Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Membership revenues increased by 16% year-on-year and 3% quarter-on-quarter.
- Global waitlist grew to 111,000, with 6,000 new members added, reaching a total of 204,000 members.
- Adjusted EBITDA grew by $2 million year-over-year to $33 million.
- Strong performance in new markets and ramp-up houses, including successful openings in Sao Paulo, Mexico City, and Portland.
- Positive cash flow from operating activities for the fifth consecutive quarter, with an 80% increase from last year.
Negative Points
- Other revenues were down 1% year-on-year.
- Initial losses from new house openings in Portland, Sao Paulo, and Bodrum had a $4 million negative impact on EBITDA.
- House level margins were impacted by new house openings, despite a 12% increase in house level contribution.
- Scorpios Bodrum and timing of design development fees contributed to a $3 million year-on-year decline in other contributions.
- Continued impact from the Hollywood strike affecting in-house revenues, particularly in the entertainment industry.
Q & A Highlights
Q: I wanted to focus on the house revenue improvement. Could you talk about any call-outs by region where things are progressing a little bit better than the overall trend? And then the broader restaurant backdrop has seen some weakness. So how do you feel about your competitive positioning just given some of the macro data points?
A: First and foremost, as you know, we're a membership club, so we're really pleased to see the strength of our demand in our membership, and it shows that our members are consistently using our houses. So it was nice to see the footfall trends improve sequentially in the quarter. But more importantly, I think as I mentioned, we saw spend per member improve in the last quarter. And I said in my prepared remarks that we have a lot of initiatives to improve these, which are really delivering results. Regarding any regional variance, the trends have been relatively similar across all our major geographies across America, UK, and Europe, rest of world, and including Latin America. So we're not seeing any real difference. We're seeing an improvement across the board from when we reported in Q1.
Q: With the increase in the membership guidance, Thomas, how should we think about preliminary planning for 2025? Is this a good run rate for us to think about on a go-forward basis in terms of membership count growth?
A: So I think it's early to give guidance for 2025. As we said, we'll host an Investor Day in December, and we're going to talk a lot about our long-term plans. So if you don't mind waiting until then.
Q: In terms of new house openings, are there any more planned for this year? And you cited a handful that you've announced, are any of those coming in '25? I'm just trying to figure out what we should think about for new house openings.
A: So we said at the beginning of the year, we anticipate to open two to four. So we've already opened two great houses, big houses in Portland and Sao Paulo. Next up is at Soho [Muse] House in London, which is our first muse concept. And it's a beautiful unique house which is going to be very much aimed at our long tenured members, so we're very excited about that for this year. We have Manchester opening early next year, and then we've recently announced upcoming openings with Barcelona for next year. And then following that, we have in the future Madrid, Milan, and Tokyo. So regarding the end of this year, we were very focused on opening muse house.
Q: Here in the third quarter, I think we're lapping now that kind of Hollywood strike last year, which I think impacted your business in several areas. Can you talk about kind of how we should think about in-house revenues as we go into the back half of the year as we're lapping that impact?
A: Yeah, that's a good question. I wouldn't say the impact totally gone right now. There's a lot of folks still in the entertainment industry that aren't back to work, and there's a lot of -- there's a transition going in Hollywood as well. So I wouldn't say that it's completely over. But what I would say and I'd reiterate that across pretty much all our houses in the quarter, we saw an improvement in member spend, and we're confident on that continuing through Q3.
Q: What are you seeing as it relates to cross-border travel? Obviously, it has been a big theme. A lot of US domestic hotel companies are talking a bit about outbound travel weighing on some of their domestic. And so just kind of curious on -- you have a unique lens into that. What are you seeing pattern wise and kind of any way you can track or give a little insight there?
A: Good question. We have had a good season in Europe, and that's the region that we see most of cross-border travel. As you saw, our occupancy and ADRs are broadly in line with last year. Occupancy is slightly up actually. So we have had a good season. We've had a fantastic last three weeks in Paris because of the Olympics. So for the most part, we've continued see really good cross border traveling with our members across the world into the house that we have bedrooms.
Q: I noticed in the beginning at the prepared remarks, you mentioned some houses that I think we would expect are doing well, Austin, Nashville. But you also mentioned downtown LA and Hong Kong, and those have been names that in the past, I think have not been top of the kind of funnel or ramp. So are you starting to see either broadening out. I mean, some of those may be a little idiosyncratic with the kind of timing and timing of openings. But curious on both those two markets in particular given you have several houses in LA, and obviously, Hong Kong is a bit of a unique gateway in Asia.
A: That's a great question, Shaun. We couldn't be more pleased with Hong Kong. We've got a fantastic new team in there from the beginning of the year. They've done a terrific job in Hong Kong, and we've seen terrific growth there throughout the year. So one of the things we're most pleased, complete turnaround in Hong Kong, and it's all down to delivering what the member really wanted in that city. Obviously, a big comeback in footfall as well, and their city has bounced back. And then with Downtown LA, we've got really good programming in Downtown LA, and we've seen a real good ramp-up in our members. We feel really good about the service and the food that we're delivering now in Downtown LA, so it's another house that we're really proud of this year.
Q: You mentioned I think a $4 million drag from the new openings at least relative to last year. Can you just remind us like either was that all isolated to this quarter and/or in the first half? And just kind of how should we think about any incremental drag from those houses? Obviously, undoubtedly contemplated in the guidance, but just trying to kind of think about the out years and modeling there going forward.
A: Yeah. So Shaun, if you think about what we opened last year versus this year, so last year, we opened Bangkok in the first half of the year and Mexico City in the second half of the year. And then this year, we've opened the three sites that we highlighted, Portland, Sao Paulo, and Bodrum in the first half of the year. And then as Andrew said, we're likely only going to open up Soho Muse House in the second half of the year. And so this year, we've seen that almost $4 million that we talked about on the call was really impact -- was really the second quarter impact. First quarter, we saw a bit of a drag, too, and then second half of the year which actually flipped a bit of a tailwind given the impact of openings last year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
