Soho House & Co Inc

Ladies and gentlemen, thank you for standing by. My name is Emma, your chorus call operator. Welcome and thanks for joining the membership collective group third quarter earnings conference call. Throughout today's recorded presentation, all participants are in listening mode. The presentation will be followed by a question and answer session. And if you'd like to ask a question, may press star followed by one on your telephone keypad. Please press the star key followed by zero for operator assistance. I would now like to turn the conference over to MCG.

Thank you for joining us today to discuss the Membership Collective Group's third quarter financial results for 2021. Before we begin, I'd like to remind everyone that certain statements may be made during this call that are forward-looking. These forward-looking statements are subject to various risks and uncertainties and reflect our current expectations based on our beliefs, assumptions and information currently available to us. Although we believe these expectations are reasonable, we undertake no obligation to revise any statements to reflect changes that occur after this call. Description of these factors and other risks that could cause actual results to differ materially from these forward-looking statements are discussed in more detail in our filings with the SEC. 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 in isolation from our gap results. Reconciliations to the most comparable gap measures are available in today's earnings press release, which is available on the investor relations section of our website at www.membershipcollectivegroup.com.

I'm Nick Jones, founder and CEO of the MCG Group. And I'm currently in the newly opened Sour House Paris, which we're going to give you a quick tour before we do the third quarter earnings presentation.

Please follow me.

Ah, Asya.

Hey, Nick. How are you? Good, and you?

Asya runs the place. She's the general manager here. Shall we walk through?

So, I'm at the restaurant, and we have our wonderful bar here.

Hello, how are you? I'm Nick. Nice to meet you. Ah, Paul, how are you? Good?

Very good. Hello, I'm Nick. Nice to meet you. Paul is our head of membership and communications in Paris. and it's sitting with a new member. How are you finding it? Do you like the house or be on it?

Yeah, it's so new in Paris. We have a big space in Paris where everything is shining and it's proud of the city. We have space to, you know, chill.

Nice meeting you here at Poole. I'll see you later. Thank you. Enjoy your lunch.

Look, come with me, Will.

Will, how are you? Good to see you. This is our cinema.

Also, we use it as a cabaret room, which is proven to be incredibly popular. It's really good to see people back in our houses and stay in our hotels. I'm just going to show you a couple of bedrooms. In fairness, this is the nicest bedroom. Sitting room.

This room is boudoir plus.

And then the bedroom is over here.

So what have we got here, Andrea?

Nick, here we have our dipping pool.

Oh, this is nice.

That concludes... the tour of Sower House Paris, which has got 36 bedrooms, it's got a club downstairs, a cabaret room, a gym, wellness, health club, and it's going super well.

We're really happy with it.

Hello, everyone. Can I just say it's great doing this from New York and seeing the city flourish and our houses reopen and get the buzz and the business which they are so accustomed to. And I also hope that everyone enjoyed seeing our new house in Paris. It's an incredibly beautiful space and we're super excited about it. I'm also delighted to welcome you all to the third quarter earnings call of the MCG. I'm going to take you through some of the highlights before handing over to Andrew and to Hemera for all the details. The MCG or Membership Collective Group, enables our members to connect with each other wherever they are in the world, either in our physical spaces or via our digital platforms. Q3 has been another strong quarter for us, and we've loved welcoming our members back to our houses, Scorpius Beach Club, The Ned, and for this quarter, The Line and Suara Hotel. All of our sites are lively and buzzing, It's wonderful to see our houses thriving once again. And of course, it's a quarter which has also had its challenges. As the impact of COVID-19 on our business has diminished, we have seen pressures from rising inflation, supply chain issues, and most pressingly, labour shortages at our site, albeit they have so far had a limited operational impact on us. Before I continue, I want to pause and thank everyone who works at the MCG around the world for their passion, resilience, and incredible hard work in facing the issues of the past few months. It means a lot to me. Turning to membership, we have welcomed nearly 17,000 new members to the MCG in the last quarter. That's due to resuming membership intakes at our houses, but also down to the strong growth of our newer memberships. Soho Friends, Soho Works, and Soho Home Plus. Demand for our membership has remained incredibly strong as ever. Our wait list has grown to just under 68,000 globally, with every site having a wait list to join. When it comes to sales in our houses, momentum has grown through the quarter, whereas before it had been the UK leading the charge. I am delighted to see all the regions showing improving momentum, particularly through September. We've opened two new houses in the quarter in Tel Aviv and Paris. We've also recently opened our house Rome in the San Lorenzo neighborhood. You've had a glimpse of the Paris house, but we're equally as excited about Rome. It's a 10-story building with bedrooms, long-stay apartments, a Soho Health Club, and a rooftop Chaconis restaurant with views across the city. I have loved visiting these new houses over the last few months, and I know our members will love visiting them too. I also recently visited Austin in Texas, and my God, that is thriving. On retail, Soho Home had another great quarter with online sales up an incredible 116%. We've also opened our first flagship sewer home studio on the King's Road in London, which has got off to a flying start, and we'll be opening a second studio here in New York this week. Scorpius Beach Club in Mykonos had a busy summer season, despite ongoing capacity restrictions, whilst the Ned, the Line, the Suaro Hotel all saw a strong repand with increases in occupancy rates as customers enjoyed being able to travel again. 2022 will be another exciting year for VMCG, as we open new houses in Brighton, West Hollywood and Nashville in the first quarter, and with four more sites to follow. We will also open our second Scorpio site in Tulum in Mexico, as well as two new NED properties. I'm incredibly excited to announce the NED New York in Midtown. This is opening mid-2022. It has 167 bedrooms, a public bar and restaurant, plus a members-only NEDS club. This growth is what the MCG is all about, continually increasing the value of our memberships by adding new access and experiences for our incredibly loyal members. And with that, I'll hand over to Andrew to take you through some of the details.

Thanks, Nick. I will talk more about our performance and momentum throughout the quarter, our profit recovery, and MCG membership hitting an all-time high. Before I hand over to Humira for our financial performance in the quarter and outlook, I will spend time talking about our strategic growth plans at MCG and how we're progressing in the next 12 months. I'll start with membership. It's at the heart of everything we do at MCG. Our global teams are here to give the best experience to our members and their guests. I'm pleased to report that total MCG membership increased by 16,700 in the quarter to 145,020% above 2019 levels. In the quarter, just under a third of our total revenue came from recurring membership fees, which grew to 51 million. This growth was driven by a combination of factors. The consistent high retention rates of Soho House members in line with historical averages. The resumption of membership intakes across all our houses. Also houses, even the oldest have experienced an uplift in membership numbers, adding to their profitability. Members continue to unfreeze membership with over 4,000 members unfreezing over the quarter. And we expect this level of unfreezing to continue throughout Q4. Our waitlist continued to grow over 6,700 by the end of the third quarter, with membership application outpacing the rate of membership intakes. Our newer memberships added an additional 10,850 members across Soho Friends, Soho Works and Soho Home Plus. Our house members continued to provide us with the backbone for acquiring new Soho House Friends members. We had over 140,000 guests registering with us on the Soho House app when they visited the houses as a guest of the member in the quarter. The exceptional membership performance contributed to a significant improvement in profitability with adjusted EBITDA turning positive in the quarter. Moving on to in-house revenues, we saw an acceleration of members using our houses throughout the quarter with over 120% growth of in-house revenues versus the third quarter in 2020. We really, really enjoyed welcoming our members back to all our houses. Accommodation continued to rebound with the group occupancy rate increasing to just below 70%. with an average room rate of increase of 35% despite ongoing restrictions in Europe and North America. Encouragingly, the weekly run rate of sales improved throughout the quarter, and we're excited that our members can travel to North America again from this week. As you can see from the video, the first time since the pandemic, we hosted a full events program across all our houses, which live streamed on our Sewer House app globally. From Fashion Week in Paris, Pride events in New York, to off-site well-being events in Toronto, our members enjoyed a wide range of events that blended music, art, fashion, and the well-being worlds. I want to pause here and mention our membership credits. We issued membership credits when our houses were closed during the pandemic as a one-time goodwill gesture to all our members. Our members have loved the credits, being able to redeem them against food, beverage, accommodation, as well as sewer homes. it was the right thing to do for our members. These credits were expired at the end of September for the vast majority of our houses, and as you would expect, we saw a peak redemption activity in the last few weeks of September. Therefore, there was a one-off impact on credits on our financials in the quarter. Since we've already recognised the cost of the membership credits programme as an expense when they were issued to members when our houses were closed, when credits are redeemed in a house, this sale is not included in our in-house revenues. which represents cash sales only. In Q3 alone, credits with a face value of $21 million were redeemed by members, equivalent to an estimated 12 million of potential gross profit if the cash sale had been made by those members. Although these membership credits are not included in the revenue numbers we are sharing with you today. At MCG, we're a membership platform connecting members in our physical spaces and digitally globally. Every day we strive to make our members' lives better socially and in their work. We have a large addressable market for Soho House, Soho Home, The Ned and Scorpius to expand into. Our revenue growth plan focuses on a number of areas, including opening new Soho houses with targets to open five to seven per year across the world as we expand our global membership, launch and grow new membership types, including Soho Friends, Soho Works, and the soon-to-be-launched Soho House Connect membership. The expansion of other brands on MCG platform, including the Ned and Scorpius in line, with a plan to open one to two sites per brand each year. The growth of our luxury interiors business, Soho Home, both digitally and physically, via our Soho Home studios. And finally, our global efficiency program, which Homero will talk more about. In Q3, we continue to make good progress in all initiatives. We opened two houses in the quarter, Tel Aviv and Paris, plus Rome in mid-October, bringing our total house openings to six this year in four new countries. These houses collectively have added over 1,500 new members. We have decided to move Brighton House in the UK, opening in March, along with other openings in Q1 in Little House West Hollywood, as well as Soho House Nashville. As Nick mentioned, we're on track to seven houses in 2022, plus two Neds and a Scorpius. So a total of 10 new experiences for our members.

Hello there. This is the Membership Collective Group. We are terribly sorry for the technical problem that we have encountered. I think many of you that have joined could either not hear us or were stuck on a holding slide. We're going to restart the presentation. Thank you for bearing with us. Operator, please start.

Thank you for joining us today to discuss the Membership Collective Group's third quarter financial results for 2021. Before we begin, I'd like to remind everyone that certain statements may be made during this call that are forward-looking. These forward-looking statements are subject to various risks and uncertainties and reflect our current expectations based on our beliefs, assumptions and information currently available to us. Although we believe these expectations are reasonable, we undertake no obligation to revise any statements to reflect changes that occur after this call. Description of these factors and other risks that could cause actual results to differ materially from these forward-looking statements are discussed in more detail in our filings with the SEC. 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 in isolation from our gap results. Reconciliations to the most comparable gap measures are available in today's earnings press release, which is available on the investor relations section of our website at www.membershipcollectivegroup.com.

I'm Nick Jones, founder and CEO of the MCG Group. And I'm currently in the newly opened Sour House Paris, which I'm going to give you a quick tour before we do the third quarter earnings presentation.

Please follow me.

Oh, Asya.

Hey, Nick. How are you? Good, and you?

Asya runs the place. She's the general manager here. Shall we walk through?

So, we have the restaurant, and we have our wonderful bar.

Hello, how are you? I'm Nick, nice to meet you. Ah, Paul, how are you? Good? Very good. Hello, I'm Nick, nice to meet you.

Paul is our Head of Membership and Communications in our house in Paris, and is sitting with a new member. How are you finding it? Do you like the house, or be honest?

Yeah, it's just so new in Paris. We have a big space, especially in Paris, where everything is so tiny and it's hard to see.

Nice meeting you. I'll see you later.

Thank you. Enjoy your lunch.

Well, how are you? Good to see you.

This is our cinema. Also, we use it as a cabaret room, which is proving to be incredibly popular. It's really good to see people back in our houses and staying in our hotels. I'm just going to show you a couple of bedrooms. In fairness, this is the nicest bedroom. Sitting room.

This room is boudoir plus. And then the bedrooms over here.

So what have we got here, Adria? Nick, here we have our dipping pool.

Oh, this is nice.

That concludes the tour of Sour House Paris, which has got 36 bedrooms, it's got a club downstairs, cabaret rooms, gym, wellness, health club, and it's going super well.

We're really happy with it.

Hello, everyone. Can I just say it's great doing this from New York and seeing the city flourish and our houses reopen and get the buzz and the business, which they are so accustomed to. And I also hope that everyone enjoyed seeing our new house in Paris. It's incredibly beautiful space and we're super excited about it. I'm also delighted to welcome you all to the third quarter earnings call of the MCG. I'm going to take you through some of the highlights before handing over to Andrew and to Hemera for all the details. The MCG, or Membership Collective Group, enables our members to connect with each other wherever they are in the world, either in our physical spaces or our digital platforms. Q3 has been another strong quarter for us, and we've loved welcoming our members back to our houses, Scorpius Beach Club, the NED, and for this quarter, the Line and Soiree Hotel. All of our sites are lively and buzzing. It's wonderful to see our houses thriving once again. And of course, it's a quarter which has also had its challenges. As the impact of COVID-19 on our business has diminished, we have seen pressures from rising inflation, supply chain issues, and most pressingly, labour shortages at our site. albeit they have so far had a limited operational impact on us. Before I continue, I want to pause and thank everyone who works at the MCG around the world for their passion, resilience, and incredible hard work in facing the issues of the past few months. It means a lot to me. Turning to membership, we have welcomed nearly 17,000 new members to the MCG in the last quarter. That's huge. to resuming membership intakes at our houses, but also down to the strong growth of our newer memberships, Soho Friends, Soho Works, and Soho Home Plus. Demand for our membership has remained incredibly strong as ever. Our wait list has grown to just under 68,000 globally, with every site having a wait list to join. When it comes to sales in our houses, momentum has grown through the quarter. Whereas before it had been the UK leading the charge, I am delighted to see all the regions showing improving momentum, particularly through September. We've opened two new houses in the quarter, in Tel Aviv and Paris. We've also recently opened, so our house Rome in the San Lorenzo neighborhood. You've had a glimpse of the Paris house, but we're equally as excited about Rome. It's a 10-story building with bedrooms, long-stay apartment, a Soho health club, and a rooftop Chaconis restaurant with views across the city. I have loved visiting these new houses over the last few months, and I know our members will love visiting them too. I also recently visited Austin in Texas, and my God, that is thriving. On retail, Soho Home had another great quarter with online sales up an incredible 116%. We've also opened our first flagship Soho Home studio on the King's Road in London, which has got off to a flying start. And we'll be opening a second studio here in New York this week. Scorpius Beach Club in Mykonos had a busy summer season despite ongoing capacity restrictions. whilst the Ned, the Line, the Suara hotels all saw a strong repand with increases in occupancy rates as customers enjoyed being able to travel again. 2022 will be another exciting year for the MCG as we open new houses in Brighton, West Hollywood and Nashville in the first quarter and with four more sites to follow. We will also open our second Scorpio site in Tulum in Mexico, as well as two new NED properties. I'm incredibly excited to announce the NED New York in Midtown. This is opening mid-2022. It has 167 bedrooms, a public bar and restaurant, plus a members-only NEDS club. This growth is what the MCG is all about, continually increasing the value of our memberships by adding new access and experiences for our incredibly loyal members. And with that, I'll hand over to Andrew to take you through some of the detail.

Thanks, Nick. I will talk more about our performance and momentum throughout the quarter, our profit recovery, and MCG membership hitting an all-time high. Before I hand over to Hemera for our financial performance in the quarter and outlook, I will spend time talking about our strategic growth plans at MCG and how we're progressing in the next 12 months. I'll start with membership. It's at the heart of everything we do at MCG. Our global teams are here to give the best experience to our members and their guests. I'm pleased to report that total MCG membership increased by 16,700 in the quarter to 145,020% above 2019 levels. In the quarter, just under a third of our total revenue came from recurring membership fees which grew to 51 million. This growth was driven by a combination of factors. The consistent high retention rates of SO House members in line with historical averages. The resumption of membership intakes across all our houses. All SO Houses, even the oldest, have experienced an uplift in membership numbers, adding to their profitability. Members continue to unfreeze membership with over 4,000 members unfreezing over the quarter. And we expect this level of unfreezing to continue throughout Q4. Our waitlist continued to grow to over 6,700 by the end of the third quarter, with membership applications outpacing the rate of membership intakes. Our newer memberships added an additional 10,850 members across Soho Friends, Soho Works and Soho Home+. Our house members continue to provide us with the backbone for acquiring new Soho House Friends members. We had over 140,000 guests registering with us on the Soho House app when they visited the houses as a guest of the member in the quarter. The exceptional membership performance contributed to a significant improvement in profitability with adjusted EBITDA turning positive in the quarter. Moving on to in-house revenues. we saw an acceleration of members using our houses throughout the quarter, with over 120% growth of in-house revenues versus the third quarter in 2020. We really, really enjoyed welcoming our members back to all our houses. Accommodation continued to rebound with the group occupancy rate increasing to just below 70%, with an average room rate of increase of 35%, despite ongoing restrictions in Europe and North America. Encouragingly, the weekly run rate of sales improved throughout the quarter, And we're excited that our members can travel to North America again from this week. As you can see from the video, the first time since the pandemic, we hosted a full events program across all our houses, which live streamed on our Sewer House app globally. From Fashion Week in Paris, Pride events in New York, to offsite well-being events in Toronto, our members enjoyed a wide range of events that blended music, art, fashion, and the well-being worlds. I want to pause here and mention our membership credits. We issued membership credits when our houses were closed during the pandemic as a one-time goodwill gesture to all our members. Our members have loved the credits, being able to redeem them against food, beverage, accommodation, as well as sewer homes. It was the right thing to do for our members. These credits were expired at the end of September for the vast majority of our houses. And as you would expect, we saw a peak redemption activity in the last few weeks of September. Therefore, there was a one-off impact in credits on our financials in the quarter. Since we've already recognized the cost of the membership credits program as an expense when they were issued to members when our houses were closed, when credits are redeemed in a house, this sale is not included in our in-house revenues, which represents cash sales only. In Q3 alone, credits with a face value of $21 million were redeemed by members, equivalent to an estimated $12 million of potential gross profit if a cash sale had been made by those members. Although these membership credits are not including the revenue numbers we are sharing with you today. At MCG, we're a membership platform connecting members in our physical spaces and digitally globally. Every day we strive to make our members' lives better socially and in their work. We have a large addressable market for Sewer House, Sewer Home, The Ned and Scorpius to expand into. Our revenue growth plan focuses on a number of areas, including opening new Soho Houses with targets to open five to seven per year across the world as we expand our global membership, launch and grow new membership types, including Soho Friends, Soho Works, and the soon-to-be-launched Soho House Connect membership. The expansion of other brands on MCG platform, including the NED and Scorpius Online, with a plan to open one to two sites per brand each year. The growth of our luxury interiors business, Soho Home, both digitally and physically by our Soho Home studios. And finally, our global efficiency program, which Homero will talk more about. In Q3, we continue to make good progress in all initiatives. We opened two houses in the quarter, Tel Aviv and Paris, plus Rome in mid-October, bringing our total house openings to six this year in four new countries. These houses collectively have added over 1,500 new members. We have decided to move Brighton House in the UK opening in March, along with other openings in Q1 in Little House, West Hollywood, as well as Soho House, Nashville. As Nick mentioned, we're on track to seven houses in 2022, plus two Neds and a Scorpius, so a total of 10 new experiences for our members. Now on to our new memberships. Our Soho Friends membership has grown to just under 18,000 members at the end of Q3. with just under 14,000 of these Friends interacting in the membership through the Friends app. In the quarter, we opened a further five Friends studios across five cities, all using our existing spaces to offer a creative space for members to visit, eat, drink, attend events, screenings, as well as hosting their own events. These events range from creative workshops to music nights to charity exhibitions. The outlook growth for Soho Friends remains very strong, in particular with over 350,000 guests now registered on the Soho House app, the chat. Now to Soho Works. We welcomed an additional 1,370 members in the quarter and our occupancy in our offices now has grown to 95% globally. The business continues to flourish as more members have adopted the flexible approach to working using our lounge, office and meeting room spaces to develop their own networks and careers. We've recently launched the Soho Works app, allowing our Soho Works members globally to connect and collaborate. Now onto Soho Home. Soho Home is our retail segment which enables our members to bring the house home. The business had a stellar quarter with online sales of 116% and profit growth significantly outpacing sales growth. Our members loved our new assortments launching in the quarter with an average order value increasing over 120% year on year and 95% of sales in the quarter at full price, with members making up more than 70% of all sales. The North American market was particularly strong with sales growth of 140% year-on-year. We opened our first Soho Home Studio in London, a 6,000-square-foot retail space showing our latest home collections, as well as brands launched and owned by our members in our members' galleries. This week, we'll be opening our second Soho Home Studio here in New York. We continue to be excited about the opportunity for Soho Home. Before I hand over to Hermera, I will finish on our progress on our digital initiatives, the SHAP or Soho House app. The Soho House app has four main focuses, all bookings globally, house pay, data content by our members, and connect features for our members to grow their own networks, both work and socially. Throughout Q3, we made improvements to bookings and house pay functionality. We continue to see nice user growth in Q3. We had over 93,000 active users with the daily usage increasing by 18% on the app. Whilst bookings and payments remained our most adopted features, our members are starting to use our recently launched Connect features, with over 20% of members actively connecting on a daily basis. We have some exciting improvements planned in Q4, which will improve our member experience on the chat further. The resilient rate of increasing user numbers and engagement provides us with great confidence for the launch of Soho's Connect membership, which we can now expect to launch in early 2022. Before I pass it on to Humera, I want to thank our teams everywhere for all their hard work and commitment in delivering a great quarter's results in a challenging environment.

Thanks, Andrew. I'll now take you through the financial highlights from the third quarter of 2021. Firstly, our total revenue of 180 million increased by 57% compared with the third quarter of 2020. In the quarter, membership revenue, which of course is recurring revenue of 51 million, was just under 30% of total revenue. This was driven by the growth in our total membership base, which Andrew has already spoken about. In-house revenue in the third quarter rebounded strongly, increasing to 67 million. This increase was driven by strong demand from our members, as well as select price increases across some of our food and beverage and accommodation offering. Andrew has already mentioned it, but it's worth re-highlighting the impact of member credits in the quarter. As credits in the vast majority of regions have now expired, the remaining liability is now de minimis. Encouragingly, we saw an improving run rate in sales throughout the quarter, even after excluding any short-term uplift from member credits. And if we think about exit rates out of the quarter, in September, the UK was trading at around 10% above comparative levels in 2019, with North America trading 10% to 15% below, although Europe's still lagging at around 20% below. Other revenues of 62 million also showed a strong recovery, up 48% versus 2020, driven by the strength of Soho Home, Scorpio Speech Club, as well as our public restaurants in the UK and North America. Other revenue also includes the management fees from the NED in London, which saw a strong recovery in food and beverage outlets, as well as in accommodation. Finally, in the third quarter, other revenue for the first time included the contribution from the Line and Soiree hotels. Moving to our profitability measures, house-level contribution, which is defined as house revenues less in-house operating expenses, was 24 million for the third quarter of 2021. and house-level contribution margin of 21%. Understandably, as volumes in houses rose, in-house operating expenses also increased. In line with the industry, we've seen inflationary pressures across our food and beverage, indirect costs, and most notably, our labor base. As mentioned in Q2, we proactively increased wage rates in June to attract and retain the best labor. Therefore, the challenging labor market the industry is currently facing is so far having a limited operational impact on our business. The food, beverage, and accommodation price increases we have implemented, combined with ongoing efficiency programs, have enabled us to partly offset the inflation pressures during Q3. It's worth noting here that we have only increased our prices gradually so that our members felt minimal impact. However, we believe we have more capacity to increase prices during Q4 and beyond to help offset inflation. In fact, our food and beverage cost ratios were 3% better than the same period pre-pandemic, notwithstanding social pressures. Other contribution, which we define as other revenues plus non-house membership revenue, less other operating expenses, was £12 million, compared to a loss of £3 million for third quarter 2020. This improvement was driven by strong growth of our other revenue, and in particular the contribution from Soho Home, Scorpius and Public Restaurants. Adjusted EBITDA was $9 million, a significant improvement from the second quarter. Net loss was $76 million for the quarter. As you know, we report our adjusted EBITDA fully burdened for growth, meaning that we include expenses that are associated with the growth of our business. The table in this slide shows some of these expenses. In the quarter, pre-opening was $5 million and related to the opening of new houses. Non-cash rent. which represents the difference between the rental cost in accordance with GAAP and the actual cash cost, was 1 million in the quarter. And deferred registration fees were a million. The capitalization table shows our position as at the end of Q3 2021. In the quarter, we received 402 million in proceeds net of fees from the IPO, which has provided us with a significantly strengthened balance sheet, as well as funding to support our growth initiatives. During the quarter, as previously disclosed, we paid down our RCF facility of 98 million, as well as repaying preference share payments totaling 20 million. In addition, we paid down a 7 million loan related to Seoul House Hong Kong. Excluding financing, cash usage in the third quarter related to the impact of membership credit, the ongoing impact on capacity at our houses as a result of COVID-19 related restrictions in some regions, as well as settling deferred rent balances from Q2 2021. Furthermore, there was capital expenditure on our digital platform and routine capital expenditure to support the ongoing reopening of the houses. Turning next to the near-term outlook, the performance of our business in the third quarter gives us confidence in the ongoing recovery of our business. Of course, COVID is still here and does create some uncertainty, particularly with rising cases again in some regions. However, the strength of our waitlist and rate of applications also underpins the future growth of our membership. In terms of new houses, we now expect to open Soho House Bright in the first quarter of 2022, in addition to Little House West Hollywood and Soho House Nashville. The rest of our development pipeline remains on track for the remainder of 2022. And with that, I'll hand back to Nick for an update on our House Foundations programme, as well as some closing comments.

Thanks, Samara. This quarter, we've made good progress on our ESG program, House Foundations. House Foundations is at the core of what we do, and our members care deeply about the initiatives within it. We are committed to building an inclusive culture and helping to make the creative industries more accessible. This quarter, we've launched new membership cohorts across the world in Hong Kong, LA, Chicago, New York, and London. We currently have 423 mentees enrolled in the programme across the world. This mentoring programme pairs SOA House members with young people from under-representative backgrounds, helping them to grow their connection, confidence and experience, ultimately providing them with a route into a creative career. Within our Diversity and Inclusion programme, our Inclusivity Board has worked alongside our teams around the world to help shape the culture of Soho House through events, training, and ongoing discussion. We've also launched a Soho Fellowship Program that gives complimentary Soho House and Soho Works membership to creatives who have financial barriers to accessing our spaces. Can I thank both you, Andrew, and you, Humera, for your great support in this last quarter? where in summary, it's been a really strong quarter in challenging circumstances. And we and I are incredibly excited about the future and the growth potential of the MCG. And we're nothing without our members. And I really would love to thank our members from the bottom of my heart. I also want to thank again our teams who have really worked incredibly hard in these challenging circumstances and also our investors for all their support in the last quarter and their advice and their help and their encouragement.

And I'm really excited about the coming quarters ahead. First question comes from the line of J.P. Morgan. Please go ahead.

Hello, guys. Hopefully you can hear me okay. Hi. This is Nick from the NCDC. Great. Yes, I can. I'm just hearing sort of a reverb here. So I'll ask a question and if you can hear me, you can talk offline. So my question is this. Since the membership credits have expired, have you seen any change in spending, visitation, or utilization of Soho House behavior in October or November?

Thanks for that question. And I do want to just start. It's Nick here. I'm sitting here with Andrew and Hemera. It was a beautiful day in New York. We walked the streets, and then we had a load of technical issues. And I do apologize for that. It was not the start we wanted, but hopefully you'll see a strong set of results there. But to answer that specific question, you know, October and November, are we seeing, you know, people coming back to our houses. And yes, we are. We're really seeing people come back to our houses. They really are making up for lost time. They are obviously keen to meet friends, keen to have dinners, keen to have drinks, and keen to get back to life how they remember it. So yes is the answer.

Great. Thank you very much. Thank you very much.

Next question comes from Steven Zucconi with Citi.

Great. Thanks very much for taking my question. I was hoping you could talk about the labor shortages that you mentioned. I guess how much is it impacting member experience right now, if at all? And I guess how are you approaching this challenge? What are the strategies in place to ensure membership experience is still up to your standards? And I guess, how long do you think this will be a bit of an issue for the business?

Well, thank you for that, Stephen. Yes, I mean, like the whole industry, there have been labor shortages. And has that affected member experience? Not really. You know, in a few cases, you know, we've had to put our hand up and say maybe. But overall, it has not harmed the member experience. And Because we've got such great teams who are happy to put extra hours in if necessary. It's all hands to death. The support officers have been out in the houses. We've been doing everything to overcome this. And also we've got loads of initiatives on how to try and overcome this. I mean, we were half expecting this in the UK because of Brexit. So we had already set up a whole lot of plans in the UK. Recruiting from different industries, retail, airlines, etc. People we want are people who are good with people and people who are passionate. And they don't necessarily have to come from the hospitality industry. So we've taken our net and made it much wider on where we're looking. And also the rate of pay, the hourly pay, I think was pretty well right up there as industry leaders. our training programs, the opportunities that people have as we're a global business to move around and to flourish within the Seller House and MCG organization. So, yes, it has been challenging, but we like a challenge and we're trying to find all sorts of ways around it. Andrew, maybe you want to add to that.

I was going to jump in there, Nick. Just to add some more color, actually, in terms of the increase in cost for us, we have actually increased our hourly rates in the UK for between £1 to £2 per hour. And in the US, we've increased between $2 and $5 per hour. And we started doing that back in June because we could foresee that this was going to be a concern for the industry and for us. And those increases equate to about 10% to 15% increase in hourly wage rates for hourly staff. And we're seeing that pay off in terms of improved retention, improved spirit. And I think spirit is really important because, you know, happy staff is as happy members. So we're certainly seeing that pay off.

Okay, great. That's very helpful. Okay, great. That seems like the echoes. I forgot the echo. The other question I had was on Austin, if you could talk about that opening in a bit more detail since it's, I guess it's one of your first openings in the smaller metro market in the U.S. You know, what have the learnings been thus far when it comes to awareness in that market, maybe house volumes out of the gate and then the projected timeline to profitability? Are there any learnings you can apply there to when you open Nashville next year to and maybe more broadly as you scale openings across smaller metro markets in the U.S.?

Well, Austin has been open for four months. I was recently able to then visit it from the U.K., and I must say what a brilliant job the team did without me being there. The design is fantastic. The team is really strong. And the membership has grown incredibly quickly. And this is due to the fact that we had a very strong CWH, which is our Cities Without Houses program, in Austin. So we started, even though during the pandemic we weren't able to do a lot of outreach out there like we normally do, we did have a very strong CWH, which meant that when we started founder membership applications, they did come piling in. And And we are now very happy with how Austin is. It's an incredibly interesting membership there. I think we're heading towards over 2,000 members in Austin. By the end of the year, that will be even more. The rooms are open and busy. Occam's is very good. And the difference between that and Nashville is that Nashville, obviously, we've got a longer runway now. because we're not going to be caught up with COVID restrictions and not be able to do all our pre-open activities. We're starting our pre-open activities in Nashville straight after this weekend. And that will then give Nashville... Again, Nashville's got a very strong CWH. So we do prefer a longer runway, and our houses have had to work around not having that runway because of the pandemic. but we're showing strong growth in all the new houses which we've opened, which is not just Austin, but we've also opened in Tel Aviv, we've also opened in Paris. Hopefully the technical issue allowed you to see the beautiful house in Paris, and also we've recently opened in Rome, and we're seeing very, very strong demand for our membership. Maybe, Andrew, you want to add something?

Thanks, Nate. I would just reiterate the importance of CWH in our growth, because it gives us a really high level of predictability on when we open new houses. And they obviously mentioned Austin, Rome, Paris Metallurie, all of them opened with strong membership. All of them had been seeded three years before CWH. And when we look ahead to our openings next year, between 5-7 and in 2023, we've already got in every single location strong CWH membership. which allows us to be very confident and successful in hitting our membership growth targets from year one and up. Great.

Thanks very much for the detail.

The next question comes from Ryan of Sean Kelly with Bank of America. Please go ahead.

Hi. Good morning, everyone. Can you hear me? No technical issues just yet. I can hear you, Sean.

Okay.

Hi, Nick. Sorry about that. I think when we were talking about the inflationary environment a little bit, Humira, it might have been you, you mentioned a little bit about the ability to take price or selectively take price in some categories. I was wondering if you could elaborate a little bit on that and just talk also about the guest behavior you're seeing at the houses. What are we seeing in terms of price increase versus You know, just overall usage or visitation being higher given, you know, demand levels and probably some pent-up demand.

So, Sean, yeah, absolutely. We have started to increase our prices already. So, crop student coverage, we've increased between 5% and 10%. It varies depending on the product and depending on the specific market. But between 5% and 10%, we've already started to increase our prices on F&B. I see that we have more capacity. I think we were potentially slow to move in the initial phases, but now we can see we still have pricing power on the F&B phase. In terms of ADRs for room rates, we have increased those up to 30%. again, varies by sort of the region, varies by the occupancy rates that we see in the state of the houses, but we can and have gone up by an additional 30%. We do also see more capacity coming forward in 2022. In terms of member behaviour, Nick, can you add a bit more on that?

Yeah, our members are incredibly understanding. They understand the inflation. They don't not expect it to be passed on to them. But we're very, very... sort of respectful in that because people do want to come to a house and feel that there is value for money but they also realise that their weekly shop is more expensive and that translates into whenever they go out and so members of understanding it's not stopping their behaviour once they're in the houses and you know We also, to offset this as well, I know Hemera didn't touch on this, but our purchasing is much improved. We are not only, we are negotiating hard with a new procurement team on all our products, which is also enabling us not to pass all of it on to our customers and our members.

The other piece I forgot to mention that should dwell on is membership prices. And we haven't increased those throughout 2020 or 2021. And I'd expect that there's significant capacity to increase pricing on membership fees. And I think we can really justify that on the basis that the membership offering has become significantly richer with the six houses that will be open additional in 2021 and the wide digital offering that we have in place. So we have pricing power on that stuff.

Great. And maybe just as a quick follow-up then, as we net all of these pieces together, would there be Any real impact on, let's call it your long-term margin targets? And I appreciate that there's a lot of moving pieces here. I also factored into that, any impact from some of the changes in mix? I think you're seeing some very strong results in some of your other revenue and home categories. So would any of that, I guess, when it kind of pulls all together, have any material impact on some of the long-term margin goals you've set out?

Sure, I'll take that. So we're still very confident in our long-term margin goals. You are right, our surname business is growing rapidly. That's actually additive to total MCG from a percent rate. We feel that we are actually more price and power than we first thought across all of MCG, which we'll be working through for 2022 and beyond. And then, as Nick mentioned, if you think about in Q3, our actual margins at F&B level were 3%. We still think there's ways to go there, especially in our biggest region in North America. So in summary, we're pretty confident on where we're directing you guys on our margins, and we think there's actually some upside in that.

Thank you very much.

Ladies and gentlemen, as a reminder, if you'd like to ask a question, please press star 1. Your next question comes from the line of Stephen Grambling with Goldman Sachs. Please go ahead.

Hi there. I know it's a little bit early, but could you just give us any initial thoughts on kind of the 2022 outlook, specifically on how some of the new houses being planned and open compared to perhaps those that have already been open and any concrete investments we should consider that could impact margins in the near term as we consider the digital membership launch or other initiatives next year? Thanks. Thanks.

Thanks, Stephen. I'll start this and then we'll jump in. I mean, our plans for opening next year are very much on track. We've always said that we're going to be opening between five and seven houses a year on our low capital model. And that is exactly the same. I think it was remarkable that the teams were able to open during COVID all the houses that we've opened this year on our low capital model. There is also a lot of opportunity out there since coming out of the pandemic for potentially other sites as well. We know that our members like nothing more than new houses and new territories and it just adds an incredible amount of new interesting members to the global membership. We're always on the lookout, but we're very happy with our development plan as it stands at the moment, and it's still very much on line to what we have said.

Thanks, Dave. I'll just add a little bit more colour on that. So I think what you're trying to kind of assess is our margin going forward. So if you think about our Q3, we're very, very focused on... retention rates and waitlists. So we're at record highs, 94%. That will continue throughout 2022, 2023 and beyond. Our waitlist is at an all-time high and actually outpaced our intakes at 67,000. Those two are very, very strong metrics at MCG that gives us a high level of predictability and helps us with our margins. We're already at 30% recurring revenue. Our members continue to freeze through Q3 and we resumed intake in our existing houses in Q3. So if you take all of that going into 2022, and what Nick said, we're very confident on opening our asset-like new locations on-site within budget. We're very confident on our margins, but we don't want to give you really concrete direction. But what we're saying is that we're very confident on Q3 on the outlook for 2022.

Got it. I guess just very quick follow-up. Are there any kind of concrete investments that we should be thinking about from some of the new initiatives that you can kind of have some visibility on already? Thanks.

Nothing has changed from when we talked to you on the investment roadshows. You know, the digital membership, the investment's already been built in because we've been doing it on our app globally for our existing members. So that's then going to be created into the digital membership and launch later next year. Our so-home business will continue to grow, but there's no extra capital investment in retail. And as Nick mentioned, our new house is our asset life. So actually, there's no material change in our capital investment structure for 2022. Awesome.

Thanks so much.

Next question comes from the line of Sharon Zaxio with William Blair. Please go ahead.

Hi, good morning. I guess following up on the margin question, if I did the math correctly, I think the house level margin was in the high 20s if you adjusted for the credits in the quarter, if you could confirm that. And then I guess I would love to get your thoughts on kind of how that house margin might progress here in the fourth quarter. I assume given some of the inflationary dynamics, we'll see that moderate a bit, but would just be curious on your insight there. And then secondarily in North America, I think you mentioned still about 10% to 15% below pre-pandemic levels. Can you kind of give some context on any regional variation you're seeing there? Thank you.

Let me start with that first part about any regional difference. UK, very strong. US, strong to getting very strong. Europe, slightly behind all that. But building, you know, when there is no restrictions, our houses are building very, very nicely. So we really do see at the MCG and also the net, you know, which you did have, you know, before lockdown, 40,000 customers would go through the ground floor and eat and drink every week. You know, we're not quite back at that number, but we're not far off it. So the recovery is strong in all our regions, if not slightly behind in Europe, America.

And just to pick up on your margin question, Sharon, yes, you're right. So to add back the effect of the credit sales would be good, and that would roughly get you to a high 20-year margin. I think the only piece I would temper on that is one would question if all of those sales would have occurred if there weren't credits available because people had credits to spend and they needed to spend them. And so high 20s is generous. I would say mid-20s would also be a good place to land on half of our contributions.

Great. And just to follow up on the first question, I was actually asking about North America and whether you're seeing variations in regions across North America.

Sorry. No. I mean, as you know, Sharon, Miami's been strong throughout the whole pandemic. New York's incredibly strong. I was down on the West Coast last week, very strong. Chicago's picked up nicely. Toronto, really strong. And Austin, as I said, really, really impressive. what's going on in Austin considering it's only been open four months. So we're very much liking what we're seeing.

Great.

Thank you.

Next question comes from the line of Thomas Allen with Morgan Stanley. Please go ahead.

Thanks. It's been about six months since you acquired the line in the Saguaro brand. Just any updated impressions there and then any thoughts on additional acquisitions? Thanks.

So in terms of the 948, it continues to perform well. We've achieved high occupancy rates and really, really good ADRs across that business. So it continues to be a positive contributor to our REBITDA. As you know, that's a management contract, and so that's pure upside for us. We expect that business to continue to perform well against the comp set. In terms of going forward on acquisitions, continue to be opportunistic in terms of looking at transactions. Things do come across our desk quite frequently when we look at them, but it's more opportunistic as opposed to a main cross-border strategy.

Thank you.

Final question comes from the line of Ali Nakri with HSBC. Please go ahead.

Hi, thanks for taking the questions. Just in terms of the wait list, how do you expect that to flex over time with house openings? I mean, you've got three openings in Q1 next year. Would you expect the wait list to go down, or could you just sort of set the expectation so we're not sort of surprised by it, please?

Thanks, Ali. I've been doing it for, I don't know, 27 years, and I never ever seen such demand for our applications at this precise moment, not just only in our existing houses, but also whenever we go into a new territory, the applications don't, they don't, we don't go to the existing wait lists. We create a new wait list for all the new territories. And they're proving to be incredibly strong. And I think, you know, membership is, where it starts and where it finishes for us. And, you know, some people have subscribers, we have members. Some people have content, we have houses. And the more houses we open, the more members we get. And they're very happy. They're delighted. The existing members are delighted when new houses come on board. So, you know, it's incredible the way... I think also... I need to add to that, you know, apres pandemic. You know, what we offer within the MCG and specifically Soho House is this real hybrid living. And with Soho Works and with the Soho Houses, you know, people can pick and choose how they live their lives. And we offer the facilities for them to be able to do that. You know, I'm currently sitting in Soho Works in meatpacking in New York. And the place is packed. of people who might have been in a corporate office a year ago, and they will then go over to Sowerhouse Meatpacking for their lunch or early evening drinks. So we really are seeing that the apropos pandemic way of living really suits what we're doing at Sowerhouse.

Just if I could follow up quickly with another question. In terms of... occupancy or volumes versus peak times and mid-week. How does that compare versus pre-pandemic? And did you say that in-house was running at sort of 80% of 2019? Can I just get that?

Yeah, I'll take that one. So I think if you take all our global bedrooms in Q3, we actually jumped up to a 70% occupancy. Back in 2019, we were running super high, 95%, and that's without any booking engines, and it's all done on our own website and app. We see that continuing to grow throughout the courses back to 2019 levels by Q1 as people start to travel more, especially now with the opening of North America for us Brits. You know, I've gone to a lot of Brits who have been here. That's fantastic for our occupancy in North America. We feel very confident and you can see in our Q2 numbers it jumped. From a house occupancy perspective, we're pretty much back to, like Nick said, 2019 levels in most of our houses. So we're pretty full. What we were able to do in Q3 was start our intakes in existing houses. So we resumed our normal intakes, which is pre-pandemic, and that just adds to the profitability of each of our house. And that's a really key metric as we grow. that we can always add new interesting people to our existing houses, which ultimately leads to increased profitability. So I hope that answers your question.

And just to clarify, I think you said, you know, is in-house 80% behind, not 80% behind, 80% of 2019. So it's a blend across the different regions. UK was 10% ahead. U.S. is, North America is 20-15 behind, and Europe is still lagging at about 20% behind, so that's sort of the weighted average across the group.

Great. Thank you.

There are no further questions registered at this time. I would like to hand back to Nick Jones for closing comments.

Well, thank you very much, and thank you for sticking with us during our early technical issues. You know, my closing points is I think we've had a strong Q3. It's so brilliant seeing our members back in our houses, laughing, smiling. It's great to see get back out on the road again and travel around our new houses, you know, being in Paris and Tel Aviv and Rome and and also the new opportunities in the future. And I know we've spoken about earlier about the NED and we're very excited to see the NED come to New York, NED Nomad, you know, it's a spectacular building, spectacular site, you know, to be able to bring back what we've done in London and the membership over here to, will not only help London, but will also create a very successful NED Nomad here. The membership's increasing everywhere, which is the key. Our digital transformation is happening at pace. Our members are really enjoying using the SewerHouse app. They're really enjoying connecting with each other in a physical house, but also they're really enjoying connecting digitally through the chat. They're enjoying the fact that they can book tables, the friction is becoming much easier for them. So, you know, the member is, they've been incredibly loyal to us and, you know, we want to pay over the next, you know, 12 months and there on after, you know, just keep on producing fantastic houses for them to enjoy, adding more and more interesting people to our membership, which then will create this unique global curated membership of interesting people. So the future is good and exciting. I also want to obviously thank all my leadership team who have been incredible during this period of time. I'm sitting here with Andrew and Humera, but that's just a start. There are many, many more which I'd like to thank. And I'd really like to thank all the investors because I'm finding this whole going public experience really enjoyable. meeting smart people with ideas, with good questions, which just make us better. So I just want to thank everyone out there who is doing that. So that is it from me. Next time, I promise, well, I can't promise because I'm not very good at the technical side of things, but hopefully there will be a much smoother introduction into our Q4 numbers. obviously keeping for a happy set of numbers as well. So thank you from me. Andrew, thank you from you. Thank you, guys.

And thank you from me.

Speak soon.

Ladies and gentlemen, the conference has now concluded and you may disconnect your telephone. Thank you for participating. Goodbye.