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.
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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Non-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 9, 2023, 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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Unaudited Condensed Consolidated Balance Sheets as of July 2, 2023 and January 1, 2023 |
2 |
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4 |
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5 |
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6 |
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Unaudited Condensed Statements of Cash Flows for the 26 weeks ended July 2, 2023 and July 3, 2022 |
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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 |
29 |
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Item 3. |
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55 |
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Item 4. |
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56 |
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PART II. |
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57 |
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Item 1. |
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57 |
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Item 1A. |
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57 |
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Item 2. |
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57 |
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Item 3. |
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Defaults Upon Senior Securities |
57 |
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Item 4. |
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Mine Safety Disclosures |
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Item 5. |
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Other Information |
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Item 6. |
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57 |
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59 |
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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 ‘Soho House & Co Inc.’, ‘Soho House & Co’, ‘SHCO,’ ‘our company,’ ‘the Company,’ ‘us,’ ‘we’ and ‘our’ refers to Soho House & Co 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.
Soho House & Co Inc.
Condensed Consolidated Balance Sheets
As of July 2, 2023 (Unaudited) and January 1, 2023
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As of |
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(in thousands, except for par value and share data) |
July 2, 2023 |
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January 1, 2023 |
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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 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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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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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
Soho House & Co Inc.
Condensed Consolidated Balance Sheets
As of July 2, 2023 (Unaudited) and January 1, 2023
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As of |
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(in thousands, except for par value and share data) |
July 2, 2023 |
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January 1, 2023 |
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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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( |
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Total shareholders’ deficit attributable to Soho House & Co Inc. |
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( |
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( |
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Noncontrolling interest |
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Total shareholders’ deficit |
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( |
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( |
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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
Soho House & Co Inc.
Condensed Consolidated Statements of Operations (Unaudited)
For the 13 weeks and 26 weeks ended July 2, 2023 and July 3, 2022
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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 2, 2023 |
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July 3, 2022 |
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July 2, 2023 |
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July 3, 2022 |
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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 gain (loss), net |
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( |
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( |
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Other, net |
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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 income (loss) |
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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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( |
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Share of income of equity method investments |
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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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Income (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 |
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( |
) |
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( |
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( |
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( |
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Net income (loss) |
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( |
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( |
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( |
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( |
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Net income (loss) attributable to noncontrolling interests |
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( |
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( |
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Net income (loss) attributable to Soho House & Co Inc. |
$ |
( |
) |
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$ |
( |
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$ |
( |
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$ |
( |
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Net income (loss) per share attributable to Class A and Class B common stock |
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Basic and diluted (Note 14) |
$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Weighted average shares outstanding: |
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Basic and diluted (Note 14) |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
Soho House & Co Inc.
Condensed Consolidated Statements of Comprehensive Loss (Unaudited)
For the 13 weeks and 26 weeks ended July 2, 2023 and July 3, 2022
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For the 13 Weeks Ended |
For the 26 Weeks Ended |
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(in thousands) |
July 2, 2023 |
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July 3, 2022 |
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July 2, 2023 |
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July 3, 2022 |
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Net income (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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( |
) |
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Comprehensive income (loss) |
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( |
) |
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( |
) |
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( |
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( |
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Income (loss) attributable to noncontrolling interests |
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( |
) |
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( |
) |
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Foreign currency translation adjustment attributable to noncontrolling interests |
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( |
) |
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( |
) |
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Total comprehensive income (loss) attributable to Soho House & Co Inc. |
$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
Soho House & Co Inc.
Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)
For the 13 weeks and 26 weeks ended July 3, 2022
(in thousands) |
Common Stock |
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Additional |
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Accumulated |
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Accumulated |
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Treasury Stock |
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Total Shareholders’ Equity Attributable to Soho House & Co Inc. |
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Noncontrolling |
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Total |
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As of January 2, 2022 |
$ |
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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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Net income (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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Purchase of noncontrolling interests in connection with the Soho Restaurants Acquisition |
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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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Shares repurchased (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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( |
) |
Non-cash 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 3, 2022 |
$ |
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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 income (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 interests |
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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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Shares repurchased (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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( |
) |
Non-cash 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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Additional IPO 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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— |
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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 July 3, 2022 |
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
( |
) |
$ |
|
$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
Soho House & Co Inc.
Condensed Consolidated Statements of Changes in Shareholders’ Deficit (Unaudited)
For the 13 weeks and 26 weeks ended July 2, 2023
(in thousands) |
Common Stock |
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Additional |
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Accumulated |
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Accumulated |
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Treasury Stock |
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Total Shareholders’ Deficit Attributable to Soho House & Co Inc. |
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Noncontrolling |
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Total |
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As of January 1, 2023 |
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
|
$ |
( |
) |
||||
Net income (loss) |
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— |
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— |
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( |
) |
|
— |
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— |
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( |
) |
|
( |
) |
|
( |
) |
Distributions to noncontrolling interests |
|
— |
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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 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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Net change in cumulative translation adjustment |
|
— |
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— |
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— |
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( |
) |
|
— |
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|
( |
) |
|
( |
) |
|
( |
) |
As of April 2, 2023 |
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
|
$ |
( |
) |
||||
Net income (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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( |
) |
|
Non-cash share-based compensation (Note 13) |
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|
|
|
|
— |
|
|
— |
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|
— |
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|
|
|
— |
|
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|
||||
Net change in cumulative translation adjustment |
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
||
As of July 2, 2023 |
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
|
$ |
( |
) |
||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7
Soho House & Co Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
For the 26 weeks ended July 2, 2023 and July 3, 2022
|
For the 26 Weeks Ended |
|
|||||
(in thousands) |
July 2, 2023 |
|
|
July 3, 2022 |
|
||
Cash flows from operating activities |
|
|
|
|
|
||
Net income (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 (income) 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 (gain) 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 operating activities |
|
|
|
|
|
||
Cash flows from investing activities |
|
|
|
|
|
||
Purchase of property and equipment |
|
( |
) |
|
|
( |
) |
Proceeds from sale of assets |
|
|
|
|
|
||
Purchase of intangible assets |
|
( |
) |
|
|
( |
) |
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 interests |
|
( |
) |
|
|
( |
) |
Purchase of treasury stock (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 (decrease) increase 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
Soho House & Co Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
For the 26 weeks ended July 2, 2023 and July 3, 2022
|
For the 26 Weeks Ended |
|
|||||
(in thousands) |
July 2, 2023 |
|
|
July 3, 2022 |
|
||
Cash, cash equivalents and restricted cash are comprised of: |
|
|
|
|
|
||
Cash and cash equivalents |
|
|
|
|
|
||
Restricted cash (Note 11) |
|
|
|
|
|
||
Cash, cash equivalents and restricted cash as of July 2, 2023 and July 3, 2022 |
$ |
|
|
$ |
|
||
Supplemental disclosures: |
|
|
|
|
|
||
Cash paid for interest |
$ |
|
|
$ |
|
||
Cash paid for income taxes |
|
|
|
|
|
||
Supplemental disclosures of non-cash investing and financing activities: |
|
|
|
|
|
||
Operating lease assets obtained in exchange for new operating lease liabilities |
|
|
|
|
|
||
Accrued capital expenditures |
|
|
|
|
|
||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
9
Soho House & Co Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 2, 2023 and January 1, 2023 and for the 13 weeks and 26 weeks ended July 2, 2023 and July 3, 2022
Soho House & Co Inc. 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 Soho House & Co Inc. 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 41 Soho Houses, 9 Soho Works Clubs, The Ned hotels, the LINE and Saguaro hotels in North America, Scorpios Beach Club in Mykonos, Soho Home, our interiors and lifestyle retail brand, and our digital channels.
On March 17, 2023, we filed with the Secretary of State of Delaware an amendment to our Certificate of Incorporation to change our corporate name from Membership Collective Group Inc. to Soho House & Co Inc., which became effective on March 20, 2023. In connection with our name change, our board of directors amended our bylaws to reflect the corporate name Soho House & Co Inc., also effective on March 20, 2023. No other changes were made to our bylaws. Prior to the change of our corporate name, our stock traded on the New York Stock Exchange under the ticker symbol “MCG”. From March 20, 2023, our common stock began trading on the New York Stock Exchange under the ticker symbol “SHCO”.
The consolidated entity presented is referred to herein as “Soho House & Co”, “SHCO”, “we”, “us”, “our”, or the “Company”, as the context requires and unless otherwise noted.
Basis of Presentation
The 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. The Company's significant estimates relate to the valuation of financial instruments, equity method investments, the measurement of goodwill and intangible assets, contingent liabilities, income taxes, leases, long-lived assets and the expected breakage of house introduction credits. Although the estimates have been prepared using management's best judgment and management believes that the estimates used are reasonable, actual results could differ from those estimates and such differences could be material.
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 1, 2023.
The results of operations for the 13- and 26-week periods ended July 2, 2023 and July 3, 2022 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 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 operating lease expenses with a cumulative impact of $
Recently Adopted Accounting Standards
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The ASU adds to US GAAP an impairment model (known as the current expected credit loss, or “CECL” model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which is intended to result in the more timely recognition of losses. Under the CECL model, entities will estimate credit losses over the entire contractual term of the instrument from the date of initial recognition of the financial instrument. The Company adopted ASU 2016-13 effective January 2, 2023 and concluded that adoption of this standard update did not have a material impact on either the financial position, results of operations, cash flows, or related disclosures. There was no impact on beginning balance retained earnings upon adoption of this ASU.
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
10
Soho House & Co Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 2, 2023 and January 1, 2023 and for the 13 weeks and 26 weeks ended July 2, 2023 and July 3, 2022
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, whilst the business has generated positive cash flows from operations during the 26 weeks ended July 2, 2023, there have been significant cash outflows over the past years primarily driven by investments in developing and opening new Houses. During the 13 weeks and 26 weeks ended July 2, 2023, the Company incurred a consolidated net loss of $
In assessing the going concern basis of preparation of the unaudited condensed consolidated financial statements for the 13 weeks and 26 weeks ended July 2, 2023, we have taken into consideration detailed cash flow forecasts for the Company, the Company’s forecast compliance with bank covenants, and the timing of debt commitments within 12 months of the approval of these financial statements, and the continued availability of committed and accessible working capital to the Company.
We have considered current global economic and political uncertainties, specifically including inflationary pressures on consumables purchased and wages, and the Company has factored these in when it undertook an assessment of the cash flow forecasts covering a period of at least
We believe that the completed working capital events, our projected cash flows and the actions available to management to further control expenditure (particularly in respect of timing of capital works and labor costs, as necessary, provide the Company with sufficient working capital (including cash and cash equivalents) to mitigate the impact of inflationary pressures and consumer confidences, subject to the following key factors:
Furthermore, available cash as a result of completed financing events, includes the exercising of an option in March 2022 for issued additional notes under the existing senior secured notes for $
Based on the above, the 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 2, 2023.
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 changes in the balance of accumulated other comprehensive income loss, net of income tax, are attributable solely to the net change in 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”): Ned-Soho House, LLP and Soho Works Limited.
Ned-Soho House, LLP
The Ned-Soho House, LLP joint venture maintains a management agreement to operate The Ned Hotel in London, which is owned by unconsolidated related parties to the Company. Management fees are recognized in other revenues in the consolidated statements of operations. The Company has a higher economic interest in Ned-Soho House, LLP as compared to its related party venture partner and therefore the Company is determined to be the primary beneficiary.
Soho Works Limited
The Soho Works Limited (“SWL”) joint venture develops and operates Soho-branded, membership-based co-working spaces, with nine sites currently in operation in the UK. The joint venture agreement relates to the UK only. The joint venture was formed on September 29, 2017, when the Company granted to two unrelated individuals an option to subscribe for
11
Soho House & Co Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 2, 2023 and January 1, 2023 and for the 13 weeks and 26 weeks ended July 2, 2023 and July 3, 2022
primary beneficiary because it has the power to direct all significant activities of the joint venture.
|
As of |
|
|||||
(in thousands) |
July 2, 2023 |
|
|
January 1, 2023 |
|
||
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, net of debt issuance costs |
|
|
|
|
|
||
Current portion of operating lease liabilities - sites trading more than one year |
|
|
|
|
|
||
Other current liabilities |
|
|
|
|
|
||
Total current liabilities |
|
|
|
|
|
||
Operating lease liabilities, net of current portion - sites trading more than one year |
|
|
|
|
|
||
Total liabilities |
|
|
|
|
|
||
Net liabilities |
$ |
( |
) |
|
$ |
( |
) |
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.
12
Soho House & Co Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 2, 2023 and January 1, 2023 and for the 13 weeks and 26 weeks ended July 2, 2023 and July 3, 2022
|
For the 13 Weeks Ended |
|
|
For the 26 Weeks Ended |
|
||||||||||
(in thousands) |
July 2, 2023 |
|
|
July 3, 2022 |
|
|
July 2, 2023 |
|
|
July 3, 2022 |
|
||||
Revenues |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Operating income (loss) |
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss)(1) |
|
|
|
|
|
|
|
|
|
|
|
||||
The Company has entered into various lease agreements for its Houses, hotels, restaurants, spas and other properties across the Americas, Europe, and Asia, which includes
The maturity of the Company’s operating and finance lease liabilities as of July 2, 2023 is as follows:
(in thousands) |
Operating |
|
|
Finance |
|
||
Undiscounted lease payments |
|
|
|
|
|
||
Remainder of 2023 |
$ |
|
|
$ |
|
||
2024 |
|
|
|
|
|
||
2025 |
|
|
|
|
|
||
2026 |
|
|
|
|
|
||
2027 |
|
|
|
|
|
||
Thereafter |
|
|
|
|
|
||
Total undiscounted lease payments |
|
|
|
|
|
||
Present value adjustment |
|
( |
) |
|
|
( |
) |
Total net lease liabilities |
$ |
|
|
$ |
|
||
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.
Straight-line rent expense recognized as part of In-House operating expenses for operating leases was $
For the 13 weeks ended July 2, 2023 and July 3, 2022, 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:
13
Soho House & Co Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 2, 2023 and January 1, 2023 and for the 13 weeks and 26 weeks ended July 2, 2023 and July 3, 2022
|
For the 26 Weeks Ended |
|
|||||
(in thousands) |
July 2, 2023 |
|
|
July 3, 2022 |
|
||
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 |
$ |
|
|
$ |
|
||
14
Soho House & Co Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 2, 2023 and January 1, 2023 and for the 13 weeks and 26 weeks ended July 2, 2023 and July 3, 2022
The following summarizes additional information related to operating and finance leases:
|
As of |
||
|
July 2, 2023 |
|
July 3, 2022 |
Weighted-average remaining lease term |
|
|
|
Finance leases |
|
||
Operating leases |
|
||
Weighted-average discount rate |
|
|
|
Finance leases |
|
||
Operating leases |
|
||
As of July 2, 2023, the Company has entered into 15 operating lease agreements that are signed but have not commenced. Of these, 11 relate to 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. The Company does not control the underlying assets under construction. 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 2023, 2024, and 2026. The Company estimates the total undiscounted lease payments for the leases commencing in fiscal years ended 2023, 2024, and 2026 will be $
The following summarizes the Company’s estimated future undiscounted lease payments for current leases signed but not commenced:
(in thousands) |
Operating |
|
|
Fiscal year ended |
Construction |
|
|
Estimated total undiscounted lease payments |
|
|
|
Remainder of 2023 |
$ |
|
|
2024 |
|
|
|
2025 |
|
|
|
2026 |
|
|
|
2027 |
|
|
|
Thereafter |
|
|
|
Total undiscounted lease payments expected for leases signed but not commenced |
$ |
|
|
Disaggregated revenue disclosures by reportable segments for the 13 weeks and 26 weeks ended July 2, 2023 and July 3, 2022 are included in Note 17, Segments. Revenue from membership fees, legacy one-time registration fees, house introduction credits and build-out contracts are the only arrangements for which revenue is recognized over time.
The following table includes estimated revenues expected to be recognized in the future related to performance obligations that were unsatisfied (or partially unsatisfied) at the end of the reporting period ending July 2, 2023.
(in thousands) |
Next twelve |
|
|
Future periods |
|
||
Membership and registration fees |
$ |
|
|
$ |
|
||
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:
|
As of |
|
|||||
(in thousands) |
July 2, 2023 |
|
|
January 1, 2023 |
|
||
Contract receivables |
$ |
|
|
$ |
|
||
Contract assets |
|
|
|
|
|
||
Contract liabilities |
|
|
|
|
|
||
15
Soho House & Co Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 2, 2023 and January 1, 2023 and for the 13 weeks and 26 weeks ended July 2, 2023 and July 3, 2022
Contract assets consist of accrued unbilled income related to build-out contracts and are recognized in prepaid expenses and other 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 2, 2023 |
|
|
January 1, 2023 |
|
||
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 1, 2023 to July 2, 2023 is as follows:
(in thousands) |
UK |
|
|
North America |
|
|
Europe and |
|
|
Total |
|
||||
January 1, 2023 |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
||||
July 2, 2023 |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The table below presents the components of accrued liabilities.
|
As of |
|
|||||
(in thousands) |
July 2, 2023 |
|
|
January 1, 2023 |
|
||
Accrued interest |
$ |
|
|
$ |
|
||
Hotel deposits |
|
|
|
|
|
||
Trade, capital and other accruals |
|
|
|
|
|
||
Total accrued liabilities |
$ |
|
|
$ |
|
||
16
Soho House & Co Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 2, 2023 and January 1, 2023 and for the 13 weeks and 26 weeks ended July 2, 2023 and July 3, 2022
Debt balances, net of debt issuance costs, are as follows:
|
As of |
|
|||||
(in thousands) |
July 2, 2023 |
|
|
January 1, 2023 |
|
||
Senior Secured Notes, interest at |
$ |
|
|
$ |
|
||
Soho Works Limited loans, unsecured, |
|
|
|
|
|
||
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 2, 2023 |
|
|
January 1, 2023 |
|
||
Term loan, interest at |
$ |
|
|
$ |
|
||
Mezzanine loan, interest at |
|
|
|
|
|
||
Term loan, interest at |
|
|
|
|
|
||
Total property mortgage loans |
$ |
|
|
$ |
|
||
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 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 £
In 2017, Soho Works Limited entered into a term loan facility agreement. The SWL loan bears interest at
17
Soho House & Co Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 2, 2023 and January 1, 2023 and for the 13 weeks and 26 weeks ended July 2, 2023 and July 3, 2022
September 29, 2023 by an amendment entered into on March 11, 2022. The Company has determined a current classification of this loan is appropriate as it best reflects the substance of the agreement with the lenders given that the loan extension period is short-term in nature (12 months).
In January 2018, the Company entered into leases in connection with its Greek Street properties. As part of these leases, the landlord has funded a principal amount of £
On March 31, 2021, Soho House Bond Limited issued pursuant to a Notes Purchase Agreement senior secured notes, which were subscribed for by certain funds managed, sponsored or advised by Goldman Sachs & Co. LLC or its affiliates, in aggregate amounts equal to $
On June 1, 2021, certain subsidiaries of the Company entered into a development funding agreement with Dorncroft Limited, the landlord of Soho Farmhouse. The agreement provided a commitment of up to £
The other loans consist of the following:
|
Currency |
|
Maturity date |
|
Principal |
|
|
Applicable |
|
||
Greek Street loan |
£ |
|
|
$ |
|
|
|
% |
|||
Compagnie de Phalsbourg credit facility |
€ |
|
|
|
|
|
|
% |
|||
Greek government loan |
€ |
|
|
|
|
|
|
% |
|||
Property Mortgage Loans
In March 2014, the Company completed a freehold property acquisition of the Soho Beach House Miami Property. In February 2019, the Company refinanced an existing term loan and mezzanine loan associated with a March 2014 acquisition of Soho Beach House Miami with a term loan of $
In May 2023, the Company refinanced the existing term loan and mezzanine loan with a new $
Future Principal Payments
The following table presents future principal payments for the Company’s debt and property mortgage loans as of July 2, 2023:
18
Soho House & Co Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 2, 2023 and January 1, 2023 and for the 13 weeks and 26 weeks ended July 2, 2023 and July 3, 2022
(in thousands) |
|
|
|
Remainder of 2023 |
$ |
|
|
2024 |
|
|
|
2025 |
|
|
|
2026 |
|
|
|
2027 |
|
|
|
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 2, 2023 and January 1, 2023 using a discounted cash flow analysis, except for the property mortgage loan as of July 2, 2023. 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 2, 2023 and January 1, 2023. The Company believes that the carrying value of the property mortgage loan (excluding debt issuance costs of $
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 2024 and thereafter:
(in thousands) |
Carrying Value |
|
|
Fair Value |
|
||
July 2, 2023 |
|
|
|
|
|
||
Senior Secured Notes |
$ |
|
|
$ |
|
||
Property mortgage loan |
|
|
|
|
|
||
Other loans |
|
|
|
|
|
||
|
$ |
|
|
$ |
|
||
(in thousands) |
Carrying Value |
|
|
Fair Value |
|
||
January 1, 2023 |
|
|
|
|
|
||
Senior Secured Notes |
$ |
|
|
$ |
|
||
Property mortgage loans |
|
|
|
|
|
||
Other loans |
|
|
|
|
|
||
|
$ |
|
|
$ |
|
||
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 SHHL ordinary D shares and the Company can grant up to
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 RSUs or performance awards. There were
19
Soho House & Co Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 2, 2023 and January 1, 2023 and for the 13 weeks and 26 weeks ended July 2, 2023 and July 3, 2022
available will increase annually on the first day of each calendar year, beginning with the calendar year ended December 31, 2022. As of July 2, 2023, there were
In December 2022, the Company modified the exercise prices for certain outstanding SARs to be $
Share-based compensation during the 13 weeks and 26 weeks ended July 2, 2023 and July 3, 2022 was recorded in the 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 2, 2023 |
|
|
July 3, 2022 |
|
|
July 2, 2023 |
|
|
July 3, 2022 |
|
||||
SARs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Restricted stock awards (Growth Shares) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
RSUs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Employer-related payroll expense(1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Share-based compensation expense, net of tax |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The weighted-average assumptions used in valuing SARs and restricted stock awards (previously zero granted as Growth Shares) granted during each period are set forth in the following table:
|
For the 26 Weeks Ended |
|
For the Fiscal Year Ended |
||
Expected average life(1) |
|
|
|
||
Expected volatility(2) |
% |
|
% |
||
Risk-free interest rate(3) |
% |
|
% |
||
Expected dividend yield(4) |
% |
|
% |
||
As of July 2, 2023, total compensation expense not yet recognized is as follows:
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
20
Soho House & Co Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 2, 2023 and January 1, 2023 and for the 13 weeks and 26 weeks ended July 2, 2023 and July 3, 2022
The tables below present changes in each class of the Company’s common stock, as applicable:
|
SHCO Common Stock |
|
|||||
|
Class A Common Stock |
|
|
Class B Common Stock |
|
||
As of January 2, 2022 |
|
|
|
|
|
||
Shares repurchased |
|
( |
) |
|
|
|
|
RSUs vested |
|
|
|
|
|
||
As of April 3, 2022 |
|
|
|
|
|
||
Shares repurchased |
|
( |
) |
|
|
|
|
As of July 3, 2022 |
|
|
|
|
|
||
|
SHCO Common Stock |
|
|||||
|
Class A Common Stock |
|
|
Class B Common Stock |
|
||
As of January 1, 2023 |
|
|
|
|
|
||
Shares issued related to share-based compensation |
|
|
|
|
|
||
As of April 2, 2023 |
|
|
|
|
|
||
Shares issued related to share-based compensation |
|
|
|
|
|
||
As of July 2, 2023 |
|
|
|
|
|
||
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 $
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.
|
For the 13 Weeks Ended |
|
|
For the 26 Weeks Ended |
|
||||||||||
(in thousands except share and per share amounts) |
July 2, 2023 |
|
|
July 3, 2022 |
|
|
July 2, 2023 |
|
|
July 3, 2022 |
|
||||
Net income (loss) attributable to Soho House & Co Inc. |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
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 |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
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.
For the 13 weeks and 26 weeks ended July 2, 2023, there have been no material changes in the Company’s estimates or provisions for income taxes recorded in the unaudited condensed consolidated balance sheet. Full valuation allowances have been recorded against the incremental deferred tax assets recognized for tax losses, share-based compensation, and excess interest in the U.K., U.S. and Hong Kong. The level of unrecognized tax benefits has increased by $
21
Soho House & Co Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 2, 2023 and January 1, 2023 and for the 13 weeks and 26 weeks ended July 2, 2023 and July 3, 2022
The effective tax rate for the 13 weeks ended July 2, 2023 was (
The Company’s core operations comprise of Houses and restaurants across a number of territories, which are managed on a geographical basis. There is a segment managing director for each of North America, and the UK, Europe and Rest of the World (“RoW”) who is responsible for Houses, hotels and restaurants in that region. Each operating segment manager reports directly to the Company’s Chief Operating Decision Maker (“CODM”), which comprises of the Chief Executive Officer, Chief Financial Officer and Chief Operating Officer - Americas combined. 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 Retail, Soho Works, and Cities Without Houses operating segments also have segment managers which report directly to the CODM and are managed separately from the Houses and hotels in each region.
The Company has identified the following three reportable segments:
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.
Intercompany revenues and costs among the reportable segments are not material and accounted for as if the sales were to third parties because these items are based on negotiated fees between the segments involved. All intercompany transactions and balances are eliminated in consolidation. Intercompany revenues and costs between entities within a reportable segment are eliminated to arrive at segment totals. Segment revenue includes revenue of certain equity method investments, which are considered stand-alone operating segments, which are therefore not included in revenues as part of these consolidated financial statements. Eliminations between segments are separately presented. Corporate results include amounts related to Corporate functions such as administrative costs and professional fees. Income tax expense is managed by Corporate on a consolidated basis and is not allocated to the reportable segments.
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, share of equity method investments adjusted EBITDA, share-based compensation expense, and certain other expenses.
The following tables present disaggregated revenue for the
|
For the 13 Weeks Ended July 2, 2023 |
|
|||||||||||||||||||||
(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 |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
22
Soho House & Co Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 2, 2023 and January 1, 2023 and for the 13 weeks and 26 weeks ended July 2, 2023 and July 3, 2022
|
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 26 Weeks Ended July 2, 2023 |
|
|||||||||||||||||||||
(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 |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
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:
23
Soho House & Co Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 2, 2023 and January 1, 2023 and for the 13 weeks and 26 weeks ended July 2, 2023 and July 3, 2022
|
For the 13 Weeks Ended July 2, 2023 |
|
|||||||||||||||||||||
(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 income 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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
( |
) |
|||||
|
For 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 income 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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
( |
) |
|||||
24
Soho House & Co Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 2, 2023 and January 1, 2023 and for the 13 weeks and 26 weeks ended July 2, 2023 and July 3, 2022
|
For the 26 Weeks Ended July 2, 2023 |
|
|||||||||||||||||||||
(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 income 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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
( |
) |
|||||
25
Soho House & Co Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 2, 2023 and January 1, 2023 and for the 13 weeks and 26 weeks ended July 2, 2023 and July 3, 2022
|
For 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 income 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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
( |
) |
|||||
|
For the 13 Weeks Ended |
|
|
For the 26 Weeks Ended |
|
||||||||||
(in thousands) |
July 2, 2023 |
|
|
July 3, 2022 |
|
|
July 2, 2023 |
|
|
July 3, 2022 |
|
||||
Net income (loss) |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
||||
Income tax expense (benefit) |
|
|
|
|
|
|
|
|
|
|
|
||||
EBITDA |
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Loss (gain) on sale of property and other, net |
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||
Share of income of profit method investments |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Foreign exchange (gain) loss, net |
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Pre-opening expenses (1) |
|
|
|
|
|
|
|
|
|
|
|
||||
Non-cash rent |
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Deferred registration fees, net |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Share of equity method investments adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
||||
Share-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
||||
Other expenses, net (2) |
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Adjusted EBITDA |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
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 2, 2023 and January 1, 2023. Asset information by segment is not reported internally or otherwise regularly reviewed by the CODM.
26
Soho House & Co Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 2, 2023 and January 1, 2023 and for the 13 weeks and 26 weeks ended July 2, 2023 and July 3, 2022
|
|
As of |
|
|||||
(in thousands) |
|
July 2, 2023 |
|
|
January 1, 2023 |
|
||
Long-lived assets by geography |
|
|
|
|
|
|
||
North America |
|
$ |
|
|
$ |
|
||
United Kingdom |
|
|
|
|
|
|
||
Europe |
|
|
|
|
|
|
||
Asia |
|
|
|
|
|
|
||
Total long-lived assets |
|
$ |
|
|
$ |
|
||
The amounts owed by (to) equity method investees due within one year are as follows:
|
|
As of |
|
|||||
(in thousands) |
|
July 2, 2023 |
|
|
January 1, 2023 |
|
||
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 consolidated balance sheets. Amounts owed to equity method investees due within one year are included in other current liabilities on the consolidated balance sheets.
Through Soho Works 875 Washington, LLC, we are a party to a property lease agreement dated April 19, 2019, for 875 Washington Street, New York with 875 Washington Street Owner, LLC, an affiliate of Raycliff Capital, LLC controlled by a member of the SHCO board of directors. The handover of five floors of the leased property occurred on a floor-by-floor basis resulting in multiple lease commencement dates in 2019 and 2020. The various lease contracts run for a term of
The Company is party to a property lease arrangement with The Yucaipa Companies LLC for 9100-9110 West Sunset Boulevard, Los Angeles, California. 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 137 Ludlow Gardens LLC, an affiliate of The Yucaipa Companies LLC. This lease runs for a term of
The Company leases the Little House West Hollywood, 8465 Hollywood Drive, West Hollywood, California, from GHWHI, LLC, an affiliate of The Yucaipa Companies LLC. This lease commenced on October 16, 2021. This lease runs for a term of
The Company leases the Tel Aviv House, 27 Yefet Street, Tel Aviv, Israel, 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 SHCO. This lease commenced on June 1, 2021. This lease runs for a term of
The Company leases a property from GHPSI, LLC, an affiliate of The Yucaipa Companies LLC, in order to operate the Le Vallauris restaurant, 385 West Tahquitz Canyon Way, Palm Springs, California. This lease runs for a term of
27
Soho House & Co Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of July 2, 2023 and January 1, 2023 and for the 13 weeks and 26 weeks ended July 2, 2023 and July 3, 2022
million and less than $
The Company leases a property from GHPSI, LLC in order to operate the Willows Historic Palm Springs Inn, 412 West Tahquitz Canyon Way, Palm Springs, California. GHPSI’s ultimate parent entity is GHREP, LLC, an affiliate of The Yucaipa Companies LLC. This lease commenced on September 15, 2022. This lease runs for a term of
The Company leases the Soho House Stockholm property located at Majorsgatan 5, Stockholm, Sweden from Majorsbolaget AB, an affiliate of The Yucaipa Companies LLC. This lease commenced on December 8, 2022. This lease runs for a term of
Ned-Soho House, LLP received management fees, development fees and cost reimbursements from The Ned totaling $
The Company received management fees from an affiliate of The Yucaipa Companies LLC related to the operations of The Ned New York, which opened in June 2022, totaling less than $
The Company received management fees under our hotel management contract for the operation of the LINE and Saguaro hotels from an affiliate of The Yucaipa Companies LLC. These fees amounted to $
Fees from the provision of Soho House Design services were received from affiliates of the Company totaled less than $
28
Shares Issued
During July 2023, the Company issued a total of
May 2023 Miami Refinancing - Restricted Cash
As a condition of closing the refinancing transaction, the Company was required to provide a certain level of insurance coverage over the Soho Beach House Miami property. $
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 audited consolidated financial statements and related notes and other financial information included elsewhere in this Quarterly Report on Form 10-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 1, 2023.
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
Soho House & Co 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 Soho House & Co platform to both work and socialize, to connect, create, have fun and drive a positive change. On March 17, 2023, we changed our corporate name from Membership Collective Group Inc. to Soho House & Co Inc., which became effective on March 20, 2023. Prior to the change of our corporate name, our stock traded on the New York Stock Exchange under the ticker symbol “MCG”. From March 20, 2023, our common stock began trading on the New York Stock Exchange under the ticker symbol “SHCO”.
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 28 years, we have significantly expanded our membership expertise and diversified our offerings—both physically and digitally. As of July 2, 2023, we have approximately 248,100 members (including approximately 176,300 Soho House members) who engage with us through our global portfolio of 41 Soho Houses, 9 Soho Works, Scorpios Beach Club in Mykonos, Soho Home, our interiors and lifestyle retail brand, and our digital channels. The Ned hotels in London, New York and Doha and the LINE and Saguaro hotels in North America also form part of Soho House & Co's wider portfolio.
Our central pillar is Soho House, which drives the majority of our membership and revenue today. 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 Soho House App and our website. Our vision for the Soho House 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, invite guests, make payments, and connect with each other. Annually, we host thousands of 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 Soho House & Co, a home to numerous memberships including Cities Without Houses, Soho Works, Soho Friends and Ned’s Club. By designing, curating and growing our membership offering, our membership platform can 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 28-year history and is built on the following pillars:
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 global wait list, which as of July 2, 2023 stands at approximately 95,000. 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.
Membership Revenues are comprised of annual membership fees and one-time initial registration fees paid by members. In-House Revenues include all revenues realized within our Houses, including food and beverage, accommodation, and spa products and treatments. Other Revenues include all revenues not realized within our Houses, including Scorpios, Soho Works and stand-alone restaurants, design and procurement fees from SHD and Soho Home among others. 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.
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 new US Every House annual membership fee of approximately $4,500, 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” (26 years old and younger) and “Millennials” (27- to 42-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 revenue
We created the following types of membership under Soho House to reach a broader audience and enhance the experience of our existing members:
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
30
intelligence for future growth, which we have employed to open new Houses in certain locations, including Copenhagen, Denmark (July 2022), Stockholm, Sweden (December 2022) and Bangkok, Thailand (February 2023). As of July 2, 2023, we had approximately 8,400 CWH members across 80 cities.
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 approximately $130. We offer access to physical spaces, including Soho House bedrooms, 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 2, 2023, we had 65,718 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 consistent 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 mostly through ecommerce. Over the past few years, we have transformed Soho Home into a high growth retail business. At the beginning of August 2022, we merged our SOHO HOME+ membership 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 primarily 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 2, 2023, we had 6,048 members. Soho Works membership rates vary by location and Soho House membership status. For Soho House members, a US Soho Works membership fee ranges from $400 to $750 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 2024.
The Ned
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”) including Ned’s Friends is aimed at a broader group of professional people. As of July 2, 2023, Ned’s Club London has approximately 3,100 members. In June 2022, The Ned NoMad in New York opened which covers 117,000 square feet and includes a Ned’s Club, Cecconi's restaurant, as well as 167 bedrooms. As of July 2, 2023, The Ned NoMad has approximately 1,500 members. The Ned in Doha opened in November 2022, which as of July 2, 2023 had approximately 500 members. The Ned offers its members The Ned’s Club app, which allows members to make bookings, publish benefits, events and club related information. We receive management fees under hotel management contracts for each of the operations of The Ned sites.
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, Palm Springs, and San Francisco (opened September 2022), and among them offer a variety of food and beverage offerings together with approximately 1,500 hotel rooms. We receive management fees under hotel management contract for the operation of these hotels. The transaction has broadened 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.
31
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, 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 17, 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 noncontrolling interest in a joint venture or (iii) 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 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-on-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 and Soho Friends are key to our growth strategy and enhancing our Soho House member experience. Like Adult Paying 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 Adult Paying 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 registration fees which are amortized over 20 years. The one-time registration fee is no longer applicable to new members admitted from April 4,
32
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 have been 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 to purchase 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 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 to the extent that they are unredeemed, are recognized. 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 Adult Paying 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, 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 hotel management contracts for The Ned Sites and the LINE and Saguaro hotels.
NON-HOUSE MEMBERSHIP REVENUES. Non-House Membership Revenues are comprised of Soho Works membership revenues, Soho Friends membership revenue and SOHO HOME+ membership revenues, which was merged into Soho Friends membership at the beginning of August 2022.
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.
AVERAGE DAILY RATE ("ADR"). Average Daily Rate represents the average rental income per paid occupied room. We believe this is a meaningful indicator of our performance.
REVENUE PER AVAILABLE ROOM ("RevPAR"). The key industry standard for measuring hotel-operating performance is RevPAR, which is calculated by multiplying the percentage of occupied rooms to available rooms by the ADR realized. We believe RevPAR is a meaningful indicator of our performance because it measures the period-over-period change in room revenues for comparable properties. RevPAR may not be comparable to similarly titled measures, such as revenues, and should not be viewed as necessarily correlating with our revenue. We also believe occupancy and ADR, which are components of calculating RevPAR, are meaningful indicators of our performance. Where this is presented on a like-for like basis, RevPAR is adjusted for new or divested sites, for example Houses that were not open in the comparison period.
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 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 percent 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.
33
KEY PERFORMANCE AND OPERATING METRICS
|
|
As of |
|
|||||
|
|
July 2, |
|
|
July 3, |
|
||
|
|
(Unaudited) |
|
|||||
Number of Soho Houses |
|
|
41 |
|
|
|
36 |
|
North America |
|
|
14 |
|
|
|
13 |
|
United Kingdom |
|
|
13 |
|
|
|
12 |
|
Europe/RoW |
|
|
14 |
|
|
|
11 |
|
Number of Soho House Members |
|
|
176,305 |
|
|
|
142,250 |
|
North America |
|
|
64,163 |
|
|
|
53,879 |
|
United Kingdom |
|
|
65,591 |
|
|
|
54,764 |
|
Europe/RoW |
|
|
38,116 |
|
|
|
27,755 |
|
All Other |
|
|
8,435 |
|
|
|
5,852 |
|
Number of Other Members |
|
|
71,766 |
|
|
|
51,120 |
|
North America |
|
|
19,707 |
|
|
|
13,421 |
|
United Kingdom |
|
|
43,029 |
|
|
|
32,013 |
|
Europe/RoW |
|
|
9,030 |
|
|
|
5,686 |
|
Number of Total Members |
|
|
248,071 |
|
|
|
193,370 |
|
Number of Active App Users |
|
|
182,502 |
|
|
|
150,259 |
|
|
|
For the 13 Weeks Ended |
|
|
For the 13 Weeks Ended |
|
|
For the 26 Weeks Ended |
|
|
For the 26 Weeks Ended |
|
||||||||||||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
July 2, |
|
|
July 3, |
|
|
July 2, |
|
|
July 3, |
|
|
July 2, |
|
|
July 3, |
|
||||||||
|
|
Actuals |
|
|
Constant Currency(1) |
|
|
Actuals |
|
|
Constant Currency(1) |
|
||||||||||||||||||||
|
|
(Unaudited, dollar amounts in thousands, except percentages) |
|
(Unaudited, dollar amounts in thousands, except percentages) |
|
|||||||||||||||||||||||||||
Operating income (loss) |
|
$ |
19,594 |
|
|
$ |
(65,488 |
) |
|
$ |
19,594 |
|
|
$ |
(66,057 |
) |
|
$ |
20,556 |
|
|
$ |
(112,910 |
) |
|
$ |
20,556 |
|
|
$ |
(108,640 |
) |
Operating loss margin |
|
|
7 |
% |
|
|
(27 |
)% |
|
|
7 |
% |
|
|
(27 |
)% |
|
|
4 |
% |
|
|
(26 |
)% |
|
|
4 |
% |
|
|
(26 |
)% |
House-Level Contribution |
|
|
53,242 |
|
|
|
36,632 |
|
|
|
53,242 |
|
|
|
36,950 |
|
|
|
99,960 |
|
|
|
66,378 |
|
|
|
99,960 |
|
|
|
63,868 |
|
House-Level Contribution Margin |
|
|
26 |
% |
|
|
22 |
% |
|
|
26 |
% |
|
|
22 |
% |
|
|
25 |
% |
|
|
22 |
% |
|
|
25 |
% |
|
|
22 |
% |
Other Contribution |
|
|
17,102 |
|
|
|
12,707 |
|
|
|
17,102 |
|
|
|
12,817 |
|
|
|
25,240 |
|
|
|
17,341 |
|
|
|
25,240 |
|
|
|
16,685 |
|
Other Contribution Margin |
|
|
21 |
% |
|
|
17 |
% |
|
|
21 |
% |
|
|
17 |
% |
|
|
17 |
% |
|
|
14 |
% |
|
|
17 |
% |
|
|
14 |
% |
Adjusted EBITDA |
|
|
31,756 |
|
|
|
15,385 |
|
|
|
31,756 |
|
|
|
15,519 |
|
|
|
51,883 |
|
|
|
17,578 |
|
|
|
51,883 |
|
|
|
16,913 |
|
Percentage of total revenues |
|
|
11 |
% |
|
|
6 |
% |
|
|
11 |
% |
|
|
6 |
% |
|
|
10 |
% |
|
|
4 |
% |
|
|
10 |
% |
|
|
4 |
% |
34
Results of Operations
Comparison of the 13 weeks ended July 2, 2023 and July 3, 2022
The following table summarizes our results of operations for the 13 weeks ended July 2, 2023 and July 3, 2022 (in thousands, except percentages):
|
|
For the 13 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
July 2, |
|
|
July 3, |
|
|
|
|
|
July 3, |
|
|
|
|
|||||
|
|
Actuals |
|
|
|
|
|
Currency(1) |
|
|
|
|
||||||||
|
|
(Dollar amounts in thousands) |
|
|
Change % |
|
|
(Dollar amounts in thousands) |
|
|
Constant |
|
||||||||
|
|
(Unaudited) |
|
|||||||||||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Membership revenues |
|
$ |
89,193 |
|
|
$ |
65,889 |
|
|
|
35 |
% |
|
$ |
66,461 |
|
|
|
34 |
% |
In-House revenues |
|
|
125,480 |
|
|
|
109,685 |
|
|
|
14 |
% |
|
|
110,638 |
|
|
|
13 |
% |
Other revenues |
|
|
74,250 |
|
|
|
68,196 |
|
|
|
9 |
% |
|
|
68,788 |
|
|
|
8 |
% |
Total revenues |
|
|
288,923 |
|
|
|
243,770 |
|
|
|
19 |
% |
|
|
245,887 |
|
|
|
18 |
% |
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
In-House operating expenses (exclusive of depreciation and amortization) |
|
|
(152,353 |
) |
|
|
(131,673 |
) |
|
|
(16 |
)% |
|
|
(132,817 |
) |
|
|
(15 |
)% |
Other operating expenses (exclusive of depreciation and amortization) |
|
|
(66,226 |
) |
|
|
(62,758 |
) |
|
|
(6 |
)% |
|
|
(63,303 |
) |
|
|
(5 |
)% |
General and administrative expenses |
|
|
(37,243 |
) |
|
|
(26,647 |
) |
|
|
(40 |
)% |
|
|
(26,878 |
) |
|
|
(39 |
)% |
Pre-opening expenses |
|
|
(4,206 |
) |
|
|
(3,741 |
) |
|
|
(12 |
)% |
|
|
(3,773 |
) |
|
|
(11 |
)% |
Depreciation and amortization |
|
|
(25,249 |
) |
|
|
(22,688 |
) |
|
|
(11 |
)% |
|
|
(22,885 |
) |
|
|
(10 |
)% |
Share-based compensation |
|
|
(5,657 |
) |
|
|
(4,274 |
) |
|
|
(32 |
)% |
|
|
(4,311 |
) |
|
|
(31 |
)% |
Foreign exchange gain (loss), net |
|
|
21,584 |
|
|
|
(57,176 |
) |
|
n/m |
|
|
|
(57,673 |
) |
|
n/m |
|
||
Other |
|
|
21 |
|
|
|
(301 |
) |
|
n/m |
|
|
|
(304 |
) |
|
n/m |
|
||
Total operating expenses |
|
|
(269,329 |
) |
|
|
(309,258 |
) |
|
|
13 |
% |
|
|
(311,944 |
) |
|
|
14 |
% |
Operating income (loss) |
|
|
19,594 |
|
|
|
(65,488 |
) |
|
n/m |
|
|
|
(66,057 |
) |
|
n/m |
|
||
Other (expense) income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest expense, net |
|
|
(22,027 |
) |
|
|
(18,778 |
) |
|
|
(17 |
)% |
|
|
(18,941 |
) |
|
|
(16 |
)% |
Gain on sale of property and other, net |
|
|
(92 |
) |
|
|
(122 |
) |
|
|
25 |
% |
|
|
(123 |
) |
|
|
25 |
% |
Share of income of equity method investments |
|
|
1,587 |
|
|
|
1,342 |
|
|
|
18 |
% |
|
|
1,354 |
|
|
|
17 |
% |
Total other expense, net |
|
|
(20,532 |
) |
|
|
(17,558 |
) |
|
|
(17 |
)% |
|
|
(17,710 |
) |
|
|
(16 |
)% |
Income (loss) before income taxes |
|
|
(938 |
) |
|
|
(83,046 |
) |
|
|
99 |
% |
|
|
(83,767 |
) |
|
|
99 |
% |
Income tax expense |
|
|
(1,349 |
) |
|
|
(509 |
) |
|
n/m |
|
|
|
(513 |
) |
|
n/m |
|
||
Net income (loss) |
|
|
(2,287 |
) |
|
|
(83,555 |
) |
|
|
97 |
% |
|
|
(84,280 |
) |
|
|
97 |
% |
Net income (loss) attributable to noncontrolling interest |
|
|
(357 |
) |
|
|
1,596 |
|
|
n/m |
|
|
|
1,610 |
|
|
n/m |
|
||
Net income (loss) attributable to Soho House & Co Inc. |
|
$ |
(2,644 |
) |
|
$ |
(81,959 |
) |
|
|
97 |
% |
|
$ |
(82,670 |
) |
|
|
97 |
% |
Components of Operating Results
Revenues
Total Revenue
|
|
For the 13 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Total revenues |
|
$ |
288,923 |
|
|
$ |
243,770 |
|
|
|
19 |
% |
|
|
18 |
% |
North America |
|
|
111,687 |
|
|
$ |
99,583 |
|
|
|
12 |
% |
|
|
12 |
% |
United Kingdom |
|
|
89,498 |
|
|
$ |
72,148 |
|
|
|
24 |
% |
|
|
23 |
% |
Europe/RoW |
|
|
47,968 |
|
|
$ |
36,060 |
|
|
|
33 |
% |
|
|
32 |
% |
All Other |
|
|
39,770 |
|
|
$ |
35,979 |
|
|
|
11 |
% |
|
|
10 |
% |
35
Membership Revenues
|
|
For the 13 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Membership revenues |
|
$ |
89,193 |
|
|
$ |
65,889 |
|
|
|
35 |
% |
|
|
34 |
% |
North America |
|
|
42,202 |
|
|
|
32,310 |
|
|
|
31 |
% |
|
|
31 |
% |
United Kingdom |
|
|
25,481 |
|
|
|
18,465 |
|
|
|
38 |
% |
|
|
37 |
% |
Europe/RoW |
|
|
9,640 |
|
|
|
6,099 |
|
|
|
58 |
% |
|
|
57 |
% |
All Other |
|
|
11,870 |
|
|
|
9,015 |
|
|
|
32 |
% |
|
|
31 |
% |
Membership revenues increased by 35% to $89,193 for the 13 weeks ended July 2, 2023 predominantly driven by an increase in Adult Paying Members of 25%, or 28,500, who joined after the end of the second quarter of fiscal 2022. Additionally, the Soho House Every House membership fee was increased at the start of fiscal 2022 which impacted existing Every House members on their renewal date throughout fiscal 2022. This increased Membership Revenue as compared to the second quarter in fiscal 2022 was driven by membership renewals which took place following this period as these are now at a higher price point in the second quarter of fiscal 2023 versus the comparative period.
All Soho House Adult paying fees were also increased in January 2023, with a mid single-digit price rise generally for existing members and a low double-digit increase in price for new members. This increase will impact new members on the date they join and existing members on their renewal date.
There was also an increase in Non-House Membership revenues of $1,268, following the increase in the number of Soho Friends, with approximately 21,000 additional Non-House members in comparison to the end of the second quarter of fiscal 2022.
North America segment saw an increase in membership revenues of $9,892, or 31% , due to approximately 9,000, or 19% increase in Adult Paying Soho House members year-on-year, with the opening of Soho House Holloway (previously known as Holloway House), Los Angeles (May 2022) and Miami Pool House (December 2022), respectively, as well as growth across all existing Houses. The impact of the 2022 Every House membership fee increase as noted above also contributed to the increase in Membership revenues year-on-year.
Our United Kingdom segment saw an increase in Membership revenues of $7,016, or 38% , due to approximately 10,000, or 21% increase in Adult Paying Soho House members, driven by growth in existing Houses and the opening of Soho House Balham in third quarter fiscal 2022, coupled with the impact of the 2022 Every House membership fee increase as noted above. In constant currency, Membership revenues in the United Kingdom segment increased by $6,856, or 37%.
The Europe/RoW segment saw an increase in Membership revenues of $3,541, or 58% (57% constant currency), due to approximately 8,000, or 49% increase in Adult paying members, predominantly from the opening of two new Houses in the second half of fiscal 2022; Copenhagen (July 2022) and Stockholm (December 2022), and the opening of Soho House Bangkok in February 2023, as well as the revenue impact of the 2022 Every House membership fee increase as noted above. In constant currency, Membership revenues in the Europe/ROW segment increased by $3,488, or 57% .
All Other saw an increase in Membership revenues, predominantly driven by over 2,100, or 39% more CWH Adult Paying Members as well as approximately 21,000 additional Non-House members in comparison to the second quarter of fiscal 2022. In constant currency, All Other Membership revenues increased by $2,777, or 31%.
In constant currency, Membership revenues increased by $22,732, or 34%.
In-House Revenues
|
|
For the 13 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
In-House revenues |
|
$ |
125,480 |
|
|
$ |
109,685 |
|
|
|
14 |
% |
|
|
13 |
% |
North America |
|
|
50,439 |
|
|
|
48,765 |
|
|
|
3 |
% |
|
|
3 |
% |
United Kingdom |
|
|
48,178 |
|
|
|
41,652 |
|
|
|
16 |
% |
|
|
15 |
% |
Europe/RoW |
|
|
26,863 |
|
|
|
19,268 |
|
|
|
39 |
% |
|
|
38 |
% |
36
In-House revenues were $125,480 for the 13 weeks ended July 2, 2023, an increase of $15,795 versus the comparative period in 2022. The increase was driven by increased footfall year-on-year in existing sites, further boosted by the five new Houses opened since second quarter fiscal 2022, as well as higher spend per visit at some of our Houses.
North America In-House revenues were $50,439 for the 13 weeks ended July 2, 2023, an increase of $1,674 versus the comparative quarter in 2022. We have seen higher sales volume in second quarter fiscal 2023 coupled with select price increases resulting in an increase in In-House revenues year-on-year. Additionally, the opening of Soho House Holloway (May 2022) has further boosted In-House revenues.
In-House revenues in our United Kingdom segment increased by $6,526 versus second quarter 2022, driven by the opening of Little House Balham, London (July 2022), and strong growth in Brighton year-on-year post opening (March 2022). Additionally, sales volumes increased from higher footfall and strong accommodation revenues driven by growth across our UK properties. In constant currency, In-House Revenues in the United Kingdom segment increased by $6,164, or 15%.
The Europe/RoW segment saw significant increase of In-House revenues year-on-year, driven by new openings, including Soho House Copenhagen (July 2022), Soho House Stockholm (December 2022) and Soho House Bangkok (February 2023). Strong revenue growth from accommodation performance versus the comparative quarter in 2022. In constant currency, In-House Revenues in the Europe/RoW segment increased by $7,428.
In constant currency, In-House Revenues increased by $14,842, or 13%.
Other Revenues
|
|
For the 13 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Other revenues |
|
$ |
74,250 |
|
|
$ |
68,196 |
|
|
|
9 |
% |
|
|
8 |
% |
North America |
|
|
18,993 |
|
|
|
18,510 |
|
|
|
3 |
% |
|
|
3 |
% |
United Kingdom |
|
|
15,839 |
|
|
|
12,031 |
|
|
|
32 |
% |
|
|
31 |
% |
Europe/RoW |
|
|
11,465 |
|
|
|
10,691 |
|
|
|
7 |
% |
|
|
6 |
% |
All Other |
|
|
27,953 |
|
|
|
26,964 |
|
|
|
4 |
% |
|
|
3 |
% |
Other revenues were $74,250 for the 13 weeks ended July 2, 2023, compared to $68,196 for the 13 weeks ended July 3, 2022, an increase of $6,054. The increase is predominantly driven by additional revenues from sites that have opened since the end of the comparative quarter, including Ned Doha, Ned NoMad, New York and Cecconi's Bicester, Oxfordshire. This is coupled with an increase in Soho Home revenues and growth in management fees from Soho House Istanbul, as well as receipt of a lease promote, further detail below, and development fees.
Other revenues in the North America segment have increased $483, or 3% versus second quarter fiscal 2022 predominantly driven by additional revenues related to the management fees from Ned NoMad, New York which opened in June 2022 and revenues from the Willows Inn, Palm Springs which the Company started operating in September 2022, offset by fewer ticket sales for the Coachella event, due to a reduction in length of the event, from two weekends to one, versus the comparative quarter in 2022.
The United Kingdom segment saw an increase in Other revenues of $3,808, or 32% versus second quarter fiscal 2022 predominantly driven by accommodation, with an increase in RevPAR across all sites, in particular Dean Street Townhouse and Little House Apartments.
Other revenues in the Europe/RoW segment have increased compared to second quarter fiscal 2022 due to additional management fees from Soho House Istanbul year-on-year, as well as management fees from the Ned Doha which opened in November 2022. In constant currency, Other Revenues in the Europe/RoW segment increased by $681, or 6%.
Other revenues in All Other have increased due to increased revenues from our Soho Home offering due to the opening of two additional sites in London (June 2022) and Los Angeles (August 2022), as well as an increase of 40% year-on-year in online sales. Additionally, during the second quarter, we recognized $3 million in respect of a lease promote in our Rome property from our landlord. As part of our lease agreements, we often include a promote clause which entitles the Company to a share of any gain in the value of the property during our tenancy.
In constant currency, Other Revenues increased by $5,461, or 8%.
37
In-House Operating Expenses and House-Level Contribution
|
|
For the 13 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
In-House operating expenses |
|
$ |
(152,353 |
) |
|
$ |
(131,673 |
) |
|
|
(16 |
)% |
|
|
(15 |
)% |
Percentage of total House revenues |
|
|
(74 |
)% |
|
|
(78 |
)% |
|
|
|
|
|
|
||
Operating income (loss) |
|
$ |
19,594 |
|
|
$ |
(65,488 |
) |
|
n/m |
|
|
n/m |
|
||
Operating margin |
|
|
7 |
% |
|
|
(27 |
)% |
|
|
|
|
|
|
||
House-Level Contribution |
|
$ |
53,242 |
|
|
$ |
36,632 |
|
|
|
45 |
% |
|
|
44 |
% |
House-Level Contribution Margin |
|
|
26 |
% |
|
|
22 |
% |
|
|
4 |
% |
|
|
|
|
House-Level Contribution by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
$ |
28,127 |
|
|
$ |
23,126 |
|
|
|
22 |
% |
|
|
22 |
% |
United Kingdom |
|
|
19,569 |
|
|
|
11,180 |
|
|
|
75 |
% |
|
|
74 |
% |
Europe/RoW |
|
|
2,207 |
|
|
|
845 |
|
|
n/m |
|
|
n/m |
|
||
All Other |
|
|
3,339 |
|
|
|
1,481 |
|
|
n/m |
|
|
n/m |
|
||
House-Level Contribution Margin by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
|
30 |
% |
|
|
29 |
% |
|
|
|
|
|
|
||
United Kingdom |
|
|
27 |
% |
|
|
19 |
% |
|
|
|
|
|
|
||
Europe/RoW |
|
|
6 |
% |
|
|
3 |
% |
|
|
|
|
|
|
||
All Other |
|
|
87 |
% |
|
|
58 |
% |
|
|
|
|
|
|
||
In-House Operating Expenses were $152,353 for the 13 weeks ended July 2, 2023, an increase of $20,680. The increase is a result of the five new Houses opened since second quarter 2022. The increase year-on-year was also driven by wage inflation and retention initiatives across all regions in the second half of fiscal 2022, as well as energy increases in all markets. In constant currency, In-House Operating Expenses increased by $19,536.
House-Level Contribution, which is defined as House Revenues less In-House Operating Expenses, was $53,242 for the 13 weeks ended July 2, 2023, compared to $36,632 for the 13 weeks ended July 3, 2022, an increase of $16,610. The increase in House-Level Contribution predominantly relates to increased Soho House membership revenues year-on-year and strong flow through from accommodation revenue, as well as the improvement in trading conditions across all regions, especially in UK which saw a strong improvement in contribution year-on-year.
House-Level Contribution Margin was 26% for the 13 weeks ended July 2, 2023, an increase of 4% from the prior period due to increased membership revenues, all regions drove incremental margin points versus the comparative period.
Other Operating Expenses and Other Contribution
|
|
For the 13 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Other operating expenses |
|
$ |
(66,226 |
) |
|
$ |
(62,758 |
) |
|
|
(6 |
)% |
|
|
(5 |
)% |
Percentage of total other revenues |
|
|
(79 |
)% |
|
|
(83 |
)% |
|
|
|
|
|
|
||
Operating loss |
|
$ |
19,594 |
|
|
$ |
(65,488 |
) |
|
n/m |
|
|
n/m |
|
||
Operating loss margin |
|
|
7 |
% |
|
|
(27 |
)% |
|
|
|
|
|
|
||
Other Contribution |
|
$ |
17,102 |
|
|
$ |
12,707 |
|
|
|
35 |
% |
|
|
33 |
% |
Other Contribution Margin |
|
|
21 |
% |
|
|
17 |
% |
|
|
4 |
% |
|
|
|
|
Other Contribution by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
$ |
1,353 |
|
|
$ |
2,298 |
|
|
|
(41 |
)% |
|
|
(41 |
)% |
United Kingdom |
|
|
6,337 |
|
|
|
3,481 |
|
|
|
82 |
% |
|
|
80 |
% |
Europe/RoW |
|
|
3,641 |
|
|
|
3,170 |
|
|
|
15 |
% |
|
|
14 |
% |
All Other |
|
|
5,771 |
|
|
|
3,758 |
|
|
|
54 |
% |
|
|
52 |
% |
Other Contribution Margin by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
|
7 |
% |
|
|
12 |
% |
|
|
|
|
|
|
||
United Kingdom |
|
|
38 |
% |
|
|
28 |
% |
|
|
|
|
|
|
||
Europe/RoW |
|
|
31 |
% |
|
|
29 |
% |
|
|
|
|
|
|
||
All Other |
|
|
16 |
% |
|
|
11 |
% |
|
|
|
|
|
|
||
38
Other Operating Expenses were $66,226 for the 13 weeks ended July 2, 2023, compared to $62,758 for the 13 weeks ended July 3, 2022, an increase of $3,468, or 6%. The increase year-on-year is predominantly driven by trade volumes in Soho Home, following the opening of two additional retail sites and a 40% increase in online sales year-on-year, largely offset by the permanent closure of all but one of our Soho Restaurants sites at the start of fiscal 2023 and the reduction in spend on the Coachella event versus comparative period due to the reduced schedule from two weekends to one. In constant currency, Other Operating Expenses increased by $2,923, or 5%.
Other Contribution, which we define as Other Revenues plus Non-House Membership Revenues less Other Operating Expenses, was $17,102 for the 13 weeks ended July 2, 2023, compared to $12,707 for the comparative period, an increase of $4,395. Other Contribution Margin was 21% for the 13 weeks ended July 2, 2023, an increase of 4% compared to the prior period. The increase in both absolute Other Contribution and Margin is predominantly driven by higher Non-House Membership Revenues year-on-year due to an additional 21,000 Non-House members, strong accommodation flow through from townhouses, better Coachella performance, as well as the receipt of the lease promote described above, in the second quarter.
39
General and Administrative Expenses
|
|
For the 13 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
Actual |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
General and administrative expenses |
|
$ |
37,243 |
|
|
$ |
26,647 |
|
|
|
40 |
% |
|
|
39 |
% |
Percentage of total revenues |
|
|
13 |
% |
|
|
11 |
% |
|
|
|
|
|
|
||
General and Administrative Expenses were $37,243 for the 13 weeks ended July 2, 2023, compared with $26,647 for the 13 weeks ended July 3, 2022, an increase of $10,596, or 40%. The increase was primarily driven by cost and headcount to support business expansion, including the five new Soho Houses opened since the comparative period, offset by initiatives to streamline support functions including digital, communications and content towards the end of fiscal 2022.
In constant currency, General and Administrative Expenses increased by $10,365, or 39%.
Pre-opening Expenses
|
|
For the 13 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
Actual |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Pre-opening expenses |
|
$ |
4,206 |
|
|
$ |
3,741 |
|
|
|
12 |
% |
|
|
11 |
% |
Percentage of total revenues |
|
|
1 |
% |
|
|
2 |
% |
|
|
|
|
|
|
||
Pre-opening expenses were $4,206 for the 13 weeks ended July 2, 2023, driven by the costs associated with the opening of Soho House Mexico City which is expected to open in the third quarter fiscal 2023 as well as costs associated with future House openings. This is compared to $3,741 in the 13 weeks ended July 3, 2022, with the increase year-on-year driven predominantly by the characteristics of fiscal 2023 Houses openings in comparison to fiscal 2022, including size and location. In constant currency, Pre-opening expenses increased by 11%.
Depreciation and Amortization
|
|
For the 13 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
Actual |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Depreciation and amortization |
|
$ |
25,249 |
|
|
$ |
22,688 |
|
|
|
11 |
% |
|
|
10 |
% |
Percentage of total revenues |
|
|
9 |
% |
|
|
9 |
% |
|
|
|
|
|
|
||
Depreciation and amortization were $25,249 for the 13 weeks ended July 2, 2023, an increase of $2,561, or 11%, from the 13 weeks ended July 3, 2022. This increase was primarily driven by the five new Soho Houses that opened after second quarter 2022 as well as increased spend in IT to support key membership and compliance initiatives. In constant currency, depreciation and amortization expenses increased by $2,364, or 10%.
Other Expenses
|
|
For the 13 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
Actual |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Share-based compensation |
|
$ |
5,657 |
|
|
$ |
4,274 |
|
|
|
32 |
% |
|
|
31 |
% |
Percentage of total revenues |
|
|
2 |
% |
|
|
2 |
% |
|
|
|
|
|
|
||
Foreign exchange (gain) loss , net |
|
$ |
(21,584 |
) |
|
$ |
57,176 |
|
|
n/m |
|
|
n/m |
|
||
Percentage of total revenues |
|
|
(7 |
)% |
|
|
23 |
% |
|
|
|
|
|
|
||
Other |
|
$ |
(21 |
) |
|
$ |
301 |
|
|
n/m |
|
|
n/m |
|
||
Percentage of total revenues |
|
|
(0 |
)% |
|
|
0 |
% |
|
|
|
|
|
|
||
40
Share-based compensation expense increased by $1,383 to $5,657 for the 13 weeks ended July 2, 2023, primarily driven by RSUs that were granted and partially vested in the second quarter of fiscal 2023 (impact of $1,407). There was no equivalent grant or vest in second quarter of 2022.
Foreign exchange, net which is unrealized and non-cash in nature, moved from a $57,176 loss to a gain of $(21,584) for the 13 weeks ended July 2, 2023, primarily driven by foreign exchange revaluation of our borrowings.
Interest Expense, Net
|
|
For the 13 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
Actual |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Interest expense, net |
|
$ |
22,027 |
|
|
$ |
18,778 |
|
|
|
17 |
% |
|
|
16 |
% |
Percentage of total revenues |
|
|
8 |
% |
|
|
8 |
% |
|
|
|
|
|
|
||
Net Interest Expense was $22,027 for the 13 weeks ended July 2, 2023, an increase of $3,249, or 17%, over the comparative period in fiscal 2022. This increase is primarily due to the loss on extinguishment of debt of $3 million incurred following the refinancing of Soho Beach House Miami in May 2023. In constant currency, net interest increased by $3,086.
Adjusted EBITDA
|
|
For the 13 Weeks Ended |
|
|
Percent Change |
|||||||
|
|
July 2, |
|
|
July 3, |
|
|
Actual |
|
Constant |
||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|||||
|
|
(Unaudited) |
||||||||||
Adjusted EBITDA |
|
$ |
31,756 |
|
|
$ |
15,385 |
|
|
n/m |
|
n/m |
Percentage of total revenues |
|
|
11 |
% |
|
|
6 |
% |
|
|
|
|
Adjusted EBITDA was $31,756 for the 13 weeks ended July 2, 2023, in comparison to income of $15,385 for the 13 weeks ended July 3, 2022, an increase of $16,371. The increase is driven by higher membership revenues from both Soho House and Non-House members versus the comparative period as well as higher In-House revenues and the receipt of a lease promote in our Rome property from our landlord. These were partially offset by an increase in General and Administrative and Operating expenses year-on-year. In constant currency, Adjusted EBITDA increased by $16,237 compared to the comparative period in fiscal 2022.
Comparison of the 26 weeks ended July 2, 2023 and July 3, 2022
The following table summarizes our results of operations for the 26 weeks ended July 2, 2023 and July 3, 2022 (in thousands, except percentages):
41
|
|
For the 26 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
July 2, |
|
|
July 3, |
|
|
|
|
|
July 3, |
|
|
|
|
|||||
|
|
Actuals |
|
|
|
|
|
Currency(1) |
|
|
|
|
||||||||
|
|
(Dollar amounts in thousands) |
|
|
Change % |
|
|
(Dollar amounts in thousands) |
|
|
Constant |
|
||||||||
|
|
(Unaudited) |
|
|||||||||||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Membership revenues |
|
$ |
172,441 |
|
|
$ |
124,662 |
|
|
|
38 |
% |
|
$ |
119,948 |
|
|
|
44 |
% |
In-House revenues |
|
|
241,558 |
|
|
|
197,440 |
|
|
|
22 |
% |
|
|
189,973 |
|
|
|
27 |
% |
Other revenues |
|
|
130,133 |
|
|
|
113,676 |
|
|
|
14 |
% |
|
|
109,377 |
|
|
|
19 |
% |
Total revenues |
|
|
544,132 |
|
|
|
435,778 |
|
|
|
25 |
% |
|
|
419,298 |
|
|
|
30 |
% |
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
In-House operating expenses (exclusive of depreciation and amortization) |
|
|
(296,325 |
) |
|
|
(241,668 |
) |
|
|
(23 |
)% |
|
|
(232,529 |
) |
|
|
(27 |
)% |
Other operating expenses (exclusive of depreciation and amortization) |
|
|
(122,607 |
) |
|
|
(110,391 |
) |
|
|
(11 |
)% |
|
|
(106,216 |
) |
|
|
(15 |
)% |
General and administrative expenses |
|
|
(67,817 |
) |
|
|
(55,933 |
) |
|
|
(21 |
)% |
|
|
(53,818 |
) |
|
|
(26 |
)% |
Pre-opening expenses |
|
|
(9,200 |
) |
|
|
(7,773 |
) |
|
|
(18 |
)% |
|
|
(7,479 |
) |
|
|
(23 |
)% |
Depreciation and amortization |
|
|
(49,713 |
) |
|
|
(45,519 |
) |
|
|
(9 |
)% |
|
|
(43,798 |
) |
|
|
(14 |
)% |
Share-based compensation |
|
|
(11,503 |
) |
|
|
(12,077 |
) |
|
|
5 |
% |
|
|
(11,620 |
) |
|
|
1 |
% |
Foreign exchange gain (loss), net |
|
|
34,597 |
|
|
|
(74,250 |
) |
|
n/m |
|
|
|
(71,442 |
) |
|
n/m |
|
||
Other |
|
|
(1,008 |
) |
|
|
(1,077 |
) |
|
|
6 |
% |
|
|
(1,036 |
) |
|
|
3 |
% |
Total operating expenses |
|
|
(523,576 |
) |
|
|
(548,688 |
) |
|
|
5 |
% |
|
|
(527,938 |
) |
|
|
1 |
% |
Operating income (loss) |
|
|
20,556 |
|
|
|
(112,910 |
) |
|
n/m |
|
|
|
(108,640 |
) |
|
n/m |
|
||
Other (expense) income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest expense, net |
|
|
(40,728 |
) |
|
|
(34,495 |
) |
|
|
(18 |
)% |
|
|
(33,191 |
) |
|
|
(23 |
)% |
Gain on sale of property and other, net |
|
|
589 |
|
|
|
1,541 |
|
|
|
(62 |
)% |
|
|
1,483 |
|
|
|
(60 |
)% |
Share of income of equity method investments |
|
|
2,458 |
|
|
|
1,740 |
|
|
|
41 |
% |
|
|
1,674 |
|
|
|
47 |
% |
Total other expense, net |
|
|
(37,681 |
) |
|
|
(31,214 |
) |
|
|
(21 |
)% |
|
|
(30,034 |
) |
|
|
(25 |
)% |
Income (loss) before income taxes |
|
|
(17,125 |
) |
|
|
(144,124 |
) |
|
|
88 |
% |
|
|
(138,674 |
) |
|
|
88 |
% |
Income tax expense |
|
|
(1,178 |
) |
|
|
(57 |
) |
|
n/m |
|
|
|
(55 |
) |
|
n/m |
|
||
Net income (loss) |
|
|
(18,303 |
) |
|
|
(144,181 |
) |
|
|
87 |
% |
|
|
(138,729 |
) |
|
|
87 |
% |
Net income (loss) attributable to noncontrolling interest |
|
|
(293 |
) |
|
|
1,743 |
|
|
n/m |
|
|
|
1,677 |
|
|
n/m |
|
||
Net income (loss) attributable to Soho House & Co Inc. |
|
$ |
(18,596 |
) |
|
$ |
(142,438 |
) |
|
|
87 |
% |
|
$ |
(137,052 |
) |
|
|
86 |
% |
Components of Operating Results
Revenues
Total Revenue
|
|
For the 26 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
Unaudited |
|
|||||||||||||
Total revenues |
|
$ |
544,132 |
|
|
$ |
435,778 |
|
|
|
25 |
% |
|
|
30 |
% |
North America |
|
|
219,779 |
|
|
|
182,076 |
|
|
|
21 |
% |
|
|
21 |
% |
United Kingdom |
|
|
168,228 |
|
|
|
137,824 |
|
|
|
22 |
% |
|
|
27 |
% |
Europe/RoW |
|
|
81,196 |
|
|
|
51,584 |
|
|
|
57 |
% |
|
|
64 |
% |
All Other |
|
|
74,929 |
|
|
|
64,294 |
|
|
|
17 |
% |
|
|
21 |
% |
42
Membership Revenues
|
|
For the 26 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
Unaudited |
|
|||||||||||||
Membership revenues |
|
$ |
172,441 |
|
|
$ |
124,662 |
|
|
|
38 |
% |
|
|
44 |
% |
North America |
|
|
82,196 |
|
|
|
60,326 |
|
|
|
36 |
% |
|
|
36 |
% |
United Kingdom |
|
|
49,178 |
|
|
|
35,636 |
|
|
|
38 |
% |
|
|
43 |
% |
Europe/RoW |
|
|
18,453 |
|
|
|
11,827 |
|
|
|
56 |
% |
|
|
62 |
% |
All Other |
|
|
22,614 |
|
|
|
16,873 |
|
|
|
34 |
% |
|
|
39 |
% |
Membership revenues increased by 38% (44% constant currency) to $172,441 for the 26 weeks ended July 2, 2023 predominantly driven by an increase of approximately 28,500 Adult Paying Soho House members joining after the end of the first half of fiscal 2022. Additionally, the Soho House Every House membership fee was increased at the start of fiscal 2022 which impacted existing Every House members on their renewal date throughout fiscal 2022.
All Soho House Adult paying fees were also increased in January 2023, with a mid single-digit price rise generally for existing members and a low double-digit increase in price for new members. This increase will impact new members on the date they join and existing members on their renewal date, and did not have had a significant material impact at the end second quarter fiscal 2023.
There was also an increase in Non-House Membership revenues, following the increase in the number of Soho Friends, with approximately 21,000 additional Non-House members in comparison to the end of the first half of fiscal 2022.
North America segment saw an increase in revenues of $21,870, or 36% , due to an increase of approximately 9,000, or 19%, Adult Paying Members versus the comparable period, including the opening of Soho House Holloway, Los Angeles (May 2022) and Miami Pool House (December 2022), as well as increased membership numbers across all existing Houses versus the first half of fiscal 2022.
Our United Kingdom segment saw an increase in Membership revenues of $13,542, or 38% (43% constant currency), due to the opening of Soho House Balham in the third quarter of fiscal 2022 and Brighton Beach House in March 2022, growth in existing Houses, coupled with the increases in Every House membership fees in fiscal year 2022 and 2023.
The Europe/RoW segment saw an increase in Membership revenues of $6,626, or 56% (62% constant currency), due to an increase in Adult Paying Members, predominantly from the opening of two new Houses in the second half of fiscal 2022; Copenhagen (July 2022) and Stockholm (December 2022) and Soho House Bangkok (February 2023) in fiscal 2023.
Membership revenue reported under All Other above saw an increase predominantly driven by growth in CWH Adult Paying Members and over 21,000 additional Non-House members in comparison to the first half of fiscal 2022.
In constant currency, Membership revenues increased by $52,493, or 44%.
In-House Revenues
|
|
For the 26 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
In-House revenues |
|
$ |
241,558 |
|
|
$ |
197,440 |
|
|
|
22 |
% |
|
|
27 |
% |
North America |
|
|
101,800 |
|
|
|
89,334 |
|
|
|
14 |
% |
|
|
14 |
% |
United Kingdom |
|
|
89,598 |
|
|
|
79,690 |
|
|
|
12 |
% |
|
|
17 |
% |
Europe/RoW |
|
|
50,160 |
|
|
|
28,416 |
|
|
|
77 |
% |
|
|
83 |
% |
In-House revenues were $241,558 for the 26 weeks ended July 2, 2023, an increase of $44,118 versus the comparative period in 2022. The increase was driven by higher sales volumes year-on-year, with the Omicron variant of COVID-19 impacting the start of fiscal 2022. Additionally, In-House revenues have been boosted by five new Houses openings since the second quarter of fiscal 2022, alongside select price increases across our In-House offerings.
Our North America segment saw an increase in In-House revenues versus the comparative half. We have seen higher sales volumes in fiscal 2023 coupled with select price increases resulting in an increase in In-House revenues year-on-year. Additionally, the opening of Soho House Holloway (May 2022) has further boosted In-House revenues. Little Beach House Malibu was shut for almost seven weeks in the comparative quarter following a fire at the site.
43
In-House revenues in our United Kingdom segment increased driven by flow through from additional members, increases in RevPAR across sites and the opening of Little House Balham, London (July 2022) and Brighton Beach House (March 2022).
The Europe/RoW segment saw significant increase of In-House revenues year-on-year driven from new openings, including Soho House Copenhagen (July 2022), Soho House Stockholm (December 2022) and Soho House Bangkok (February 2023) and improved RevPAR year-on-year. In addition to this, during the first half of fiscal 2023 we recognized approximately $1,800 from the Dutch government related to COVID-19 subsidies and approximately $1,100 settlement to recover costs incurred on behalf of a former development partner in connection to an upcoming European House opening.
In constant currency, In-House Revenues increased by $51,585.
Other Revenues
|
|
For the 26 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Other revenues |
|
$ |
130,133 |
|
|
$ |
113,676 |
|
|
|
14 |
% |
|
|
19 |
% |
North America |
|
|
35,784 |
|
|
|
32,418 |
|
|
|
10 |
% |
|
|
10 |
% |
United Kingdom |
|
|
29,452 |
|
|
|
22,498 |
|
|
|
31 |
% |
|
|
36 |
% |
Europe/RoW |
|
|
12,582 |
|
|
|
11,339 |
|
|
|
11 |
% |
|
|
15 |
% |
All Other |
|
|
52,315 |
|
|
|
47,421 |
|
|
|
10 |
% |
|
|
15 |
% |
Other revenues were $130,133 for the 26 weeks ended July 2, 2023, compared to $113,676 for the 26 weeks ended July 3, 2022, an increase of $16,457. The increase is predominantly driven by additional sites that have opened since the end of the comparative period, including Ned Doha, Ned NoMad, New York and Cecconi's Bicester, Oxfordshire. This is coupled with an increase in Soho Home revenues of 45% versus the comparative period, and growth in management fees from Soho House Mumbai and Soho House Istanbul.
Additionally, we recognized $3 million in respect of a lease promote in our Rome property from our landlord. As part of our lease agreements, we often include a promote clause which entitles the Company to any gain in the value of the property during our tenancy.
This is offset slightly by the reduction in revenues relating to the Coachella Event, which took place over one weekend versus two weekends in the comparable period in fiscal 2022, and the closure of all but one of our Soho Restaurant properties at the start of fiscal 2023.
In constant currency, Other Revenues had increased by $20,756.
In-House Operating Expenses and House-Level Contribution
|
|
For the 26 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
In-House operating expenses |
|
$ |
(296,325 |
) |
|
$ |
(241,668 |
) |
|
|
(23 |
)% |
|
|
(27 |
)% |
Percentage of total House revenues |
|
|
(75 |
)% |
|
|
(78 |
)% |
|
|
|
|
|
|
||
Operating income (loss) |
|
$ |
20,556 |
|
|
$ |
(112,910 |
) |
|
n/m |
|
|
n/m |
|
||
Operating margin |
|
|
4 |
% |
|
|
(26 |
)% |
|
|
|
|
|
|
||
House-Level Contribution |
|
$ |
99,960 |
|
|
$ |
66,378 |
|
|
|
51 |
% |
|
|
57 |
% |
House-Level Contribution Margin |
|
|
25 |
% |
|
|
22 |
% |
|
|
3 |
% |
|
|
|
|
House-Level Contribution by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
$ |
56,070 |
|
|
$ |
43,500 |
|
|
|
29 |
% |
|
|
29 |
% |
United Kingdom |
|
|
34,351 |
|
|
|
23,133 |
|
|
|
48 |
% |
|
|
54 |
% |
Europe/RoW |
|
|
3,721 |
|
|
|
(2,812 |
) |
|
n/m |
|
|
n/m |
|
||
All Other |
|
|
5,818 |
|
|
|
2,557 |
|
|
n/m |
|
|
n/m |
|
||
House-Level Contribution Margin by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
|
31 |
% |
|
|
29 |
% |
|
|
|
|
|
|
||
United Kingdom |
|
|
25 |
% |
|
|
20 |
% |
|
|
|
|
|
|
||
Europe/RoW |
|
|
5 |
% |
|
|
(7 |
)% |
|
|
|
|
|
|
||
All Other |
|
|
81 |
% |
|
|
60 |
% |
|
|
|
|
|
|
||
44
In-House Operating Expenses were $296,325 for the 26 weeks ended July 2, 2023, an increase of $54,657, driven by five additional House openings and increased wage and energy costs year-on-year. In constant currency, In-House Operating Expenses increased by $63,796.
House-Level Contribution, which is defined as House Revenues less In-House Operating Expenses, was $99,960 for the 26 weeks ended July 2, 2023, compared to $66,378 for the 26 weeks ended July 3, 2022, an increase of $33,582. The increase in House-Level Contribution related to increased Soho House membership revenues and strong flow through of accommodation revenue. This increase is partially offset by the opening of five additional Houses since the first half of fiscal 2022, with Houses tending to have negative contribution in their first year as the House matures.
House-Level Contribution Margin was 25% for the 26 weeks ended July 2, 2023, an increase of 3% from the prior period due to increased membership revenues and higher trading in the 26 weeks ended July 3, 2022 compared to the prior period, partially offset by the dilutive impact of five new Houses.
Other Operating Expenses and Other Contribution
|
|
For the 26 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Other operating expenses |
|
$ |
(122,607 |
) |
|
$ |
(110,391 |
) |
|
|
(11 |
)% |
|
|
(15 |
)% |
Percentage of total other revenues |
|
|
(83 |
)% |
|
|
(86 |
)% |
|
|
|
|
|
|
||
Operating loss |
|
$ |
20,556 |
|
|
$ |
(112,910 |
) |
|
n/m |
|
|
n/m |
|
||
Operating loss margin |
|
|
4 |
% |
|
|
(26 |
)% |
|
|
|
|
|
|
||
Other Contribution |
|
$ |
25,240 |
|
|
$ |
17,341 |
|
|
|
46 |
% |
|
|
51 |
% |
Other Contribution Margin |
|
|
17 |
% |
|
|
14 |
% |
|
|
3 |
% |
|
|
11 |
% |
Other Contribution by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
$ |
5,082 |
|
|
$ |
5,605 |
|
|
|
(9 |
)% |
|
|
(9 |
)% |
United Kingdom |
|
|
11,177 |
|
|
|
5,686 |
|
|
|
97 |
% |
|
n/m |
|
|
Europe/RoW |
|
|
3,014 |
|
|
|
3,242 |
|
|
|
(7 |
)% |
|
|
(3 |
)% |
All Other |
|
|
5,967 |
|
|
|
2,808 |
|
|
n/m |
|
|
n/m |
|
||
Other Contribution Margin by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
|
14 |
% |
|
|
17 |
% |
|
|
|
|
|
|
||
United Kingdom |
|
|
36 |
% |
|
|
24 |
% |
|
|
|
|
|
|
||
Europe/RoW |
|
|
23 |
% |
|
|
28 |
% |
|
|
|
|
|
|
||
All Other |
|
|
9 |
% |
|
|
5 |
% |
|
|
|
|
|
|
||
Other Operating Expenses were $122,607 for the 26 weeks ended July 2, 2023, compared with $110,391 for the 26 weeks ended July 3, 2022, an increase of $12,216, or 11%. This increase is primarily driven by increased trade volume in Soho Home from additional sites and online year-on-year sales growth. In addition to this, new restaurant and hotel sites in the UK and North America resulted in increased costs. This was offset by a reduction in the Coachella event spend versus comparable half and the permanent closure of all but one of our Soho Restaurants sites at the start of fiscal 2023. In constant currency, Other Operating Expenses increased by $16,391, or 15%.
Other Contribution, which we define as Other Revenues plus Non-House Membership Revenues less Other Operating Expenses, was $25,240 for the 26 weeks ended July 2, 2023, compared to $17,341 for the comparative period, an increase of $7,899. This was predominately driven by higher Non-House Membership Revenues year-on-year, as well as increase from high margin revenue streams, including partnerships, and management fees from our Ned and Soho House management contracts Additionally, in the first half fiscal 2023 there was the receipt of a lease promote, detailed above.
Other Contribution Margin was 17% for the 26 weeks ended July 2, 2023, an increase of 3% compared to the prior period, predominately driven by Home.
45
General and Administrative Expenses
|
|
For the 26 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
Actual |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
General and administrative expenses |
|
$ |
67,817 |
|
|
$ |
55,933 |
|
|
|
21 |
% |
|
|
26 |
% |
Percentage of total revenues |
|
|
12 |
% |
|
|
13 |
% |
|
|
|
|
|
|
||
General and Administrative Expenses were $67,817 for the 26 weeks ended July 2, 2023, compared with $55,933 for the 26 weeks ended July 3, 2022, an increase of $11,884, or 21%. The increase was primarily driven by additional headcount to support business expansion.
In constant currency, General and Administrative Expenses had an increase of $13,999, or 26%.
Pre-opening Expenses
|
|
For the 26 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
Actual |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Pre-opening expenses |
|
$ |
9,200 |
|
|
$ |
7,773 |
|
|
|
18 |
% |
|
|
23 |
% |
Percentage of total revenues |
|
|
2 |
% |
|
|
2 |
% |
|
|
|
|
|
|
||
Pre-opening expenses were $9,200 for the 26 weeks ended July 2, 2023. The increase of $1,427 in comparison to $7,773 for the 26 weeks ended July 3, 2022, is driven by the opening of Soho House Bangkok in first half of fiscal 2023 and costs associated with the opening of further Houses later in fiscal 2023. In constant currency, Pre-opening expenses increased by 1,721, or 23%.
Depreciation and Amortization
|
|
For the 26 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
Actual |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Depreciation and amortization |
|
$ |
49,713 |
|
|
$ |
45,519 |
|
|
|
9 |
% |
|
|
14 |
% |
Percentage of total revenues |
|
|
9 |
% |
|
|
10 |
% |
|
|
|
|
|
|
||
Depreciation and amortization were $49,713 for the 26 weeks ended July 2, 2023, an increase of $4,194, or 9%, from the 26 weeks ended July 3, 2022.This increase was primarily driven by amortization of capitalized IT development costs, as well as depreciation associated with five new Soho Houses that opened since first half of fiscal 2022. In constant currency, depreciation and amortization expenses increased by $5,915, or 14%.
46
Other Expenses
|
|
For the 26 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
Actual |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Share-based compensation |
|
$ |
11,503 |
|
|
$ |
12,077 |
|
|
|
(5 |
)% |
|
|
(1 |
)% |
Percentage of total revenues |
|
|
2 |
% |
|
|
3 |
% |
|
|
|
|
|
|
||
Foreign exchange (gain) loss , net |
|
$ |
(34,597 |
) |
|
$ |
74,250 |
|
|
n/m |
|
|
n/m |
|
||
Percentage of total revenues |
|
|
(6 |
)% |
|
|
17 |
% |
|
|
|
|
|
|
||
Other |
|
$ |
1,008 |
|
|
$ |
1,077 |
|
|
|
(6 |
)% |
|
|
(3 |
)% |
Percentage of total revenues |
|
|
0 |
% |
|
|
0 |
% |
|
|
|
|
|
|
||
Share-based compensation expense decreased by $574 to $11,503 for the 26 weeks ended July 2, 2023, primarily driven by relatively short vesting RSUs that vested in the first half of fiscal 2022 (impact of $3,195) and the lack of vesting of the RSU and Growth Share awards to our former Chief Operating Officer who departed the Company in Q4 2022 (impact of $700). This was partially offset by new grants of SARs and the continued impact of the fourth quarter 2022 repricing of previously granted SARs (total impact of $1,500) as well as the grant and vesting impact of RSU awards to senior leaders (impact of $500). Also offsetting this is an RSUs grant which partially vested in the second quarter of fiscal 2023 (impact of $1,407).
Foreign exchange (gain) loss, net, which is unrealized and non-cash in nature, moved by $108,847 to $(34,597) for the 26 weeks ended July 2, 2023, primarily driven by foreign exchange revaluation of our borrowings, which have increased since the preceding period. Decreased foreign exchange volatility during the period has also contributed to this most notably on our dollar borrowings held by non-dollar Group undertakings. While 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 $69 to $1,008 for the 26 weeks ended July 2, 2023, which is not materially significant.
Interest Expense, Net
|
|
For the 26 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
Actual |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Interest expense, net |
|
$ |
40,728 |
|
|
$ |
34,495 |
|
|
|
18 |
% |
|
|
23 |
% |
Percentage of total revenues |
|
|
7 |
% |
|
|
8 |
% |
|
|
|
|
|
|
||
Net Interest Expense was $40,728 for the 26 weeks ended July 2, 2023, an increase of $6,233, or 18%, on the comparative period in 2022. This increase is driven by the incremental interest expense incurred following issuance of $100 million additional notes in March 2022 under the Goldman Sachs Senior Secured Note facility and the incremental interest expense incurred following the refinancing of mortgage debt on Soho Beach House Miami in May 2023, including a $3 million loss on extinguishment of debt. In constant currency, net interest decreased by $7,537, or 23%.
Adjusted EBITDA
|
|
For the 26 Weeks Ended |
|
|
Percent Change |
|||||||
|
|
July 2, |
|
|
July 3, |
|
|
Actual |
|
Constant |
||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|||||
|
|
(Unaudited) |
||||||||||
Adjusted EBITDA |
|
$ |
51,883 |
|
|
$ |
17,578 |
|
|
n/m |
|
n/m |
Percentage of total revenues |
|
|
10 |
% |
|
|
4 |
% |
|
|
|
|
Adjusted EBITDA was $51,883 for the 26 weeks ended July 2, 2023, in comparison to $17,578 for the 26 weeks ended July 3, 2022, an increase of $34,305. The increase is driven by higher membership revenues from both Soho House and Non-House members versus the comparative period as well as increased operations following the removal of COVID-19 related restrictions especially in Europe and Hong Kong in the comparative period. Additionally, the Company recognized a Dutch government grant related to COVID-19 subsidies, which we only became eligible for in the 26 weeks ended July 2, 2023, and a lease
47
promote in our Rome property from our landlord. This increase was partially offset by increased General and administrative costs in contrast to the 26 weeks ended July 3, 2022. In constant currency, Adjusted EBITDA increased by $34,970.
48
Non-GAAP Financial Measures
For the 13 weeks ended July 2, 2023 and July 3, 2022
A reconciliation of Net Loss to Adjusted EBITDA is set forth below for the periods specified:
|
|
For the 13 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Unaudited, dollar amounts in thousands) |
|
|||||||||||||
Net income (loss) |
|
$ |
(2,287 |
) |
|
$ |
(83,555 |
) |
|
|
97 |
% |
|
|
97 |
% |
Depreciation and amortization |
|
|
25,249 |
|
|
|
22,688 |
|
|
|
11 |
% |
|
|
10 |
% |
Interest expense, net |
|
|
22,027 |
|
|
|
18,778 |
|
|
|
17 |
% |
|
|
16 |
% |
Income tax benefit |
|
|
1,349 |
|
|
|
509 |
|
|
n/m |
|
|
n/m |
|
||
EBITDA |
|
|
46,338 |
|
|
|
(41,580 |
) |
|
n/m |
|
|
n/m |
|
||
Loss on sale of property and other, net |
|
|
92 |
|
|
|
122 |
|
|
|
(25 |
)% |
|
|
(25 |
)% |
Share of income of equity method investments |
|
|
(1,587 |
) |
|
|
(1,342 |
) |
|
|
(18 |
)% |
|
|
(17 |
)% |
Foreign exchange (gain) loss, net(2) |
|
|
(21,584 |
) |
|
|
57,176 |
|
|
n/m |
|
|
n/m |
|
||
Share of equity method investments adjusted EBITDA |
|
|
2,840 |
|
|
|
2,365 |
|
|
|
20 |
% |
|
|
19 |
% |
Share-based compensation expense⁽²⁾ |
|
|
5,657 |
|
|
|
4,274 |
|
|
|
32 |
% |
|
|
31 |
% |
Membership credits expense⁽³⁾ |
|
|
— |
|
|
|
555 |
|
|
n/m |
|
|
n/m |
|
||
Out of period operating lease liability adjustment(4) |
|
|
— |
|
|
|
(6,185 |
) |
|
n/m |
|
|
n/m |
|
||
Adjusted EBITDA |
|
$ |
31,756 |
|
|
$ |
15,385 |
|
|
n/m |
|
|
n/m |
|
||
The computation of House-Level Contribution and Other Contribution is set forth below:
|
|
For the 13 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
July 2, |
|
|
July 3, |
|
|
Change % |
|
|
July 3, 2022 |
|
|
Constant Currency |
|
|||||
|
|
Actuals |
|
|
|
|
|
|
|
|||||||||||
|
|
(Unaudited, dollar amounts in thousands) |
|
|||||||||||||||||
Operating income (loss) |
|
$ |
19,594 |
|
|
$ |
(65,488 |
) |
|
n/m |
|
|
$ |
(66,057 |
) |
|
n/m |
|
||
General and administrative |
|
|
37,243 |
|
|
|
26,647 |
|
|
|
40 |
% |
|
|
26,878 |
|
|
|
39 |
% |
Pre-opening expenses |
|
|
4,206 |
|
|
|
3,741 |
|
|
|
12 |
% |
|
|
3,773 |
|
|
|
11 |
% |
Depreciation and amortization |
|
|
25,249 |
|
|
|
22,688 |
|
|
|
11 |
% |
|
|
22,885 |
|
|
|
10 |
% |
Share-based compensation |
|
|
5,657 |
|
|
|
4,274 |
|
|
|
32 |
% |
|
|
4,311 |
|
|
|
31 |
% |
Foreign exchange (gain) loss, net |
|
|
(21,584 |
) |
|
|
57,176 |
|
|
n/m |
|
|
|
57,673 |
|
|
n/m |
|
||
Other |
|
|
(21 |
) |
|
|
301 |
|
|
n/m |
|
|
|
304 |
|
|
n/m |
|
||
Non-House membership revenues |
|
|
(9,078 |
) |
|
|
(7,269 |
) |
|
|
(25 |
)% |
|
|
(7,332 |
) |
|
|
(24 |
)% |
Other revenues |
|
|
(74,250 |
) |
|
|
(68,196 |
) |
|
|
(9 |
)% |
|
|
(68,788 |
) |
|
|
(8 |
)% |
Other operating expenses |
|
|
66,226 |
|
|
|
62,758 |
|
|
|
6 |
% |
|
|
63,303 |
|
|
|
5 |
% |
House-Level Contribution |
|
$ |
53,242 |
|
|
$ |
36,632 |
|
|
|
45 |
% |
|
$ |
36,950 |
|
|
|
44 |
% |
Operating income (loss) margin |
|
|
7 |
% |
|
|
(27 |
)% |
|
|
|
|
|
(27 |
)% |
|
|
|
||
House-Level Contribution Margin |
|
|
26 |
% |
|
|
22 |
% |
|
|
|
|
|
22 |
% |
|
|
|
||
49
|
|
For the 13 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
July 2, |
|
|
July 3, |
|
|
Change % |
|
|
July 3, 2022 |
|
|
Constant Currency |
|
|||||
|
|
Actuals |
|
|
|
|
|
|
|
|||||||||||
|
|
(Unaudited, dollar amounts in thousands) |
|
|||||||||||||||||
Membership revenues |
|
$ |
89,193 |
|
|
$ |
65,889 |
|
|
|
35 |
% |
|
$ |
66,461 |
|
|
|
34 |
% |
Less: Non-House membership revenues |
|
|
(9,078 |
) |
|
|
(7,269 |
) |
|
|
(25 |
)% |
|
|
(7,332 |
) |
|
|
(24 |
)% |
Add: In-House revenues |
|
|
125,480 |
|
|
|
109,685 |
|
|
|
14 |
% |
|
|
110,638 |
|
|
|
13 |
% |
Total House revenues |
|
|
205,595 |
|
|
|
168,305 |
|
|
|
22 |
% |
|
|
169,767 |
|
|
|
21 |
% |
Less: In-House operating expenses |
|
|
152,353 |
|
|
|
131,673 |
|
|
|
16 |
% |
|
|
132,817 |
|
|
|
15 |
% |
House-Level Contribution |
|
$ |
53,242 |
|
|
$ |
36,632 |
|
|
|
45 |
% |
|
$ |
36,950 |
|
|
|
44 |
% |
|
|
For the 13 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
July 2, |
|
|
July 3, |
|
|
Change % |
|
|
July 3, 2022 |
|
|
Constant Currency |
|
|||||
|
|
Actuals |
|
|
|
|
|
|
|
|||||||||||
|
|
(Unaudited, dollar amounts in thousands) |
|
|||||||||||||||||
Operating income (loss) |
|
$ |
19,594 |
|
|
$ |
(65,488 |
) |
|
n/m |
|
|
$ |
(66,057 |
) |
|
n/m |
|
||
General and administrative |
|
|
37,243 |
|
|
|
26,647 |
|
|
|
40 |
% |
|
|
26,878 |
|
|
|
39 |
% |
Pre-opening expenses |
|
|
4,206 |
|
|
|
3,741 |
|
|
|
12 |
% |
|
|
3,773 |
|
|
|
11 |
% |
Depreciation and amortization |
|
|
25,249 |
|
|
|
22,688 |
|
|
|
11 |
% |
|
|
22,885 |
|
|
|
10 |
% |
Share-based compensation |
|
|
5,657 |
|
|
|
4,274 |
|
|
|
32 |
% |
|
|
4,311 |
|
|
|
31 |
% |
Foreign exchange loss, net |
|
|
(21,584 |
) |
|
|
57,176 |
|
|
n/m |
|
|
|
57,673 |
|
|
n/m |
|
||
Other |
|
|
(21 |
) |
|
|
301 |
|
|
n/m |
|
|
|
304 |
|
|
n/m |
|
||
House membership revenues |
|
|
(80,115 |
) |
|
|
(58,620 |
) |
|
|
37 |
% |
|
|
(59,129 |
) |
|
|
(35 |
)% |
In-House revenues |
|
|
(125,480 |
) |
|
|
(109,685 |
) |
|
|
(14 |
)% |
|
|
(110,638 |
) |
|
|
(13 |
)% |
In-House operating expenses |
|
|
152,353 |
|
|
|
131,673 |
|
|
|
16 |
% |
|
|
132,817 |
|
|
|
15 |
% |
Total Other Contribution |
|
$ |
17,102 |
|
|
$ |
12,707 |
|
|
|
35 |
% |
|
$ |
12,817 |
|
|
|
33 |
% |
Operating income (loss) margin |
|
|
7 |
% |
|
|
(27 |
)% |
|
|
|
|
|
(27 |
)% |
|
|
|
||
Other Contribution Margin |
|
|
21 |
% |
|
|
17 |
% |
|
|
|
|
|
17 |
% |
|
|
|
||
|
|
For the 13 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
July 2, |
|
|
July 3, |
|
|
Change % |
|
|
July 3, 2022 |
|
|
Constant Currency |
|
|||||
|
|
Actuals |
|
|
|
|
|
|
|
|||||||||||
|
|
(Unaudited, dollar amounts in thousands) |
|
|||||||||||||||||
Other Contribution |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Non-House membership revenues |
|
$ |
9,078 |
|
|
$ |
7,269 |
|
|
|
25 |
% |
|
$ |
7,332 |
|
|
|
24 |
% |
Add: other revenues |
|
|
74,250 |
|
|
|
68,196 |
|
|
|
9 |
% |
|
|
68,788 |
|
|
|
8 |
% |
Less: other operating expenses |
|
|
66,226 |
|
|
|
62,758 |
|
|
|
6 |
% |
|
|
63,303 |
|
|
|
5 |
% |
Other Contribution |
|
$ |
17,102 |
|
|
$ |
12,707 |
|
|
|
35 |
% |
|
$ |
12,817 |
|
|
|
33 |
% |
For the 26 weeks ended July 2, 2023 and July 3, 2022
A reconciliation of Net Loss to Adjusted EBITDA is set forth below for the periods specified:
50
|
|
For the 26 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
July 2, |
|
|
July 3, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Unaudited, dollar amounts in thousands) |
|
|||||||||||||
Net income (loss) |
|
$ |
(18,303 |
) |
|
$ |
(144,181 |
) |
|
|
87 |
% |
|
|
87 |
% |
Depreciation and amortization |
|
|
49,713 |
|
|
|
45,519 |
|
|
|
9 |
% |
|
|
14 |
% |
Interest expense, net |
|
|
40,728 |
|
|
|
34,495 |
|
|
|
18 |
% |
|
|
23 |
% |
Income tax expense |
|
|
1,178 |
|
|
|
57 |
|
|
n/m |
|
|
n/m |
|
||
EBITDA |
|
|
73,316 |
|
|
|
(64,110 |
) |
|
n/m |
|
|
n/m |
|
||
Gain on sale of property and other, net |
|
|
(589 |
) |
|
|
(1,541 |
) |
|
|
62 |
% |
|
|
60 |
% |
Share of income of equity method investments |
|
|
(2,458 |
) |
|
|
(1,740 |
) |
|
|
(41 |
)% |
|
|
(47 |
)% |
Foreign exchange (gain) loss, net(2) |
|
|
(34,597 |
) |
|
|
74,250 |
|
|
n/m |
|
|
n/m |
|
||
Share of equity method investments adjusted EBITDA |
|
|
4,708 |
|
|
|
3,704 |
|
|
|
27 |
% |
|
|
32 |
% |
Share-based compensation expense⁽²⁾ |
|
|
11,503 |
|
|
|
12,077 |
|
|
|
(5 |
)% |
|
|
(1 |
)% |
Membership credits expense⁽³⁾ |
|
|
— |
|
|
|
1,260 |
|
|
n/m |
|
|
n/m |
|
||
Out of period operating lease liability adjustment(4) |
|
|
— |
|
|
|
(6,322 |
) |
|
n/m |
|
|
n/m |
|
||
Adjusted EBITDA |
|
$ |
51,883 |
|
|
$ |
17,578 |
|
|
n/m |
|
|
n/m |
|
||
The computation of House-Level Contribution and Other Contribution is set forth below:
|
|
For the 26 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
July 2, |
|
|
July 3, |
|
|
Change % |
|
|
July 3, 2022 |
|
|
Constant Currency |
|
|||||
|
|
Actuals |
|
|
|
|
|
|
|
|||||||||||
|
|
(Unaudited, dollar amounts in thousands) |
|
|||||||||||||||||
Operating income (loss) |
|
$ |
20,556 |
|
|
$ |
(112,910 |
) |
|
n/m |
|
|
$ |
(108,640 |
) |
|
n/m |
|
||
General and administrative |
|
|
67,817 |
|
|
|
55,933 |
|
|
|
21 |
% |
|
|
53,818 |
|
|
|
26 |
% |
Pre-opening expenses |
|
|
9,200 |
|
|
|
7,773 |
|
|
|
18 |
% |
|
|
7,479 |
|
|
|
23 |
% |
Depreciation and amortization |
|
|
49,713 |
|
|
|
45,519 |
|
|
|
9 |
% |
|
|
43,798 |
|
|
|
14 |
% |
Share-based compensation |
|
|
11,503 |
|
|
|
12,077 |
|
|
|
(5 |
)% |
|
|
11,620 |
|
|
|
(1 |
)% |
Foreign exchange (gain) loss, net |
|
|
(34,597 |
) |
|
|
74,250 |
|
|
n/m |
|
|
|
71,442 |
|
|
n/m |
|
||
Other |
|
|
1,008 |
|
|
|
1,077 |
|
|
|
(6 |
)% |
|
|
1,036 |
|
|
|
(3 |
)% |
Non-House membership revenues |
|
|
(17,714 |
) |
|
|
(14,056 |
) |
|
|
(26 |
)% |
|
|
(13,524 |
) |
|
|
(31 |
)% |
Other revenues |
|
|
(130,133 |
) |
|
|
(113,676 |
) |
|
|
(14 |
)% |
|
|
(109,377 |
) |
|
|
(19 |
)% |
Other operating expenses |
|
|
122,607 |
|
|
|
110,391 |
|
|
|
11 |
% |
|
|
106,216 |
|
|
|
15 |
% |
House-Level Contribution |
|
$ |
99,960 |
|
|
$ |
66,378 |
|
|
|
51 |
% |
|
$ |
63,868 |
|
|
|
57 |
% |
Operating loss margin |
|
|
4 |
% |
|
|
(26 |
)% |
|
|
|
|
|
(26 |
)% |
|
|
|
||
House-Level Contribution Margin |
|
|
25 |
% |
|
|
22 |
% |
|
|
|
|
|
22 |
% |
|
|
|
||
51
|
|
For the 26 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
July 2, |
|
|
July 3, |
|
|
Change % |
|
|
July 3, 2022 |
|
|
Constant Currency |
|
|||||
|
|
Actuals |
|
|
|
|
|
|
|
|||||||||||
|
|
(Unaudited, dollar amounts in thousands) |
|
|||||||||||||||||
Membership revenues |
|
$ |
172,441 |
|
|
$ |
124,662 |
|
|
|
38 |
% |
|
$ |
119,948 |
|
|
|
44 |
% |
Less: Non-House membership revenues |
|
|
(17,714 |
) |
|
|
(14,056 |
) |
|
|
(26 |
)% |
|
|
(13,524 |
) |
|
|
(31 |
)% |
Add: In-House revenues |
|
|
241,558 |
|
|
|
197,440 |
|
|
|
22 |
% |
|
|
189,973 |
|
|
|
27 |
% |
Total House revenues |
|
|
396,285 |
|
|
|
308,046 |
|
|
|
29 |
% |
|
|
296,397 |
|
|
|
34 |
% |
Less: In-House operating expenses |
|
|
296,325 |
|
|
|
241,668 |
|
|
|
23 |
% |
|
|
232,529 |
|
|
|
27 |
% |
House-Level Contribution |
|
$ |
99,960 |
|
|
$ |
66,378 |
|
|
|
51 |
% |
|
$ |
63,868 |
|
|
|
57 |
% |
|
|
For the 26 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
July 2, |
|
|
July 3, |
|
|
Change % |
|
|
July 3, 2022 |
|
|
Constant Currency |
|
|||||
|
|
Actuals |
|
|
|
|
|
|
|
|||||||||||
|
|
(Unaudited, dollar amounts in thousands) |
|
|||||||||||||||||
Operating loss |
|
$ |
20,556 |
|
|
$ |
(112,910 |
) |
|
n/m |
|
|
$ |
(108,640 |
) |
|
n/m |
|
||
General and administrative |
|
|
67,817 |
|
|
|
55,933 |
|
|
|
21 |
% |
|
|
53,818 |
|
|
|
26 |
% |
Pre-opening expenses |
|
|
9,200 |
|
|
|
7,773 |
|
|
|
18 |
% |
|
|
7,479 |
|
|
|
23 |
% |
Depreciation and amortization |
|
|
49,713 |
|
|
|
45,519 |
|
|
|
9 |
% |
|
|
43,798 |
|
|
|
14 |
% |
Share-based compensation |
|
|
11,503 |
|
|
|
12,077 |
|
|
|
(5 |
)% |
|
|
11,620 |
|
|
|
(1 |
)% |
Foreign exchange loss, net |
|
|
(34,597 |
) |
|
|
74,250 |
|
|
n/m |
|
|
|
71,442 |
|
|
n/m |
|
||
Other |
|
|
1,008 |
|
|
|
1,077 |
|
|
|
(6 |
)% |
|
|
1,036 |
|
|
|
(3 |
)% |
House membership revenues |
|
|
(154,727 |
) |
|
|
(110,606 |
) |
|
|
(40 |
)% |
|
|
(106,424 |
) |
|
|
(45 |
)% |
In-House revenues |
|
|
(241,558 |
) |
|
|
(197,440 |
) |
|
|
(22 |
)% |
|
|
(189,973 |
) |
|
|
(27 |
)% |
In-House operating expenses |
|
|
296,325 |
|
|
|
241,668 |
|
|
|
23 |
% |
|
|
232,529 |
|
|
|
27 |
% |
Total Other Contribution |
|
$ |
25,240 |
|
|
$ |
17,341 |
|
|
|
46 |
% |
|
$ |
16,685 |
|
|
|
51 |
% |
Operating loss margin |
|
|
4 |
% |
|
|
(26 |
)% |
|
|
|
|
|
(26 |
)% |
|
|
|
||
Other Contribution Margin |
|
|
17 |
% |
|
|
14 |
% |
|
|
|
|
|
14 |
% |
|
|
|
||
|
|
For the 26 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
July 2, |
|
|
July 3, |
|
|
Change % |
|
|
July 3, 2022 |
|
|
Constant Currency |
|
|||||
|
|
Actuals |
|
|
|
|
|
|
|
|||||||||||
|
|
(Unaudited, dollar amounts in thousands) |
|
|||||||||||||||||
Other Contribution |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Non-House membership revenues |
|
$ |
17,714 |
|
|
$ |
14,056 |
|
|
|
26 |
% |
|
$ |
13,524 |
|
|
|
31 |
% |
Add: other revenues |
|
|
130,133 |
|
|
|
113,676 |
|
|
|
14 |
% |
|
|
109,377 |
|
|
|
19 |
% |
Less: other operating expenses |
|
|
122,607 |
|
|
|
110,391 |
|
|
|
11 |
% |
|
|
106,216 |
|
|
|
15 |
% |
Other Contribution |
|
$ |
25,240 |
|
|
$ |
17,341 |
|
|
|
46 |
% |
|
$ |
16,685 |
|
|
|
51 |
% |
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 2, 2023, we maintained a cash and cash equivalents balance of $129 million and a restricted cash balance of $48 million. Refer to Note 11, Debt and Note 19, Subsequent Events in this Quarterly Report on Form 10-Q for additional information on the nature of the restricted cash.
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:
52
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 taking account of repayment terms of our Miami property debt.
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 2, |
|
|
July 3, |
|
||
|
|
(Unaudited, dollar amounts in thousands) |
|
|||||
Net cash provided by (used in) |
|
|
|
|
|
|
||
Net cash provided by operating activities |
|
$ |
8,281 |
|
|
$ |
13,661 |
|
Net cash used in investing activities |
|
|
(40,774 |
) |
|
|
(44,246 |
) |
Net cash provided by financing activities |
|
|
17,766 |
|
|
|
84,589 |
|
Effect of exchange rates on cash and cash equivalents |
|
|
2,077 |
|
|
|
(8,340 |
) |
Net (decrease) increase in cash and cash equivalents |
|
$ |
(12,650 |
) |
|
$ |
45,664 |
|
Net Cash Provided by 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 2, 2023, we had a $8,281 inflow of cash from operating activities, which includes a net loss of $18,303, depreciation and amortization of $49,713, and an unfavorable net working capital change of $19,105.
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.
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.
For the 26 weeks ended July 2, 2023, we had a $40,774 outflow of cash from investing activities, primarily due to purchases of property and equipment of $33,313 and purchases of intangible assets of $8,823.
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.
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 2, 2023, we had a $17,766 inflow of cash from financing activities, primarily due to the additional amount borrowed following the refinancing of the $117,000 Miami Property mortgage, comprising of the term loan of $55,000 and mezzanine loan of $62,000. The replacement property loan provided gross proceeds of $140,000 with issuance costs of $2,822 and extinguishment costs of $1,686. This provided a net inflow of $18,290. Refer to Note 11, Debt in this Quarterly Report on Form 10-Q for additional information.
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.
Cash Requirements from Contractual and Other Obligations
As of July 2, 2023, other than the refinancing of the existing term loan and mezzanine loan, as described above, with a new $140 million loan maturing in ten years time (refer to Note 11, Debt in this Quarterly Report on Form 10-Q for additional information), there have been no further 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 1, 2023.
Critical Accounting Estimates and Judgments
53
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 1, 2023.
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.
54
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 1, 2023.
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.
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 operation 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 $8 million lower and approximately $9 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 2, 2023.
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 2, 2023.
If the USD had strengthened/weakened by 10% versus the GBP, revenue would have been approximately $27 million lower and approximately $30 million higher, respectively, and Net Loss would have been approximately $1 million lower and approximately $1 million higher, respectively, for the 26 weeks ended July 2, 2023.
If the Euro 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 $1 million lower and approximately less than $1 million higher, respectively, for the 26 weeks ended July 2, 2023.
Concentration of Credit Risk
Credit risk is the risk of loss from amounts owed by financial counter-parties. 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 2, 2023, we had $129 million in cash and cash equivalents on the balance sheet, $48 million of restricted cash and £71 million ($90 million) undrawn on the Revolving Credit Facility (subject to complying with our covenants) 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. 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.
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Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Management concluded that as of July 2, 2023 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 1, 2023, 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 1, 2023, because of the identification of two material weaknesses identified in our internal control over financial reporting. The material weaknesses related to (i) our lack of a sufficient number of personnel with an appropriate level of knowledge and experience with the application of US generally accepted accounting principles (“GAAP”) and with our financial reporting requirements, including lease accounting; and (ii) the fact that policies and procedures with respect to the review, supervision and monitoring of our accounting and reporting functions, including IT general controls, were either not designed and in place, or not operating effectively. As a result, adjustments to our financial reporting were identified and made during the course of the audit process.
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 2, 2023 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.
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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 1, 2023, 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. 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.
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
None.
(c) Issuer Purchases of Equity Securities
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
Exhibit |
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Description |
31.1* |
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31.2* |
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32.1* |
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32.2* |
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101.INS |
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Inline XBRL Instance Document |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document |
101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith.
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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.
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Soho House & Co Inc. |
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Date: August 11, 2023 |
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By: |
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/s/ Andrew Carnie |
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Andrew Carnie |
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Chief Executive Officer |
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Date: August 11, 2023 |
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By: |
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/s/ Thomas Allen |
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Thomas Allen |
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Chief Financial Officer |
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