Q2 2021 Membership Collective Group Inc Earnings Call
Ladies and gentlemen, thank you for standing by my name is Emma your chorus call operator.
Welcome and thank you for joining D membership collective groups second quarter earnings conference calls throughout two players.
As recorded presentation, all participants will be in a listen only mode.
Patients will be followed by a question and answer session and if you'd like to ask a question you might be played by pressing star followed by one on your Touchtone telephone.
Please.
The stock he followed by zero for operator assistance.
And I would now like to turn the conference over to Rebecca Please.
Please go ahead.
Thank you for joining us for the membership collective groups second quarter 2021 financial results before we begin I'd like to remind everyone that certain statements me maybe.
Made on this call today the forward looking statements.
These forward looking statements are subject to various risks and uncertainties and reflects our current expectations based on our beliefs assumptions and information currently available to us. Although we believe these expectations are reasonable we undertake no obligation to revise any statements to reflect changes that occur at all.
Cool.
Description of these factors and other risks that could cause actual results to differ materially from these forward looking statements are discussed in more detail in our filings with the SEC. During the call. We also refer to certain non-GAAP financial measures. These non-GAAP measures should be considered in addition to and not as a substitute for.
After the isolation from all got presents reconciliations to most comparable GAAP measures are available in today's earnings press release, which is available on our Investor Relations section of our website at Www Dot membership collective group Dotcom Hello, everyone and thank you for joining us I'm delighted to welcome you all to the second quarter.
Or an earnings call of the membership collective group, a Nick CEO and founder of the M. C. G and I'm joined by Andrew Group, President and Humira CFO I'm looking to take you through some of the highlights of the last quarter before handing over to Andrew and Humira, who will take you through the operational.
<unk> financial results.
The last few months have been incredibly exciting for the M C J.
Our successful IPO in the New York, Mark the beginning of a new really exciting chapter for M. C J and I'm hugely grateful for the support and contribution of our member.
<unk> the people, who work for us and all our investors.
We believe that the M. C. G is a unique and special business with significant white space and huge potential for growth are.
Lifting means we are extremely well positioned to continue growing up.
Members and to focus on making membership even better that's what has driven us on for the last 26 years over the last few months, we have been able to reopen all houses restaurants and workspaces as restrictions have eased we have loved welcoming members.
Our base back to Sarah houses around the world to the net in London, and the Scorpius Beach club and Mykonos.
And one of the most challenging periods of our history, we are happy to get back to doing what we do best obviously as we sit here today the world is still living with Covid.
Members in team and ongoing restrictions are still having an impact on our industry's recovery, including the recent mask and vaccine mandates in North America and other restrictions across Europe.
That said, we have seen over the last few months gives me confidence but win.
<unk> no COVID-19 restrictions fully and finally lift our business will be back to full strength.
In fact against the challenging backdrop of the last quarter.
We've opened two houses one here in London, and one in Austin, Texas.
And today, we opened the doors of solar has Tel Aviv.
N F a district.
Originally built as a convent we have retained and restored many of the original features and designed into areas that are inspired by the city's cultures colors and incidences. It's a beautiful house that I know our members will love looking ahead.
I'm excited that by the end of the year, we will have opened seven new houses, including free hugely anticipated locations in Paris, Rome embracing in England. So her house Perez sits in one of the city's most vibrant neighborhoods and it's a beautiful format.
And jumped in century townhouse spread over five floors with 36 bedrooms due to open next month.
The anticipation in the city of Paris is enormous and our membership demand I've never seen anything quite like it is hugely exciting for us opening after that in the heart of Sandler.
My name is Sarah House, Rome, our first house in Italy.
Set in a 10 story building the house features a rooftop pool forty-nine bedrooms, and 'twenty long stay a palm and again very exciting.
I've been looking forward to opening houses in France, and Italy for many.
And Lorraine is so this is going to be a really exciting period for us.
Again, this is all about making membership better Ed.
Every day I continue to be overwhelmed by the loyalty of our members. Our membership retention has remained exceptionally strong and I've been amazed.
Many increase in applications for Sarah House membership during the quarter, a 40% increase versus pre pandemic levels I've never seen anything like it in the 26 years I've been running so our house a membership waiting list now stands at a record high of 64.
By being.
During this quarter, we have also relaunched the shop.
Our house App, our digital platform that allows members to bring solar house into their pocket.
More on that from Andrew later.
Answer house, we've seen robust growth of our newer membership.
Adding over 8000 members across Soho friends members. So her works lounge members and sell a home plus which gives me real confidence in the future success of these new tailored memberships and we've only just began now let me hand over to Andrew who will take you through some more of a detail. Thanks, Nick Island ethics in how.
<unk> opened and performed in the quarter talk more about membership provides insight into how we're delivering our growth plans and then hand over to Humira for our financial performance in terms of key performance highlights. We finished the quarter with 128000 members and 8000 increase from Q1 2021.
Total revenues grew to 100.
How we reach $4 million versus Q2 in 2020 membership accounted for 36% of our revenue, which is recurring subscription revenue has contribution rebounded up 34% to 25 million and our in house revenue grew by 188% to 46 million as Nick mentioned, we welcomed our members back.
EBITDA number that is fully burden for growth to encourage all our preopening costs was a loss of $13 million and Humira will unpack. This later.
As Nick mentioned Q2 was our first quarter as a publicly traded company, we started the quarter with full or partial closures or some form of restrictions across all our houses.
<unk> ended the quarter. Our teams are successfully reopened our houses whilst improving all aspects of member experience. Although some of our European House is still have restrictions we were able to welcome all our members back and our members were desperate to come back so much so that the bookings slots, we released on a daily basis, we're often sold out within minutes.
Encouragingly, the weekly rate of food and beverage cell shape momentum throughout the quarter and our members started staying with US again, leading to an average 58% occupancy increasing to 63% by the end of June and we had 93% occupancy levels for June in our destination properties within so house so have format.
His babington house in South Beach House Miami.
These are all booked by our own platforms and we saw strong daily rate increases across all our properties. So now let me focus on our unique membership subscription performance at M. C. J as I said over a third of our revenue is achieved by recurring membership subscription.
<unk> fees.
Our members continue to show incredible loyalty in the quarter with membership retention rates remaining very strong Saar has applications increased by 40% versus comparable pre pandemic period with application span across all houses and regions and with the weaker rate of applications accelerating Fuji desk.
The amount of demand for other membership types resulted in an increase in the M. C. G waitlist to an all time high of 64000.
It is particularly notable that demand remains strong even warehouses were close eye restrictions were in place. This gives us a high level of confidence for future growth.
We saw a highway of.
<unk> plus is globally unfreeze their memberships during the quarter shrinking the number of Fraser members to 11000, and we expect this trend to continue we took a cautious approach to accepting new sort of house members jeopardize existing Mems enjoyment at the houses as they reopen we have now resumed normal member intakes in the third quarter.
Remember now let me talk more about members we were delighted to welcome over 1400 team members across our two new houses that Nick mentioned 180 House in London, and so house Austin in North America. We also welcomed over 8000, new members across all of the membership brands. So her friends membership delivered a strong quarter in terms of growth.
So her work continues to progress nicely, we are benefiting from the structural tend towards flexible working and our unique offer membership additions have been very strong in office occupancy increased over 8% in the quarter and continues to grow we reopened the net in May and launch the first net trends membership program.
Pam offering members access to exclusive spaces within the net and we already have over 1000 net members. So let's move now on to our physical openings of M. C. G.
We were pleased to open two houses in the quarter, bringing our total to 30 houses globally.
Wanting to house is our ninth house here in London, which opened in mid April the house features.
She's 1970 style interiors, a rooftop pool and eclipse space and currently has just under 600 members with a large and growing waitlist.
So house Austin, our first house in Texas features a rooftop pool forty-six bedrooms are screening women restaurants, and the house has over 850 members with also.
Strong waitlist, which will enable us to grow membership base quickly in the year. We have opened four sell houses so far in 'twenty or 'twenty, one with a further three on track as Nick mentioned to open by the end of the year bring.
Bringing our total to seven which is well in line with the growth outlined in our S. One.
In 'twenty 'twenty two we are on track to open a fed.
That six Sarah houses in West Hollywood, Cabo, Manchester, Mexico City, Nashville, and Stockholm, as well of five other sites, which will include net New York Sculpeys to learn so her works Berlin and the line San Francisco and a third Ned site. We are really pleased with this year's house.
Growth in the openings in 2022 that we're very confident in our execution now I'd like to update you on our progress of M. C. D. Digital initiatives. One thing we are most proud of and how the team has worked through Covid disruptions to create new features for members and accelerate our digital platforms and innovation, while delivering on our strategic roadmap.
We launched this show has app it may redesigning and introducing new features to improve member experience and help them connect digitally wherever they are in the world.
This includes house connect our new connect platform improvements in booking features and updates to our proprietary payment service house pay we're seeing positive trends in member engaged.
<unk> unique daily member usage is up significantly at plus 25%. The time spent on our App is increasing significantly and table bookings had a successful launch with 62% of all global table bookings taken by us or a house app in Q2.
Our members started to connect with each other through the house connect feature.
Finally house guests continues to be used across all our houses globally. We had over 230000 guests registered on our app, providing us with invaluable data about the people visit our houses, but not yet members long term. This data will be a key differentiator for us.
Now to retail so home is our retail.
Segment, which allows members to bring so households.
Home delivered another strong second quarter with revenues, increasing over 100% versus the previous year, 99% of those cells were full price with little or no more downs, which shows the strength of execution within the team gross margin I'm you increase in the quarter leading.
Leading to a higher profit growth in cells, we added new product, which are unique so house inspired by our houses and which you can only find at Soho DTC accounted for 95% of cells with conversion and U P T, both increasing nicely versus the previous quarter.
We introduced into design services.
Services only available for our members, which has proven extremely popular in the quarter. We gained over 700, new so home plus members and so house members account for 55% of revenue, which contributed to a big increase in AAV. We continue to be very excited about significant opportunity and prospects for Soho.
We completed the purchase of the line and cigar in June we further enhanced our membership platform as we entered into six hotel management agreements related to the alliance regard hotels.
In Los Angeles, Washington, D C Austin, Scottsdale, and Palm Springs, the hotels offer a variety of food and beverage as well of over 1000 and for.
400 hotel bedrooms.
We're very excited about this acquisition not only with a broadened our geographical reach it will also continue to enhance the experience for our members on our platform I will now pass over to Humira, who will take you through our financial performance.
Thanks, Andrew I'll now take you through the financial highlights from the second quarter of 2000.
'twenty one.
Lastly, our total revenue of $124 million increase compared with the second quarter of 2020.
In the quarter membership revenue of 45 million represented 36% of total revenue.
And this was driven by the resilience and the retention rate of our existing thorough house members as well as.
The addition of new members across the Mcg brands.
As Andres already mentioned, we made the strategic decision to limit sell a house membership intakes in the last 12 months.
However, the fall in cell house members versus the second quarter of 2020 was offset by the increase in new membership brands, including friends works in hone plus.
In addition to the ongoing unfazed or sell a house members throughout the quarter in house revenue in the second quarter rebounded strongly increasing to 46 million versus 3 million in 2020. The increase was driven by the reopening of our houses and the gradual removing a social distancing restrictions across all of our regions.
Although it is important to note that our sites.
Sites are still impacted by local regulations for much of the quarter.
And if we think about the exit rates out of the quarter at the end of June North America market was trading at around 20% to 30% below comparative levels in June 2019, with the year cat, 10% below and Europe still lagging around 40% below.
Other revenue.
Of $33 million also showed a strong recovery versus $9 million in Q2 2020.
In the quarter, we reopened our public restaurants in the U K and North America in line with the easing of local restrictions.
Overall these sites delivered strong results driven by pent up consumer demand as well as additional seating and outdoor areas.
Additionally, we acquired the remaining 50% share of the mandolin, a public restaurant in Miami, which further boosted our other revenues.
<unk> also delivered another strong quarter growing revenues by 104% year on year.
Finally, other revenue growth also includes the benefit from the reopening of Scorpios as well as.
Revenues in face from the net as the London property reopened.
We made good progress in our cost savings program, which resulted in our houses operating at significantly improved cost ratios versus the comparative period in 2019.
Our global procurement program continues to deliver purchasing savings through contract renegotiation and vendor consolidation.
Manage isn't.
And the program also continues to identify new savings opportunities and we believe there is significant opportunity in north American market, where we have only just started.
At the site level, we delivered improvements in all stuck in waste management and this combined with procurement savings contributed in June two or three.
And solid improvement in our food cost of sales ratio as well as a 2% improvement in the beverage cost of sales ratio in June versus the pre COVID-19 comparative period in 2019.
As I'm sure you're aware the hospitality industry has seen increasing inflationary wage pressures in the last few months and we were not immune to help retain our valued employees as.
Three pillars attract new employees, we increased our hourly wages in the quarter, ensuring that we continue to pay the most competitive rates. However, we were able to manage the inflationary pressures through careful hours and wrote to the management of the site level.
We also closely controlled support office costs, because we have reopened recognizing the uncertainty.
You have the environment that we operate in and the need to tightly control costs moving onto our profitability measures house level contribution margin was 19%, which was lower than 2020 due to the increase in expenses as we reopened our houses and lower house membership revenues other contribution, which we define as other revenues plus non house.
Membership revenue less all other operating expenses was a loss of $4 million as compared to a loss of $10 million for second quarter 2020.
This improvement year on year was predominantly driven by the recovery of our public restaurants, as well as the growth and so home versus the comparative period in the prior year.
And also the opening of.
Sculpsure in May 2021, which remain fully closed in the comparative period.
Adjusted EBITDA was a loss of $13 million impacted by factors, including the partial opening of our business in the quarter G&A of $20 million as well as pre opening expenses of $6 million.
It's important to re.
Highlight here that when we report our adjusted EBITDA, We reported fully burdened for growth, meaning that we include expenses that are associated with the growth of our business.
These items include Preopening expenses, which are operational expenses that we incur before opening a new house and these totaled $6 million in the.
Quarter foundry related primarily to the opening of both 180 house in London, So a house Austin as well as the Preopening costs associated with the new European houses due to open in Q3.
Other items that we add back our represent noncash rent, which is the difference between the rental costs in accordance with GAAP and the.
Actual cash cost for management purposes, we add back noncash rent to assess the performance of our houses noncash rent represents the difference between the rental costs in accordance with GAAP and the actual cash cost.
In the second quarter noncash rent totaled a credit of $5 million due to a restructure of our Hong Kong lease the table on.
The recent development slide shows our capitalization adjusted for the IPO proceeds we received 402 million proceeds net of fees from the transaction, which is provide us us with significantly strengthened <unk> balance sheet as well as funding to support our growth initiatives.
Given the uncertainty in the current environment and in.
Order to preserve liquidity and access to funding we have decided to preserve our senior secured notes facility and instead paid off all CF totaling $98 million.
As previously disclosed we have also repaid preference shares totaling $20 million.
Cash usage in the second quarter related to the reduced levels of in house revenue.
In addition to capital expenditure on our digital platform the extension of Soho farmhouse, as well as capital contributions related to sell a house Austin and so house Paris.
I'll now hand back to Nick for an update on House Foundation as well as our outlook. Thanks, Humira, we have made strong progress.
G program.
Her foundations, which is of course, what we do every day it is central to our DNA and our members' care deeply about these initiatives.
In the last quarter, we formed our first inclusivity Board a group of 30 individuals from around the world who work with our teams to increase diverse.
Diversity and representation within the houses.
We've set an annual energy reduction targets to help reach our 50% goal by 2030 and have introduced sustainability training into supplier Onboarding.
I'm, particularly excited to launch so her chance.
Our program to support anyone who's just starting out will starting again in growing their business for which we have already received over 500 applications many of which have been truly brilliant innovative ideas.
Members love, helping other people and giving them an opportunity to.
Succeed in achieving their passions.
Also her Mentorship program, which pairs members with young people from marginalized backgrounds pursuing careers and the creative industries continues to go from strength to strength launching new cities, including L. A and Chicago the pent up demand.
<unk>, we have seen so far from our members as we've reopened gives me great confidence in the recovery of our business in the near term understandably. The rise of Covid cases does create some uncertainty and the exact timing and profile over recoveries conditional.
On this as well as associated restrictions, we have seen stronger momentum in the U K compared to Europe, where our houses are impacted by capacity in international travel restrictions and are in term preventing a global members from visiting North America is seeing some impact from the mosque in vaccine.
The mandates, but we have confidence it's recovery will follow the shape of the U K, but clearly it's too early to call. The time of VAT recovery, our development pipeline remains on track and we expect to open three new solar houses in the third quarter of 2021, and so has brightened in before.
Fourth quarter 2021 the strong waitlist and high number of applications also positions us well for the future membership growth.
Longer term our ambitions remain unchanged, we have a very attractive financial model and plan to open five to seven houses.
Or is this a year, we aim to grow membership revenue by 20% per year, and we're looking to achieve a 15% EBITA margin and finally, we aim to grow adjusted EBITDA at between 20% to 25% each year.
It's been a strong start to life as a listed.
Good company and we are very excited for the future.
I'd like to finish by thanking all of our members our team and our investors for all their support in the last quarter and in the quarters ahead.
Ladies and gentlemen, we will begin with the question and answer.
Answer session, if you'd like to ask a question you May press star followed by one on your telephone keypad. If you wish to remove yourself from the question queue. You May press star followed by Chi.
You have a question My press Star followed by one at this time one moment for the first question. Please.
The.
First question comes from the line of Stephens <unk> County with Citigroup. Please go ahead.
Great. Thanks, very much good morning, everyone.
I had a I wanted to focus a bit more.
Financing performance.
You cited some metrics on the exit rate.
And how does that look thus far in the third.
Third quarter.
And then you alluded to a different shape of recovery I guess, just could you walk a little bit more through your expectations for the second half of the year.
Presumably membership revenue should be okay, but how are you thinking about the trajectory of house revenues.
Hi, David.
Yes.
And then.
Andrew.
There will.
Add to it.
Yes, we're here in England in UK.
We're seeing a very strong recovery.
We're seeing our numbers.
Exceeding 2019 figures now.
Our houses.
Because we've been living with the Delta Varun here.
There are no restrictions in the UK you can go to soccer matches sports matches people can guidance restaurant.
Boss mandate.
The.
The UK is 40%.
We're seeing very very strong.
Our members love coming back to their houses.
They they they are.
Aiming a lot more people are aiming to be working from the office from from September in the pool.
So the U K is in pretty good shape.
Europe is in good shape as far as.
The local members I think the great thing about so a house is the fact that it relies locally on its local members, but also you know.
The fact is our local members unable to necessarily travel globally. It means that they used to have more and that sort of gives a bit of.
A buffer in the fact that not so many people are using the hotel rooms, because it's difficult to get into the particular cities.
Cities. So Europe is in a much better position than it was say a couple of months ago.
The vaccine programs in Europe are going very well and people are I think.
And I go to Teva.
The strength of the membership and in Paris, and Rome is really encouraging.
And North America again, you know our houses are back open they're all back open.
Let's see Miami's had a phenomenal run of it because.
We know what's been happening in Florida, but new.
Europe is good it's busy but it's not quite.
Quite 2019 figures nor is it nor is the west coast, but very encouraging signs and also encouraging signs in Mumbai in India, where web restrictions in nearly all gone and also in Hong.
So you know.
Hey, Mara you can add to that yeah, the only thing I'd add to that Brexit.
That's what we're seeing is that members are continuing to see.
Correct.
The membership on squeezing as outpacing what our original expectation of glass.
We're continuing to see that.
But it always varies in terms of performance there are levers that we have and all guests that we would continue to pool understood. Since you know the Delta Varian continues to be effective and in some of those leavers.
Tight cost control and capital ship management and payments of all Labor management.
And all procurement programs that continue to be effective and as there's more tool kit to work towards a specific angle from ACA.
So I'd start out a little bit more of a membership. So I think it was constant on membership growth in the second half.
And it's accelerating both in our new houses that Nick mentioned.
Adding.
Marx and an existing houses as we regime pre COVID-19 levels of intakes.
Our new membership types really super excited about.
Got that highlight list. So we have a high level of predictability kicking into half two.
And.
So it's 6% of our revenue the membership.
These everything so I think we feel really strong about our members could be back to the houses umbrella.
So her friends membership, which we introduced last year.
Marketable.
The amount of applications every week for about.
It's for people, who can go into our houses, but if you'd like to staying in our bedrooms.
We can like who like.
Using all work spaces, who.
Have access to our studio spaces, and this is going incredibly well and we've only just launched in North America then.
Europe we're.
We're seeing a really healthy amount of applications typically so.
I mean the world.
So just wasting provides loss restrictions to go away.
No I think we're very well.
That answer your question Steven.
Yes, thanks for all the detail I appreciate it best of luck in the back half. Thank you.
Thank you.
The next question comes from the line of.
Thomas Allen with Morgan Stanley. Please go ahead.
Thank you.
So the other revenue strength really stood out can you just elaborate on that a little bit.
It sounds like zero home business does very well.
But just.
Historically, I think about half of that came from restaurants.
So can you just give us a little bit more color there. Thank you.
Yeah.
All other revenue, yes, certainly a very very strong come back we're seeing so if I take it down and break it down by region, specifically in North America, we acquired the additional 50% of our restaurant grateful mandate.
She already had an interesting so that has been a bunch of pizza.
Uh huh.
I think kindred in U K, we expect public restaurant is far better than we expected and part of that was actually had having additional capacity to outdoor dining and so they're not okay outpaced.
Display applications.
And then in Europe.
Sure.
We opened four peers for the summer season to that that typically is around this time of year.
Oh much better despite the restrictions that were in place across Europe.
And then of course, we have also won business with.
I'll talk about the under if you talk a little bit more about how basketball missile guidance, yes sure. Thanks, Sarah so.
<unk> business is all about allowing our members to bring the household.
As I mentioned, 55% myself from our members.
So <unk> is our membership business, we have a home plus members, which is growing really nicely.
No.
We're very confident in half two the ourselves, we'll continue that that high level of trajectory and a coffee as much. He go ahead of sales and it's super exciting.
Our business is very unique.
They'll all around on membership.
And we're very confident in growing that business quite rapidly over the next two to.
So we'll continue to talk about each quarter, Nick if you want to add.
From a creative point of view and I know the call is not about creates a visible if you will.
Awesome.
In the autumn collection is fantastic we've ever take food.
But it really is fantastic.
Three years.
So the foundries come onboard in the last two years all of our businesses.
Really rocket.
We have huge ambitions with a home in the future.
Sure.
Thank you Thomas.
Two questions.
It does and then and then just as my follow up there were three things.
And that I thought.
Were incremental and new one in Rome, you opening up long stay apartments is that new two Mcg second thing you talked you announced that you're going to open up the night at the Nomad in Midtown are you still opening up another nine in New York and what happened there and then the Soho.
Hum Studios can you just elaborate on those a little bit. Thank you.
I'll take the first couple of <unk>.
And then Andrew will talk about the last one but long stay yes, we have got little house apartments here in May that we are doing incredibly well there always full.
We chose that route in rone because it.
I heard the area. We're in it's a very local area Theres a big film industry. It's next to film studios with lots of people who don't stay.
Long long upon study so that's why we created that.
They all really beautiful.
I think very well.
So incredibly well as far as the net.
We have.
We are moving with it.
Super exciting.
We just talked about but not here in London because.
It's a big piece of that.
Before lockdown it was doing 40000 customer.
Customers a week on the ground floor.
And then lockdown came.
And we've introduced different membership types and we've introduced net friends we've been.
We've enhanced the net membership offering as well, but the return of put food on the on the on the ground floor is very very encouraging as is the occupancy in the hotels.
Well I mean.
It is really encouraging for a large 200 bedroom hotels. So the net is right to expand the membership.
Hotels so.
The opportunity came with the Nomad, it's a really beautiful building in New York.
It's going to be transferred.
Further than that.
Keep a lot of the lovely things that people loved about about the nomad before but we're gonna be including our membership.
We are in it so super excited about and then maybe I'll have a building in Europe and Youre right. I mean, it is signed and we are on the on the on this.
Construction of a moment in the IMAX film stock Exchange building, where you if it's going to be low in bedrooms, but it's got a huge amount of experiential F&B membership opportunities Andrew maybe you want to add about Soho and Stooges, Yeah sure <unk>.
Business is a digital first business, but we felt.
There was a big opportunity to trade space for our members that would allow members.
Ms Judy Osage actually showcase their own products, but also to have a gallery store format.
Tail space with our interior design service, which we recently launched it's been incredibly popular small numbers, it's only available.
The bulk of our members.
So we've got London I'm coming in the next couple of months and Boston, New York and the meat packing district.
We're gonna be CP unique spaces, all based around our members you're gonna have unique advance unique spaces for them and us.
It's just another way of enhancing our membership.
Greg opportunity.
And as you know because there are so many opportunities out there because of where we're at retailers and on the.
The whole thing about community pushing komatsu Super excited because as soon as the communities in that when they go off and buy whatever that physical and more over time.
So.
We're pleased about.
Is that does that also having taught us.
Yep, that's great. Thank you very much Craig Thank you very much.
Yeah.
The next question comes from the line of Stephen Grambling with Goldman Sachs. Please go ahead.
Hey, Thanks for taking the question good morning, good afternoon.
I'd love to hear your latest.
On the pricing strategy, both as it relates to the memberships and as you think about kind of in house, given your what youre seeing in terms of labor inflation.
I'm going to start Stephen and then I'm going to pass to Humira.
Pricing.
We've always been reasonably priced which always means that there is there is capability of.
Raising our prices you know our members are Super smart about they know our cost of goods are going up everywhere. They understand labor costs are going up.
They very very expensive.
To see increases in the in the F&B prices in that room pricing.
But we're always very sensitive and very responsible in how we go around run run run run delivering up so.
As far as the labor market, because we are not saying we.
We have a.
The Crystal ball here, but we certainly in the U K realize that something was going to be a challenge when we reopened because not because of COVID-19 necessarily than people.
Thinking of changing that Chris, but because of Brexit so we.
We work very hard before.
The pandemic on how we were going to be dealing with are starting and we.
We've looked at all on everyone's on new contracts and contract people.
We've reviewed ovale rates and I think we're best in town on that now and we've done exactly the same in America and we always.
And they are initiatives are different ways of recruiting in the past. We would go directly source would go we'd have recruitment centers in Italy, and France, and Portugal and now we are massively looking at re training people.
People, who are good with people.
About.
What we do they do.
You know so people from retail people from airlines, So, we're really retraining and encouraging them to come into the business Nomura Yeah, just to add some color to that in terms of the increase in hourly rates. So we did increase the new county rates between one and two.
And we will take U S hourly rates.
Got it.
And to your point.
Yes, we are seeing wage wage inflation, we also seeing inflationary pressure in other areas such as you know Frank laundry and linen contract cleaning and.
Do you know how are we managing that.
We still believe we have significant pricing power.
I mean, we've increased prices in the past without having seen a reduction in volume and I think we would continue to listen to the other feature structure.
And perhaps maybe one one other follow up to an earlier question.
On the outlook.
One time or other.
<unk> expenses that we should be thinking through.
In the second half of the year either.
Or even just ramping back up.
Coming out of the recent.
Restrictions.
No none that we currently forecast and yes, there may be some advisory costs.
It's related to the IPO that is still coming through but that's starting to I can't see anything that would be a one off.
We are seeing.
Really good improvement.
And as compared to when we were in 2019 and that was that would go through us during the pandemic looking on how to make profit.
And more efficient and there was low hanging fruit and there was a lot of opportunity and we're beginning to see that and we continue to see that.
In the coming months and years.
And maybe one quick follow up on that I guess as you've seen is very very strong in house trends.
Typically I think you can look at over the past.
Several years since you already have in house revenue is less in house expenses kind of running at a loss and you make up all of that was the membership fee.
Are you actually seeing the in house revenue less expenses turned profitable in some of these locations get into how.
Strong the revenues are.
Yes, it's a good follow up question.
So we are we.
We set a significant improvement at highest level margins through the cost changes that we've made based on improving F&B margins, we should shrink.
And streamlining the teams in supply base. So we are all.
Our mid term goal is actually to move from what you're describing as of last night to breakeven because ultimately our long term goal is that membership revenue was all EBITDA.
Huge focus of ours, and we're making it as Nick said, we're making really good progress on it and if you want to add anything on that amount, yet and we're already seeing some improvement coming through.
We talked about peak spending driven in the feed cost it sounds like it's been in for a minute on the sandwich sales ratios will continue to work on that wages.
Wages, while she talks about inflation pressure on wages.
As you know better scheduling better management of our team I need this technology.
Supercharge that.
Initiatives as well if they only think that doesn't want to pay for.
That's all Super helpful. Thanks, so much.
Thank you Susan.
Next question comes from the line of Shaun Kelley with Bank of America. Please go ahead.
Hi, good afternoon, everyone.
Wondering if you could just comment a little bit more on the customer behavior of the member behavior that you're seeing in the houses. So specifically just thinking about those exit rates that you gave us on could you help us think about just you know what are the visitation or usage levels relative to kind of the spend per member levels and not not specifics, but maybe directional.
Any color would be it would be interesting and helpful.
Yeah.
So our members are delighted to be back right.
They've been very very love Socialising, They love talking they love connecting they love.
Love to be able to be in the room, where there's other people they love laughter.
So we are seeing a return to old old.
2019 habit, you know all places whenever we put on members events, which we do overtime constant day, we are really seeing members coming out and enjoying that.
Al.
A member spend et cetera et cetera.
Faster than before.
Hum.
Members of the.
Before I'm hearing I'll switch of a zone.
Ooh Ooh.
Places where people can relax.
You know the demand.
If if if if I've got another email for someone else can be rented copy number for them I would be.
Going into the hundreds of thousands but me remember.
The member behavior.
Really it's good to see it and also the other thing that I've been really positive is that we did a big.
Demand.
Trying to make so houses during the day less work less laptop.
We've also who work offering we have been encouraging them to take a lounge membership.
Work space.
Unused laptops less in the houses, which will give us more capacity in our houses and give them.
Ship more but social so overall, but with them so work so.
We are seeing the response to that very positive so but.
So her work here in London at the office space is 100% full in the Soho lounge membership is really increasing week.
Light week.
We really are seeing one thing we are already seeing so and as you know members really loved the hybrid way of living they love our digital they love a better physical because we've really ramped up the shop and we launched connect on the shop with.
Content on to Vishal, we've taken a lot of friction out to being a member.
On the sharp sharp as far as payment and bookings are concerned.
They they really feel that they got so it hasnt membership 24 hours a day.
And.
As you can tell from my voice.
Is it.
It is great to see it's great to see people back in our houses it's great to see our members engage in our shop and it's great to see the demand on the applications Thats coming in.
To answer that.
Thanks.
That being said, we're seeing an uptick in average then I.
I think you know that's been a pent.
The non people haven't had.
You should not know many places to go and so we are seeing a slight uptick in average then what we're also seeing and sort of related to this is the occupancy rate. That's all experiential houses if we look at boddington and somehow and actually in Miami, we have high nineties.
90% Okay.
Great.
I call them getting myself I am sorry.
Okay.
Hi, I mean do you have any sort of other thing I'd add is it's 50 houses.
But you're not getting because not 100% people people are back into the offices, but.
But I think you'll see that coming.
People are like in Europe.
And then I'll finish with something Sean I'll, just finish with something that Hasnt changed which is our retention rates are extraordinarily high still in our historical levels and that just goes to show. The all our teams globally are continually focused on giving the best <unk>.
Experience in every house, which leads to those really high retention rate.
Thank you.
And the short follow up Nick I think you mentioned in the prepared remarks that we're.
Works was progressing nicely and obviously you just talked about that trade off relative to the behavior a little bit.
Can you just comment a little bit more specifically on how you expect works to be impacted by.
Sort of the return to office cadence you know is it a.
Actually a bit of a tailwind right now that you know people arent going back to normal behavior or do you need some some of the urban markets to fill up a little bit more before you see the workspace.
Can you take off a little bit more aggressively.
We have very good follow up Sean.
Well sort of.
Life design.
Todd.
The design for post pandemic.
Companies are looking at.
Losing that leases on their buildings and they are looking.
Paul.
The people who work for them to have a hybrid style.
Working in Soho works is perfect for that so we're seeing a huge demand.
Smaller office requests, which we call you can't do anything about it in the UK at the moment because 100% true.
We're still working through in the U S.
The lounge membership works very well in our company could take small office and then fallback company. They could take the 50 lounge memberships, which they have a sort of hybrid approach on working from home and working in the city. They can go into different locations in the city, where not just in one location where in five locations in Boston.
So we.
We are seeing that but so how what's in there.
This is more food more luck when when when judgment Jordan, So I'm not trying to see some sort of a critical.
It really it really it really dovetailing well into the new way that people want to do it.
It's really encouraging thank you everyone.
The next question comes from the line of Daniel Adam with Loop capital markets. Please go ahead.
Hi, Thanks and congratulations.
One for me it looks like the cities without houses memberships declined by about 500 members.
Sequentially was the reason for that decline related to the partial opening of Austin, Texas and in Florida, and then I.
Yes, just looking ahead, what do you expect your expenses.
Great.
Got it wrong.
Expect gradual decline because you continue to own the masses.
Hey, Daniel.
So great question. So yes, you are correct.
When we have a seat you got house City for example, Paris in Austin when those houses open we transfer the <unk> membership into house membership. So that's something that we've always done we've got actually a huge ambitious plans for <unk> because he's wonderful for us.
It helps us find our next physical locations.
Expand our membership into newer regions like Latin America Africa, and Asia. So this year, we will expand to 60 cities and by early next year will actually be in eight cities. So actually we are expanding <unk> because he has proven to be so successful.
Successful it adds to the diversity and inclusivity of our membership.
Helps us grow both by membership and also physically so there's actually a lot more to come on <unk> and it's incredibly exciting.
Okay. Thanks for that.
Our next question comes from the line of Sharon Zackfia with William Blair. Please go ahead.
Hi, I hope everyone's doing well.
So I guess I'm thinking through what sounds like really really Reengage membership group at sea housing, particularly in the U K.
And youre seeing that visitation patterns really accelerate how does that inform your willingness to start to.
Do what I think was quite normal member intake.
And I'm thinking you know if the existing members are acting more like new members because they are so excited to come back.
Does that mean or translate to out more cautious cadence even in the third quarter and continuing to winnow down that waitlist.
But let me tell you about eventual under Hum.
Sure sure.
We.
And they're being cautious in Q2 because of the reasons you said.
We didn't know how our members are going to come back and we pay to our members.
We're not having or the overcrowded clubs.
Like if they don't want to it won't busy clubs like walking into an empty.
And so we've.
So to use Q T is Q2 sort of testing to see restrictions loosen.
Food away and see how our members Rita and Youre right, but they have come back a bit like new members, but as every new member dog. This lockup kept getting a Christmas.
Brexit you never you.
They play.
Without Christmas present dramatically in January and February and then it goes back into the top of it and it comes out but that's all.
So we will definitely be able to resume our membership intake.
In Q3, which we have.
Obviously, we got a huge demand on the waiting list, but never to Overcrowd dotcom.
It's never never to make.
To have a situation, where remember silver, but they they congress see when they want to see when they can't get them when they want to go and so but there is there is various capacity.
Thank you Joe.
Uh huh.
I do see I would just add a little bit more collateral on that in a case, where we're incredibly excited about our new houses.
We've got seven new house CCA with oil.
New members, which adds to our global membership and makes our membership again more interesting diverse inclusive and then we've.
But on the membership types, which Nick mentioned, it's getting fantastic traction from.
Works are friends in hand, plus.
We're obviously always focused on say a half members and existing houses that we do have a lot of new house smoked me memberships to grow at the same time.
No.
Thank you want to add anything else to that.
No.
Good.
Great.
To answer your question Sharon.
Yeah.
Yeah, that's perfect. Thank you.
Yeah.
Next question comes from the line of geographic with Jpmorgan. Please go ahead.
Hello.
Hello, everyone just on the topic of new Soho House member intake and resumed to normal levels here in the <unk>, how even was that resumption.
Across geographies the UK the U S and the rest of Europe.
I'll take that and then Nick can answer it.
Even Joe we are wait list is pretty evenly spread across all of our houses in all our regions globally.
So our intakes are done based off that so I would say, but at the moment in Q3 that it'll be a nice even spread across most of our houses and then obviously you have the new houses.
It's pretty even on new houses up large whitelist, so it's a pretty even spread and go forward.
Yes.
Out of that JV.
Capacity.
We didn't want to knee jerk in Q2.
And see their various capacity.
Earlier today I.
It is indeed, a call with all of our membership teams in Hong Kong.
Bye bye.
We're talking to our membership teams overtime and really understanding how our members are coming back and how excited they ought to be back and how excited.
Excited they are to come to members' event some.
But.
Hum.
There is this opportunity to add.
And more and I know, it's a remember that always concerns.
<unk> got crews are getting more and more than ever and over team. The membership teams are just people.
Really really wanted to get into the houses.
It is effective.
Well people nervous.
Who's around them, so I hope that answers.
Gotcha.
Perfect. That's all for me thanks.
And there are no further questions rich frontline I would like to hand back to you in exchange for closing comments.
Well.
Space.
This is Mike, but none of us doing it.
Never done an earnings call before them.
And although.
I've got to say I really enjoyed.
Public I really enjoyed.
Beating everyone.
And on the on the sort of the.
The more sort of the focus we have on I'm doing what we've been doing for 25 years six years.
We are so determined to achieve our plan.
Wed never more determined whenever more you know the leadership team you know we got a brilliant leadership team who are absolutely if I.
Gifts on making life for our members better which means more houses better experience within the house and more interesting members than.
We are really delivering out on a or on a good level I'm super excited about retail and.
Okay.
The expansion of retail and over different membership types, which we have been working on for a number of years, but I've only recently launched it.
It gives me great great great faith in that and also the digital which as you know it.
You you you people you talk to companies.
But taking a very physical company, making a hybrid company you know has its challenges and I think during the lockdown, we'd been able to really get everyone on board on the fab, but we all know gonna be a hybrid of members are really loving. The fact that the membership it's turned from just.
You don't want to go to a hybrid membership so.
I look forward to many more of these tools in the future I saw as restrictions.
Disappear and our members return big time, but thank you. Thank you. Thank you.
Ladies and gentlemen.
Just that concludes today's conference call. Thank you very much for joining and have a pleasant day goodbye.
Okay.
Yeah.
[music].
This.
[music].
Okay.
Okay.
[music].
Oh.
Okay.
Yes.
[music].
Okay.
Yes.
Okay.
Yes.
Yeah.
Okay.
[music].
Okay.
[music].