 3, |
|
|
July 4, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Other revenues |
|
$ |
113,676 |
|
|
$ |
49,072 |
|
|
n/m |
|
|
n/m |
|
||
North America |
|
|
32,418 |
|
|
|
12,190 |
|
|
n/m |
|
|
n/m |
|
||
United Kingdom |
|
|
22,498 |
|
|
|
5,486 |
|
|
n/m |
|
|
n/m |
|
||
Europe/ROW |
|
|
11,339 |
|
|
|
4,801 |
|
|
n/m |
|
|
n/m |
|
||
All Other |
|
|
47,421 |
|
|
|
26,595 |
|
|
|
78 |
% |
|
|
93 |
% |
Other revenues were $113,676 for the 26 weeks ended July 3, 2022, compared to $49,072 for the 26 weeks ended July 4, 2021, an increase of $64,604. The increase is predominantly driven by increased trading in first half of fiscal 2022 following fewer COVID-19 related restrictions in comparison to first half of fiscal 2021.
In addition to reduced trading restrictions, the North America segment Other revenues have benefited in first quarter of fiscal 2022 due to the acquisition of the remaining 50% share of the Mandolin restaurant in the second quarter of 2021 such that we now fully consolidate the restaurant’s financial results. The acquisition of the operating agreements relating to The LINE & Saguaro hotels in the second quarter of fiscal 2021 and the agreement to manage and operate the Le Vallauris restaurant, Palm Springs in the first quarter of fiscal 2022 have also contributed to the increase in Other revenues year on year.
The Europe/RoW Other revenues segment has increased compared to first half fiscal 2021 due to Scorpios Beach Club, which benefited from less restrictions versus last year as well as opening for the season two weeks earlier than in fiscal 2021, meaning increased revenue year on year.
In constant currency, Other Revenues have an increased by $68,251.
In-House Operating Expenses and House-Level Contribution
49
|
|
For the 26 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 3, |
|
|
July 4, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
In-House operating expenses |
|
$ |
(241,668 |
) |
|
$ |
(116,239 |
) |
|
n/m |
|
|
n/m |
|
||
Percentage of total House revenues |
|
|
(78 |
)% |
|
|
(81 |
)% |
|
|
|
|
|
|
||
Operating loss |
|
$ |
(112,910 |
) |
|
$ |
(110,420 |
) |
|
|
(2 |
)% |
|
|
(10 |
)% |
Operating loss margin |
|
|
(26 |
)% |
|
|
(56 |
)% |
|
|
|
|
|
|
||
House-Level Contribution |
|
$ |
66,378 |
|
|
$ |
26,866 |
|
|
n/m |
|
|
n/m |
|
||
House-Level Contribution Margin |
|
|
22 |
% |
|
|
19 |
% |
|
|
3 |
% |
|
|
|
|
House-Level Contribution by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
$ |
43,500 |
|
|
$ |
17,694 |
|
|
n/m |
|
|
n/m |
|
||
United Kingdom |
|
|
23,133 |
|
|
|
6,062 |
|
|
n/m |
|
|
n/m |
|
||
Europe/ROW |
|
|
(2,812 |
) |
|
|
(3,297 |
) |
|
|
15 |
% |
|
|
8 |
% |
All Other |
|
|
2,557 |
|
|
|
6,407 |
|
|
|
(60 |
)% |
|
|
(57 |
)% |
House-Level Contribution Margin by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
|
29 |
% |
|
|
22 |
% |
|
|
|
|
|
|
||
United Kingdom |
|
|
20 |
% |
|
|
13 |
% |
|
|
|
|
|
|
||
Europe/ROW |
|
|
(7 |
)% |
|
|
(24 |
)% |
|
|
|
|
|
|
||
All Other |
|
|
60 |
% |
|
n/m |
|
|
|
|
|
|
|
|||
In-House Operating Expenses were $241,668 for the 26 weeks ended July 3, 2022, an increase of $125,429. The increase is a result of six new Houses and fewer capacity restrictions in comparison to first half 2021, where the majority of Houses were shut or operating at reduced capacity, and the associated increase in volumes. Additionally, we also received fewer COVID-19 related government support grants to retain workers than in the first half of fiscal 2021. The increase in In-House Operating Expenses was offset by an out-of-period adjustment correcting an error with respect to the estimation of the operating lease liability identified during the 13 week period ended July 3, 2022 but relating to the 13 week period ended April 3, 2022 and fiscal years 2022, 2020 and 2019. Refer to Note 2, Summary of Significant Accounting Policies—Basis of Presentation for further information.
In the first half of 2022, as a result of the continued impact from the COVID-19 pandemic, governmental agencies in the European Union provided grants primarily to retain on payroll workers that would have otherwise been terminated and were instead furloughed in accordance with the rules of the applicable national scheme. Such government grants, which under their terms meant that the furloughed employees were prohibited by law from providing the Company with services but kept on payroll rather than being terminated to claim unemployment benefits, totaled $0.7 million in first half of 2022, and are presented as a reduction of payroll expenses within In-House Operating Expenses. Under the rules of the schemes, we applied to the relevant government agency and recovered the costs of furloughed employees. The net payroll expense within In-House Operating Expenses therefore only reflects the costs incurred from staff that were not furloughed and hence provided revenue generating services. In constant currency, In-House Operating Expenses would have increased by $134,065.
House-Level Contribution, which is defined as House Revenues less In-House Operating Expenses, was $66,378 for the 26 weeks ended July 3, 2022, compared to $26,866 for the 26 weeks ended July 4, 2021, an increase of $39,512. The increase in House-Level Contribution partly relates to the impact of COVID-19 related restrictions in first half 2021 and the return of trading volumes in first half 2022, as well as increased Soho House membership revenues. This increase is partially offset by the opening of six additional Houses versus first half of fiscal 2021, with Houses tending to have negative contribution in their first year as the House matures.
House-Level Contribution Margin was 22% for the 26 weeks ended July 3, 2022, increased by 3% from the prior period due to increased membership revenues and higher trading in the 26 weeks ended July 4, 2021 compared to the prior period, partially offset by the dilutive impact of six new Houses and Houses in Europe / RoW that were still impacted by COVID restrictions.
Other Operating Expenses and Other Contribution
50
|
|
For the 26 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 3, |
|
|
July 4, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Other operating expenses |
|
$ |
(110,391 |
) |
|
$ |
(68,878 |
) |
|
|
(60 |
)% |
|
|
(73 |
)% |
Percentage of total other revenues |
|
|
(86 |
)% |
|
n/m |
|
|
|
|
|
|
|
|||
Operating loss |
|
$ |
(112,910 |
) |
|
$ |
(110,420 |
) |
|
|
(2 |
)% |
|
|
(10 |
)% |
Operating loss margin |
|
|
(26 |
)% |
|
|
(56 |
)% |
|
|
|
|
|
|
||
Other Contribution |
|
$ |
17,341 |
|
|
$ |
(15,503 |
) |
|
n/m |
|
|
n/m |
|
||
Other Contribution Margin |
|
|
14 |
% |
|
|
(29 |
)% |
|
|
43 |
% |
|
|
(72 |
)% |
Other Contribution by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
$ |
5,605 |
|
|
$ |
2,719 |
|
|
n/m |
|
|
n/m |
|
||
United Kingdom |
|
|
5,686 |
|
|
|
(3,427 |
) |
|
n/m |
|
|
n/m |
|
||
Europe/ROW |
|
|
3,242 |
|
|
|
825 |
|
|
n/m |
|
|
n/m |
|
||
All Other |
|
|
2,808 |
|
|
|
(15,620 |
) |
|
n/m |
|
|
n/m |
|
||
Other Contribution Margin by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
|
17 |
% |
|
|
22 |
% |
|
|
|
|
|
|
||
United Kingdom |
|
|
24 |
% |
|
|
(34 |
)% |
|
|
|
|
|
|
||
Europe/ROW |
|
|
28 |
% |
|
|
17 |
% |
|
|
|
|
|
|
||
All Other |
|
|
5 |
% |
|
|
(51 |
)% |
|
|
|
|
|
|
||
Other Operating Expenses were $110,391 for the 26 weeks ended July 3, 2022, compared with $68,878 for the 26 weeks ended July 4, 2021, an increase of $41,513, or 60%. This increase is primarily driven by reduced COVID-19 related trading restrictions in first half of fiscal 2022 compared to first half of fiscal 2021, thus resulting in higher trading volumes. In constant currency, Other Operating Expenses would have increased $46,630, or 73%.
Other Contribution, which we define as Other Revenues plus Non-House Membership Revenues less Other Operating Expenses, was $17,341 for the 26 weeks ended July 3, 2022, compared to a loss of $15,503 for the comparative period, an increase of $32,844. This was predominantly driven by higher Non-House Membership Revenues and increased contribution from public restaurants and Scorpios Beach Club, Mykonos following removal of COVID-19 related trading restrictions.
Other Contribution reported under All Other above has increased significantly year on year due to better performance of Soho Restaurants, following removal of COVID-19 restrictions in UK, as well as improved profitability of our IHDB business year on year.
Other Contribution Margin was 14% for the 26 weeks ended July 3, 2022, an increase of 43% compared to the prior period, predominantly driven by removal of trading restrictions.
51
General and Administrative Expenses
|
|
For the 26 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 3, |
|
|
July 4, |
|
|
Actual |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
General and administrative expenses |
|
$ |
55,933 |
|
|
$ |
36,005 |
|
|
|
55 |
% |
|
|
68 |
% |
Percentage of total revenues |
|
|
13 |
% |
|
|
18 |
% |
|
|
|
|
|
|
||
General and Administrative Expenses were $55,933 for the 26 weeks ended July 3, 2022, compared with $36,005 for the 26 weeks ended July 4, 2021, an increase of $19,928, or 55%. The increase was primarily driven by the increase in headcount at support offices as a result of increase in business activity following removal of COVID restrictions, additional headcount to support expansion and wage increases for existing staff from February 2022 onwards. In addition to this, there was a decrease in government support received in the 26 weeks ended July 3, 2022 in comparison to the prior period.
In constant currency, General and Administrative Expenses would have an increase of $22,603, or 68%.
Pre-Opening Expenses
|
|
For the 26 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 3, |
|
|
July 4, |
|
|
Actual |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Pre-opening expenses |
|
$ |
7,773 |
|
|
$ |
11,318 |
|
|
|
(31 |
)% |
|
|
(26 |
)% |
Percentage of total revenues |
|
|
2 |
% |
|
|
6 |
% |
|
|
|
|
|
|
||
Pre-Opening expenses were $7,773 for the 26 weeks ended July 3, 2022, driven by the opening of three Soho Houses during the first half of fiscal 2022. The reduction in comparison to $11,318 for the 26 weeks ended July 4, 2021, is predominantly driven by better cost control and timing of new House openings. In constant currency, Pre-Opening expenses would have decreased by 26%.
Depreciation and Amortization
|
|
For the 26 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 3, |
|
|
July 4, |
|
|
Actual |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Depreciation and amortization |
|
$ |
45,519 |
|
|
$ |
39,750 |
|
|
|
15 |
% |
|
|
24 |
% |
Percentage of total revenues |
|
|
10 |
% |
|
|
20 |
% |
|
|
|
|
|
|
||
Depreciation and amortization was $45,519 for the 26 weeks ended July 3, 2022, an increase of $5,769, or 15%, from the 26 weeks ended July 4, 2021. This increase was primarily driven by amortization of capitalized IT development costs, as well as depreciation associated with six new Soho Houses that opened in since first half of fiscal 2021. In constant currency, depreciation and amortization expenses would have increased by $8,722, or 24%.
52
Other Expenses
|
|
For the 26 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 3, |
|
|
July 4, |
|
|
Actual |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Share-based compensation |
|
$ |
12,077 |
|
|
$ |
4,677 |
|
|
n/m |
|
|
n/m |
|
||
Percentage of total revenues |
|
|
3 |
% |
|
|
2 |
% |
|
|
|
|
|
|
||
Foreign exchange loss, net |
|
$ |
74,250 |
|
|
$ |
15,922 |
|
|
n/m |
|
|
n/m |
|
||
Percentage of total revenues |
|
|
17 |
% |
|
|
8 |
% |
|
|
|
|
|
|
||
Other |
|
$ |
1,077 |
|
|
$ |
14,111 |
|
|
|
(92 |
)% |
|
|
(92 |
)% |
Percentage of total revenues |
|
n/m |
|
|
|
7 |
% |
|
|
|
|
|
|
|||
Share-based compensation expense increased by $7,400 to $12,077 for the 26 weeks ended July 3, 2022, primarily driven by the grant of Restricted Stock Units in the third and fourth quarter of fiscal 2021, in addition to the impact of the continued vesting of pre-fiscal 2021 awards (Share Appreciation Rights and Growth Shares) which continued to vest in both periods presented.
Foreign exchange loss, net, which is unrealized and non-cash in nature, increased by $58,328 to $74,250 for the 26 weeks ended July 3, 2022, primarily driven by foreign exchange revaluation of our borrowings, which have increased since the preceding period. Increased foreign exchange volatility during the period has also contributed to this increase most notably on our dollar borrowings held by non-dollar Group undertakings. Whilst the majority of our external borrowings are denominated in dollars, the foreign exchange impact primarily reflects the revaluation of our non-dollar denominated intra-group debt where we have lent dollars to non-dollar operating companies outside of the United States as well as our dollar denominated external borrowing held in non-dollar companies in our Group.
Other expenses decreased by $13,034 to $1,077 for the 26 weeks ended July 3, 2022, primarily driven by non-cash member credit expense of $4 million in the prior period as a result of the pandemic related closures in the prior period and costs incurred associated with our Goldman Sachs refinancing in March 2021 and July 2021 IPO of $8 million. In the current period, the expense primarily relates to member credits and, because of comparatively fewer closures and operating restrictions, the associated expense is smaller. There were no refinancing or IPO related costs.
Interest Expense, Net
|
|
For the 26 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 3, |
|
|
July 4, |
|
|
Actual |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Interest expense, net |
|
$ |
34,495 |
|
|
$ |
46,622 |
|
|
|
(26 |
)% |
|
|
(20 |
)% |
Percentage of total revenues |
|
|
8 |
% |
|
|
24 |
% |
|
|
|
|
|
|
||
Net Interest Expense was $34,495 for the 26 weeks ended July 3, 2022, a decrease of $12,127, or 26%, on the comparative period in 2021. This decrease is primarily due to the one off $9 million loss on extinguishment of the Permira Senior Facility in the 13 weeks ended April 4, 2021, offset by the incremental interest expense incurred following issuance of $100 million of additional notes in March 2022 under the Goldman Sachs Senior Secured Note facility. In constant currency, net interest would have decreased by $8,663, or 20%.
Adjusted EBITDA
|
|
For the 26 Weeks Ended |
|
|
Percent Change |
|||||||
|
|
July 3, |
|
|
July 4, |
|
|
Actual |
|
Constant |
||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|||||
|
|
(Unaudited) |
||||||||||
Adjusted EBITDA |
|
$ |
17,578 |
|
|
$ |
(35,348 |
) |
|
n/m |
|
n/m |
Percentage of total revenues |
|
|
4 |
% |
|
|
(18 |
)% |
|
|
|
|
Adjusted EBITDA was $17,578 for the 26 weeks ended July 3, 2022, in comparison to a loss of $35,348 for the 26 weeks ended July 4, 2021, an increase of $52,926. The increase is driven by increased operations following the removal of COVID-19 related restrictions in comparison to the 26 weeks ended July 4, 2021 as well as increased membership revenues from both Soho House and Non-House members driven by both price increase for Soho House membership as well as an increase in the number of both House and Non-House member versus first half of fiscal 2021. This increase was partially offset by increased General
53
and administrative costs in contrast to first half of fiscal 2021. In constant currency, Adjusted EBITDA would have increased by $50,300 compared to the comparative period in fiscal 2021.
54
Non-GAAP Financial Measures
For the 13 weeks ended July 3, 2022 and July 4, 2021
A reconciliation of Net Loss to Adjusted EBITDA is set forth below for the periods specified:
|
|
For the 13 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 3, |
|
|
July 4, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Unaudited, dollar amounts in thousands) |
|
|||||||||||||
Net loss |
|
$ |
(83,555 |
) |
|
$ |
(57,108 |
) |
|
|
(46 |
)% |
|
|
(64 |
)% |
Depreciation and amortization |
|
|
22,688 |
|
|
|
21,905 |
|
|
|
4 |
% |
|
|
16 |
% |
Interest expense, net |
|
|
18,778 |
|
|
|
17,018 |
|
|
|
10 |
% |
|
|
24 |
% |
Income tax expense |
|
|
509 |
|
|
|
3 |
|
|
n/m |
|
|
n/m |
|
||
EBITDA |
|
|
(41,580 |
) |
|
|
(18,182 |
) |
|
n/m |
|
|
n/m |
|
||
Loss (gain) on sale of property and other, net |
|
|
122 |
|
|
|
(6,903 |
) |
|
n/m |
|
|
n/m |
|
||
Share of (profit) loss of equity method investments |
|
|
(1,342 |
) |
|
|
130 |
|
|
n/m |
|
|
n/m |
|
||
Foreign exchange⁽²⁾ |
|
|
57,176 |
|
|
|
1,055 |
|
|
n/m |
|
|
n/m |
|
||
Share of equity method investments adjusted EBITDA |
|
|
2,365 |
|
|
|
1,456 |
|
|
|
62 |
% |
|
|
83 |
% |
Share-based compensation expense⁽²⁾ |
|
|
4,274 |
|
|
|
2,548 |
|
|
|
68 |
% |
|
|
89 |
% |
Membership credits expense⁽³⁾ |
|
|
555 |
|
|
|
1,404 |
|
|
|
(60 |
)% |
|
|
(56 |
)% |
COVID-19 related rebate⁽⁴⁾ |
|
|
— |
|
|
|
(272 |
) |
|
n/m |
|
|
n/m |
|
||
Corporate financing and restructuring costs⁽⁵⁾ |
|
|
— |
|
|
|
6,208 |
|
|
n/m |
|
|
n/m |
|
||
Out of period operating lease liability adjustment(6) |
|
|
(6,185 |
) |
|
|
— |
|
|
n/m |
|
|
n/m |
|
||
Adjusted EBITDA |
|
$ |
15,385 |
|
|
$ |
(12,556 |
) |
|
n/m |
|
|
n/m |
|
||
The computation of House-Level Contribution and Other Contribution is set forth below:
55
|
|
For the 13 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
July 3, |
|
|
July 4, |
|
|
Change % |
|
|
July 4, 2021 |
|
|
Constant Currency |
|
|||||
|
|
Actuals |
|
|
|
|
|
|
|
|||||||||||
|
|
(Unaudited, dollar amounts in thousands) |
|
|||||||||||||||||
Operating loss |
|
$ |
(65,488 |
) |
|
$ |
(46,860 |
) |
|
|
(40 |
)% |
|
$ |
(41,694 |
) |
|
|
(57 |
)% |
General and administrative |
|
|
26,647 |
|
|
|
19,500 |
|
|
|
37 |
% |
|
|
17,350 |
|
|
|
54 |
% |
Pre-opening expenses |
|
|
3,741 |
|
|
|
6,493 |
|
|
|
(42 |
)% |
|
|
5,777 |
|
|
|
(35 |
)% |
Depreciation and amortization |
|
|
22,688 |
|
|
|
21,905 |
|
|
|
4 |
% |
|
|
19,490 |
|
|
|
16 |
% |
Share-based compensation |
|
|
4,274 |
|
|
|
2,548 |
|
|
|
68 |
% |
|
|
2,267 |
|
|
|
89 |
% |
Foreign exchange loss, net |
|
|
57,176 |
|
|
|
1,055 |
|
|
n/m |
|
|
|
939 |
|
|
n/m |
|
||
Other |
|
|
301 |
|
|
|
8,323 |
|
|
|
(96 |
)% |
|
|
7,405 |
|
|
|
(96 |
)% |
Non-House membership revenues |
|
|
(7,269 |
) |
|
|
(3,483 |
) |
|
n/m |
|
|
|
(3,099 |
) |
|
n/m |
|
||
Other revenues |
|
|
(68,196 |
) |
|
|
(33,423 |
) |
|
n/m |
|
|
|
(29,738 |
) |
|
n/m |
|
||
Other operating expenses |
|
|
62,758 |
|
|
|
40,685 |
|
|
|
54 |
% |
|
|
36,200 |
|
|
|
73 |
% |
House-Level Contribution |
|
$ |
36,632 |
|
|
$ |
16,743 |
|
|
n/m |
|
|
$ |
14,897 |
|
|
n/m |
|
||
Operating loss margin |
|
|
(27 |
)% |
|
|
(38 |
)% |
|
|
|
|
|
(38 |
)% |
|
|
|
||
House-Level Contribution Margin |
|
|
22 |
% |
|
|
19 |
% |
|
|
|
|
|
19 |
% |
|
|
|
||
|
|
13 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
July 3, |
|
|
July 4, |
|
|
Change % |
|
|
July 4, 2021 |
|
|
Constant Currency |
|
|||||
|
|
Actuals |
|
|
|
|
|
|
|
|||||||||||
|
|
(Unaudited, dollar amounts in thousands) |
|
|||||||||||||||||
Membership revenues |
|
$ |
65,889 |
|
|
$ |
44,863 |
|
|
|
47 |
% |
|
$ |
39,917 |
|
|
|
65 |
% |
Less: Non-House membership revenues |
|
|
(7,269 |
) |
|
|
(3,483 |
) |
|
n/m |
|
|
|
(3,099 |
) |
|
n/m |
|
||
Add: in-House revenues |
|
|
109,685 |
|
|
|
45,793 |
|
|
n/m |
|
|
|
40,745 |
|
|
n/m |
|
||
Total House revenues |
|
|
168,305 |
|
|
|
87,173 |
|
|
|
93 |
% |
|
|
77,563 |
|
|
n/m |
|
|
Less: in-House operating expenses |
|
|
131,673 |
|
|
|
70,430 |
|
|
|
87 |
% |
|
|
62,666 |
|
|
n/m |
|
|
House-Level Contribution |
|
$ |
36,632 |
|
|
$ |
16,743 |
|
|
n/m |
|
|
$ |
14,897 |
|
|
n/m |
|
||
|
|
13 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
July 3, |
|
|
July 4, |
|
|
Change % |
|
|
July 4, 2021 |
|
|
Constant Currency |
|
|||||
|
|
Actuals |
|
|
|
|
|
|
|
|||||||||||
|
|
(Unaudited, dollar amounts in thousands) |
|
|||||||||||||||||
Operating loss |
|
$ |
(65,488 |
) |
|
$ |
(46,860 |
) |
|
|
(40 |
)% |
|
$ |
(41,694 |
) |
|
|
(57 |
)% |
General and administrative |
|
|
26,647 |
|
|
|
19,500 |
|
|
|
37 |
% |
|
|
17,350 |
|
|
|
54 |
% |
Pre-opening expenses |
|
|
3,741 |
|
|
|
6,493 |
|
|
|
(42 |
)% |
|
|
5,777 |
|
|
|
(35 |
)% |
Depreciation and amortization |
|
|
22,688 |
|
|
|
21,905 |
|
|
|
4 |
% |
|
|
19,490 |
|
|
|
16 |
% |
Share-based compensation |
|
|
4,274 |
|
|
|
2,548 |
|
|
|
68 |
% |
|
|
2,267 |
|
|
|
89 |
% |
Foreign exchange loss, net |
|
|
57,176 |
|
|
|
1,055 |
|
|
n/m |
|
|
|
939 |
|
|
n/m |
|
||
Other |
|
|
301 |
|
|
|
8,323 |
|
|
|
(96 |
)% |
|
|
7,405 |
|
|
|
(96 |
)% |
House membership revenues |
|
|
(58,620 |
) |
|
|
(41,380 |
) |
|
|
42 |
% |
|
|
(36,818 |
) |
|
|
(59 |
)% |
In-House revenues |
|
|
(109,685 |
) |
|
|
(45,793 |
) |
|
n/m |
|
|
|
(40,745 |
) |
|
n/m |
|
||
In-House operating expenses |
|
|
131,673 |
|
|
|
70,430 |
|
|
|
87 |
% |
|
|
62,666 |
|
|
n/m |
|
|
Total Other Contribution |
|
$ |
12,707 |
|
|
$ |
(3,779 |
) |
|
n/m |
|
|
$ |
(3,363 |
) |
|
n/m |
|
||
Operating loss margin |
|
|
(27 |
)% |
|
|
(38 |
)% |
|
|
|
|
|
(38 |
)% |
|
|
|
||
Other Contribution Margin |
|
|
17 |
% |
|
|
(10 |
)% |
|
|
|
|
|
(10 |
)% |
|
|
|
||
56
|
|
13 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
July 3, |
|
|
July 4, |
|
|
Change % |
|
|
July 4, 2021 |
|
|
Constant Currency |
|
|||||
|
|
Actuals |
|
|
|
|
|
|
|
|||||||||||
|
|
(Unaudited, dollar amounts in thousands) |
|
|||||||||||||||||
Other Contribution |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Non-House membership revenues |
|
$ |
7,269 |
|
|
$ |
3,483 |
|
|
n/m |
|
|
$ |
3,099 |
|
|
n/m |
|
||
Add: other revenues |
|
|
68,196 |
|
|
|
33,423 |
|
|
n/m |
|
|
|
29,738 |
|
|
n/m |
|
||
Less: other operating expenses |
|
|
62,758 |
|
|
|
40,685 |
|
|
|
54 |
% |
|
|
36,200 |
|
|
|
73 |
% |
Other Contribution |
|
$ |
12,707 |
|
|
$ |
(3,779 |
) |
|
n/m |
|
|
$ |
(3,363 |
) |
|
n/m |
|
||
For the 26 weeks ended July 3, 2022 and July 4, 2021
A reconciliation of Net Loss to Adjusted EBITDA is set forth below for the periods specified:
|
|
For the 26 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 3, |
|
|
July 4, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Unaudited, dollar amounts in thousands) |
|
|||||||||||||
Net loss |
|
$ |
(144,181 |
) |
|
$ |
(150,145 |
) |
|
|
4 |
% |
|
|
(4 |
)% |
Depreciation and amortization |
|
|
45,519 |
|
|
|
39,750 |
|
|
|
15 |
% |
|
|
24 |
% |
Interest expense, net |
|
|
34,495 |
|
|
|
46,622 |
|
|
|
(26 |
)% |
|
|
(20 |
)% |
Income tax expense (benefit) |
|
|
57 |
|
|
|
(820 |
) |
|
n/m |
|
|
n/m |
|
||
EBITDA |
|
|
(64,110 |
) |
|
|
(64,593 |
) |
|
|
1 |
% |
|
|
(7 |
)% |
Gain on sale of property and other, net |
|
|
(1,541 |
) |
|
|
(6,903 |
) |
|
|
78 |
% |
|
|
76 |
% |
Share of (profit) loss of equity method investments |
|
|
(1,740 |
) |
|
|
826 |
|
|
n/m |
|
|
n/m |
|
||
Foreign exchange⁽²⁾ |
|
|
74,250 |
|
|
|
15,922 |
|
|
n/m |
|
|
n/m |
|
||
Share of equity method investments adjusted EBITDA |
|
|
3,704 |
|
|
|
2,327 |
|
|
|
59 |
% |
|
|
72 |
% |
Share-based compensation expense⁽²⁾ |
|
|
12,077 |
|
|
|
4,677 |
|
|
n/m |
|
|
n/m |
|
||
Membership credits expense⁽³⁾ |
|
|
1,260 |
|
|
|
4,154 |
|
|
|
(70 |
)% |
|
|
(67 |
)% |
COVID-19 related rebate⁽⁴⁾ |
|
|
— |
|
|
|
(241 |
) |
|
n/m |
|
|
n/m |
|
||
Corporate financing and restructuring costs⁽⁵⁾ |
|
|
— |
|
|
|
8,483 |
|
|
n/m |
|
|
n/m |
|
||
Out of period operating lease liability adjustment(6) |
|
|
(6,322 |
) |
|
|
— |
|
|
n/m |
|
|
n/m |
|
||
Adjusted EBITDA |
|
$ |
17,578 |
|
|
$ |
(35,348 |
) |
|
n/m |
|
|
n/m |
|
||
The computation of House-Level Contribution and Other Contribution is set forth below:
57
|
|
For the 26 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
July 3, |
|
|
July 4, |
|
|
Change % |
|
|
July 4, 2021 |
|
|
Constant Currency |
|
|||||
|
|
Actuals |
|
|
|
|
|
|
|
|||||||||||
|
|
(Unaudited, dollar amounts in thousands) |
|
|||||||||||||||||
Operating loss |
|
$ |
(112,910 |
) |
|
$ |
(110,420 |
) |
|
|
(2 |
)% |
|
$ |
(102,218 |
) |
|
|
(10 |
)% |
General and administrative |
|
|
55,933 |
|
|
|
36,005 |
|
|
|
55 |
% |
|
|
33,330 |
|
|
|
68 |
% |
Pre-opening expenses |
|
|
7,773 |
|
|
|
11,318 |
|
|
|
(31 |
)% |
|
|
10,477 |
|
|
|
(26 |
)% |
Depreciation and amortization |
|
|
45,519 |
|
|
|
39,750 |
|
|
|
15 |
% |
|
|
36,797 |
|
|
|
24 |
% |
Share-based compensation |
|
|
12,077 |
|
|
|
4,677 |
|
|
n/m |
|
|
|
4,330 |
|
|
n/m |
|
||
Foreign exchange loss, net |
|
|
74,250 |
|
|
|
15,922 |
|
|
n/m |
|
|
|
14,739 |
|
|
n/m |
|
||
Other |
|
|
1,077 |
|
|
|
14,111 |
|
|
|
(92 |
)% |
|
|
13,063 |
|
|
|
(92 |
)% |
Non-House membership revenues |
|
|
(14,056 |
) |
|
|
(4,303 |
) |
|
n/m |
|
|
|
(3,983 |
) |
|
n/m |
|
||
Other revenues |
|
|
(113,676 |
) |
|
|
(49,072 |
) |
|
n/m |
|
|
|
(45,426 |
) |
|
n/m |
|
||
Other operating expenses |
|
|
110,391 |
|
|
|
68,878 |
|
|
|
60 |
% |
|
|
63,761 |
|
|
|
73 |
% |
House-Level Contribution |
|
$ |
66,378 |
|
|
$ |
26,866 |
|
|
n/m |
|
|
$ |
24,870 |
|
|
n/m |
|
||
Operating loss margin |
|
|
(26 |
)% |
|
|
(56 |
)% |
|
|
|
|
|
(56 |
)% |
|
|
|
||
House-Level Contribution Margin |
|
|
22 |
% |
|
|
19 |
% |
|
|
|
|
|
19 |
% |
|
|
|
||
|
|
For the 26 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
July 3, |
|
|
July 4, |
|
|
Change % |
|
|
July 4, 2021 |
|
|
Constant Currency |
|
|||||
|
|
Actuals |
|
|
|
|
|
|
|
|||||||||||
|
|
(Unaudited, dollar amounts in thousands) |
|
|||||||||||||||||
Membership revenues |
|
$ |
124,662 |
|
|
$ |
85,356 |
|
|
|
46 |
% |
|
$ |
79,014 |
|
|
|
58 |
% |
Less: Non-House membership revenues |
|
|
(14,056 |
) |
|
|
(4,303 |
) |
|
n/m |
|
|
|
(3,983 |
) |
|
n/m |
|
||
Add: In-House revenues |
|
|
197,440 |
|
|
|
62,052 |
|
|
n/m |
|
|
|
57,442 |
|
|
n/m |
|
||
Total House revenues |
|
|
308,046 |
|
|
|
143,105 |
|
|
n/m |
|
|
|
132,473 |
|
|
n/m |
|
||
Less: in-House operating expenses |
|
|
241,668 |
|
|
|
116,239 |
|
|
n/m |
|
|
|
107,603 |
|
|
n/m |
|
||
House-Level Contribution |
|
$ |
66,378 |
|
|
$ |
26,866 |
|
|
n/m |
|
|
$ |
24,870 |
|
|
n/m |
|
||
|
|
For the 26 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
July 3, |
|
|
July 4, |
|
|
Change % |
|
|
July 4, 2021 |
|
|
Constant Currency |
|
|||||
|
|
Actuals |
|
|
|
|
|
|
|
|||||||||||
|
|
(Unaudited, dollar amounts in thousands) |
|
|||||||||||||||||
Operating loss |
|
$ |
(112,910 |
) |
|
$ |
(110,420 |
) |
|
|
(2 |
)% |
|
$ |
(102,218 |
) |
|
|
(10 |
)% |
General and administrative |
|
|
55,933 |
|
|
|
36,005 |
|
|
|
55 |
% |
|
|
33,330 |
|
|
|
68 |
% |
Pre-opening expenses |
|
|
7,773 |
|
|
|
11,318 |
|
|
|
(31 |
)% |
|
|
10,477 |
|
|
|
(26 |
)% |
Depreciation and amortization |
|
|
45,519 |
|
|
|
39,750 |
|
|
|
15 |
% |
|
|
36,797 |
|
|
|
24 |
% |
Share-based compensation |
|
|
12,077 |
|
|
|
4,677 |
|
|
n/m |
|
|
|
4,330 |
|
|
n/m |
|
||
Foreign exchange loss, net |
|
|
74,250 |
|
|
|
15,922 |
|
|
n/m |
|
|
|
14,739 |
|
|
n/m |
|
||
Other |
|
|
1,077 |
|
|
|
14,111 |
|
|
|
(92 |
)% |
|
|
13,063 |
|
|
|
(92 |
)% |
House membership revenues |
|
|
(110,606 |
) |
|
|
(81,053 |
) |
|
|
(36 |
)% |
|
|
(75,031 |
) |
|
|
(47 |
)% |
In-House revenues |
|
|
(197,440 |
) |
|
|
(62,052 |
) |
|
n/m |
|
|
|
(57,442 |
) |
|
n/m |
|
||
In-House operating expenses |
|
|
241,668 |
|
|
|
116,239 |
|
|
n/m |
|
|
|
107,603 |
|
|
n/m |
|
||
Total Other Contribution |
|
$ |
17,341 |
|
|
$ |
(15,503 |
) |
|
n/m |
|
|
$ |
(14,352 |
) |
|
n/m |
|
||
Operating loss margin |
|
|
(26 |
)% |
|
|
(56 |
)% |
|
|
|
|
|
(56 |
)% |
|
|
|
||
Other Contribution Margin |
|
|
14 |
% |
|
|
(29 |
)% |
|
|
|
|
|
(29 |
)% |
|
|
|
||
58
|
|
For the 26 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
July 3, |
|
|
July 4, |
|
|
Change % |
|
|
July 4, 2021 |
|
|
Constant Currency |
|
|||||
|
|
Actuals |
|
|
|
|
|
|
|
|||||||||||
|
|
(Unaudited, dollar amounts in thousands) |
|
|||||||||||||||||
Other Contribution |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Non-House membership revenues |
|
$ |
14,056 |
|
|
$ |
4,303 |
|
|
n/m |
|
|
$ |
3,983 |
|
|
n/m |
|
||
Add: other revenues |
|
|
113,676 |
|
|
|
49,072 |
|
|
n/m |
|
|
|
45,426 |
|
|
n/m |
|
||
Less: other operating expenses |
|
|
110,391 |
|
|
|
68,878 |
|
|
|
60 |
% |
|
|
63,761 |
|
|
|
73 |
% |
Other Contribution |
|
$ |
17,341 |
|
|
$ |
(15,503 |
) |
|
n/m |
|
|
$ |
(14,352 |
) |
|
n/m |
|
||
Liquidity and Capital Resources
Liquidity is the ability to generate sufficient cash flows to meet the cash requirements of our business operations. Our principal sources of liquidity are operating cash flows, holdings of cash and cash equivalents and availability under our Revolving Credit Facility. As of July 3, 2022, we maintained a Cash and cash equivalents balance of $259 million and a Restricted cash balance of $7 million.
Our primary requirements for liquidity are to fund our working capital needs, operating and finance lease obligations, capital expenditures and general corporate needs. Our ongoing capital expenditures are principally related to opening new Houses, refurbishing and maintaining the existing House portfolio as well as investments in our corporate technology infrastructure to support our digital strategy and technology infrastructure.
In a given year, our primary cash inflows and outflows relate to the following:
We believe our existing cash and marketable securities balances will be sufficient to fund our operating and finance lease obligations, capital expenditures and working capital needs for at least the next 12 months and the foreseeable future.
Cash Flows and Working Capital
The following table provides a summary of cash flow data for the periods presented:
|
|
For the 26 Weeks Ended |
|
|||||
|
|
July 3, |
|
|
July 4, |
|
||
|
|
(Unaudited, dollar amounts in thousands) |
|
|||||
Net cash generated (used in) by |
|
|
|
|
|
|
||
Net cash provided by (used in) operating activities |
|
$ |
13,661 |
|
|
$ |
(94,220 |
) |
Net cash used in investing activities |
|
|
(44,246 |
) |
|
|
(50,028 |
) |
Net cash provided by financing activities |
|
|
84,589 |
|
|
|
140,983 |
|
Effect of exchange rates on cash and cash equivalents |
|
|
(8,340 |
) |
|
|
242 |
|
Net increase (decrease) in cash and cash equivalents |
|
$ |
45,664 |
|
|
$ |
(3,023 |
) |
Net Cash Used in Operating Activities
The primary cash inflows from operating activities include Membership Revenues, In-House Revenues and Other Revenues, such as the sale of retail products. The primary cash outflows from operating activities include general operating expenses and interest payments.
For the 26 weeks ended July 3, 2022, we had a $13,661 inflow of cash from operating activities, which includes a net loss of $144,181, depreciation and amortization of $45,519, and a favorable net working capital change of $10,506.
For the 26 weeks ended July 4, 2021, we had a $94,220 outflow of cash from operating activities, which includes a net loss of $150,145, depreciation and amortization of $39,750, and a favorable net working capital change of $68,494.
Net Cash Used in Investing Activities
The primary cash inflows from investing activities include the cash acquired as a result of acquisitions. The primary cash outflows from investing activities include the purchase of property and equipment, intangibles and the acquisition of noncontrolling interests.
59
For the 26 weeks ended July 3, 2022, we had a $44,246 outflow of cash from investing activities, primarily due to purchases of property and equipment of $33,799 and purchases of intangible assets of $11,112.
For the 26 weeks ended July 4, 2021, we had a $50,028 outflow of cash from investing activities, primarily due to purchases of property and equipment of $36,941.
Net Cash Provided by Financing Activities
The primary cash inflows from financing activities include proceeds from borrowings and from the issuance of shares. The primary cash outflows from financing activities include principal payments on borrowings and payments to settle redeemable preferred shares.
For the 26 weeks ended July 3, 2022, we had a $84,589 inflow of cash from financing activities, primarily due to the proceeds from borrowings, net of debt issuance costs of $1 million, of $99 million related to the Goldman Sachs Senior Secured Note Purchase Agreement. Refer to Note 11 - Debt in this Quarterly Report on Form 10-Q for additional information.
For the 26 weeks ended July 4, 2021, we had a $140,983 inflow of cash from financing activities, primarily due to repayment of borrowings of $508,386, offset with the receipt of proceeds of new borrowings of $456,635 and a further $161,574 and $47,000 in proceeds from the issuance of preferred shares and redeemable C ordinary shares, respectively. The preferred shares and redeemable C ordinary shares were subsequently converted in to shares of Class A common stock as part of our IPO in July 2021.
Cash Requirements from Contractual and Other Obligations
As of July 3, 2022, there have been no material changes outside the ordinary course of business to our contractual obligations from those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as described in our Annual Report on Form 10-K for the fiscal year ended January 2, 2022.
Critical Accounting Estimates and Judgments
Management’s discussion and analysis of the financial condition and results of operations is based on the financial statements, which have been prepared in accordance with US GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses incurred during the reporting periods. The estimates are based on historical experience and on various other factors that are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. There have been no significant changes in our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included our Annual Report on Form 10-K for the fiscal year ended January 2, 2022.
Emerging Growth Company Status
We are an ‘emerging growth company,’ as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not ‘emerging growth companies,’ including, but not limited to: presenting only two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley; having reduced disclosure obligations regarding executive compensation in our periodic reports and proxy or information statements; being exempt from the requirements to hold a non-binding advisory vote on executive compensation or seek stockholder approval of any golden parachute payments not previously approved; and not being required to adopt certain accounting standards until those standards would otherwise apply to private companies. As a result, our financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
60
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Our exposure to market risk has not materially changed from what was previously disclosed in our Annual Report on Form 10-K for the fiscal year ended January 2, 2022; however, we continue to monitor our exposure to market risk given the continued impact of the COVID-19 pandemic as well as the impact of the Russian invasion of Ukraine.
Foreign Exchange Risk
We principally operate in the UK and North America, although we have significant operations in Europe. Therefore, we are exposed to reporting foreign exchange risk in Pound sterling and Euros.
Accordingly, we have not, to date, used any material financial instruments to mitigate our foreign exchange risk. The directors and management will keep this situation under review. As income is received and suppliers paid in respect of the UK and European operations in Pound sterling or Euros, respectively, this acts as a natural hedge against foreign exchange risk.
If the USD had strengthened/weakened by 10% versus the GBP, revenue would have been approximately $6 million lower and approximately $6 million higher, respectively, and Net Loss would have been approximately $4 million lower and approximately $4 million higher, respectively, for the 13 weeks ended July 3, 2022.
If the Euro had strengthened/weakened by 10% versus the GBP, revenue would have been approximately $2 million lower and approximately $2 million higher, respectively, and Net Loss would have been approximately less than $1 million lower and approximately less than $1 million higher, respectively, for the 13 weeks ended July 3, 2022.
If the USD had strengthened/weakened by 10% versus the GBP, revenue would have been approximately $21 million lower and approximately $23 million higher, respectively, and Net Loss would have been approximately $13 million lower and approximately $14 million higher, respectively, for the 26 weeks ended July 3, 2022.
If the Euro had strengthened/weakened by 10% versus the GBP, revenue would have been approximately $5 million lower and approximately $4 million higher, respectively, and Net Loss would have been approximately less than $1 million lower and approximately less than $1 million higher, respectively, for the 26 weeks ended July 3, 2022.
Concentration of Credit Risk
Credit risk is the risk of loss from amounts owed by financial counterparties. Credit risk can occur at multiple levels; as a result of broad economic conditions, challenges within specific sectors of the economy, or from issues affecting individual companies. Financial instruments that potentially subject us to credit risk consist of cash equivalents and accounts receivable.
We maintain cash and cash equivalents with major financial institutions. Our cash and cash equivalents consist of bank deposits held with banks, and money market funds that, at times, exceed federally or locally insured limits. We limit our credit risk by dealing with counterparties that are considered to be of high credit quality and by performing periodic evaluations of investments and of the relative credit standing of these financial institutions.
Liquidity Risk
We seek to manage our financial risks to ensure that sufficient liquidity is available to meet our foreseeable needs. We believe we have significant flexibility to control our capital expenditure commitments in new House developments through different investment formats. As of July 3, 2022, we had $259 million in cash and cash equivalents on the balance sheet to meet our funding needs.
Cash Flow and Fair Value Interest Rate Risk
We have historically financed our operations through a mixture of bank borrowings and bond notes which are generally fixed, and expect to finance our operations through operating cash flows and availability under our Revolving Credit Facility, which is currently undrawn. We seek to manage exposure to adverse interest rate changes through our normal operating and financing activities.
Inflation Risk
Inflation has an impact on food, utility, labor, rent, and other costs which materially impact operations. Severe increases in inflation could have an adverse impact on our business, financial condition and results of operations. If several of the various costs in our business experience inflation at the same time, we may not be able to adjust prices to sufficiently offset the effect of the various cost increases without negatively impacting consumer demand.
Commodity Price Risks
We are exposed to commodity price risks specially foodstuffs, natural gas and oil. Many of the ingredients we use to prepare our food and beverages are commodities or are affected by the price of other commodities. Factors that affect the price of commodities are generally outside of our control and include foreign currency exchange rates, foreign and domestic supply and demand, inflation, weather, the geopolitical situation, and seasonality.
61
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Management concluded that as of July 3, 2022 our disclosure controls and procedures were not effective at the reasonable assurance level, due to material weaknesses in our internal control over financial reporting, to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As disclosed in our Annual Report in Form 10-K for the fiscal year ended January 2, 2022, based on management’s assessment of the effectiveness of our internal controls over financial reporting, management concluded that our internal controls over financial reporting were not effective as of January 2, 2022, due to insufficiently qualified accounting and other finance personnel with an appropriate level of US GAAP knowledge and experience. Management believes that our lack of experience with US GAAP and the fact that policies and procedures with respect to the review, supervision and monitoring of our accounting and reporting functions were either not designed and in place constituted material weaknesses in our internal control over financial reporting. Until such time, if ever, that we remediate the material weakness in our internal control over financial reporting we expect that the material weaknesses in our disclosure controls and procedures will continue.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the 26 weeks ended July 3, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Disclosure Controls and Procedures
In designing and evaluating our disclosure controls and procedures and internal control over financial reporting, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and our management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. The design of any disclosure controls and procedures and internal control over financial reporting also are based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
62
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time we are subject to legal proceedings and claims that arise in the ordinary course of business. At present, we are not a party to any litigation other than litigation in the ordinary course of business. We do not expect that the ultimate outcome of any of the currently ongoing legal proceedings, individually or collectively, will have a significant adverse effect on our business, financial condition, results of operations or cash flows.
However, the results of litigation and arbitration are inherently unpredictable and the possibility exists that the ultimate resolution of matters to which we are or could become subject could result in a material adverse effect on our business, financial condition, results of operations and cash flows.
Item 1A. Risk Factors.
You should carefully consider the risk factors discussed in section “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended January 2, 2022, which could materially affect our business, financial position, or future results of operations. There have been no material changes to the risk factors described in our Annual Report on Form 10-K, except for the below. The risks described in our Annual Report Form 10-K are not the only risks that we face. Additional risks and uncertainties not precisely known to us, or that we currently deem to be immaterial, may also arise and materially impact our business. If any of these risks occur, our business, results of operations and financial condition could be materially and adversely affected and the trading price of our common stock could decline.
Our business, financial condition and results of operations could be adversely affected by disruptions in the global economy caused by Russia’s ongoing conflict with Ukraine
Russia’s invasion of Ukraine has negatively affected the global economy. Financial and economic sanctions imposed on certain industry sectors and parties in Russia by the U.S., United Kingdom and European Union, as well as potential retaliatory actions by Russia, could also have a negative impact on the global economy. Although the Company does not operate in Russia or Ukraine, the broader consequences of this conflict, including rising energy prices and shortages of and increased costs for food, goods and services and transportation or further escalation in adjacent areas could have negative downstream effects on our business and operations. Further expansion or escalation of military confrontations or related geopolitical tensions, including increased restrictions on global trade, could result in, among other things, lower travel demand, cyberattacks, terrorist activities, supply disruptions, workforce volatility and changes to foreign currency exchange rates and constraints, volatility or disruption in financial markets including increases in interest rates, any of which may adversely affect the global economy and our business. In addition, the effects of the ongoing conflict could intensify or otherwise affect many of our other risk factors that are included in “Part I—Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended January 2, 2022, filed with the SEC on March 16, 2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(a) Sales of Unregistered Securities
None.
(b) Use of Proceeds from Public Offering of Common Stock
On July 19, 2021, we completed the IPO of our Class A of our common stock pursuant to a Registration Statement on Form S-1 (File No. 333-257206). We sold 30,567,918 shares of Class A common stock (which included 567,918 shares that were offered and sold pursuant to the partial exercise of the IPO underwriters’ option to purchase additional shares) at a price to the public of $14.00 per share. Including the option exercise, The Company received aggregate net proceeds of $388 million after deducting underwriting discounts and other offering costs. The underwriters of the offering were J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, Goldman Sachs & Co. LLC, BofA Securities, Inc., HSBC Securities (USA) Inc., Citigroup Global Markets Inc., William Blair & Company, L.L.C and Loop Capital Markets LLC. Following the sale of the shares in connection with the closing of the IPO, the offering terminated. No offering expenses were paid or are payable, directly or indirectly, to our directors or officers, to persons owning 10% or more of any class of our equity securities or to any of our affiliates except for a fee payable to our sponsor, an affiliate of Yucaipa Companies LLC, of $9 million pursuant to a fee letter arrangement with the Company dated July 19, 2021.
(c) Issuer Purchases of Equity Securities
The following table sets forth information regarding our purchases of shares of our common stock during the 13 weeks ended July 3, 2022:
Period |
Total Number of Shares Purchased |
|
Average Price Paid per Share(1) |
|
Total Number of Shares Purchased as Part of Publicly Announced Program(2) |
|
Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program(2) (in millions) |
|
||||
April 4, 2022 through May 1, 2022 |
|
718,683 |
|
$ |
7.71 |
|
|
718,683 |
|
$ |
42 |
|
May 2, 2022 through May 29, 2022 |
|
873,150 |
|
$ |
7.44 |
|
|
873,150 |
|
$ |
35 |
|
May 30, 2022 through July 3, 2022 |
|
662,672 |
|
$ |
7.38 |
|
|
662,672 |
|
$ |
30 |
|
Total |
|
2,254,505 |
|
|
|
|
2,254,505 |
|
|
|
||
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Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
Exhibit |
|
Description |
31.1* |
|
|
31.2* |
|
|
32.1* |
|
|
32.2* |
|
|
101.INS |
|
Inline XBRL Instance Document |
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith.
64
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
|
|
|
|
|
Membership Collective Group Inc. |
||
|
|
|
|
|||
Date: August 17, 2022 |
|
|
|
By: |
|
/s/ Nick Jones |
|
|
|
|
|
|
Nick Jones |
|
|
|
|
|
|
Chief Executive Officer |
|
|
|
|
|||
Date: August 17, 2022 |
|
|
|
By: |
|
/s/ Thomas Allen |
|
|
|
|
|
|
Thomas Allen |
|
|
|
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|
|
Chief Financial Officer |
65