Soho House & Co Inc

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 the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. At this time, I would like to turn the conference over to Thomas Allen, Chief Financial Officer. Please go ahead.

Thank you for joining us today to discuss Soho House & Co.' 's fourth quarter financial results. My name is Thomas Allen, and I'm the Chief Financial Officer. I'm here 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 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 earnings release, which can be found at sohouseco.com in the News and Events section. Additionally, we have posted our Q4 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 for 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.

Before I start, I want to acknowledge our continued confidence in how we run our business and our accounting practices. To further counter any misleading statements that have been made about us, Our audit committee engaged a large, globally recognised forensic accounting firm and a prominent independent global law firm to review our accounting and accounting practices. Their review was recently completed and the results reported directly to the audit committee. As expected, this has shown no material issues. As part of our year-end audit, we have made two small non-cash revisions to our ongoing financial reporting, which Thomas will cover later. 2023 is my first full year as CEO. I'm proud of our achievements and what our teams have delivered. In the past 12 months, I prioritised visiting our houses around the world, and Sewer House is still as special as when we opened our first site in 1995. Our houses are full of creative, interesting people from different backgrounds who come together to have a good time and meet fellow members. As the only global private members club of its kind, We operate in more than 20 cities that represent creative, dynamic, and progressive hubs. During our 29 year history, we have never closed a house. And the reason for our success and enduring appeal across all ages is that we're a scaled global membership club with local houses where members create its identity. We're building on those strong fundamentals with a business that we believe is getting stronger and stronger. A result of the plan we put in place 18 months ago to focus on two strategic priorities. To grow and enhance the membership experience, which leads to increasing recurring revenues. And to drive operational excellence, leading to greater profitability. Our 2023 results show we are making good progress and I'm excited to share the results with you today. We welcome more than 30,000 net new Sowerhouse members. an increase of 20% year-on-year, taking us to 194,000 members globally, versus our guidance of above 192,000. Our membership growth last year came primarily from 24 houses we had opened since 2018. For example, Nashville, Austin, Paris, Rome, Brighton and Stockholm. These newer houses allow us greater choice in where we grow membership, given their maturity curve. as well as positively enhancing the membership experience for our Every House members, who represent approximately 80% of our total membership. We are particularly pleased with Mexico City. Since we opened back in September, we have more than 2,000 members. This makes us even more excited to continue to expand in Latin America, where we will open Serra House San Paolo soon. Cities Without Houses, or CWH, membership grew 50% in 2023. Demonstrating the strength of our brand in cities where we do not have a physical house, but the demand to be part of our global network of creative members is high. It signals the runway that we have for further growth. Demand for membership was very strong and our waitlist finished in 2023 at 99,000, up from 86,000 at the beginning of the year. Demonstrating the continued appeal of Serra House globally. Annual retention remained high at 91.5% and in line with our expectations, given the recent growth of membership and the expansion of our business into new regions like Asia. Total revenues grew 17% year on year, with membership revenues, the cornerstone of our business model, rising 33% year on year and representing 32% of total revenues, up from 28% in 2022. In-house revenues grew 13% and other revenues grew 7% in the year. Adjusted EBITDA more than doubled in the year, growing approximately 110% to 128 million, with margins almost doubling from 6% to 11.3%. Finally, net cash flow from operations more than tripled year on year to 50 million, from 15 million in 2022 and negative in prior years. Looking at just the fourth quarter itself, we welcome more than 9,000 net new Soho House members. 4Q adjusted EBITDA was 37 million, up approximately 60% year on year, supported by 13% margin compared to 9% in 4Q 2022. Total revenues were up 8% over the same period. Membership delivered 96 million of recurring membership revenues, a 24% increase year on year. Net cash from operations for the quarter were again positive at £19 million compared to a £15 million loss in 4Q22. Now let me give you an update on progress we're making against our two strategic priorities. Growing and enhancing the value of membership and delivering operational excellence to drive profitability in cash flow. As I've said before, giving our members the best experience is at the heart of what we do. I want to give you more colour on what we're focused on in 2024. We continue to invest in talent and training across our teams to deliver high quality service to our members. We're expanding spaces and refurbishing areas our members love, like our pools and rooftops in our existing houses. For example, in London, we have recently refurbished White City House roof and pool and expanded the ground floor to create more member space. In LA, we will open the Luckman Club, an 8,000 square foot new event and member space at Soho House West Hollywood. While we're also working on a new member space on the roof of Holloway House. And in New York, we're refurbishing the outside space at Soho House Dumbo to be ready for an exciting summer. We continue to introduce new food concepts and dining options. Our popular Japanese restaurant, Pen Yen, has just opened at Ludlow House in New York. while we'll open Bear and Jack, a celebrated Persian restaurant at Soho Farmhouse in the spring. Members have told us how important fitness and wellness is in their lives. We're investing in new equipment and facilities across all our houses. Some examples include expanding our gym of White City and Chicago, while recently opening a new wellness barn at Farmhouse. Our new weekend wellness retreats at Soho Houses globally have been a real hit with members. Our member satisfaction scores that we are constantly tracking show that our approach is working. This is particularly true in our three most established cities, London, New York and LA, where our demand and retention rates are very high. We have 17 houses in total across these cities and our plan as of last year is to limit intakes in these cities. This means we will not increase membership in 2024 in our most mature houses, so House London, Shoreditch House, Sarah House New York and Sarah House West Hollywood as we focus on making sure our houses don't feel too busy. We have always been very intentional about where we've opened new houses and chosen to expand into creative, exciting and progressive cities, introducing new members that make our global community more diverse and interesting. Portland is no exception with its exciting food culture and thriving arts and film community We opened Sewer House Portland last week in Central Eastside, located in a historical building that has been restored by the Sewer House design team. It offers members a rooftop terrace, a pool, gym and attractive club spaces. Sewer House San Paolo will be our first house in South America and will open soon in one of the city's most ambitious urban redevelopments. The house is situated within the former hospital and features 32 bedrooms, a gym, a rooftop pool and bar, and club spaces for members. Soho House Manchester, our first house in the north of England, is set to open later this year across five floors with a gym and health club, bedrooms, rooftop pool and bar, event spaces, and two floors of club space. And finally, we will open Soho Muse House in London's Mayfair area later this year. Turning to our second strategic priority, operational excellence. We have made significant improvements to make Sir House & Co. a more profitable business, whilst delivering a better experience for members. Initiatives over the past year include operationally streamlining processes and systems like rotaring to allow house teams to spend more quality time with members. Further rolling out an F&B ordering system which allows our teams to more frequently tailor menus for members whilst growing margins. Re-platforming the technology for online bedroom bookings and simplifying the member journey. Launching personalized event recommendations on the app that are relevant to member interests. And introducing a state-of-the-art warehouse for SoHome to optimize delivery times and service. Initiatives like those are delivering for the business and for our members. helping drive EBITDA to more than double from 61 million in 2022 to 128 million in 2023. Adjusted EBITDA margins in the year almost doubled from 6% to over 11%. We continue to keep a firm grasp on costs, with wages as a percentage of revenues for the year, improving approximately 200 basis points year over year and approximately 100 basis points versus 2019. while F&B margins were flat year-over-year despite very high cost inflation and up approximately 200 basis points versus 2019. Full-year rev par was up 11% year-on-year and 32% higher than 2019. We've seen improved house contribution margins in our mature houses at over 40% across each of London, New York and LA, and we're seeing strong growth in profitability in our newer houses in line with expected maturation curves. Now, let me pass on to Thomas to give you more detail on the numbers.