Membership Collective Group Inc. (MCG) on Q3 2021 Results - Earnings Call Transcript
Disclaimer*: This transcript is designed to be used alongside the freely available audio recording on this page. Timestamps within the transcript are designed to help you navigate the audio should the corresponding text be unclear. The machine-assisted output provided is partly edited and is designed as a guide.: 00:04
Unidentified Company Representative: 15:45 Hello, this is the Membership Collective Group. We are terribly sorry for the technical problem that we have been encountered. I think many of you that joined could either not hear us or stuck on our holding slide. We're going to restart the presentation, Thank you for bearing with us. Operator, please start.
Operator: 16:02 Thank you for joining us today to discuss the Membership Collective Group's Third Quarter Financial Results for Twenty Twenty One. Before we begin, I'd like to remind everyone that certain statements may be made during this call that are 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. 16:28 Although we believe these expectations are reasonable, we undertake no obligation to revise any statements 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. 16:48 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 the Investor Relations section of our website at www. membershipcollectivegroup.com.
Nick Jones: 17:22 04:50 Hello, everyone. Can I just say it's great doing its from New York and seeing the city flourish and our Houses reopen and get the the business, which they so accustomed to, and I also hope that everyone enjoyed seeing our new House in Paris. It's incredibly beautiful space, and we're super excited about it. I'm also delighted to welcome you all to the third quarter earnings call of the MCG. I'm going to take you through some of the highlights before handing over to Andrew and Humera for all the details. 05:25 The MCG or Membership Collective Group enables our members to connect with each other wherever they are in the world either in our physical spaces or our digital platform. Q3 has been another strong quarter for us, and we've loved welcoming our members back to our houses, Scorpios Beach Club, the Ned and for this quarter, the Line, and Saguaro Hotels. 20:51 All of our sites are lively and buzzing. It's wonderful to see our houses arriving once 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 have seen pressures from rising inflation, supply chain issues and most pressingly labor shortages at our site. Albeit, they have so far had a limited operational impact on it. 21:20 Before I continue, I want to pause and thank everyone who works at the MCG around the world for their passion, resilient, and incredible hard work and facing the issues of the past few months. It means a lot to me. 21:36 Turning to membership, we have welcomed nearly seventeen thousand new members to the MCG in the last quarter. That's due to resuming membership intakes and our houses. But also down to the strong growth of our newer memberships. Soho Friends, Soho Works, and Soho Home plan. Demand for our membership has remained incredibly strong as ever. Our wait list is growing to just under sixty eight thousand globally. With every side having a wait list to join. When it comes to sales in our houses, momentum has grown through the quarter. Whereas before, it had been the UK leading the charge. 22:20 I am delighted to see all the regions showing improving momentum, particularly through September. We've opened two new houses in the quarter in Tel Aviv and Paris. We’ve also recently opened our Soho House Rome in San Lorenzo neighborhood. You've had a glimpse of prioritized, but where equally excited about Rome. It's a ten-storey building with bedrooms, long stay apartment at Soho House Club and a rooftop restaurant, views 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 in Texas and my god, that is thriving. 23:09 On retail, Soho Home had another great quarter with online sales up an incredible one hundred and sixteen percent. We've also opened our first flagship Soho Homes studio on the King’s 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. Scorpios Beach Club in Mykonos had a busy summer season despite ongoing capacity restrictions also Ned, the Line, the Saguaro Hotels also a strong rebound with increases in occupancy rates as customers enjoyed being able to travel again. Twenty twenty two will be another exciting year for the MCG. As we opened new Houses in Brighton, West Hollywood and Nashville in the first quarter and we’ve four more sites to follow. 24:04 We will also open our second Scorpios start in Tulum, Mexico as well as two new net property. I'm incredibly excited to announce the Ned, New York, and Midtown. This is opening mid twenty twenty two. It has a one hundred and sixty seven bedrooms, a public bar and restaurant plus a members only in Ned’s Club. This growth is what the MCG is all about, continually increasing the value of our memberships by adding new access and experiences for our incredibly loyal members. 24:41 And with that, I'll hand over to Andrew to take you through some of the detail.
Andrew Carnie: 24:48 Thanks, Nick. I will talk more about our performance and momentum throughout the quarter. Our profit recovery and MCG Membership hitting an all-time high. Before I hand over to Humera for our financial performance in the quarter and outlook, I will spend time talking about our strategic growth plans at MCG and how we're progressing in the next twelve months. 25:07 I'll start with membership is at the heart of everything we do at MCG, our global teams are here to give the best experience to our members and no guests. I'm pleased to report that total MCG membership increased by sixteen thousand seven hundred in the quarter to one hundred and forty five thousand and twenty percent above twenty nineteen levels. In the quarter, just on the third of our total revenue came from carrying membership fees which grew to fifty one million dollars. This growth was driven by combination of factors. The consistent high retention rates of Soho House members in line with historical averages. The resumption of membership takes across all our houses. All Soho Houses even the oldest have experienced and uplifting membership numbers adding to their profitability. 25:57 Members continue to unfreeze membership with four thousand members unfreezing over the quarter, and we expect this level of unfreezing to continue throughout Q4. Our wait list continued to grow over six thousand seven hundred by the end of the third quarter with membership application outpacing the rates of membership intakes. Our newer memberships added an additional ten thousand eight hundred fifty members across the Soho Friends, Soho Works, and SOHO HOME+. Our House members continue to provide us with the backbone requiring new Soho House, Friends, Members. We had over one hundred and forty thousand guests registering with us under Soho House app when they visited the houses as a guest for the member in the quarter. The exceptional membership performance contributed to a significant improvement in profitability with adjusted EBITDA turning positive in the quarter. 26:53 Moving on to In House Revenues, we saw an acceleration of members using our Houses throughout the quarter. With over one hundred and twenty percent growth of In House Revenues versus the third quarter in twenty twenty. We really, really enjoyed welcoming our members back to all our houses. Accommodation continued to rebound the group occupancy rate increasing to just below seventy percent with an average room rate of increase of thirty five percent despite ongoing restrictions in Europe and North America. Encouragingly, the weekly run rate of sales improved throughout the quarter, and we're excited our members can travel to North America again on this week. 27:31 As you can see from the video, the first time since the pandemic, we hosted a full events program across all our Houses, which livestreamed on our Soho House app globally. From Fashion week in Paris prior events in New York to offsite well-being events in Toronto. Our members enjoyed a wide range of events that blended music, art fashion and the well-being wells. I want to pause here and mention on membership credits. We issued membership credits where our houses were closed during the pandemic, as a onetime goodwill gesture to all our members. 28:05 Our members have loved the credits being able to redeem them against food, beverage, accommodation and as well as Soho 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. 28:28 Since we've already recognized the cost of the membership credits program was an expense, when they were issued to members where our 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 the face value of twenty one million dollars were redeemed by members, equivalent to an estimated twelve million dollars of potential gross profit if the cash sale had been made by those members. Although these membership credits are not including in the revenue numbers we are sharing with you today. 29:02 Our MCG, We're a 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 Soho House, Soho Home, the Ned and Scorpios to expand into. Our revenue growth plan focuses on a number of areas including only new Soho Houses with targets to open five to seven per year, across the world is we expand our global membership. 29:32 Launch and grow new membership types including Soho Friends, Soho Works, and soon to be launched Soho House connect membership. The expansion of other brands on MCG platform including the Ned and Scorpios in line with a plan to open one to two sites per brand each year. The growth of our luxury interiors business Soho Home, but digitally and physically by our Soho Homes Studios. And finally, our global efficiency program, which will narrow talk more about. 30:01 In Q3, we continue to make good progress in all initiatives. We opened two houses in the quarter, Tel Aviv in Paris, plus Rome in mid-October, bringing our total House openings to six this year in four new countries. These Houses collectively added over one thousand five hundred new members. We have decided to move Brighton House in the UK opening in March along with other openings in Q1 in Soho House West Hollywood as well as Soho Houses in Nashville. As Nick mentioned, we're on track to seven Houses in twenty twenty two plus two Neds and Scorpios. So a total of ten new experiences for our members. 30:40 Now, onto to our new memberships. Soho Friends membership has grown to just under eighteen thousand members at the end of Q3. We just under fourteen thousand of these friends interacting in the membership through the friends app. In the quarter, we opened satisfied Friends Studios Across Five Cities, all using our existing spaces to offer a 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 music night to challenging exhibitions. The outlook growth for Soho Friends remains very strong, in particular with the three hundred and fifty thousand guests now registered on the Soho House app this year. 31:19 Now to Soho Works, we welcome with the additional one thousand three and seventy members in the quarter and our occupancy in our offices now is growing to ninety five percent globally. The business continues to flourish as more members have adopted the flexible approach working using our allowance office and meeting room spaces to develop their own networks in careers. We have recently launched Soho Works app allowing us Soho Works members globally to connect and collaborate. 31:47 Now on to Soho Home. Soho Home is our retail segment, which enables our members to bring the House home. The business had a stellar quarter with online sales of one hundred and sixteen percent and profit growth significantly outpacing sales growth. Our members loved our new assortments launching in the quarter with an average order value increasing over one hundred and twenty percent year-on-year and ninety five percent of sales in the quarter at full price, with members making up more than seventy percent of all sales. The North American market was particularly strongly with sales growth of one hundred and forty percent year-on-year. 32:21 We opened up fair Soho Home studio in London, six thousand square foot retail space showing our latest home collections, as well as brands launched and owned by members in our members galleries. This week, we will be opening our second Soho Home Studio here in New York. We continue to be excited about the opportunity Soho Home. 32:42 Before I hand over to Humera, I will finish on our progress on our digital initiatives to SH. APP or Soho House App. The Soho House App has four main focuses all bookings globally, House pay, daily content by our members and connect features for our members to grow their own networks, but it’s work and socially. Throughout Q3, we made improvements to bookings and house based functionality. We continued to see nice user growth in Q3 with we had over ninety three thousand nineteen users with a daily usage, increasing by eighteen percent on the app. 33:15 Whilst bookings and payments remained our adopted features our members are starting to use our recently launched connect features. With over twenty percent of members actively connecting on a daily basis. We have some exciting improvements planned in Q4 which will improve our member experience on the SH.APP further. The resilient rate of increasing user numbers and engagement provides with great confidence for the launch of Soho House Connect membership, which we can now expect to launch in early twenty two. 33:44 Before I hand over to Humera, I want to thank my teams everywhere for all the hard working commitment and delivering your great quarter's results and in challenging environment.
Humera Afzal: 33:54 Thanks, Andrew. I'll now take you through the financial highlights from third quarter of twenty twenty one. Firstly, our total revenue of one hundred and eighty million dollars increased by fifty seven percent compared with the third quarter of twenty twenty. In the quarter, membership revenue, which of course is recurring revenue of fifty one million dollars was just under thirty percent of total revenue. This was driven by the growth in our total membership base, which Andrew has already spoken about. 34:22 In House Revenue in the third quarter rebounded strongly increasing to sixty seven million dollars This increase was driven by strong demand from our members, as well as select price increases across some of our food and beverage and accommodation offering. Andrew has already mentioned it, but it's worth highlighting the impact of member credits in the quarter. 34:43 As credit in the Vast Majority of the regions have now expired, the remaining liability is now the minimis. Encouragingly, we saw an improving run rate in sales throughout quarter, even after excluding any short term uplift remember credit. And if we think about exit rates over the quarter, in September, the UK was trading at around ten percent above comparative levels in twenty nineteen. With North America trading ten percent to fifteen percent below or the Europe lagging in around twenty percent below. Other revenues of sixty two million dollars also showed a strong recovery up forty eight percent versus twenty twenty. Driven by the strength of Soho Home, Scorpios Beach Club as well as our public restaurants in the UK and North America. Other revenue also includes the management fees from the Ned and London which towards strong recovery in food beverage outlet as well as in accommodation. 35:34 Finally, in the third quarter, other revenue for the first time included the contribution from the Line in Saguaro hotels. Moving to our profitability measures, house level contribution, which has defined as house revenues less in house operating expenses, was twenty four million dollars for the third quarter of twenty twenty one and house level contribution margin was twenty one percent. Understandably, as volumes in House’s rose, In House operating expenses also increased. In line with the industry, we've seen inflationary pressures across our food and beverage indirect costs and most notably our labor base. 36:12 As mentioned in Q2, we proactively increased wage rates in June to attract and retain the best labor. Therefore, the challenging labor market the industry is currently facing is Soho are having a limited operation impact on our business. The food beverage and accommodation price increases we have implemented combined with ongoing efficiency programs have 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 our 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 were three percent better in the same period pre-pandemic, notwithstanding inflationary pressures. 37:01 Other contribution, which we define as other revenues plus non-House membership revenue less other operating expenses was twelve million dollars compared to a loss of three million dollars for third quarter twenty twenty. This improvement was driven by strong growth of our other revenue and in particular, the contribution from Soho Home, Scorpios and public restaurant. Adjusted EBITDA was nine million dollars a significant improvement from the second quarter. Net loss was seventy six million dollars for the quarter. As you know, we report our adjusted EBITDA fully burdened for growth, meaning that we include expenses are associated with the growth of our business. The table in this slide shows some of these expenditures. In the quarter, pre-opening was five million dollars and related to the opening of new Houses. 37:49 Non-cash rents, which represents the difference between the rental cost in accordance with GAAP and the actual cash cost was one million dollars in the quarter, and deferred registration fees were a million dollars. The capitalization table shows our position as at the end of Q3 twenty twenty one. In the quarter, we received four zero two million dollars in proceeds Ned fees from the IPO, which has provided us with a significantly strengthened balance sheet as well as funding to support our initiatives. During the quarter, as previously disclosed, we paid down our half year facility of ninety eight million dollars as well as repaying preference share payments totaling twenty million dollars. In addition, we paid down a seven million dollars loan related to Soho House Hong Kong. Excluding financing, cash usage in the third quarter related to the impact of membership credit. 38:37 The ongoing impact 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 twenty twenty one. Furthermore, there was capital expenditure on our digital platform and routine capital expenditure to support the ongoing reopening of the Houses. 38:56 Turning next to the near term outlook, The performance of our business in the third quarter gives us confidence in the ongoing recovery of our business. Of course, COVID is still here and does create some uncertainty, particularly with rising cases again in some regions. However, the strength of our wait list and rate of applications also underpins the future growth of our membership. 39:19 In terms of new Houses, we now expect open Soho House price in the first quarter of twenty twenty two in addition to Little House West Hollywood and Soho House Nashville. The rest of our development pipeline remained on track for the remainder of twenty twenty two. And with that, I'll hand back to Nick for an update on our House Foundations program, as well as some closing comments.
Nick Jones: 39:40 Thanks, Humera. This quarter, we've made good progress on our ESG program House Foundation. House Foundations is at the core of what we do, and our members can deeply about the initiatives within. We are committed to building an inclusive culture and helping to make a creative industries more accessible. This quarter we've have launched new membership cohort across the world. In Hong Kong, LA, Chicago, New York and London. We currently have four twenty three mentees enrolled in the program across the world. 40:18 This mentoring program has Soho House members of young people from under unprecedented background, helping them to grow, connection, confident and experience, Ultimately providing them with a route into a creative career. Within our diversity inclusion program, our exclusivity board has worked alongside our teams around the world to help shape a culture of Soho House through events, training, and ongoing discussion. 40:49 We've also launched a Soho fellowship program that gives complementary, Soho House and Soho Works, membership to creators who have financial barriers to accessing cost spaces. Can I thanks new Andrew and new Humera for your great support in this last quarter where in summary, it's been a really strong quarter in challenging circumstances. And we and I are incredibly excited about the future and the growth potential of the MCG. 41:24 And we're nothing without our members, and I really would love to thank our members from the bottom of my heart. I also want to thank again our teams who have really worked incredibly hard in these challenging circumstances. And also, our investors for all their support in the last quarter and their advised and their help and their encouragement, and I'm really excited about the coming quarters ahead.
Operator: 41:56 Ladies and gentlemen, First question comes from JPMorgan. Please go ahead.
Unidentified Analyst: 42:17 Hello, guys. Hopefully, you can hear me okay. Wait, yes, I can, I'm just . So, my question is this, specifically membership credits have expired and have you seen any change in spending visitation or utilization of Soho House in October or November.
Nick Jones: 42:57 Thanks for that question. I do want to start, this is Nick here. I'm here sitting here with Andrew and Humera. It was a beautiful day in New York. We walked us three and then we had a loads of technical issues. And I do apologize for that. It was not the stuff we want do. But hopefully you'll see a strong set of results there. But just to answer that specific question, October and November, are we seeing, people coming back to our Houses and yes, we are, we're really seeing people come back to our Houses. They really, I'm making up the lost time, they are obviously keen to meet friends, keen to have dinner, keen to have drinks and keen to get back to life how they remember it. So, yes, it is the answer.
Unidentified Analyst: 43:49 Great. Thank you very much.
Operator: 43:56 Next question comes from the line with Citi.
Unidentified Analyst: 44:03 Great. Thanks very much for my question. I was hoping you shortages that mentioned. I guess how much is it impacting member experience right now if at all? And I guess how are you approaching this challenge, what are the strategies in place to ensure membership experience is still up to your standards? And I guess how long do you think this will be a bit of an issue for the business?
Nick Jones: 44:32 Well, thank you for that, Steven. Yes, I mean like the whole industry, there have been labor shortages and has that affected member experience not really in a few cases, we've to put our add up and say, maybe, but overall, it has not heard the member experience. And because we got such great teams who are happy to put extra and have necessary it all hands severe with support offices to be now in the Houses, we'd be doing everything to all the companies. And also we got some lot of initiatives somehow to try and overcome this. I mean, we were half expecting this in the UK because of Brexit. So we've already set up a whole lot of plans in the UK, recruiting from different industries, retail airlines, etcetera. People we want, people we have people who have given people and people have passionate. And they necessarily have to come to hospitality industry. So we've taken that and made it much wider from where we're looking. And also the rate to pay, I mean we're pretty well right up there industry leaders, our training programs, the opportunities that people have as we're a global business to move around and flourish within Soho House at MCG organization. So, yes, it's been challenging, but we like a challenge and we're trying to find all sorts of ways around it. Andrew, maybe you want to add to that.
Andrew Carnie: 46:14 Yes.
Humera Afzal: 46:16 I was going to add. I just to add some more color actually in terms of the increase in cost work. We have to increase our hourly rate in UK, two pounds per hour and in the U.S. we have increased between two and five dollars per hour and we have also doing that back in June because we can see that this was going to be a concern for the industry and those increases equates about ten percent to fifteen percent increase in hourly wage rates for our stock and reviewing that payoff in terms of improved retention increase spares and I think spares is really important because happy stuff is as healthy numbers fully .
Unidentified Analyst: 47:04 Okay, great. That's very helpful. 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 market in the U. S. One of the learnings been thus far when it comes to awareness in that market, maybe house volumes out of the gate and then the projected timeline of profitability. Are there any learnings you can apply there? To when you open Nashville next year and maybe more broadly as you scale openings across smaller metro markets in the U. S.
Nick Jones: 47:43 Well, Austin has been opened for four months. So I was recently able to revisit from the UK and I must say what a brilliant job the team did that design is fantastic. The team is really strong, and the membership has grown incredibly quickly, and this is due to the fact that we had a very strong CWH which is our cities with that. Houses in Austin So we started in those during the pandemic, we weren't able to do a lot about which we normally do it. We did have a very strong CWH, which meant when we started founder membership applications they did come again, and we are now very happy with power it’s incredibly interesting membership there. 48:40 I mean we're heading towards over two thousand members in Austin. By the end of the year, that will be even more the rooms are open and busy occupancy is very good. And difference between that and Nashville, the Nashville obviously not a longer runway now because we're not going to be calls up with COVID restrictions and not be able to do all our preopen activities. We're starting our preopen activity in Nashville straight after this weekend. And that will then give Nashville, again Nashville has got a very strong CWH. So, we do prefer a longer runway and we have had to work around not having a runway because of the pandemic of which showing strong growth in all the new houses, which we have opened, which is not just Austin, but we've also opened into Tel Aviv, we've also opened in Paris, hopefully, the technical issue allows you to see these new house in Paris and also we've recently opened in very, very strong demand from our Membership. Maybe Andrew you want to add something.
Andrew Carnie: 49:52 Thanks, Nick. I will just the importance of CWH in our growth because it gives us a really high level of predictability on what we have is and they obviously mentioned Austin, Rome, all of them opened with strong membership. All of them had been exceeded three years four exceeding the range and where we look ahead to our earnings next year between five to seven and in twenty twenty three. We've already got every single locations strong CWH membership, and that is part of our secret source, which allows us to be very confident and successful hitting our membership great topics from .
Unidentified Analyst: 50:34 Great. Thanks very much for the detail.
Operator: 50:41 Your next question comes from the line of Shaun Kelly with Bank of America. Please go ahead.
Shaun Kelley: 50:47 Hi, good morning, everyone. Can you hear me?
Nick Jones: 50:54 No technical issues. Just go ahead. Welcome to Nick Jones.
Shaun Kelley: 51:00 Okay. Hi, Nick. Sorry about that. Yes. So, I think what we're talking about the inflationary environment a little bit, Humera might have been you, you mentioned a little bit about the ability to take price or selectively take price in some category, I was wondering if could elaborate a little bit on that and just talk also about the guest behavior you're seeing at the houses, what are we seeing in terms of price increase versus the just overall usage or visitation being higher given demand levels and probably some pent demand.
Humera Afzal: 51:36 Shaun, yeah, absolutely, we have thought to increase our prices already so across government. We've increased between five percent and ten percent. It is very depending on the product and depending on the significant market between five percent and ten percent, we've already stopped to take three or four purchase on SMB. I see is that we have more capacity, I think we have potentially slow to move in the initial basis. But now we can see we still have pricing color on the SMB space. 52:08 In terms of ADR for room rates, we have increased those by again varied by to the region and varied by the occupancy that we see in particular Houses that we can and have gone buyers an additional thirty percent. We deals to see more capacity coming forward in twenty twenty two. It you can add that more or not.
Andrew Carnie: 52:31 All members are incredibly understanding. They understand the inflation, they don't not expect it to be passed on. But we are very, very sort of respectful in that because people do want to come to a hats and feel that various value for money, but they also realize that there though we too shop with more expensive in that channels made sense and whenever they go out and so members understanding is not stopping out but behavior I want so in the houses and we also to offset this as well and Humera didn't touch on this. But our purchasing is much improved. We are not only good, we are negotiating hard with the new procurement team products, which is also enabling us not to pass up all of it onto to our customers and our members.
Humera Afzal: 53:45 And on the great, another piece I forgot mention it should dwell on membership prices. And we haven't increased those throughout twenty twenty or twenty twenty one. And I'd expect that there's significant capacity to increase pricing or member fees, and I think we can really justify that on the basis that the membership offering has become significantly richer. There is six houses that will be able additional in twenty twenty one and why the digital offering that we have in placed .
Shaun Kelley: 54:21 Great. And maybe just as the quick follow-up then. Kinda we met 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 there's a lot of moving pieces here. 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 would any of that, I guess, when it kind of pulls all together have any material impact on some of the long-term margin goals you set out?
Andrew Carnie: 54:56 Sure, I think that's we're still very confident on long-term margin goals, you are right. Our business is growing rapidly. That's actually additive to turn to MCG from a percent rate. We feel that we actually more pricing power than we first thought across all of the MCG, which should be working through for twenty twenty two beyond and then as Nick mentioned, if you think about in Q3 our actual margins, that could be level of three point five percent better than in twenty nineteen. 55:29 We still think there's ways to go that, especially in our biggest region in North America. So, we're pretty confident on where we're direct you guys on our margins, and we've been that's upside in that.
Shaun Kelley: 55:43 Thank you very much.
Operator: 55:52 Your next question comes from the line of Stephen Grambling with Goldman Sachs. Please go ahead.
Stephen Grambling: 55:58 Hi, there. I know it's a little bit early, but could you just give us any initial thoughts on kind of twenty twenty two outlook specifically on how some of the new houses being planned and open compared to perhaps those that have already been opened and any concrete investments we should consider that could impact margins in the near term as we consider the digital membership launch or other initiatives next year? Thanks.
Nick Jones: 56:23 Thanks, Steve. I'll start with and Humera, we will jump in. Our plan for the next year we're not on track. All that was going to be opening between five and seven Houses a year on our low capital model and that is exactly certainly. I would like to give us a remarkable goal for the teams whereas open during COVID, the houses that we've opened this year, and on our low capital model. So and there is also a lot of opportunity out there since coming out to the pandemic, so potentially other sites as well. 57:04 We know that nothing – our members like nothing mall, the new houses, there is new territories, and it just had an incredible amount of new interest members to be over with global membership. So, we always on the lookout, but we're very happy with our development plan as the stands at moment and it's still very much online to what we have said.
Andrew Carnie: 57:32 Thank you Nick. I'll just add a little bit more color on that, so I think why you're trying to kind of assess our margin going forward. So if you think about our Q3 we're very, very focused on, retention rates some weakness. So we're record high ninety four percent that will continue throughout twenty twenty two. Twenty three and beyond, our wait list is an all-time high actually outpaced intake and sixty seven thousand those two are very, very strong metrics, the MCG will gives us the high level of flexibility and helps with our margins for already thirty percent recurring revenue on members continues to freeze through Q3 and we resumed intake in our existing housing in Q3. Increasing, so all if you take all of that going into twenty twenty two and what we Nick said we're very confident opening our asset life new locations on operating budget. We're very confident on our margins, but we don't want to give you really concrete direction, but what we're saying is that we're very confident on Q3 on the outlook between twenty two.
Stephen Grambling: 58:39 Got it. I guess just very quick follow-up. Are there any kind of concrete investments that we should be thinking about from some of the new initiatives that you can kind of have some visibility on already? Thanks.
Andrew Carnie: 58:57 Nothing has changed from what we talked to on the investment roadshows shows, the digital membership, the investments already been billing because we've been doing our app globally for existing members. So that's the going to be created in the digital membership and launch next year. Our Soho Home business will continue to grow the direction of capital investment in retail and as Nick mentioned our new houses are added low. So, obviously, there's no material change in our Capital investment structure for twenty twenty two.
Stephen Grambling: 59:29 Awesome. Thanks so much.
Operator: 59:33 Next question comes from the line of Sharon Zackfia with William Blair. Please go ahead.
Sharon Zackfia: 59:39 Hi good morning. I guess, Following up on the margin question. If I did the math correctly, I think the household margin was in the high twenties, if you adjusted for the credits in the quarter, If you could confirm that and then 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 will see that moderated bit, but would just be curious on your insight there? And then secondarily, in North America, I think you mentioned still about ten percent to fifteen percent below pre-pandemic levels. Can you kind of give some context on any regional variation you're seeing there? Thank you.
Nick Jones: 60:27 Yes. Let me start with that first part about any regional difference. UK very strong. U. S. Strong to getting very strong, Europe slightly behind all that and but building when there is no restrictions, our houses are building very very nicely. So, we really do see the MCG and also the net, which you did have before lockdown, forty thousand customers would go through the grand floor, and you can drink every week. We're not quite back at that number, but we're not far off there. So the recovery is strong in all our regions, it not slightly behind in Europe. Humera?
Humera Afzal: 61:18 And just to pick up on your margin questions Sharon. Yes, you're right. So secure add back the effects of the credit sales would be good up and I would roughly get you the high twenties model, I think you a temper or not, one was question what those say wood the occurred if they want credits available because people have credits to spend and their needed to spend. And so high twenties is generous, I would say, .
Sharon Zackfia: 61:50 Great. And just to follow-up on the first question, I was actually asking about North America and whether you're seeing variations in regions across North America?
Nick Jones: 62:03 Sorry. No. I mean, as you Sharon, Miami too strong throughout, is throughout the whole pandemic. New York is incredibly strong. I stand on the West Coast last week very strong, Chicago picked up nicely, Toronto really strong. So an Austin with that really impressive what's going out in Austin and considering is opened four months, So, we're very much liking what we're seeing.
Sharon Zackfia: 62:43 That’s great. Thank you.
Operator: 62:46 Next question comes from the line of Thomas Allen with Morgan Stanley. Please go ahead.
Thomas Allen: 62:52 Thanks. It has been about six months since you acquired the line in brand, just an update impressions there and then you thoughts an additional acquisitions?
Humera Afzal: 63:05 Capture in terms of the lines, it perform well. We've achieved high occupancy rates and really really good. ADR would across that business, so continue to be, approximately continue to EBITDA as you know that's management contract and so that's your upside for us. We expect that business to continue to perform well against the concept. Independently going forward on acquisitions, continue to be opportunistic in terms of looking at transaction things come a across of that like frequently look at them, but it's more opportunistic as questioning cost of strategy.
Thomas Allen: 63:51 Thank you.
Operator: 63:56 Final question comes from the line of Ali Naqvi with HSBC. Please go ahead.
Ali Naqvi: 64:01 Hi, thanks for taking the questions. Just in terms of the wait list, how do you expect that to flex over time with house openings. I mean, you've got three openings in Q1 next year, would you expect the wait list to go down? Or could just sort the expectation So, we're not sort of surprised by it please.
Andrew Carnie: 64:22 Thanks, Ali. I'd been very good over twenty seven years, never ever seen such demand for our applications at this precise maybe. Not just say in our existing houses, but also whenever we go into a new territory, the applications, basically we don't go to the existing wait list, we create a new wait list for the new territories and their proving to be incredibly strong. And I think membership is where it starts and where it finishes for us. And some people have subscribers, we have members. Some people have content, we have houses and the more houses we open, the more members we get. We are very happy. That delighted, the existing members are delighted when new houses come on board. So, yes it's incredible way. I mean, so, also add to that, upright pandemic is what we offer within the MCG and specifically. So, this real high good living and with certain works and which is houses, people can pick choose have available their lives and we offer synergies to be able to do that. I'm currently sitting in New York and the places packed of people who might have been in a corporate office a year ago and they will then go over to so has been packing for their lunch or evening drinks. So, we really are seeing with the upright pandemic way of living. Really suit what we're doing at perhaps.
Ali Naqvi: 66:17 Andrew just I could follow-up quickly. With another question, in terms of occupancy or volumes versus peak times and mid-week, how does that compare pre-pandemic? And Humera, did you say that in house was running at sort of eighty percent of twenty nineteen? Can kind just get that?
Andrew Carnie: 66:39 Yes I will take that. So I think if you take a lot of our global bedrooms in Q3. We actually jumped up to a seventy percent occupancy. Back in twenty nineteen, we were running super high ninety five percent and that's that any booking engines, it's all website and app. We see that continuing to grow throughout the quarter back to twenty nineteen levels by Q1 as people start to travel more, especially now with the opening of North America being ended up fantastic for occupancy in North America. So the north occupancy bedrooms perspective, we feel very confident to see our Q2 numbers jump. From a house occupancy perspective, we're pretty much to slightly mix than twenty nineteen levels in most of our houses. So we are pretty full. What we were able to do in Q3 was start our intakes in existing assets, so we resumed our normal intakes, which is pre-pandemic and that just adds profitability into our house. And that's a really key metric as we grow, that we can always add new interesting people to our existing houses which ultimately leads to increase profitability, so I have answered to your question.
Humera Afzal: 67:59 Just to clarify, As you said, house, eight percent behind. I think it is behind the eighty percent of twenty nineteen. So it’s across the different regions, UK was ten percent ahead. U.S. is – North America is twenty fifteen behind and Europe is still lagging about twenty percent behind this that .
Ali Naqvi: 68:24 Great Thank you.
Operator: 68:27 There are no further questions registered at this time. I would like hand back to Nick Jones for closing comments.
Nick Jones: 68:37 Well, thank you very much. And thank you for sticking with us during the technical issues. My closing points is, I think we've had a strong Q3. It's so brilliant seeing our members back in our Houses, laughing, smiling, it’s great to see back up on the road again and travel around our new Houses, in Paris and Tel Aviv and Rome and also the new opportunities in the future. And I know, we're spoken about it earlier about the Ned, and we're very excited to see the Ned come to New York. building that tax type, to be able to bring that what we've done in London and the membership overhead to – more than we have in London but will also create very successful with no matter here. The memberships increasing everywhere, which is the key digital transformation is happening at pace, our members are really enjoy using the Soho House App that are really enjoying connecting with each other in the physical house but also I really enjoyed connecting digitally through the shop. Enjoying of that making book tables, the friction is becoming much easier for that. The member is incredibly low to us, and we want to pay over the next you know, twelve months and thereafter. You can just keep on producing and fantastic houses them to enjoy adding more and more interesting people to our membership, which then will create this unique global, curated membership for interesting people. So the future is good and exciting. 70:43 I also want to obviously thank the all my leadership team who have been incredible during this period of time, I'm sitting here with Andrew and Humera that's just to start maybe many more, which I'd like to thank. And I'd really like to thank you all the investors, I'm blending is whole going public experience really enjoy whole meeting small people with variety ideas with good questions, which just make us better. So I just want to thank everyone out, Andrew is doing that. So is it for me, next time comments, welcome comments, because I'm not very good at the technical facings, but hopefully, there'll be much introduction into our Q4 numbers and obviously, we've been for happy set of numbers as well? So, thank you for me. Andrew, thank you for you.
Andrew Carnie: 71:42 Thank you, guys.
Humera Afzal: 71:46 Thank you for me.
Operator: 71:50 Ladies and gentlemen, the conference is now concluded, and you may disconnect the telephone. Thank you for participating. Goodbye.
