Soho House & Co Inc

Thank you for standing by. At this time, I would like to welcome everyone to the Membership Collective Group, Inc. Fourth Quarter 2022 results call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. Thomas Allen, Chief Financial Officer, you may begin your conference.

Thank you for joining us today to discuss the Membership Collective Group's fourth quarter and four-year 2022 financial results. My name is Thomas Allen, and I'm the Chief Financial Officer. I'm here this morning with Andrew Carney, 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 Q4 and full-year 2022 earnings release, which can be found at membershipcollectivegroup.com in the News and Events section. Additionally, we have posted our Q4 and full-year 2022 earnings 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 in isolation from, our GAAP results. Reconciliations to the most comparable GAAP measures are available in today's earnings press release. Now, let me hand it over to Andrew.

Thanks Thomas and good morning everyone. I'm going to start by talking through Q4 and the full year 22 highlights, then give you an update on the progress we've made against our two strategic priorities. I'll then hand over to Thomas to talk through the financial performance and to outline our guidance for 2023 and we'll end with Q&A. Let's start with the fourth quarter. We delivered a strong performance due to executing against our strategic priorities, leading to continuing revenue and membership growth and improved profitability. Sir House membership hit a new high of 162,000 members, a year-on-year increase of 32% and a 6% rise quarter-on-quarter. We came in within our original guidance range despite the decision we made in the third quarter to reduce our annual target for 2022 new houses openings from nine to seven. We delivered strong profit growth over the period, with adjusted EBITDA reaching $23 million, up $21 million year-on-year, and above our implied guidance range of $17 to $22 million. This was driven by revenue growth, which was up 47% year-over-year, and the implementation of the operational excellence initiatives we outlined last quarter. More on that shortly. While our Q4 results show the progress we've made on profitability, alongside continued strong membership demand, it's important to look at our full year 2022 picture to appreciate how much the business has grown year over year. The number of SoHouse members rose 39,000, or nearly a third. We added around 10,000 members or more in each of North America, the UK and Europe, while our Cities Without Houses programme grew the fastest at around 45%, highlighting the excitement people have for our membership even in the cities where we don't have houses. Our total MCG membership was up 46% to 227,000 as we also saw strong membership growth in Soho Friends and Soho Works. It was a record year for new applications that are growing in all regions and the MCG waitlist rose to 86,000 up 22% compared to 71,000 at the end of 2021 and that's despite our record intakes throughout the year. The number of frozen members continued to fall down approximately 4,500 at the end of 2021 to approximately 2,250 by the close of 2022. We delivered seven new houses over the year, growing our house footprint by 21% with exciting new USA locations in Nashville, LA and Miami, continued expansion in the UK with Ballam and Brighton and our first Scandinavian houses in Copenhagen and Stockholm. We also expanded outside of our core sewer house business with the net openings in New York and Doha and the opening of The Line San Francisco. The growth we've seen in membership and new openings, as well as strong pricing power, drove total revenues up 73% to $972 million. Finally, on adjusted EBITDA, we've moved from a $24 million loss in 2021 to a $61 million of EBITDA in 2022. While we are proud of the turnaround, it is still early days and our focus of driving improved profitability in 2022 adjusted EBITDA does not reflect the true potential of the business. Finally, it's worth highlighting that in the fourth quarter, we completed our 50 million share buyback program, spending 15 million to purchase 3.5 million shares at an average of $4.31. In total over the year, we bought back 8.5 million shares or 4% of our shares outstanding, at an average price of $5.91. Now let me give you an update on the progress we're making against our strategic priorities. To recap, you'll remember last quarter that we said we're refining our strategy to focus obsessively on two things. First, growing enhancing the value of membership to drive long-term recurring revenue, recognising that membership remains the core driver of our business. And second, delivering operational excellence to drive profitability and free cash flow. an area where we know we can do more and where we've identified and orally implemented a number of initiatives. In line with our first priority, today we've announced a decision to change the group's name from Membership Collective Group to Soar House & Co. As we've spent time as a listed company, we've recognised the benefits of being associated with a powerful and unique brand. The Soar House name is a huge asset for us and we want to leverage that fully. This change is also aligned with our move to strengthen our focus on the Sower House business, while continuing to support our other strong businesses. We would expect the name change to take effect later this month, and the stock will trade on the New York Stock Exchange under the ticker SHCO. Members are at the heart and soul of Sower House, and we know that bringing people together in our houses with great atmospheres is what matters most to them and us. Starting in the fourth quarter and continuing over the recent months, we've focused on how we can drive even greater value for our members. We've significantly increased the amount of data that we look at by house, which has enabled us to provide the right service at the right time and tailor our programmes such as menus and events to the local market and members. Here are a couple of examples. At 180 House in London, we've introduced a more elevated, 1970s-inspired menu which leans into the design and feel of that house. We've also launched new events, programming such as weekly jazz nights and daily wellness talks to align with the atmosphere and approach. At two of our houses in Soho, the original Soho House at 40 Greek Street and 76 Dean Street, we've designed new menus to reflect the differing member demographic, behaviours and needs of each house. Across all three houses, a third of the menu now is bespoke to that club. More broadly, we've focused on two main improvements across our houses driven by member feedback. Firstly, we've changed our menus to be more seasonal with more healthy options. Secondly, to improve service across all our houses, we've rolled out new staff training and realigned manager incentives with member satisfaction as the primary focus. Both of these quality improvement processes will continue throughout this year. The changes have been well received by the teams and the initiatives are driving positive results where we've seen improved performance and member satisfaction across our houses over the past few months. New house openings in Miami and Stockholm in Q4 and last month in Bangkok further create value for members and we're looking forward to announcing exciting openings throughout the course of 2023 in line with our target of five to seven new houses a year. We've also seen good progress in delivering operational excellence to drive profitability and free cash flow. Our strategy here is clear and focused on three key areas. Leveraging data and member insight to operate and scale efficiently without compromising what matters most to our members. and a focused approach to expanding in-house margins and enhancing the membership value proposition. We hit the ground running in the fourth quarter and already made good inroads into a number of areas. We talked to you previously about the need to reduce our in-house operating expenses and in particular our wage bill. Through more efficient rostering and ensuring that we have the right number of staff in our houses at the right time for our members, wages as a percentage of revenues dropped approximately 1,000 basis points in December versus August last year. Now, there's certainly a seasonal benefit here of how busy our houses are in December, and I wouldn't expect the delta to repeat month on month, but it demonstrates the benefits that we can drive by implementing the initiatives we outline. At the same time, we've also reduced support office expenses with targeted reductions on content and digital, as we discussed last quarter, and other corporate expenses across all parts of our business. And the changes we've made in our F&B programme continue to drive growth, margin expansion, with light-flight F&B margins 230 basis points above the final quarter of 2019. In addition, greater focus on driving higher occupancy in ADR led to RevPAR increasing 22% year-over-year at light-flight properties. It's still early days in terms of driving the benefits of these profit initiatives. and we have much more to go, but we're on track and we feel confident that this will help us generate stronger, more consistent earnings going forward, which is a great segue to pass over to Thomas to give more detail on the fourth quarter results and updated guidance.