Soho House & Co Inc

Good morning. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the SoHo House & Co third quarter 2024 conference call. Today's conference is being recorded. 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'd 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 third quarter financial results. My name is Thomas Allen. 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. We assume no obligation to update any forward-looking statements if our views change. By now, you should have access to our third quarter earnings release, which can be found at sohouseco.com in the news and events section. Additionally, we have posted our third quarter 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 comfortable GAAP measures are available in today's earnings press release. Now, let me hand it over to Andrew.

Thanks, Thomas, and hello, everyone. Before we get into the quarter, I wanted to discuss another press release we published this morning. In July, UKIPO retained financial advisors to do a strategic review of Sohausen Co. to enhance shareholder value, as they believe the inherent value of the company is not reflected in its current share price. Earlier this week, the board of directors of the company received an offer from a new third-party consortium who has spent substantial time and energy understanding the company, including recent internal due diligence and time with management. The group presented an actionable plan with an offer of $9 per share that our executive chairman would support. A substantial premium to the current share price. The offer is conditional on certain significant shareholders, including UKIPA, rolling over their equity interests in the company. As a result, our board has reformed an independent special committee to evaluate the offer. Remember, our board and their affiliates own approximately 75% of our common stock. Given that this work is led by independent members of the board, as management, we are not able to address any questions regarding it on the Q&A. No assurances can be given that the special committee's assessment will result in any change in strategy or if a transaction is undertaken. Until there is more clarity, we will also hold off on confirming a date for our investor day. Now I'm going to update you on the course'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 financial performance, give an update on our balance sheet and our guidance before moving to Q&A. We continue to deliver against our strategic priorities of growing and enhancing membership and operational excellence to deliver greater profitability. Q3 has been another solid quarter with year-on-year and quarter-on-quarter growth in membership revenues and adjusted EBITDA. Membership demand continues to grow nicely. Membership revenues increased 17% versus the same time last year and 5% versus the last quarter. We welcome 4,000 Soho House members growing to approximately 208,000 members globally while our waitlist remained at record highs. We now have 27 houses that have opened since 2018 and are still on their ramp-up phase. Like recent quarters, these houses drove the majority of our membership growth. With really strong growth in houses such as Sao Paulo, Portland, Mexico City, Rome, and Paris this quarter, we expect to see a continuation of this proven maturation curve in 2025 and beyond. Total revenues grew 14% year-on-year to $333 million. We again saw a slight sequential improvement in light flight and house trends, driven by improved spend per visit, with in-house revenues up 5% year on year. We saw light flight sales growth in our housing UK, Europe, and the rest of the world, while North America was slightly behind. Scorpius Mykonos had a record-breaking season, and we opened our second Scorpius in Bodrum. So our home continues to be strong, with this quarter's new collections and our first source book delivering double-digit revenue growth in the quarter. We continue to be excited about the opportunity for Soho. Q3 adjusted EBITDA was 48 million, growing 38% year on year, but slightly below our expectations. That said, we continue to live a good growth, levering strong membership revenue and our progress on operational excellence. This led to increased adjusted EBITDA margins of approximately 14.5% this quarter, despite a choppy revenue environment. Net income was positive in the quarter. up from negative 49 million in the third quarter last year. When it comes to growing and enhancing membership value, we continue to focus on providing our members with the best experience in our houses, which we've seen reflected in our continued improving membership satisfaction scores this quarter. We opened Soho Muse House at the end of the quarter in London's Mayfair area. Our new house, the 11th in London, has three floors in a cobbled courtyard with an outdoor terrace and a restaurant British Grill menu. On the top floor, we are providing our members with live performances in such a great space. So far, we've hosted Nick Cave, Jules Holland and Macy Gray, among many others. We continue to deliver unique events in our houses. We again hosted Food Festival at So Farmhouse and introduced it to our National Houses Quarter. These types of events are resulting in more members attending our events and increased spend per member at events they attend. As well as opening great new houses and delivering unique events, we'll also continue to focus on ensuring our members enjoy the best experience in our existing houses, whether that's through training, our F&B offering, including our new no and low drinks offer, or house improvements. I was recently in LA visiting all our houses and teams, and I'm pleased to see our investments in Malibu, Holloway House, and West Hollywood are delivering an enhanced member experience and also driving revenues. Our focus on operational excellence leads to greater profits and cash flow continued over the period. We are driving change that both directly benefit our members as well as change to simplify our business and transform our back of house systems. In turn, helping us achieve greater efficiencies, improve service and lowering our costs. This is an important strategic unlock for the business and we have made significant progress over the recent months. While this is having a slight drag on our quarters results, it will be a significant tailwind in the long run As part of this transformation, we continue to simplify our business and increase our focus on what matters most to members. Since the second quarter and into this period, this has evolved restructuring of our corporate offices globally, including removal of roles that were not core to our long-term strategy and reflecting our more targeted approach to new houses openings. We have continued to focus on improving cost management through vendor consolidation and also a focus on improving our labour hours within our houses. Together, we've seen the initiatives drive positive results over the quarter. We increased food and beverage margins again over the period, while our successful accommodations focus helped drive red power up 5% year over year. Q3 house level contribution increased 17% year on year, with house level margins up approximately 150 basis points, despite more new houses having a short term impact on our growth and margins. Now let me pass over to Thomas to give you more detail on our numbers and guidance.