Soho House & Co Inc
NYSE:SHCO
US |
Fubotv Inc
NYSE:FUBO
|
Media
|
|
US |
Bank of America Corp
NYSE:BAC
|
Banking
|
|
US |
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
|
US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
US |
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
|
CN |
NIO Inc
NYSE:NIO
|
Automobiles
|
|
US |
Fluor Corp
NYSE:FLR
|
Construction
|
|
US |
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
|
US |
TopBuild Corp
NYSE:BLD
|
Consumer products
|
|
US |
Abbott Laboratories
NYSE:ABT
|
Health Care
|
|
US |
Chevron Corp
NYSE:CVX
|
Energy
|
|
US |
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
|
US |
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
|
US |
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
|
US |
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
|
US |
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
52 Week Range |
4.55
7.67
|
Price Target |
|
We'll email you a reminder when the closing price reaches USD.
Choose the stock you wish to monitor with a price alert.
Fubotv Inc
NYSE:FUBO
|
US | |
Bank of America Corp
NYSE:BAC
|
US | |
Palantir Technologies Inc
NYSE:PLTR
|
US | |
C
|
C3.ai Inc
NYSE:AI
|
US |
Uber Technologies Inc
NYSE:UBER
|
US | |
NIO Inc
NYSE:NIO
|
CN | |
Fluor Corp
NYSE:FLR
|
US | |
Jacobs Engineering Group Inc
NYSE:J
|
US | |
TopBuild Corp
NYSE:BLD
|
US | |
Abbott Laboratories
NYSE:ABT
|
US | |
Chevron Corp
NYSE:CVX
|
US | |
Occidental Petroleum Corp
NYSE:OXY
|
US | |
Matrix Service Co
NASDAQ:MTRX
|
US | |
Automatic Data Processing Inc
NASDAQ:ADP
|
US | |
Qualcomm Inc
NASDAQ:QCOM
|
US | |
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Earnings Call Analysis
Q2-2024 Analysis
Soho House & Co Inc
Soho House & Co reported solid performance in the second quarter of 2024, showcasing a robust year-on-year growth in key metrics. Membership revenues surged by 16% to $104 million compared to the same quarter last year, indicative of strong membership demand. Notably, the global member waitlist saw a considerable increase, finishing the quarter with 111,000 potential new members. The company successfully welcomed an additional 6,000 members this quarter, bringing the total global membership to 204,000.
The quarter also marked significant expansion for Soho House, with notable successes from recent openings in São Paulo, Mexico City, and Portland. The total count of open houses now stands at 26 since 2018, contributing to a diverse operating portfolio. Future plans include openings in Madrid, Milan, Barcelona, and Tokyo, underscoring the company’s aggressive growth strategy aimed at enhancing membership and reinforcing its global presence.
Total revenues increased by 6% to $305 million year-on-year, reflecting a healthy operational performance. Adjusted EBITDA improved by $2 million to $33 million, with house-level contribution growing 12% year-on-year. This contribution reinforces a house-level margin increase of nearly 100 basis points, achieving 27%. While the current investments in new houses impacted short-term earnings, the long-term profitability outlook remains optimistic.
Soho House faced a $4 million negative impact from new house openings during the quarter, though management expressed confidence in future profitability as these locations ramp up operations. Despite the drag from initial losses, management reported positive cash flow from operating activities—marking the fifth consecutive quarter of positive cash flow, and a significant 80% increase from last year. Such metrics affirm the resilience of the company amid the cyclical challenges faced by the broader restaurant and hospitality industry.
Encouragingly, management raised their year-end membership guidance to over 212,000, alongside an increase in the membership revenue estimate to a range of $410 million to $420 million from the previous $405 million to $415 million. This adjustment reflects the management's confidence built on the strong member engagement and the proactive initiatives introduced across their houses to improve service and dining experiences.
To enhance member experiences, Soho House has rolled out various menu innovations, pop-up events, and improved service training during the quarter. These initiatives were well-received and resulted in a 20% increase in member event attendance year-on-year, alongside higher spend per event. The overall member satisfaction has seen positive improvements, as the company remains focused on providing unique experiences that members cherish, thus driving deeper engagement.
As the company lays the groundwork for long-term growth, they plan to host an Investor Day in December 2024, where they will further elaborate on their strategic initiatives and growth trajectory. This transparency and emphasis on constructive stakeholder engagement signal a proactive approach to future challenges, aiming to maintain the company’s momentum and leverage emerging opportunities.
Hello, everyone, and welcome to the Soho House & Co Inc. Second Quarter 2024 Results Conference Call. Please note that this call is being recorded. [Operator Instructions]
I'd now like to hand over to Thomas Allen, Soho House & Co Inc., Chief Financial Officer. You may now begin.
Thank you for joining us today to discuss Soho House & Co's second quarter financial results. My name is Thomas Allen, and I'm the Chief Financial Officer. I'm here with Andrew Carnie, our CEO. Today's discussion contains forward-looking statements that represent our beliefs or expectations about future events. All forward-looking statements involve risks and uncertainties that could cause the actual results to differ materially from the forward-looking statements.
Some of the factors that may cause such differences are described in our SEC filings. Any forward-looking statements represent our views only as of today, and we assume no obligation to update any forward-looking statements if our views change. By now, you should have access to our Q2 earnings release, which can be found at sohohouseco.com in the News and Events section.
Additionally, we have posted our Q2 presentation, which can also be found in the News and Events section on our site. During the call, we also refer to certain non-GAAP financial measures. These non-GAAP measures should be considered in addition to and not as a substitute for or an isolation from our GAAP results. Reconciliations from the most comparable GAAP measures are available in today's earnings press release.
Now let me hand it over to Andrew.
Thanks, Thomas, and hello, everyone. I'm going to update you on the quarter's highlights and provide an update on the progress we've made against our strategic priorities. I'll then hand over to Thomas to talk through the financial performance, give an update on our balance sheet and our guidance before moving on to Q&A. Q2 has been another strong quarter with year-on-year and quarter-on-quarter growth in membership, revenues and EBITDA as we continue to deliver against our strategic priorities of growing enhancing membership and operational excellence to drive greater profitability.
Membership demand continues to be very strong. Membership revenues increased 16% versus the same period last year and 3% versus the last quarter. Our global wait list continues to grow, finishing the quarter at 111,000, and we welcomed 6,000 Soho House members growing to 204,000 members globally. Soho House member growth was driven by the strong opening of Soho House in Sao Paulo, our first house in South America and other new openings such as Mexico City and Portland.
We now have 26 houses that have opened since 2018 and are still in the ramp-up phase. We saw strong growth in houses such as Austin, Nashville, Downtown L.A., Dumbo, White City, Hong Kong and Rome this quarter. As we think about the future, we also announced our plans to open new Soho Houses in Madrid, Milan, Barcelona and Tokyo over the coming years, helping to further strengthen membership demand.
Q2 adjusted EBITDA grew $2 million year-over-year to $33 million. It's worth noting that excluding our planned investments in growth, with the initial losses at new houses, which this year includes Portland, Sao Paulo and Bodrum that had a $4 million greater impact in the quarter, EBITDA would have grown closer to 20%.
Total revenues grew 6% year-on-year to $305 million. We saw a sequential improvement in in-house trends driven by better footfall and spend per visit, with in-house revenues up 2% year-on-year and improving throughout the quarter. We are really pleased with the membership demand we are seeing in our new markets and ramp up houses, which gives us the confidence to raise our financial guidance today on total membership and membership revenue while reiterating guidance on total revenue and adjusted EBITDA.
Our goal is to provide our members with a great experience in service and our houses, which we have seen reflected in improved member satisfaction scores began this quarter. We introduced more dining choices across all our houses, including new menus, new pop-ups and 1 night only experiences. We continued our focus on service, rolling out further training, increasing the speed of service and enhanced member recognition when members check in and eat with us.
We increased the quality and variety of member events, which combined with the personalized event recommendations on the app resulted in almost 20% more members attending events year-on-year and an increase of spend per member events attended.
Finally, we continue to provide members with the unique experiences they can't find anywhere else. We delivered our first Backstage Soho House [indiscernible] Festival and a [ Soho ] House Festival in London. We continue to focus on operational excellence, which leads to great profits and cash flow. Through our new global beverages deal, we've improved the quality and choice of drinks for our members and have grown margins at the same time.
We continue to transform our back-of-house systems to help us achieve greater efficiencies, improving member service and lowering our costs, and we have further streamlined our corporate office to reflect the current operating environment and our plans for few new openings over the next couple of years. These strategic initiatives contributed to house level contribution increasing 12% year-on-year, with house level margins up approximately 100 basis points despite more new houses having a short-term impact on our growth in margins.
Now let me pass over to Thomas to give you more detail on the numbers and our guidance.
Thanks, Andrew. Total revenues for the first quarter grew 6% year-on-year to $305 million. Membership revenue rose 16% year-on-year to $104 million, while in-house revenue was up 2% and other revenues were down 1%. The House level contribution was up $6 million or 12% year-on-year, with house level margins up almost 100 basis points to 27% despite the short-term impact of new house openings.
Other contribution was down $3 million or 16% year-on-year due to the initial impact from Scorpios Bodrum, the timing of design and development fees and lower stand-alone restaurant and townhouse sales, giving more details on revenue. Year-on-year revenues were up more than $16 million, driven by the increase in recurring membership revenues. Membership growth and pricing drove a $14 million increase in membership revenues.
In-house revenues were up $3 million year-on-year, while other revenues were $1 million lower. Like-for-like in-house revenues for the quarter were approximately flat year-on-year, an improvement from the mid-single-digit year-on-year decline we saw in Q1. We and trends were relatively consistent across our major geographic regions, the Americas, U.K. and Europe/rest of world.
Our second quarter adjusted EBITDA was $33.3 million, up $2 million year-over-year. Higher membership revenues was offset by opening Soho House Portland at the end of the first quarter, and Soho House Sao Paulo and Scorpios Bodrum in the second quarter compared to last year when we only opened Soho House Bangkok in the first half of the year.
As you know from our maturation curves, we are confident all will drive long-term profitability. But in the quarter, these new openings had a year-over-year impact on our EBITDA growth of approximately $4 million.
Now discussing our balance sheet. We ended the quarter with $154 million of cash and cash equivalents, $10 million higher than the end of the first quarter and $665 million of net debt. We had positive cash flow from operating activities again in the quarter, our fifth quarter in a row and up approximately 80% from last year. While we incurred sequentially higher CapEx in the quarter related to all our openings, our cash flow from operating and investing activities were still net positive. We continue to expect to spend $90 million to $100 million of CapEx in the year, in line with our prior guidance.
We ended the quarter at 5x net debt to adjusted EBITDA and down from 6x at the end of the second quarter of 2023. We announced in February, the Board had approved a new $50 million share repurchase authorization. Following the dissolution of the special committee in late May, we began repurchasing stock and bought back $5 million of shares in the quarter.
Finally, after 1/4 of strong delivery cost of business and particularly good membership metrics, we are raising our year-end membership guidance to over 212,000 and increasing our membership revenue range to $410 million to $420 million from $405 million to $415 million. We are reiterating guidance for other key financial metrics, total revenue and adjusted EBITDA.
With that, let me hand back to Andrew.
In closing, it's been a solid quarter for the business as we deliver against the goals we've set ourselves this year. I would like to thank our teams globally for their hard work and passion and our members for their continued support and loyalty. I also want to mention that we plan on holding an Investor Day in New York on December 5. We look forward to sharing with you our plans around long-term growth and profitability and bringing to life our excitement about the significant opportunities ahead. With that, we will now open up to questions.
Operator, we can take the first question, please. As a reminder, you can either ask your questions over the phone or submit them over the webcast.
[Operator Instructions] Our first question comes from Steven Zaccone from Citi.
I wanted to focus on the house revenue improvement, could you talk about any callouts by region where things are progressing a little bit better than the overall trend. And then the broader restaurant backdrop has seen some weakness. So how do you feel about your competitive positioning, just given some of the macro data points?
Steve, first and foremost, as you know, we're membership club. So we're really pleased to see the strength of our demand in our membership, and it shows our members are consistently using our houses. So it was nice to see that our footfall trends improved sequentially in the quarter. But more importantly, I think as I mentioned, we saw spend per member improved in the last quarter. And I said in my prepared remarks that we have a lot of initiatives to improve these, which are really delivering results.
Regarding any regional variance. The trends have been relatively similar across all our major geographies across America, U.K. and Europe, rest of world and including Latin America. So we're not seeing any real different, we're seeing an improvement across the board from when we reported in Q1.
Okay. Great. And then my follow-up question is just with the increase in the membership count guidance, Thomas, how should we think about preliminary planning for 2025? Is this a good run rate for us to think about on a go-forward basis in terms of membership count growth?
Thanks, Steven. So I think it's early to give guidance for 2025. As we said, we'll host an Investor Day in December, and we're going to talk a lot then about our long-term plans. So if you don't mind, wait until that.
Question comes from Sharon Zackfia from William Blair.
I guess in terms of new health openings, are there any more planned for this year? And you cited a handful that you've announced are any of those coming in '25. I'm just trying to figure out what we should think about for new house openings?
Sharon, so we said at the beginning of the year, we anticipate to open 2 to 4. So we've already opened 2 great houses, big houses in Portland, San Paulo. Next up is a Soho Mews House in London, which is our first Mews concept, and it's a beautiful unique house, which is going to be very much aimed at our longer tenured members. So we're very excited about that for this year. We have Manchester opening early next year. And then we recently announced upcoming openings with Barcelona for next year. And then following that, we have in the future, Madrid, Milan and Tokyo. So regarding the end of this year, we were very focused on opening Mews house.
Okay. And then on here in the third quarter, I think we're lapping now the kind of Hollywood strike last year, which I think impacted your business in several areas. Can you talk about kind of how we should think about in-house revenues as we go into the back half of the year as we're lapping that impact?
Yes, that's a good question. I wouldn't say it's the impact of 2 to be gone right now. There's a lot of folks still in the entertainment industry that are back at work, and there's a lot of there's a transition going in Hollywood as well. So I wouldn't say that it's completely over. But what I would say and I'd reiterate that across pretty much all our houses in the quarter, we saw an improvement in member spend and we're confident on that continuing through Q3.
Our next question comes from Shaun Kelley of Bank of America.
Andrew, Thomas, just wanted to ask about what you're seeing as it relates to cross-border travel, Obviously, it's been a big theme. A lot of U.S. and domestic hotel companies are talking a bit about outbound travel way on some of their domestic plan, so just kind of curious on you have a unique lens into that. What are you seeing pattern wise and kind of any way you can track or give a little insight there?
Good question. Shaun. We have had a good season in Europe, and that's the region that we see most of cross-border travel. We've -- as you saw our occupancy in ADRs are broadly in line with last year, occupancy slightly up actually. So we have had a good season. We've had a fantastic last 3 weeks in Paris, because of Olympics. So for the most part, we've continued to see really good cross-border traveling with our members across the world into the house that we have bedrooms.
Great. And then Andrew, I noticed in the beginning of the prepared remarks, you mentioned some houses that I think we would expect are doing well, Austin, Nashville, but you also mentioned Downtown L.A., in Hong Kong, and those have been names that in the past, I think, have not been top of the kind of funnel or ramp. So are you starting to see either broadening out? I mean some of those may be a little idiosyncratic with the kind of timing of openings, but curious on both those 2 markets, in particular, given you have several houses in L.A. and obviously, Hong Kong is a bit of a unique gateway in Asia.
That's a great question, Shaun. We couldn't be more pleased with Hong Kong. We've got a fantastic new team in there from the beginning of the year. They've done a terrific job in Hong Kong, and we've seen terrific growth there throughout the year. So one of the things we're most pleased with, complete turnaround in Hong Kong. And it's all down to delivering what the member really wanted in that city obviously, a big comeback in footfall as well and their cities bounced back.
And then with downtown LA, we've got really good programming in Downtown. We've seen a real good ramp-up in our members. We feel really good about the service and the food that we're delivering now in Downtown L.A. So that's another house that we're really proud of this year.
Great. Last question for me would just be, Thomas, you mentioned, I think, a $4 million drag from the new openings, at least relative to last year. Can you just remind us like either was that all isolated to this quarter and/or the first half? And just kind of how should we think about any incremental drag from those houses.
Obviously, it's undoubtedly contemplated the guidance, but just trying to kind of think about the out years and modeling there going forward.
Yes. So Shaun, if you think about what we opened last year versus this year. So last year, we opened Bangkok in the first half of the year in Mexico City in the second half of the year. And then this year, we've opened we've opened these 3 sites that we highlighted, Portland, Sao Paulo and Bodrum in the first half of the year. And then as Andrew said, we're likely only going to open up Soho Mews House in the second half of the year. And so this year, we've seen a -- that almost $4 million that we talked about on the call was really -- was really the second quarter impact. First quarter, we saw a bit of a drag too. And then second half of the year, which actually flipped a bit of a tailwind given the impact of openings last year.
Our next question comes from George Kelly of Roth Capital.
First on Scorpios and I apologize, I missed part of your prepared remarks. But can you talk about how the new Bodrum location is performing and your plans for opening into Rome at some point, if that's still later this year?
And then how do you expect the Bodrum, given that you've seen it for a little while after since it's been open, how do you expect it to perform as compared to the location and weakness?
George, good question. Firstly, Scorpios making us -- has gone off to another strong season. I think it's going to be one of our best. So that shows the strength of the Scorpios brand. Bodrum opened in June. I was there recently. It's a beautiful property. We've got our first private bungalow, which is the first accommodation Scorpios has delivered. And we're confident it will be another success story. It -- and we'll -- next year, it will build, just like Scorpios Mykonos system and we're confident in the future will get the same levels as Mykonos.
With Tulum, it's still under construction. As reported, there was a hurricane in that region. So the developers had to pause construction. And in that property, we'll also have accommodation component, and we're excited to see the performance when it opens.
Okay. Okay. And that location will probably open? Is it next year?
Most likely.
Okay. And then second, topic I wanted to cover is just you speak about member surveys and satisfaction. I know you're kind of regularly checking on those things. I guess -- so 2 questions. The first one is, what are you hearing that members are still maybe complaining about or wanting more of, and then secondly, have you seen any kind of changes to attrition this year in recent quarters?
So we measure, we obviously do our surveys, where we ask our members questions. Then we have our weakest survey, which measures our success on service, food, atmosphere experiences. Why are members continue to want more of these unique experiences and be in houses that are fantastic experiences for them. And we've seen our scores improve on that. What members want us to continue to focus on great service, friendly service and member recognition when they're in their houses. And I think I quoted those things on my prerecorded remarks, that's what we're very, very focused on. What was the second part of your question?
Whether or not you've seen any changes to member retention?
No, it's consistent. So we're not seeing any changes.
We have reached the end of our Q&A session. Thank you, everyone, for joining today's call, and we hope you have a wonderful day. Stay safe, and you may now disconnect.