8-K: Soho House & Co Reports Mixed Q1 2024 Results: Membership Growth Strong, Profitability Pressured

Soho House & Co saw a 17% year-over-year increase in Soho House membership and a record waitlist, but experienced a net loss and a slight decrease in adjusted EBITDA in the first quarter of 2024.

Summary

• Soho House & Co announced its financial results for the first quarter of 2024, ending March 31, 2024.
• Total membership grew to 261,571, a 9.9% increase year-over-year, with Soho House members reaching 198,021, a 17.4% increase year-over-year.
• The company's membership waitlist hit an all-time high of approximately 102,000.
• Total revenues reached $263.1 million, a 3.1% increase year-over-year, with membership revenues growing to $100.2 million, a 20.4% increase year-over-year.
• In-House revenues decreased by 5% year-over-year to $110.4 million, and Revenue Per Available Room (RevPAR) decreased by 3% year-over-year on a like-for-like basis.
• The company reported a net loss attributable to Soho House & Co Inc. of $46.0 million, or $0.24 per share.
• Adjusted EBITDA was $19.3 million, a decrease of $0.8 million compared to the first quarter of 2023.
• Soho House opened a new location in Portland during the quarter and anticipates opening a location in Sao Paulo soon.
• The company has raised the midpoint of its Adjusted EBITDA guidance for fiscal year 2024.

Sentiment

Score: 5

Explanation: The document presents a mixed picture with strong membership growth but concerning profitability metrics. The increase in membership and raised EBITDA guidance are positive, but the net loss and decrease in in-house revenue temper the overall sentiment.

Positives

• Soho House membership experienced strong growth, increasing by 17.4% year-over-year.
• Membership revenues saw a significant increase of 20.4% year-over-year.
• The company's waitlist reached a record high, indicating strong demand for memberships.
• Total revenues increased by 3.1% year-over-year.
• The company is expanding its physical presence with the opening of Soho House Portland and plans for Sao Paulo.
• The company has raised the midpoint of its Adjusted EBITDA guidance for fiscal year 2024.
• Like-for-like Food & Beverage margins at the Houses improved compared to the first quarter of 2023, despite cost inflation.

Negatives

• The company reported a net loss of $46.0 million, or $0.24 per share.
• Adjusted EBITDA decreased by $0.8 million compared to the first quarter of 2023.
• In-House revenues decreased by 5% year-over-year.
• Revenue Per Available Room (RevPAR) decreased by 3% year-over-year on a like-for-like basis.
• Other Memberships including Soho Friends and Soho Works decreased by 8% year-over-year.

Risks

• The company is experiencing a net loss, which could impact investor confidence.
• The decrease in In-House revenues and RevPAR may indicate challenges in the hospitality segment.
• The company's adjusted EBITDA decreased year-over-year, which could signal potential profitability issues.
• The company is exposed to foreign exchange volatility impacting non-USD debt and working capital.

Future Outlook

The company has raised the midpoint of its Adjusted EBITDA guidance for fiscal year 2024, indicating a positive outlook for the remainder of the year. The company expects to open Soho House Sao Paulo soon.

Management Comments

• Andrew Carnie, CEO of Soho House & Co, stated that the first quarter results are a testament to the strong appeal of Soho House globally.
• The CEO also noted that the company has seen steady improvement in underlying trends since the start of the year.
• Management expressed confidence in raising the midpoint of their Adjusted EBITDA guidance due to continued strong execution.

Industry Context

The results reflect a mixed performance in the hospitality and membership sector, with strong membership growth offset by challenges in profitability and in-house revenues. The company's focus on expanding its global footprint aligns with industry trends of experiential and community-based hospitality.

Comparison to Industry Standards

• While Soho House's membership growth is strong, its profitability metrics lag behind some established hotel chains and membership clubs.
• For example, companies like Marriott or Hilton typically report higher RevPAR and occupancy rates, though they operate in a different segment of the market.
• Membership-based businesses like Equinox or The Wing have different financial structures, making direct comparisons challenging, but they often focus on recurring revenue and high retention rates, similar to Soho House.
• The decrease in Soho House's RevPAR is a concern, as it indicates a potential weakness in the company's ability to generate revenue from its physical spaces, which is a key metric for the hospitality industry.
• The company's adjusted EBITDA margin of 7% is lower than some of its peers in the hospitality sector, which often aim for margins in the double digits.

Stakeholder Impact

• Shareholders may be concerned about the net loss and decrease in adjusted EBITDA.
• Employees may be impacted by the company's focus on operational efficiency.
• Members may benefit from the continued expansion and improved member experience.
• Suppliers may be affected by changes in the company's operational strategies.
• Creditors may be concerned about the company's financial performance.

Next Steps

• The company will host a conference call and webcast to discuss these results on May 10, 2024.
• The company plans to continue its global expansion, with the opening of Soho House Sao Paulo expected soon.
• The company will continue to focus on improving member experience and operational efficiency.

Key Dates

Keywords

Soho House, Membership, EBITDA, Revenue, Hospitality, Financial Results, Net Loss, RevPAR, Waitlist