Membership Collective Group Announces Second Quarter 2021 Results
MCG's global portfolio of brands (Graphic: Business Wire)
-
Significant progress against MCG growth strategy; robust recovery as restrictions lift
-
Successful Initial Public Offering on
New York Stock Exchange raising$402m -
Strong total revenue growth driven by significant rebound of In-House Revenue which increased to
$46m $16m -
Delivering against site expansion plan with two new Soho Houses in
London &Austin , and on track to deliver a total of seven new Houses for 2021. - Significant demand for MCG memberships with MCG wait list growing to 63,700 in second quarter, our highest number to date.
- Encouraging growth of new membership brands: Soho Friends, Soho Works and SOHO HOME+ collectively added over 8,000 new members in the second quarter.
-
Successful Initial Public Offering on
“I am incredibly grateful for the support and contribution of our members, employees and investors to our successful Initial Public Offering on the
Despite Covid-19 restrictions varying globally, we’ve loved welcoming members back to our Houses around the world, to
The total size of our wait list for MCG memberships has reached a record high – providing confidence in the platform’s future growth. Our membership retention has also remained exceptionally high, although understandably we have continued to take a cautious approach to accepting new Soho House members and have prioritised existing members’ enjoyment of the Houses when they have reopened. This quarter we opened two new Houses in
Looking ahead, I’m excited by the new membership experiences we’ll create through our physical pipeline, with the opening of Soho House Tel Aviv and new Soho House sites nearing completion in
Financial Summary for the Second Quarter 2021:
-
Total Revenues in the second quarter 2021 increased
118% to$124m -
Membership Revenue in the second quarter 2021 was
$45m -
In-House Revenue increased from
$3m $46m -
Other Revenue in the second quarter of 2021 was
$33m 267% increase from the second quarter of 2020 driven by the reopening of our public restaurants, The Ned and Scorpios, in addition to continued strength in Soho Home. -
Operating loss narrowed to
$47m $58m -
House-Level Contribution of
$17m 19% of total House Revenue in the second quarter 2021, was in line with the second quarter 2020. -
Net loss attributable to
Membership Collective Group Inc. was$56m $76m -
Adjusted EBITDA was
$(13)m July 4 2021 , or (10)% of revenue, compared to$(20)m $6m $5m -
Subsequent events – completion of IPO of Class A of common stock with net proceeds of
$402m $98m $20m
Operational Summary for the Second Quarter 2021:
Memberships
- Total Members grew in the second quarter to over 127,800 from 119,100 in first quarter 2021, and 120,700 in the second quarter 2020.
- Soho House Members grew to over 111,910 in the second quarter, from 111,311 in the first quarter 2021. We have continued to see the resilience in membership retention rate in line with recent trends, and have also remained cautious in the intakes of new members at our Houses despite very high applications in the quarter, to ensure safe social distancing and to prioritise existing members’ enjoyment of the Houses. New membership intakes have now resumed in the third quarter.
- Soho House Frozen Memberships total 10,800 at the end of the second quarter 2021, compared to 16,500 at the end of the first quarter 2021, with an accelerated rate of unfreezing across the second quarter.
- New Membership Brands saw robust growth. Soho Friends, Soho Works and SOHO HOME+ added over 8,000 new members during the second quarter.
Soho Houses
-
Number of Soho Houses increased to 30 in the second quarter 2021, with the opening of two Houses in the quarter. 180 House is our ninth House in
London and opened inmid-April 2021 . 180 House features 1970s-style interiors, a rooftop pool and club space and at the end of second quarter 2021 had 591 members. Situated between downtown andSouth Austin , Soho House Austin features 46 bedrooms, a rooftop pool, screening room and restaurant.The House inAustin opened in May and had 863 members at the end of the second quarter 2021. - Reopening of Soho Houses has been successful as Covid-19 restrictions were gradually removed, with all Soho Houses opened by the end of the second quarter.
-
Recovery of In-House Revenue as we welcomed members back. We saw significant pent up demand from our members with House visit slots sold out on a daily basis. Food & Beverage sales saw momentum growing throughout the quarter. Accommodation sales were particularly strong at our experiential and beach side properties, with Soho
Beach House Miami , Soho Farmhouse andBabington House achieving an average occupancy of93% in June in addition to a higher average daily rate in comparison to the comparative period in 2019. -
Efficiency programmes progressed well, resulting in Houses operating at significantly improved cost ratios versus 2019. In
June 2021 , the food cost of sales ratio improved by3% versus the comparative period in 2019, whilst the beverage cost of sales ratio improved by2% . -
SH.APP re-launched in
May 2021 with a20% increase in weekly usage since launch, and active SH.APP users increasing to just over 80,000, an increase of33% on second quarter 2020, and a28% increase on first quarter 2021.
Other MCG Brands
-
Soho Home online revenue grew
104% year-on-year, partly driven by a significant increase in average order value to$670 -
Scorpios in Mykonos reopened in May against a backdrop of ongoing Covid-19 restrictions across
Europe and we signed a lease for Scorpius Tulum, with opening expected at the end of 2022. -
The Ned in
London reopened inMay 2021 , together with the launch of the newNed Friends membership (Ned’s Club andNed Friends members are not included in total members). -
Soho Works sites in both the
UK andNorth America have seen membership base growth and office occupancy increase to over80% , as the relaxation of Covid-19 restrictions encouraged more people to return to work as well as the trend towards a more flexible working structure. -
Soho Friends Membership grew in the second quarter as we expanded the programme into
North America andEurope , as well as opening four new Studio spaces and hosting a weekly events programme. -
The LINE and
Saguaro Hotels – We acquired hotel management agreements for six hotels under The Line and Saguaro brands that will broaden MCG’s geographic reach inNorth America and enhance our membership experience. Current locations inLos Angeles ,Washington ,Austin , Scottsdale andPalm Springs offer approximately 1,470 hotel rooms with a further hotel currently under development inSan Francisco and due to open in 2022. - House Foundations programme made strong progress with the launch of our inaugural Inclusivity Soho House Board as well as the roll-out of the Soho Apprenticeship programme.
Current Outlook:
The following forward-looking statement reflects MCG’s expectations as of
- We remain optimistic about the ongoing recovery of In-House Revenues driven by the pent-up demand of our members we have seen so far.
-
Near term, the exact timing and profile of the recovery is conditional on the progression of Covid-19 as well as associated restrictions. Reflecting this, we currently see stronger momentum in the
UK compared toNorth America and, particularly,Europe where Houses and other sites continue to be impacted by restrictions. - We expect to open three new Soho Houses in the third quarter 2021 and Soho House Brighton in the fourth quarter 2021.
- The strong wait list and high number of applications position MCG well to grow the member base across both new and existing Soho Houses, as well as across other MCG membership brands.
Conference Call and Webcast:
The
To listen to the live conference call, please dial
A replay of the webcast will be available on the MCG website following the call for up to 90 days.
Non-GAAP Financial Measures
This release contains certain financial measures, including Adjusted EBITDA, House-Level Contribution and Margin, Other Contribution and Margin and certain financial measures presented on a Constant Currency basis that are not required by, or presented in accordance with, accounting principles generally accepted in
The non-GAAP financial measures we use herein are defined by us as follows:
ADJUSTED EBITDA. Adjusted EBITDA is a supplemental measure of our performance. Adjusted EBITDA is defined as net income (loss) before depreciation and amortization, interest expense, net, provision (benefit) for income taxes, adjusted to take account of the impact of certain non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These other items include, but are not limited to, loss (gain) on sale of property and other, net, share of loss (profit) from equity method investments, foreign exchange, share of equity method investments adjusted EBITDA and share-based compensation expense (see summary Historical Consolidated Financial and Operating data in our final prospectus under Rule 424(b) filed with the
HOUSE-LEVEL CONTRIBUTION AND MARGIN. House-Level Contribution is defined as House Revenues less In-House Operating Expenses, which includes expense items such as food and beverage costs, labor costs, variable overheads and fixed costs, such as rent. It does not reflect the impact of depreciation, amortization, impairment, gain or loss on sale of property, or general and administrative expenses. House-Level Contribution Margin is defined as House-Level Contribution as a percentage of our House Revenues and is a key determinant of our performance and profitability and our return on the investment we make in each of our Houses. Given that all costs associated with providing our members with the Soho House experience, including the costs associated with maintaining our Houses and providing services to members while in Houses, are included in In-House Operating Expenses, we use House Revenues (inclusive of House Membership Revenues) in calculating House-Level Contribution and House-Level Contribution Margin to assess the overall profitability of our Houses. Accordingly, our management considers House-Level Contribution and House-Level Contribution Margin to be an important management measure to evaluate the performance of each House, and growth in aggregate House-Level Contribution allows us to leverage our general and administrative costs and improve overall profitability.
HOUSE MEMBERSHIP REVENUES. House Membership Revenues are comprised primarily of annual membership fees and one-time registration fees from Soho House members which are amortized over 20 years.
IN-HOUSE REVENUES. In-House Revenues include all revenues realized within our Houses, including food and beverage, accommodation and spa products and treatments.
HOUSE REVENUES. House Revenues is defined as House Membership Revenues plus In-House Revenues, less Non-House Membership Revenues. Our management views House Membership Revenues and In-House Revenues as interrelated and their aggregation as important in tracking House performance. Although there is no minimum spend for any member on In-House offerings, nevertheless in practice most members consume food and beverage, accommodations and other offerings at our Houses. The pricing of our In-House offerings is reflective of the fact that the significant majority of In-House offerings that generate In-House revenues are consumed by members who also pay a membership fee in relation to that House, with pricing of such In-House offerings being identical for both members and non-members.
OTHER CONTRIBUTION AND MARGIN. Other Contribution is defined as Other Revenues plus Non-House Membership Revenues less Other Operating Expenses, which includes expense items not related to the operation of Houses, such as labor costs, variable overheads and fixed costs, such as rent. It does not reflect the impact of depreciation, amortization, impairment, gain or loss on sale of property, or general and administrative expenses. Other Contribution Margin defined as Other Contribution as a percentage of our Other Revenues and is a key determinant of our performance and profitability and our return on the investment in our non-House business. Our management considers Other Contribution and Contribution Margin to be an important management measure.
CONSTANT CURRENCY. Some of our financial and operational data that we disclose in this release is presented on a ‘constant currency’ basis to isolate the effect of currency changes during the period. Where we refer to a measure being calculated in ‘constant currency,’ we are calculating the dollar change and the percentage change as if the exchange rate that is being used in the current period was in effect for all prior periods presented except where we discuss a comparison of our results comparing fiscal 2020 to fiscal 2019, in which case we calculate constant currency for fiscal 2019, using exchange rates in effect in 2020. We believe that this calculation provides a more meaningful indication of actual year over year performance and eliminates any fluctuations from currency exchange rates.
While we believe that these non-GAAP financial measures are useful in evaluating our business, this information should be considered as supplemental in nature and is not meant as a substitute for revenues or net income (loss), in each case as recognized in accordance with GAAP. In addition, other companies may calculate one or more of these measures differently, which reduces the usefulness of any such measure as a comparative measure.
A reconciliation of Net Loss to Adjusted EBITDA is set forth below for the 13-Weeks Ending
| 13-Weeks Ended | Percentage Change | |||||||||||||||||
| Actuals | Constant Currency⁽¹⁾ | |||||||||||||||||
| Actuals | Actuals | |||||||||||||||||
| (Unaudited, dollar amounts in thousands) | ||||||||||||||||||
| Net Loss | (57,108 |
) |
(77,857 |
) |
27 |
% |
36 |
% |
||||||||||
| Depreciation and Amortization | 21,905 |
|
16,176 |
|
35 |
% |
19 |
% |
||||||||||
| Interest Expense, net | 17,018 |
|
17,897 |
|
(5 |
)% |
(16 |
)% |
||||||||||
| Income tax benefit | 3 |
|
(277 |
) |
n/m |
|
n/m |
|
||||||||||
| EBITDA | (18,182 |
) |
(44,061 |
) |
59 |
% |
64 |
% |
||||||||||
| (Gain) loss on sale of property and other, net | (6,903 |
) |
12 |
|
n/m |
|
n/m |
|
||||||||||
| Share of loss of equity method investments | 130 |
|
2,136 |
|
94 |
% |
95 |
% |
||||||||||
| Foreign exchange (2) | 1,055 |
|
4,903 |
|
78 |
% |
81 |
% |
||||||||||
| Share of equity method investments adjusted EBITDA | 1,456 |
|
498 |
|
n/m |
|
n/m |
|
||||||||||
| Share-based compensation expense | 2,548 |
|
- |
|
n/m |
|
n/m |
|
||||||||||
| Membership credits expense (3) | 1,404 |
|
8,175 |
|
83 |
% |
85 |
% |
||||||||||
| COVID-19 related charges (4) | (272 |
) |
1,739 |
|
n/m |
|
n/m |
|
||||||||||
| Corporate financing and restructuring costs (5) | 6,208 |
|
505 |
|
n/m |
|
n/m |
|
||||||||||
| Abandoned project and site closure costs | - |
|
6,413 |
|
100 |
% |
100 |
% |
||||||||||
| Adjusted EBITDA | (12,556 |
) |
(19,680 |
) |
36 |
% |
44 |
% |
||||||||||
See “Non-GAAP Financial Measures” for an explanation of our constant currency results.
(1) |
See “Non-GAAP Financial Measures” for an explanation of our constant currency results. |
|
(2) |
The increase in foreign exchange period on period is driven by an increase in non-USD denominated borrowings, which have increased since the preceding period, foreign exchange volatility, and an out of period adjustment. |
|
(3) |
Beginning on |
|
(4) |
Represent items of additional expense incurred in order to comply with health and safety protocols while keeping certain Houses open during the pandemic. In 2021, we received a government grant related to business rates in the |
|
(5) |
Our corporate financing and restructuring costs vary significantly each year and period presented based on financing and restructuring being undertaken. Such costs do not relate to normal, recurring, cash operating expenses. In the second quarter 2021, these costs consisted of IPO-related costs of |
A Reconciliation of Operating Loss to House-Level Contribution & Other Contribution for the 13 weeks ending
| Change % | 2020 Constant Currency⁽¹⁾ |
Constant Currency Change %⁽¹⁾ |
||||||||||||||
| Actuals | ||||||||||||||||
| (Unaudited, dollar amounts in thousands) | ||||||||||||||||
| Operating Loss | (46,860 |
) |
(58,089 |
) |
19 |
% |
(66,096 |
) |
29 |
% |
||||||
| General and Administrative | 19,500 |
|
15,702 |
|
24 |
% |
17,866 |
|
9 |
% |
||||||
| Pre-opening expenses | 6,493 |
|
5,701 |
|
14 |
% |
6,487 |
|
0 |
% |
||||||
| Depreciation and Amortization | 21,905 |
|
16,176 |
|
35 |
% |
18,406 |
|
19 |
% |
||||||
| Other | 11,926 |
|
28,759 |
|
(59 |
)% |
32,723 |
|
(64 |
)% |
||||||
| Non-House Membership Revenue | (3,483 |
) |
(333 |
) |
n/m |
|
(379 |
) |
n/m |
|
||||||
| Other Revenues | (33,423 |
) |
(9,437 |
) |
n/m |
|
(10,738 |
) |
n/m |
|
||||||
| Other Operating Expenses | 40,685 |
|
19,561 |
|
n/m |
|
22,257 |
|
83 |
% |
||||||
| House-Level Contribution | 16,743 |
|
18,040 |
|
(7 |
)% |
20,526 |
|
(18 |
)% |
||||||
| Operating Loss Margin | (38 |
)% |
n/m |
|
n/m |
|
||||||||||
| House-Level Contribution Margin | 19 |
% |
38 |
% |
(19 |
)% |
||||||||||
| Change % | 2020 Constant Currency⁽¹⁾ |
Constant Currency Change %⁽¹⁾ |
||||||||||||||
| Actuals | ||||||||||||||||
| (Unaudited, dollar amounts in thousands) | ||||||||||||||||
| Operating Loss | (46,860 |
) |
(58,089 |
) |
19 |
% |
(66,096 |
) |
29 |
% |
||||||
| General and Administrative | 19,500 |
|
15,702 |
|
24 |
% |
17,866 |
|
9 |
% |
||||||
| Pre-opening expenses | 6,493 |
|
5,701 |
|
14 |
% |
6,487 |
|
0 |
% |
||||||
| Depreciation and Amortization | 21,905 |
|
16,176 |
|
35 |
% |
18,406 |
|
19 |
% |
||||||
| Other | 11,926 |
|
28,759 |
|
(59 |
)% |
32,723 |
|
(64 |
)% |
||||||
| House Membership Revenue | (41,380 |
) |
(44,123 |
) |
(6 |
)% |
(50,205 |
) |
(18 |
)% |
||||||
| In-House Revenues | (45,793 |
) |
(3,111 |
) |
n/m |
|
(3,540 |
) |
n/m |
|
||||||
| In-House Operating Expenses | 70,430 |
|
29,194 |
|
n/m |
|
33,218 |
|
n/m |
|
||||||
| Total Other Contribution | (3,779 |
) |
(9,791 |
) |
61 |
% |
(11,141 |
) |
66 |
% |
||||||
| Operating Loss Margin | (38 |
)% |
n/m |
|
n/m |
|
||||||||||
| Other Contribution Margin | (10 |
)% |
(100 |
)% |
(100 |
)% |
||||||||||
Key Performance and Operating Metrics Evaluated by Management
In assessing the performance of our business, we consider a variety of operating and financial measures. These key measures include:
NUMBER OF SOHO HOUSES. The number of Soho Houses reflects the total number of Soho Houses in operation in any period, irrespective of whether each House is (i) controlled by us, (ii) operated through a non-controlling interest in a joint venture or (iii) operated through a management contract.
We review the number of members from all Houses to assess new member growth, total House Revenues, and House-Level Contribution.
NUMBER OF SOHO HOUSE MEMBERS. Our Soho House membership model is an integral part of our business and has a significant impact on our profitability and financial performance. Typically, members hold an Every House membership or a Local House membership. Member count is the primary driver of Membership Revenues and is also a critical factor in In-House Revenues as members utilize the offerings that are provided within the Houses. Soho House members include all active, frozen and non-paying members.
The extent to which we achieve growth in our membership base, retain existing members and periodically increase our membership fee rates will impact our profitability. We have historically enjoyed strong member loyalty, reflected by very high retention rates. Robust demand for our memberships is also evidenced by considerable wait lists for our Houses.
The year-over-year increase in our total number of Soho House members is driven by a combination of increases in membership at existing Houses and members from new Houses.
NUMBER OF OTHER MEMBERS. Other members include members of Soho Works, Soho Friends and SOHO HOME+ and are key to our growth strategy and enhancing our Soho House member experience. Like Soho House members, other memberships are an integral part of our business and we believe will have a significant impact on our profitability and financial performance in the future.
FROZEN MEMBERS. Frozen Members refers to Soho House members who have elected to suspend their membership payments on a six, nine- or twelve-month basis during which period the member is not able to gain access to a Soho House site as a member, access our membership Apps, or book bedrooms or Cowshed treatments or products on discounted member rates. Frozen Members are not included in Adult Paying Members, but are included in the total number of Soho House members.
MEMBERSHIP REVENUES. Membership Revenues are comprised of House Membership Revenues (as defined below) and Non-House Membership Revenues (as defined below). House Membership Revenues and Non-House Membership Revenue are each comprised primarily of annual membership fees and one-time registration fees which are amortized over 20 years. Membership Revenues are a function of the number of members, membership mix, and membership pricing. For GAAP, we report Membership Revenues only from Houses and sites in which we own a controlling interest. Our membership pricing varies by geographic segment and membership offering and, as such, our mix of House and Soho Works club openings can affect our revenue growth and profitability over time. Prices are generally higher in
HOUSE MEMBERSHIP REVENUES. House Membership Revenues is an important performance indicator and is defined above in the NON-GAAP reconciliation.
IN-HOUSE REVENUES. In-House Revenues refer to all revenues realized within our Houses, and primarily includes revenues from food and beverage, accommodation, and spa products and treatments.
HOUSE REVENUES. House Revenues is an important performance indicator and is defined in “Non-GAAP Financial Measures.”
OTHER REVENUES. Other Revenues are defined as total revenues that are not realized within our Houses, including revenues from Scorpios, Soho Works and our stand-alone restaurants, procurement fees from Soho House Design, Soho Home and Cowshed retail products and other revenues from products and services that we provide outside of our Houses, as well as management fees from the Ned.
NON-HOUSE MEMBERSHIP REVENUES. Non-House Membership Revenues are comprised of Soho Works membership revenue, Soho Friends membership revenue and SOHO HOME+ membership revenue.
ACTIVE APP USERS. Active App Users is defined as unique users who have logged into any of our membership Apps within the last three months.
Forward Looking Statements
This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this release that do not relate to matters of historical fact should be considered forward-looking statements, including, without limitation, statements regarding our expected financial performance and operational performance for the second quarter of 2021, as well as statements that include the words “expect,” “intend,” “plan,” “believe,” “project,” “forecast,” “estimate,” “may,” “should,” “anticipate” and similar statements of a future or forward-looking nature. These forward-looking statements are based on management’s current expectations. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including important factors discussed under the caption “Risk Factors” in our final prospectus under Rule 424(b) filed with the
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