UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from |
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to |
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Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
Registrant’s telephone number, including area code: +44 (0)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of November 17, 2021, the registrant had
Table of Contents
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PART I. |
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2 |
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Item 1. |
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2 |
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Condensed Consolidated Balance Sheets as of October 3, 2021 (Unaudited) and January 3, 2021 |
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10 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
37 |
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Item 3. |
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60 |
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Item 4. |
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60 |
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PART II. |
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62 |
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Item 1. |
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62 |
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Item 1A. |
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62 |
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Item 2. |
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Item 3. |
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62 |
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Item 4. |
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62 |
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Item 5. |
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62 |
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Item 6. |
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63 |
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64 |
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i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are based on our beliefs and assumptions and on information currently available to us. Forward-looking statements include information concerning our possible or assumed future results of operations and expenses, business strategies and plans, trends, market sizing, competitive position, industry environment, potential growth opportunities and product capabilities, among other things. Forward-looking statements include all statements that are not historical facts and, in some cases, can be identified by terms such as “aim,” “anticipates,” “believes,” “could,” “estimates,” “expects,” “goal,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “strive,” “will,” “would,” or similar expressions and the negatives of those terms.
As used in this report, any reference to ‘Membership Collective Group,’ ‘MCG,’ ‘our company,’ ‘the company,’ ‘us,’ ‘we’ and ‘our’ refers to: (i) if prior to the exchange of equity interests by equity holders in Soho House Holdings Limited for shares of Class A common stock or Class B common stock (as applicable) in Membership Collective Group Inc. as described in this report, to Soho House Holdings Limited and its consolidated subsidiaries, and (ii) if following such exchange, to Membership Collective Group Inc., together with its consolidated subsidiaries.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our 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 those described in “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this report. Given these uncertainties, you should not place undue reliance on these forward-looking statements.
1
PART I-FINANCIAL INFORMATION
Item 1. Financial Statements.
Membership Collective Group Inc.
Condensed Consolidated Balance Sheets
As of October 3, 2021 (Unaudited) and January 3, 2021
(in thousands, except for par value and share data) |
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October 3, 2021 |
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January 3, 2021 |
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Assets |
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Current assets |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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Accounts receivable, net |
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Inventories |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease assets |
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Goodwill |
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Other intangible assets, net |
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Equity method investments |
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Deferred tax assets |
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Other non-current assets |
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Total non-current assets |
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Total assets |
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$ |
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$ |
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Current liabilities |
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Accounts payable |
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$ |
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$ |
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Accrued liabilities |
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Current portion of deferred revenue |
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Indirect and employee taxes payable |
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Current portion of debt, net of debt issuance costs |
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Current portion of related party loans |
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Current portion of operating lease liabilities—sites trading less than one year |
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Current portion of operating lease liabilities—sites trading more than one year |
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Other current liabilities |
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Total current liabilities |
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Debt, net of current portion and debt issuance costs |
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Property mortgage loans, net of debt issuance costs |
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Related party loans, net of current portion and imputed interest |
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Operating lease liabilities, net of current portion - sites trading less than one year |
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Operating lease liabilities, net of current portion - sites trading more than one year |
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Finance lease liabilities |
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Financing obligation |
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Deferred revenue, net of current portion |
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Deferred tax liabilities |
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Other non-current liabilities |
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Total non-current liabilities |
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Total liabilities |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
Membership Collective Group Inc.
Condensed Consolidated Balance Sheets
As of October 3, 2021 (Unaudited) and January 3, 2021
(in thousands, except for par value and share data) |
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October 3, 2021 |
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January 3, 2021 |
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Senior convertible preference shares, £ |
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Redeemable C ordinary shares, £ |
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Shareholders’ equity (deficit) |
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Class A common stock, $ |
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A ordinary shares, £ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
) |
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( |
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Accumulated other comprehensive income (loss) |
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( |
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Total shareholders’ equity (deficit) attributable to Membership Collective Group Inc. |
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( |
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Noncontrolling interest |
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Total shareholders’ equity (deficit) |
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( |
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Total liabilities, redeemable shares and shareholders’ equity (deficit) |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
Membership Collective Group Inc.
Condensed Consolidated Statements of Operations (Unaudited)
For the 13 Weeks and 39 Weeks Ended October 3, 2021 and September 27, 2020
(in thousands except for per share data) |
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13 Weeks Ended |
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39 Weeks Ended |
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October 3, 2021 |
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September 27, 2020 |
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October 3, 2021 |
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September 27, 2020 |
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Revenues |
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Membership revenues |
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$ |
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$ |
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$ |
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$ |
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In-House revenues |
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Other revenues |
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Total revenues |
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Operating expenses |
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In-House operating expenses (exclusive of depreciation and amortization of $ |
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( |
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( |
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( |
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( |
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Other operating expenses (exclusive of depreciation and amortization of $ |
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( |
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( |
) |
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( |
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( |
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General and administrative expenses |
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( |
) |
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( |
) |
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( |
) |
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( |
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Pre-opening expenses |
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( |
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( |
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( |
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( |
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Depreciation and amortization |
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( |
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( |
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( |
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( |
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Share-based compensation |
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( |
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( |
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( |
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( |
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Foreign exchange (loss) gain, net |
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( |
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( |
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( |
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Other |
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( |
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( |
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( |
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( |
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Total operating expenses |
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( |
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( |
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( |
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( |
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Operating loss |
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( |
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( |
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( |
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( |
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Other (expense) income |
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Interest expense, net |
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( |
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( |
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( |
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( |
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(Loss) gain on sale of property and other, net |
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( |
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Share of income (loss) of equity method investments |
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( |
) |
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( |
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Total other expense, net |
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( |
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( |
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( |
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( |
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Loss before income taxes |
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( |
) |
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( |
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( |
) |
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( |
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Income tax (expense) benefit |
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( |
) |
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( |
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Net loss |
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( |
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( |
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( |
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( |
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Net (income) loss attributable to noncontrolling interests |
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( |
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Net loss attributable to Membership Collective Group Inc. |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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$ |
( |
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Net loss per share attributable to Class A and Class B common stock |
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Basic and diluted (Note 17) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
Membership Collective Group Inc.
Condensed Consolidated Statements of Comprehensive Loss (Unaudited)
For the 13 Weeks and 39 Weeks Ended October 3, 2021 and September 27, 2020
(in thousands) |
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13 Weeks Ended |
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39 Weeks Ended |
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October 3, 2021 |
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September 27, 2020 |
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October 3, 2021 |
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September 27, 2020 |
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Net loss |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Other comprehensive income (loss) |
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Foreign currency translation adjustment |
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( |
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Comprehensive loss |
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( |
) |
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( |
) |
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( |
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( |
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(Income) loss attributable to noncontrolling interest |
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( |
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Foreign currency translation adjustment attributable to noncontrolling interest |
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( |
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Total comprehensive loss attributable to Membership Collective Group Inc. |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
Membership Collective Group Inc.
Condensed Consolidated Statements of Changes in Redeemable Shares and Shareholders’ Equity (Deficit) (Unaudited)
For the 13 Weeks and 39 Weeks Ended October 3, 2021 and September 27, 2020
(in thousands) |
Soho House Holdings Limited Redeemable Preferred Shares |
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Soho House Holdings Limited Redeemable C Ordinary Shares |
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Soho House Holdings Limited Ordinary Shares |
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Additional |
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Accumulated |
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Accumulated |
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Total Shareholders’ Deficit Attributable to Membership Collective Group Inc. |
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Noncontrolling |
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Total |
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As of December 29, 2019 |
$ |
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$ |
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$ |
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$ |
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$ |
( |
) |
$ |
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$ |
( |
) |
$ |
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$ |
( |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
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( |
) |
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( |
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Distributions to noncontrolling interest |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Contributions from noncontrolling interest |
|
— |
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— |
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— |
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— |
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— |
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— |
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— |
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Net change in cumulative translation adjustment |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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As of March 29, 2020 |
$ |
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$ |
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$ |
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$ |
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$ |
( |
) |
$ |
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$ |
( |
) |
$ |
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$ |
( |
) |
||||||
Net loss |
|
— |
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— |
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— |
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— |
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|
( |
) |
|
— |
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|
( |
) |
|
( |
) |
|
( |
) |
Distributions to noncontrolling interest |
|
— |
|
|
— |
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— |
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— |
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|
— |
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|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
Contributions from noncontrolling interest |
|
— |
|
|
— |
|
|
— |
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— |
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|
— |
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|
— |
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— |
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Conversion of related party loan to SHHL A ordinary shares |
|
— |
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— |
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— |
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— |
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— |
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Proceeds from issuance of SHHL redeemable C ordinary shares |
|
— |
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— |
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— |
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— |
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— |
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— |
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|
— |
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|
— |
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|
SHHL redeemable C ordinary shares issuance costs |
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Net change in cumulative translation adjustment |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
( |
) |
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|||
As of June 28, 2020 |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
( |
) |
$ |
|
$ |
( |
) |
||||||
Net loss |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
( |
) |
|
( |
) |
Distributions to noncontrolling interest |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
Contributions from noncontrolling interest |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
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Noncontrolling interest related to the Soho Restaurants Limited reorganization (Note 4) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
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|
— |
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|
— |
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Share-based compensation, net of tax |
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|||
Net change in cumulative translation adjustment |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
|
|
|
( |
) |
|
As of September 27, 2020 |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
( |
) |
$ |
|
$ |
( |
) |
||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
(in thousands except for share data) |
Soho House Holdings Limited Redeemable Preferred Shares |
|
Soho House Holdings Limited Redeemable C Ordinary Shares |
|
Soho House Holdings Limited Ordinary Shares |
|
Membership Collective Group Inc. Common Stock |
|
Additional |
|
Accumulated |
|
Accumulated |
|
Total Shareholders’ (Deficit) Equity Attributable to Membership Collective Group Inc. |
|
Noncontrolling |
|
Total |
|
||||||||||
As of January 3, 2021 |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
|
$ |
( |
) |
||||||
Net loss |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
|
|
( |
) |
|
( |
) |
|
( |
) |
|
Distributions to noncontrolling interest |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
Contributions from noncontrolling interest |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
||
Issuance of senior convertible preference shares (Note 15) |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Senior convertible preference shares issuance costs |
|
( |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Proceeds from issuance of SHHL redeemable C ordinary shares (Note 16) |
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Share-based compensation, net of tax |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|||
Net change in cumulative translation adjustment |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
||||
As of April 4, 2021 |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
( |
) |
$ |
|
$ |
( |
) |
|||||||
Net loss |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
( |
) |
|
( |
) |
Distributions to noncontrolling interest |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
Non-cash dividends on senior convertible preference shares |
|
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
SHHL C2 ordinary shares issued in connection with the Cipura Acquisition (Note 3) |
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
||||
SHHL C2 ordinary shares issued in connection with the Mandolin Acquisition (Note 3) |
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
||||
Purchase of Soho Works North America noncontrolling interests (Note 3) |
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|
( |
) |
|
— |
|
|||
Purchase of Scorpios noncontrolling interests (Note 3) |
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|
( |
) |
|
( |
) |
|||
SHHL C2 ordinary shares issued in connection with the Line and Saguaro Acquisition (Note 3) |
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
||||
Accretion of redeemable preferred shares to redemption value, net of foreign currency remeasurement gain |
|
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
||
Share-based compensation, net of tax |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|||
Net change in cumulative transition adjustment |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
|
|
|
( |
) |
|
As of July 4, 2021 |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
( |
) |
$ |
|
$ |
( |
) |
|||||||
Net loss |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
|
|
( |
) |
|
Distributions to noncontrolling interest |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
Non-cash dividends on senior convertible preference shares |
|
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
Effect of the Reorganization Transactions (Note 1) |
|
— |
|
|
( |
) |
|
( |
) |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
||||
Issuance of common stock in connection with initial public offering, net of offering costs, underwriting discounts and commissions |
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
||||
Conversion of senior convertible preference shares into Class A common stock (Note 1) |
|
( |
) |
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
||||
Foreign currency remeasurement loss on redeemable preferred shares |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
Redemption of the May 2016 preferred shares |
|
( |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Share-based compensation, net of tax |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|||
Net change in cumulative transition adjustment |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
|||
As of October 3, 2021 |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7
Membership Collective Group Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
For the 39 Weeks Ended October 3, 2021 and September 27, 2020
(in thousands) |
|
39 Weeks Ended |
|
|||||
|
|
October 3, 2021 |
|
|
September 27, 2020 |
|
||
Cash flows from operating activities |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash used in operating activities |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Share-based compensation, net of tax |
|
|
|
|
|
|
||
Income tax expense (benefit) |
|
|
|
|
|
( |
) |
|
Gain on disposal of property and other, net |
|
|
( |
) |
|
|
( |
) |
Share of (profit) loss of equity method investments |
|
|
( |
) |
|
|
|
|
Amortization of debt issuance costs |
|
|
|
|
|
|
||
Loss on debt extinguishment |
|
|
|
|
|
— |
|
|
Imputed interest on interest free related party loans |
|
|
— |
|
|
|
|
|
PIK interest settled on extinguishment, net of non-cash interest |
|
|
( |
) |
|
|
|
|
Distributions from equity method investees |
|
|
|
|
|
|
||
Foreign exchange loss, net |
|
|
|
|
|
|
||
Guarantee provision |
|
|
— |
|
|
|
|
|
Changes in assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
( |
) |
|
|
|
|
Inventories |
|
|
( |
) |
|
|
|
|
Operating leases, net |
|
|
|
|
|
|
||
Other operating assets |
|
|
( |
) |
|
|
|
|
Deferred revenue |
|
|
|
|
|
( |
) |
|
Accounts payable and accrued and other liabilities |
|
|
|
|
|
|
||
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from investing activities |
|
|
|
|
|
|
||
Purchase of property and equipment |
|
|
( |
) |
|
|
( |
) |
Purchase of intangible assets |
|
|
( |
) |
|
|
( |
) |
Acquisition of subsidiaries, net of cash acquired (Note 3 and Note 4) |
|
|
|
|
|
|
||
Acquisition of noncontrolling interests (Note 3) |
|
|
( |
) |
|
|
|
|
Investments in equity method investees |
|
|
|
|
|
( |
) |
|
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from financing activities |
|
|
|
|
|
|
||
Repayment of borrowings (Note 12) |
|
|
( |
) |
|
|
|
|
Payment for debt extinguishment costs (Note 12) |
|
|
( |
) |
|
|
|
|
Issuance of related party loans |
|
|
|
|
|
|
||
Proceeds from borrowings (Note 12) |
|
|
|
|
|
|
||
Payments for debt issuance costs |
|
|
( |
) |
|
|
( |
) |
Proceeds from finance leases |
|
|
|
|
|
|
||
Principal payments on finance leases |
|
|
( |
) |
|
|
( |
) |
Proceeds from financing obligation |
|
|
|
|
|
|
||
Principal payments on financing obligation |
|
|
( |
) |
|
|
( |
) |
Distributions to noncontrolling interest |
|
|
( |
) |
|
|
( |
) |
Contributions from noncontrolling interest |
|
|
|
|
|
|
||
Senior convertible preference shares issued, net of issuance costs (Note 15) |
|
|
|
|
|
|
||
Proceeds from issuance of SHHL redeemable C ordinary shares, net of issuance costs (Note 16) |
|
|
|
|
|
|
||
Redeemable preferred shares redeemed (Note 15) |
|
|
( |
) |
|
|
|
|
Proceeds from initial public offering, net of offering costs (Note 1) |
|
|
|
|
|
|
||
Net cash provided by financing activities |
|
|
|
|
|
|
||
Effect of exchange rate changes on cash and cash equivalents, and restricted cash |
|
|
( |
) |
|
|
( |
) |
Net increase in cash and cash equivalents, and restricted cash |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash |
|
|
|
|
|
|
||
Beginning of period |
|
|
|
|
|
|
||
End of period |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8
Membership Collective Group Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
For the 39 Weeks Ended October 3, 2021 and September 27, 2020
(in thousands) |
|
39 Weeks Ended |
|
|||||
|
|
October 3, 2021 |
|
|
September 27, 2020 |
|
||
Cash, cash equivalents and restricted cash are comprised of: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Restricted cash in current assets |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash as of October 3, 2021 and September 27, 2020 |
|
$ |
|
|
$ |
|
||
Supplemental disclosures: |
|
|
|
|
|
|
||
Cash paid for interest (including settlement of paid-in-kind interest) |
|
$ |
|
|
$ |
|
||
Cash paid for income taxes |
|
|
|
|
|
|
||
Supplemental disclosures of non-cash investing and financing activities: |
|
|
|
|
|
|
||
Conversion of senior convertible preference shares to Class A common stock, including deemed dividend upon conversion of $ |
|
$ |
|
|
$ |
|
||
SHHL C2 ordinary shares issued in exchange for acquisitions of businesses and noncontrolling interests (Note 3) |
|
|
|
|
|
|
||
Conversion of related party loan to SHHL A ordinary shares |
|
|
|
|
|
|
||
Operating lease assets obtained in exchange for new operating lease liabilities |
|
|
|
|
|
|
||
Accrued offering costs |
|
|
|
|
|
|
||
Non-cash dividends on senior convertible preference shares (Note 15) |
|
|
|
|
|
|
||
Accrued capital expenditures |
|
|
|
|
|
|
||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
9
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Membership Collective Group Inc. (“MCG”) is a global membership platform of physical and digital spaces that connects a vibrant, diverse group of members from across the world. These members use the MCG platform to both work and socialize, to connect, create, have fun and drive a positive change. Our members engage with us through our global portfolio of 30 Soho Houses, 9 Soho Works Clubs, The Ned in London, Scorpios Beach Club in Mykonos, Soho Home, our interiors and lifestyle retail brand, and our digital channels.
MCG was incorporated on February 10, 2021 under the laws of the State of Delaware. On July 19, 2021, we completed the initial public offering (“IPO”) of Class A of our common stock pursuant to a Registration Statement on Form S-1 (File No. 333-257206). Immediately prior to the closing of the IPO, we completed the following reorganization transactions (the "Reorganization Transactions") which resulted in changes to our common stock and issued and outstanding shares:
In the IPO, we sold
The net proceeds from the IPO were $
During periods preceding the IPO that are presented in these unaudited interim condensed consolidated financial statements, our business was conducted through SHHL, a Jersey, Channel Islands private limited company, and its subsidiaries and joint ventures. As a result of the Reorganization Transactions, SHHL became a wholly-owned subsidiary of MCG. Such transactions were accounted for as a reorganization and, therefore, the consolidated financial statements of MCG in periods after the IPO recognize the assets and liabilities received in the Reorganization Transactions at their historical carrying amounts, as reflected in the historical financial statements of SHHL.
The consolidated entity presented is referred to herein as “MCG”, “we”, “us”, “our”, or the “Company”, as the context requires and unless otherwise noted.
Basis of Presentation
The unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for reporting interim information on Form 10-Q.The preparation of the financial statements in conformity with US GAAP requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the periods presented. We consistently applied the accounting policies described in the consolidated financial statements of SHHL as of and for the year ended January 3, 2021 included in Amendment No. 1 to the Company’s Form S-1 filed with the SEC on July 6, 2021 in preparing these unaudited condensed consolidated financial statements, other than those impacted by new accounting standards as described below.
We operate on a fiscal year calendar consisting of a 52-or 53-week period ending on the last Sunday in December or the first Sunday in January of the next calendar year. In a 52-week fiscal year, each quarter contains 13 weeks of operations; in a 53-week fiscal year, each of the first, second and third quarters includes 13 weeks of operations and the fourth quarter includes 14 weeks of operations.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been omitted in accordance with the rules and regulations of the SEC. The year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by US GAAP. The unaudited condensed consolidated financial statements include normal recurring adjustments, which in the opinion of management are necessary for the fair presentation of the condensed consolidated balance sheets, condensed consolidated statements of operations, of comprehensive loss, of changes in redeemable shares and shareholders’ equity (deficit), and of cash
10
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
flows for the periods presented. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto, included in Amendment No. 1 to the Company’s Form S-1 filed with the SEC on July 6, 2021.
The results of operations for the 13-week and 39-week periods ending October 3, 2021 and September 27, 2020 are not necessarily indicative of the operating results for the full fiscal year or any future periods.
The unaudited condensed consolidated statement of operations and statement of comprehensive loss for the 39 weeks ended October 3, 2021 include the correction of an error related to the Company’s consolidated financial statements for the fiscal years ended January 3, 2021 and December 29, 2019. The error relates to the correction of a consolidating adjustment for foreign currency transaction gains of $
Certain prior period amounts have been reclassified to conform to the current period presentation with no impact on previously reported net loss or cash flows, and no material impact on financial position.
Going Concern
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared assuming the Company will continue as a going concern. The going concern basis of presentation assumes that we will continue in operation for at least a period of 12 months after the date these financial statements are issued, and contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
We have experienced net losses and significant cash outflows from cash used in operating activities over the past years as we develop our Houses. During the 13 weeks and 39 weeks ended October 3, 2021, the Company incurred a consolidated net loss of $
In addition, since March 2020, the COVID-19 pandemic has significantly impacted our business and we have had to temporarily close some or all of our Houses, hotels and public restaurants, at different times due to the ongoing effects of the pandemic, which has and will continue to have an impact on our revenues. At the date of issuance of these condensed consolidated financial statements, our Houses are open where possible.
In assessing the going concern basis of preparation of the condensed consolidated financial statements for the 13 weeks and 39 weeks ended October 3, 2021, we have taken into consideration detailed cash flow forecasts for the Company, the Company’s forecast compliance with bank covenants, and the continued availability of funding to the Company from banks and shareholders.
We have considered the impact of the COVID-19 pandemic on the Company and the resultant global economic uncertainties and have undertaken are-assessment of the cash flow forecasts covering a period of at least
We believe that the completed working capital events, our projected cash flows and the actions available to management to further control expenditure, as necessary, provide the Company with sufficient working capital (including cash and cash equivalents) to achieve its plans to recover from the impact of the pandemic, subject to the following key factors:
11
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
While the impact of lockdowns and other restrictions may re-occur beyond current expectations and impact the Company’s ability to keep open Houses and return to a level of operation consistent with pre COVID-19 within the timeframes assumed in management’s detailed cash flow forecasts, we believe that the Company has sufficient financial resources together with an established and cash generative business model, and access to capital.
Based on the available cash as a result of completed financing events discussed above, and the measures that have been put in place to control costs, we believe that the Company is able to continue in operational existence, meet its liabilities as they fall due, operate within its existing facilities, and meet all of its covenant requirements for a period of at least twelve months from the date these financial statements are issued.
Based on the above, the condensed consolidated financial statements have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, we continue to adopt the going concern basis in preparing the condensed consolidated financial statements for the 13 weeks and 39 weeks ended October 3, 2021.
Offering Costs
Comprehensive Loss
The entire balance of accumulated other comprehensive income (loss), net of income taxes, is related to the cumulative translation adjustment in each of the periods presented. The changes in the balance of accumulated other comprehensive income (loss), net of income tax, are attributable solely to the net change in the cumulative translation adjustment in each of the periods presented, and include the error correction described above during the 39 weeks ended October 3, 2021.
Recently Adopted Accounting Standards
In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU is part of the FASB’s simplification initiative, which aims to reduce unnecessary complexity in US GAAP. The ASU’s amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The Company elected to early adopt the ASU on January 4, 2021. The provisions of this ASU have been applied on a modified retrospective basis and did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures.
Cipura Acquisition
Prior to May 2021, the Company held a
The Cipura Acquisition was accounted for as a business combination under the acquisition method of accounting. As a result, the Company recognized less than $
As a result of the acquisition, the Company recognized goodwill of $
12
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
operating lease right-of-use asset and associated lease liability of $
The unaudited condensed consolidated financial statements include the results of Cipura from May 10, 2021 through October 3, 2021, however such results are considered immaterial to the overall operations of the Company. The unaudited condensed consolidated statements of operations for the 39 weeks ended October 3, 2021 also include less than $
Mandolin Acquisition
On May 10, 2021, the Company acquired the intellectual property rights for Mr. Mandolin and Mrs. Mandolin (the “Mandolin IP”) in exchange for issuing
Soho Works Acquisition
On May 10, 2021, the Company issued
Scorpios Noncontrolling Interests Acquisitions
On April 30, 2021, the Company acquired an additional
Line and Saguaro Acquisition
On June 22, 2021 the Company entered into a membership interests purchase agreement with Sydell Group LLC (“Sydell”) to acquire all of the outstanding shares in the companies that together operate existing and future “The Line” and “Saguaro” hotels in the United States (the “Line and Saguaro Acquisition”). The hotels that are currently operational are located in Los Angeles, Washington DC, Austin, Scottsdale and Palm Springs, and between them offer a variety of food and beverage offerings together with approximately 1,470 hotel rooms. An additional hotel is under development in San Francisco. The Company issued
The Line and Saguaro Acquisition was accounted for as a business combination under the acquisition method of accounting. The only acquired identifiable assets are related to the hotel management agreements intangible asset, which has a total fair value of $
As a result of the Line and Saguaro Acquisition, the Company recognized $
The condensed consolidated financial statements include the results of the acquired business from June 22, 2021 through October 3, 2021, however such results are considered immaterial to the overall operations of the Company. The condensed consolidated statements of operations for the 39 weeks ended October 3, 2021 also include less than $
13
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
The C2 ordinary shares issued in the transactions described above were exchanged for Class A common stock of MCG in connection with our IPO in July 2021, as further described in Note 1, Nature of the Business.
The Company determined that it is the primary beneficiary of the following material variable interest entities (“VIEs”): Soho Restaurants Limited (13 weeks and 39 weeks ended October 3, 2021 and 13 weeks ended September 27, 2020 only); Soho House-Sydell, LLP (all periods presented); Soho Works Limited (all periods presented); and Soho Works North America, LLC (all periods presented).
Soho Restaurants Limited
Soho Restaurants Limited (“Soho Restaurants”) is a casual fast-dining business that operates various restaurants throughout the UK. Prior to the August 2020 reorganization of Soho Restaurants (as further described below), the Company provided unsecured non-interest bearing loan notes (“Soho Restaurants Loan Notes”) to Soho Restaurants from time to time and guaranteed the obligations of Soho Restaurants under certain property leases with respect to any required rental and other payments. Prior to the year ended January 3, 2021, the Company did not have to make any payments under these rental guarantees and determined that the likelihood of the Company having to perform under the guarantees was remote. As a result of the impact of the COVID-19 pandemic on Soho Restaurants’ operations, the Company reassessed the likelihood of performance under the guarantees and recognized a charge of $
On August 18, 2020, Soho Restaurants underwent a series of reorganization steps, through which Quentin Partners Limited (“Quentin Partners”), an affiliate of the Company, became the sole equity holder of Soho Restaurants Limited. As part of these reorganization steps, various notes payable and receivable held by Soho Restaurants were acquired, settled, or, in some cases, forgiven. Specifically, Quentin Partners acquired for nominal consideration (and forgave) all outstanding Soho Restaurants Loan Notes with the exception of a £
The Soho Restaurants reorganization transaction was accounted for using the acquisition method of accounting. Upon initial consolidation, the Company recognized $
Soho House-Sydell, LLP
The Soho House-Sydell, LLP joint venture maintains a management agreement to operate The Ned, which is owned by unconsolidated related parties to the Company. Management fees are recognized in other revenues in the condensed consolidated statements of operations.
Soho Works Limited and Soho Works North America, LLC
The following table summarizes the carrying amounts and classification of the consolidated VIEs’ assets and liabilities included in the condensed consolidated balance sheets. The obligations of the consolidated VIEs other than Soho Restaurants Limited are non-recourse to the Company, and the assets of the VIEs can be used only to settle those obligations.
14
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
October 3, 2021⁽¹⁾ |
|
|
January 3, 2021 |
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Restricted cash |
|
|
|
|
|
|
||
Accounts receivable |
|
|
|
|
|
|
||
Inventories |
|
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
|
|
|
|
||
Total current assets |
|
|
|
|
|
|
||
Property and equipment, net |
|
|
|
|
|
|
||
Operating lease assets |
|
|
|
|
|
|
||
Other intangible assets, net |
|
|
|
|
|
|
||
Other non-current assets |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
Accounts payable |
|
|
|
|
|
|
||
Accrued liabilities |
|
|
|
|
|
|
||
Indirect and employee taxes payable |
|
|
|
|
|
|
||
Current portion of operating lease liabilities - sites trading less than one year |
|
|
|
|
|
|
||
Current portion of operating lease liabilities - sites trading more than one year |
|
|
|
|
|
|
||
Other current liabilities |
|
|
|
|
|
|
||
Total current liabilities |
|
|
|
|
|
|
||
Debt |
|
|
|
|
|
|
||
Operating lease liabilities, net of current portion - sites trading less than one year |
|
|
|
|
|
|
||
Operating lease liabilities, net of current portion - sites trading more than one year |
|
|
|
|
|
|
||
Other non-current liabilities |
|
|
|
|
|
|
||
Total liabilities |
|
$ |
|
|
$ |
|
||
Net assets |
|
$ |
|
|
$ |
|
||
The Company maintains a portfolio of equity method investments owned through noncontrolling interests in investments with one or more partners. There have been no changes in the Company’s equity method investment ownership interests in existing entities (other than the Cipura Acquisition, as described in Note 3, Acquisitions) and
Toronto Joint Venture
On March 28, 2012, the Company and two unrelated investors (“Toronto Partners”) formed Soho House Toronto to establish and operate a house in Toronto, Canada. The Company is responsible for managing the development and operations of the property with key operating decisions requiring joint approval with the Toronto Partners.
Barcelona Joint Venture
On January 28, 2014, the Company and an unrelated development partner (“Barcelona Partner”) formed Mimea XXI, S.L.U. (“Mimea”) to establish and operate Soho House Barcelona in Barcelona, Spain. Soho House Barcelona is owned by Mirador Barcel S.L., a subsidiary of Mimea. On June 4, 2020, the Company entered into an agreement to operate Little Beach House Barcelona, a private members club and hotel developed at the existing Barcelona property. Little Beach House Barcelona is a newly formed subsidiary under Mimea.
56-60 Redchurch Street, London Joint Venture
15
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
On July 6, 2015, the Company and an unrelated investor (“Raycliff Partner”) formed Raycliff Red LLP (“Club Row Rooms”) to develop and operate a hotel at 58-60 Redchurch Street intended to provide additional members’ accommodation to the nearby Shoreditch House in London. This was later extended to include 56 Redchurch Street under the same terms. The Company is responsible for managing the operations of the property and the Raycliff Partner is responsible for managing the building.
The Company concluded that it is not the primary beneficiary of the Soho House Toronto or 56-60 Redchurch Street, London VIEs in any of the periods presented, as its joint venture partners have the power to participate in making decisions related to the majority of significant activities of each investee. Accordingly, the Company concluded that application of the equity method of accounting is appropriate for these investees. Barcelona was previously determined to be a VIE; however, the execution of amended governing documents in June 2020 constitutes a reconsideration event and Barcelona no longer meets the VIE criteria.
Summarized Financial Information
The following tables present summarized financial information for all unconsolidated equity method investees. The Company’s maximum exposure to losses related to its equity method investments is limited to its ownership interests, as well as certain guarantees.
(in thousands) |
|
13 Weeks Ended |
|
|
39 Weeks Ended |
|
||||||||||
|
|
October 3, 2021 |
|
|
September 27, 2020 |
|
|
October 3, 2021⁽¹⁾ |
|
|
September 27, 2020 |
|
||||
Revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Operating income (loss) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Net income (loss) (2) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
(in thousands) |
|
As of |
|
|||||
|
|
October 3, 2021⁽¹⁾ |
|
|
January 3, 2021 |
|
||
Current assets |
|
$ |
|
|
$ |
|
||
Non-current assets |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
Current liabilities |
|
|
|
|
|
|
||
Non-current liabilities |
|
|
|
|
|
|
||
Total liabilities |
|
$ |
|
|
$ |
|
||
The Company’s equity method investees have not yet adopted ASC 842, Leases; therefore, the balance sheets of equity method investees do not include operating right-of-use assets and liabilities.
The Company has entered into various lease agreements for its Houses, hotels, restaurants, spas and other properties across North America, Europe, and Asia. The Company’s material leases have reasonably assured lease terms ranging from
As part of our overall plan to improve liquidity during the COVID-19 pandemic, the Company negotiated with certain lessors to defer or waive certain rent payments on leased buildings. Cash payment deferrals and waivers have been separately recorded in the period arrangements occurred, and therefore, there have been no remeasurements to the lease liabilities and right-of-use assets associated with the sites that received concessions. The Company accounted for the deferrals of lease payments as if there are no changes in the lease contract. Deferred amounts have been recognized in accounts payable and subsequent reversals will occur once the payments are made. As of October 3, 2021 and January 3, 2021, $
16
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
The maturity of the Company’s operating and finance lease liabilities as of October 3, 2021 is as follows:
(in thousands) |
|
Operating |
|
|
Finance |
|
||
Undiscounted lease payments |
|
|
|
|
|
|
||
Remainder of 2021 |
|
$ |
|
|
$ |
|
||
2022 |
|
|
|
|
|
|
||
2023 |
|
|
|
|
|
|
||
2024 |
|
|
|
|
|
|
||
2025 |
|
|
|
|
|
|
||
Thereafter |
|
|
|
|
|
|
||
Total undiscounted lease payments |
|
|
|
|
|
|
||
Present value adjustment |
|
|
|
|
|
|
||
Total net lease liabilities |
|
$ |
|
|
$ |
|
||
As of October 3, 2021 and January 3, 2021, the long-term liabilities for finance leases were $
Certain lease agreements include variable lease payments that, in the future, will vary based on changes in the local inflation rates, market rate rents, or business revenues of the leased premises. Leases that contain market rate rents generally reset every
Straight-line rent expense recognized for operating leases was $
For the 13 weeks ended October 3, 2021 and September 27, 2020, the Company recognized amortization expense related to the right-of-use asset for finance leases of less than $
New Houses typically have a maturation profile that commences sometime after the lease commencement date used in the determination of the lease accounting in accordance with Topic 842. The condensed consolidated balance sheets set out the operating lease liabilities split between sites trading less than one year and sites trading more than one year. “Sites trading less than one year” and “sites trading more than one year” reference sites that have been open (as measured from the date the site first accepted a paying guest) for a period less than one year from the balance sheet date and those that have been open for a period longer than one year from the balance sheet date.
The following information represents supplemental disclosure for the statement of cash flows related to operating and finance leases:
(in thousands) |
|
39 Weeks Ended |
|
|||||
|
|
October 3, 2021 |
|
|
September 27, 2020 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
||
Operating cash flows from operating leases |
|
$ |
( |
) |
|
$ |
( |
) |
Interest payments for finance leases |
|
|
( |
) |
|
|
( |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
||
Principal payments for finance leases |
|
$ |
( |
) |
|
$ |
( |
) |
Supplemental disclosures of non-cash investing and financing activities: |
|
|
|
|
|
|
||
Operating lease assets obtained in exchange for new operating lease liabilities |
|
$ |
|
|
$ |
|
||
The following summarizes additional information related to operating and finance leases:
17
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
39 Weeks Ended |
|
|||||
|
|
October 3, 2021 |
|
|
September 27, 2020 |
|
||
Weighted-average remaining lease term |
|
|
|
|
|
|
||
Finance leases |
|
|
|
|
||||
Operating leases |
|
|
|
|
||||
Weighted-average discount rate |
|
|
|
|
|
|
||
Finance leases |
|
|
% |
|
|
% |
||
Operating leases |
|
|
% |
|
|
% |
||
As of October 3, 2021, the Company has entered into 9 operating lease agreements for Houses, hotels, restaurants, and other properties that are in various stages of construction by the landlord. The Company will determine the classification as of the lease commencement date, but currently expects these under construction leases to be operating leases. Soho House Design (“SHD”) is involved to varying degrees in the design of these leased properties under construction. For certain of these leases, the Soho House Design team is acting as the construction manager on behalf of the landlord. Pending significant completion of all landlord improvements and final execution of the related lease, the Company expects these leases to commence in fiscal years ending 2021, 2022, 2023 and 2026. The Company estimates the total undiscounted lease payments for the leases commencing in fiscal years 2021, 2022, 2023 and 2026 will be $
The following summarizes the Company’s estimated future undiscounted lease payments for current leases under construction, including properties where the Soho House Design team is acting as the construction manager:
(in thousands) |
|
Operating |
|
|
Fiscal year ending |
|
Construction |
|
|
Estimated total undiscounted lease payments |
|
|
|
|
Remainder of 2021 |
|
$ |
|
|
2022 |
|
|
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
Thereafter |
|
|
|
|
Total undiscounted lease payments expected to be capitalized |
|
$ |
|
|
The Company’s revenues consist primarily of annual membership fees and initial registration fees; food and beverage, accommodation and spa revenues generated in the Company’s Houses; and revenues that are not generated within the Houses, such as revenues from the stand-alone restaurants, as well as design fees from Soho House Design, Soho Home, retail Cowshed products, Soho Works sites, the Scorpios Beach Club, and management fees from The Ned. Disaggregated revenue disclosures for the 13 weeks and 39 weeks ended October 3, 2021 and September 27, 2020 are included in Note 20, Segments.
The following table includes estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period ending October 3, 2021. The Company applies the practical expedient and does not disclose information about remaining performance obligations for contracts that have original expected durations of one year or less.
(in thousands) |
|
Next twelve |
|
|
Future periods |
|
||
Membership and registration fees |
|
$ |
|
|
$ |
|
||
Total future revenues |
|
$ |
|
|
$ |
|
||
All consideration from contracts with customers is included in the amounts presented above.
The following table provides information about contract receivables, contract assets and contract liabilities from contracts with customers:
(in thousands) |
|
October 3, 2021 |
|
|
January 3, 2021 |
|
||
Contract receivables |
|
$ |
|
|
$ |
|
||
Contract assets |
|
|
|
|
|
|
||
Contract liabilities |
|
|
|
|
|
|
||
18
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Contract assets consist of accrued unbilled income related to build-out contracts and are recognized in prepaid expenses and other assets on the condensed consolidated balance sheets.
Contract liabilities include deferred membership revenue, hotel deposits (which are presented in accrued liabilities on the condensed consolidated balance sheets), and gift vouchers. Revenue recognized that was included in the contract liability balance as of the beginning of the period was $
Inventories consist of raw materials, service stock and supplies (primarily food and beverage) and finished goods which are externally sourced. Raw materials and service stock and supplies totaled $
The table below presents the components of prepaid expenses and other current assets.
(in thousands) |
|
October 3, 2021 |
|
|
January 3, 2021 |
|
||
Amounts owed by equity method investees |
|
$ |
|
|
$ |
|
||
Prepayments and accrued income |
|
|
|
|
|
|
||
Contract assets |
|
|
|
|
|
|
||
Other receivables |
|
|
|
|
|
|
||
Total prepaid expenses and other current assets |
|
$ |
|
|
$ |
|
||
Additions totaled $
A summary of goodwill for each of the Company’s applicable reportable segments from January 3, 2021 to October 3, 2021 is as follows:
(in thousands) |
|
UK |
|
|
North America |
|
|
Europe and |
|
|
Total |
|
||||
January 3, 2021 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Cipura Acquisition (Note 3) |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Line and Saguaro Acquisition (Note 3) |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Foreign currency translation adjustment |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
October 3, 2021 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Refer to Note 3, Acquisitions, for information on additional intangible assets recognized during the 39 weeks ended October 3, 2021 in connection with the Cipura Acquisition, Mandolin Acquisition, and the Line and Saguaro Acquisition.
(in thousands) |
|
October 3, 2021 |
|
|
January 3, 2021 |
|
||
Accrued interest |
|
$ |
|
|
$ |
|
||
Hotel deposits |
|
|
|
|
|
|
||
Trade, capital and other accruals |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
Included in trade, capital and other accruals is $
The balance of other current liabilities on the condensed consolidated balance sheets includes a contingent liability of $
19
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Debt balances, net of debt issuance costs, are as follows:
(in thousands) |
|
October 3, 2021 |
|
|
January 3, 2021 |
|
||
Revolving credit facilities, interest at |
|
$ |
— |
|
|
$ |
|
|
Permira Senior Facility, interest at |
|
|
— |
|
|
|
|
|
US government-backed bank loan, interest at |
|
|
— |
|
|
|
|
|
Senior Secured Notes, interest at |
|
|
|
|
|
— |
|
|
Other loans (see additional description below) |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Less: Current portion of long-term debt |
|
|
( |
) |
|
|
( |
) |
Total long-term debt, net of current portion |
|
$ |
|
|
$ |
|
||
Property mortgage loans, net of debt issuance costs, are as follows:
(in thousands) |
|
October 3, 2021 |
|
|
January 3, 2021 |
|
||
Term loan, interest at |
|
$ |
|
|
$ |
|
||
Mezzanine loan, interest at |
|
|
|
|
|
|
||
Total property mortgage loans |
|
$ |
|
|
$ |
|
||
Related party loans, net of current portion and imputed interest, are as follows:
(in thousands) |
|
October 3, 2021 |
|
|
January 3, 2021 |
|
||
Related party loans, unsecured, |
|
$ |
|
|
$ |
|
||
Related party loans, unsecured, |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Less: Current portion of related party loans |
|
|
( |
) |
|
|
( |
) |
Total related party loans, net of current portion |
|
$ |
|
|
$ |
|
||
The weighted-average interest rate on fixed rate borrowings was
Debt
The descriptions below show the financial instrument amounts in the currency of denomination with USD equivalent in parentheses, where applicable, translated using the exchange rates in effect at the time of the respective transaction.
On December 5, 2019, the Company entered into a £
20
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
In April 2017, the Company entered into the Permira Senior Facility, which consisted of a £
On April 24, 2020, the Company entered into an unsecured promissory note under the Paycheck Protection Program (the “PPP”), with a principal amount of $
On March 31, 2021, Soho House Bond Limited, a wholly-owned subsidiary of the Company, issued pursuant to a Notes Purchase Agreement senior secured notes, which were subscribed for by certain funds managed, sponsored or advised by Goldman Sachs & Co. LLC or its affiliates, in aggregate amounts equal to $
The remaining loans consist of the following:
|
|
Currency |
|
Maturity date |
|
Principal |
|
|
Applicable |
|
||
Greek Street loan |
|
£ |
|
|
$ |
|
|
|
% |
|||
Farmhouse loan⁽¹⁾ |
|
£ |
|
|
|
|
|
|
% |
|||
Soho House Hong Kong loan⁽2⁾ |
|
$ |
|
|
|
— |
|
|
|
|||
Compagnie de Phalsbourg credit facility |
|
€ |
|
|
|
|
|
|
% |
|||
Optima Bank loan |
|
€ |
|
|
|
|
|
|
% |
|||
Greek government loan |
|
€ |
|
|
|
|
|
|
% |
|||
Property Mortgage Loans
21
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
In February 2019, the Company refinanced an existing term loan and mezzanine loan associated with a March 2014 corporate acquisition of Soho Beach House Miami with a new term loan and mezzanine loan. The new term loan of $
The loans bear interest at
Related Party Loans
In 2017, Soho Works Limited entered into a term loan facility agreement with two individuals who are the holders of the Company’s redeemable preferred shares related to a £
In August 2020, the Company entered into a non-interest bearing loan agreement with a noncontrolling interest shareholder of certain of its subsidiaries in Greece for a principal amount of less than €
Shareholders of the Company provided £
The following table presents future principal payments for the Company’s debt, property mortgage loans, and related party loans as of October 3, 2021:
(in thousands) |
|
|
|
|
Remainder of 2021 |
|
$ |
|
|
2022 |
|
|
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
Thereafter |
|
|
|
|
|
|
$ |
|
|
Recurring and Non-recurring Fair Value Measurements
There were
Fair Value of Financial Instruments
The Company believes the carrying values of its financial instruments related to current assets and liabilities approximate fair value due to short-term maturities.
The Company believes that the carrying value of the Senior Secured Notes (excluding debt issuance costs of $
With respect to the fair value of the Permira Senior Facility as of January 3, 2021, the Company does not believe that its financial performance or creditworthiness changed significantly since the inception of the facility, which was issued at par with a floating interest rate of LIBOR (subject to a floor of
22
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
The fair value of the remaining debt is estimated to be equal to the current carrying value of each instrument based on a comparison of each instrument’s contractual terms to current market terms. The Company does not believe that the use of different market inputs would have resulted in a materially different fair value of debt as of October 3, 2021 and January 3, 2021.
The following table presents the estimated fair values (all of which are Level 2 fair value measurements) of the Company’s debt instruments with maturity dates in 2022 and thereafter:
(in thousands) |
|
Carrying Value |
|
|
Fair Value |
|
||
October 3, 2021 |
|
|
|
|
|
|
||
Senior Secured Notes |
|
$ |
|
|
$ |
|
||
Property mortgage loans |
|
|
|
|
|
|
||
Other non-current debt |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
(in thousands) |
|
Carrying Value |
|
|
Fair Value |
|
||
January 3, 2021 |
|
|
|
|
|
|
||
Related party loans |
|
$ |
|
|
$ |
|
||
Permira Senior Facility |
|
|
|
|
|
|
||
US government-backed bank loan |
|
|
|
|
|
|
||
Property mortgage loans |
|
|
|
|
|
|
||
Other non-current debt |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
The carrying values of the Company’s other non-current liabilities and non-current assets approximate their fair values.
In August 2020, the Company established the 2020 Equity and Incentive Plan (the “2020 Plan”) under which Share Appreciation Rights (”SARs”) and Growth Shares were issued to certain of its employees. According to the provisions of the 2020 Plan, the awards would be settled in ordinary D shares of SHHL and the Company could grant up to
In July 2021, the Company established its 2021 Equity and Incentive Plan (the "2021 Plan"). The 2021 Plan allows for grants of nonqualified stock options, SARs, and restricted stock units ("RSUs"), or performance awards. There were
On July 19, 2021, the Company granted
Share-based compensation during the 13 weeks and 39 weeks ended October 3, 2021 and the 13 weeks and 39 weeks ended September 27, 2020 was recorded in the condensed consolidated statements of operations within general and administrative expense as shown in the following tables:
|
|
13 Weeks Ended |
|
|
39 Weeks Ended |
|
||||||||||
(in thousands) |
|
October 3, 2021 |
|
|
September 27, 2020 |
|
|
October 3, 2021 |
|
|
September 27, 2020 |
|
||||
SARs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Restricted stock awards (Growth Shares) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
RSUs |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Total share-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Tax benefit for share-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Share-based compensation expense, net of tax |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
As of October 3, 2021, total compensation expense not yet recognized is as follows:
23
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
In May 2016, the Company issued
On March 31, 2021, the Company issued
On July 19, 2021, all of the outstanding Senior Preference Shares were converted into an aggregate of
On August 23, 2019, the Company issued redeemable C ordinary shares to an unrelated third party. On the same date, the new investor purchased A ordinary shares directly from Mr. Nick Jones; these shares were immediately converted into an equal number of redeemable C ordinary shares. On November 4, 2019, the Company issued additional shares to the same investor, resulting in a total of
On May 19, 2020, the Company issued an additional
An investor option was provided in conjunction with the redeemable C ordinary shares issued on May 19, 2020. In March 2021, the investor option was exercised for the full $
On December 8, 2020, Mr. Nick Jones sold certain of his A ordinary shares to an unrelated third party and as a condition of the transaction, the A ordinary shares were converted into
On July 19, 2021, all of the outstanding C ordinary shares were exchanged into an aggregate of
Prior to the IPO, SHHL had five classes of ordinary shares: A ordinary shares , B ordinary shares, C ordinary shares (a portion of which had certain redemption rights), C2 ordinary shares and D ordinary shares. Each ordinary shareholder was entitled pari passu to dividend payments or any other
24
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
distributions, subject to certain minimum return thresholds being met in the case of B ordinary shares and D ordinary shares. Holders of A ordinary shares and redeemable C ordinary shares were entitled to
Immediately prior to the closing of the IPO, affiliates of The Yucaipa Companies, LLC, and Messrs. Ron Burkle, Nick Jones, and Richard Caring exchanged their A ordinary shares, B ordinary shares, C ordinary shares and D ordinary shares for
Holders of Class A common stock and Class B common stock are entitled to receive dividends out of legally available funds on a pari passu basis. Holders of Class A common stock are entitled to
The tables below present changes in each class of the Company’s redeemable preferred shares, ordinary shares and common stock, as applicable:
|
|
|
|
|
|
SHHL Ordinary Shares |
|
||||||||||||
(in thousands except for share data) |
SHHL Redeemable Preferred Shares |
|
SHHL Redeemable C Ordinary Shares |
|
|
A |
|
B |
|
C2 |
|
D |
|
||||||
As of December 29, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
As of March 29, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Conversion of related party loan to SHHL A ordinary shares |
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
Issuance of SHHL redeemable C ordinary shares |
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
As of June 28, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Share-based compensation, net of tax |
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
As of September 27, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
SHHL Ordinary Shares |
|
|
MCG Common Stock |
|
|||||||||||||||||||
(in thousands except for share data) |
SHHL Redeemable Preferred Shares |
|
SHHL Redeemable C Ordinary Shares |
|
|
A |
|
B |
|
C |
|
C2 |
|
D |
|
|
Class A |
|
Class B |
|
|||||||||
As of January 3, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Issuance of senior convertible preference shares (Note 15) |
|
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
Issuance of SHHL redeemable C ordinary shares (Note 16) |
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
As of April 4, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
SHHL C2 ordinary shares issued in connection with the Cipura Acquisition (Note 3) |
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
— |
|
|
SHHL C2 ordinary shares issued in connection with the Mandolin Acquisition (Note 3) |
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
— |
|
|
Purchase of Soho Works North America noncontrolling interests (Note 3) |
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
— |
|
|
Purchase of Scorpios noncontrolling interests (Note 3) |
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
— |
|
|
SHHL C2 ordinary shares issued in connection with the Line and Saguaro Acquisition (Note 3) |
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
— |
|
|
As of July 4, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Effect of the Reorganization Transactions (Note 1) |
|
— |
|
|
( |
) |
|
|
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
|
|
|
|
|
||
Issuance of common stock in connection with initial public offering |
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
Redemption of the May 2016 preferred shares |
|
( |
) |
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
Conversion of senior convertible preference shares into Class A common stock (Note 1) |
|
( |
) |
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
As of October 3, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
25
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
The Company computes loss per share using the two-class method. As the liquidation and dividend rights are identical, the undistributed earnings or losses are allocated on a proportionate basis to each class of common stock, and the resulting basic and diluted loss per share attributable to common stockholders are therefore the same for Class A and Class B common stock.
As discussed in Note 1, Nature of the Business, immediately prior to the IPO, the Company completed certain reorganization transactions which resulted in changes to our common stock and issued and outstanding shares but no change in relative shareholder rights, rank, or value before and after the reorganization transaction. As such, the Reorganization Transactions were considered to have an equivalent effect to a stock split and require retrospective treatment for purposes of computing loss per share. All share and per share information has been retroactively adjusted to reflect the impact of the Reorganization Transactions for all periods presented. The issuance of shares in the IPO and the impact of the conversion of the Senior Preference Shares into Class A common stock are included in the calculation of loss per share prospectively from the date of issuance or conversion, as the case may be.
The tables below illustrate the reconciliation of the loss and the number of shares used in the calculations of basic and diluted loss per share:
|
|
13 Weeks Ended |
|
|
39 Weeks Ended |
|
||||||||||
(in thousands except share and per share amounts) |
|
October 3, 2021 |
|
|
September 27, 2020 |
|
|
October 3, 2021 |
|
|
September 27, 2020 |
|
||||
Net loss attributable to Membership Collective Group Inc. |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Less: Cumulative May 2016 preferred shares undeclared dividends |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Less: Incremental accretion of May 2016 preferred shares to redemption value |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Add: Foreign currency remeasurement of redeemable preferred shares |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Less: Non-cash dividends on the Senior Preference Shares |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Less: Preferred shares deemed dividend upon conversion |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Adjusted net loss attributable to Class A and Class B common stockholders |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Weighted average shares outstanding for basic and diluted loss per share for Class A and Class B common stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic and diluted loss per share |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
The net loss attributable to the Company in calculating basic and diluted loss per share for all periods presented is adjusted for cumulative undeclared dividends on the May 2016 preferred shares. In addition, the net loss attributable to the Company in calculating basic and diluted loss per share for the 13 weeks and 39 weeks ended October 3, 2021 is adjusted for non-cash dividends on the Senior Preference Shares and the impact of the deemed dividend to the holders of Senior Preference Shares upon their conversion into MCG Class A common stock.
The loss per share calculations for the 13 weeks and 39 weeks ended September 27, 2020 exclude additional shares that would be issuable to the holders of SHHL redeemable C ordinary shares in the event of a public listing that resulted in the value of the SHHL redeemable C ordinary shares being less than the investor’s initial subscription price, because the impact of including such additional shares would be anti-dilutive. In addition, the loss per share calculation for the 13 weeks and 39 weeks ended October 3, 2021 and September 27, 2020 exclude the impact of unvested Growth Shares (which were exchanged into restricted stock awards in connection with the IPO) because the inclusion of such shares in diluted loss per share would be anti-dilutive.
Litigation Matters
The Company is not a party to any litigation other than litigation in the ordinary course of business. The Company’s management and legal counsel do not expect that the ultimate outcome of any of its currently ongoing legal proceedings, individually or collectively, will have a material adverse effect on the Company’s condensed consolidated financial statements.
Commitments and Contingencies
In connection with the closure of Houses across the world beginning on March 14, 2020, the Company in its discretion issued membership credits to members to be redeemed for certain Soho House products and services. Membership credits were issued as a one-time goodwill gesture deemed to be a marketing offer to members, and were initially set to expire on December 31, 2020. The liability associated with the membership credits is derecognized based on the usage of credits and the cost of the inventory or services to fulfill the Company’s obligation to its members; this liability is classified within other current liabilities on the Company’s condensed consolidated balance sheet. In March 2021, the Company decided in its discretion to further extend the expiration date to September 30, 2021. The Company simultaneously adjusted its obligation based on its best estimate of the cost to be incurred. The redemption rate used to estimate the obligation associated with the membership credits was based on the Company’s cumulative experience to-date. An estimated liability of $
26
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
27, 2020, respectively, which are included within other expense in the condensed consolidated statements of operations. The expense recognized during the 13 weeks ended October 3, 2021 is net of $
Capital Commitments
As of October 3, 2021, capital expenditure commitments contracted for but not yet incurred total $
For the 13 weeks and 39 weeks ended October 3, 2021, there have been no material changes in the Company’s estimates or provisions for income taxes recorded in the unaudited condensed consolidated balance sheet. The Company has generated incremental deferred tax assets relating to tax losses, share-based compensation, and excess interest of $
The effective tax rate for the 13 weeks ended October 3, 2021 was (
27
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
The Company’s core operations comprise of Houses and restaurants across a number of territories, which are managed on a geographical basis. In addition to Houses and restaurants, the Company offers other products and services, such as retail, home & beauty products and services, which comprise its Retail, Home & Beauty operating segment. The Company also provides build-out and design services, which comprise its Soho House Design operating segment.
The Company has identified the following four reportable segments:
The Company analyzed the results of the Retail, Home & Beauty and Soho Works operating segments and concluded that they did not warrant separate presentation as reportable segments as they do not provide additional useful information to the readers of the financial statements. Therefore, these segments are included as part of an “All Other” category.
The Company manages and assesses the performance of the reportable segments by adjusted EBITDA, which 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 the Company does not consider in its 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) of equity method investments, foreign exchange, pre-opening expenses, non-cash rent, deferred registration fees, net, share of equity method investments adjusted EBITDA, and share-based compensation expense.
The following tables present disaggregated revenue for the 13 weeks and 39 weeks ended October 3, 2021 and September 27, 2020 and the key financial metrics reviewed by the Chief Operating Decision Maker (“CODM”) for the Company’s reportable segments:
(in thousands) |
|
13 Weeks Ended October 3, 2021 |
|
|||||||||||||||||||||||||||||||
|
|
North |
|
|
|
UK |
|
|
|
Europe & |
|
|
|
Soho |
|
|
Reportable |
|
|
All |
|
|
Total |
|
||||||||||
Membership revenues |
|
$ |
|
$ |
— |
|
$ |
|
$ |
— |
|
$ |
|
$ |
— |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
In-House revenues |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Other revenues |
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total segment revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Elimination of equity accounted revenue |
|
|
( |
) |
|
|
|
( |
) |
|
— |
|
|
( |
) |
|
— |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
Consolidated revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||||
(in thousands) |
|
13 Weeks Ended September 27, 2020 |
|
|||||||||||||||||||||||||||||
|
|
North |
|
|
UK |
|
|
|
Europe & |
|
|
|
Soho |
|
|
Reportable |
|
|
All |
|
|
Total |
|
|||||||||
Membership revenues |
|
$ |
|
|
$ |
|
$ |
— |
|
$ |
|
$ |
— |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
In-House revenues |
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Other revenues |
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total segment revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Elimination of equity accounted revenue |
|
|
( |
) |
|
|
( |
) |
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||||
Consolidated revenue |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||||
28
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(in thousands) |
|
39 Weeks Ended October 3, 2021 |
|
|||||||||||||||||||||||||
|
|
North |
|
|
UK |
|
|
Europe |
|
|
Soho |
|
|
Reportable |
|
|
All |
|
|
Total |
|
|||||||
Membership revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
In-House revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Other revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total segment revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Elimination of equity accounted revenue |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
$ |
( |
) |
|
|
|
|
|
( |
) |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Consolidated revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
(in thousands) |
|
39 Weeks Ended September 27, 2020 |
|
|||||||||||||||||||||||||
|
|
North |
|
|
UK |
|
|
Europe |
|
|
Soho |
|
|
Reportable |
|
|
All |
|
|
Total |
|
|||||||
Membership revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
In-House revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Other revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total segment revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Elimination of equity accounted revenue |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Consolidated revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Revenue recognized from Soho House Design totaled $
29
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following tables present the reconciliation of reportable segment adjusted EBITDA to total consolidated segment revenue and the reconciliation of net loss to adjusted EBITDA:
(in thousands) |
|
13 Weeks Ended October 3, 2021 |
|
|||||||||||||||||||||||||
|
|
North |
|
|
UK |
|
|
Europe |
|
|
Soho |
|
|
Reportable |
|
|
All |
|
|
Total |
|
|||||||
Total consolidated segment revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Total segment operating expenses |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Share of equity method investments adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Reportable segments adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|||||
Unallocated corporate overhead |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||||
Consolidated adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||||
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||||
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||||
Loss on sale of property and other, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||||
Share of income of equity method investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Foreign exchange |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||||
Pre-opening expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||||
Non-cash rent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||||
Deferred registration fees, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||||
Share of equity method investments adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||||
Share-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||||
Other expenses, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||||
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
( |
) |
||||||
30
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
13 Weeks Ended September 27, 2020 |
|
|||||||||||||||||||||||||
(in thousands) |
|
North |
|
|
UK |
|
|
Europe & |
|
|
Soho |
|
|
Reportable |
|
|
All |
|
|
Total |
|
|||||||
Total consolidated segment revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Total segment operating expenses |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Share of equity method investments adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Reportable segments adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|||||
Unallocated corporate overhead |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||||
Consolidated adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||||
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||||
Income tax benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Gain on sale of property and other, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Share of loss of equity method investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||||
Foreign exchange |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Pre-opening expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||||
Non-cash rent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Deferred registration fees, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Share of equity method investments adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||||
Share-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||||
Other expenses, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||||
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
( |
) |
||||||
(in thousands) |
|
39 Weeks Ended October 3, 2021 |
|
|||||||||||||||||||||||||
|
|
North |
|
|
UK |
|
|
Europe & |
|
|
Soho |
|
|
Reportable |
|
|
All |
|
|
Total |
|
|||||||
Total consolidated segment revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Total segment operating expenses |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Share of equity method investments adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Reportable segments adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|||||
Unallocated corporate overhead |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||||
Consolidated adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||||
31
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
Gain on sale of property and other, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share of income of equity method investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
Pre-opening expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
Non-cash rent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
Deferred registration fees, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
Share of equity method investments adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
Share-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
Other expenses, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
( |
) |
32
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(in thousands) |
|
39 Weeks Ended September 27, 2020 |
|
|||||||||||||||||||||||||
|
|
North |
|
|
UK |
|
|
Europe & |
|
|
Soho |
|
|
Reportable |
|
|
All |
|
|
Total |
|
|||||||
Total consolidated segment revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Total segment operating expenses |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Share of equity method investments adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|||||
Reportable segments adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|||||
Unallocated corporate overhead |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||||
Consolidated adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||||
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||||
Income tax benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Gain on sale of property and other, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Share of loss of equity method investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||||
Foreign exchange |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||||
Pre-opening expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||||
Non-cash rent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||||
Deferred registration fees, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||||
Share of equity method investments adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||||
Share-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||||
Other expenses, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||||
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
( |
) |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
33
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(in thousands) |
|
13 Weeks Ended |
|
|
39 Weeks Ended |
|
||||||||||
|
|
October 3, 2021 |
|
|
September 27, 2020 |
|
|
October 3, 2021 |
|
|
September 27, 2020 |
|
||||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income tax expense (benefit) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
EBITDA |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss (gain) on sale of property and other, net |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Share of (profit) loss of equity method investments |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Foreign exchange |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Pre-opening expenses (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Non-cash rent |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Deferred registration fees, net |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Share of equity method investments adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Share-based compensation expense, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other expenses, net (2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjusted EBITDA |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
The following table presents long-lived asset information (which includes property and equipment, net, operating lease right-of-use assets and equity method investments) by geographic area as of October 3, 2021 and January 3, 2021. Asset information by segment is not reported internally or otherwise regularly reviewed by the CODM.
(in thousands) |
|
October 3, 2021 |
|
|
January 3, 2021 |
|
||
Long-lived assets by geography |
|
|
|
|
|
|
||
United Kingdom |
|
$ |
|
|
$ |
|
||
North America |
|
|
|
|
|
|
||
All other foreign countries |
|
|
|
|
|
|
||
Total long-lived assets |
|
$ |
|
|
$ |
|
||
In 2017, Soho Works Limited entered into a term loan facility agreement with two individuals who were the holders of the Company’s redeemable preferred shares until the redemption of such shares during the 13 weeks ended October 3, 2021. For additional information, refer to Note 12, Debt – Related Party Loans.
In 2013, 2016, 2018, and 2019, the Company entered into certain loans with its existing shareholders, affiliates of The Yucaipa Companies, LLC, Richard Caring and Nick Jones. These loans have been repaid or converted into ordinary shares of SHHL as of January 3, 2021. For additional information, refer to Note 12, Debt – Related Party Loans.
The amounts owed by (to) equity method investees due within one year are as follows:
34
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(in thousands) |
|
October 3, 2021 |
|
|
January 3, 2021 |
|
||
Soho House Toronto Partnership |
|
$ |
( |
) |
|
$ |
( |
) |
Soho House—Cipura (Miami), LLC |
|
|
|
|
|
|
||
Raycliff Red LLP |
|
|
( |
) |
|
|
( |
) |
Mirador Barcel S.L. |
|
|
|
|
|
|
||
Little Beach House Barcelona S.L. |
|
|
( |
) |
|
|
|
|
Mimea XXI S.L. |
|
|
|
|
|
|
||
|
|
$ |
( |
) |
|
$ |
( |
) |
Amounts owed by equity method investees due within one year are included in prepaid expenses and other current assets on the condensed consolidated balance sheets. Amounts owed to equity method investees due within one year are included in other current liabilities on the condensed consolidated balance sheets.
In 2016, Soho Works Limited, a consolidated VIE, entered into an agreement to lease a property under construction by the landlord with Store Holding Group Ltd, a wholly-owned subsidiary of the noncontrolling interest holders of SWL. The handover of six floors of the leased property occurred on a floor-by-floor basis upon substantial completion of landlord improvements, resulting in
The Company is party to a property lease arrangement with The Yucaipa Companies LLC. The operating lease asset and liability associated with this lease are $
Through Soho-Ludlow Tenant LLC, the Company is a party to a property lease agreement dated May 3, 2019 for 137 Ludlow Street, New York with Ludlow 137 Holdings LLC, an affiliate of The Yucaipa Companies LLC. This lease runs for a term of
The Company leases the Ludlow property from 139 Ludlow Acquisition LLC, an equity method investee. This is a
The Company leases the Tel Aviv House from an affiliate of Raycliff Capital, LLC which held a portion of the SHHL redeemable C ordinary shares prior to the IPO and continues to hold Class A common stock of MCG. This lease commenced on June 1, 2021. The operating lease right-of-use asset and liability associated with this lease were $
In return for arranging, and providing financial and transaction advisory services in connection with, the issuance of the Senior Secured Notes and the Senior Preference Shares as described in Note 12, Debt, and Note 15, Redeemable Preferred Shares, respectively, an affiliate of Yucaipa Companies LLC received a fee in an aggregate amount of $
In return for its role as sponsor in connection with our IPO, an affiliate of Yucaipa Companies LLC received a fee of $
First Amended and Restated Note Purchase Agreement
On November 15, 2021, Soho House Bond Limited, a wholly-owned subsidiary of the Company, entered into the First Amended and Restated Note Purchase Agreement (the “First Note Amendment”), which amends and restates in its entirety the existing Notes Purchase Agreement (the “Notes
35
Membership Collective Group Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Purchase Agreement”), dated March 23, 2021, for an aggregate of $
The First Note Amendment amends the Notes Purchase Agreement to, among other things, transition reporting from accounting principles generally accepted in the United Kingdom to accounting principles generally accepted in the United States of America.
The Initial Notes are guaranteed and secured on substantially the same basis as our Revolving Credit Facility, which was also amended and restated on November 15, 2021, as described below.
First Amended and Restated Revolving Credit Facility Agreement
On November 15, 2021, Soho House Bond Limited, a wholly-owned subsidiary of the Company entered into the First Amended and Restated Revolving Facility Agreement (the "First Amendment"), which amends and restates in its entirety the existing £
The First Amendment amends the Revolving Credit Facility to, among other things, change the reference rate under the Revolving Credit Facility for borrowings denominated in pounds sterling from a LIBOR-based rate to a SONIA-based rate and to transition reporting from accounting principles generally accepted in the United Kingdom to accounting principles generally accepted in the United States of America.
36
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
Management’s discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes and other financial information included elsewhere in this Quarterly Report on Form10-Qand our audited consolidated financial statements and notes thereto and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our final prospectus dated July 14, 2021 that forms a part of our Registration Statement on FormS-1(File No. 333-257206),as filed with the Securities and Exchange Commission pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the “Securities Act”), on July 16, 2021.
In addition to historical financial information, this discussion and other parts of this report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, based upon current expectations that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the “Risk Factors” section in this Quarterly Report on Form 10-Q, and under Part II, Item 1A below. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results and events to differ from those anticipated. These statements are based upon information currently available to us, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements, like all statements in this report, speak only as of their date, and we undertake no obligation to update or revise these statements in light of future developments. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.
Overview
Our Membership Platform
The Membership Collective Group (“MCG”) is a global membership platform of physical and digital spaces that connects a vibrant, diverse group of members from across the world. These members use the MCG platform to both work and socialize, to connect, create, have fun and drive a positive change.
We began with the opening of the first Soho House in 1995 and remain the only company to have scaled a private membership platform with a global presence. Over the last 26 years, we have expanded our membership expertise and diversified our offerings—both physically and digitally. As of October 3, 2021, we have over 144,500 members (including over 117,700 Soho House members) who engage with MCG through our global portfolio of 32 Soho Houses, 9 Soho Works, The Ned in London, Scorpios Beach Club in Mykonos, Soho Home, our interiors and lifestyle retail brand, and our digital channels.
The central pillar of MCG is Soho House, which drives the majority of our membership and revenue today. Since the opening of our first House in the Soho district of London in 1995, we have successfully identified the demand for a premium membership offering that caters to a progressive, creative and diverse global audience. Today, we believe our membership offering, consistently high standards of service, and our global footprint remain unparalleled. A Soho House membership offers access to a network of distinctive and carefully curated Houses, across North America, the United Kingdom, Europe and Asia, which serve as the cornerstone of our member experience. We enhance our member experience through our digital channels, including the SH.APP and our website. Our vision for the SH.APP has always been for it to be like having a House in your pocket. It’s our central destination for members to make bookings and payments, to connect with each other and access video content and podcasts — made for our members, by our members. Annually, we host thousands of physical and digital member events worldwide, spanning film, fashion, art, food and drink, well-being, work and music—and help our members forge connections to bring them closer together.
Our membership expertise, honed through the growth of Soho House, has led to our evolution into the Membership Collective Group, a home to numerous memberships including Cities Without Houses, Soho Works, Soho Friends, Soho House Digital, SOHO HOME+ and Ned’s Club. By designing, curating and growing our membership offering, our membership platform can quickly and easily respond to shifting lifestyle trends and the evolution of our members’ needs. Our memberships work together, allowing us to reach new audiences with a set of interconnected offerings.
Everything we do across these memberships begins and ends with our members. The foundation of our member experience has been crafted over our 26-year history and is built on the following pillars:
37
Our membership has remained resilient through multiple economic cycles and the COVID-19 pandemic. When our physical sites were forced to close as a result of the COVID-19 pandemic, there was minimal impact on the retention of Soho House members. The power of our model is driven by the important role we believe that we play in our members’ lives and the value we consistently provide them for their membership fees. We believe our retention compares favorably to leading consumer subscriptions or memberships—across music, media, fitness, entertainment and commerce—despite, in many cases, their significantly lower price points.
The demand for our membership is also demonstrated by our large and growing MCG global wait list, which as of October 3, 2021 stands at over 66,700 applicants. Awareness of our distinct membership offerings and their scarcity is spread by our members organically through word of mouth, social media and press coverage.
There are multiple consumer forces at play that have increased the relevance of our memberships. We have observed a secular shift in the ways that people live and work—with less time spent in traditional corporate offices and more time in social spaces that encourage creativity and mutual engagement. We believe that these trends will only accelerate, and that the freedom to be able to choose where to live and work—particularly in light of the COVID-19 pandemic—will likely have a significant impact on our target market. We believe this will create an even greater demand for curated communities that can grow and thrive in a more deliberate environment.
For the 13 weeks ended October 3, 2021, of our $180 million in revenue, $51 million (28%) was attributable to Membership Revenues, $67 million (37%) to In-House Revenues, and $62 million (34%) to Other Revenues. For the 13 weeks ended September 27, 2020, of our $114 million in revenue, $42 million (37%) was attributable to Membership Revenues, $30 million (26%) to In-House Revenues, and $42 million (37%) to Other Revenues.
For the 39 weeks ended October 3, 2021, of our $376 million in revenue, $137 million (36%) was attributable to Membership Revenues, $129 million (34%) to In-House Revenues, and $111 million (30%) to Other Revenues. For the 39 weeks ended September 27, 2020, of our $313 million in revenue, $135 million (43%) was attributable to Membership Revenues, $101 million (32%) to In-House Revenues, and $77 million (25%) to Other Revenues.
Membership Revenues are comprised of annual membership fees and one-time initial registration fees paid by members. In-House Revenues include all revenues realized within our Houses, including food and beverage, accommodation, and spa products and treatments. Other Revenues include all revenues not realized within our Houses, including Scorpios, Soho Works and standalone restaurants, design and procurement fees from Soho House Design and Soho Home among others. We view Membership Revenues and In-House Revenues as interrelated, insofar as although there is no minimum spend for any member on our In-House offerings that generate In-House Revenues. In practice the significant majority of In-House Revenues are generated by our members, and the pricing of our In-House offerings reflects that accordingly, with pricing of such In-House offerings being identical for both members and non-members.
Our Membership Platform
All of our memberships have been built to enrich the lives of their members, as well as expand our membership offering to a broader audience.
Soho House
Soho House remains at the core of our membership platform by creating a foundation upon which additional membership businesses can be built and scaled. While our physical Houses provide our foundation, the people inside them are the soul of Soho House. As a membership founded for the creative industries, we are proud to have championed members who have gone on to shape our cultural landscape as world class writers, artists, performers, directors, founders, designers, and producers – all reflecting the spirit and energy of Soho House.
The membership of each House is assembled by a select committee of influential creatives and innovators that represent the local area in which the membership is founded. Our members actively engage in creating the culture of each House, helping to shape and localize it by participating in member events and contributing to editorial and digital content. We believe this adds to the value of each House, enriching the membership and enhancing the attractiveness of membership to prospective members worldwide. With a current US Every House annual membership fee of approximately $3,400 providing access to all of our Houses globally, we believe our membership offering provides compelling value to our members that increases as we add new Houses and more members to our global community. Our Houses attract members from every demographic, with members from “Generation Z” (21 years old and younger) and “Millennials”(22- to 37-year-olds)constituting the fastest-growing cohorts. We also believe that the pricing of our In-House offerings represents great value to our members because of the level of quality provided, reinforcing the overall membership experience, rewarding their brand loyalty and creating opportunities for future and recurring revenues.
We created the following types of membership under Soho House to reach a broader audience and enhance the experience of our existing members:
In 2017, we introduced a new type of Soho House membership known as Cities Without Houses (‘CWH’), which opens up the Soho House membership to people who live in cities where we do not yet have a physical House. This membership allows us to welcome members to our global community in new geographies, generates additional revenues on our existing base of Houses and provides
38
intelligence for future growth, which we have employed to open new Houses in certain locations, including in Austin, Texas, which partially open in June 2021, and Paris, which is expected to open in the second half of 2021. We currently have more than 4,300 CWH members across 45 cities.
The ambition for Soho House has always been to create a truly global membership that brings creative people together, from all over the world. We believe that we will be able to achieve this through the introduction of Soho House Digital Membership—a new, paid digital-only membership that we are now actively working on. Not limited by our physical footprint, Soho House Digital Membership will expand our global reach, allowing us to move further into Asia, Africa and South America, adding fascinating creatives from dynamic cities to our membership.
Soho House Digital Membership will be subject to the same application and approval process as Soho House membership, allowing like-minded individuals to connect, communicate and collaborate with each other, in a purely digital space through the SH.APP. It will make our membership truly diverse, and will enable the best creatives from all over the world to make meaningful connections with each other. In the same way that we’ve grown Cities Without Houses membership in 45 cities around the world, we will use our connections and liaisons on the ground in new cities to build awareness of digital membership, growing it organically through existing creative communities.
By leveraging our digital platforms in this way, and removing the reliance on physical spaces to experience the benefits of our membership, we have created a gateway to previously untapped growth opportunities. We believe this new membership type will be attractive to potential members who are already used to socializing, networking and working digitally. Existing Soho House members will also receive the full functionalities of the Soho House Digital Membership, and therefore, the introduction of the Soho House Digital Membership only serves to improve the richness of their membership experience, making it more valuable – with new opportunities to connect with and consume content from a truly global and diverse membership base.
There are a significant number of people who enjoy the Soho House way of living and who have already visited our Houses as guests, stayed in our bedrooms, or visited our public restaurants and spas, but do not currently have a Soho House membership. To respond to this audience, we launched Soho Friends in November 2020 for an annual subscription cost of £100. We offer access to physical spaces, including Soho House bedrooms, and Soho Studios (our new social spaces for Soho Friends and Soho House members) that host curated programs of events and screenings, with additional benefits from our restaurants, spas and online retail brands, although Soho Friends do not have full access to our Houses. As of October 3, 2021, we had 17,890 Soho Friends members. We intend to grow this membership brand in a measured way so that our Soho House members continue to account for the majority of visitors to our Houses and restaurants.
Soho Home
Soho Home was created as a result of the constant requests from our members to recreate the look and feel of the Houses in their own homes. Soho Home is an interiors and lifestyle retail brand that offers handcrafted furniture, lighting, textiles, tableware and accessories through ecommerce. Over the past year, we have transformed Soho Home into a high growth retail business, and in October 2020, we launched SOHO HOME+, which is a subscription-based membership platform with 4,380 members as of October 3, 2021, that offers price discounts, free delivery, and expert design advice plus early access to new collections and seasonal sales for an annual price of £60.
Soho Works
First launched in 2015, Soho Works provides its members with the space and resources to work alongside other like-minded individuals and businesses—facilitating connections and providing the tools to flourish. Aimed at existing Soho House and Soho Friends members, Soho Works draws on the same design principles and membership ethos as Soho House, but is a space purposed entirely for work and creative collaboration.
Beginning with one location in London, we have since opened eight additional sites in London, New York and Los Angeles over the last two years and as of October 3, 2021, we had 4,497 members. Soho Works membership rates vary by location and Soho House membership status. For Soho House members, a US Soho Works membership ranges from $100—$650 per month, depending on membership type.
Scorpios Beach Club
Set in a cove on the southern tip of Mykonos, Scorpios offers a one of a kind beach experience with a well-established globally recognized brand. With a restaurant, terraces and daybeds, and a distinctive wellness offering, Scorpios enriches the lives of its guests who are looking to escape from their daily lives. We believe the Scorpios concept has significant potential to expand into additional locations as a key part of our platform and we expect to open our second site in Tulum, Mexico at the end of 2022. While we do not currently offer a standalone membership, there is significant interest from our customers to do so and we therefore plan to launch a unique Scorpios membership in 2022.
The Ned
The Ned has created a new space in the heart of the City of London for its members to meet, eat, drink and socialize. The Ned brand seeks to embody a “city within a city” full-service destination, by playing host to multiple restaurants, bedrooms, a range of grooming services, spa, gym and a full service members’
39
club. The membership offered by The Ned (“Ned’s Club”) is aimed at a broader group of professional people. As of October 3, 2021, Ned’s Club had just over 2,700 members, and intends to expand into additional cities beyond London. We have recently launched Ned Friends – a more accessible membership similar to Soho Friend for frequent visitors and customers of The Ned. We receive management fees under our hotel management contract for the operation of The Ned.
The Line
On June 22, 2021, we acquired the operating agreements relating to the ‘The Line’ and ‘Saguaro’ hotels. The hotels that are currently operational are located in Los Angeles, Washington, Austin, Scottsdale and Palm Springs, and among them offer a variety of food and beverage offerings together with approximately 1,470 hotel rooms. A further hotel is under development in San Francisco. We receive management fees under our hotel management contract for the operation of these hotels. We believe the transaction will broaden our geographic reach in North America. Refer to Item 1 Financial Statements Note 3 Acquisitions for further information.
Factors Affecting Our Business
We believe the coveted lifestyle brand we have created has significant and proven growth potential. This potential, combined with the stability of our membership base, we believe will enable us to maintain our position as an industry leader in the future. We expect to grow our member base by growing the number of Soho Houses, continuing to scale our existing membership brands and launching and growing new membership brands. We believe our track record in expanding and growing our platform will position us to achieve significant and sustained growth.
A significant portion of our revenues is derived from House Revenues which consist of Membership Revenues and In-House Revenues. Our Membership Revenues, which are reflective of our steady and growing global brand, help to provide us with a recurring revenue base that limits the impact of fluctuations in regional economic conditions.
Our business and future performance is also affected by a variety of factors, including:
Reportable Segments
Our operations consist of four reportable segments (United Kingdom, North America, Europe and Rest of the World (“ROW”), Soho House Design) and one non-reportable segment that we present as “all other”. Each of our segments includes all operations in that region including our Houses and all associated facilities, spas and stand-alone restaurants. Refer to Note 20 - Segments in this Quarterly Report on Form 10-Q for more information on reportable segments.
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.
40
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 in “Non-GAAP Financial Measures”) 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 North America and the rest of the world compared with the UK and Europe. Membership Revenues provide a stable and recurring source of revenues which have few direct costs and, as such, is a reliable and predictable source of cash flow.
HOUSE MEMBERSHIP REVENUES. House Membership Revenues is an important performance indicator and is defined in “Non-GAAP Financial Measures.”
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.
Non-GAAP Financial Measures
We refer to Adjusted EBITDA, House-Level Contribution, House-Level Contribution Margin, Other Contribution and Other Contribution Margin throughout this Quarterly Report on Form 10-Q,as we use these measures to evaluate our operating performance and each of these measures is defined in “Non-GAAP Financial Measures.” We believe these measures are useful to investors in evaluating our operating performance. Adjusted EBITDA, House-Level Contribution, House-Level Contribution Margin, Other Contribution and Other Contribution Margin are all supplemental measures of our performance that are neither required by, nor presented in accordance with, GAAP. Adjusted EBITDA, House-Level Contribution, House-Level Contribution Margin, Other Contribution and Other Contribution Margin should not be considered as substitutes for GAAP metrics such as Operating Loss and Net Loss or any other performance measure derived in accordance with GAAP. Some of our financial and operational data that we disclose in this Quarterly Report on Form 10-Q are 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 the prior period presented. We believe that this calculation provides a more meaningful indication of actual year over year performance and eliminates the fluctuations from currency exchange rates.
41
KEY PERFORMANCE AND OPERATING METRICS
|
|
As of |
|
||||||
|
|
October 3, |
|
|
September 27, |
|
|||
|
|
(Unaudited) |
|
||||||
Number of Soho Houses |
|
|
32 |
|
|
|
|
27 |
|
North America |
|
|
11 |
|
|
|
|
9 |
|
United Kingdom |
|
|
11 |
|
|
|
|
10 |
|
Europe/RoW |
|
|
10 |
|
|
|
|
8 |
|
Number of Soho House Members |
|
|
117,728 |
|
|
|
|
118,134 |
|
North America |
|
|
44,067 |
|
|
|
|
44,822 |
|
United Kingdom |
|
|
47,341 |
|
|
|
|
46,287 |
|
Europe/RoW |
|
|
22,013 |
|
|
|
|
21,781 |
|
All Other |
|
|
4,307 |
|
|
|
|
5,244 |
|
Number of Other Members |
|
|
26,775 |
|
|
|
|
1,391 |
|
North America |
|
|
6,385 |
|
|
|
|
282 |
|
United Kingdom |
|
|
18,372 |
|
|
|
|
1,109 |
|
Europe/RoW |
|
|
2,018 |
|
|
|
|
0 |
|
Number of Active App Users |
|
|
93,410 |
|
|
|
|
70,017 |
|
|
|
13 Weeks Ended |
|
|
13 Weeks Ended |
|
|
39 Weeks Ended |
|
|
39 Weeks Ended |
|
||||||||||||||||||||
|
|
October 3, |
|
|
September 27, |
|
|
October 3, |
|
|
September 27, |
|
|
October 3, |
|
|
September 27, |
|
|
October 3, |
|
|
September 27, |
|
||||||||
|
|
Actuals |
|
|
Actuals |
|
|
Constant Currency(1) |
|
|
Actuals |
|
|
Actuals |
|
|
Constant Currency(1) |
|
||||||||||||||
|
(Unaudited, dollar amounts in thousands) |
|
||||||||||||||||||||||||||||||
Operating loss |
|
$ |
(53,444 |
) |
|
$ |
(15,751 |
) |
|
$ |
(53,444 |
) |
|
$ |
(16,799 |
) |
|
$ |
(163,864 |
) |
|
$ |
(100,992 |
) |
|
$ |
(163,864 |
) |
|
$ |
(110,491 |
) |
Operating loss margin |
|
|
(30 |
)% |
|
|
(14 |
)% |
|
|
(30 |
)% |
|
|
(14 |
)% |
|
|
(44 |
)% |
|
|
(32 |
)% |
|
|
(44 |
)% |
|
|
(32 |
)% |
House-Level Contribution |
|
|
23,950 |
|
|
|
26,647 |
|
|
|
23,950 |
|
|
|
28,418 |
|
|
|
50,816 |
|
|
|
64,039 |
|
|
|
50,816 |
|
|
|
70,062 |
|
House-Level Contribution Margin |
|
|
21 |
% |
|
|
37 |
% |
|
|
21 |
% |
|
|
37 |
% |
|
|
20 |
% |
|
|
27 |
% |
|
|
20 |
% |
|
|
27 |
% |
Other Contribution |
|
|
11,890 |
|
|
|
(2,978 |
) |
|
|
11,890 |
|
|
|
(3,176 |
) |
|
|
(3,613 |
) |
|
|
(12,167 |
) |
|
|
(3,613 |
) |
|
|
(13,311 |
) |
Other Contribution Margin |
|
|
18 |
% |
|
|
(7 |
)% |
|
|
18 |
% |
|
|
(7 |
)% |
|
|
(3 |
)% |
|
|
(15 |
)% |
|
|
(3 |
)% |
|
|
(15 |
)% |
Adjusted EBITDA |
|
|
8,820 |
|
|
|
3,666 |
|
|
|
8,820 |
|
|
|
3,910 |
|
|
|
(26,528 |
) |
|
|
(24,957 |
) |
|
|
(26,528 |
) |
|
|
(27,304 |
) |
Percentage of total revenues |
|
|
5 |
% |
|
|
3 |
% |
|
|
5 |
% |
|
|
3 |
% |
|
|
(7 |
)% |
|
|
(8 |
)% |
|
|
(7 |
)% |
|
|
(8 |
)% |
42
Results of Operations
Comparison of the 13 Weeks Ended October 3, 2021 and September 27, 2020
The following table summarizes our results of operations for the 13 weeks ended October 3, 2021 and September 27, 2020 (in thousands, except percentages):
|
|
13 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
October 3, |
|
|
September 27, |
|
|
|
|
|
September 27, |
|
|
|
|
|||||
|
|
Actuals |
|
|
|
|
|
Currency(1) |
|
|
|
|
||||||||
|
|
(Dollar amounts in thousands) |
|
|
Change % |
|
|
(Dollar amounts in thousands) |
|
|
Constant |
|
||||||||
|
(Unaudited) |
|
||||||||||||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Membership revenues |
|
$ |
51,162 |
|
|
$ |
42,351 |
|
|
|
21 |
% |
|
$ |
45,165 |
|
|
|
13 |
% |
In-House revenues |
|
|
66,859 |
|
|
|
30,162 |
|
|
n/m |
|
|
|
32,166 |
|
|
n/m |
|
||
Other revenues |
|
|
61,538 |
|
|
|
41,666 |
|
|
|
48 |
% |
|
|
44,435 |
|
|
|
38 |
% |
Total revenues |
|
|
179,559 |
|
|
|
114,179 |
|
|
|
57 |
% |
|
|
121,766 |
|
|
|
47 |
% |
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
In-House operating expenses (exclusive of depreciation and amortization) |
|
|
(89,340 |
) |
|
|
(45,432 |
) |
|
|
(97 |
)% |
|
|
(48,451 |
) |
|
|
(84 |
)% |
Other operating expenses (exclusive of depreciation and amortization) |
|
|
(54,379 |
) |
|
|
(45,078 |
) |
|
|
(21 |
)% |
|
|
(48,074 |
) |
|
|
(13 |
)% |
General and administrative expenses |
|
|
(24,369 |
) |
|
|
(17,336 |
) |
|
|
(41 |
)% |
|
|
(18,488 |
) |
|
|
(32 |
)% |
Pre-opening expenses |
|
|
(4,672 |
) |
|
|
(4,588 |
) |
|
|
(2 |
)% |
|
|
(4,893 |
) |
|
|
5 |
% |
Depreciation and amortization |
|
|
(21,500 |
) |
|
|
(15,825 |
) |
|
|
(36 |
)% |
|
|
(16,877 |
) |
|
|
(27 |
)% |
Share-based compensation |
|
|
(15,281 |
) |
|
|
(642 |
) |
|
n/m |
|
|
|
(685 |
) |
|
n/m |
|
||
Foreign exchange (loss) gain, net |
|
|
(14,599 |
) |
|
|
1,656 |
|
|
n/m |
|
|
|
1,766 |
|
|
n/m |
|
||
Other |
|
|
(8,863 |
) |
|
|
(2,685 |
) |
|
n/m |
|
|
|
(2,863 |
) |
|
n/m |
|
||
Total operating expenses |
|
|
(233,003 |
) |
|
|
(129,930 |
) |
|
|
(79 |
)% |
|
|
(138,565 |
) |
|
|
(68 |
)% |
Operating loss |
|
|
(53,444 |
) |
|
|
(15,751 |
) |
|
n/m |
|
|
|
(16,799 |
) |
|
n/m |
|
||
Other (expense) income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest expense, net |
|
|
(20,827 |
) |
|
|
(20,680 |
) |
|
|
(1 |
)% |
|
|
(22,054 |
) |
|
|
6 |
% |
(Loss) gain on sale of property and other, net |
|
|
(31 |
) |
|
|
284 |
|
|
n/m |
|
|
|
303 |
|
|
n/m |
|
||
Share of profit (loss) of equity method investments |
|
|
949 |
|
|
|
(600 |
) |
|
n/m |
|
|
|
(640 |
) |
|
n/m |
|
||
Total other expense, net |
|
|
(19,909 |
) |
|
|
(20,996 |
) |
|
|
5 |
% |
|
|
(22,391 |
) |
|
|
11 |
% |
Loss before income taxes |
|
|
(73,353 |
) |
|
|
(36,747 |
) |
|
|
(100 |
)% |
|
|
(39,190 |
) |
|
|
(87 |
)% |
Income tax (expense) benefit |
|
|
(2,868 |
) |
|
|
158 |
|
|
n/m |
|
|
|
169 |
|
|
n/m |
|
||
Net loss |
|
|
(76,221 |
) |
|
|
(36,589 |
) |
|
n/m |
|
|
|
(39,021 |
) |
|
|
(95 |
)% |
|
Net (loss) income attributable to noncontrolling interest |
|
|
(806 |
) |
|
|
359 |
|
|
n/m |
|
|
|
383 |
|
|
n/m |
|
||
Net loss attributable to Membership Collective Group Inc. |
|
$ |
(77,027 |
) |
|
$ |
(36,230 |
) |
|
n/m |
|
|
$ |
(38,638 |
) |
|
|
(99 |
)% |
|
Components of Operating Results
Revenues
Total Revenue
|
|
13 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
October 3, |
|
|
September 27, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Total revenues |
|
$ |
179,559 |
|
|
$ |
114,179 |
|
|
|
57 |
% |
|
|
47 |
% |
North America |
|
$ |
62,043 |
|
|
$ |
32,712 |
|
|
|
90 |
% |
|
|
90 |
% |
United Kingdom |
|
$ |
58,111 |
|
|
$ |
34,696 |
|
|
|
67 |
% |
|
|
57 |
% |
Europe/RoW |
|
$ |
32,462 |
|
|
$ |
18,521 |
|
|
|
75 |
% |
|
|
64 |
% |
Soho House Design |
|
$ |
7,573 |
|
|
$ |
17,697 |
|
|
|
(57 |
)% |
|
|
-60 |
% |
All Other |
|
$ |
19,370 |
|
|
$ |
10,553 |
|
|
|
84 |
% |
|
|
72 |
% |
43
Membership Revenues
|
|
13 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
October 3, |
|
|
September 27, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Membership revenues |
|
$ |
51,162 |
|
|
$ |
42,351 |
|
|
|
21 |
% |
|
|
13 |
% |
North America |
|
$ |
24,168 |
|
|
$ |
22,243 |
|
|
|
9 |
% |
|
|
9 |
% |
United Kingdom |
|
$ |
16,102 |
|
|
$ |
12,899 |
|
|
|
25 |
% |
|
|
17 |
% |
Europe/RoW |
|
$ |
4,618 |
|
|
$ |
4,838 |
|
|
|
(5 |
)% |
|
|
(11 |
)% |
All Other |
|
$ |
6,274 |
|
|
$ |
2,371 |
|
|
n/m |
|
|
n/m |
|
||
Membership Revenues were $51,162 for the third quarter 2021 compared to $42,351 for the third quarter 2020, an increase of $8,811, or 21%. This increase was predominantly driven by an increase in Adult paying Soho House members at our fully consolidated Houses to 90,525 members from 83,679 in the third quarter 2020. The higher number of members was the result of the recommencement of membership intakes at existing Houses in the third quarter, the continued unfreezing of memberships as well as membership from new Houses openings. There was also an increase in Non-House Membership revenue, following the growth in the number of Soho Friends, Soho Works and Soho HOME+ members, with 25,384 additional members added during the quarter. We also saw strong demand for memberships with the wait list growing to 66,700 as the rate of applications outpaces the number of membership intakes.
Our North America segment saw Membership Revenues of $24,168, which increased from the prior year due to an increase of 2,544 Adult paying members. The UK saw an increase of 9% in Membership Revenues to $16,102, due to an increase of 3,428 Soho House Adult Paying Members. Europe/ROW increased Membership Revenues by $220, or 5%, to $4,618 due to an increase in Soho House Adult Paying Members, with 1,199 more members compared the third quarter 2020.
Our Other segment saw an increase in Membership Revenues to $6,274, driven by the increase in our Non-House Memberships.
In constant currency, Membership Revenues would have increased by $5,996, or 13%.
In-House Revenues
|
|
13 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
October 3, |
|
|
September 27, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
In-House revenues |
|
$ |
66,859 |
|
|
$ |
30,162 |
|
|
n/m |
|
|
n/m |
|
||
North America |
|
$ |
26,455 |
|
|
$ |
7,147 |
|
|
n/m |
|
|
n/m |
|
||
United Kingdom |
|
$ |
30,389 |
|
|
$ |
15,452 |
|
|
|
97 |
% |
|
|
84 |
% |
Europe/RoW |
|
$ |
10,015 |
|
|
$ |
7,563 |
|
|
|
32 |
% |
|
|
24 |
% |
In-House Revenues were $66,859 for the third quarter 2021, compared to $30,162 for the third quarter 2020, an increase of $36,697. The increase was driven by the continued recovery from the COVID-19 pandemic and the removal of many social distancing restrictions. The UK continued to show the strongest momentum, followed by North America, with a notable acceleration of demand across all Houses in September. The group occupancy rate of 67% and the increase in the average daily room rate by 35% reflects the pent-up demand of our members to travel.
In North America In-House Revenues increased by $19,308 to $26,455. Our New York properties saw a recovery throughout the quarter, notwithstanding the introduction of mask and vaccine mandates in September. Our West Coast properties also saw an improving rate of weekly sales through the quarter, benefiting from the vaccine rollout across North America.
In the UK, our Houses maintained their strong momentum from the second quarter with In-House Revenue increasing to $30,389. Countryside properties, including Soho Farmhouse and Babington House, continued to see high occupancy levels, while we also saw a strong recovery of London properties in the quarter.
44
Our Europe/ROW Soho Houses generated $10,015 of In-House Revenues, an increase of $2,452 or 32% compared to $7,563 for the third quarter 2020. This is predominantly driven by gradual easing for COVID-19 restrictions across Europe in the quarter, although international travel restrictions continued to have an adverse impact on occupancy rates and footfall in the region.
In constant currency, In-House Revenues would have increased by $34,692.
Other Revenues
|
|
13 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
October 3, |
|
|
September 27, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Other revenues |
|
$ |
61,538 |
|
|
$ |
41,666 |
|
|
|
48 |
% |
|
|
38 |
% |
North America |
|
$ |
11,420 |
|
|
$ |
3,323 |
|
|
n/m |
|
|
n/m |
|
||
United Kingdom |
|
$ |
11,621 |
|
|
$ |
6,345 |
|
|
|
83 |
% |
|
|
72 |
% |
Europe/RoW |
|
$ |
17,828 |
|
|
$ |
6,119 |
|
|
n/m |
|
|
n/m |
|
||
Soho House Design |
|
$ |
7,573 |
|
|
$ |
17,697 |
|
|
|
(57 |
)% |
|
|
-60 |
% |
All Other |
|
$ |
13,096 |
|
|
$ |
8,182 |
|
|
|
60 |
% |
|
|
50 |
% |
Other Revenues were $61,538 for the third quarter 2021 compared to $41,666 for the third quarter 2020, an increase of $19,872. In North America, public restaurants continued to recover period-on-period, and we also benefited from the acquisition of the remaining 50% share of the Mandolin restaurant in Miami. The North America segment also includes the contribution from our hotel management contracts for the Line and Saguaro Hotels, which saw a strong recovery in their accommodation business, driven by higher room rates and an increase in hotel occupancy during the quarter. UK Other Revenues of $11,621 increased due to the recovery of UK public restaurants, including the impact of Soho Restaurants. In Europe, revenues increased by $11,709 to $17,828 driven by Scorpios Beach club in Mykonos. Although the site was still impacted by local restrictions in the quarter, these restrictions had a lesser impact compared to the same period in 2020.
Our Other segment increased Other Revenues by $4,914, or 60%, predominantly driven by the continued strength in Soho Home, with online sales up 116% and average order value up 129% in the quarter, with 95% sales at full price. We opened Soho Home Studio in London, a 6,000 square foot retail space showcasing both our latest Home range as well as brands launched and owned by members. In constant currency, Other Revenues had an increase of $17,102.
In-House Operating Expenses and House-Level Contribution
|
|
13 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
October 3, |
|
|
September 27, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
In-House operating expenses |
|
$ |
(89,340 |
) |
|
$ |
(45,432 |
) |
|
|
(97 |
)% |
|
|
(84 |
)% |
Percentage of total House revenues |
|
|
(79 |
)% |
|
|
(63 |
)% |
|
|
|
|
|
|
||
Operating loss |
|
$ |
(53,444 |
) |
|
$ |
(15,751 |
) |
|
n/m |
|
|
n/m |
|
||
Operating loss margin |
|
|
(30 |
)% |
|
|
(14 |
)% |
|
|
|
|
|
|
||
House-Level Contribution |
|
$ |
23,950 |
|
|
$ |
26,647 |
|
|
|
(10 |
)% |
|
|
(16 |
)% |
House-Level Contribution Margin |
|
|
21 |
% |
|
|
37 |
% |
|
|
(16 |
)% |
|
|
|
|
House-Level Contribution by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
$ |
9,200 |
|
|
$ |
17,599 |
|
|
|
(48 |
)% |
|
|
(48 |
)% |
United Kingdom |
|
|
10,686 |
|
|
|
5,776 |
|
|
|
85 |
% |
|
|
73 |
% |
Europe/RoW |
|
|
3,356 |
|
|
|
2,114 |
|
|
|
59 |
% |
|
|
49 |
% |
All Other |
|
|
708 |
|
|
|
1,158 |
|
|
|
(39 |
)% |
|
|
(43 |
)% |
House-Level Contribution Margin by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
|
18 |
% |
|
|
60 |
% |
|
|
|
|
|
|
||
United Kingdom |
|
|
23 |
% |
|
|
20 |
% |
|
|
|
|
|
|
||
Europe/RoW |
|
|
23 |
% |
|
|
17 |
% |
|
|
|
|
|
|
||
All Other |
|
|
40 |
% |
|
|
60 |
% |
|
|
|
|
|
|
||
45
In-House Operating Expenses were $89,340 for the third quarter 2021, compared to $45,432 for the third quarter 2020, an increase of $43,908. The increase is largely the result the easing of social distancing measures across many of our sites versus the prior period. In the third quarter of 2020, there was also a one-off credit of $10.5m related to Covid-19 lease amendments.
Our efficiency programs continue to progress well, notwithstanding the inflationary pressures that the industry is facing. We proactively increased wage rates to attract and retain the best labor, and as a result the tight labor market has so far had a limited operational impact on our business. We also gradually increased food, beverage and accommodation prices to partly offset the inflation pressures such that food and beverage cost ratios were still 3% better than the third quarter 2020.
House-Level Contribution, which is defined as House Revenues less In-House Operating Expenses, was $23,950 for the third quarter 2021, compared to $26,647 for the third quarter 2020, a decrease of $2,697 or 10%. The decrease in House-Level Contribution relates to the impact of the one-off credit in the third quarter of 2020.
House-Level Contribution Margin decreased by 16% to 21% for the third quarter 2021 reflecting the impact of the credit as well as the impact from higher In-House expenses period-on-period.
Other Operating Expenses and Other Contribution
|
|
13 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
October 3, |
|
|
September 27, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Other operating expenses |
|
$ |
(54,379 |
) |
|
$ |
(45,078 |
) |
|
|
(21 |
)% |
|
|
(13 |
)% |
Percentage of total other revenues |
|
|
(82 |
)% |
|
n/m |
|
|
|
|
|
|
|
|||
Operating loss |
|
$ |
(53,444 |
) |
|
$ |
(15,751 |
) |
|
n/m |
|
|
n/m |
|
||
Operating loss margin |
|
|
(30 |
)% |
|
|
(14 |
)% |
|
|
|
|
|
|
||
Other Contribution |
|
$ |
11,890 |
|
|
$ |
(2,978 |
) |
|
n/m |
|
|
n/m |
|
||
Other Contribution Margin |
|
|
18 |
% |
|
|
(7 |
)% |
|
|
25 |
% |
|
|
|
|
Other Contribution by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
$ |
3,539 |
|
|
$ |
983 |
|
|
n/m |
|
|
n/m |
|
||
United Kingdom |
|
|
888 |
|
|
|
(942 |
) |
|
n/m |
|
|
n/m |
|
||
Europe/RoW |
|
|
6,103 |
|
|
|
1,163 |
|
|
n/m |
|
|
n/m |
|
||
Soho House Design |
|
|
(278 |
) |
|
|
(929 |
) |
|
|
70 |
% |
|
|
(72 |
)% |
All Other |
|
|
1,638 |
|
|
|
(3,253 |
) |
|
n/m |
|
|
n/m |
|
||
Other Contribution Margin by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
|
31 |
% |
|
|
30 |
% |
|
|
|
|
|
|
||
United Kingdom |
|
|
8 |
% |
|
|
(15 |
)% |
|
|
|
|
|
|
||
Europe/RoW |
|
|
34 |
% |
|
|
19 |
% |
|
|
|
|
|
|
||
Soho House Design |
|
|
(4 |
)% |
|
|
(5 |
)% |
|
|
|
|
|
|
||
All Other |
|
|
9 |
% |
|
|
(38 |
)% |
|
|
|
|
|
|
||
Other Operating Expenses were $54,379 for the third quarter 2021, compared with $45,078 for the third quarter 2020, an increase of $9,301. This increase was driven by the ongoing recovery in our public restaurants, Soho Works sites and Scorpios Beach Club, in addition to some inflationary pressures on salaries and wages at our sites. Furthermore, the increase was driven by higher sales volumes in our Soho Home business.
Other Contribution, which we define as Other Revenues plus Non-House Membership Revenue less Other Operating Expenses, was $11,890 for the third quarter 2021 compared to $2,978 loss for the third quarter 2020, an improvement of $14,868. The improvement was predominantly driven by the growth in Other Revenues across the majority of our businesses. In constant currency, Other Contribution would have increased by $15,066.
Other Contribution Margin was 18% for the third quarter 2021, an increase of 25% compared to the third quarter 2020. The margin improvement was partly driven by an increase in Non-House Membership Revenues in third quarter 2021 in comparison to third quarter 2020, which has a high flow-through to Other Contribution. Additionally, the increase in Other Revenues was greater than the increase in Other Operating Expenses in third quarter 2021 in comparison to third quarter 2020, due to cost management and operational leverage in each of the businesses.
General and Administrative Expenses
46
|
|
13 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
October 3, |
|
|
September 27, |
|
|
Actual |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
General and administrative expenses |
|
$ |
24,369 |
|
|
$ |
17,336 |
|
|
|
41 |
% |
|
|
32 |
% |
Percentage of total revenues |
|
|
14 |
% |
|
|
15 |
% |
|
|
|
|
|
|
||
General and Administrative Expenses were $24,369 for the third quarter 2021, compared with $17,336 for the third quarter 2020, an increase of $7,033, or 41%. The increase was primarily driven by costs to support the increase in operations at our sites, as compared to the third quarter 2020 when most of our sites were operating under capacity and trading restrictions. These costs were partially offset by our ongoing cost savings program, including savings in costs related to our variable cost base. In constant currency, General and Administrative Expenses would have an increase of $5,881, or 32%.
Pre-Opening Expenses
|
|
13 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
October 3, |
|
|
September 27, |
|
|
Actual |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Pre-opening expenses |
|
$ |
4,672 |
|
|
$ |
4,588 |
|
|
|
2 |
% |
|
|
(5 |
)% |
Percentage of total revenues |
|
|
3 |
% |
|
|
4 |
% |
|
|
|
|
|
|
||
Pre-opening expenses were $4,672 for the third quarter 2021, largely driven by the opening of two Soho Houses in Tel Aviv and Paris in the quarter, in addition to the costs related to the upcoming opening of Soho House Rome. This was largely in line with the third quarter 2020. In constant currency, pre-opening expenses would have a decrease of $221, or 5%.
Depreciation and Amortization
|
|
13 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
October 3, |
|
|
September 27, |
|
|
Actual |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Depreciation and amortization |
|
$ |
21,500 |
|
|
$ |
15,825 |
|
|
|
36 |
% |
|
|
27 |
% |
Percentage of total revenues |
|
|
12 |
% |
|
|
14 |
% |
|
|
|
|
|
|
||
Depreciation and Amortization was $21,500 for the third quarter 2021, compared with $15,825 for the third quarter 2020, an increase of $5,675, or 36%. This increase was primarily driven by amortization of capitalized IT development costs, partly related to the development of the SH.APP, as well as depreciation associated with five new Soho Houses that were not open in the third quarter of 2020. In constant currency, Depreciation and Amortization expenses would have increased by $4,623, or 27%.
Other Expenses
|
|
13 Weeks Ended |
|
|
Percent Change |
|||||||
|
|
October 3, |
|
|
September 27, |
|
|
Actual |
|
Constant |
||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|||||
|
|
(Unaudited) |
||||||||||
Share-based compensation |
|
$ |
15,281 |
|
|
$ |
642 |
|
|
n/m |
|
n/m |
Percentage of total revenues |
|
|
9 |
% |
|
|
1 |
% |
|
|
|
|
Foreign exchange loss (gain), net |
|
$ |
14,599 |
|
|
$ |
(1,656 |
) |
|
n/m |
|
n/m |
Percentage of total revenues |
|
|
8 |
% |
|
|
1 |
% |
|
|
|
|
Other |
|
$ |
8,863 |
|
|
$ |
2,685 |
|
|
n/m |
|
n/m |
Percentage of total revenues |
|
|
5 |
% |
|
|
2 |
% |
|
|
|
|
47
Share-based compensation expense was $15,281 for the third quarter 2021, compared to $642 for the third quarter 2020, an increase of $14,639. This increase was primarily driven by the acceleration of vesting for certain outstanding awards in connection with the IPO, in accordance with the original award terms, combined with the fact that the third quarter 2020 included shared-based compensation expense only for a portion of the quarter, based on the grant date of the awards.
Foreign exchange loss (gain), net increased by $16,255 to $14,599 for the third quarter 2021, primarily driven by an increase in non-USD denominated borrowings, which have increased since the preceding period, and foreign exchange volatility.
Other expenses were $8,863 for the third quarter 2021, compared with $2,685 for the third quarter 2020, an increase of $6,178. This increase was primarily driven by non-cash member credit expense of $1 million and costs incurred associated with the IPO of $9 million.
Interest Expense, Net
|
|
13 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
October 3, |
|
|
September 27, |
|
|
Actual |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Interest expense, net |
|
$ |
20,827 |
|
|
$ |
20,680 |
|
|
|
1 |
% |
|
|
(6 |
)% |
Percentage of total revenues |
|
|
12 |
% |
|
|
18 |
% |
|
|
|
|
|
|
||
Net Interest Expense was $20,827 for the third quarter 2021, compared with $20,680 for the third quarter 2020, an increase of $147 or 1%. In the quarter we paid a $5 million exit fee on the Permira Senior Facility upon completion of the IPO transaction. This was partially offset by the refinance our senior facility in March 2021 and the paydown of out Revolving Credit Facility during the third quarter of 2021. In constant currency, net interest would have decreased by $1,227, or 6%, compared to third quarter 2020.
Adjusted EBITDA
|
|
13 Weeks Ended |
|
|
Percent Change |
|||||||
|
|
October 3, |
|
|
September 27, |
|
|
Actual |
|
Constant |
||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|||||
|
|
(Unaudited) |
||||||||||
Adjusted EBITDA |
|
$ |
8,820 |
|
|
$ |
3,666 |
|
|
n/m |
|
n/m |
Percentage of total revenues |
|
|
5 |
% |
|
|
3 |
% |
|
|
|
|
Adjusted EBITDA of $8,820 increased by $5,154 compared to the Adjusted EBITDA in the comparative period primarily due to the higher membership revenues as a result of membership intakes, higher In-House revenues due to the removal of restrictions related to the COVID-19 pandemic, partially offset by higher Operating and General and Administrative Expenses.
Comparison of the 39 Weeks Ended October 3, 2021 and September 27, 2020
The following table summarizes our results of operations for the 39 weeks ended October 3, 2021 and September 27, 2020 (in thousands, except percentages):
48
|
|
39 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
October 3, |
|
|
September 27, |
|
|
|
|
|
September 27, |
|
|
|
|
|||||
|
|
Actuals |
|
|
|
|
|
Currency(1) |
|
|
|
|
||||||||
|
|
(Dollar amounts in thousands) |
|
|
Change % |
|
|
(Dollar amounts in thousands) |
|
|
Constant |
|
||||||||
|
|
(Unaudited) |
|
|||||||||||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Membership revenues |
|
$ |
136,518 |
|
|
$ |
134,559 |
|
|
|
1 |
% |
|
$ |
147,215 |
|
|
|
(7 |
)% |
In-House revenues |
|
|
128,911 |
|
|
|
101,144 |
|
|
|
27 |
% |
|
|
110,657 |
|
|
|
16 |
% |
Other revenues |
|
|
110,610 |
|
|
|
77,032 |
|
|
|
44 |
% |
|
|
84,277 |
|
|
|
31 |
% |
Total revenues |
|
|
376,039 |
|
|
|
312,735 |
|
|
|
20 |
% |
|
|
342,149 |
|
|
|
10 |
% |
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
In-House operating expenses (exclusive of depreciation and amortization) |
|
|
(205,579 |
) |
|
|
(170,095 |
) |
|
|
(21 |
)% |
|
|
(186,093 |
) |
|
|
(10 |
)% |
Other operating expenses (exclusive of depreciation and amortization) |
|
|
(123,257 |
) |
|
|
(90,768 |
) |
|
|
(36 |
)% |
|
|
(99,305 |
) |
|
|
(24 |
)% |
General and administrative expenses |
|
|
(60,374 |
) |
|
|
(57,185 |
) |
|
|
(6 |
)% |
|
|
(62,564 |
) |
|
|
4 |
% |
Pre-opening expenses |
|
|
(15,990 |
) |
|
|
(15,976 |
) |
|
|
(0 |
)% |
|
|
(17,479 |
) |
|
|
9 |
% |
Depreciation and amortization |
|
|
(61,250 |
) |
|
|
(46,950 |
) |
|
|
(30 |
)% |
|
|
(51,366 |
) |
|
|
(19 |
)% |
Share-based compensation |
|
|
(19,958 |
) |
|
|
(642 |
) |
|
n/m |
|
|
|
(702 |
) |
|
n/m |
|
||
Foreign exchange loss, net |
|
|
(30,521 |
) |
|
|
(3,638 |
) |
|
n/m |
|
|
|
(3,980 |
) |
|
n/m |
|
||
Other |
|
|
(22,974 |
) |
|
|
(28,473 |
) |
|
|
19 |
% |
|
|
(31,151 |
) |
|
|
26 |
% |
Total operating expenses |
|
|
(539,903 |
) |
|
|
(413,727 |
) |
|
|
(30 |
)% |
|
|
(452,640 |
) |
|
|
(19 |
)% |
Operating loss |
|
|
(163,864 |
) |
|
|
(100,992 |
) |
|
|
(62 |
)% |
|
|
(110,491 |
) |
|
|
(48 |
)% |
Other (expense) income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest expense, net |
|
|
(67,449 |
) |
|
|
(56,333 |
) |
|
|
(20 |
)% |
|
|
(61,631 |
) |
|
|
(9 |
)% |
Gain on sale of property and other, net |
|
|
6,872 |
|
|
|
273 |
|
|
n/m |
|
|
|
299 |
|
|
n/m |
|
||
Share of profit (loss) of equity method investments |
|
|
123 |
|
|
|
(2,912 |
) |
|
n/m |
|
|
|
(3,186 |
) |
|
n/m |
|
||
Total other expense, net |
|
|
(60,454 |
) |
|
|
(58,972 |
) |
|
|
(3 |
)% |
|
|
(64,518 |
) |
|
|
6 |
% |
Loss before income taxes |
|
|
(224,318 |
) |
|
|
(159,964 |
) |
|
|
(40 |
)% |
|
|
(175,009 |
) |
|
|
(28 |
)% |
Income tax (expense) benefit |
|
|
(2,048 |
) |
|
|
538 |
|
|
n/m |
|
|
|
589 |
|
|
n/m |
|
||
Net loss |
|
|
(226,366 |
) |
|
|
(159,426 |
) |
|
|
(42 |
)% |
|
|
(174,420 |
) |
|
|
(30 |
)% |
Net income attributable to noncontrolling interest |
|
|
2,873 |
|
|
|
3,415 |
|
|
|
(16 |
)% |
|
|
3,736 |
|
|
|
(23 |
)% |
Net loss attributable to Membership Collective Group Inc. |
|
$ |
(223,493 |
) |
|
$ |
(156,011 |
) |
|
|
(43 |
)% |
|
$ |
(170,684 |
) |
|
|
(31 |
)% |
Components of Operating Results
Revenues
Total Revenue
|
|
39 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
October 3, |
|
|
September 27, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
Unaudited |
|
|||||||||||||
Total revenues |
|
$ |
376,039 |
|
|
$ |
312,735 |
|
|
|
20 |
% |
|
|
10 |
% |
North America |
|
$ |
154,308 |
|
|
$ |
123,221 |
|
|
|
25 |
% |
|
|
25 |
% |
United Kingdom |
|
$ |
112,136 |
|
|
$ |
96,480 |
|
|
|
16 |
% |
|
|
6 |
% |
Europe/RoW |
|
$ |
51,107 |
|
|
$ |
39,705 |
|
|
|
29 |
% |
|
|
18 |
% |
Soho House Design |
|
$ |
16,033 |
|
|
$ |
25,527 |
|
|
|
(37 |
)% |
|
|
(43 |
)% |
All Other |
|
$ |
42,455 |
|
|
$ |
27,802 |
|
|
|
53 |
% |
|
|
40 |
% |
49
Membership Revenues
|
|
39 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
October 3, |
|
|
September 27, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
Unaudited |
|
|||||||||||||
Membership revenues |
|
$ |
136,518 |
|
|
$ |
134,559 |
|
|
|
1 |
% |
|
|
(7 |
)% |
North America |
|
$ |
65,840 |
|
|
$ |
72,841 |
|
|
|
(10 |
)% |
|
|
(10 |
)% |
United Kingdom |
|
$ |
44,156 |
|
|
$ |
40,164 |
|
|
|
10 |
% |
|
|
0 |
% |
Europe/RoW |
|
$ |
12,704 |
|
|
$ |
13,698 |
|
|
|
(7 |
)% |
|
|
(15 |
)% |
All Other |
|
$ |
13,818 |
|
|
$ |
7,856 |
|
|
|
76 |
% |
|
|
61 |
% |
Membership Revenues increased by 1% to $136,518 for the 39 weeks ended October 3, 2021. This increase was driven by the recommencement of membership intakes at existing Houses in the third quarter of 2021, the unfreezing of memberships during the second and third quarter of 2021 as well as membership from new House openings in 2021. There was also an increase in Non-House Membership revenue, following the increase in the number of Soho Friends, Soho Works and Soho HOME+ members, with 25,000 additional members in comparison to the end of the third quarter 2020.
Our United Kingdom segment saw an increase in Membership Revenues of $3,992 or 10% due to the opening of 180 House, London, membership intakes as well as the highest rate of membership unfreezing across all regions. In contrast the North America segment saw a decrease in revenues of $7,001 or 10% due to fewer Adult paying members at the end of the third quarter of 2021. The Europe segment saw a decrease in membership revenues of $994 or 7% due to a decrease in Adult paying members.
In constant currency, Membership Revenues would have increased by $10,697, or 7%.
In-House Revenues
|
|
39 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
October 3, |
|
|
September 27, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
In-House revenues |
|
$ |
128,911 |
|
|
$ |
101,144 |
|
|
|
27 |
% |
|
|
16 |
% |
North America |
|
$ |
64,858 |
|
|
$ |
40,039 |
|
|
|
62 |
% |
|
|
62 |
% |
United Kingdom |
|
$ |
48,280 |
|
|
$ |
41,474 |
|
|
|
16 |
% |
|
|
6 |
% |
Europe/RoW |
|
$ |
15,773 |
|
|
$ |
19,631 |
|
|
|
(20 |
)% |
|
|
(27 |
)% |
In-House Revenues were $128,911 for the 39 weeks ended October 3, 2021, an increase of $27,767, or 27% versus the comparative period in 2020. The increase was driven by an easing of social distancing restrictions, new Soho Houses opened in 2021 as well as select price increases across our In-House offering. In-House Revenues have shown an improving trajectory in the last three months ended October 3, 2021. In constant currency, In-House Revenues would have increased by $18,254, or 16%.
Other Revenues
|
|
39 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
October 3, |
|
|
September 27, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Other revenues |
|
$ |
110,610 |
|
|
$ |
77,032 |
|
|
|
44 |
% |
|
|
31 |
% |
North America |
|
$ |
23,610 |
|
|
$ |
10,342 |
|
|
n/m |
|
|
n/m |
|
||
United Kingdom |
|
$ |
19,701 |
|
|
$ |
14,842 |
|
|
|
33 |
% |
|
|
21 |
% |
Europe/RoW |
|
$ |
22,629 |
|
|
$ |
6,375 |
|
|
n/m |
|
|
n/m |
|
||
Soho House Design |
|
$ |
16,033 |
|
|
$ |
25,527 |
|
|
|
(37 |
)% |
|
|
(43 |
)% |
All Other |
|
$ |
28,637 |
|
|
$ |
19,946 |
|
|
|
44 |
% |
|
|
31 |
% |
Other Revenues were $110,610 for the 39 weeks ended October 3, 2021, compared to $77,032 for the 39 weeks ended September 27, 2020, an increase of $33,578, or 44%. This was driven by an additional restaurant in North America, the strong performance of Soho Home, and the impact of Soho Restaurants in the UK as well as the earlier opening in the year of Scorpios in 2021. In constant currency, Other Revenues had an increase of $26,332, or 31%.
50
In-House Operating Expenses and House-Level Contribution
|
|
39 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
October 3, |
|
|
September 27, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
In-House operating expenses |
|
$ |
(205,579 |
) |
|
$ |
(170,095 |
) |
|
|
(21 |
)% |
|
|
(10 |
)% |
Percentage of total House revenues |
|
|
(80 |
)% |
|
|
(73 |
)% |
|
|
|
|
|
|
||
Operating loss |
|
$ |
(163,864 |
) |
|
$ |
(100,992 |
) |
|
|
(62 |
)% |
|
|
(48 |
)% |
Operating loss margin |
|
|
(44 |
)% |
|
|
(32 |
)% |
|
|
|
|
|
|
||
House-Level Contribution |
|
$ |
50,816 |
|
|
$ |
64,039 |
|
|
|
(21 |
)% |
|
|
(27 |
)% |
House-Level Contribution Margin |
|
|
20 |
% |
|
|
27 |
% |
|
|
(7 |
)% |
|
|
|
|
House-Level Contribution by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
$ |
26,895 |
|
|
$ |
40,114 |
|
|
|
(33 |
)% |
|
|
(33 |
)% |
United Kingdom |
|
|
16,747 |
|
|
|
14,863 |
|
|
|
13 |
% |
|
|
3 |
% |
Europe/RoW |
|
|
4,756 |
|
|
|
5,732 |
|
|
|
(17 |
)% |
|
|
(24 |
)% |
All Other |
|
|
2,418 |
|
|
|
3,330 |
|
|
|
(27 |
)% |
|
|
(34 |
)% |
House-Level Contribution Margin by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
|
21 |
% |
|
|
36 |
% |
|
|
|
|
|
|
||
United Kingdom |
|
|
18 |
% |
|
|
18 |
% |
|
|
|
|
|
|
||
Europe/RoW |
|
|
17 |
% |
|
|
17 |
% |
|
|
|
|
|
|
||
All Other |
|
|
46 |
% |
|
|
53 |
% |
|
|
|
|
|
|
||
In-House Operating Expenses were $205,579 for the 39 weeks ended October 3, 2021, an increase of $35,484, or 21%. The increase is a result of new Houses and fewer capacity restrictions related to the COVID-19 pandemic in 2021 and the associated increase in volumes. In the third quarter of 2020, there was also a one-off credit of $10.5m related to Covid-19 lease amendments.
In the nine months ended October 3, 2021, as a result of the impact from the COVID-19 pandemic, governmental agencies in the United Kingdom and European Union provided grants primarily to retain on payroll workers that would have otherwise been terminated and were instead furloughed in accordance with the rules of the applicable national scheme. Such government grants, which under their terms meant that the furloughed employees were prohibited by law from providing the Company with services but kept on payroll rather than being terminated to claim unemployment benefits, totaled $14.8 million the nine months ended October 3, 2021, and are presented as a reduction of payroll expenses within In-House Operating Expenses ($11.4 million), Other Operating Expenses ($2.5 million) and General and Administrative Expenses ($0.9 million). Under the rules of the schemes, we applied to the relevant government agency and recovered the costs of furloughed employees. The net payroll expense within In-House Operating Expenses, Other Operating Expenses and General and Administrative Expenses therefore only reflects the costs incurred from staff that were not furloughed and hence provided revenue generating services. In constant currency, In-House Operating Expenses had an increase of $19,486, or 10%.
House-Level Contribution, which is defined as House Revenues less In-House Operating Expenses, was $50,816 for the 39 weeks ended October 3, 2021, compared to $64,039 for the 39 weeks ended September 27, 2020, a decrease of $13,223 or 21%. The decrease in House-Level Contribution partly relates to the impact of the credit in the third quarter 2020.
House-Level Contribution Margin was 20% for the 39 weeks ended October 3, 2021, an decrease of 7% from the comparative period.
Other Operating Expenses and Other Contribution
51
|
|
39 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
October 3, |
|
|
September 27, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Other operating expenses |
|
$ |
(123,257 |
) |
|
$ |
(90,768 |
) |
|
|
(36 |
)% |
|
|
(24 |
)% |
Percentage of total other revenues |
|
n/m |
|
|
n/m |
|
|
|
|
|
|
|
||||
Operating loss |
|
$ |
(163,864 |
) |
|
$ |
(100,992 |
) |
|
|
(62 |
)% |
|
|
(48 |
)% |
Operating loss margin |
|
|
(44 |
)% |
|
|
(32 |
)% |
|
|
|
|
|
|
||
Other Contribution |
|
$ |
(3,613 |
) |
|
$ |
(12,167 |
) |
|
|
70 |
% |
|
|
73 |
% |
Other Contribution Margin |
|
|
(3 |
)% |
|
|
(15 |
)% |
|
|
12 |
% |
|
|
|
|
Other Contribution by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
$ |
6,258 |
|
|
$ |
(597 |
) |
|
n/m |
|
|
n/m |
|
||
United Kingdom |
|
|
(3,908 |
) |
|
|
(457 |
) |
|
n/m |
|
|
n/m |
|
||
Europe/RoW |
|
|
6,928 |
|
|
|
(1,407 |
) |
|
n/m |
|
|
n/m |
|
||
Soho House Design |
|
|
(5,079 |
) |
|
|
(1,507 |
) |
|
n/m |
|
|
n/m |
|
||
All Other |
|
|
(7,812 |
) |
|
|
(8,199 |
) |
|
|
5 |
% |
|
|
13 |
% |
Other Contribution Margin by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
|
26 |
% |
|
|
(6 |
)% |
|
|
|
|
|
|
||
United Kingdom |
|
|
(20 |
)% |
|
|
(3 |
)% |
|
|
|
|
|
|
||
Europe/RoW |
|
|
31 |
% |
|
|
(22 |
)% |
|
|
|
|
|
|
||
Soho House Design |
|
|
(32 |
)% |
|
|
(6 |
)% |
|
|
|
|
|
|
||
All Other |
|
|
(21 |
)% |
|
|
(38 |
)% |
|
|
|
|
|
|
||
Other Operating Expenses were $123,257 for the 39 weeks ended October 3, 2021, compared with $90,768 for the 39 weeks ended September 27, 2020, an increase of $32,489, or 36%. This increase is primarily driven by six additional restaurants in the UK and one in North America, an increase in In-House Design and Build (“IHDB”) costs and the increase in volumes for Soho Home. In addition, Scorpios was re-opened in May 2021 where as it did not open until July 2020 in the prior year. In constant currency, Other Operating Expenses would have an increase of $23,952, or 24%.
Other Contribution, which we define as Other Revenues plus Non-House Membership Revenues less Other Operating Expenses, was a loss of $3,613 for the 39 weeks ended October 3, 2021, compared to a loss of $12,167 for the comparative period, a decrease in the loss of $8,554. This was predominantly driven by higher Non-House Membership Revenues and increased contribution from Public Restaurants, Scorpios and Soho Home..
Other Contribution Margin was (3)% for the 39 weeks ended October 3, 2021, a increase of 12% compared to the prior period driven by margin improvement in our Public Restaurants as well as an improvement in profitability of Soho Home.
Other Contribution Margin improvement in North America was driven by the strong performance of North America restaurants, benefiting from the acquisition of the remaining 50% share of the Mandolin restaurant in the second quarter of 2021 such that we now fully consolidate the restaurant’s financial results.
Other Contribution Margin improvement in Europe/ROW segment was driven by the earlier opening of Scorpios as well as the removal of many social distancing restrictions in comparison to the same period in 2020.
General and Administrative Expenses
|
|
39 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
October 3, |
|
|
September 27, |
|
|
Actual |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
General and administrative expenses |
|
$ |
60,374 |
|
|
$ |
57,185 |
|
|
|
6 |
% |
|
|
(4 |
)% |
Percentage of total revenues |
|
|
16 |
% |
|
|
18 |
% |
|
|
|
|
|
|
||
General and Administrative Expenses were $60,374 for the 39 weeks ended October 3, 2021, compared with $57,185 for the 39 weeks ended September 27, 2020, an increase of $3,189, or 6%. The increase was primarily driven by the increase in wages at support offices as a result of removal of many COVID-19 restrictions and the associated increase in business activity, in addition to the decrease in government support received in the nine months ended October 3, 2021. This was partially offset by our ongoing cost efficiency program to manage support costs. In constant currency, General and Administrative Expenses would have a decrease of $2,190, or 4%.
Pre-Opening Expenses
52
|
|
39 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
October 3, |
|
|
September 27, |
|
|
Actual |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Pre-opening expenses |
|
$ |
15,990 |
|
|
$ |
15,976 |
|
|
|
0 |
% |
|
|
(9 |
)% |
Percentage of total revenues |
|
|
4 |
% |
|
|
5 |
% |
|
|
|
|
|
|
||
Pre-Opening expenses were $15,990 for the 39 weeks ended October 3, 2021,compared with $15,976 for the comparative period in 2020. In constant currency, Pre-Opening expenses would have decreased by 9%.
Depreciation and Amortization
|
|
39 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
October 3, |
|
|
September 27, |
|
|
Actual |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Depreciation and amortization |
|
$ |
61,250 |
|
|
$ |
46,950 |
|
|
|
30 |
% |
|
|
19 |
% |
Percentage of total revenues |
|
|
16 |
% |
|
|
15 |
% |
|
|
|
|
|
|
||
Depreciation and Amortization was $61,250 for the 39 weeks ended October 3, 2021, an increase of $14,300, or 30%, from the 39 weeks ended September 27, 2020. This increase was primarily driven by amortization of capitalized IT development costs, partly related to the development of the SH.APP, as well as depreciation associated with five new Soho Houses. In constant currency, Depreciation and Amortization expenses would have increased by $9,884, or 19%.
Other Expenses
|
|
39 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
October 3, |
|
|
September 27, |
|
|
Actual |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Share-based compensation |
|
$ |
19,958 |
|
|
$ |
642 |
|
|
n/m |
|
|
n/m |
|
||
Percentage of total revenues |
|
|
5 |
% |
|
|
0 |
% |
|
|
|
|
|
|
||
Foreign exchange loss, net |
|
$ |
30,521 |
|
|
$ |
3,638 |
|
|
n/m |
|
|
n/m |
|
||
Percentage of total revenues |
|
|
8 |
% |
|
|
1 |
% |
|
|
|
|
|
|
||
Other |
|
$ |
22,974 |
|
|
$ |
28,473 |
|
|
|
(19 |
)% |
|
|
(26 |
)% |
Percentage of total revenues |
|
|
6 |
% |
|
|
9 |
% |
|
|
|
|
|
|
||
Share-based compensation expense increased by $19,316 to $19,958 for the 39 weeks ended October 3, 2021, primarily driven by the acceleration of vesting for certain outstanding awards in connection with the IPO, in accordance with the original award terms.
Foreign exchange loss, net increased by $26,883 to $30,521 for the 39 weeks ended October 3, 2021, primarily 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 as described in Note 2 of the Company’s condensed consolidated financial statements included elsewhere in this document.
Other expenses decreased by $5,499 to $22,974 for the 39 weeks ended October 3, 2021, primarily driven by non-cash member credit expense of $5 million and costs incurred associated with the IPO of $17 million.
Interest Expense, Net
|
|
39 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
October 3, |
|
|
September 27, |
|
|
Actual |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Interest expense, net |
|
$ |
67,449 |
|
|
$ |
56,333 |
|
|
|
20 |
% |
|
|
9 |
% |
Percentage of total revenues |
|
|
18 |
% |
|
|
18 |
% |
|
|
|
|
|
|
||
53
Net Interest Expense was $67,449 for the 39 weeks ended October 3, 2021, an increase of $11,116, or 20%, on the comparative period in 2020. This increase was primarily driven by the $9 million loss on extinguishment of the Permira Senior Facility, in addition to a $5 million exit fee on the Senior Facility related to the IPO transaction. In constant currency, net interest would have increased $5,818, or 9%.
Adjusted EBITDA
|
|
39 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
October 3, |
|
|
September 27, |
|
|
Actual |
|
|
Constant |
|
||||
|
|
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
(Unaudited) |
|
|||||||||||||
Adjusted EBITDA |
|
$ |
(26,528 |
) |
|
$ |
(24,957 |
) |
|
|
(6 |
)% |
|
|
3 |
% |
Percentage of total revenues |
|
|
(7 |
)% |
|
|
(8 |
)% |
|
|
|
|
|
|
||
Adjusted EBITDA was a loss of $(26,528) for the 39 weeks ended October 3, 2021, in comparison to a loss of $(24,957) for the 39 weeks ended September 27, 2020, an increase of $1,571, or 6%. The increase in Membership and In-House Revenues in the first nine months ended October 3, 2021 were more than offset by higher Operating and General and Administrative Expenses period-on-period. In constant currency, Adjusted EBITDA would have decrease by $776, or 3%, compared to the comparative period in 2020.
Non-GAAP Financial Measures
For the 13 Weeks Ended October 3, 2021 and September 27, 2020
A reconciliation of Net Loss to Adjusted EBITDA is set forth below for the periods specified:
|
|
13 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
October 3, |
|
|
September 27, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Unaudited, dollar amounts in thousands) |
|
|||||||||||||
Net loss |
|
$ |
(76,221 |
) |
|
$ |
(36,589 |
) |
|
n/m |
|
|
|
(95 |
)% |
|
Depreciation and amortization |
|
|
21,500 |
|
|
|
15,825 |
|
|
|
36 |
% |
|
|
27 |
% |
Interest expense, net |
|
|
20,827 |
|
|
|
20,680 |
|
|
|
1 |
% |
|
|
(6 |
)% |
Income tax expense (benefit) |
|
|
2,868 |
|
|
|
(158 |
) |
|
n/m |
|
|
n/m |
|
||
EBITDA |
|
|
(31,026 |
) |
|
|
(242 |
) |
|
n/m |
|
|
n/m |
|
||
Loss (gain) on sale of property and other, net |
|
|
31 |
|
|
|
(284 |
) |
|
n/m |
|
|
n/m |
|
||
Share of (profit) loss of equity method investments |
|
|
(949 |
) |
|
|
600 |
|
|
n/m |
|
|
n/m |
|
||
Foreign exchange⁽²⁾ |
|
|
14,599 |
|
|
|
(1,656 |
) |
|
n/m |
|
|
n/m |
|
||
Share of equity method investments adjusted EBITDA |
|
|
1,848 |
|
|
|
906 |
|
|
n/m |
|
|
|
91 |
% |
|
Share-based compensation expense⁽²⁾ |
|
|
15,281 |
|
|
|
642 |
|
|
n/m |
|
|
n/m |
|
||
Membership credits expense⁽³⁾ |
|
|
898 |
|
|
|
(1,893 |
) |
|
n/m |
|
|
n/m |
|
||
COVID-19 related charges⁽⁴⁾ |
|
|
(376 |
) |
|
|
1,423 |
|
|
n/m |
|
|
n/m |
|
||
Corporate financing and restructuring costs⁽⁵⁾ |
|
|
8,514 |
|
|
|
1,985 |
|
|
n/m |
|
|
n/m |
|
||
Abandoned project and site closure costs |
|
|
— |
|
|
|
2,185 |
|
|
|
(100 |
)% |
|
|
(100 |
)% |
Adjusted EBITDA |
|
$ |
8,820 |
|
|
$ |
3,666 |
|
|
n/m |
|
|
n/m |
|
||
54
The computation of House-Level Contribution and Other Contribution is set forth below:
|
|
13 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
October 3, |
|
|
September 27, |
|
|
Change % |
|
|
September 27, 2020 |
|
|
Constant Currency |
|
|||||
|
|
Actuals |
|
|
|
|
|
|
|
|||||||||||
|
|
(Unaudited, dollar amounts in thousands) |
|
|||||||||||||||||
Operating loss |
|
$ |
(53,444 |
) |
|
$ |
(15,751 |
) |
|
n/m |
|
|
$ |
(16,799 |
) |
|
n/m |
|
||
General and administrative |
|
|
24,369 |
|
|
|
17,336 |
|
|
|
41 |
% |
|
|
18,488 |
|
|
|
32 |
% |
Pre-opening expenses |
|
|
4,672 |
|
|
|
4,588 |
|
|
|
2 |
% |
|
|
4,893 |
|
|
|
(5 |
)% |
Depreciation and amortization |
|
|
21,500 |
|
|
|
15,825 |
|
|
|
36 |
% |
|
|
16,877 |
|
|
|
27 |
% |
Share-based compensation |
|
|
15,281 |
|
|
|
642 |
|
|
n/m |
|
|
|
685 |
|
|
n/m |
|
||
Foreign exchange loss (gain), net |
|
|
14,599 |
|
|
|
(1,656 |
) |
|
n/m |
|
|
|
(1,766 |
) |
|
n/m |
|
||
Other |
|
|
8,863 |
|
|
|
2,685 |
|
|
n/m |
|
|
|
2,863 |
|
|
n/m |
|
||
Non-House membership revenues |
|
|
(4,731 |
) |
|
|
(434 |
) |
|
n/m |
|
|
|
(463 |
) |
|
n/m |
|
||
Other revenues |
|
|
(61,538 |
) |
|
|
(41,666 |
) |
|
|
(48 |
)% |
|
|
(44,435 |
) |
|
|
(38 |
)% |
Other operating expenses |
|
|
54,379 |
|
|
|
45,078 |
|
|
|
21 |
% |
|
|
48,074 |
|
|
|
13 |
% |
House-Level Contribution |
|
$ |
23,950 |
|
|
$ |
26,647 |
|
|
|
(10 |
)% |
|
$ |
28,417 |
|
|
|
(16 |
)% |
Operating loss margin |
|
|
(30 |
)% |
|
|
(14 |
)% |
|
|
|
|
|
(14 |
)% |
|
|
|
||
House-Level Contribution Margin |
|
|
21 |
% |
|
|
37 |
% |
|
|
|
|
|
37 |
% |
|
|
|
||
|
|
13 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
October 3, |
|
|
September 27, |
|
|
Change % |
|
|
September 27, 2020 |
|
|
Constant Currency |
|
|||||
|
|
Actuals |
|
|
|
|
|
|
|
|||||||||||
|
|
(Unaudited, dollar amounts in thousands) |
|
|||||||||||||||||
Membership revenues |
|
$ |
51,162 |
|
|
$ |
42,351 |
|
|
|
21 |
% |
|
$ |
45,165 |
|
|
|
13 |
% |
Less: Non-House membership revenues |
|
|
(4,731 |
) |
|
|
(434 |
) |
|
n/m |
|
|
|
(463 |
) |
|
n/m |
|
||
Add: in-House revenues |
|
|
66,859 |
|
|
|
30,162 |
|
|
n/m |
|
|
|
32,166 |
|
|
n/m |
|
||
Total House revenues |
|
|
113,290 |
|
|
|
72,079 |
|
|
|
57 |
% |
|
|
76,868 |
|
|
|
47 |
% |
Less: in-House operating expenses |
|
|
89,340 |
|
|
|
45,432 |
|
|
|
97 |
% |
|
|
48,451 |
|
|
|
84 |
% |
House-Level Contribution |
|
$ |
23,950 |
|
|
$ |
26,647 |
|
|
|
(10 |
)% |
|
$ |
28,417 |
|
|
|
(16 |
)% |
|
|
13 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
October 3, |
|
|
September 27, |
|
|
Change % |
|
|
September 27, 2020 |
|
|
Constant Currency |
|
|||||
|
|
Actuals |
|
|
|
|
|
|
|
|||||||||||
|
|
(Unaudited, dollar amounts in thousands) |
|
|||||||||||||||||
Operating loss |
|
$ |
(53,444 |
) |
|
$ |
(15,751 |
) |
|
n/m |
|
|
$ |
(16,799 |
) |
|
n/m |
|
||
General and administrative |
|
|
24,369 |
|
|
|
17,336 |
|
|
|
41 |
% |
|
|
18,488 |
|
|
|
32 |
% |
Pre-opening expenses |
|
|
4,672 |
|
|
|
4,588 |
|
|
|
2 |
% |
|
|
4,893 |
|
|
|
(5 |
)% |
Depreciation and amortization |
|
|
21,500 |
|
|
|
15,825 |
|
|
|
36 |
% |
|
|
16,877 |
|
|
|
27 |
% |
Share-based compensation |
|
|
15,281 |
|
|
|
642 |
|
|
n/m |
|
|
|
685 |
|
|
n/m |
|
||
Foreign exchange loss (gain), net |
|
|
14,599 |
|
|
|
(1,656 |
) |
|
n/m |
|
|
|
(1,766 |
) |
|
n/m |
|
||
Other |
|
|
8,863 |
|
|
|
2,685 |
|
|
n/m |
|
|
|
2,863 |
|
|
n/m |
|
||
House membership revenues |
|
|
(46,431 |
) |
|
|
(41,917 |
) |
|
|
11 |
% |
|
|
(44,702 |
) |
|
|
(4 |
)% |
In-House revenues |
|
|
(66,859 |
) |
|
|
(30,162 |
) |
|
n/m |
|
|
|
(32,166 |
) |
|
n/m |
|
||
In-House operating expenses |
|
|
89,340 |
|
|
|
45,432 |
|
|
|
97 |
% |
|
|
48,451 |
|
|
|
84 |
% |
Total Other Contribution |
|
$ |
11,890 |
|
|
$ |
(2,978 |
) |
|
n/m |
|
|
$ |
(3,176 |
) |
|
n/m |
|
||
Operating loss margin |
|
|
(30 |
)% |
|
|
(14 |
)% |
|
|
|
|
|
(14 |
)% |
|
|
|
||
Other Contribution Margin |
|
|
18 |
% |
|
|
(7 |
)% |
|
|
|
|
|
(7 |
)% |
|
|
|
||
55
|
|
13 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
October 3, |
|
|
September 27, |
|
|
Change % |
|
|
September 27, 2020 |
|
|
Constant Currency |
|
|||||
|
|
Actuals |
|
|
|
|
|
|
|
|||||||||||
|
|
(Unaudited, dollar amounts in thousands) |
|
|||||||||||||||||
Other Contribution |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Non-House membership revenues |
|
$ |
4,731 |
|
|
$ |
434 |
|
|
n/m |
|
|
$ |
463 |
|
|
n/m |
|
||
Add: other revenues |
|
|
61,538 |
|
|
|
41,666 |
|
|
|
48 |
% |
|
|
44,435 |
|
|
|
38 |
% |
Less: other operating expenses |
|
|
54,379 |
|
|
|
45,078 |
|
|
|
21 |
% |
|
|
48,074 |
|
|
|
13 |
% |
Other Contribution |
|
$ |
11,890 |
|
|
$ |
(2,978 |
) |
|
n/m |
|
|
$ |
(3,176 |
) |
|
n/m |
|
||
For the 39 Weeks Ended October 3, 2021 and September 27, 2020
A reconciliation of Net Loss to Adjusted EBITDA is set forth below for the periods specified:
|
|
39 Weeks Ended |
|
|
Percent Change |
|
||||||||||
|
|
October 3, |
|
|
September 27, |
|
|
Actuals |
|
|
Constant |
|
||||
|
|
(Unaudited, dollar amounts in thousands) |
|
|||||||||||||
Net loss |
|
$ |
(226,366 |
) |
|
$ |
(159,426 |
) |
|
|
(42 |
)% |
|
|
(30 |
)% |
Depreciation and amortization |
|
|
61,250 |
|
|
|
46,950 |
|
|
|
30 |
% |
|
|
19 |
% |
Interest expense, net |
|
|
67,449 |
|
|
|
56,333 |
|
|
|
20 |
% |
|
|
9 |
% |
Income tax benefit |
|
|
2,048 |
|
|
|
(538 |
) |
|
n/m |
|
|
n/m |
|
||
EBITDA |
|
|
(95,619 |
) |
|
|
(56,681 |
) |
|
|
(69 |
)% |
|
|
(54 |
)% |
Gain on sale of property and other, net |
|
|
(6,872 |
) |
|
|
(273 |
) |
|
n/m |
|
|
n/m |
|
||
Share of (profit) loss of equity method investments |
|
|
(123 |
) |
|
|
2,912 |
|
|
n/m |
|
|
n/m |
|
||
Foreign exchange⁽²⁾ |
|
|
30,521 |
|
|
|
3,638 |
|
|
n/m |
|
|
n/m |
|
||
Share of equity method investments adjusted EBITDA |
|
|
4,175 |
|
|
|
2,614 |
|
|
|
60 |
% |
|
|
46 |
% |
Share-based compensation expense⁽²⁾ |
|
|
19,958 |
|
|
|
642 |
|
|
n/m |
|
|
n/m |
|
||
Membership credits expense⁽³⁾ |
|
|
5,052 |
|
|
|
6,282 |
|
|
|
(20 |
)% |
|
|
(26 |
)% |
COVID-19 related charges⁽⁴⁾ |
|
|
(617 |
) |
|
|
4,324 |
|
|
n/m |
|
|
n/m |
|
||
Corporate financing and restructuring costs⁽⁵⁾ |
|
|
16,997 |
|
|
|
2,987 |
|
|
n/m |
|
|
n/m |
|
||
Abandoned project and site closure costs |
|
|
— |
|
|
|
8,598 |
|
|
n/m |
|
|
n/m |
|
||
Adjusted EBITDA |
|
$ |
(26,528 |
) |
|
$ |
(24,957 |
) |
|
|
(6 |
)% |
|
|
3 |
% |
The computation of House-Level Contribution and Other Contribution is set forth below:
56
|
|
39 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
October 3, |
|
|
September 27, |
|
|
Change % |
|
|
September 27, 2020 |
|
|
Constant Currency |
|
|||||
|
|
Actuals |
|
|
|
|
|
|
|
|||||||||||
|
|
(Unaudited, dollar amounts in thousands) |
|
|||||||||||||||||
Operating loss |
|
$ |
(163,864 |
) |
|
$ |
(100,992 |
) |
|
|
(62 |
)% |
|
$ |
(110,491 |
) |
|
|
(48 |
)% |
General and administrative |
|
|
60,374 |
|
|
|
57,185 |
|
|
|
6 |
% |
|
|
62,564 |
|
|
|
(4 |
)% |
Pre-opening expenses |
|
|
15,990 |
|
|
|
15,976 |
|
|
|
0 |
% |
|
|
17,479 |
|
|
|
(9 |
)% |
Depreciation and amortization |
|
|
61,250 |
|
|
|
46,950 |
|
|
|
30 |
% |
|
|
51,366 |
|
|
|
19 |
% |
Share-based compensation |
|
|
19,958 |
|
|
|
642 |
|
|
n/m |
|
|
|
702 |
|
|
n/m |
|
||
Foreign exchange loss, net |
|
|
30,521 |
|
|
|
3,638 |
|
|
n/m |
|
|
|
3,980 |
|
|
n/m |
|
||
Other |
|
|
22,974 |
|
|
|
28,473 |
|
|
|
(19 |
)% |
|
|
31,151 |
|
|
|
(26 |
)% |
Non-House membership revenues |
|
|
(9,034 |
) |
|
|
(1,569 |
) |
|
n/m |
|
|
|
(1,717 |
) |
|
n/m |
|
||
Other revenues |
|
|
(110,610 |
) |
|
|
(77,032 |
) |
|
|
44 |
% |
|
|
(84,277 |
) |
|
|
31 |
% |
Other operating expenses |
|
|
123,257 |
|
|
|
90,768 |
|
|
|
36 |
% |
|
|
99,305 |
|
|
|
24 |
% |
House-Level Contribution |
|
$ |
50,816 |
|
|
$ |
64,039 |
|
|
|
(21 |
)% |
|
$ |
70,062 |
|
|
|
(27 |
)% |
Operating loss margin |
|
|
(44 |
)% |
|
|
(32 |
)% |
|
|
|
|
|
(32 |
)% |
|
|
|
||
House-Level Contribution Margin |
|
|
20 |
% |
|
|
27 |
% |
|
|
|
|
|
27 |
% |
|
|
|
||
|
|
39 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
October 3, |
|
|
September 27, |
|
|
Change % |
|
|
September 27, 2020 |
|
|
Constant Currency |
|
|||||
|
|
Actuals |
|
|
|
|
|
|
|
|||||||||||
|
|
(Unaudited, dollar amounts in thousands) |
|
|||||||||||||||||
Membership revenues |
|
$ |
136,518 |
|
|
$ |
134,559 |
|
|
|
1 |
% |
|
$ |
147,215 |
|
|
|
(7 |
)% |
Less: Non-House membership revenues |
|
|
(9,034 |
) |
|
|
(1,569 |
) |
|
n/m |
|
|
|
(1,717 |
) |
|
n/m |
|
||
Add: In-House revenues |
|
|
128,911 |
|
|
|
101,144 |
|
|
|
27 |
% |
|
|
110,657 |
|
|
|
16 |
% |
Total House revenues |
|
|
256,395 |
|
|
|
234,134 |
|
|
|
10 |
% |
|
|
256,155 |
|
|
|
0 |
% |
Less: in-House operating expenses |
|
|
205,579 |
|
|
|
170,095 |
|
|
|
21 |
% |
|
|
186,093 |
|
|
|
10 |
% |
House-Level Contribution |
|
$ |
50,816 |
|
|
$ |
64,039 |
|
|
|
(21 |
)% |
|
$ |
70,062 |
|
|
|
(27 |
)% |
|
|
39 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
October 3, |
|
|
September 27, |
|
|
Change % |
|
|
September 27, 2020 |
|
|
Constant Currency |
|
|||||
|
|
Actuals |
|
|
|
|
|
|
|
|||||||||||
|
|
(Unaudited, dollar amounts in thousands) |
|
|||||||||||||||||
Operating loss |
|
$ |
(163,864 |
) |
|
$ |
(100,992 |
) |
|
|
(62 |
)% |
|
$ |
(110,491 |
) |
|
|
(48 |
)% |
General and administrative |
|
|
60,374 |
|
|
|
57,185 |
|
|
|
6 |
% |
|
|
62,564 |
|
|
|
(4 |
)% |
Pre-opening expenses |
|
|
15,990 |
|
|
|
15,976 |
|
|
|
0 |
% |
|
|
17,479 |
|
|
|
(9 |
)% |
Depreciation and amortization |
|
|
61,250 |
|
|
|
46,950 |
|
|
|
30 |
% |
|
|
51,366 |
|
|
|
19 |
% |
Share-based compensation |
|
|
19,958 |
|
|
|
642 |
|
|
n/m |
|
|
|
702 |
|
|
n/m |
|
||
Foreign exchange loss, net |
|
|
30,521 |
|
|
|
3,638 |
|
|
n/m |
|
|
|
3,980 |
|
|
n/m |
|
||
Other |
|
|
22,974 |
|
|
|
28,473 |
|
|
|
(19 |
)% |
|
|
31,151 |
|
|
|
(26 |
)% |
House membership revenues |
|
|
(127,484 |
) |
|
|
(132,990 |
) |
|
|
(4 |
)% |
|
|
(145,498 |
) |
|
|
(12 |
)% |
In-House revenues |
|
|
(128,911 |
) |
|
|
(101,144 |
) |
|
|
27 |
% |
|
|
(110,657 |
) |
|
|
16 |
% |
In-House operating expenses |
|
|
205,579 |
|
|
|
170,095 |
|
|
|
21 |
% |
|
|
186,093 |
|
|
|
10 |
% |
Total Other Contribution |
|
$ |
(3,613 |
) |
|
$ |
(12,167 |
) |
|
|
70 |
% |
|
$ |
(13,311 |
) |
|
|
73 |
% |
Operating loss margin |
|
|
(44 |
)% |
|
|
(32 |
)% |
|
|
|
|
|
(32 |
)% |
|
|
|
||
Other Contribution Margin |
|
|
(3 |
)% |
|
|
(15 |
)% |
|
|
|
|
|
(15 |
)% |
|
|
|
||
57
|
|
39 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
October 3, |
|
|
September 27, |
|
|
Change % |
|
|
September 27, 2020 |
|
|
Constant Currency |
|
|||||
|
|
Actuals |
|
|
|
|
|
|
|
|||||||||||
|
|
(Unaudited, dollar amounts in thousands) |
|
|||||||||||||||||
Other Contribution |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Non-House membership revenues |
|
$ |
9,034 |
|
|
$ |
1,569 |
|
|
n/m |
|
|
$ |
1,717 |
|
|
n/m |
|
||
Add: other revenues |
|
|
110,610 |
|
|
|
77,032 |
|
|
|
44 |
% |
|
|
84,277 |
|
|
|
31 |
% |
Less: other operating expenses |
|
|
123,257 |
|
|
|
90,768 |
|
|
|
36 |
% |
|
|
99,305 |
|
|
|
24 |
% |
Other Contribution |
|
$ |
(3,613 |
) |
|
$ |
(12,167 |
) |
|
|
70 |
% |
|
$ |
(13,311 |
) |
|
|
73 |
% |
Liquidity and Capital Resources
Liquidity is the ability to generate sufficient cash flows to meet the cash requirements of our business operations. Our principal sources of liquidity are operating cash flows, holdings of cash and cash equivalents and availability of unsecured or secured credit lines.
Our future development and redevelopment expenditures are expected to be funded via holdings of cash and cash equivalents as well as cash flows provided by operations. However, they may also be funded through unsecured or secured credit facilities, proceeds from the issuance of equity or debt securities, sales of properties or joint ventures.
First Amended and Restated Note Purchase Agreement
On November 15, 2021, Soho House Bond Limited, a wholly-owned subsidiary of the Company, entered into the First Amended and Restated Note Purchase Agreement (the “First Note Amendment”), which amends and restates in its entirety the existing Notes Purchase Agreement (the “Notes Purchase Agreement”), dated March 23, 2021, for an aggregate of $441 million in senior secured notes (the “Initial Notes”), subscribed for by certain funds managed, sponsored or advised by Goldman Sachs & Co. LLC and its affiliates.
The First Note Amendment amends the Notes Purchase Agreement to, among other things, transition reporting from accounting principles generally accepted in the United Kingdom to accounting principles generally accepted in the United States of America.
The Initial Notes are guaranteed and secured on substantially the same basis as our Revolving Credit Facility, which was also amended and restated on November 15, 2021, as described below.
First Amended and Restated Revolving Facility Agreement
On November 15, 2021, Soho House Bond Limited, a wholly-owned subsidiary of the Company entered into the First Amended and Restated Revolving Facility Agreement (the "First Amendment"), which amends and restates in its entirety the existing £75.0 million Revolving Facility Agreement (the "Revolving Credit Facility"), dated December 5, 2019, among HSBC Bank PLC and SHG Acquisition (UK) Limited and Soho House U.S. Corp., two of the Company's wholly-owned indirect subsidiaries, as borrowers.
The First Amendment amends the Revolving Credit Facility to, among other things, change the reference rate under the Revolving Credit Facility for borrowings denominated in pounds sterling from a LIBOR-based rate to a SONIA-based rate and to transition reporting from accounting principles generally accepted in the United Kingdom to accounting principles generally accepted in the United States of America. The First Amendment also reset the Company's Consolidated EBITDA (as defined in the Revolving Credit Facility) test levels, scaling up from £0 at December 31, 2021 to £32 million ($44 million, if translated using the average exchange rate in effect during the 39 weeks ended October 3, 2021) after June 30, 2022. The First Amendment matures on January 25, 2023.
Cash Flows and Working Capital
The following table provides a summary of cash flow data for the periods presented:
|
|
39 Weeks Ended |
|
|||||
|
|
October 3, |
|
|
September 27, |
|
||
|
|
(Unaudited, dollar amounts in thousands) |
|
|||||
Net cash (used in) generated by |
|
|
|
|
|
|
||
Net cash used in operating activities |
|
$ |
(114,939 |
) |
|
$ |
(18,004 |
) |
Net cash used in investing activities |
|
|
(79,556 |
) |
|
|
(98,881 |
) |
Net cash provided by financing activities |
|
|
404,451 |
|
|
|
173,774 |
|
Effect of exchange rates on cash and cash equivalents |
|
|
(1,104 |
) |
|
|
(304 |
) |
Net increase in cash and cash equivalents |
|
$ |
208,852 |
|
|
$ |
56,585 |
|
Net Cash Used in Operating Activities
58
The primary cash inflows from operating activities include Membership Revenues, In-House Revenues and Other Revenues, such as the sale of retail products. The primary cash outflows from operating activities include general operating expenses and interest payments.
For the 39 weeks ended October 3, 2021, we had a $114,939 outflow of cash from operating activities, which includes a net loss of $226,366, depreciation and amortization of $61,250, and the net working capital improvement of $51,710.
For the 39 weeks ended September 27, 2020, we had a $18,004 outflow of cash from operating activities, which includes a net loss of $159,426, depreciation and amortization of $46,950, and the net working capital improvement of $51,122.
Net Cash Used in Investing Activities
The primary cash inflows from investing activities include the cash acquired as a result of acquisitions. The primary cash outflows from investing activities include the purchase of property and equipment, intangibles and the acquisition of noncontrolling interests.
For the 39 weeks ended October 3, 2021, we had a $79,556 outflow of cash from investing activities, primarily due to purchases of property and equipment of $64,125 and the acquisition of an additional 12% noncontrolling interest related to Scorpios Beach Club of $8,653. Refer to Note 3 – Acquisitions in this Quarterly Report on Form 10-Q for further information on the Scorpios noncontrolling interest acquisition.
For the 39 weeks ended September 27, 2020, we had a $98,881 outflow of cash from investing activities, primarily due to purchases of property and equipment of $91,315.
Net Cash Provided by Financing Activities
The primary cash inflows from financing activities include proceeds from borrowings and from the issuance of shares. The primary cash outflows from financing activities include principal payments on borrowings and payments to settle redeemable preferred shares.
For the 39 weeks ended October 3, 2021, we had a $404,451 inflow of cash from financing activities, primarily due to the proceeds from the initial public offering of $388,078, the receipt of proceeds of new borrowings of $459,290 and a further $161,574 and $47,000 in proceeds from the issuance of preferred shares and redeemable C ordinary shares, respectively, partially offset with the repayment of borrowings of $612,566.
For the 39 weeks ended September 27, 2020, we had a $173,774 inflow of cash from financing activities, primarily due to the proceeds of $92,989 from the issuance of redeemable C ordinary shares, new borrowings of $54,292 and contributions from non-controlling interests of $24,998.
Contractual Obligations and Commercial Commitments
As of October 3, 2021, there have been no material changes outside the ordinary course of business to our contractual obligations from those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as described in our final prospectus filed with the SEC on July 16, 2021.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of October 3, 2021.
Critical Accounting Estimates and Judgments
Management’s discussion and analysis of the financial condition and results of operations is based on the financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses incurred during the reporting periods. The estimates are based on historical experience and on various other factors that are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. There have been no significant changes in our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included our final prospectus filed with the SEC on July 16, 2021.
Emerging Growth Company Status
We are an ‘emerging growth company,’ as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not ‘emerging growth companies,’ including, but not limited to: presenting only two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley; having reduced disclosure obligations regarding executive compensation in our periodic reports and proxy or information statements; being exempt from the requirements to hold anon-binding advisory vote on executive compensation or seek stockholder approval of any golden parachute payments not previously approved; and not being required to adopt certain accounting standards until those standards would otherwise apply to private companies. As a result, our financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
59
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Foreign Exchange Risk
We principally operate in the UK and North America, although we have significant operations in Europe. Therefore, we are exposed to reporting foreign exchange risk in Pound sterling and Euros.
Accordingly, we have not, to date, used any material financial instruments to mitigate our foreign exchange risk. The directors and management will keep this situation under review. However, as suppliers of the US and German businesses are predominantly paid in US dollars or Euros respectively, this acts as a natural hedge against foreign exchange risk.
If the US Dollar had strengthened/weakened by 10% versus the Pound sterling, revenue would have been approximately $11 million lower and approximately $11 million higher, respectively, and Net Loss would have been approximately $7 million lower and approximately $7 million higher, respectively, for third quarter 2021.
If the Euro had strengthened/weakened by 10% versus the Pound sterling, revenue would have been approximately $3 million lower and approximately $3 million higher, respectively, and Net Loss would have been approximately $0 million lower and approximately $0 million higher, respectively, for third quarter 2021.
If the US Dollar had strengthened/weakened by 10% versus the Pound sterling, revenue would have been approximately $21 million lower and approximately $21 million higher, respectively, and Net Loss would have been approximately $19 million lower and approximately $19 million higher, respectively, for the nine months ended October 3, 2021.
If the Euro had strengthened/weakened by 10% versus the Pound sterling, revenue would have been approximately $4 million lower and approximately $5 million higher, respectively, and Net Loss would have been approximately $0 million lower and approximately $0 million higher, respectively, for the nine months ended October 3, 2021.
Concentration of Credit Risk
Credit risk is the risk of loss from amounts owed by financial counterparties. Credit risk can occur at multiple levels; as a result of broad economic conditions, challenges within specific sectors of the economy, or from issues affecting individual companies. Financial instruments that potentially subject us to credit risk consist of cash equivalents and accounts receivable.
We maintain cash and cash equivalents with major financial institutions. Our cash and cash equivalents consist of bank deposits held with banks, and money market funds that, at times, exceed federally or locally insured limits. We limit our credit risk by dealing with counterparties that are considered to be of high credit quality and by performing periodic evaluations of investments and of the relative credit standing of these financial institutions.
Liquidity Risk
We seek to manage our financial risks to ensure that sufficient liquidity is available to meet our foreseeable needs. We believe we have significant flexibility to control our capital expenditure commitments in new House developments through different investment formats. As of October 3, 2021, we had $259 million in cash and cash equivalents on the balance sheet to meet our funding needs.
Cash Flow and Fair Value Interest Rate Risk
We have historically financed our operations through a mixture of bank borrowings and bond notes which are generally fixed, and expect to finance our operations through operating cash flows and availability under our Revolving Credit Facility. We seek to manage exposure to adverse interest rate changes through our normal operating and financing activities.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Management concluded as of October 3, 2021 that our disclosure controls and procedures were not effective at the reasonable assurance level, due to material weaknesses in our internal control over financial reporting, to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As disclosed in our Registration Statement dated July 16, 2021, based on management’s assessment of the effectiveness of our internal controls over financial reporting, management concluded that our internal controls over financial reporting were not effective as of January 3, 2021, due to insufficiently qualified accounting and other finance personnel with an appropriate level of U.S. GAAP knowledge and experience. Management believes that our lack of experience with U.S. GAAP and the fact that policies and procedures with respect to the review, supervision and monitoring of our accounting and reporting functions were either not designed and in place constituted material weaknesses in our internal control over financial reporting. Until such time, if ever, that we remediate the material weakness in our internal control over financial reporting we expect that the material weaknesses in our disclosure controls and procedures will continue.
60
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the 39 weeks ended October 3, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Disclosure Controls and Procedures
In designing and evaluating our disclosure controls and procedures and internal control over financial reporting, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and our management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. The design of any disclosure controls and procedures and internal control over financial reporting also are based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
61
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time we are subject to legal proceedings and claims that arise in the ordinary course of business. At present, we are not a party to any litigation other than litigation in the ordinary course of business. We do not expect that the ultimate outcome of any of the currently ongoing legal proceedings, individually or collectively, will have a significant adverse effect on our business, financial condition, results of operations or cash flows.
However, the results of litigation and arbitration are inherently unpredictable and the possibility exists that the ultimate resolution of matters to which we are or could become subject could result in a material adverse effect on our business, financial condition, results of operations and cash flows.
Item 1A. Risk Factors.
You should carefully consider the risk factors discussed in section “Risk Factors” in our final prospectus dated July 14, 2021 that forms a part of our Registration Statement on Form S-1 (File No. 333-257206), as filed with the Securities and Exchange Commission pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the “Securities Act”), on July 16, 2021 (“Form S-1”), as updated by the risk factors discussed in Part II, “Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q as of and for the 13-weeks and 26-weeks ended July 4, 2021 (“Q2 2021 Quarterly Report”), which could materially affect our business, financial position, or future results of operations. There have been no material changes to the risk factors described in our Form S-1, as updated by our Q2 2021 Quarterly Report, except as set forth below. The risks described in our Form S-1 and our Q2 2021 Quarterly Report as updated below are not the only risks that we face. Additional risks and uncertainties not precisely known to us, or that we currently deem to be immaterial, may also arise and materially impact our business. If any of these risks occur, our business, results of operations and financial condition could be materially and adversely affected and the trading price of our common stock could decline.
Increasing inflation could adversely affect our business, financial condition, results of operations or cash flows.
Inflation and some of the measures taken by or that may be taken by the governments in countries where we operate in an attempt to curb inflation may have negative effects on the economies of those countries generally. If the United States or other countries where we operate experience substantial inflation in the future, our business may be adversely affected. In addition, we may not be able to adjust the prices we charge our members to offset the impact of inflation on our expenses, leading to an increase in our operating expenses and a reduction in our House-Level Contribution Margin and Other Contribution Margin. This could have a material adverse impact on our business, financial condition, results of operations or cash flows.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(a) Sales of Unregistered Securities
None.
(b) Use of Proceeds from Public Offering of Common Stock
On July 19, 2021, we completed the IPO of Class A of our common stock pursuant to a Registration Statement on Form S-1 (File No. 333-257206). We sold 30,567,918 shares of common stock (which included 567,918 shares that were offered and sold pursuant to the partial exercise of the IPO underwriters’ option to purchase additional shares) at a price to the public of $14.00 per share. Including the option exercise, The Company received aggregate net proceeds of $388 million after deducting underwriting discounts and other offering costs. The underwriters of the offering were J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, Goldman Sachs & Co. LLC, BofA Securities, Inc., HSBC Securities (USA) Inc., Citigroup Global Markets Inc., William Blair & Company, L.L.C and Loop Capital Markets LLC. Following the sale of the shares in connection with the closing of the IPO, the offering terminated. No offering expenses were paid or are payable, directly or indirectly, to our directors or officers, to persons owning 10% or more of any class of our equity securities or to any of our affiliates.
Refer to Note 1 - Nature of the Business in this Quarterly Report on Form 10-Q for further information on the use of proceeds from the IPO.
(c) Issuer Purchases of Equity Securities
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
62
Item 6. Exhibits.
Exhibit |
|
Description |
10.1* |
|
|
10.2* |
|
|
31.1* |
|
|
31.2* |
|
|
32.1* |
|
|
32.2* |
|
|
101.INS |
|
Inline XBRL Instance Document |
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith.
63
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
|
|
|
|
|
Membership Collective Group Inc. |
||
|
|
|
|
|||
Date: November 17, 2021 |
|
|
|
By: |
|
/s/ Nick Jones |
|
|
|
|
|
|
Nick Jones |
|
|
|
|
|
|
Chief Executive Officer |
|
|
|
|
|||
Date: November 17, 2021 |
|
|
|
By: |
|
/s/ Humera Afzal |
|
|
|
|
|
|
Humera Afzal |
|
|
|
|
|
|
Chief Financial Officer |
64