8-K: Soho House & Co Reports Strong Membership Growth and Improved Profitability in 2023

Soho House & Co announced its fourth quarter and full year 2023 results, highlighting significant membership growth and a substantial increase in adjusted EBITDA.

Summary

• Soho House & Co reported its financial results for the fourth quarter and fiscal year ended December 31, 2023.
• Total membership reached 259,884 in Q4 2023, a 14.6% increase year-over-year.
• Soho House members specifically grew to 193,865, a 19.7% year-over-year increase.
• The company's membership waitlist hit an all-time high of approximately 99,000.
• Total revenues for Q4 2023 were $290.8 million, a 7.5% increase year-over-year.
• Membership revenues for Q4 2023 were $95.8 million, a 24.2% increase year-over-year, representing 32.9% of total revenues.
• In-House revenues grew to $125.2 million, a 3.8% increase year-over-year.
• RevPAR increased by 4% year-over-year on a like-for-like basis in Q4 2023.
• The net loss attributable to Soho House & Co Inc. was $57.0 million in Q4 2023, including a $47 million impairment charge.
• Adjusted EBITDA for Q4 2023 was $36.6 million, up $13.4 million from Q4 2022.
• For the full fiscal year 2023, total revenues increased by 16.8% year-over-year to $1,135.9 million.
• Membership revenues for fiscal year 2023 were $361.5 million, a 32.5% increase year-over-year, accounting for 31.8% of total revenues.
• In-House revenues for fiscal year 2023 grew to $482.1 million, a 13% increase year-over-year.
• RevPAR for fiscal year 2023 was 11% higher year-over-year on a like-for-like basis.
• The net loss attributable to Soho House & Co Inc. for fiscal year 2023 was $118.0 million, including the same impairment charge.
• Adjusted EBITDA for fiscal year 2023 was $128.0 million, up from $60.7 million in fiscal year 2022.
• Two new Houses were opened in 2023: Bangkok in February and Mexico City in September.
• Soho House Portland opened recently, and Soho House Sao Paulo is expected to open soon.

Sentiment

Score: 7

Explanation: The document presents a generally positive outlook with strong membership growth and improved profitability, but the net loss and impairment charges temper the overall sentiment. The future guidance is also positive.

Positives

• Soho House & Co experienced strong growth in membership numbers, indicating high demand for its services.
• Membership revenues saw significant growth, demonstrating the effectiveness of the membership model.
• The company achieved a substantial increase in adjusted EBITDA, reflecting improved profitability.
• The opening of new houses in Bangkok and Mexico City expands the company's global footprint.
• The company's focus on operational excellence is driving improved financial performance.
• The company has a strong membership retention rate.
• The company has a large waitlist indicating future growth potential.

Negatives

• The company reported a net loss of $57.0 million in Q4 2023 and $118.0 million for the full year 2023.
• The net loss includes a $47 million impairment charge, primarily related to Soho Works North America.
• Other memberships including Soho Friends and Soho Works decreased by 4,691 from the end of the third quarter 2023.

Risks

• The company's net loss, despite improved EBITDA, indicates potential financial challenges.
• The impairment charge related to Soho Works North America suggests underperformance in that segment.
• The company's net debt is $638.4 million.
• The company operates in a rapidly changing environment and new risks may emerge.

Future Outlook

The company expects total Soho House members to exceed 210,000, membership revenues between $405 million and $415 million, total revenues between $1,200 million and $1,250 million, and adjusted EBITDA between $155 million and $165 million for fiscal year 2024. These estimates do not include pre-opening costs, non-cash rent and deferred registration fees of ~$25-30m combined for fiscal 2024 as a whole.

Management Comments

• Andrew Carnie, CEO of Soho House & Co, stated that the strong results in 2023 demonstrate the company's focus on improving member experience and profitability.
• The CEO also highlighted the 20% growth in Soho House membership and the doubling of Adjusted EBITDA.

Industry Context

Soho House & Co operates in the competitive hospitality and membership club sector. The company's focus on unique member experiences and global expansion aligns with trends in the industry. The growth in membership and revenue indicates a strong market position, but the net loss and impairment charges highlight the challenges of scaling a global business.

Comparison to Industry Standards

• Comparing Soho House's RevPAR growth of 11% to industry benchmarks, such as Marriott International's reported RevPAR growth of 12.5% in 2023, shows that Soho House is performing well in the hospitality sector.
• However, Soho House's net loss of $118 million contrasts with the profitability of established hotel chains like Hilton, which reported a net income of $1.2 billion in 2023, indicating that Soho House still has room to improve its financial performance.
• In terms of membership growth, Soho House's 19.7% increase in Soho House members is comparable to the growth rates of other premium membership clubs, but the company's unique focus on a global network of physical and digital spaces sets it apart from traditional membership models.
• The adjusted EBITDA margin of 11% is a significant improvement from 6% in 2022, but it still lags behind the margins of some established hospitality companies, such as Hyatt, which reported an adjusted EBITDA margin of 17.5% in 2023.

Management Changes

Stakeholder Impact

• Shareholders will likely view the strong membership growth and improved profitability positively.
• Employees may benefit from the company's growth and expansion.
• Members will likely appreciate the continued investment in member experience and new locations.
• Suppliers and creditors may see the company as a more stable and reliable partner due to its improved financial performance.

Next Steps

• The company expects to open Soho House Sao Paulo soon.
• The company will host a conference call and webcast on March 15, 2024, to discuss the results.

Key Dates

Keywords

Soho House, Membership, Adjusted EBITDA, Revenue, RevPAR, Net Loss, Hospitality, Global Membership Platform, Soho Works, Soho Friends