Q3 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 thanks for joining the membership collective groups third quarter earnings Conference calls throughout today's recorded presentation. All participants are in a listen only mode. The presentation will be followed by a question and answer session.
Session and if you'd like to ask a question press star followed by one on your telephone keypad. Please.
Please press the stock he followed by zero for operator assistance I would now like to turn the conference over to M. C. G.
Yeah.
Yeah.
Yeah.
Okay.
Sure.
Yeah.
Okay.
Okay.
Okay.
Okay.
Yeah.
Thank you for joining us today to discuss the membership.
Ship collection group third quarter financial results 2021.
Before we begin I'd like to remind everyone that certain statements may be made during this call that is forward looking.
These forward looking statements are subject to various risks and uncertainties and reflect our current expectations based on our beliefs assumptions.
<unk> and information currently available to us.
Although we believe these expectations are reasonable we undertake no obligation to revise any statement to reflect changes that occur after this call.
Description of these factors and other risks that could cause actual results to differ materially from these forward looking statements.
I will discuss 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 or in isolation from GAAP results.
Reconciliations to the most comparable.
<unk> GAAP measures are available in today's earnings press release, which is available on the Investor Relations section of our website at Www Dot membership collective group dotcom.
Okay.
Okay.
Okay.
Kevin.
Let's see.
The M C G.
And I'm currently in newly open House, Paris, which was going to give you a quick before we do but third quarter earnings presentation transported.
Oh I see.
And in Europe.
It's a general manager.
Right right.
No.
Right.
Oh wonderful.
Hello, how are you.
Nick.
Sure.
Yeah.
Oh yeah.
Thank you.
Hello.
Nice to meet you I'm pool is our head of membership and communications.
In Paris.
And it's the thing with the new member how are you finding it you like the house or beyond it.
Alright.
Right.
Hi.
Okay.
Great.
Yes.
Hi, Nathan.
Oh thank.
Thank you Julien.
Hello.
Yeah.
Well.
Yes.
Okay.
Alright.
Got it.
Yeah.
This is cinema.
Oh, sorry, we use it as a temporary which is proven to be incredibly popular.
Yeah.
Really good to see people back in Ohio.
I'm just going to show you a couple of the bedroom.
This has been licensed spectrum.
[noise] sitting room.
[noise] This room is boudoir plus.
And then the bedroom sort it out.
[noise], so what do we got here.
And from here, we have our existing pool.
Uh huh.
Oh, sorry go ahead.
Hi, Brian.
Jim well Oh club.
Okay Super well, we're really happy with it.
Mhm.
Yes.
Yeah.
Hello, everyone can I, just say, it's great doing it from New York, and saying, what's the city, Florida should all houses.
Open them.
And the business, which yeah. So accustomed to I don't know I also hope everyone enjoyed seeing.
Do you have some Paris, it's incredibly beautiful space and we're super excited about it.
Delighted to welcome you all to the third quarter earnings call of the M. C G.
I'm going to take you through some of the highlights before handing over to Andrew.
Tomorrow for all the detail.
The M C. G. All membership collective group enables our members to connect with each other wherever they are in the world I ran a physical spaces overall, our digital platform.
Q3 has been another strong quarter for us and we've loved welcoming all members Basra houses.
Sculpeys Beach club, the med and full day quarter.
And swore a hotel who live outside the lively and buzzing.
It's wonderful to say all houses freising once again.
Of course, if a quarter, which has also had its challenges.
As the impact of COVID-19.
Although our business has diminished we've seen pressures from rising inflation supply chain issues, most pressingly labor shortages at all site, albeit they have so far had limited operational impact on us.
Before I continue I want to pause and thank everyone, who works at the M C.
Around the world.
Passion resilience.
An incredible hard work and facing the issues of the past few months.
Means a lot to me.
Turning to membership we have welcomed nearly 17000, new members to the M. C. G in the last quarter.
Q2 review.
Resuming membership intakes, Hello houses, but also down to the strong growth of our newer memberships. So her friends who are.
And so our hometown.
Demand for our membership has remained incredibly strong as ever a waitlist has grown to just under 60.
<unk> thousand globally with every site, having a waitlist to joy.
When it comes to sales in our houses momentum has grown through the quarter.
Whereas before it had been the U K, leading the charge I am delighted to see you over region showing improving momentum.
Particularly free September.
We've opened two new houses in the quarter and Tel Aviv in Paris.
They recently opened so how its road the San Lorenzo neighbourhood.
You've had a glimpse of the paradigm.
But we're equally as excited.
Road.
It's a 10 story building with bedrooms long stay apartment, so a health club and the rooftop Chicago restaurant reviews across the system I.
I have loved visiting these new houses over the last few months.
And I know our members will love visiting them too.
I also recently visited Austin.
In Texas, Michael is thriving.
On retail so at home had another great quarter with online sales up an incredible 116%.
We have also opened our first flagship Zara home studio on the Kings Road in London, which has got off to a flying.
And we'll be opening a second studio here in New York This week.
Copious Beach club and <unk> had a busy summer season, despite ongoing capacity restrictions also Ned line swore our hotels all saw a strong rebound with increases in.
Thanks to see rates as customers enjoyed being able to travel again.
2022.
It will be another exciting year for V. M. C. J as we opened new houses in Brighton West Hollywood, and Nashville, and in the first quarter and with four more sites to follow.
We will.
Oh can open a second scope is selected to loom in Mexico as well as two new net property I'm incredibly excited to announce the net New York and Midtown.
Opening mid 2022 is 167 bedrooms public bar and restaurant plus a members only nuts club.
Also as growth is what the M. C. G is all about.
Continually increasing the value of our membership by adding new access and experiences for our incredibly loyal members.
And with that I'll handover to Andrew to take you through some of the detail.
We think it's Nick I'll talk more about our performance and momentum throughout the quarter, our profit recovery and M. C. G membership, reaching an all time high.
Before I hand over to Humira across financial performance in the quarter and outlook I'll spend time talking about our strategic growth plans of M. C. G and how we're progressing in the next 12 months.
I'll start with membership.
The heart of everything we give a M C. G. A global teams I hate to get the best experience to our members and their guests.
I'm pleased to report that title M. C. G membership increased by 16700 in the quarter to 145020% above 2019.
Yeah.
In the quarter just under a third of our total revenue came from recurring membership fees, which grew to 51 million.
This growth was driven by combination of factors.
Assistant high retention rates are so house members in line with historical averages.
The resumption of.
Membership and takes across all our houses also houses even the oldest have experienced an uplift in membership numbers, adding to their profitability.
Members continued to unfreeze membership with a 4000 members unfreezing of the quarter and we expect this level of Unfreezing to continue throughout Q4.
I'll wait list continued to grow at a six 6700 by the end of the third quarter with membership application outpacing the rate of membership intakes.
Our new ships I did an additional 10850 members across our friends silhouettes and so having plus.
Our house members continue to provide us with the backbone for acquiring new So house friends members we.
We had over 140000 guests registering with us on that so house app when they visited the houses as a guest but the number in the quarter.
Exceptional membership performance contributed to a significant improvement.
<unk> and profitability with adjusted EBITDA, turning positive in the quarter.
Moving onto inhouse revenues, we saw an acceleration of members using our houses throughout the quarter with over 120% growth of in house revenues versus the third quarter. In 2020, we really really enjoyed welcoming our members back to all our houses.
Accommodation continued to rebound the group occupancy rate increasing to just below 70% with an average room rate of increase of 35%.
<unk> ongoing restrictions in Europe, and North America incur.
Encouragingly the weekly run rate yourselves improved throughout the quarter and we're excited that our members can trap.
North America again from this week.
As you can see from the video the first time since the pandemic, we hosted a full events program across all our houses with live streamed on us So a house up globally from fashion week in Paris private events in New York to Offsite wellbeing events in Toronto, our members enjoy a wide.
Events that blended music, our passion and the wellbeing wells.
I want to pause here I've mentioned, our membership credits we should membership credits went on houses were closed during the pandemic as a onetime goodwill gesture to all our members.
Our members have loved the credits being able to redeem them against food beverage accommodation.
Ranger <unk> and <unk> as well as her home it was the right thing to do for our members.
These credits were expired at the end of September, but the vast majority of our houses.
And as you would expect we saw a peak redemption activity in the last few weeks of September.
Therefore, there was a one off impact in credits on our financials in the quarter.
Combinations, we've already recognized the cost of the membership credits program as an expense when they were issued to members rental houses were closed when credits are redeemed in the house. This sale is not included in our in house revenues.
<unk> represents cash sales omi.
In Q3 alone credits with a face value of $21 million were redeemed by members.
Equivalent to an estimated $12 million of potential gross profit if the cash style had been made by those members.
Although these membership credits are not included in the revenue numbers, we are sharing with you today.
Our M C G where membership platform connecting members in our physical spaces and digitally globally.
Hey, we strive to make our members' lives better socially and in the work we have a large addressable market. So house, so home the net ensco peers to expand into.
Our revenue growth plan focuses on a number of areas including.
Only new solar houses with targets to open five to seven per year.
Every day the world as we expand our global membership.
Launch and grow new membership types, including so her friends to her words and the soon to be launched so house connect membership.
The expansion of the other brands in M. C G platform, including the net and scope is in line with the plan to open one to two sites per brand each year.
The growth of our luxury interiors business, so home, but digitally and physically viral saw him studios and.
And finally, our global efficiency program, which Humira will talk more about.
In Q3, we continued to make good progress in all the initiatives.
We are keen to houses in the quarter Tel Aviv in Paris plus room.
Call. It October bringing our total household names to 64.
Four new countries.
These houses collectively added over 1500 new members.
We've decided to be brought in house in the U K in March along with other openings in Q1 in literally house West Hollywood as well So house Nashville.
In mentioned, we're on track to seven houses in 2022, plus two nodes and the scope is sort of a total of 10 new experiences for our members.
And I know this is the membership collectively we are decisively technical partners.
As Nate we hadn't counted I think many of you that joined.
I did not have always done on a holding side at least on the presentation. Thank Keith Bang without.
Alright. Thank.
Thank you for joining us today to discuss the membership collectively third quarter financial results for 2021.
Before.
And again I'd like to remind everyone that certain statements may be made during this call now forward looking.
These forward looking statements are subject to various risks and uncertainties and reflect our current expectations based on our beliefs assumptions and information currently available to us.
Although we believe these expectations.
Actions are reasonable we undertake no obligation to revise any statement to reflect changes that occur after this call.
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 or in isolation from our GAAP results.
Reconciliations to the most comparable GAAP measures are available in today's earnings press release, which is available on.
So our relations section of our website at Www Dot membership collective group dotcom.
Okay.
[music].
Charlie.
Okay.
C G.
I'm currently in.
Indefinitely.
House, Paris, which weren't going to give you a quick.
So into the third quarter earnings presentation.
Oh I see.
Are you getting your fair running the place with a general manager.
Right.
Yes.
No.
[noise] Oh wonderful.
Hello, how are you.
That's fair.
Oh, Oh, Oh, yes.
Very good.
Nice to meet you Paul is at a membership.
In the near term.
Paris.
It's the thing with the new member how are you finding that you like the house or illness.
Yeah.
Okay.
Right.
Aye.
Okay.
Great.
Sure.
These figures.
Oh I'll see you later, thank you enjoy your lunch.
Hello.
Yes.
Well.
Good to see.
Sure.
Okay.
Got it.
This is Austin well.
Yes.
Both of them to use it.
Cadbury room, which has proven to be incredibly popular.
Okay.
Yes.
Really good to see people back in Ohio.
Stay in our hotels I'm, just going to show you a couple of bedrooms incentives. This is unlicensed spectrum.
Okay.
Anything wrong.
[noise] this room is boudoir path.
And then the bedroom suites.
Okay.
Got it.
So why don't we go ahead.
Yeah, we have I want to thank Paul.
Well listen to us.
Right.
Please.
But oh, sorry has apart but.
Sometimes the temporary road to Jim well the health club.
Okay Super well, we're really happy with it.
[noise] Hello, everyone.
Can I just say, it's great doing it from New York, and saying, what's the city flourish in our houses reopen them get the bonds in the business, which they are so accustomed to and I also hope everyone enjoyed seeing on you have some Paris, it's incredibly useful space and we're super excited.
Size of that asset.
I'm also delighted to welcome you all to the third quarter earnings call of the M. C. G I.
I'm going to take you through some of the highlights before handing over to Andrew and Humira for all the detail.
The M C G.
All membership collective group enables our members.
We will connect with each other wherever they are in the world either in a physical spaces.
Our digital platform.
Q3 has been another strong quarter for us and we've loved welcoming all members Basra houses Sculpeys Beach club.
Net and full base quarter align.
<unk> taken Soiree hotel all of our sites are lively and buzzing, it's wonderful to say all houses thriving months again.
And of course, it's a quarter, which has also had its challenges.
As the impact of COVID-19 on our business has diminished we've seen pressures from rising inflation supply.
Supply chain issues, and most pressingly labor shortages that our site, albeit they have so far had limited operational impact on us.
Before I continue I want to pause and thank everyone, who works at the M. C G around the world.
That passion resilience.
And.
The incredible hard work.
Faced with the issues of the past few months it.
It means a lot to me.
Turning to membership we have welcomed nearly 17000, new members to the M. C. G. In the last quarter, that's Q2, resuming membership intakes and all houses, but also down.
To the strong growth of our newer memberships. So her friends so her work and so our hometown.
Demand for our membership has remained incredibly strong as ever a waitlist has grown to just under 68000 globally with every site, having a waitlist to.
Joey when it comes to sales in our houses momentum has grown through the quarter.
Whereas before it had been the U K, leading the charge I am delighted to see over region showing improving momentum.
Particularly for September.
We've opened two new houses in the quarter.
In Tel Aviv in Paris.
We've also recently opened so a house road Sander Enzo neighborhood.
You've had a glimpse of the parents as well.
But we're equally as excited about rug.
It's a 10 story building with bedrooms long stay apartment.
Uh huh.
And the rooftop Chicago needs restaurant reviews across the city.
I have loved visiting these new houses over the last few months.
And I know our members will love visiting them too.
I also recently visited Austin, Texas, Michael that is frightening.
On retail.
Water per home had another great quarter with online sales up an incredible 116%.
We have also opened our first flagship so a home studio on the Kings Road in London, which has got off to a flying start and we'll be opening a second studio here in New York This week.
Scope is beach club and <unk> had a busy summer season. Despite ongoing capacity restrictions also Ned align suarez hotels, all saw a strong rebound with increases in occupancy rates as customers enjoyed being able to travel again.
2022.
Will be another exciting year for V. M. C. J as we opened new houses Embrighten West Hollywood in Nashville, and the first quarter and with four more sites to follow.
We will also open our second scope here, so I seemed to loom in Mexico as well as two new net property.
I'm incredibly excited to announce the net New York and Midtown. This is opening mid 'twenty 'twenty. Two it has 167 bedrooms public bar and restaurant plus a members only nuts club.
This growth is what the M. C. G is all about.
Continually increasing the value.
Of our membership by adding new access and experiences for our incredibly loyal members.
And with that I'll hand over to Andrew to take you through some of the detail.
Thanks, Nick I'll talk more about our performance and momentum throughout the quarter.
Profit recovery.
And M C G membership hitting an all time high.
Before I hand over to Humira across financial performance in the quarter and outlook I'll spend time talking about our strategic growth plans M. C G and how we're progressing in the next 12 months.
I'll start with membership.
It's at the heart of everything we do at M. C G.
Global team.
Did you get the best experience to our members and their guests.
I'm pleased to report that title MTG membership increased by 16700 in the quarter to 145020% above 2019 levels.
In the quarter, just under a third of our total revenue came from recurring.
Membership fees, which grew to 51 million.
This growth was driven by combination of factors.
Assistant high retention rates are set of house members in line with historical averages.
The resumption of membership and takes across all our houses.
Also houses even the oldest have experienced.
So I hate to membership numbers, adding to their profitability.
Members continued to unfreeze membership with a 4000 members unfreezing of the quarter and we expect this level of Unfreezing to continue throughout Q4.
A wait list continued to grow at a six 6700 by the.
End of the third quarter with membership application outpacing the rate of membership intakes.
Our new a M chips I did an additional 10850 members across our friends, so what and so home plus.
Our house members continue to provide us with the backbone for acquiring new so a house.
House friends members.
We had over 140000 guests registering with us on that so has app when they visited the houses as a guest with a member in the quarter.
Exceptional membership performance contributed to a significant improvement in profitability with adjusted EBITDA turning positive in the quarter.
Moving onto inhouse revenues, we saw an acceleration of members using our houses throughout the quarter with over 120% growth of in house revenues versus the third quarter. In 2020, we really really enjoyed welcoming our members back to all our houses.
Accommodation continued to rebound the group occupancy rate increasing to just below 70%.
With an average room rate of increase of 35% despite ongoing restrictions in Europe and North America.
Encouragingly the weekly run rate yourselves improved throughout the quarter and we're excited that our members can travel to North America again from this week.
As you can see from the video first.
First time since the pandemic, we hosted a full events program across all our houses with live streamed on us So a house up globally from fashion week in Paris private events in New York to Offsite wellbeing events in Toronto, our members enjoy the wide range of events that blended music, our passion and the wellbeing wells.
I want to pause.
You had mentioned a membership credits we issued membership credits went on houses were closed during the pandemic as a onetime goodwill gesture to all our members.
Our members have loved the credits being able to redeem them against food beverage combination and as well as her home. It was the right thing to do for our members.
These credits.
Credit spec spot at the end of September the vast majority of our houses and as you would expect we saw a peak redemption activity in the last few weeks of September therefore.
Therefore, there was a one off impact in credits on our financials in the quarter.
Since we've already recognized the cost of the membership credits program as an expense when they were issued to members.
All houses were closed when credits are redeemed in the house. This sale is not included in our in house revenues, which represents cash sales only.
In Q3 alone credits with a face value of $21 million were redeemed by members equivalent to an estimated $12 million of potential gross profit if a cash sale have been.
By those members.
Although these membership credits are not included in the revenue numbers, we are sharing with you today.
I N C G, where membership platform connecting members in our physical spaces and digitally globally.
Every day, we strive to make our members' lives better socially and in their work.
We have a large.
Addressable market So house, so home the net ensco peers to expand into.
Our revenue growth plan focuses on a number of areas including.
The new solar houses with targets to open five to seven per year across the world as we expand our global membership.
Launch and grow new membership types, including Soho.
We made friends to her words and the soon to be launched so house Tonight membership.
The expansion of other brands and M. C G platform, including the net in scope is in line with the plan to open one to two site per brand each year.
The growth of our luxury interiors business Soho digitally and physically viral circumstance.
Studios.
And finally, our global efficiency program, which Humira will talk more about.
In Q3, we continued to make good progress in all the initiatives.
We opened two houses in the quarter Tel Aviv in Paris, plus room in mid October, bringing our total housing needs to 60 shape.
Four new countries.
These houses collectively added over 1500 new members.
We have decided to be brought in house in the U K in March along with other openings in Q1 in which a lot of house West Hollywood as well So house Nashville.
As Nick mentioned, we're on track to seven houses in 2022, plus two nodes and school.
So the total of 10, new experiences for our members.
Now onto our new memberships I saw her friends membership has grown to just under 18000 members at the end of Q3, we just under 14 thousands of these friends interacting in the membership through the friends.
In the quarter, we agreed to have a five French Judy.
Past five cities, all using our existing spaces to offer creative space for members to visit eat drink attend events screenings as well as hosting their own events. These events range from creative workshops to me is it nice to Cherokee exhibitions the outlook growth sorry friends remains very strong in particular with the 300.
<unk> thousand guests now registered on the slaughterhouse I shop.
Now to show her what we welcome an additional 1370 members in the quarter and our occupancy in our offices now has grown to 95% globally. The business continues to flourish as more members have adopted the flexible approach working using our lounge office.
Hopefully, it's a meeting room spaces to develop their own networks and Chris we.
We have recently launched several works out, allowing also what's members globally to connect and collaborate.
Now onto so home so home is our retail segment, which enables our members to bring the household.
The business had a stellar quarter with online sales.
50, <unk>, 16% and profit growth significantly outpacing sales growth.
Our members loved our newest assortments launching in the quarter with an average order value increasing over 120% year on year and 95% themselves in the quarter at full price with members, making up more than 70% of all sales.
The North American market was particularly strong with sales growth of 140% year on year.
We opened our first show him studio in London, 6000 square foot retail space sharing our latest home collection as well as brands launched and owned by our members and our members galleries.
This week, we will do everything in our second Sir I'm sure you're hearing.
[noise] appeal.
We continue to be excited about the opportunity set.
Before I hand over to her Meera I will finish on our progress on our digital initiatives the shop or so how's that.
So has happened four main focuses all bookings globally house pay daily content bio members.
<unk> and connect features for our members to grow their own networks, but its work and socially.
Throughout Q3, we made improvements to bookings in house based functionality.
We continued to see nice user growth in Q3, we had over 93000 nights you've uses with the daily usage, increasing by 18% on the App.
Here at Kings and payments remained almost adopted features our members are starting to use our recently launched connect features.
With over 20% of members actively connecting on a daily basis.
We have some exciting improvements planned in Q4, which will improve our member experience on the shot further.
The resilient rate of increase in user numbers and.
Engagement provides us with great confidence for the launch of somehow connect membership, which we can now expect to launch in early 'twenty two.
Before I pass on to Humira I want to thank our teams everywhere for all the hard work and commitment in delivering a great quarters results in a challenging environment.
Thanks, Andrew.
I'll take you through the financial highlights from the third quarter of 2021.
Lastly, our careful that when you have 119 million increased by 57% compared with the third quarter of 2020.
In the quarter membership revenue, which of course is recurring revenue of 51 million was just under 30% of potential backing.
This was driven by the price and our total membership base, which Andrew has already spoken about.
In house revenue in third quarter rebounded strongly increasing to 67 million.
This increase was driven by strong demand from all of them, but as well as select price increases across some of our food and beverage and accommodation offering.
As already mentioned it but it's worth highlighting the impact of member credits in the quarter.
As credit and the vast majority of regions have now expired. The remaining liability is now de Minimis encouragingly, we saw an improving run rate in sales throughout the quarter, even after excluding any short term uplift remember credit.
And if we think about exit rates out of the quarter in September the U K was trading at around 10% above comparator levels in 2019, when North America trading, 10% to 15% below although Europe still lagging at around 20% below.
Other revenues of $62 million also showed a strong recovery up 48% that's just trying.
Okay.
And by the strength of cell Hum Scorpius Beach club as well as our public restaurants in the U K and North America.
Other revenue also included management fees from London, which saw a strong recovery in food and beverage outlets as well as an accommodation.
Finally in the third quarter other revenue for the first time.
10 treated the contribution from the line into our hotels.
Moving to our profitability measures.
House level contribution, which is defined as house revenues less in house operating expenses was 24 million for the third quarter of 'twenty to 'twenty one.
And house level contribution margin was 21%.
Timing understandably as volumes in houses raised in house operating expenses also increased.
In line with the industry, we've seen inflationary pressure across our food and beverage indirect costs and most notably our labor base.
As mentioned in Q2, we proactively increased wage rates in June to attract and retain.
S labor there.
Therefore, the challenging labor market. The industry is currently facing is so far having a limited operational impacts on our business.
The food beverage and the competition price increases we have implemented combined with ongoing efficiency programs has enabled us to partly offset the inflation pressures during Q3.
It's worth noting here that we have only increased our prices gradually so that all members felt minimal impact. However, we believe we have more capacity to increase prices during Q4 and beyond to help offset inflation.
In fact, our food and beverage cost ratios with 3% better than the same period pre pandemic.
Endemic notwithstanding inflationary pressures.
Other contribution which redefined as other revenues plus non house membership revenue less although operating expenses was 12 million compared to a loss of 3 million for third quarter 2020. This improvement was driven by strong growth of other revenue and in particular the contribution.
Tributes from Soho home school peers and public restaurant.
Adjusted EBITDA was 9 million a significant improvement from the second quarter.
Net loss was 76 million for the quarter.
We report our adjusted EBITDA fully burden for gray, meaning that we include expenses that are associated.
With the growth of our business.
The table in this slide shows some of these expenses in.
In the quarter Preopening was $5 million and related to the opening of new houses.
Noncash rent, which represents the difference between the rental cost in accordance with GAAP and the actual cash cost was $1 million in the quarter and.
Fed registration fees were a million.
The capitalization table shows a position as at the end of Q3 2021.
In the quarter received $402 million in proceeds net of fees from the IPO, which has provided us with a significantly strengthened balance sheet as well as funding to support our growth initiatives.
As previously disclosed we paid down all CF facility of 98 million as well as repaying preference share payments totaling $20 million. In addition, we paid down $7 million loan relationships. So house, Hong Kong, excluding financing cash usage in the third quarter related to the impact of membership credit.
The ongoing.
During patch on capacity at our houses as a result of COVID-19 related restrictions in some regions as well as settling deferred rent balances from Q2 2021.
Furthermore, there was capital expenditure on our digital platform and routine capital expenditure to support the ongoing react the houses.
Turning.
Turning next to the near term outlook the performance of our business in the third quarter. It gives us confidence in the ongoing recovery of our business.
Of course, Covid is still here and it does create some uncertainty, particularly with rising cases again in some regions. However, the strength of our waitlist and ratio of applications also underpins the future growth of our.
Going into <unk>.
In terms of new houses, we now expect to open several house price in the first quarter of 2022. In addition to this will house West Hollywood and so a house Nashville.
The rest of our development pipeline remains on track for the remainder of 2022 and with that I'll hand back to Nick for an update on our <unk> House foundations program as.
And then with some closing comments.
Thanks Mary.
This quarter, we've made good progress.
GE program House Foundation.
Harriss foundations is at the core of what we do and our members can deeply about the initiatives.
We are committed to building an inclusive culture.
Culture, and hoping to make the creative industries more accessible this quarter, we've launched new membership cohorts across the world.
Hong Kong L, a Chicago, New York and London.
We currently have.
423, Ts enrolled in the program across the world.
His mentoring program.
So our house members of young people from under representative background.
Bring them to grow that connection comfortably experience.
Ultimately providing them with a route into a creative career within our diversity and inclusion program.
Inclusivity Board has worked alongside our teams around the world to help shape our culture.
Through events training and ongoing discussion.
We've also launched so her fellowship program. It gives complementary Sarah house in Soho, a membership to creators.
Financial barriers to accessing all spaces.
Hello.
You, Andrew a new Humira for your great support in this last quarter.
In summary.
And a really strong quarter and challenging circumstances.
And.
We are now.
I'm incredibly excited about the future and the growth potential of the M. C G.
When nothing without all members.
Really would love to find a members from the bottom of my heart.
I also want to thank again, our teams who have really worked incredibly hard in these challenging.
King circumstances.
And also our investors for all their support from the last quarter and their advice and their health.
Amira encouragement and I'm really excited about the coming quarters ahead.
Ladies and gentlemen.
Please.
Followed by one by.
Thank you wished you made yourself and if you wish to meet yourself from the question Shah Chase Prescott.
First question comes from the line of Jim comes from line of J P. Morgan. Please go ahead and open. Please go ahead.
Hello, guys hope hopefully you.
Hear me, Okay, not hear me okay.
Hi.
Yeah.
Hum.
Yes, I can I'm just.
Sort of a cause reverb here.
The army.
And we can talk offline.
It took offline.
So my question is this a physically membership credits had the same buyer.
Have you seen any change in spending visitation or utilization of the Soho house behavior that we'll have in October or November tober or November.
Thanks for that question.
I do want to just start it's Nick Yeah, sitting here with Andrea and Humira. It was a beautiful day in New York, We walked the streets and definitely had a lot of technical issues and I do apologize for that it was not what we won't do it but hopefully you'll see a.
A strong set of results.
But so to answer that specific question you know October and November are we seeing either people coming back to Ohio system. Yes. We are we really seeing people come back to all houses.
They really are making up for lost time.
Obviously keen to meet friends.
Keen to have dinner is keen to have drinks and keen to get back to life, how they remember right. So yes is the answer.
Great. Thank you very much thank you very much.
Yeah.
Okay.
Next question comes from the line of questions.
My name is cities, even but kind of a city.
Great. Thanks, very much for answering my.
Question.
Was hoping you might talk about hope labor shortage ones that you mentioned, which is and you know I guess, how much is it impacting member experience right now if at all and I guess how.
<unk> been approaching this challenge you know what are the strategies in place to ensure membership experience just fill up to your standards and I guess, how long do you think this will be a bit of an issue for the business.
Well, thank you for that Steven but yes, I mean, I like the whole industry. There are have been.
How are you able to shortages.
Has that affected member experience.
Not really.
In a few cases.
But I'll hand off and say, maybe but overall it has not it hum the member experience and.
And because we've got such great teams are happy.
That's right and if necessary.
<unk> said that the support offices to be now in the how good you know we'd be doing everything to or overcome it. So and also we got loads of initiatives somehow to try and overcome it. So I mean, we were half expecting that in the U K.
K because of Brexit. So we had already set up a whole lot of patents in the U K, our recruiting from different industries retail airlines et cetera people. We want our people. We have people people who are good with people and people who are passionate and they don't necessarily have to come.
From the hospitality industry.
We've taken on that and made it much why that why we're looking at.
And also.
But the rates of pay the Iot pay I think we're pretty well right up there as industry leaders all training programs opportunities that people have is we're a global.
<unk> business to move around and to flourish women that have an M. C G.
Organization. So yes, it has been challenging, but we like a challenge and we're trying to find all sorts of ways around it.
Maybe you want to add to that.
I was going to jump in and then it just.
More color actually in terms of the increase in cost for US we have actually increased the rate in the U K 12 has seen up houses two pounds per hour.
And then in the U S. We've increased between two and $5 per hour and we saw something that back in June because we could foresee that this works.
What's going to be a concern for the industry as well.
And those increases equate to about 10% to 15% increase in hourly wage rates for hourly staff and we're seeing that pay off in terms of improved retention improved spirit and I think spirits is really unfortunate because yeah happy stuff at ice hockey members.
So they sent me, saying that.
Yeah.
Okay, Great that's very helpful.
Like Jack I'm, sorry about the.
The other question I had was on Austin, if you could talk about that opening in a bit more detail since it's I guess, it's one of your first openings in the smaller metro.
And both in the U S. You know one of the learnings been thus far when it comes to awareness in that market, maybe house volumes out of the gate and then our projected timeline to profitability are there any learnings you can apply there to win you opened Nashville next year maybe.
And maybe more broadly as you scale openings across smaller metro market.
Mark in the U S.
Okay.
Hum.
Austin has been opened for four months, sorry, if I was recently able to visit from the UK.
I must say well a brilliant job the team did without me.
<unk> been that the design was fantastic.
Hmm.
<unk>.
Really strong.
The membership is growing incredibly quickly I'm this is Jim.
We had a very strong CW running switches off cities without power.
In Austin, So we started even though during the pandemic, we weren't able to do.
I'm, all about with childhood might be normally.
We did have a very strong CW edge switch mode, but when we when we started filing to membership.
They did compiling it.
And we are now I'm very happy with how often news with some incredibly interesting membership.
I think we're heading towards the two five.
And Austin.
By the end of the year that will be even more.
These are opened I'm busy occupancy is very good and.
It's between not I'm not sure that's true obviously, we don't have a longer runway now.
Because we're not going to be caught up with COVID-19 restrictions and not be able to do all our pre opening activities with stopping all preopening activities in Nashville striped out.
This weekend.
And that will that will then give match again in Nashville, It's got a very strong speed W. I S.
We do prefer a longer runway and we have well how does this have had to work around not having a runway because of the pandemic.
Showing strong growth and we would do houses, which we've opened which is not just often but we've also opened in Tel Aviv. We are also open to Paris hopefully.
So the technical issue allowed you to see the beautiful house in Paris and also.
We've recently Ericsson did brought it and remember it's a very very strong demand for all of them understand maybe Andrew you want to add something.
Thanks, Nate I would just add.
Reiterate the importance there seem to be an H in all great because it gives.
Such a really high level of predictability on when we actually do you have any obviously you mentioned Austin right.
Pass them Kennedy one of them opened with strong membership all of them had been seeded 384 seat range and when we look ahead.
Everything's next year between five to seven and in 2023 before.
<unk> already got in every single location shock CPU like membership and that is part of our secret sauce, which allows us to be very constant at successful teaching our membership growth topics called years Walmart.
Yeah.
Okay.
Great. Thanks, very much for the detail.
Okay.
The next question comes from the line of Shaun Kelley with Bank of America. Please go ahead.
Hi, good good morning, everyone can you hear me.
No technical issues just yet.
Okay.
Okay.
Sorry about that yeah.
So.
I think what we were talking about the inflationary environment, a little bit Humira might've been you you mentioned, a little bit about the ability to take price or selectively take price.
In some categories I was wondering if you could elaborate a little bit on that and just talk also about you know the guest behavior, you're seeing you know at the houses what.
What are we seeing in terms of price increase versus.
Just just overall usage or visitation being higher given you know demand levels and probably some pent up demand.
Okay. Thank you.
I would say so on and yeah, absolutely we have started to increase our prices.
Alright, So cross stadium coverage.
The increase between five and 10% it varies depending on the product and depending on that.
But between five and 10% and we've already started taking away stuff like this oh F&B I see that we have more capacity I think we will have potentially slow.
With me in the initial phases.
But now we can see we still have pricing power on the F&B space in terms of a day off for win rates, we have increased those off but.
But up to 50% again varies by so did the region varied by the occupancy rates that we've seen in particular.
Maybe if we can have gone up by I think it shows that we.
We also see more capacity coming forward in 2022, and it doesn't mean that they had been taken out of that one.
Our members are incredibly understanding right.
They understand the inflation.
Don't expect it to be published.
Onto them, but we're very very.
Respectful.
Because people do want to come to a house and feel that better value for money.
But they also realize that the there we do show up as more expensive and that translates into.
Whenever they go out and.
Other members of understanding it's not stopping our behavior once they're in the houses.
We also you know to offset this as well on a humira didn't touch on this but you know were up.
I'll put this thing is much improved we all we all know Ernie you know very well, where we are negotiating hard.
With a new procurement team on all our all our products, which.
Oh, sorry.
Not to pass up.
All of it onto our customers are not members.
Yeah.
And all the other great. The other piece I mentioned central Alon is membership I said and we have an increase throughout 2020 or 10% to one and I'd expect that there's significant capacity to increase by membership.
And I think we can really justify that on the basis that the membership offering has become significantly in Russia with the steak houses that will be okay.
In terms of check one and the wife is suffering that we have in place.
I think so.
Great and maybe just as a quick follow up then.
As we net all of these pieces together would there be any real impact on let's call. It your long term margin targets and I. Appreciate that you know, there's a lot of moving pieces here.
It also factored into that any impact from some of the changes in mix I think you're seeing.
Some very strong results in some of your other revenue and home categories. So what any of that I guess when it kind of pull it all together have any material impact on some of the long term margin goals that you've set out.
Okay.
Sure sure I'll take that so we're still very confident on our long term margin goals.
You are right.
And business is growing rapidly that's actually additive to towards a N C. G from a percent right.
We feel that we are actually more pricing power than we first thought across all of M. C. G. We should be working through.
For 2022 and beyond and then Nick mentioned.
If you think about it in Q3, our actual margins that can be level three.
5% better than in 2019, we feel we still think there's ways to go with that especially in our biggest region in North America. So we.
In summary, we're pretty confident on where we're direct to you guys on our margins that we see with us.
I did not.
Yeah.
Thank you very much.
Okay.
Ladies and gentlemen, as a reminder, if you'd like to ask a question. Please press star one.
The next question comes from the line of Stephen Grambling with Goldman Sachs. Please go ahead.
Hi, there I know, it's a little bit early but could you just give us any initial.
Did you touch on kind of the 2022 outlook, specifically on how some of the new houses being planted opened compare to perhaps those that have already been opened in any concrete investments, we should consider that could impact margins.
Margins in the near term as we consider the digital membership launch or other initiatives next year. Thanks.
Thanks, Steve and I'll I'll start with Humira will jump in our.
Our plans for next year are very much on track with that we're going to be I predicted between five and seven houses a year.
Learn capital.
And that is exactly the same way I mean, I think it was.
Remarkable.
But the teams were items right.
During COVID-19 or warehouses that we've opened this year.
A lot of capital.
<unk>.
So you know.
So a lot of opportunity out of that since since coming out of a pandemic or potentially other types as well.
Yeah.
But nothing our members like nothing more than new houses in new territories and it just had an incredible amount of new interest in bundles to be out of the global membership. So we're always on the lookout, but we're very happy with our development plans as it stands.
Okay.
Is it still very much on line.
What we have said.
Yeah.
Thanks, Dave I'll, just add a little bit more color on that to say I think one of them.
Trying to kind of assesses our margin going forward.
So if you think about our Q.
But very very focused on.
You know retention made some weightless and we're at record high at 94% that will continue throughout 2022 23 and beyond our waitlist is at an all time high and actually outpaced our intakes.
67000, Boes to a very very strong metrics the mcg that gives.
Q3 high level capability helps us about margins.
Already at 80% recurring revenue augment our Memphis competes threes.
During Q3, and we resumed intake in our existing houses in Q3.
Freezing.
So all if you take all of that going into 2022, and what we need.
But we're very confident in opening our asset light new locations on time within budget, we're very confident in our margin, but we don't want to keep you really concrete direction, but what we're saying is that we're very confident on Q3 on the outlook for 2010.
Got it and I guess, just very quick follow up are there any.
<unk> concrete investments that we should be thinking about from some of the new initiatives.
That you can kind of have some visibility on already.
Okay.
Nothing has changed from when we talk to you Oney investment ratios you know the digital membership.
Any kind of estimates or would you can fill in because we've been doing lately for existing members. So that they can be created in the digital membership and launch late next year or so and.
Business will continue to grow.
That extra capital investment in retail and I think mentioned, our new habits of asset life.
So obviously, there's no material change in our capital investment structure for 2022.
Awesome. Thanks, so much.
Next question comes from the line of Sharon Zackfia with William Blair. Please go ahead.
Hi, Good morning, I guess I am calling up on the margin question.
Shifting I did the math correctly I think the household my margin within the high Twenty's if you adjusted for the credits.
And in the corner, if you could confirm that and then I.
I guess I would love to get your thoughts on kind of how that house margin might progress here in the fourth quarter I assume given some of the inflationary dynamics.
I'd say that moderate a bit but would just be curious on your insight there and then secondarily in North America I think you mentioned.
Still about 10% to 15% below pre pandemic levels can you kind of give some context on any regional variation you're seeing there. Thank you.
Looks like or something of that nature.
Okay.
Yes, let me start with that first part about any regional differences.
You know you came very strong.
U S strong to get a very strong year.
Europe slightly behind it.
And but building when there is no restrictions our houses are building very very nicely.
So we really do see that'd be M. C. J I know and also the net do that Richard.
Did have you know before lockdown 40000 customers would go through the ground floor and.
You can drink every week.
Not quite back up that number, but we're not far off of it. So the recovery is strong in all our regions if not slightly behind in Europe and America.
And just to pick up on your margin question Sharon.
Yes, you're right.
I got that.
Of the credit sales would be would be good.
But you get used to a high 20 margin I think any piece I would temper on that one more question. If all of this and what are the cut if they watch credits available because people have credits to spend and they needed to spend or I'm sorry. The high Twenty's. It is generally I would say to.
In fact incentives aligned.
Jason.
Great and just to follow up on the first question I was actually asking about North America, and whether youre seeing variations in regions across North America.
Oh, sorry.
Hum.
Sure.
By having two strong throughout.
Oh.
The whole pandemic.
New York's incredibly strong on the West Coast last week very strong Chicago's picked up nicely.
Toronto.
Not really strong.
So and also the what's it do it really really.
Presses.
What's going on in Austin, considering getting opened four months so.
We were very much liking what we're seeing.
Okay, great. Thank you.
Our next question comes from the line of Thomas Allen with Morgan Stanley. Please go ahead.
It's been about six months since you acquired the wine and sidewall our brands.
At impressions, there and then any thoughts on additional acquisition.
So in terms of the ninth floor rate. It continues to perform well leave it seems high occupancy rates and really really good ADR the.
Across that business that continues to the Atlantic on T. G I.
But that is as you know that that.
Our management contract and so that that's pure upside for us.
In fact that business continued to perform well against it.
The comp set.
In terms of going forwards on acquisition.
Continue to be opportunistic in terms of looking at transactions they do come across my desk.
Frequently we look at them, but it's more opportunity.
Okay.
I mean, the cost of testing.
Thank you.
Yeah.
Final question comes from the line of Ali Naqvi with HSBC. Please go ahead.
Hi, Thanks for taking the questions just in terms of the waitlist.
How do you expect that to flex overtime with house, hoping things I mean, you've called three of things in Q1 next year would you expect the weakness to go down well because you just have to set the expectation.
So we're not sort of surprised by it please.
Thanks Sally.
Uh huh.
She might be doing it.
27 years.
Never seen such demand for applications at this precise moment not just in our existing houses, but also whenever we go into a new territory the applications.
Yeah.
We go to the existing.
Wages, we create a new way to do it so the new territories.
And that's proven to be incredibly strong and I think.
Membership dues.
Where it stops and where it finishes for us.
You know.
Even if some people have subscribers we have members some.
You don't have contact we have houses are more houses we open.
The more members, we get and we're very happy with who is a delight.
I like to do your existing numbers with the likes of Glen do you have just come on board. So it's incredible to witness.
So oh sorry.
I like to add to that upright pandemic, because what we offer within the M. C. G. In Pacifically. So high so just real hybrid living.
We started work so much of our houses and that people can pick and choose how they live their lives and we offer lots of synergies to be able.
But to do that.
Currently sitting inside works in the meat packing in New York and the replacement part of people you might agree and in our corporate office a year ago.
It will then go over to so it has to be packing for my lunch or early evening drink.
We really are seeing that.
But the upgrade time definite way of living really suits, what we're doing at our house.
Okay.
And then just if I could follow up quickly.
Another question in terms of occupancy or vulgarity is versus peak time.
Send it midweek, how does that compare versus pre pandemic and did you say that in house, who is running that sort of 80% of 2019.
Can I just get.
Got that.
Yeah, I'll take that one so I think if you take all of our global bedrooms.
In Q3, we actually jumped up to a 70% occupancy back in 2019, we when we were running Super high at 95% and that's without any booking engines and it's all done on our website.
We see that continuing to grow throughout the quarters back to 2019 levels by Q walnuts.
People start to travel more especially now with the opening of North America.
Great.
We're going to do a lot of effort.
Opinions.
Occupancy in North America, So if occupancy bedroom perspective, we.
We feel very confident in Q2 number was it jumped from a house occupancy expected.
It was pretty much flat to slight mix at 2019 levels in most of our housing.
We're pretty we're pretty full but we were able to do in Q3 was stopped in tapes and existing houses. So we resumed our normally it takes which was pre pandemic and not just the cost.
The ability.
Our house.
And that's a really key metric as we grow.
Can always add new interesting people to our existing houses, which ultimately leads to increased profitability. So I hope that answers your question.
And just to clarify I think he said you know it didn't help 80% and the high.
You said a lot behind the 80%.
Oh 15 19.
And then across the different region, a new camera sensors, then I had a U S is no smack of defense 15 behind and in Europe, It's still lagging at about 50% of mindset, that's sort of the weighted average across the fleet.
Alright, thank you.
There are no further questions registered at this time I would like to hand back to Nick Childs for closing comments.
Well, thank you very much and thank you for sticking with us here at all.
The technical issues.
Oh My God.
Hi, Mike How're you can point to is I think we've had a strong Q3, I'm sorry, Berlin, Shanghai members bucket, all houses laughing and smiling.
It's great to see get back out on the road again I'm traveling around a new houses being in Paris in Tel Aviv and.
Yeah.
Right.
And also with new opportunities in the future.
And I know we've spoken about.
Earlier about net and we're very excited to see that come to New York Nomad.
Spectacular building spectacular sight.
Yeah to be able to bring.
What we've done in London, and the membership over here to London.
London will also create a very successful debt no bad debt.
The memberships, increasing everywhere, which is the key.
Our digital.
And formation is happening at pace members are really enjoying using beside her shop.
Really enjoying connecting with each other.
In our physical house, but also as I really enjoy it connecting digitally.
<unk> proved through the shop and enjoying the fact that they can book table.
Tables.
Friction is becoming much easier for them.
Yeah, remember as I've been incredibly loyal to us.
We want to pay.
Over the next 12 months and down after you know just keep them producing fantastic houses for them to enjoy.
Having more and more interesting people to our membership which spend will create this unique global curated membership of interesting people. So the feature is good and exciting.
I also want to obviously, thank you know who might be to ship team.
Joy.
Incredible during this period of time, I'm sitting here with Andrew and Tomorrow, but.
That's just the start but many many more which I'd like the fact and I'd really like to thank all the investors.
I'm finding this whole going public experience really enjoyable.
Beefing smart people with ideas with you.
Good questions, which just makes us better so I just wanted to thank everyone who is doing that so.
Is it from me.
All right.
Comments on kind of a problem it because I'm not very good at the technical side.
But hopefully there'll be a much smoother introduction into all enter into off until our Q4 numbers and hope to see things a big set of numbers as well. So thank you for me Andrew.
Andrew Thank you for me here.
Thank you guys and thank you for me.
Sure.
Speak soon.
Ladies and gentlemen, the conference has now concluded and may disconnect. Your telephone. Thank you for participating goodbye.
Okay.
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