Soho House & Co Inc. - Quarter Report: 2023 April (Form 10-Q)

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 2, 2023


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	For the transition period from		to

Commission File Number: 001-40605

Soho House & Co Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware		86-3664553
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

180 Strand London, WC2R 1EA United Kingdom		WC2R 1EA
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: +44 (0) 207 8512 300

Membership Collective Group Inc.

(Former Name or Former Address, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

Class A Common Stock, par value $0.01 per share

SHCO

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 10, 2023, the registrant had 195,686,258 shares outstanding, comprised of 54,185,873 Class A common stock, $0.01 par value per share, outstanding and 141,500,385 shares of Class B common stock, $0.01 par value per share, outstanding.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION	2
Item 1.	Financial Statements	2
	Condensed Consolidated Balance Sheets as of April 2, 2023 (Unaudited) and January 1, 2023	2
	Unaudited Condensed Consolidated Statements of Operations for the 13 weeks ended April 2, 2023 and April 3, 2022	4
	Unaudited Condensed Consolidated Statements of Comprehensive Loss for the 13 weeks ended April 2, 2023 and April 3, 2022	5
	Unaudited Condensed Consolidated Statements of Changes in Shareholders' Deficit for the 13 weeks ended April 3, 2022	6
	Unaudited Condensed Consolidated Statements of Changes Shareholders’ Equity for the 13 weeks ended April 2, 2023	6
	Unaudited Condensed Statements of Cash Flows for the 13 weeks ended April 2, 2023 and April 3, 2022	8
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.	Controls and Procedures	45
PART II.	OTHER INFORMATION	47
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 3.	Defaults Upon Senior Securities	47
Item 4.	Mine Safety Disclosures	47
Item 5.	Other Information	47
Item 6.	Exhibits	47
Signatures		49

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are based on our beliefs and assumptions and on information currently available to us. Forward-looking statements include information concerning our possible or assumed future results of operations and expenses, business strategies and plans, trends, market sizing, competitive position, industry environment, potential growth opportunities and product capabilities, among other things. Forward-looking statements include all statements that are not historical facts and, in some cases, can be identified by terms such as “aim,” “anticipates,” “believes,” “could,” “estimates,” “expects,” “goal,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “strive,” “will,” “would,” or similar expressions and the negatives of those terms.

As used in this report, any reference to ‘Soho House & Co Inc.’, ‘Soho House & Co’, ‘SHCO,’ ‘our company,’ ‘the Company,’ ‘us,’ ‘we’ and ‘our’ refers to Soho House & Co Inc., together with its consolidated subsidiaries.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including those described in “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this report. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

PART I-FINANCIAL INFORMATION

Item 1. Financial Statements.

Soho House & Co Inc.

Condensed Consolidated Balance Sheets

As of April 2, 2023 (Unaudited) and January 1, 2023


	As of
(in thousands, except for par value and share data)	April 2, 2023		January 1, 2023
Assets
Current assets
Cash and cash equivalents	$	153,820	$	182,115
Restricted cash		8,400		7,928
Accounts receivable, net		44,460		42,215
Inventories		57,396		57,848
Prepaid expenses and other current assets		111,131		91,101
Total current assets		375,207		381,207
Property and equipment, net		644,743		647,001
Operating lease assets		1,118,819		1,085,579
Goodwill		202,316		199,646
Other intangible assets, net		127,164		125,968
Equity method investments		22,856		21,629
Deferred tax assets		301		295
Other non-current assets		5,147		6,571
Total non-current assets		2,121,346		2,086,689
Total assets	$	2,496,553	$	2,467,896
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable	$	72,585	$	80,741
Accrued liabilities		83,955		84,112
Current portion of deferred revenue		104,391		91,611
Indirect and employee taxes payable		34,262		38,088
Current portion of debt, net of debt issuance costs		26,130		25,617
Current portion of operating lease liabilities - sites trading less than one year		5,732		4,176
Current portion of operating lease liabilities - sites trading more than one year		37,518		35,436
Other current liabilities		33,519		36,019
Total current liabilities		398,092		395,800
Debt, net of current portion and debt issuance costs		591,340		579,904
Property mortgage loans, net of debt issuance costs		116,362		116,187
Operating lease liabilities, net of current portion - sites trading less than one year		193,236		227,158
Operating lease liabilities, net of current portion - sites trading more than one year		1,047,966		982,306
Finance lease liabilities		78,101		76,638
Financing obligation		76,358		76,239
Deferred revenue, net of current portion		26,861		27,118
Deferred tax liabilities		1,375		1,666
Other non-current liabilities		—		256
Total non-current liabilities		2,131,599		2,087,472
Total liabilities		2,529,691		2,483,272
Commitments and contingencies (Note 16)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Soho House & Co Inc.

Condensed Consolidated Balance Sheets

As of April 2, 2023 (Unaudited) and January 1, 2023


	As of
(in thousands, except for par value and share data)	April 2, 2023			January 1, 2023
Shareholders’ equity
Class A common stock, $0.01 par value, 1,000,000,000 shares authorized, 62,558,066 shares issued and 54,090,946 outstanding as of April 2, 2023 and 62,189,717 issued and 53,722,597 outstanding as of January 1, 2023; Class B common stock, $0.01 par value, 500,000,000 shares authorized, 141,500,385 shares issued and outstanding as of April 2, 2023 and January 1, 2023		2,041			2,037
Additional paid-in capital		1,218,759			1,213,086
Accumulated deficit		(1,258,364	)		(1,242,412	)
Accumulated other comprehensive income		47,828			54,853
Treasury stock, at cost; 8,467,120 shares as of April 2, 2023 and January 1, 2023		(50,000	)		(50,000	)
Total shareholders’ equity attributable to Soho House & Co Inc.		(39,736	)		(22,436	)
Noncontrolling interest		6,598			7,060
Total shareholders’ equity		(33,138	)		(15,376	)
Total liabilities and shareholders’ equity	$	2,496,553		$	2,467,896

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Soho House & Co Inc.

Condensed Consolidated Statements of Operations (Unaudited)

For the 13 Weeks Ended April 2, 2023 and April 3, 2022


	For the 13 Weeks Ended
(in thousands, except for per share data)	April 2, 2023			April 3, 2022
Revenues
Membership revenues	$	83,248		$	58,773
In-House revenues		116,078			87,755
Other revenues		55,883			45,480
Total revenues		255,209			192,008
Operating expenses
In-House operating expenses (exclusive of depreciation and amortization of $14,323 and $13,715 for the 13 weeks ended April 2, 2023 and April 3, 2022, respectively)		(143,972	)		(109,995	)
Other operating expenses (exclusive of depreciation and amortization of $6,715 and $9,116 for the 13 weeks ended April 2, 2023 and April 3, 2022, respectively)		(56,381	)		(47,633	)
General and administrative expenses		(30,574	)		(29,286	)
Pre-opening expenses		(4,994	)		(4,032	)
Depreciation and amortization		(24,464	)		(22,831	)
Share-based compensation		(5,846	)		(7,803	)
Foreign exchange gain (loss), net		13,013			(17,074	)
Other		(1,029	)		(776	)
Total operating expenses		(254,247	)		(239,430	)
Operating income (loss)		962			(47,422	)
Other (expense) income
Interest expense, net		(18,701	)		(15,717	)
Gain on sale of property and other, net		681			1,663
Share of income of equity method investments		871			398
Total other expense, net		(17,149	)		(13,656	)
Income (loss) before income taxes		(16,187	)		(61,078	)
Income tax benefit		171			452
Net income (loss)		(16,016	)		(60,626	)
Net income (loss) attributable to noncontrolling interests		64			147
Net income (loss) attributable to Soho House & Co Inc.	$	(15,952	)	$	(60,479	)
Net income (loss) per share attributable to Class A and Class B common stock
Basic and diluted (Note 15)	$	(0.08	)	$	(0.30	)
Weighted average shares outstanding
Basic and diluted (Note 15)		195,422			202,396

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Soho House & Co Inc.

Condensed Consolidated Statements of Comprehensive Loss (Unaudited)

For the 13 Weeks Ended April 2, 2023 and April 3, 2022


	For the 13 Weeks Ended
(in thousands)	April 2, 2023			April 3, 2022
Net income (loss)	$	(16,016	)	$	(60,626	)
Other comprehensive income
Foreign currency translation adjustment		(7,033	)		11,131
Comprehensive income (loss)		(23,049	)		(49,495	)
Income (loss) attributable to noncontrolling interest		64			147
Foreign currency translation adjustment attributable to noncontrolling interest		8			79
Total comprehensive income (loss) attributable to Soho House & Co Inc.	$	(22,977	)	$	(49,269	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Soho House & Co Inc.

Condensed Consolidated Statements of Changes in Shareholders’ Deficit (Unaudited)

For the 13 Weeks Ended April 3, 2022


(in thousands)	Common Stock		Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)		Treasury Stock			Total Shareholders’ Equity Attributable to Soho House & Co Inc.			Noncontrolling Interest			Total Shareholders’ Deficit
As of January 2, 2022	$	2,025	$	1,189,044		$	(1,021,832	)	$	6,897	$	—		$	176,134		$	6,058		$	182,192
Net income (loss)		—		—			(60,479	)		—		—			(60,479	)		(147	)		(60,626	)
Purchase of noncontrolling interests in connection with the Soho Restaurants Acquisition (Note 3)		—		(1,884	)		—			—		—			(1,884	)		1,884			—
Shares repurchased (Note 15)		—		—			—			—		(2,611	)		(2,611	)		—			(2,611	)
Non-cash share-based compensation (Note 14)		—		7,331			—			—		—			7,331			—			7,331
Net change in cumulative translation adjustment		—		—			—			11,210		—			11,210			(79	)		11,131
As of April 3, 2022	$	2,025	$	1,194,491		$	(1,082,311	)	$	18,107	$	(2,611	)	$	129,701		$	7,716		$	137,417

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Soho House & Co Inc.

Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)

For the 13 Weeks Ended April 2, 2023


(in thousands)	Common Stock		Additional Paid-In Capital		Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Shareholders’ Equity Attributable to Soho House & Co Inc.			Noncontrolling Interest			Total Shareholders’ Equity

As of January 1, 2023	$	2,037	$	1,213,086	$	(1,242,412	)	$	54,853		$	(50,000	)	$	(22,436	)	$	7,060		$	(15,376	)
Net income (loss)		—		—		(15,952	)		—			—			(15,952	)		(64	)		(16,016	)
Distributions to noncontrolling interests (Note 3)		—		—		—			—			—			—			(390	)		(390	)
Non-cash share-based compensation (Note 14)		4		5,673		—			—			—			5,677			—			5,677
Net change in cumulative translation adjustment		—		—		—			(7,025	)		—			(7,025	)		(8	)		(7,033	)
As of April 2, 2023	$	2,041	$	1,218,759	$	(1,258,364	)	$	47,828		$	(50,000	)	$	(39,736	)	$	6,598		$	(33,138	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Soho House & Co Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

For the 13 Weeks Ended April 2, 2023 and April 3, 2022


	For the 13 Weeks Ended
(in thousands)	April 2, 2023			April 3, 2022
Cash flows from operating activities
Net income (loss)	$	(16,016	)	$	(60,626	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization		24,464			22,831
Non-cash share-based compensation (Note 14)		5,677			7,331
Deferred tax benefit		(683	)		(895	)
Gain on sale of property and other, net		(681	)		(1,663	)
Share of (income) loss of equity method investments		(871	)		(398	)
Amortization of debt issuance costs		762			1,148
PIK interest (settled), net of non-cash interest		9,073			6,977
Distributions from equity method investees		159			132
Foreign exchange (gain) loss, net		(13,013	)		17,074
Changes in assets and liabilities:
Accounts receivable		(1,612	)		(6,039	)
Inventories		1,373			(7,058	)
Operating leases, net		(1,125	)		7,498
Other operating assets		(18,385	)		(29,204	)
Deferred revenue		297			7,859
Accounts payable and accrued and other liabilities		(1,907	)		25,458
Net cash used in operating activities		(12,488	)		(9,575	)
Cash flows from investing activities
Purchase of property and equipment		(12,010	)		(17,658	)
Proceeds from sale of assets		978			665
Purchase of intangible assets		(4,674	)		(5,185	)
Net cash used in investing activities		(15,706	)		(22,178	)
Cash flows from financing activities
Repayment of borrowings (Note 12)		(202	)		(425	)
Proceeds from borrowings (Note 12)		—			103,650
Payments for debt issuance costs		—			(1,860	)
Principal payments on finance leases		(39	)		(127	)
Principal payments on financing obligation		—			(376	)
Distributions to noncontrolling interest		(390	)		—
Purchase of treasury stock (Note 15)		—			(2,577	)
Net cash (used in) provided by financing activities		(631	)		98,285
Effect of exchange rate changes on cash and cash equivalents, and restricted cash		1,002			(2,192	)
Net (decrease) increase in cash and cash equivalents, and restricted cash		(27,823	)		64,340
Cash, cash equivalents and restricted cash
Beginning of period		190,043			220,662
End of period	$	162,220		$	285,002

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Soho House & Co Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

For the 13 Weeks Ended April 2, 2023 and April 3, 2022


	For the 13 Weeks Ended
(in thousands)	April 2, 2023		April 3, 2022
Cash, cash equivalents and restricted cash are comprised of:
Cash and cash equivalents		153,820		277,196
Restricted cash in current assets		8,400		7,806
Cash, cash equivalents and restricted cash as of April 2, 2023 and April 3, 2022	$	162,220	$	285,002
Supplemental disclosures:
Cash paid for interest	$	8,573	$	7,828
Cash paid for income taxes		263		14
Supplemental disclosures of non-cash investing and financing activities:
Operating lease assets obtained in exchange for new operating lease liabilities		33,152		129,413
Acquisitions of property and equipment under finance leases		—		10,359
Accrued capital expenditures		15,354		—

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Soho House & Co Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of April 2, 2023 and January 1, 2023 and for the 13 Weeks Ended April 2, 2023 and April 3, 2022

Nature of the Business

Soho House & Co Inc. is a global membership platform of physical and digital spaces that connects a vibrant, diverse group of members from across the world. These members use the Soho House & Co Inc. platform to both work and socialize, to connect, create, have fun and drive a positive change. Our members engage with us through our global portfolio of 41 Soho Houses, 9 Soho Works Clubs, The Ned hotels, the LINE and Saguaro hotels in North America, Scorpios Beach Club in Mykonos, Soho Home, our interiors and lifestyle retail brand, and our digital channels.

On March 17, 2023, we filed with the Secretary of State of Delaware an amendment to our Certificate of Incorporation to change our corporate name from Membership Collective Group Inc. to Soho House & Co Inc., which became effective on March 20, 2023. In connection with our name change, our board of directors amended our bylaws to reflect the corporate name Soho House & Co Inc., also effective on March 20, 2023. No other changes were made to our bylaws. Prior to the change of our corporate name, our stock traded on the New York Stock Exchange under the ticker symbol “MCG”. From March 20, 2023, our common stock began trading on the New York Stock Exchange under the ticker symbol “SHCO”.

The consolidated entity presented is referred to herein as “Soho House & Co”, “SHCO”, “we”, “us”, “our”, or the “Company”, as the context requires and unless otherwise noted.

Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for reporting interim information on Form 10-Q. The preparation of the financial statements in conformity with US GAAP requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the periods presented. The Company's significant estimates relate to the valuation of financial instruments, equity method investments, the measurement of goodwill and intangible assets, contingent liabilities, income taxes, leases, long-lived assets and the expected breakage of house introduction credits. Although the estimates have been prepared using management's best judgment and management believes that the estimates used are reasonable, actual results could differ from those estimates and such differences could be material.

We operate on a fiscal year calendar consisting of a 52-or 53-week period ending on the last Sunday in December or the first Sunday in January of the next calendar year. In a 52-week fiscal year, each quarter contains 13 weeks of operations; in a 53-week fiscal year, each of the first, second and third quarters includes 13 weeks of operations and the fourth quarter includes 14 weeks of operations.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been omitted in accordance with the rules and regulations of the SEC. The year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by US GAAP. The unaudited condensed consolidated financial statements include normal recurring adjustments, which in the opinion of management are necessary for the fair presentation of the unaudited condensed consolidated balance sheets, unaudited condensed consolidated statements of operations, of comprehensive loss, of changes in redeemable shares and shareholders’ equity (deficit), and of cash flows for the periods presented. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto, included in the Company’s Annual Report on Form 10-K as of and for the fiscal year ended January 1, 2023.

The results of operations for the 13-week periods ended April 2, 2023 and April 3, 2022 are not necessarily indicative of the operating results for the full fiscal year or any future periods.

Certain prior period amounts have been reclassified to conform to the current period presentation with no impact on previously reported net loss or cash flows, and no material impact on financial position.

Recently Adopted Accounting Standards

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The ASU adds to US GAAP an impairment model (known as the current expected credit loss, or “CECL,” model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which is intended to result in the more timely recognition of losses. Under the CECL model, entities will estimate credit losses over the entire contractual term of the instrument from the date of initial recognition of the financial instrument. The Company adopted ASU 2016-13 effective January 2, 2023 and concluded that adoption of this standard update did not have a material impact on either the financial position, results of operations, cash flows, or related disclosures. There was no impact on beginning balance retained earnings upon adoption of this ASU.

Going Concern

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared assuming the Company will continue as a going concern. The going concern basis of presentation assumes that we will continue in operation for at least a period of 12 months after the date these financial statements are issued, and contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

We have experienced net losses and significant cash outflows from cash used in operating activities over the past years as we develop our Houses. During the 13 weeks ended April 2, 2023, the Company incurred a consolidated net loss of $16 million. During the 13 weeks ended April 2, 2023, the

Soho House & Co Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of April 2, 2023 and January 1, 2023 and for the 13 Weeks Ended April 2, 2023 and April 3, 2022

Company had a cash outflow from operations of $12 million. As of April 2, 2023, the Company had an accumulated deficit balance of $1,258 million, cash and cash equivalents of $154 million, and a restricted cash balance of $8 million.

In assessing the going concern basis of preparation of the unaudited condensed consolidated financial statements for the 13 weeks ended April 2, 2023, we have taken into consideration detailed cash flow forecasts for the Company, the Company’s forecast compliance with bank covenants, and the timing of debt commitments within 12 months of the approval of these financial statements, and the continued availability of committed and accessible working capital to the Company.

We have considered current global economic and political uncertainties, specifically including inflationary pressures on consumables purchased and wages, and the Company has factored these in when it undertook an assessment of the cash flow forecasts covering a period of at least 12 months from the date these financial statements are issued. Cash flow forecasts have been prepared based on a range of scenarios including, but not limited to, no further debt or equity funding, repayment of existing short-term debt, macro-economic dynamics, cost reductions, both limited and extensive, and a combination of these different scenarios.

We believe that the completed working capital events, our projected cash flows and the actions available to management to further control expenditure (particularly in respect of timing of capital works and labor costs, as necessary, provide the Company with sufficient working capital (including cash and cash equivalents) to mitigate the impact of inflationary pressures and consumer confidences, subject to the following key factors:

•

the level of in-House sales activity (primarily sales of food and beverage) that, even after opening, may be subject to operational constraints connected with a re-emergence of any restrictions;

•

the continued high level of membership retention and renewals, with members continuing their current spending patterns; and

•

the implementation, and timely deployment, of cost containment and reductions measures that are aligned with the anticipated levels of capacity.

Furthermore, available cash as a result of completed financing events, includes the exercising of an option on March 9, 2022 for issued additional notes under the existing senior secured notes for $100 million and available additional liquidity, and access to an undrawn revolving credit facility of $87 million (see Note 12, Debt, for additional information). We also have refinanced our Soho Beach House Miami property mortgage, borrowing approximately $20 million of additional net funds (see Note 20, Subsequent Events, for additional information). This, together with the Company’s wider sufficient financial resources, an established business model, access to capital and the measures that have been put in place to control costs, mean that we believe that the Company is able to continue in operational existence, meet its liabilities as they fall due, operate within its existing facilities, and meet all of its covenant requirements for a period of at least 12 months from the date these financial statements are issued.

Based on the above, the consolidated financial statements have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, we continue to adopt the going concern basis in preparing the unaudited condensed consolidated financial statements for the 13 weeks ended April 2, 2023.

Soho House & Co Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of April 2, 2023 and January 1, 2023 and for the 13 Weeks Ended April 2, 2023 and April 3, 2022

Comprehensive Loss

The entire balance of accumulated other comprehensive loss, net of income taxes, is related to the cumulative translation adjustment in each of the periods presented. The changes in the balance of accumulated other comprehensive income loss, net of income tax, are attributable solely to the net change in the cumulative translation adjustment in each of the periods presented.

Acquisitions

Soho Restaurants Limited (previously known as Quentin Limited) Reorganization and Acquisition

In August 2020, the Company became the primary beneficiary of Quentin Limited (now known as Soho Restaurants Limited, “Soho Restaurants”) after a related party became the sole equity owner of Soho Restaurants following a reorganization of the entity. As a result, the Company began consolidating Soho Restaurants and applied the acquisition method of accounting at the date that it became the primary beneficiary as a result of this transaction. No consideration was paid by the Company in this transaction. Upon initial consolidation, the Company recognized $1 million of cash and cash equivalents, $5 million of net working capital liabilities, and $11 million of right-of-use assets and related lease liabilities. In addition, the Company recognized noncontrolling interest of $2 million. There were no material property, plant and equipment and no intangible assets recognized by the Company as a result of consolidating Soho Restaurants.

Prior to the reorganization, the Company guaranteed the obligations of Soho Restaurants under certain property leases with respect to any required rental and other payments. Prior to fiscal 2020, the Company did not have to make any payments under these rental guarantees and determined that the likelihood of the Company having to perform under the guarantees was remote. As a result of the impact of the COVID-19 pandemic on Soho Restaurants’ operations, the Company reassessed the likelihood of performance under the guarantees and recognized a charge of $5 million prior to the Soho Restaurants reorganization; this guarantee provision is included in general and administrative expense in the consolidated statement of operations for the fiscal year ended January 3, 2021. Upon consolidating Soho Restaurants in August 2020, the Company’s guarantee obligation pertaining to leases retained by Soho Restaurants after the reorganization was effectively settled as a pre-existing relationship.

On March 29, 2022, the Company acquired all of the outstanding equity interests of Soho Restaurants for nominal consideration (the “Soho Restaurants Acquisition”) from Quentin Partners. Because the Company consolidated Soho Restaurants prior to the Soho Restaurants Acquisition, the Company accounted for the Soho Restaurants Acquisition as a transaction with a noncontrolling interest holder that did not result in a change of control. The Company derecognized a noncontrolling deficit of $2 million and recorded the difference between the fair value of consideration transferred to Quentin Partners and the carrying value of the noncontrolling interest as a reduction in additional paid-in capital (i.e., a deemed distribution in the absence of retained earnings). Following the Soho Restaurants Acquisition, the Company became the sole equity owner of Soho Restaurants.

Also on March 29, 2022, Soho Restaurants entered into a Trademark Assignment with Chick’n Limited, pursuant to which Soho Restaurants has agreed to transfer the rights to certain intangible assets to Chick’n Limited in exchange for three separate cash payments over a one-year period, commencing on March 29, 2022, totaling £1 million ($2 million), all of which was recognized in gain on sale of property and other, net in the consolidated statements of operations for the fiscal year ended January 1, 2023.

Soho Restaurants also entered into a royalty-free Product License Agreement with Chick’n Limited on March 29, 2022, pursuant to which Chick’n Limited has agreed to grant the Company a non-exclusive, royalty-free license to produce and sell certain burgers at certain Soho Restaurant properties for a term of two years. Other than with respect to this limited license, Soho Restaurants has no legal right to the product.

Consolidated Variable Interest Entities

The Company determined that it is the primary beneficiary of the following material variable interest entities (“VIEs”): Ned-Soho House, LLP and Soho Works Limited.

Prior to March 2022, Soho Restaurants was accounted for as a VIE and the Company was the primary beneficiary. Following the Soho Restaurants Acquisition described in Note 3, Acquisitions, the Company became the sole equity owner of Soho Restaurants, controls all voting rights and holds exposure to all of the economics of the entity as a result of Soho Restaurants being a wholly-owned subsidiary of the Company. Following the Soho Restaurants Acquisition, Soho Restaurants is no longer considered a VIE.

Ned-Soho House, LLP
The Ned-Soho House, LLP joint venture maintains a management agreement to operate The Ned Hotel in London, which is owned by unconsolidated related parties to the Company. Management fees are recognized in other revenues in the consolidated statements of operations. The Company has a higher economic interest in Ned-Soho House, LLP as compared to its related party venture partner and therefore the Company is determined to be the primary beneficiary.

Soho Works Limited
The Soho Works Limited (“SWL”) joint venture develops and operates Soho-branded, membership-based co-working spaces, with nine sites currently in

Soho House & Co Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of April 2, 2023 and January 1, 2023 and for the 13 Weeks Ended April 2, 2023 and April 3, 2022

operation in the UK. The joint venture agreement relates to the UK only. The joint venture was formed on September 29, 2017 when the Company granted to two unrelated individuals an option to subscribe for 30% of the issued shares of SWL. The option has not yet been exercised and, consequently, the Company has 100% economic interest in SWL. Upon exercise of the option, the Company would have 70% economic interest in SWL. The options carry voting rights such that the Company and other joint venture partners each hold 50% of the voting rights in respect of shareholder resolutions and certain reserved matters as defined in the joint venture agreement. The Company is determined to be the primary beneficiary because it has the power to direct all significant activities of the joint venture.

The following table summarizes the carrying amounts and classification of the consolidated VIEs’ assets and liabilities included in the consolidated balance sheets. The obligations of the consolidated VIEs are non-recourse to the Company, and the assets of the VIEs can be used only to settle those obligations.


	As of
(in thousands)	April 2, 2023			January 1, 2023
Cash and cash equivalents	$	4,919		$	7,941
Accounts receivable		388			1,823
Inventories		15			19
Prepaid expenses and other current assets		3,289			3,283
Total current assets		8,611			13,066
Property and equipment, net		31,667			32,288
Operating lease assets		103,048			99,717
Other intangible assets, net		288			284
Other non-current assets		185			181
Total assets		143,799			145,536
Accounts payable		381			337
Accrued liabilities		6,415			8,131
Indirect and employee taxes payable		276			1,548
Current portion of debt, net of debt issuance costs		25,105			24,612
Current portion of operating lease liabilities - sites trading more than one year		5,480			4,362
Other current liabilities		4,877			4,153
Total current liabilities		42,534			43,143
Operating lease liabilities, net of current portion - sites trading more than one year		117,080			115,182
Total liabilities		159,614			158,325
Net liabilities	$	(15,815	)	$	(12,789	)

Equity Method Investments

The Company maintains a portfolio of equity method investments owned through noncontrolling interests in investments with one or more partners. There have been no changes in the Company’s equity method investment ownership interests in existing entities and no new equity method investments since January 1, 2023. Under applicable guidance for VIEs, the Company determined that its investments in Soho House Toronto Partnership (“Soho House Toronto”) and the entities comprising 56-60 Redchurch Street, London are VIEs. Soho House Toronto owns and operates a House located in Toronto, while 56-60 Redchurch Street, London provides additional members’ accommodation capacity for Shoreditch House in London.

Toronto Joint Venture

On March 28, 2012, the Company and two unrelated investors (“Toronto Partners”) formed Soho House Toronto to establish and operate a House in Toronto, Canada. The Company is responsible for managing the development and operations of the property with key operating decisions requiring joint approval with the Toronto Partners.

56-60 Redchurch Street, London Joint Venture

On July 6, 2015, the Company and a related party investor (“Raycliff Partner”) formed Raycliff Red LLP (“Club Row Rooms”) to develop and operate a hotel at 58-60 Redchurch Street intended to provide additional members’ accommodation to the nearby Shoreditch House in London. This was later extended to include 56 Redchurch Street under the same terms. The Company is responsible for managing the operations of the property and the Raycliff Partner is responsible for managing the building.

The Company concluded that it is not the primary beneficiary of the Soho House Toronto or 56-60 Redchurch Street, London VIEs in any of the periods

Soho House & Co Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of April 2, 2023 and January 1, 2023 and for the 13 Weeks Ended April 2, 2023 and April 3, 2022

presented, as its joint venture partners have the power to participate in making decisions related to the majority of significant activities of each investee. Accordingly, the Company concluded that application of the equity method of accounting is appropriate for these investees.

Summarized Financial Information

The following tables present summarized financial information for all unconsolidated equity method investees. The Company’s maximum exposure to losses related to its equity method investments is limited to its ownership interests as well as certain guarantees as described in Note 16, Commitments and Contingencies.


	For the 13 Weeks Ended
(in thousands)	April 2, 2023		April 3, 2022
Revenues	$	11,244	$	9,247
Operating income (loss)		2,592		(821	)
Net income (loss) (1)		1,809		(51	)

(1)

The net income / (loss) shown above relates entirely to continuing operations.

Leases

The Company has entered into various lease agreements for its Houses, hotels, restaurants, spas and other properties across the Americas, Europe, and Asia, which includes 13 equipment leases. The Company’s material leases have reasonably assured lease terms ranging from 1 year to 30 years for operating leases and 50 years for finance leases. Certain operating leases provide the Company with multiple renewal options that generally range from 5 years to 10 years, with rent payments on renewal based on a predetermined annual increase or market rates at the time of exercise of the renewal. The Company has 3 material finance leases with 25 year renewal options, with rent payments on renewal based on upward changes in inflation rates. As of April 2, 2023, the Company recognized right-of-use assets and lease liabilities for 115 operating leases and 3 finance leases. When recognizing right-of-use assets and lease liabilities, the Company includes certain renewal options where the Company is reasonably assured to exercise the renewal option.

The maturity of the Company’s operating and finance lease liabilities as of April 2, 2023, is as follows:


(in thousands) Fiscal year ended	Operating Leases		Finance Leases
Undiscounted lease payments
Remainder of 2023	$	104,784	$	4,396
2024		143,036		5,889
2025		145,008		5,813
2026		145,877		5,813
2027		137,342		5,813
Thereafter		1,668,350		220,872
Total undiscounted lease payments		2,344,397		248,596
Present value adjustment		1,059,945		170,495
Total net lease liabilities	$	1,284,452	$	78,101

Certain lease agreements include variable lease payments that, in the future, will vary based on changes in the local inflation rates, market rate rents, or business revenues of the leased premises.

Straight-line rent expense recognized as part of in-House operating expenses for operating leases was $36 million and $34 million for the 13 weeks ended April 2, 2023 and April 3, 2022, respectively.

For the 13 weeks ended April 2, 2023 and April 3, 2022, the Company recognized amortization expense related to the right-of-use asset for finance leases of less than $1 million and less than $1 million, respectively, and interest expense related to finance leases of $1 million and $1 million, respectively. There were no material variable lease payments for finance leases for the 13 weeks ended April 2, 2023 and April 3, 2022.

New Houses typically have a maturation profile that commences sometime after the lease commencement date used in the determination of the lease accounting in accordance with Topic 842. The consolidated balance sheets set out the operating lease liabilities split between sites trading less than one year and sites trading more than one year. “Sites trading less than one year” and “sites trading more than one year” reference sites that have been open (as measured from the date the site first accepted a paying guest) for a period less than one year from the balance sheet date and those that have been open for a period longer than one year from the balance sheet date.

Soho House & Co Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of April 2, 2023 and January 1, 2023 and for the 13 Weeks Ended April 2, 2023 and April 3, 2022

The following information represents supplemental disclosure for the statement of cash flows related to operating and finance leases:


	For the 13 Weeks Ended
(in thousands)	April 2, 2023			April 3, 2022
Cash flows from operating activities:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	(34,141	)	$	(29,955	)
Interest payments for finance leases		(1,365	)		(1,208	)
Cash flows from financing activities:
Principal payments for finance leases	$	(39	)	$	(127	)
Supplemental disclosures of non-cash investing and financing activities:
Operating lease assets obtained in exchange for new operating lease liabilities	$	33,152		$	129,413

Soho House & Co Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of April 2, 2023 and January 1, 2023 and for the 13 Weeks Ended April 2, 2023 and April 3, 2022

The following summarizes additional information related to operating and finance leases:


	As of
	April 2, 2023	April 3, 2022
Weighted-average remaining lease term
Finance leases	43 years	43 years
Operating leases	16 years	18 years
Weighted-average discount rate
Finance leases	7.29%	7.00%
Operating leases	7.87%	8.10%

As of April 2, 2023, the Company has entered into 14 operating lease agreements that are signed but have not commenced. Of these, 11 relate to Houses, hotels, restaurants, and other properties that are in various stages of construction by the landlord. The Company will determine the classification as of the lease commencement date, but currently expects these under construction leases to be operating leases. Soho House Design (“SHD”) is involved to varying degrees in the design of these leased properties under construction. The Company does not control the underlying assets under construction. Pending significant completion of all landlord improvements and final execution of the related lease, the Company expects these leases to commence in fiscal years ending 2023, 2024, and 2026. The Company estimates the total undiscounted lease payments for the leases commencing in fiscal years ended 2023, 2024, and 2026 will be $427 million, $251 million, and $754 million, respectively, with weighted-average expected lease terms of 23 years, 19 years, and 16 years for 2023, 2024, and 2026, respectively.

The following summarizes the Company’s estimated future undiscounted lease payments for current leases signed but not commenced:


(in thousands)	Operating Leases Under
Fiscal year ended	Construction
Estimated total undiscounted lease payments
Remainder of 2023	$	2,897
2024		13,181
2025		25,879
2026		67,594
2027		72,835
Thereafter		1,250,081
Total undiscounted lease payments expected for leases signed but not commenced	$	1,432,467

Revenue Recognition

Disaggregated revenue disclosures by reportable segments for the 13 weeks ended April 2, 2023 and April 3, 2022 are included in Note 18, Segments. Revenue from membership fees, legacy one-time registration fees, house introduction credits and build-out contracts are the only arrangements for which revenue is recognized over time.

The following table includes estimated revenues expected to be recognized in the future related to performance obligations that were unsatisfied (or partially unsatisfied) at the end of the reporting period ending April 2, 2023.


(in thousands)	Next twelve months from April 2, 2023		Future periods
Membership and registration fees	$	95,798	$	26,861
Total future revenues	$	95,798	$	26,861

All consideration from contracts with customers is included in the amounts presented above.

Soho House & Co Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of April 2, 2023 and January 1, 2023 and for the 13 Weeks Ended April 2, 2023 and April 3, 2022

The following table provides information about contract receivables, contract assets and contract liabilities from contracts with customers:


	As of
(in thousands)	April 2, 2023		January 1, 2023
Contract receivables	$	44,460	$	42,215
Contract assets		4,611		9,344
Contract liabilities		153,522		130,975

Contract assets consist of accrued unbilled income related to build-out contracts and are recognized in prepaid expenses and other assets on the unaudited condensed consolidated balance sheets.

Contract liabilities include deferred membership revenue, hotel deposits (which are presented in accrued liabilities on the unaudited condensed consolidated balance sheets), and gift vouchers. Revenue recognized that was included in the contract liabilities balance as of the beginning of the period was $26 million and $22 million during the 13 weeks ended April 2, 2023 and April 3, 2022, respectively.

Inventories, Prepaid Expenses and Other Current Assets

Inventories consist of raw materials, service stock and supplies (primarily food and beverage) and finished goods which are externally sourced. Raw materials and service stock and supplies totaled $26 million and $19 million as of April 2, 2023 and January 1, 2023, respectively. Finished goods totaled $31 million and $39 million as of April 2, 2023 and January 1, 2023, respectively.

The table below presents the components of prepaid expenses and other current assets.


	As of
(in thousands)	April 2, 2023		January 1, 2023
Amounts owed by equity method investees	$	1,444	$	1,492
Prepayments and accrued income		35,536		27,416
Contract assets		4,611		9,344
Other receivables		69,540		52,849
Total prepaid expenses and other current assets	$	111,131	$	91,101

Property and Equipment, Net

Additions totaled $12 million and $22 million during the 13 weeks ended April 2, 2023 and April 3, 2022, respectively, and were primarily related to leasehold improvements and fixtures and fittings for existing sites.

10.

Goodwill

A summary of goodwill for each of the Company’s applicable reportable segments from January 1, 2023 to April 2, 2023 is as follows:


(in thousands)	UK		North America		Europe and RoW		Total
January 1, 2023	$	89,975	$	47,446	$	62,225	$	199,646
Foreign currency translation adjustment		1,799		—		871		2,670
April 2, 2023	$	91,774	$	47,446	$	63,096	$	202,316

Soho House & Co Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of April 2, 2023 and January 1, 2023 and for the 13 Weeks Ended April 2, 2023 and April 3, 2022

11.

Accrued Liabilities

The table below presents the components of accrued liabilities.


	As of
(in thousands)	April 2, 2023		January 1, 2023
Accrued interest	$	543	$	440
Hotel deposits		17,622		11,758
Trade and other accruals		65,790		71,914
Total accrued liabilities	$	83,955	$	84,112

12.

Debt

Debt balances, net of debt issuance costs, are as follows:


	As of
(in thousands)	April 2, 2023			January 1, 2023
Senior Secured Notes, interest at 8.1764% for the Initial Notes and 8.5% for the Additional Notes, maturing March 2027	$	582,365		$	570,712
Soho Works Limited loans, unsecured, 7% interest bearing, maturing September 2024 (see additional description below)		25,105			24,612
Other loans (see additional description below)		10,000			10,197
		617,470			605,521
Less: Current portion of long-term debt		(26,130	)		(25,617	)
Total long-term debt, net of current portion	$	591,340		$	579,904

Property mortgage loans, net of debt issuance costs, are as follows:


	As of
(in thousands)	April 2, 2023		January 1, 2023
Term loan, interest at 5.34%, maturing February 6, 2024	$	54,696	$	54,614
Mezzanine loan, interest at 7.25%, maturing February 6, 2024		61,666		61,573
Total property mortgage loans	$	116,362	$	116,187

The weighted-average interest rate on fixed rate borrowings was 8% as of April 2, 2023 and 8% as of April 3, 2022 and January 1, 2023. There were no outstanding floating rate borrowings as of April 2, 2023 or January 1, 2023.

Debt

The descriptions below show the financial instrument amounts in the currency of denomination with USD equivalent in parentheses, where applicable, translated using the exchange rates in effect at the time of the respective transaction.

On December 5, 2019, the Company entered into a £55 million ($72 million) floating rate revolving credit facility (the “Revolving Credit Facility”) with a maturity date of January 25, 2022. In April 2020, the Company secured an additional £20 million ($25 million) of liquidity under this facility and extended the maturity until January 2023. During the fiscal year ended January 2, 2022, the Company repaid the entire outstanding balance of the facility with proceeds from our initial public offering (the "IPO"). As of April 2, 2023 and January 1, 2023, £71 million ($87 million) is available to draw under this facility, with £4 million ($5 million) utilized as a letter of guarantee in respect of one of the Company’s lease agreements. The facility is secured on a fixed and floating charge basis over certain assets of the Company. The Company incurred interest expense of less than $1 million and $1 million on this facility during the 13 weeks ended April 2, 2023 and April 3, 2022, respectively. On November 15, 2021, Soho House Bond Limited, a wholly-owned subsidiary of the Company entered into the First Amended and Restated Revolving Facility Agreement (the "First Amendment"). The First Amendment amended the Revolving Credit Facility to, among other things, change the reference rate under the Revolving Credit Facility for borrowings denominated in pounds sterling from a LIBOR-based rate to a SONIA-based rate and to transition reporting from accounting principles generally accepted in the United Kingdom to US GAAP. The First Amendment also reset the Company's Consolidated EBITDA (as defined in the Revolving Credit Facility) test levels, scaling from zero at December 31, 2021 to £32 million ($39 million, if translated using the average exchange rate in effect during the fiscal year ended January 1, 2023) after June 30, 2022. On February 11, 2022, Soho House Bond Limited, a wholly-owned subsidiary of the Company, entered into

Soho House & Co Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of April 2, 2023 and January 1, 2023 and for the 13 Weeks Ended April 2, 2023 and April 3, 2022

the Second Amended and Restated Revolving Facility Agreement (the “Second Amendment”), which amends and restates the Revolving Credit Facility. The Second Amendment amends the Revolving Credit Facility to extend the maturity date from January 25, 2023 to January 25, 2024. On November 10, 2022, Soho House Bond Limited, entered into the Third Amended and Restated Revolving Facility Agreement (the “Third Amendment”), which further amends and restates the Revolving Credit Facility. The Third Amendment amends the Revolving Credit Facility to extend the maturity date from January 25, 2024 to July 25, 2026. In addition, the Third Amendment provides that from March 2023 we are required to maintain certain leverage covenants (as defined in the Revolving Credit Facility) which are applicable when 40% or more of the facility is drawn. As of April 2, 2023 the facility remains undrawn.

In 2017, Soho Works Limited entered into a term loan facility agreement. The SWL loan bears interest at 7% and matures at the earliest of: (a) September 29, 2023; (b) the date of disposal of the whole or substantial part of the Soho Works Limited; (c) the date of sale by the shareholders of the entire issued share capital of Soho Works Limited to a third party; (d) the date of the admission of Soho Works Limited to any recognized investment exchange or multi-lateral trading facility; and (e) any later date that the two individuals may determine in their sole discretion. During fiscal 2022, Soho Works Limited drew an additional £3 million ($3 million) under the facility. The carrying amount of the term loan was £20 million ($25 million) and £16 million ($21 million) as of April 2, 2023 and January 1, 2023, respectively. The Company incurred interest expense of $1 million and $1 million on this facility during the 13 weeks ended April 2, 2023 and April 3, 2022, respectively. On March 3, 2023, this loan was subsequently extended and the maturity date is now September 29, 2024 after having previously been extended to September 29, 2023 by an amendment entered into on March 11, 2022. The Company has determined a current classification of this loan is appropriate as it best reflects the substance of the agreement with the lenders given that the loan extension period is short-term in nature (12 months).

In January 2018, the Company entered into leases in connection with its Greek Street properties. As part of these leases, the landlord has funded a principal amount of £5 million ($7 million), which represents costs paid directly by the landlord which will be repaid by the Company. Amounts funded by the landlord prior to the lease inception date were initially reflected as accrued liabilities and subsequently converted into long-term debt upon execution of the respective agreements. The Greek Street loans carry interest of 7.5%, are due for repayment in January 2028 and are unsecured. The Company incurred interest expense of less than $1 million during each of the 13 weeks ended April 2, 2023 and April 3, 2022, respectively.

On March 31, 2021, Soho House Bond Limited issued pursuant to a Notes Purchase Agreement senior secured notes, which were subscribed for by certain funds managed, sponsored or advised by Goldman Sachs & Co. LLC or its affiliates, in aggregate amounts equal to $295 million, €62 million ($73 million) and £53 million ($73 million) (the “Initial Notes”). The Notes Purchase Agreement included an option to issue, and a commitment on the part of the purchasers to subscribe for, further notes in one or several issuances on or prior to March 31, 2022 in an aggregate amount of up to $100 million (the “Additional Notes” and, together with the Initial Notes, the “Senior Secured Notes”). The Additional Notes were issued for the full $100 million on March 9, 2022. The Senior Secured Notes mature on March 31, 2027 and bear interest at a fixed rate equal to a cash margin of 2.0192% per annum for the Initial Notes or 2.125% per annum for any Additional Notes, plus a payment-in-kind (capitalized) margin of 6.1572% per annum for the Initial Notes or 6.375% per annum for any Additional Notes. The Senior Secured Notes issued pursuant to the Notes Purchase Agreement may be redeemed and prepaid for cash, in whole or in part, at any time in accordance with the terms thereof, subject to payment of redemption fees. The Senior Secured Notes are guaranteed and secured on substantially the same basis as our Revolving Credit Facility. The Company incurred interest expense of $13 million and $10 million during the 13 weeks ended April 2, 2023 and April 3, 2022, respectively, related to the Senior Secured Notes. On November 15, 2021, Soho House Bond Limited entered into the First Amended and Restated Note Purchase Agreement (the "First Note Agreement"). The First Note Amendment amended the Notes Purchase Agreement to, among other things, transition reporting from accounting principles generally accepted in the United Kingdom to US GAAP.

On June 1, 2021, certain subsidiaries of the Company entered into a development funding agreement with Dorncroft Limited, the landlord of Soho Farmhouse. The agreement provided a commitment of up to £9 million ($12 million) for certain improvements at the Farmhouse property. Interest on the balance drawn under the agreement accrued at an annual rate of 7.9% per annum and was added to the loan principal balance. The facility expired on July 31, 2022, and the outstanding loan balance converted to a finance lease. The Company incurred interest expense of less than $1 million during the 13 weeks ended April 2, 2023.

The other loans consist of the following:


	Currency	Maturity date	Principal balance as of April 2, 2023		Applicable interest rate as of April 2, 2023
Greek Street loan	£	January 2028	$	3,368		7.5	%
Compagnie de Phalsbourg credit facility	€	January 2025		5,620		7	%
Greek government loan	€	July 2025		1,017		3.1	%

Property Mortgage Loans

In February 2019, the Company refinanced an existing term loan and mezzanine loan associated with a March 2014 corporate acquisition of Soho Beach House Miami with a new term loan and mezzanine loan. The new term loan of $55 million and mezzanine loan of $62 million are secured on the

Soho House & Co Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of April 2, 2023 and January 1, 2023 and for the 13 Weeks Ended April 2, 2023 and April 3, 2022

underlying property and operations of Soho Beach House Miami and are due in February 2024. The loans bear interest at 5.34% and 7.25%, respectively. The Company incurred interest expense of $2 million and $2 million on these facilities during the 13 weeks ended April 2, 2023 and April 3, 2022, respectively.

In May 2023, the Company refinanced the existing term loan and mezzanine loan as described above. The new loan matures in June 2033 and bears interest at 6.99% The Company has classified the property mortgage loan as non-current as of April 2, 2023 because the Company had the intent and ability to refinance the property mortgage loan originally due for repayment in February 2024. Refer to Note 20 Subsequent Events for further information on the refinancing of this loan agreement.

Future Principal Payments

The following table presents future principal payments for the Company’s debt and property mortgage loans as of April 2, 2023:


(in thousands)
Remainder of 2023	$	658
2024		26,446
2025		751
2026		7,411
2027		591,062
Thereafter(1)		116,373
	$	742,701

(1) In May 2023, the Company refinanced the existing Soho Beach House Miami property mortgage loan. The future principal payments related to this loan reflect the new maturity date of June 1, 2033. Refer to Note 20 Subsequent Events for further information.

13.

Fair Value Measurements

Recurring and Non-recurring Fair Value Measurements

There were no assets or liabilities measured at fair value on a recurring or non-recurring basis as of April 2, 2023 or January 1, 2023.

Fair Value of Financial Instruments

The Company believes the carrying values of its financial instruments related to current assets and liabilities approximate fair value due to short-term maturities.

The Company has estimated the fair value of the debt as of April 2, 2023 and January 1, 2023 using a discounted cash flow analysis. The Company does not believe that the use of different market inputs would have resulted in a materially different fair value of debt as of April 2, 2023 and January 1, 2023.

The following table presents the estimated fair values (all of which are Level 3 fair value measurements) of the Company’s debt instruments with maturity dates in 2023 and thereafter:


(in thousands)	Carrying Value		Fair Value
April 2, 2023
Senior Secured Notes	$	582,365	$	561,183
Property mortgage loans		116,362		113,945
Other loans		10,000		9,495
	$	708,727	$	684,623


(in thousands)	Carrying Value		Fair Value
January 1, 2023
Senior Secured Notes	$	570,712	$	545,362
Property mortgage loans		116,187		113,066
Other loans		10,197		9,647
	$	697,096	$	668,075

The carrying values of the Company’s other non-current liabilities and non-current assets approximate their fair values.

14.

Share-Based Compensation

In August 2020, the Company established the 2020 Equity and Incentive Plan (the “2020 Plan”) under which SHHL Share Appreciation Rights (“SARs”) and SHHL Growth Shares were issued to certain employees. The awards are settled in SHHL ordinary D shares and the Company can grant up to 9,978,143 ordinary D shares of SHHL under the 2020 Plan. In connection with the IPO in July 2021, 25% of the outstanding awards accelerated in

Soho House & Co Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of April 2, 2023 and January 1, 2023 and for the 13 Weeks Ended April 2, 2023 and April 3, 2022

accordance with the original plan and all of the outstanding awards were exchanged into awards that will be settled in Class A common stock of SHCO. As a result of the exchange, 7,127,246 SHHL SARs were converted into 6,023,369 SHCO SARs and 2,850,897 SHHL Growth Shares were converted into 781,731 SHCO restricted stock awards. The exchanged awards are subject to the same vesting conditions as the original awards. As of April 2, 2023 and January 1, 2023, there were 5,138,118 and 5,290,719 SARs outstanding under the 2020 Plan, respectively. As of both April 2, 2023 and January 1, 2023, there were 146,575 and 146,574 SHCO restricted stock awards outstanding under the 2020 Plan, respectively.

In July 2021, the Company established its 2021 Equity and Incentive Plan (the “2021 Plan”). The 2021 Plan allows for grants of nonqualified stock options, SARs, and RSUs or performance awards. There were 12,107,333 shares initially available for all awards under the 2021 Plan and the shares available will increase annually on the first day of each calendar year, beginning with the calendar year ended December 31, 2022. As of April 2, 2023, there were 4,783,373 shares available for future awards. The Company granted 3,113,109 SARs under the 2021 Plan during the 13 weeks ended April 2, 2023. As of April 2, 2023, there were 3,031,240 SARs outstanding under the 2021 Plan. As of April 2, 2023 and January 1, 2023, there were 2,681,852 and 2,998,865 RSUs outstanding under the 2021 Plan, respectively.

In December 2022, the Company modified the exercise prices for the certain of the outstanding SARs to be $4.00 per share. As a result, the Company accounted for the modification as a Type I modification, resulting in $2.2 million of incremental fair value, of which $1.5 million was recorded immediately.

Share-based compensation during the 13 weeks ended April 2, 2023 and April 3, 2022 was recorded in the consolidated statements of operations within a separate line item as shown in the following table:


	For the 13 Weeks Ended
(in thousands)	April 2, 2023		April 3, 2022
SARs	$	3,578	$	2,034
Restricted stock awards (Growth Shares)		432		655
RSUs		1,667		4,642
Employer-related payroll expense(1)		169		472
Share-based compensation expense, net of tax	$	5,846	$	7,803

(1)

Relates to employment related taxes, including employer national insurance tax in the UK. These amounts were settled in cash and are not included in additional paid-in capital or as an adjustment to reconcile net loss to net cash used in operating activities in the consolidated statements of cash flows.

As of April 2, 2023, total compensation expense not yet recognized is as follows:

•

With respect to the unvested SARs issued under the 2020 and 2021 Plans, approximately $7 million, which is expected to be recognized over a weighted-average period of 1.42 years;

•

With respect to the unvested restricted stock awards (Growth Shares) issued under the 2020 Plan, approximately $1 million, which is expected to be recognized over a weighted-average period of less than one year; and

•

With respect to the unvested RSUs issued under the 2021 Plan, approximately $13 million, which is expected to be recognized over a weighted-average period of 2.14 years.

15.

Loss Per Share and Shareholders’ Equity

Holders of Class A common stock and Class B common stock are entitled to receive dividends out of legally available funds on a pari passu basis. Holders of Class A common stock are entitled to one vote per share, while holders of Class B common stock are entitled to 10 votes per share. Each holder of Class B common stock has the right to convert its shares of Class B common stock into shares of Class A common stock, at any time, on a one-for-one basis. Additionally, shares of Class B common stock will automatically convert into shares of Class A common stock, on a one-for-one basis, upon transfer to any non-permitted holder of Class B common stock. Holders of Class A and Class B common stock are entitled to liquidation distributions on a pro rata basis, subject to prior satisfaction of all outstanding debt and liabilities and the payment of liquidation preferences, if any.

The tables below present changes in each class of the Company’s common stock, as applicable:


	SHCO Common Stock
	Class A Common Stock			Class B Common Stock
As of January 2, 2022		61,029,730			141,500,385
Shares repurchased		(324,972	)		—
RSUs vested		506,990			—
As of April 3, 2022		61,211,748			141,500,385

Soho House & Co Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of April 2, 2023 and January 1, 2023 and for the 13 Weeks Ended April 2, 2023 and April 3, 2022


	SHCO Common Stock
	Class A Common Stock		Class B Common Stock
As of January 1, 2023		53,722,597		141,500,385
Shares issued related to share-based compensation		368,349		—
As of April 2, 2023		54,090,946		141,500,385

Stock Repurchase Program

On March 18, 2022, the Company’s board of directors and a relevant sub-committee thereof authorized and approved a stock repurchase program for up to $50 million of the then outstanding shares of the Company’s Class A common stock. Under the stock repurchase program, the Company was authorized to repurchase from time to time shares of its outstanding Class A common stock on the open market or in privately negotiated transactions in the United States. The timing and amount of stock repurchases depended on a variety of factors, including market conditions as well as corporate and regulatory considerations. Under the program, the repurchased shares were returned to the status of authorized, but unissued shares of common stock held in treasury at average cost. During the 13 weeks ended April 3, 2022, the Company repurchased a total of 324,972 shares of Class A common stock for $3 million, including commissions. The repurchase plan upper limit of $50 million was met in December 2022 and as such there were no further stock repurchases under the above plan subsequent to December 2022.

Loss Per Share

The Company computes loss per share using the two-class method. As the liquidation and dividend rights are identical, the undistributed earnings or losses are allocated on a proportionate basis to each class of common stock, and the resulting basic and diluted loss per share attributable to common stockholders are therefore the same for Class A and Class B common stock.

16.

Commitments and Contingencies

Litigation Matters

The Company is not a party to any litigation other than litigation in the ordinary course of business. The Company’s management and legal counsel do not expect that the ultimate outcome of any of its currently ongoing legal proceedings, individually or collectively, will have a material adverse effect on the Company’s unaudited condensed consolidated financial statements.

17.

Income Taxes

For the 13 weeks ended April 2, 2023, there have been no material changes in the Company’s estimates or provisions for income taxes recorded in the unaudited condensed consolidated balance sheet. The Company has generated incremental deferred tax assets relating to tax losses, share-based compensation, and excess interest of $1 million based on the results for the 13 weeks ended April 2, 2023. Full valuation allowances have been recorded against the incremental deferred tax assets recognized for tax losses, share-based compensation, and excess interest. The level of unrecognized tax benefits has increased by $7 million in the 13 weeks ended April 2, 2023. There is no impact on the Company’s effective tax rate for the 13 weeks ended April 2, 2023 as there is a corresponding reduction in the valuation allowance applied for the period.

The effective tax rate for the 13 weeks ended April 2, 2023 was 1.0%, compared to 0.74% for the 13 weeks ended April 3, 2022. The effective tax rate for the 13 weeks ended April 2, 2023 differs from the US statutory rate of 21% primarily due to a full valuation allowance being recorded against the tax losses and other deferred tax assets generated during the period then ended.

18.

Segments

The Company’s core operations comprise of Houses and restaurants across a number of territories, which are managed on a geographical basis. There is a segment managing director for each of North America, and the UK, Europe and Rest of the World (“RoW”) who is responsible for Houses, hotels and restaurants in that region. Each operating segment manager reports directly to the Company’s Chief Operating Decision Maker (“CODM”), the Chief Executive Officer, Chief Financial Officer and Chief Operating Officer - Americas combined. In addition to Houses and restaurants, the Company offers other products and services, such as retail, home & beauty products and services, which comprise its Retail operating segment; access to Soho Works collaboration spaces across the UK and North America, which comprise its Soho Works operating segment; and memberships for people who live in cities where physical Houses do not exist, which comprise its Cities Without Houses operating segment. The Retail, Soho Works, and Cities Without Houses operating segments also have segment managers which report directly to the CODM and are managed separately from the Houses and hotels in each region.

The Company has identified the following three reportable segments:

•

UK,

•

North America, and

•

Europe and RoW.

Soho House & Co Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of April 2, 2023 and January 1, 2023 and for the 13 Weeks Ended April 2, 2023 and April 3, 2022

The Company analyzed the results of the Retail, Soho Works, Soho Restaurants, and Cities Without Houses operating segments and concluded that they did not warrant separate presentation as reportable segments as they do not provide additional useful information to the readers of the financial statements. Therefore, these segments are included as part of an “All Other” category.

Intercompany revenues and costs among the reportable segments are not material and accounted for as if the sales were to third parties because these items are based on negotiated fees between the segments involved. All intercompany transactions and balances are eliminated in consolidation. Intercompany revenues and costs between entities within a reportable segment are eliminated to arrive at segment totals. Segment revenue includes revenue of certain equity method investments, which are considered stand-alone operating segments, which are therefore not included in revenues as part of these consolidated financial statements. Eliminations between segments are separately presented. Corporate results include amounts related to Corporate functions such as administrative costs and professional fees. Income tax expense is managed by Corporate on a consolidated basis and is not allocated to the reportable segments.

The Company manages and assesses the performance of the reportable segments by adjusted EBITDA, which is defined as net income (loss) before depreciation and amortization, interest expense, net, provision (benefit) for income taxes, adjusted to take account of the impact of certain non-cash and other items that the Company does not consider in its evaluation of ongoing operating performance. These other items include, but are not limited to, loss (gain) on sale of property and other, net, share of loss (profit) of equity method investments, foreign exchange, pre-opening expenses, non-cash rent, deferred registration fees, net, share of equity method investments adjusted EBITDA, share-based compensation expense, and certain other expenses.

The following tables present disaggregated revenue for the 13 weeks ended April 2, 2023 and April 3, 2022 and the key financial metrics reviewed by the CODM for the Company’s reportable segments:


	For the 13 Weeks Ended April 2, 2023
(in thousands)	North America			UK			Europe & RoW			Reportable Segment Total			All Other		Total
Membership revenues	$	41,543		$	23,697		$	10,312		$	75,552		$	10,797	$	86,349
In-House revenues		52,052			41,420			27,178			120,650			—		120,650
Other revenues		18,706			15,269			1,117			35,092			24,362		59,454
Total segment revenue		112,301			80,386			38,607			231,294			35,159		266,453
Elimination of equity accounted revenue		(4,209	)		(1,656	)		(5,379	)		(11,244	)		—		(11,244	)
Consolidated revenue	$	108,092		$	78,730		$	33,228		$	220,050		$	35,159	$	255,209


	For the 13 Weeks Ended April 3, 2022
(in thousands)	North America			UK			Europe & RoW			Reportable Segment Total			All Other		Total
Membership revenues	$	29,292		$	17,171		$	6,974		$	53,437		$	7,858	$	61,295
In-House revenues		41,067			38,038			11,908			91,013			—		91,013
Other revenues		15,571			12,271			648			28,490			20,457		48,947
Total segment revenue		85,930			67,480			19,530			172,940			28,315		201,255
Elimination of equity accounted revenue		(3,437	)		(1,804	)		(4,006	)		(9,247	)		—		(9,247	)
Consolidated revenue	$	82,493		$	65,676		$	15,524		$	163,693		$	28,315	$	192,008

Soho House & Co Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of April 2, 2023 and January 1, 2023 and for the 13 Weeks Ended April 2, 2023 and April 3, 2022

The following tables present the reconciliation of reportable segment adjusted EBITDA to total consolidated segment revenue and the reconciliation of net loss to adjusted EBITDA:


	For the 13 Weeks Ended April 2, 2023
(in thousands)	North America			UK			Europe & RoW			Reportable Segment Total			All Other			Total
Total consolidated segment revenue	$	108,092		$	78,730		$	33,228		$	220,050		$	35,159		$	255,209
Total segment operating expenses		(83,172	)		(63,284	)		(33,394	)		(179,850	)		(38,663	)		(218,513	)
Share of equity method investments adjusted EBITDA		803			180			885			1,868			—			1,868
Reportable segments adjusted EBITDA		25,723			15,626			719			42,068			(3,504	)		38,564
Unallocated corporate overhead																	(10,125	)
Consolidated adjusted EBITDA																	28,439
Depreciation and amortization																	(24,464	)
Interest expense, net																	(18,701	)
Income tax benefit																	171
Gain on sale of property and other, net																	681
Share of income of equity method investments																	871
Foreign exchange																	13,013
Pre-opening expenses																	(4,994	)
Non-cash rent																	(2,776	)
Deferred registration fees, net																	461
Share of equity method investments adjusted EBITDA																	(1,868	)
Share-based compensation expense																	(5,846	)
Other expenses, net																	(1,003	)
Net income (loss)																$	(16,016	)

Soho House & Co Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of April 2, 2023 and January 1, 2023 and for the 13 Weeks Ended April 2, 2023 and April 3, 2022


	For 13 Weeks Ended April 3, 2022
(in thousands)	North America			UK			Europe & RoW			Reportable Segment Total			All Other			Total
Total consolidated segment revenue	$	82,493		$	65,676		$	15,524		$	163,693		$	28,315		$	192,008
Total segment operating expenses		(63,512	)		(52,225	)		(20,856	)		(136,593	)		(33,971	)		(170,564	)
Share of equity method investments adjusted EBITDA		585			183			571			1,339			—			1,339
Reportable segments adjusted EBITDA		19,566			13,634			(4,761	)		28,439			(5,656	)		22,783
Unallocated corporate overhead																	(10,869	)
Consolidated adjusted EBITDA																	11,914
Depreciation and amortization																	(22,831	)
Interest expense, net																	(15,717	)
Income tax benefit																	452
Gain on sale of property and other, net																	1,663
Share of income of equity method investments																	398
Foreign exchange																	(17,074	)
Pre-opening expenses																	(4,032	)
Non-cash rent																	(3,403	)
Deferred registration fees, net																	(2,389	)
Share of equity method investments adjusted EBITDA																	(1,339	)
Share-based compensation expense																	(7,803	)
Other expenses, net(1)																	(465	)
Net income (loss)																$	(60,626	)

(1) Includes membership credits expense, COVID-19 related charges and corporate financing and restructuring costs.


	For the 13 Weeks Ended
(in thousands)	April 2, 2023			April 3, 2022
Net income (loss)	$	(16,016	)	$	(60,626	)
Depreciation and amortization		24,464			22,831
Interest expense, net		18,701			15,717
Income tax benefit		(171	)		(452	)
EBITDA		26,978			(22,530	)
Gain on sale of property and other, net		(681	)		(1,663	)
Share of income of equity method investments		(871	)		(398	)
Foreign exchange (gain) loss, net		(13,013	)		17,074
Pre-opening expenses (1)		4,994			4,032
Non-cash rent		2,776			3,403
Deferred registration fees, net		(461	)		2,389
Share of equity method investments adjusted EBITDA		1,868			1,339
Share-based compensation expense		5,846			7,803
Other expenses, net (2)		1,003			465
Adjusted EBITDA	$	28,439		$	11,914

(1)

The entire balance of these costs is related to pre-opening activities for our Houses in each of the periods presented.

(2)

Represents other items included in operating expenses, which are outside the normal scope of the Company’s ordinary activities or non-cash, including expenses incurred in respect of membership credits of less than $1 million and $1 million for the 13 weeks ended April 2, 2023 and April 3, 2022, respectively.

Soho House & Co Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of April 2, 2023 and January 1, 2023 and for the 13 Weeks Ended April 2, 2023 and April 3, 2022

The following table presents long-lived asset information (which includes property and equipment, net, operating lease right-of-use assets and equity method investments) by geographic area as of April 2, 2023 and January 1, 2023. Asset information by segment is not reported internally or otherwise regularly reviewed by the CODM.


	As of
(in thousands)	April 2, 2023		January 1, 2023
Long-lived assets by geography
North America	$	902,492	$	901,505
United Kingdom		512,805		509,221
Europe		312,977		297,247
Asia		58,144		46,236
Total long-lived assets	$	1,786,418	$	1,754,209

19.

Related Party Transactions

The amounts owed by (to) equity method investees due within one year are as follows:


	As of
(in thousands)	April 2, 2023			January 1, 2023
Soho House Toronto Partnership	$	823		$	1,015
Raycliff Red LLP		(4,505	)		(4,169	)
Mirador Barcel S.L.		(575	)		(499	)
Little Beach House Barcelona S.L.		(309	)		(313	)
Mimea XXI S.L.		621			477
	$	(3,945	)	$	(3,489	)

Amounts owed by equity method investees due within one year are included in prepaid expenses and other current assets on the consolidated balance sheets. Amounts owed to equity method investees due within one year are included in other current liabilities on the consolidated balance sheets.

Through Soho Works 875 Washington, LLC, we are a party to a property lease agreement dated April 19, 2019 for 875 Washington Street, New York with 875 Washington Street Owner, LLC, an affiliate of Raycliff Capital, LLC controlled by a member of the SHCO board of directors. The hand over of five floors of the leased property occurred on a floor-by-floor basis resulting in multiple lease commencement dates in 2019 and 2020. The various lease contracts run for a term of 15 years until March 31, 2036, with further options to extend. The total operating lease right-of-use asset and liability associated with this property were $44 million and $56 million, respectively, as of April 2, 2023 and $44 million and $56 million, respectively, as of January 1, 2023. The rent expense associated with this lease was $2 million and $2 million during the 13 weeks ended April 2, 2023 and April 3, 2022, respectively.

The Company is party to a property lease arrangement with The Yucaipa Companies LLC for 9100-9110 West Sunset Boulevard, Los Angeles, California. This lease runs for a term of 25 years until March 31, 2040. The operating right-of-use asset and liability associated with this lease are $17 million and $21 million as of April 2, 2023, respectively, and $17 million and $21 million as of January 1, 2023, respectively. Rent expense associated with this lease totaled $1 million and $1 million for the 13 weeks ended April 2, 2023 and April 3, 2022, respectively.

Through Soho-Ludlow Tenant LLC, the Company is a party to a property lease agreement dated May 3, 2019 for 137 Ludlow Street, New York with 137 Ludlow Gardens, LLC, an affiliate of The Yucaipa Companies LLC. This lease runs for a term of 27 years until May 31, 2046, with options to extend for two additional five-year terms. The operating lease right-of-use asset and liability associated with this lease were $8 million, $15 million, respectively, as of April 2, 2023 and $9 million and $15 million, respectively, as of January 1, 2023. The rent expense associated with this lease was less than $1 million and less than $1 million for the 13 weeks ended April 2, 2023 and April 3, 2022, respectively.

The Company leases the Little House West Hollywood, 8465 Hollywood Drive, West Hollywood, California, from GHWHI, LLC, an affiliate of The Yucaipa Companies LLC. This lease commenced on October 16, 2021. This lease runs for a term of 25 years (15-year base lease term, including two 5-year renewal options). The operating lease right-of-use asset and liability associated with this lease were $65 million and $69 million, respectively, as of April 2, 2023 and $65 million and $69 million, respectively, as of January 1, 2023. The rent expense associated with this lease totaled $1 million and $1 million for the 13 weeks ended April 2, 2023 and April 3, 2022, respectively.

The Company leases the Tel Aviv House, 27 Yefet Street, Tel Aviv, Israel, from an affiliate of Raycliff Capital, LLC which held a portion of the SHHL redeemable C ordinary shares prior to the IPO and continues to hold Class A common stock of SHCO. This lease commenced on June 1, 2021. This lease runs for a term of 19 years until December 15, 2039. The operating lease right-of-use asset and liability associated with this lease were $22 million and $22 million, respectively, as of April 2, 2023 and $21 million and $22 million, respectively, as of January 1, 2023. The rent expense associated with this lease was $1 million and $1 million for the 13 weeks ended April 2, 2023 and April 3, 2022, respectively.

The Company leases a property from GHPSI, LLC, an affiliate of The Yucaipa Companies LLC, in order to operate the Le Vallauris restaurant, 385 West Tahquitz Canyon Way, Palm Springs, California. This lease runs for a term of 15 years until March 16, 2037, with options to extend for two additional five-year terms. The operating lease right-of-use asset and liability associated with this lease were $7 million and $7 million, respectively, as

Soho House & Co Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of April 2, 2023 and January 1, 2023 and for the 13 Weeks Ended April 2, 2023 and April 3, 2022

of April 2, 2023, and $7 million and $7 million, respectively as of January 1,2023. The rent expense associated with this lease was less than $1 million and less than $1 million for the 13 weeks ended April 2, 2023 and April 3, 2022, respectively.

The Company leases a property from GHPSI, LLC in order to operate the Willows Historic Palm Springs Inn, 412 West Tahquitz Canyon Way, Palm Springs, California. GHPSI’s ultimate parent entity is GHREP, LLC, an affiliate of The Yucaipa Companies LLC. This lease commenced on September 15, 2022. This lease runs for a term of 15 years until September 14, 2037, with options to extend for two additional five-year terms. The operating lease right-of-use asset and liability associated with this lease were $14 million and $14 million, respectively, as of April 2, 2023 and $14 million and $14 million, respectively, as of January 1, 2023. The rent expense associated with this lease was less than $1 million for the 13 weeks ended April 2, 2023.

The Company leases the Soho House Stockholm property located at Majorsgatan 5, Stockholm, Sweden from Majorsbolaget AB, an affiliate of The Yucaipa Companies LLC. This lease commenced on December 8, 2022. This lease runs for a term of 15 years. The operating lease right-of-use asset and liability associated with this lease were $28 million and $28 million, respectively, as of April 2, 2023 and $28 million and $28 million, respectively, as of January 1, 2023. The rent expense associated with this lease was $1 million for the 13 weeks ended April 2, 2023.

Ned-Soho House, LLP received management fees, development fees and cost reimbursements from The Ned totaling less than $1 million and less than $1 million for the 13 weeks ended April 2, 2023 and April 3, 2022, respectively.

The Company received management fees from an affiliate of The Yucaipa Companies LLC related to the operations of The Ned New York, which opened in June 2022, totaling less than $1 million for the 13 weeks ended April 2, 2023. The Company received management fees from affiliates of the Company related to the operations of The Ned Doha, which opened in November 2022, totaling less than $1 million for the 13 weeks ended April 2, 2023.

The Company received management fees under our hotel management contract for the operation of the LINE and Saguaro hotels from an affiliate of The Yucaipa Companies LLC. These fees amounted to $2 million and $2 million for the 13 weeks ended April 2, 2023 and April 3, 2022, respectively.

Fees from the provision of Soho House Design services were received from affiliates of the Company totaled less than $1 million and less than $1 million for the 13 weeks ended April 2, 2023 and April 3, 2022, respectively. Costs incurred on behalf of affiliates of the Company in connection to the provision of Soho House Design services totaled less than $1 million and less than $1 million for the 13 weeks ended April 2, 2023 and April 3, 2022.

As of April 2, 2023, the Company is owed $11 million, classified as other receivables within the prepaid expenses and other current assets financial statement line item, from the affiliates of The Yucaipa Companies LLC in respect of certain reimbursable payments for Houses that are under development.

20.

Subsequent Events

Shares Issued

During April 2023, the Company issued a total of 94,927 shares of Class A common stock as a result of RSU awards scheduled vesting and SARs being exercised.

Miami Property Mortgage Loan

In May 2023, the Company refinanced an existing term loan and mezzanine loan associated with a March 2014 corporate acquisition of Soho Beach House Miami (the "Property") with a new $140 million loan agreement with JP Morgan Chase Bank, National Association and Citi Real Estate Funding Inc. The loan is secured with a recorded and insured first priority mortgage on the Property and first priority security interests in all collateral related to the Property. The loan matures in June 2033 and bears interest at 6.99%. The Company is subject to all customary loan agreement covenants, in addition to covenants relating to continuous operation of the Property at the same standard as it is operated at the time of closing and maintenance of the trademarks related to the Property. There is a covenant restricting transfer of the Company and Property except as otherwise permitted under the Agreement. The Company has classified the $116 million property mortgage loan as non-current as of April 2, 2023 because the Company had the intent and ability, as demonstrated via subsequently entering into the loan agreement described above, to refinance the property mortgage loan originally due for repayment in February 2024, which, prior to refinance described above, was less than 12 months from the balance sheet date. The excess proceeds of c.$20 million will be used for general corporate purposes.


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Management’s discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and notes thereto and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended January 1, 2023.

In addition to historical financial information, this discussion and other parts of this report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, based upon current expectations that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the “Risk Factors” section in this Quarterly Report on Form 10-Q, and under Part II, Item 1A below. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results and events to differ from those anticipated. These statements are based upon information currently available to us, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements, like all statements in this report, speak only as of their date, and we undertake no obligation to update or revise these statements in light of future developments. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.

Overview

Our Membership Platform

Soho House & Co is a global membership platform of physical and digital spaces that connects a vibrant, diverse group of members from across the world. These members use the Soho House & Co platform to both work and socialize, to connect, create, have fun and drive a positive change. On March 17, 2023, we changed our corporate name from Membership Collective Group Inc. to Soho House & Co Inc., which became effective on March 20, 2023. Prior to the change of our corporate name, our stock traded on the New York Stock Exchange under the ticker symbol “MCG”. From March 20, 2023, our common stock began trading on the New York Stock Exchange under the ticker symbol “SHCO”.

We began with the opening of the first Soho House in 1995 and remain the only company to have scaled a private membership platform with a global presence. Over the last 28 years, we have significantly expanded our membership expertise and diversified our offerings—both physically and digitally. As of April 2, 2023, we have approximately 238,000 members (including approximately 168,700 Soho House members) who engage with us through our global portfolio of 41 Soho Houses, 9 Soho Works, Scorpios Beach Club in Mykonos, Soho Home, our interiors and lifestyle retail brand, and our digital channels. The Ned hotels in London, New York and Doha and the LINE and Saguaro hotels in North America also form part of Soho House & Co's wider portfolio.

Our central pillar is Soho House, which drives the majority of our membership and revenue today. A Soho House membership offers access to a network of distinctive and carefully curated Houses, across North America, the United Kingdom, Europe and Asia, which serve as the cornerstone of our member experience. We enhance our member experience through our digital channels, including the Soho House App and our website. Our vision for the Soho House App has always been for it to be like having a House in your pocket. It’s our central destination for members to make bookings, invite guests, make payments, and connect with each other. Annually, we host thousands of member events worldwide, spanning film, fashion, art, food and drink, well-being, work and music—and help our members forge connections to bring them closer together.

Our membership expertise, honed through the growth of Soho House, has led to our evolution into the Soho House & Co, a home to numerous memberships including Cities Without Houses, Soho Works, Soho Friends and Ned’s Club. By designing, curating and growing our membership offering, our membership platform can respond to shifting lifestyle trends and the evolution of our members’ needs. Our memberships work together, allowing us to reach new audiences with a set of interconnected offerings.

Everything we do across these memberships begins and ends with our members. The foundation of our member experience has been crafted over our 28-year history and is built on the following pillars:

•

Membership: We are in the business of forging connections and bringing people together. Our diverse global membership is the soul of our company. It is the people that define our culture and shape the experience – in turn attracting new members.

•

Physical and digital spaces: We create and operate interconnected spaces. Each of our physical locations is designed to reflect our members and the local community that they serve. Our digital platforms extend our connection with members beyond our physical spaces, in turn significantly enhancing the member experience.

•

Design: Our design DNA is instantly recognizable across all of our membership models, whether in our Houses, Soho Works, The Ned, Scorpios Beach Club or Soho Home. While each House and property is unique, they each have a consistency in their architectural and interior style that has come to define the Soho House experience. In each new House or site that we develop for our other brands, this style is interpreted for local tastes and preferences, reflecting the culture of the respective city.

•

Services, products and experiences: Our member-obsessed culture drives us to relentlessly improve the quality of the services, products and experiences we offer to our members. We do not cut corners or compromise on quality, taking the long-term view that there is no substitute for the highest quality services, products and experiences when it comes to fostering loyalty from our members.

•

Innovation: We have always strived to adapt and evolve by anticipating our members’ needs and wants. Innovation has always been part of our culture and approach, and we have used that mindset to create new memberships to serve a wider audience of people who desire personal connection via new channels.

•

House Foundations: We are committed to integrating the pillars of our social responsibility and sustainability program, House Foundations, into everything we do.

Our membership has remained resilient through multiple economic cycles and the COVID-19 pandemic. When our physical sites were forced to close as a result of the COVID-19 pandemic, there was minimal impact on the retention of Soho House members. The power of our model is driven by the important role we believe that we play in our members’ lives and the value we consistently provide them for their membership fees. We believe our retention compares very favorably to leading consumer subscriptions or memberships—across music, media, fitness, entertainment and commerce—despite, in many cases, their significantly lower price points.

The demand for our membership is also demonstrated by our large and growing global wait list, which as of April 2, 2023 stands at over 89,000. Awareness of our distinct membership offerings and their scarcity is spread by our members organically through word of mouth, social media and press coverage.

There are multiple consumer forces at play that have increased the relevance of our memberships. We have observed a secular shift in the ways that people live and work—with less time spent in traditional corporate offices and more time in social spaces that encourage creativity and mutual engagement. We believe that these trends will only accelerate, and that the freedom to be able to choose where to live and work—particularly in light of the COVID-19 pandemic—will likely have a significant impact on our target market. We believe this will create an even greater demand for curated communities that can grow and thrive in a more deliberate environment.

Membership Revenues are comprised of annual membership fees and one-time initial registration fees paid by members. In-House Revenues include all revenues realized within our Houses, including food and beverage, accommodation, and spa products and treatments. Other Revenues include all revenues not realized within our Houses, including Scorpios, Soho Works and stand-alone restaurants, design and procurement fees from SHD and Soho Home among others. We view Membership Revenues and In-House Revenues as interrelated, insofar as although there is no minimum spend for any member on our In-House offerings that generate In-House Revenues. In practice the significant majority of In-House Revenues are generated by our members, and the pricing of our In-House offerings reflects that accordingly, with pricing of such In-House offerings being identical for both members and non-members.

Our Membership Platform

All of our memberships have been built to enrich the lives of their members, as well as expand our membership offering to a broader audience.

Soho House

Soho House remains at the core of our membership platform by creating a foundation upon which additional membership businesses can be built and scaled. While our physical Houses provide our foundation, the people inside them are the soul of Soho House. As a membership founded for the creative industries, we are proud to have championed members who have gone on to shape our cultural landscape as world class writers, artists, performers, directors, founders, designers, and producers – all reflecting the spirit and energy of Soho House.

The membership of each House is assembled by a select committee of influential creatives and innovators that represent the local area in which the membership is founded. Our members actively engage in creating the culture of each House, helping to shape and localize it by participating in member events and contributing to editorial and digital content. We believe this adds to the value of each House, enriching the membership and enhancing the attractiveness of membership to prospective members worldwide. With a new US Every House annual membership fee of approximately $4,500, providing access to all of our Houses globally, we believe our membership offering provides compelling value to our members that increases as we add new Houses and more members to our global community. Our Houses attract members from every demographic, with members from “Generation Z” (26 years old and younger) and “Millennials” (27- to 42-year-olds) constituting the fastest-growing cohorts. We also believe that the pricing of our In-House offerings represents great value to our members because of the level of quality provided, reinforcing the overall membership experience, rewarding their brand loyalty and creating opportunities for future and recurring revenue

We created the following types of membership under Soho House to reach a broader audience and enhance the experience of our existing members:

•

Cities Without Houses

In 2017, we introduced a new type of Soho House membership known as Cities Without Houses (“CWH”), which opens up the Soho House membership to people who live in cities where we do not yet have a physical House. This membership allows us to welcome members to our global community in new geographies, generates additional revenues on our existing base of Houses and provides intelligence for future growth, which we have employed to open new Houses in certain locations, including Copenhagen, Denmark (July 2022), Stockholm, Sweden (December 2022) and Bangkok, Thailand (February 2023). As of April 2, 2023, we have over 7,400 CWH members across 76 cities.

•

Soho Friends

There are a significant number of people who enjoy the Soho House way of living and who have already visited our Houses as guests, stayed in our bedrooms, or visited our public restaurants and spas, but do not currently have a Soho House membership. To respond to this audience, we launched Soho Friends in November 2020 for an annual subscription cost of approximately $130. We offer access to physical spaces, including Soho House bedrooms, and screenings, with additional benefits from our restaurants, spas and online retail brands, although Soho Friends do not have full access to our Houses. As of April 2, 2023, we had over 62,900 Soho Friends members. We

intend to grow this membership brand in a measured way so that our Soho House members continue to account for the majority of visitors to our Houses and restaurants.

Soho Home

Soho Home was created as a result of the consistent requests from our members to recreate the look and feel of the Houses in their own homes. Soho Home is an interiors and lifestyle retail brand that offers handcrafted furniture, lighting, textiles, tableware and accessories mostly through ecommerce. Over the past few years, we have transformed Soho Home into a high growth retail business. At the beginning of August 2022, we merged our SOHO HOME+ membership into Soho Friends.

Soho Works

First launched in 2015, Soho Works provides its members with the space and resources to work alongside other like-minded individuals and businesses—facilitating connections and providing the tools to flourish. Aimed primarily at existing Soho House and Soho Friends members, Soho Works draws on the same design principles and membership ethos as Soho House, but is a space purposed entirely for work and creative collaboration.

Beginning with one location in London, we have since opened eight additional sites in London, New York and Los Angeles over the last two years and as of April 2, 2023, we had 6,364 members. Soho Works membership rates vary by location and Soho House membership status. For Soho House members, a US Soho Works membership fee ranges from $400 to $750 per month, depending on membership type.

Scorpios Beach Club

Set in a cove on the southern tip of Mykonos, Scorpios offers a one of a kind beach experience with a well-established globally recognized brand. With a restaurant, terraces and daybeds, and a distinctive wellness offering, Scorpios enriches the lives of its guests who are looking to escape from their daily lives. We believe the Scorpios concept has significant potential to expand into additional locations as a key part of our platform and we expect to open our second site in Tulum, Mexico in 2024.

The Ned

The Ned brand seeks to embody a “city within a city” full-service destination, by playing host to multiple restaurants, bedrooms, a range of grooming services, spa, gym and a full-service members’ club. The membership offered by The Ned (“Ned’s Club”) including Ned’s Friends is aimed at a broader group of professional people. As of April 2, 2023, Ned’s Club London has approximately 3,100 members. In June 2022, The Ned NoMad in New York opened which covers 117,000 sq ft and includes a Ned’s Club, Cecconi's restaurant, as well as 167 bedrooms. As of April 2, 2023, The Ned NoMad has approximately 1,500 members. The Ned in Doha opened in November 2022, which as of April 2, 2023 had over 400 members. The Ned offers its members The Ned’s Club app, which allows members to make bookings, publish benefits, events and club related information. We receive management fees under hotel management contracts for each of the operations of The Ned sites.

The LINE

On June 22, 2021, we acquired the operating agreements relating to the ‘The LINE’ and ‘Saguaro’ hotels. The hotels that are currently operational are located in Los Angeles, Washington, Austin, Palm Springs, and San Francisco (opened September 2022), and among them offer a variety of food and beverage offerings together with approximately 1,500 hotel rooms. We receive management fees under hotel management contract for the operation of these hotels. The transaction has broadened our geographic reach in North America.

Factors Affecting Our Business

We believe the coveted lifestyle brand we have created has significant and proven growth potential. This potential, combined with the stability of our membership base, we believe will enable us to maintain our position as an industry leader in the future. We expect to grow our member base by growing the number of Soho Houses, continuing to scale our existing membership brands and launching and growing new membership brands. We believe our track record in expanding and growing our platform will position us to achieve significant and sustained growth.

A significant portion of our revenues is derived from House Revenues which consist of Membership Revenues and In-House Revenues. Our Membership Revenues, which are reflective of our steady and growing global brand, help to provide us with a recurring revenue base that limits the impact of fluctuations in regional economic conditions.

Our business and future performance is also affected by a variety of factors, including:

•

The ability to grow our member base: Long-term member growth is a direct driver of Membership Revenue growth and an important factor in In-House Revenue growth. The impact of long-term member growth on Membership Revenues can be particularly impactful to our earnings given the lower direct expenses associated with incremental Membership Revenues relative to our other revenue streams.

•

Our ability to grow In-House Revenues. In addition to their annual membership fee, our members pay for goods and services that they consume, which we refer to as In-House Revenues. We continue to actively develop the offerings in our Soho Houses and our other membership brands to improve overall experience and capture greater spend on food and beverage, accommodation, spa services, private events and our other goods and services. We believe that the pricing of our In-House offerings, which is reflective of the membership fees we receive from members who consume most of our In-House offerings, represents great value to our members for the level of quality provided, reinforcing the overall membership experience, rewarding brand loyalty and creating the opportunity for future revenue enhancement. Our proven ability to drive long-term member growth at existing Houses is also an important contributing factor in sustaining In-House Revenue growth.

•

Our ability to adjust membership pricing. As we expand our number of Soho Houses globally and continue to invest in maintaining the quality of our existing Soho Houses, we are able to grow Membership Revenues by periodically reviewing our membership fee rates, as well as migrating members from Local House to Every House membership, which also has the effect of increasing Membership Revenues and offering new membership brands to join. Contrary to traditional hospitality companies which may experience brand dilution as they expand, the value of our membership and brand strengthens as we expand into new cities and properties and new membership brands. As we expand globally, the value of an Every House membership becomes more compelling to both new and existing members, enhancing our revenue potential. Historically, our membership price increases have not had a material impact on our retention rates and we believe this provides a strong indication of demand and price inelasticity for our memberships.

•

Our ability to grow our membership brands and products. We believe the strength of our brand and our culture of creativity and innovation will allow us to continue to capitalize on opportunities in complementary concepts and product lines and that our adjacent lines of business can achieve substantial stand-alone scale. Our expansion into new products and businesses can contribute meaningfully to our revenue in the future as we tap into our existing and growing membership base.

Reportable Segments

Our operations consist of three reportable segments (United Kingdom, North America, Europe and Rest of the World (“ROW”)) and one non-reportable segment that we present as “All Other”. Each of our segments includes all operations in that region including our Houses and all associated facilities, spas and stand-alone restaurants. Refer to Note 18 - Segments in this Quarterly Report on Form 10-Q for more information on reportable segments.

Key Performance and Operating Metrics Evaluated by Management

In assessing the performance of our business, we consider a variety of operating and financial measures. These key measures include:

NUMBER OF SOHO HOUSES. The number of Soho Houses reflects the total number of Soho Houses in operation in any period, irrespective of whether each House is (i) controlled by us, (ii) operated through a noncontrolling interest in a joint venture or (iii) through a management contract.

We review the number of members from all Houses to assess new member growth, total House Revenues, and House-Level Contribution.

NUMBER OF SOHO HOUSE MEMBERS. Our Soho House membership model is an integral part of our business and has a significant impact on our profitability and financial performance. Typically, members hold an Every House membership or a Local House membership. Member count is the primary driver of Membership Revenues and is also a critical factor in In-House Revenues as members utilize the offerings that are provided within the Houses. Soho House members include all active, frozen and non-paying members.

The extent to which we achieve growth in our membership base, retain existing members and periodically increase our membership fee rates will impact our profitability. We have historically enjoyed strong member loyalty, reflected by very high retention rates. Robust demand for our memberships is also evidenced by considerable wait lists for our Houses.

The year-over-year increase in our total number of Soho House Members is driven by a combination of increases in membership at existing Houses and members from new Houses.

NUMBER OF OTHER MEMBERS. Other members include members of Soho Works and Soho Friends are key to our growth strategy and enhancing our Soho House member experience. Like Adult Paying members, other memberships are an integral part of our business and we believe will have a significant impact on our profitability and financial performance in the future.

FROZEN MEMBERS. Frozen Members refers to Adult Paying Members who have elected to suspend their membership payments on a six, nine- or twelve-month basis during which period the member is not able to gain access to a Soho House site as a member, access our membership Apps, or book bedrooms or Cowshed treatments or products on discounted member rates. Frozen Members are not included in Adult Paying Members, but are included in the total number of Soho House members.

MEMBERSHIP REVENUES. Membership Revenues are comprised of House Membership Revenues (as defined below) and Non-House Membership Revenues (as defined below). House Membership Revenues and Non-House Membership Revenues are each comprised primarily of annual membership fees and one-time registration fees which are amortized over 20 years. The one-time registration fee is no longer applicable to new members admitted from April 4, 2022; see "House Introduction Credits" below. Membership Revenues are a function of the number of members, membership mix, and membership pricing. For GAAP, we report Membership Revenues only from Houses and sites in which we own a controlling interest. Our membership pricing varies by geographic segment and membership offering and, as such, our mix of House and Soho Works club openings can affect our revenue growth and profitability over time. Prices are generally higher in North America and the ROW compared with the UK and Europe. Membership Revenues provide a stable and recurring source of revenues which have few direct costs and, as such, is a reliable and predictable source of cash flow.

HOUSE INTRODUCTION CREDITS. New members admitted from April 4, 2022 have been required to purchase House Introduction Credits as part of their membership, per the House rules. House Introduction Credits are credits of an equivalent value to cash within Houses and are redeemable to purchase food and beverage items, and bedroom stays, at the Houses. House Introduction Credits expire after the first three months from the date of issuance, where legally permitted in the regions we operate, if not utilized or if the Company terminates a member’s House membership. House Introduction Credits are recognized upon issuance as deferred revenue on our consolidated balance sheets. Revenue from House Introduction Credits are recognized as In-House revenues when redeemed by members, and as breakage revenue within Membership revenues upon expiration or in the period that we are able to reliably estimate expected breakage to the extent that they are unredeemed, are recognized. House Introduction Credits expire three months from the date of issue.

HOUSE MEMBERSHIP REVENUES. House Membership Revenues are comprised primarily of annual membership fees and one-time legacy registration fees from Adult Paying Members which are amortized over 20 years. The one-time registration fee is no longer applicable to new members admitted from April 4, 2022; see "House Introduction Credits" above.

IN-HOUSE REVENUES. In-House Revenues refer to all revenues realized within our Houses, and primarily includes revenues from food and beverage, accommodation, and spa products and treatments.

HOUSE REVENUES. House Revenues is defined as House Membership Revenues plus In-House Revenues, less Non-House Membership Revenues. Our management views House Membership Revenues and In-House Revenues as interrelated and their aggregation as important in tracking House performance. Although there is no minimum spend for any member on In-House offerings, in practice most members consume food and beverage, accommodations and other offerings at our Houses. The pricing of our In-House offerings is reflective of the fact that the significant majority of In-House offerings that generate In-House revenues are consumed by members who also pay a membership fee in relation to that House, with pricing of such In-House offerings being identical for both members and non-members.

OTHER REVENUES. Other revenues are defined as total revenues that are not realized within our Houses, including revenues from Scorpios, Soho Works and our stand-alone restaurants, procurement fees from SHD, Soho Home and Cowshed retail products and other revenues from products and services that we provide outside of our Houses, as well as management fees from hotel management contracts for The Ned Sites and the LINE and Saguaro hotels.

NON-HOUSE MEMBERSHIP REVENUES. Non-House Membership Revenues are comprised of Soho Works membership revenues, Soho Friends membership revenue and SOHO HOME+ membership revenues, which was merged into Soho Friends membership at the beginning of August 2022.

ACTIVE APP USERS. Active App Users is defined as unique users who have logged into any of our membership Apps within the last three months.

AVERAGE DAILY RATE ("ADR"). Average Daily Rate represents the average rental income per paid occupied room. We believe this is a meaningful indicator of our performance.

REVENUE PER AVAILABLE ROOM ("RevPAR"). The key industry standard for measuring hotel-operating performance is RevPAR, which is calculated by multiplying the percentage of occupied rooms to available rooms by the ADR realized. We believe RevPAR is a meaningful indicator of our performance because it measures the period-over-period change in room revenues for comparable properties. RevPAR may not be comparable to similarly titled measures, such as revenues, and should not be viewed as necessarily correlating with our revenue. We also believe occupancy and ADR, which are components of calculating RevPAR, are meaningful indicators of our performance. Where this is presented on a like-for like basis, RevPAR is adjusted for new or divested sites, for example Houses that were not open in the comparison period.

Non-GAAP Financial Measures

We refer to Adjusted EBITDA, House-Level Contribution, House-Level Contribution Margin, Other Contribution and Other Contribution Margin throughout this Quarterly Report on Form 10-Q, as we use these measures to evaluate our operating performance and each of these measures is defined in “Non-GAAP Financial Measures.” We believe these measures are useful to investors in evaluating our operating performance. Adjusted EBITDA, House-Level Contribution, House-Level Contribution Margin, Other Contribution and Other Contribution Margin are all supplemental measures of our performance that are neither required by, nor presented in accordance with, GAAP. Adjusted EBITDA, House-Level Contribution, House-Level Contribution Margin, Other Contribution and Other Contribution Margin should not be considered as substitutes for GAAP metrics such as Operating Loss and Net Loss or any other performance measure derived in accordance with GAAP. Some of our financial and operational data that we disclose in this Quarterly Report on Form 10-Q are presented on a ‘constant currency’ basis to isolate the effect of currency changes during the period. Where we refer to a measure being calculated in ‘constant currency’, we are calculating the USD change and the percent change as if the exchange rate that is being used in the current period was in effect for the prior period presented. We believe that this calculation provides a more meaningful indication of actual year-over-year performance and eliminates the fluctuations from currency exchange rates.

KEY PERFORMANCE AND OPERATING METRICS


	As of
	April 2, 2023		April 3, 2022
Number of Soho Houses		41		35
North America		14		12
United Kingdom		13		12
Europe/RoW		14		11
Number of Soho House Members		168,685		130,919
North America		61,885		48,953
United Kingdom		63,285		51,280
Europe/RoW		36,031		25,478
All Other		7,484		5,208
Number of Other Members		69,276		41,008
North America		18,894		10,686
United Kingdom		41,756		25,991
Europe/RoW		8,626		4,331
Number of Active App Users		175,323		123,733


		For the 13 Weeks Ended						For the 13 Weeks Ended
		April 2, 2023			April 3, 2022			April 2, 2023			April 3, 2022
		Actuals						Constant Currency(1)
	(Unaudited, dollar amounts in thousands, except percentages)
Operating income (loss)		$	962		$	(47,422	)	$	962		$	(43,568	)
Operating margin			0	%		(25	)%		0	%		(25	)%
House-Level Contribution			46,718			29,746			46,718			27,329
House-Level Contribution Margin			24	%		21	%		24	%		21	%
Other Contribution			8,138			4,634			8,138			4,257
Other Contribution Margin			13	%		9	%		13	%		9	%
Adjusted EBITDA			20,127			2,330			20,127			2,141
Percentage of total revenues			8	%		—			8	%		—

(1)

See “Non-GAAP Financial Measures” for an explanation of our constant currency results.

Results of Operations

Comparison of the 13 weeks ended April 2, 2023 and April 3, 2022

The following table summarizes our results of operations for the 13 weeks ended April 2, 2023 and April 3, 2022 (in thousands, except percentages):


	For the 13 Weeks Ended
	April 2, 2023			April 3, 2022						April 3, 2022 Constant
	Actuals									Currency(1)
	(Dollar amounts in thousands)						Change %			(Dollar amounts in thousands)			Constant Currency Change %(1)
	(Unaudited)
Revenues
Membership revenues	$	83,248		$	58,773			42	%	$	53,997			54	%
In-House revenues		116,078			87,755			32	%		80,623			44	%
Other revenues		55,883			45,480			23	%		41,784			34	%
Total revenues		255,209			192,008			33	%		176,404			45	%
Operating expenses
In-House operating expenses (exclusive of depreciation and amortization)		(143,972	)		(109,995	)		(31	)%		(101,056	)		(42	)%
Other operating expenses (exclusive of depreciation and amortization)		(56,381	)		(47,633	)		(18	)%		(43,762	)		(29	)%
General and administrative expenses		(30,574	)		(29,286	)		(4	)%		(26,906	)		(14	)%
Pre-opening expenses		(4,994	)		(4,032	)		(24	)%		(3,704	)		(35	)%
Depreciation and amortization		(24,464	)		(22,831	)		(7	)%		(20,976	)		(17	)%
Share-based compensation		(5,846	)		(7,803	)		25	%		(7,169	)		18	%
Foreign exchange gain (loss), net		13,013			(17,074	)	n/m				(15,686	)	n/m
Other		(1,029	)		(776	)		(33	)%		(713	)		(44	)%
Total operating expenses		(254,247	)		(239,430	)		(6	)%		(219,972	)		(16	)%
Operating income (loss)		962			(47,422	)	n/m				(43,568	)	n/m
Other (expense) income
Interest expense, net		(18,701	)		(15,717	)		(19	)%		(14,440	)		(30	)%
Gain on sale of property and other, net		681			1,663			(59	)%		1,528			(55	)%
Share of income of equity method investments		871			398		n/m				366		n/m
Total other expense, net		(17,149	)		(13,656	)		(26	)%		(12,546	)		(37	)%
Income (loss) before income taxes		(16,187	)		(61,078	)		73	%		(56,114	)		71	%
Income tax benefit		171			452			(62	)%		415			(59	)%
Net income (loss)		(16,016	)		(60,626	)		74	%		(55,699	)		71	%
Net income (loss) attributable to noncontrolling interest		64			147			(56	)%		135			(53	)%
Net income (loss) attributable to Soho House & Co Inc.	$	(15,952	)	$	(60,479	)		74	%	$	(55,564	)		71	%

(1)

See “Non-GAAP Financial Measures” for an explanation of our constant currency results.

Components of Operating Results

Revenues

Total Revenue


	For the 13 Weeks Ended				Percent Change
	April 2, 2023		April 3, 2022		Actuals			Constant Currency(1)
	(Dollar amounts in thousands)
	Unaudited
Total revenues	$	255,209	$	192,008		33	%		45	%
North America		108,092		82,493		31	%		31	%
United Kingdom		78,730		65,676		20	%		30	%
Europe/RoW		33,228		15,524	n/m			n/m
All Other		35,159		28,315		24	%		35	%

(1)

See “Non-GAAP Financial Measures” for an explanation of our constant currency results.

Membership Revenues


	For the 13 Weeks Ended				Percent Change
	April 2, 2023		April 3, 2022		Actuals			Constant Currency(1)
	(Dollar amounts in thousands)
	Unaudited
Membership revenues	$	83,248	$	58,773		42	%		54	%
North America		39,994		28,016		43	%		43	%
United Kingdom		23,697		17,171		38	%		50	%
Europe/RoW		8,813		5,728		54	%		67	%
All Other		10,744		7,858		37	%		49	%

(1)

See “Non-GAAP Financial Measures” for an explanation of our constant currency results.

Membership revenues increased by 42% to $83,248 for the 13 weeks ended April 2, 2023. This increase was predominantly driven by an additional 32,300 Adult Paying members at the end of the first quarter of fiscal 2023 versus the comparative period, an increase of 31%. Additionally, the Soho House Every House membership fee was increased at the start of fiscal 2022 which impacted existing Every House members on their renewal date throughout fiscal 2022. This increased Membership Revenue as compared to the first quarter in fiscal 2022 driven by membership renewals which took place following this period as these and are now at a higher price point in the first quarter of fiscal 2023 versus the comparative period..

All Soho House Adult paying fees were increased in January 2023 also, with in general a mid single-digit price rise for existing members and a low double-digit increase in price for new members. This increase will impact new members on the date they join and existing members on their renewal date, and did not have had a significant material impact at the end of first quarter fiscal 2023.

There was also an increase in Non-House Membership revenues of $1,849, following the increase in the number of Soho Friends and Soho Works, with 28,000 additional members in comparison to the end of the first quarter of fiscal 2022.

North America segment saw an increase in revenues of $11,978 or 43% due to an additional 11,451, or 28% increase in Adult Paying Soho House members year-over-year, with the opening of Holloway House, Los Angeles (May 2022) and Little Pool House, Miami (December 2022), respectively, as well as growth across all existing Houses. The impact of the 2022 Every House membership fee increase as noted above also contributed to the increase in Membership revenues year-over-year.

Our United Kingdom segment Non-House Membership revenues saw an increase in Membership revenues of $6,526 or 38% due to an additional 11,253, or 25% Adult Paying Soho House members, driven by growth in existing Houses and the opening of Soho House Balham in third quarter fiscal 2022, coupled with the impact of the 2022 Every House membership fee increase as noted above. In constant currency, Membership revenues in the United Kingdom segment increased by $7,921, or 50%.

The Europe/RoW segment saw an increase in Membership revenues of $3,085 or 54% due to a 55% increase in Adult paying members, predominantly from the opening of two new Houses in the second half of fiscal 2022; Copenhagen (July 2022) and Stockholm (December 2022), and the opening of Soho House Bangkok in February 2023, as well as the revenue impact of the 2022 Every House membership fee increase as noted above. In constant currency, Membership revenues in the Europe/ROW segment increased by $3,551, or 67%.

All Other saw an increase in Membership revenues predominantly driven by almost 2,000 or 42% more CWH Adult Paying members as well as over 28,000 additional Non-House members in comparison to the first quarter of fiscal 2022. In constant currency, All Other Membership revenues increased $3,525, or 49%.

In constant currency, Membership revenues increased by $29,252, or 54%.

In-House Revenues


	For the 13 Weeks Ended				Percent Change
	April 2, 2023		April 3, 2022		Actuals			Constant Currency(1)
	(Dollar amounts in thousands)
	(Unaudited)
In-House revenues	$	116,078	$	87,755		32	%		44	%
North America		51,361		40,569		27	%		27	%
United Kingdom		41,420		38,038		9	%		19	%
Europe/RoW		23,297		9,148	n/m			n/m

(1)

See “Non-GAAP Financial Measures” for an explanation of our constant currency results.

In-House revenues were $116,078 for the 13 weeks ended April 2, 2023, an increase of $28,323 versus the comparative period in 2022. The increase was driven by higher sales volumes year-over-year, given lower footfall in the comparative period the impact of the Omicron variant of COVID-19 at the start of fiscal 2022, particularly in Amsterdam, Berlin and Hong Kong where government related restrictions were still in place at the time. In addition to this, In-House revenues have been further boosted by the six new Houses opened since first quarter fiscal 2022, as well as select price increases across our In-House offerings since first quarter 2022.

Our North America segment saw an increase in In-House revenues versus the comparative quarter as sales were still partially impacted by Omicron uncertainty at the start of fiscal 2022, particularly at our New York sites. We have seen higher sales volume in first quarter fiscal 2022 coupled with select price increases resulting in an increase in In-House revenues year-on-year. Additionally, the opening of Holloway House (May 2022) has further boosted In-House revenues and Little Beach House Malibu was shut for almost seven weeks in the comparative quarter following a fire at the site.

In-House revenues in our United Kingdom segment increased by $3,382 versus first quarter 2022 driven by the opening of Little House Balham, London (July 2022), increase sales volumes from higher footfall due to the effects of the Omicron variant in the comparative quarter and selective price increases. In constant currency, In-House Revenues in the United Kingdom segment increased by $6,473, or 19%

The Europe/ROW segment saw significant increase of In-House revenues year-over-year following the removal of COVID-19 related restrictions across Europe and Hong Kong which were still prevalent in the first quarter of fiscal 2022, as well as revenues from new openings, including Soho House Copenhagen (July 2022), Soho House Stockholm (December 2022) and Soho House Bangkok (February 2023). In addition to this, during the first quarter of fiscal 2023 we recognized approximately $1,800 from the Dutch government related to COVID-19 subsidies which we only became eligible for in the current quarter following completion of the application process, and approximately $1,100 settlement to recover costs incurred on behalf of a former development partner in connection to an upcoming European House opening. In constant currency, In-House Revenues in the Europe/ROW segment increased by $14,892.

In constant currency, In-House Revenues increased by $35,454 or 44%.

Other Revenues


	For the 13 Weeks Ended				Percent Change
	April 2, 2023		April 3, 2022		Actuals			Constant Currency(1)
	(Dollar amounts in thousands)
	(Unaudited)
Other revenues	$	55,883	$	45,480		23	%		34	%
North America		16,791		13,908		21	%		21	%
United Kingdom		13,613		10,467		30	%		42	%
Europe/RoW		1,117		648		72	%		88	%
All Other		24,362		20,457		19	%		30	%

(1)

See “Non-GAAP Financial Measures” for an explanation of our constant currency results.

Other revenues were $55,883 for the 13 weeks ended April 2, 2023, compared to $45,480 for the 13 weeks ended April 3, 2022, an increase of $10,403. The increase is predominantly driven additional revenues from sites that have opened since the end of the comparative quarter, including Ned Doha, Ned NoMad, New York and Cecconi's Bicester, Oxfordshire. This is coupled with an increase in Soho Home revenues and growth in management fees from Soho House Mumbai and Soho House Istanbul, as well as increased partnerships revenue year-on-year.

Other revenues in North America segment have increased $2,883 or 21% versus first quarter fiscal 2022 predominantly driven by additional revenues related to the management fees from Ned NoMad, New York which opened in June 2022 and revenues from the Willows Inn, Palm Springs which the Company started operating in September 2022.

The United Kingdom segment saw an increase in Other revenues of $3,146 or 30% versus first quarter fiscal 2022 predominantly driven by additional revenues from Cecconi's Bicester, Oxfordshire which opened in November 2022, and a 14% increase in revenue year-on-year at Dean Street Townhouse.

Other revenues in Europe/ROW segment have increased compared to first quarter fiscal 2022 due to additional management fees from Soho House Mumbai and Soho House Istanbul year-on-year, as well as management fees from the Ned Doha which opened in November 2022. In constant currency, Other Revenues in the Europe/ROW segment increase by $522, or 88%.

Other revenues in All Other have increased due to increased revenues from our Soho Home offering due to the opening of two additional sites in London (June 2022) and Los Angeles (August 2022), as well as an increase of 75% year-on-year in online sales. This increase was partially offset by the permanent closure of all but one of our Soho Restaurants sites at the start of fiscal 2023.

In constant currency, Other revenues have increased by $14,100 or 34%.

In-House Operating Expenses and House-Level Contribution


	For the 13 Weeks Ended						Percent Change
	April 2, 2023			April 3, 2022			Actuals			Constant Currency(1)
	(Dollar amounts in thousands)
	(Unaudited)
In-House operating expenses	$	(143,972	)	$	(109,995	)		(31	)%		(42	)%
Percentage of total House revenues		(76	)%		(79	)%
Operating income (loss)	$	962		$	(47,422	)	n/m			n/m
Operating margin		0	%		(25	)%
House-Level Contribution	$	46,718		$	29,746			57	%		71	%
House-Level Contribution Margin		24	%		21	%		3	%
House-Level Contribution by segment:
North America	$	27,943		$	20,374			37	%		37	%
United Kingdom		14,782			11,953			24	%		35	%
Europe/RoW		1,514			(3,657	)	n/m			n/m
All Other		2,479			1,076		n/m			n/m
House-Level Contribution Margin by segment:
North America		31	%		30	%
United Kingdom		23	%		22	%
Europe/RoW		5	%		(25	)%
All Other		77	%		64	%

(1)

See “Non-GAAP Financial Measures” for an explanation of our constant currency results.

In-House Operating Expenses were $143,972 for the 13 weeks ended April 2, 2023, an increase of $33,977 compared to the 13 weeks ended April 3, 2022. The increase is a result of the six new Houses opened since first quarter 2022 and the removal of COVID-19 related restrictions that were still having an impact on trade levels especially in Europe and Hong Kong in first quarter 2022. The increase year-on-year was also driven by wage inflation and retention initiatives across all regions in the second half of fiscal 2022, as well as energy increases in the United Kingdom, the cost of which has doubled at our Houses versus the comparative quarter. In constant currency, In-House Operating Expenses increased by $42,916.

House-Level Contribution, which is defined as House Revenues less In-House Operating Expenses, was $46,718 for the 13 weeks ended April 2, 2023, compared to $29,746 for the 13 weeks ended April 3, 2022, an increase of $16,972. The increase in House-Level Contribution predominantly relates to increased Soho House membership revenues year-over year as well the improvement in trading conditions especially in Europe and Hong Kong year-on-year, meaning greater contribution from these sites.

House-Level Contribution Margin was 24% for the 13 weeks ended April 2, 2023, increased by 3% from the prior period due to increased membership revenues prior period as well as the grant received from the Dutch government related to COVID-19 subsidies which we only became eligible for in the current quarter following completion of the application process, and proceeds from a settlement agreement from a developer in relation to an upcoming Europe House.

Other Operating Expenses and Other Contribution


	For the 13 Weeks Ended						Percent Change
	April 2, 2023			April 3, 2022			Actuals			Constant Currency(1)
	(Dollar amounts in thousands)
	(Unaudited)
Other operating expenses	$	(56,381	)	$	(47,633	)		(18	)%		(29	)%
Percentage of total other revenues		(87	)%		(91	)%
Operating income (loss)	$	962		$	(47,422	)	n/m			n/m
Operating margin		0	%		(25	)%
Other Contribution	$	8,138		$	4,634			76	%		91	%
Other Contribution Margin		13	%		9	%		4	%
Other Contribution by segment:
North America	$	3,729		$	3,307			13	%		13	%
United Kingdom		4,840			2,205		n/m			n/m
Europe/RoW		(627	)		72		n/m			n/m
All Other		196			(950	)	n/m			n/m
Other Contribution Margin by segment:
North America		22	%		23	%
United Kingdom		34	%		20	%
Europe/RoW		(48	)%		10	%
All Other		1	%		(4	)%

(1)

See “Non-GAAP Financial Measures” for an explanation of our constant currency results.

Other Operating Expenses were $56,381 for the 13 weeks ended April 2, 2023, compared with $47,633 for the 13 weeks ended April 3, 2022, an increase of $8,748, or 18%. The increase year-on-year is predominantly driven by new restaurant and hotel sites in the UK and North America as well as increased trade volumes in Soho Home, following the opening of two additional retail sites and 75% increase in online sales year-on-year. In constant currency, Other Operating Expenses increased $12,619, or 29%.

Other Contribution, which we define as Other Revenues plus Non-House Membership Revenues less Other Operating Expenses, was $8,138 for the 13 weeks ended April 2, 2023, compared to $4,634 for the comparative period, an increase of $3,504. Other Contribution Margin was 13% for the 13 weeks ended April 2, 2023, an increase of 4% compared to the prior period. The increase in both absolute Other Contribution and Margin is predominantly driven by higher Non-House Membership Revenues year-on-year due to an additional 28,000 Non-House members, as well as increase year-on-year of high margin revenue streams, including partnerships and management fees from our Ned and Soho House management contracts.

General and Administrative Expenses


	For the 13 Weeks Ended						Percent Change
	April 2, 2023			April 3, 2022			Actual			Constant Currency(1)
	(Dollar amounts in thousands)
	(Unaudited)
General and administrative expenses	$	30,574		$	29,286			4	%		14	%
Percentage of total revenues		12	%		15	%

(1)

See “Non-GAAP Financial Measures” for an explanation of our constant currency results.

General and Administrative Expenses were $30,574 for the 13 weeks ended April 2, 2023, compared with $29,286 for the 13 weeks ended April 3, 2022, an increase of $1,288, or 4%. The increase was primarily driven by cost and headcount to support business expansion, including the six new Soho Houses opened since the comparative period, offset by initiatives to streamline support functions including digital, communications and content towards the end of fiscal 2022, as well as favorable foreign exchange movements year-over-year.

In constant currency, General and Administrative Expenses increased by $3,668, or 14%.

Pre-Opening Expenses


	For the 13 Weeks Ended						Percent Change
	April 2, 2023			April 3, 2022			Actual			Constant Currency(1)
	(Dollar amounts in thousands)
	(Unaudited)
Pre-opening expenses	$	4,994		$	4,032			24	%		35	%
Percentage of total revenues		2	%		2	%

(1)

See “Non-GAAP Financial Measures” for an explanation of our constant currency results.

Pre-Opening expenses were $4,994 for the 13 weeks ended April 2, 2023, driven by the opening of Soho House Bangkok during the current quarter as well as costs associated with future House openings. This is compared to $4,032 for the 13 weeks ended April 3, 2022, with the increase year-on-year driven predominantly by the characteristics of fiscal 2023 Houses openings in comparison to fiscal 2022, including size and location.

In constant currency, Pre-Opening expenses increased by $1,290, or 35%.

Depreciation and Amortization


	For the 13 Weeks Ended						Percent Change
	April 2, 2023			April 3, 2022			Actual			Constant Currency(1)
	(Dollar amounts in thousands)
	(Unaudited)
Depreciation and amortization	$	24,464		$	22,831			7	%		17	%
Percentage of total revenues		10	%		12	%

(1)

See “Non-GAAP Financial Measures” for an explanation of our constant currency results.

Depreciation and amortization was $24,464 for the 13 weeks ended April 2, 2023, an increase of $1,633, or 7%, from the 13 weeks ended April 3, 2022. This increase was primarily driven by the five new Soho Houses that opened after first quarter 2022 as well as Soho House Bangkok which opened mid first quarter 2023. In constant currency, depreciation and amortization expenses increased by $3,488, or 17%.

Other Expenses


	For the 13 Weeks Ended						Percent Change
	April 2, 2023			April 3, 2022			Actual			Constant Currency(1)
	(Dollar amounts in thousands)
	(Unaudited)
Share-based compensation	$	5,846		$	7,803			(25	)%		(18	)%
Percentage of total revenues		2	%		4	%
Foreign exchange (gain) loss, net	$	(13,013	)	$	17,074		n/m			n/m
Percentage of total revenues		(5	)%		9	%
Other	$	1,029		$	776			33	%		44	%
Percentage of total revenues		0	%		0	%

(1)

See “Non-GAAP Financial Measures” for an explanation of our constant currency results.

Share-based compensation expense decreased by $1,957 to $5,846 for the 13 weeks ended April 2, 2023, primarily driven by relatively short vesting RSUs that vested in the first quarter of fiscal 2022 (impact of $3,195) and the lack of vesting of the RSU and Growth Share awards to our former Chief Operating Officer who departed the Company in Q4 2022 (impact of $700). There was no equivalent grant or vest in Q1 2023. This was partially offset by new grants of SARs and the continued impact of the Q4 2022 repricing of previously granted SARs (total impact of $1,500) as well as the grant and vesting impact of RSU awards to senior leaders (impact of $500).

Foreign exchange, net which is unrealized and non-cash in nature, moved from a $17,074 loss to a gain of $13,013 for the 13 weeks ended April 2, 2023, primarily driven by foreign exchange revaluation of our borrowings. Decreased foreign exchange volatility during the period has contributed to this movement in foreign exchange.

Other expenses has remained materially in line with 13 weeks ended April 3, 2022 decreasing by $253 to $1,029 for the 13 weeks ended April 2, 2023,

Interest Expense, Net


	For the 13 Weeks Ended						Percent Change
	April 2, 2023			April 3, 2022			Actual			Constant Currency(1)
	(Dollar amounts in thousands)
	(Unaudited)
Interest expense, net	$	18,701		$	15,717			19	%		30	%
Percentage of total revenues		7	%		8	%

(1)

See “Non-GAAP Financial Measures” for an explanation of our constant currency results.

Net Interest Expense was $18,701 for the 13 weeks ended April 2, 2023, an increase of $2,984, or 19%, on the comparative period in 2022. This increase is primarily due to the incremental interest expense incurred following issuance of $100 million additional notes in March 2022 under the Goldman Sachs Senior Secured Note facility. In constant currency, net interest increased by $4,261, or 30%.

Adjusted EBITDA


	For the 13 Weeks Ended					Percent Change
	April 2, 2023			April 3, 2022		Actual	Constant Currency(1)
	(Dollar amounts in thousands)
	(Unaudited)
Adjusted EBITDA	$	20,127		$	2,330	n/m	n/m
Percentage of total revenues		8	%	$	-

(1)

See “Non-GAAP Financial Measures” for an explanation of our constant currency results.

Adjusted EBITDA was $20,127 for the 13 weeks ended April 2, 2023, in comparison to $2,330 for the 13 weeks ended April 3, 2022, an increase of $17,797. The increase is driven by higher membership revenues from both Soho House and Non-House members versus the comparative period as well as increased operations following the removal of COVID-19 related restrictions especially in Europe and Hong Kong in comparison the comparative quarter. Additionally, the Company recognized a Dutch government grant related to COVID-19 subsidies which we only became eligible for in the current quarter following completion of the application process, and a settlement to recoup costs we have incurred from a former development partner in relation to an upcoming European House opening. These were partially offset by an increase in General and Administrative and Operating expenses year-over-year. In constant currency, Adjusted EBITDA increased by $17,986 compared to the comparative period in fiscal 2022.

Non-GAAP Financial Measures

For the 13 weeks ended April 2, 2023 and April 3, 2022

A reconciliation of Net Loss to Adjusted EBITDA is set forth below for the periods specified:


	For the 13 Weeks Ended						Percent Change
	April 2, 2023 Actuals			April 3, 2022 Actuals			Actuals			Constant Currency(1)
	(Unaudited, dollar amounts in thousands)
Net income (loss)	$	(16,016	)	$	(60,626	)		74	%		71	%
Depreciation and amortization		24,464			22,831			7	%		17	%
Interest expense, net		18,701			15,717			19	%		30	%
Income tax benefit		(171	)		(452	)		62	%		59	%
EBITDA		26,978			(22,530	)	n/m			n/m
Gain on sale of property and other, net		(681	)		(1,663	)		59	%		55	%
Share of income of equity method investments		(871	)		(398	)	n/m			n/m
Foreign exchange (gain) loss, net⁽²⁾		(13,013	)		17,074		n/m			n/m
Share of equity method investments adjusted EBITDA		1,868			1,339			40	%		52	%
Share-based compensation expense⁽²⁾		5,846			7,803			(25	)%		(18	)%
Membership credits expense⁽³⁾		—			705		n/m			n/m
Adjusted EBITDA	$	20,127		$	2,330		n/m			n/m

(1)

See “Non-GAAP Financial Measures” for an explanation of our constant currency results.

(2)

See “Comparison of the 13 Weeks Ended April 2, 2023 and April 3, 2022 - Other Expenses” for information regarding the increase in foreign exchange and share-based compensation period-on-period.

(3)

Beginning on March 14, 2020, due to the COVID-19 pandemic, we issued membership credits to active members of our closed Houses to be redeemed for certain Soho Home products and services. Membership credits were a one-time goodwill gesture, issued as a marketing offer to active members. The expense represents our best estimate of the cost in fulfilling the membership credits.

The computation of House-Level Contribution and Other Contribution is set forth below:


	For the 13 Weeks Ended
	April 2, 2023			April 3, 2022			Change %			April 3, 2022 Constant Currency(1)			Constant Currency Change %(1)
	Actuals
	(Unaudited, dollar amounts in thousands)
Operating income (loss)	$	962		$	(47,422	)	n/m			$	(43,568	)	n/m
General and administrative		30,574			29,286			4	%		26,906			14	%
Pre-opening expenses		4,994			4,032			24	%		3,704			35	%
Depreciation and amortization		24,464			22,831			7	%		20,976			17	%
Share-based compensation		5,846			7,803			(25	)%		7,169			(18	)%
Foreign exchange (gain) loss, net		(13,013	)		17,074		n/m				15,686		n/m
Other		1,029			776			33	%		713			44	%
Non-House membership revenues		(8,636	)		(6,787	)		(27	)%		(6,235	)		(39	)%
Other revenues		(55,883	)		(45,480	)		(23	)%		(41,784	)		(34	)%
Other operating expenses		56,381			47,633			18	%		43,762			29	%
House-Level Contribution	$	46,718		$	29,746			57	%	$	27,329			71	%
Operating margin		0	%		(25	)%					(25	)%
House-Level Contribution Margin		24	%		21	%					21	%

(1)

See “Non-GAAP Financial Measures” for an explanation of our constant currency results.


	For the 13 Weeks Ended
	April 2, 2023			April 3, 2022			Change %			April 3, 2022 Constant Currency(1)			Constant Currency Change %(1)
	Actuals
	(Unaudited, dollar amounts in thousands)
Membership revenues	$	83,248		$	58,773			42	%	$	53,997			54	%
Less: Non-House membership revenues		(8,636	)		(6,787	)		(27	)%		(6,235	)		(39	)%
Add: In-House revenues		116,078			87,755			32	%		80,623			44	%
Total House revenues		190,690			139,741			36	%		128,385			49	%
Less: in-House operating expenses		143,972			109,995			31	%		101,056			42	%
House-Level Contribution	$	46,718		$	29,746			57	%	$	27,329			71	%

(1)

See “Non-GAAP Financial Measures” for an explanation of our constant currency results.


	For the 13 Weeks Ended
	April 2, 2023			April 3, 2022			Change %			April 3, 2022 Constant Currency(1)			Constant Currency Change %(1)
	Actuals
	(Unaudited, dollar amounts in thousands)
Operating income (loss)	$	962		$	(47,422	)	n/m			$	(43,568	)	n/m
General and administrative		30,574			29,286			4	%		26,906			14	%
Pre-opening expenses		4,994			4,032			24	%		3,704			35	%
Depreciation and amortization		24,464			22,831			7	%		20,976			17	%
Share-based compensation		5,846			7,803			(25	)%		7,169			(18	)%
Foreign exchange (gain) loss, net		(13,013	)		17,074		n/m				15,686		n/m
Other		1,029			776			33	%		713			44	%
House membership revenues		(74,612	)		(51,986	)		(44	)%		(47,762	)		(56	)%
In-House revenues		(116,078	)		(87,755	)		(32	)%		(80,623	)		(44	)%
In-House operating expenses		143,972			109,995			31	%		101,056			42	%
Total Other Contribution	$	8,138		$	4,634			76	%	$	4,257			91	%
Operating margin		0	%		(25	)%					(25	)%
Other Contribution Margin		13	%		9	%					9	%

(1)

See “Non-GAAP Financial Measures” for an explanation of our constant currency results.


	For the 13 Weeks Ended
	April 2, 2023		April 3, 2022		Change %			April 3, 2022 Constant Currency(1)		Constant Currency Change %(1)
	Actuals
	(Unaudited, dollar amounts in thousands)
Other Contribution
Non-House membership revenues	$	8,636	$	6,787		27	%	$	6,235		39	%
Add: other revenues		55,883		45,480		23	%		41,784		34	%
Less: other operating expenses		56,381		47,633		18	%		43,762		29	%
Other Contribution	$	8,138	$	4,634		76	%	$	4,257		91	%

(1)

See “Non-GAAP Financial Measures” for an explanation of our constant currency results.

Liquidity and Capital Resources

Liquidity is the ability to generate sufficient cash flows to meet the cash requirements of our business operations. Our principal sources of liquidity are operating cash flows, holdings of cash and cash equivalents and availability under our Revolving Credit Facility. As of April 2, 2023, we maintained a cash and cash equivalents balance of $154 million and a restricted cash balance of $8 million.

Our primary requirements for liquidity are to fund our working capital needs, operating and finance lease obligations, capital expenditures and general corporate needs. Our ongoing capital expenditures are principally related to opening new Houses, refurbishing and maintaining the existing House portfolio as well as investments in our corporate technology infrastructure to support our digital strategy and technology infrastructure.

In a given year, our primary cash inflows and outflows relate to the following:

(1)

from operating activities, our cash inflows include Membership revenues, In-House revenues and Other revenues, such as the sale of retail products. The primary cash outflows from operating activities include general operating expenses and interest payments.

(2)

from investing activities, our cash inflows include the proceeds from sale of property and equipment and the sales of subsidiaries. The primary cash outflows from investing activities include the purchase of property and equipment as well as intangibles.

(3)

from financing activities, our cash inflows from financing activities include proceeds from borrowings and from the issuance of shares. The primary cash outflows from financing activities include repayments of borrowings and legal and professional fees from debt or equity related transactions.

We believe our existing cash and marketable securities balances will be sufficient to fund our operating and finance lease obligations, capital expenditures and working capital needs for at least the next 12 months and the foreseeable future taking account of repayment terms of our Miami property debt.

Cash Flows and Working Capital

The following table provides a summary of cash flow data for the periods presented:


	For the 13 Weeks Ended
	April 2, 2023			April 3, 2022
	(Unaudited, dollar amounts in thousands)
Net cash (used in) generated by
Net cash used in operating activities	$	(12,488	)	$	(9,575	)
Net cash used in investing activities		(15,706	)		(22,178	)
Net cash (used in) provided by financing activities		(631	)		98,285
Effect of exchange rates on cash and cash equivalents		1,002			(2,192	)
Net (decrease) increase in cash and cash equivalents	$	(27,823	)	$	64,340

Net Cash Used in Operating Activities

The primary cash inflows from operating activities include Membership Revenues, In-House Revenues and Other Revenues, such as the sale of retail products. The primary cash outflows from operating activities include general operating expenses and interest payments.

For the 13 weeks ended April 2, 2023, we had a $12,488 outflow of cash from operating activities, which includes a net loss of $16,016, depreciation and amortization of $24,464, and an unfavorable net working capital change of $21,359.

For the 13 weeks ended April 3, 2022, we had a $9,575 outflow of cash from operating activities, which includes a net loss of $60,626, depreciation and amortization of $22,831, and an unfavorable net working capital change of $1,486.

Net Cash Used in Investing Activities

The primary cash inflows from investing activities include the cash acquired as a result of acquisitions. The primary cash outflows from investing activities include the purchase of property and equipment, intangibles and the acquisition of noncontrolling interests.

For the 13 weeks ended April 2, 2023, we had a $15,706 outflow of cash from investing activities, primarily due to purchases of property and equipment of $12,010 and purchases of intangible assets of $4,674.

For the 13 weeks ended April 3, 2022, we had a $22,178 outflow of cash from investing activities, primarily due to purchases of property and equipment of $17,658 and purchases of intangible assets of $5,185.

Net Cash Provided by Financing Activities

The primary cash inflows from financing activities include proceeds from borrowings and from the issuance of shares. The primary cash outflows from financing activities include principal payments on borrowings and payments to settle redeemable preferred shares.

For the 13 weeks ended April 2, 2023, we had a $631 outflow of cash from financing activities, primarily due to distributions to noncontrolling interest.

For the 13 weeks ended April 3, 2022, we had a $98,285 inflow of cash from financing activities, primarily due to the proceeds from borrowings of $103,650 principally related to the issuance of the Goldman Sachs Senior Secured Note Purchase Agreement Additional Notes on March 9, 2022. Refer to Note 12 - Debt in this Quarterly Report on Form 10-Q for additional information.

Cash Requirements from Contractual and Other Obligations

As of April 2, 2023, there have been no material changes outside the ordinary course of business to our contractual obligations from those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as described in our Annual Report on Form 10-K for the fiscal year ended January 1, 2023.

Critical Accounting Estimates and Judgments

Management’s discussion and analysis of the financial condition and results of operations is based on the financial statements, which have been prepared in accordance with US GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses incurred during the reporting periods. The estimates are based on historical experience and on various other factors that are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions. There have been no significant changes in our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included our Annual Report on Form 10-K for the fiscal year ended January 1, 2023.

Emerging Growth Company Status

We are an ‘emerging growth company,’ as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not ‘emerging growth companies,’ including, but not limited to: presenting only two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley; having reduced disclosure obligations regarding executive compensation in our periodic reports and proxy or information statements; being exempt from the requirements to hold a non-binding advisory vote on executive compensation or seek stockholder approval of any golden parachute payments not previously approved; and not being required to adopt certain accounting standards until those standards would otherwise apply to private companies. As a result, our financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our exposure to market risk has not materially changed from what was previously disclosed in our Annual Report on Form 10-K for the fiscal year ended January 1, 2023.

Foreign Exchange Risk

We principally operate in the UK and North America, although we have significant operations in Europe. Therefore, we are exposed to reporting foreign exchange risk in Pound sterling and Euros.

We have not, to date, used any material financial instruments to mitigate our foreign exchange risk. The directors and management will keep this situation under review. As income is received and suppliers paid in respect of the UK and European operation in Pound sterling or Euros, respectively, this acts as a natural hedge against foreign exchange risk.

If the USD had strengthened/weakened by 10% versus the GBP, revenue would have been approximately $14 million lower and approximately $14 million higher, respectively, and Net Loss would have been approximately $2 million lower and approximately $2 million higher, respectively, for the 13 weeks ended April 2, 2023.

If the Euro had strengthened/weakened by 10% versus the GBP, revenue would have been approximately $3 million higher and approximately $2 million lower, respectively, and Net Loss would have been approximately less than $1 million lower and approximately less than $1 million higher, respectively, for the 13 weeks ended April 2, 2023.

Concentration of Credit Risk

Credit risk is the risk of loss from amounts owed by financial counter-parties. Credit risk can occur at multiple levels; as a result of broad economic conditions, challenges within specific sectors of the economy, or from issues affecting individual companies. Financial instruments that potentially subject us to credit risk consist of cash equivalents and accounts receivable.

We maintain cash and cash equivalents with major financial institutions. Our cash and cash equivalents consist of bank deposits held with banks, and money market funds that, at times, exceed federally or locally insured limits. We limit our credit risk by dealing with counterparties that are considered to be of high credit quality and by performing periodic evaluations of investments and of the relative credit standing of these financial institutions.

Liquidity Risk

We seek to manage our financial risks to ensure that sufficient liquidity is available to meet our foreseeable needs. We believe we have significant flexibility to control our capital expenditure commitments in new House developments through different investment formats. As of April 2, 2023, we had $154 million in cash and cash equivalents on the balance sheet and £70.8m undrawn on the Revolving Credit Facility (subject to complying with our covenants) to meet our funding needs.

Cash Flow and Fair Value Interest Rate Risk

We have historically financed our operations through a mixture of bank borrowings and bond notes which are generally fixed, and expect to finance our operations through operating cash flows and availability under our Revolving Credit Facility. We seek to manage exposure to adverse interest rate changes through our normal operating and financing activities.

Inflation Risk

Inflation has an impact on food, utility, labor, rent, and other costs which materially impact operations. Severe increases in inflation could have an adverse impact on our business, financial condition and results of operations. If several of the various costs in our business experience inflation at the same time, we may not be able to adjust prices to sufficiently offset the effect of the various cost increases without negatively impacting consumer demand.

Commodity Price Risks

We are exposed to commodity price risks specially foodstuffs, natural gas and oil. Many of the ingredients we use to prepare our food and beverages are commodities or are affected by the price of other commodities. Factors that affect the price of commodities are generally outside of our control and include foreign currency exchange rates, foreign and domestic supply and demand, inflation, weather, the geopolitical situation, and seasonality.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Management concluded that as of April 2, 2023 our disclosure controls and procedures were not effective at the reasonable assurance level, due to material weaknesses in our internal control over financial reporting, to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such

information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As disclosed in our Annual Report in Form 10-K for the fiscal year ended January 1, 2023, based on management’s assessment of the effectiveness of our internal controls over financial reporting, management concluded that our internal controls over financial reporting were not effective as of January 1, 2023, because of the identification of two material weaknesses identified in our internal control over financial reporting. The material weaknesses related to (i) our lack of a sufficient number of personnel with an appropriate level of knowledge and experience with the application of US generally accepted accounting principles (“GAAP”) and with our financial reporting requirements, including lease accounting; and (ii) the fact that policies and procedures with respect to the review, supervision and monitoring of our accounting and reporting functions, including IT general controls, were either not designed and in place, or not operating effectively. As a result, adjustments to our financial reporting were identified and made during the course of the audit process.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the 13 weeks ended April 2, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Disclosure Controls and Procedures

In designing and evaluating our disclosure controls and procedures and internal control over financial reporting, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and our management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. The design of any disclosure controls and procedures and internal control over financial reporting also are based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time we are subject to legal proceedings and claims that arise in the ordinary course of business. At present, we are not a party to any litigation other than litigation in the ordinary course of business. We do not expect that the ultimate outcome of any of the currently ongoing legal proceedings, individually or collectively, will have a significant adverse effect on our business, financial condition, results of operations or cash flows.

However, the results of litigation and arbitration are inherently unpredictable and the possibility exists that the ultimate resolution of matters to which we are or could become subject could result in a material adverse effect on our business, financial condition, results of operations and cash flows.

Item 1A. Risk Factors.

You should carefully consider the risk factors discussed in section “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended January 1, 2023, which could materially affect our business, financial position, or future results of operations. There have been no material changes to the risk factors described in our Annual Report on Form 10-K. The risks described in our Annual Report Form 10-K are not the only risks that we face. Additional risks and uncertainties not precisely known to us, or that we currently deem to be immaterial, may also arise and materially impact our business. If any of these risks occur, our business, results of operations and financial condition could be materially and adversely affected and the trading price of our common stock could decline.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

(a) Sales of Unregistered Securities

None.

(b) Use of Proceeds from Public Offering of Common Stock

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.


Exhibit Number		Description
3.1		Certificate of Amendment and Restated Certificate of Incorporation of Soho House & Co Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 20, 2023).
3.2		Amended and Restated Bylaws of Soho House & Co Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on March 20, 2023).
10.1*		Loan agreement dated May 11, 2023 between Beach House Owner, LLC and JP Morgan Chase Bank, National Association and Citi Real Estate Funding Inc
10.2*		Revised Service Agreement dated May 12, 2023 between Nick Jones and Soho House UK Limited
31.1*		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.


31.2*		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	Soho House & Co Inc.

Date: May 12, 2023	By:	/s/ Andrew Carnie
		Andrew Carnie
		Chief Executive Officer

Date: May 12, 2023	By:	/s/ Thomas Allen
		Thomas Allen
		Chief Financial Officer