Soho House & Co - Q1 2022

Transcript

Operator (participant)

Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Membership Collective Group Inc. First Quarter 2022 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, just press star one. Thank you. Greg Feehely, Director of Investor Relations, you may begin your conference.

Greg Feehely (Director of Investor Relations)

Thank you for joining us today to discuss the Membership Collective Group's first quarter 2022 financial results. Some of today's statements may be forward-looking, and actual results may differ materially due to a number of risks and uncertainties, including those discussed in our most recent annual report on Form 10-K filed on March 16, 2022. Any forward-looking statements represent our views only as of today, and we assume no obligation to update any forward-looking statements if our views change. By now, you should have access to our first quarter 2022 earnings release, which can be found at membershipcollectivegroup.com in the News and Events section. Additionally, we posted our Q1 2022 earnings presentation, which can also be found in the News and Events section on our site. During the call, we also refer to certain non-GAAP financial measures.

These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results. Reconciliations to the most comparable GAAP measures are available in today's earnings press release.

Nick Jones (CEO and Founder)

Hello, everyone, and welcome to the MCG Q1 2022 earnings presentation. My name is Nick Jones. I am the CEO and founder of Soho House and the MCG. I want to start by giving you an overview of our Q1 performance, and it's good news. We had a good start to the year. January was problematic because the pandemic was still affecting our house openings. By the end of January, all our houses were open apart from in Hong Kong, and we saw a really strong recovery.

Our members were very keen to get back to the houses, and they also very much enjoyed the fact that they didn't have to wear masks, there wasn't social distancing, and life seemed to be getting back to normal. That was really good to see. Our members' events were hugely popular with all our members globally, and it really felt like for the first time it was back to similar levels of what we were doing in 2019. We had exceptional membership growth in the quarter with 16,000 new members. The demand from members continues with the MCG waitlist at an all-time high of 79,000. We saw continued growth in recurring membership revenues up 45% versus Q1 2021 and 12% versus the prior Q4 2021. Retention remains at pre-COVID-19 levels.

We opened 2 Soho Houses in the quarter and are on track to open 9 this fiscal year. I got to say, the new houses we're opening they're some of the best we've ever done. They really feel fantastic. I got to thank our design team for just doing such an amazing job. Our in-house revenue saw strong recovery up 440% versus Q1 2021. Even April this year was 14% up on 2019 levels, which is very, very positive. We delivered adjusted EBITDA of $2.3 million, which was up $25.1 million versus Q1 2021. I am excited to announce that today we will be introducing 2022 guidance on the back of the Q1 performance and momentum in Q2.

I just want to talk about membership because it's something I wake up every day and think about. What I think about is two things. A, how do I look after our existing members better? B, how do I add more members? What really makes our members super happy is when we open new houses in new, exciting cities. Membership is at the center of Soho House, and Soho House is at the center of the MCG, and I've been acquiring and retaining members for 27 years. The more global we get, the more exciting it gets, not just as a membership group of people, but also the different countries add such flavor and interest into our global membership. Recurring membership revenues underpin our business. In Q1 this year, we added 10,000 new members, which is the best we've ever done.

Our waitlist is sitting at 79,000, which again is the highest it's ever been. The retention of our members is higher than I've ever known it in 27 years. Naturally, we are very confident we will hit our membership target, which will be 40,000 new Soho House members by the end of the year. We're on track to open 9 new Soho Houses this year. You know, we've successfully opened Nashville and Brighton in Q1, and we've opened Holloway House, which is in West Hollywood, California, this month. Again, I just want to stress these are fantastic houses. The new members are so excited about them and also the existing members who visit them just think my membership has got better. We're also adding new houses into four new countries.

In the second part of this year, Scandinavia is going to get two, one in Copenhagen and one in Stockholm. Those members globally, when you look at what we have on CWH, which is our Cities Without Houses members, are very, very strong cities. Later in the year we're going to Mexico City and then we're going to Bangkok. What is happening is Soho House membership is becoming truly global with interesting members. Just a little bit more about Cities Without Houses because Cities Without Houses is what it says on the tin. It, it's a city where we don't have a house, but we have a membership base. Currently we are in 72 cities where we have membership representation, we have membership committees and we have members.

Within those cities we put members events on and those members travel to cities where there are houses and use them. Also what they do is really show us that the city they live in really requires a physical house and they help us find that physical house. They help us find the local developing partner and they are incredibly loyal to the house when it opens. Our new houses and the ones I've just spoken about, they're all in interesting buildings. They're all what I believe are fantastic spaces and they're on our asset-light model where the local developer pays for everything. Each one has a local design feel because it's for the local membership. The design inspiration always comes from the building and the city, and that also runs through into everything we do in our houses.

There's a global opinion but a local decision and our house has been super successful with the local members and we offer a home away from home for our global members. When our global members visit these cities, they don't want to visit a house which feels like it was designed for every city in the world. They want to visit a house which feels local to the city they're visiting. I'm incredibly confident that our pipeline of between 8 and 10 Soho Houses per year is achievable. This gets us to 85 houses by 2027. Our members will love that. I'm also very excited about other openings within the MCG portfolio. We got The Ned opening in New York for the first time.

Members have been asking, London members, New York members have been asking when The Ned's coming there for a very long time and the early uptake of membership is super impressive and we got exciting plans for the future for The Ned. Andrew.

Speaker 8

Thank you Nick and good morning, good afternoon everyone. I'm really pleased to speak with you all today with Nick and Humera Afzal. I'm really pleased with our strong Q1 results within a volatile operating backdrop that we witnessed in Q1. Specifically, there remained COVID restrictions in select regions earlier in the quarter, though progressively eased as the quarter progressed. For example, Hong Kong House was closed for most of the quarter. I am however glad to say that our teams did an incredible job adapting within this environment and welcoming our members back to our houses. Notwithstanding the challenges I just described, our teams delivered record quarterly results in terms of revenue. This was driven by a strong rebound across Feb and March, seeing nice growth versus 2019 and we saw further momentum in April which is super encouraging.

I'd like to actually spend a few moments talking about the significant progress we've made on each of our strategic pillars which we outlined at the time of our IPO. First, global expansion of Soho Houses is a priority for us. Nick has already discussed a lot of the detail around our pipeline, our unprecedented demand. However, I would just like to reiterate our revised annual target is 8-10 houses per year which gets us to that 85-90 houses in five years. Secondly, if you remember on the last call I talked quite a bit about our Cities Without Houses membership. CWH is incredibly important to us and incredibly important to our growth. It provides us a low cost, highly predictable path to opening new houses.

To give you an example, both Nashville and Brighton houses we opened in Q1 had a very strong CWH membership which ensured we opened the houses perfectly tailored to what our members want in each of those cities and achieving our opening membership goals. I'm really pleased to say we've now expanded CWH into a further 15 cities across Africa, Asia and Latin America which will really fuel our house openings in the next 5 years. Now on to enhancing membership value. You know it's really at the core of our long-term success and Nick talked a lot about this. You know we're really focused on growing the number of Soho Houses and it adds clear value to our membership. That's what you're seeing in our record wait list but also our Every House membership is at all-time highs of 81%.

Additionally, retention rates of existing members are at record levels so I'm really pleased that those three KPIs are really strong as a barometer for the membership value that we're delivering. Additionally, events at our houses which are key to our proposition for our members are starting again. As we see a semblance of normalized environment, we're really starting to put what our members love the most, which is events back in our houses again. For example, for the first time since the pandemic, our North American and UK houses across February and March had a full event program. Each house put on 30-plus events across music, fashion, art, film, health and wellbeing, and it was really great to see our events full with happy members. I'll give you a great example of this.

In celebration of the triumphant return for South by Southwest, our Austin House offered several days of varied programming. Musical acts included George Clinton and Sister Sledge and many more. From music showcases to panel discussions to pool parties to art events, members were treated to the best of South by Southwest. Now on to creating new membership brands, which is our third strategic priority. This is important as it diversifies our revenue base and adds new revenue streams. At the IPO, we said a key focus should increase the share of wallet of our members by providing them unique value-add services from Soho House, focus on the new ways of working from Soho Works and being able to take the House home by Soho Home. We're really pleased with our continued growth in each, and both are resonating very well with our members.

First, I'd love to talk about Soho Home. Our new spring assortments, which are all based from our houses, resonated well with our members. This resulted in 150% revenue growth versus Q1 2021. That's off the back of over 100% growth in Q4 2021. What we're seeing in Soho Home is continued high growth, but most importantly, our members are really enjoying what we're offering at Soho Home, and that's why 70% of our sales are accounted for by our members. Our Soho Works membership jumped over 400% versus Q1 2021 as our members return to work, and I'm pleased to say that now all our offices globally are full occupancy, which is a great achievement.

Similar to Soho Home, what our members are loving is a unique environment created by Soho House that allows a lot of flexibility in their lives for them to flourish in their work. Fourth is enhancing our digital experience for our members. You know, we're midway through our digital transformation journey, which is three purposes, to really improve member experience and have a frictionless experience throughout their lives within Soho Houses, to enhance and improve our connectivity with our members, and thirdly, driving cost efficiency opportunities across our company. Firstly on our apps. We continue to invest in our existing members' experience through our proprietary platforms that powers the Soho House app.

The app continued to improve throughout Q1 with feature enhancements, including the addition of health club bookings, which led to the 75% of all global bookings being by the app, an increase of 500 basis points versus Q1 2021. We are addressing member feedback on our app by simplifying user experience, including improvements in navigation, homepage, and personalization, which members will progressively experience throughout Q2. Most excitedly, we're currently beta testing our Soho House Connect app, which will provide the next level of digital connectivity to our members. The new product is on track to be introduced to Soho House members this summer. You know by the end of July, our members are gonna have a fantastic app that will be able to book and pay throughout all our Soho Houses globally and a really great way to connect digitally both in the houses and out the houses.

That's something we've been working on for over 2 years. We're really excited about what our members are gonna get from Soho House by the end of Q2. Operational excellence as we deliver our growth plans is a core pillar. While top line is incredibly important and we are a high-growth business, we're equally focused on profitable growth and improving our margin and hitting our targets. We'll achieve this through operational leverage, targeted cost management, smarter procurement policies, and better management of fixed costs as we grow. This is demonstrated by an improvement of 300 basis points in house level contribution. In Q1, we ended at 21% margin versus 18% in Q1 2021. F&B margins for the quarter continued to grow, and we're ahead by 260 basis points versus 2019 on a comparable basis.

Now, I'd like to address a few macro clouds and how they relate to MCG and our margins. The supply chain remains constrained, and we expect these constraints to continue for the balance of year. To compensate, we have significantly diversified our supply base over the last 24 months, which has alleviated a lot of the pressures. That's resulted in Soho Home being able to continue its exceptional growth and us opening our houses, which we've opened now three-quarters to date, and we feel very confident on opening our nine as Nick mentioned earlier. Inflationary pressures we expect to continue throughout 2022. We have strong pricing power, which we have demonstrated already this year, and combined with better procurement and F&B margins can offset the near-term pressures.

Regarding labor, we have multiple initiatives in place to retain our existing colleagues and also find new colleagues, and we're already seeing the benefits of our efforts. Finally, we continue to build on our ESG program, House Foundations. We're incredibly proud today to publish our first ESG report, which outlines our goals and key initiatives for 2030. Our strategy uses the foundations we've built over 27 years to have a positive impact on the people around us, the lives of our members, and our environment. We have strengthened our commitment to help people from lower socioeconomic and underrepresented backgrounds to have access to the creative industries. By 2030, 5% of our annual Soho House membership intake will represent members in our creative access programs.

In the last quarter, we expanded our Soho mentorship program to 9-13 cities and welcomed over 170 new members. To ensure we minimize our impact on the environment, we have set environmental goals which include net zero and carbon emissions by 2030 and reducing waste across all our operations globally by 50%. In Q1, we launched our Waste No Food campaign in North America, increasing total sites that divert food from landfill from 65% to 74%. As you can see, each quarter we're making progress against the targets that we're gonna outline today that are at 2030, and we'll always update you on our progress against them. In summary, I recognize we're operating under a volatile macro environment.

Within that backdrop, I'm really pleased with our performance and also our progress towards our strategic goals that we outlined at our IPO. Importantly, we continue to see our high retentions in our members, demand for membership being at all-time highs, and we continue to open our new houses, which ultimately drives the most value to our Soho House members. However, I recognize that we do have to carefully navigate the coming years in terms of balancing growth and demand and profitability, which we are very focused on. I'm now gonna hand over to Humera, who will drill into the numbers and our results and share with you for the first time our 2022 guidance.

Humera Afzal (Former CFO)

Thanks, Andrew, and good morning, everyone. Here are some of the highlights for Q1 2022. Overall, it was a good quarter for us, with total revenues of $192 million, representing an increase of 165% year-over-year, with a growing contribution across all three of our segments. These results are delivered despite a number of restrictions prevailing, particularly earlier on in the quarter, due to the Omicron variant in most of the territories in which we operate in. It's worth noting that there continued to be very strict restrictions in Hong Kong throughout the whole quarter, which are only now being eased. We saw continued growth in recurring membership revenues, which were up 45% versus Q1 2021 and 12% higher than Q4 2021.

Our in-house revenues saw a very strong recovery, up 440% year-over-year during the quarter, driven by the increase in mobility and strength in leisure spending from our members. Our improved performance reflects continued focus on cost management as well as strong top-line performance, particularly as our houses travel up the maturity curve. Given our confidence in our recovery, we are now introducing fiscal year 2022 guidance on the back of our first quarter performance as well as our current trading. Turning to some of the details of our Q1 2022 performance on slide 12. As noted, our total revenue in Q1 of $192 million increased by 165% compared with the first quarter of 2021.

In the quarter, membership revenue, our recurring revenue income stream, increased to $58.8 million or 45% above Q1 2021 levels and accounted for 31% of total revenue in the period. This was driven by the growth in our Soho House membership base year-over-year. In-house revenue in Q1 continued to rebound strongly overall despite the Omicron impacts, increasing to $87.8 million, a 440% improvement year-over-year. Other revenues of $45.5 million also showed a very strong recovery, up 191% versus 2021, and sustaining the recovery seen in Q4 2021, where we delivered $42.8 million. This was driven by the continued robust performance of Soho Home, and we also saw a recovery of public restaurants in the U.K. and North America.

Improved performance of The Ned London, for which we receive a management fee, and growing contribution from The LINE and Saguaro Hotels, which became part of the group of MCG in June 2021, also aided our other revenue growth. House level contribution benefited from significantly reduced restrictions year-over-year and robust membership growth both in the second half of last year and the first quarter of this year. However, this was partially offset by increased operating costs and the impact of new openings, which you are aware tend to impact contribution in the first 1-2 years. House contribution margin for Q1 2022 is 21% versus 18% at Q1 2021. This improvement is predominantly due to the flow-through of additional membership fees and higher sales flow-through.

Other contribution also improved strongly from a loss of nearly $12 million in Q1 2021 to a positive $4.6 million in Q1 2022, predominantly due to growth in our retail offering year-on-year and improved performance in our restaurants and townhouses following reduced restrictions. Moving on to the revenue bridge. This slide sets out the building blocks of our year-on-year revenue growth in the first quarter. You'll see here the three main drivers to our improved revenue performance, and they include membership growth, much improved in-house revenue performance, and finally, the revenue from our other businesses. Membership revenue growth was driven by 19,819 new adult paying members in existing houses since Q1 2021 and 6,960 new members in the new houses opened during 2021.

We added 1,677 new members from the two new houses opened during Q1 2022. It's worth noting that a full quarter's revenue would not be recognized, given that members would be joining only partway through the quarter. Frozen members continued to drop quarter-over-quarter, now at a level of 3,519, which is below pre-pandemic levels. We increased our Every House membership fee for those members renewing from February 2022 onwards, having not raised membership prices since 2019. Other memberships contributed to circa 30% of the revenue growth versus the same quarter in 2021.

The in-house revenue increase of 440% versus Q1 2021 to $87.8 million was aided by our new house openings in Nashville and Brighton, the fact that we experienced fewer COVID closures and restrictions overall versus Q1 2021, leading to increased footfall through the houses. There were also price increases across food and beverage, and as a reminder, the price increases were a weighted average of 5% across categories. RevPAR in February and March was above comparable 2019 levels, led by North America and UK. North America RevPAR was 22% higher in Q1 2022 versus Q1 2019, and UK RevPAR was 30% higher in Q1 2022 versus Q1 2019. This overall RevPAR growth of 4% in Q1 2022 versus Q1 2019 on a like-for-like basis was driven by higher average daily rates.

It's worth noting that occupancy levels were impacted due to the Omicron variant in January before rebounding February and March, and this improvement has continued into April. Other revenue growth came from various sources, including revenue from Mandolin and the Cecconi's restaurants, as well as contribution from The LINE and Saguaro properties, which were not part of the group in Q1 2021. We saw improved management fees from The Ned London due to increased activity versus Q1 2021. Additionally, there was continued strong growth in the Soho Home offering, showing revenue growth of 150% versus Q1 2021. Turning next to EBITDA. Our adjusted EBITDA improved from a loss of $22.8 million in Q1 2021 to a positive $2.3 million for Q1 2022.

In terms of the key drivers of the improved performance, EBITDA growth year-on-year is predominantly driven by four key aspects. Firstly, increased membership revenues were volume driven, with significant increase in full paying Soho House members year-on-year, as well as membership fees from new houses. Additional membership revenue was driven by improved occupancy at Soho Works. The next driver is the recovery of in-house contribution through increased footfall, given fewer restrictions year-on-year. As noted, there was an impact of new houses on house contribution, but at the same time, the positive benefit of other houses progressing up the maturity curve. Within other contribution, we benefited from continued growth in retail, as well as improved performances from our restaurants and contributions from The LINE and Saguaro. Finally, EBITDA growth was partially offset by increased G&A expenses.

Firstly, due to the increase in business activity as compared to Q1 2021 and also increased support costs for our new houses. We also saw wage inflation at our corporate office. Finally, we incurred $4 million of costs in the quarter related to being a public company. However, strong cost control and vacancy management at support sites further helped offset some of these G&A expense increases. Overall, operating expenses grew at a rate below the revenue growth rate. A further driver of the increase in EBITDA margin was an employee retention tax credit gain of $2.5 million. As you know, we report our adjusted EBITDA born for growth, meaning that we include expenses that are associated with the growth of our business. The bridge in the slide shows some of these expenses.

Firstly, pre-opening costs were $4 million in Q1 2022, lower by $0.8 million than the same quarter prior year. Secondly, non-cash rent, which is the difference between the rental cost in accordance with GAAP and the actual cash cost, was $3.4 million in the quarter. Finally, deferred registration fees were $2.4 million in Q1 2022. The table on this slide shows our cash and debt position as at the end of Q1 2022. We ended the quarter with $285 million of cash and cash equivalents in restricted cash and net debt of $423.5 million. As previously noted, on March 9, 2022, we exercised our option under the Goldman Sachs Senior Secured Note Purchase Agreement to issue $100 million of additional notes.

The company also repurchased 342,972 shares for $2.6 million during the first quarter 2022. We utilized $18 million for CapEx and anticipates FY 2022 CapEx broadly similar to 2021 levels. We also paid GBP 4 million for a new energy supply deposit in the U.K. As you can see from our loan maturity profile, the vast majority of our debt currently runs out to 2027. We do not anticipate any difficulty in refinancing or extending the facilities due in 2024. Overall, our liquidity profile, including undrawn debt of circa $93 million, provides us with sufficient flexibility to fund our operational needs as well as our capacity to grow. Our priority remains to generate free cash flow and pay down debt in the short to medium term.

Looking ahead to the balance of fiscal 2022, we remain confident about the overall recovery of our MCG group revenues given the positive momentum of Q1 2022 carrying through into Q2 2022. Total MCG membership increased by a further 3% in April, and together with our high level of member retention, record wait list numbers, and growth from new houses, membership continues to be a very valuable recurring revenue stream. Based on our confidence in our recovery, I now believe we can provide the following guidance. In terms of Soho House members, we anticipate ending the current fiscal year between 160,000 and 165,000 members. That should translate into total MCG membership revenue, including non-house members, in the range of $270 million-$280 million.

From a total revenue perspective for MCG, we anticipate a range of $950 million-$1.025 billion. We are targeting adjusted EBITDA between $80-$90 million for fiscal 2022. For clarity, this is without adding back pre-opening costs, non-cash rent, and deferred registration fees, which we currently estimate to be a total of $60 million combined for the year as a whole.

We're still cautious about the emergence of any future COVID-19 variants, and this guidance assumes no future unforeseen interruptions from the emergence of any such variants. We're also mindful of continuing inflationary pressures. However, we have several cost control measures in progress to counter some of these concerns. Notwithstanding these headwinds, we expect to deliver sustained margin growth within the short term. Now I'll pass you back to Nick.

Nick Jones (CEO and Founder)

What a year so far, and we're nearly halfway through it. My God, it feels like things are really getting back to normal plus. COVID feels like it's in the rear-view mirror. Members are super excited to be back. All our events which are happening in the houses are full. Our rooftops are full. There's a real excitement just to connect again with human beings in spaces that they are familiar and they love. Our team are doing a brilliant job executing our growth plans. You know, all in good time, 3 houses already open, and I'm super proud of them. I just, again, want to thank our very incredible loyal members.

I want to thank the patience of the 79,000 people who are on our wait list, and I want to thank the teams who put so much work and effort into making Soho House work.

Operator (participant)

Thank you, Mr. Nick Jones. At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. Your first question comes from the line of Stephen Zaccone from Citi. Your line is open.

Stephen Zaccone (Senior Research Analyst)

Great. Good morning, everyone. Thanks for taking my question. I wanted to start asking on the price increases that you've taken both on, you know, membership and then also on food and beverage. You know, how are members taking these increases to rates? Is there room to increase it a little bit more as we go through the year? That'd be very helpful. Thanks.

Nick Jones (CEO and Founder)

Thank you for that, Stephen. Well, as Humera mentioned in her bit, you know, we have put the membership price up for Every House members ranging between 10%-13%. Our members, there's been no resistance to that at all. Our members are, you know, they realize that things have gone up in price. They're very logical about that. That has been received with no problem whatsoever. As far as menu prices are concerned, you know, we're always reasonably priced in our houses and, but we've had to pass inflationary prices on to our members, and they understand that. They get that.

As far as room rates are concerned, you know, again, our room product, I believe, is some of the best on the market. Again, you know, we're very lucky in the fact that we don't use any booking engines to drive our bookings. We don't use Booking.com, or we don't pay any commission to anyone to book rooms. We always pass that on to our members. They always feel that they're getting a benefit. Yeah, our members are fine about the pricing. If inflation does keep going up, you know, we won't hesitate but to, you know, pass some of it on.

Stephen Zaccone (Senior Research Analyst)

Okay, great. Very helpful. Thanks for that, Nick. Then my follow-up was just on the guidance, you know, much appreciated for giving guidance this year. I'm curious how you think about, you know, 2023. I know you're not providing guidance for that today, but is there a way to contextualize, you know, maybe the exit rate that you'll come out of this year as a potential run rate for the business?

Speaker 8

I think on 2023, I think what we're gonna say today is, you know, we're comfortable where we're seeing 2023 meet our expectations today. Our focus is getting through this year, and that's why we wanted to provide the guidance this year which reflected Q1. As you know, and that's what we wanted to give you guys today.

Humera Afzal (Former CFO)

I'd just add to that. In terms of the ramp-up to the margin, it increases quarter-on-quarter. You know, first quarter is typically a lower quarter. Second quarter will get better, and that's supported by Scorpios opening, which is a very high margin business. Q3 again gets stronger and Q4 because of Christmas, New Year bookings and that sort of thing. In terms of the ramp-up to the margin, you'll see it ramp up through the year.

Stephen Zaccone (Senior Research Analyst)

Great. Thank you for the detail.

Operator (participant)

Your next question comes from the line of Stephen Grambling from Goldman Sachs. Your line is open.

Stephen Grambling (Equity Research Analyst)

Hi. Thanks. Maybe another follow-up on the guidance. Could you just help break down maybe the revenue guidance into other revenues and in-house, you know, especially the KPIs in each of those, as well as give us a little bit more color on how you're thinking about in-house contribution?

Humera Afzal (Former CFO)

Hi, Stephen. In terms of the revenue breakdown and the weightings between the three different segments, I'd say that Q1 is a reasonably good indicator of the different weightings. Q1 in terms of sort of the membership revenue, we've always said, you know, between 70%-79%, I think that's consistent. There may be a bit of variation between in-house and other, but broadly, that breakdown and that weighting will be consistent. In terms of margin and house level contribution, I'd point you back to the maturation curve. The houses are going to progress up the curve. They are progressing up the curve versus 2019, which is the last normal year. I'd point you back to that. I don't see any anomalies coming through.

Stephen Grambling (Equity Research Analyst)

Maybe an unrelated follow-up. How has developer-funded CapEx lending rates moved over the course of the quarter? It just seems like there's been a lot of moving parts in the capital markets around hospitality in particular. I'm wondering if there's anything that's changed there, and if you can help clarify maybe how much developer-funded CapEx are you anticipating this year?

Humera Afzal (Former CFO)

In terms of the rentalization of the CapEx spend by developers, that's typically around the 5%-7% yield. That hasn't really changed for us. We're not seeing that changing in the short term in any of the deals that we're negotiating now. You know, our debt, as you know, is at around 8.5%, so that still represents a good cost of capital relative to the cost of our debt.

Stephen Zaccone (Senior Research Analyst)

Awesome. Thanks. I'll jump back in the queue.

Humera Afzal (Former CFO)

Thank you.

Speaker 8

Okay.

Operator (participant)

Your next question comes from a line of Bo Lloyd from Lloyd Holdings. Your line is open.

Bo Lloyd (Analyst)

Hi. Yes. Just wondering if you can provide a little bit of insight based on your members without houses, what region is kind of showing the most demand or maybe area of opportunity for growth?

Nick Jones (CEO and Founder)

Hi, Bo. Cities Without Houses is a really successful membership program for us. You know, the areas where we're seeing most success are actually where we're opening houses. For instance, Stockholm, we've our founder members already are there through CWH members, same with Copenhagen. We see very strong growth in other cities in America on CWH, San Francisco, Portland, where we're eventually gonna be opening physically and other cities around. It's a really good indicator of how popular, you know, a potential physical house will be in that city. Obviously, you know, over COVID, over the two years of COVID, you know, we haven't been doing the activity that we were doing pre-COVID, and now that's back in full swing.

We've expanded to 72 countries now, and it'll be something I'll be really pleased to report on, you know, in future calls.

Bo Lloyd (Analyst)

Just a quick follow-up as well, on property kind of, I guess, type. I know you have your more traditional, in-city properties, and then you have your more, farmhouse and maybe bathing houses estates. Just curious if there's any insight as to the strategy as to property type and mix in the future. Do you continue just to be more in, city or is it more maybe essentially estate-style properties as well?

Nick Jones (CEO and Founder)

Well, you know, we got 4 types of houses for sale house. We've got the large house, the big house, we've got medium houses, we've got little houses, and we've got the resort-style houses. We plan to expand all 4 types equally over the coming years.

Humera Afzal (Former CFO)

To give you a bit more color on that, actually, in 2022, I'd say five of the nine are medium houses. One or two are small and the remainder will be large. Looking forward to 2023, there's probably one experiential, four mediums and four large. That's the rough breakdown for the next couple of years.

Speaker 8

I'll add a third on that. So if you think about North America, our largest region, which is seeing a huge amount of growth, we're gonna add a lot more of the experiential houses into North America, which will again increase the value of our membership, 'cause most of the folks are members in North America are Every House. So if you think about the farmhouse concept we have here, which is incredibly popular with all our members, those kind of concepts will be coming to North America to round out our North America membership. So that's, you know, that's the way we, you know, we see the experiential houses is really adding value to our biggest regions.

Bo Lloyd (Analyst)

Thank you.

Operator (participant)

Your next question comes from a line of Joe Greff from J.P. Morgan. Your line is open.

Joe Greff (Managing Director, Equity Research)

Hello, everybody. Another couple of questions with regard to your 2022 guidance. Your membership guidance implies, you know, 32,000 net adds over the next three quarters. I was hoping you could help us understand the breakout or the contribution coming from houses that are opening in 2022. In the balance of 2022, houses that opened last year and earlier in the Q1 and are ramping, and then maybe contribution from houses that opened prior to 2021.

Speaker 8

Yeah, great question. I would think of it a little bit like this. You have our existing houses, so you think about what we call vintage houses, so pre-2018. We will add between 5%-10% of members in those houses. We've been doing that for the last 27 years 'cause of the natural usage of our members within those existing houses. I would always think of that as a real strong indicator of the strength of our business, that we can always add each year between 5%-10% members in those houses. That's almost like-to-like comparables. Your 2018 houses up until 2021, they're the houses that we've opened recently, and that's where we can ramp up the membership a lot more this year.

You're gonna see, you know, roughly a third of the new members going in our newer houses. As we've always said, when we open the new houses, the 9 this year, we always intend to open with a minimum of 1,000 members.

I would think about it in those three buckets. A good ramp up on the 2018 houses and to 2021. The new houses opening about 1,000 each. We're actually beating that right now with Nashville and Brighton, and then the like-for-like growth in our existing houses.

Humera Afzal (Former CFO)

The other variation to note is actually the regional variation. For instance, North America sees a significant portion of growth with 38% of the balance of the years coming out of North America. This also points to the point we've made before, that the geographical mix of our membership is changing, moving more towards North America, and that's the higher price point which also drives margin.

Nick Jones (CEO and Founder)

Great. Do I imply from your overall guidance that that other segment, the non-Soho House segment, is profitable for the balance of 2022?

Speaker 8

Yes.

Humera Afzal (Former CFO)

It's well, it varies. In total, yes. There'll be ups and downs within that.

Nick Jones (CEO and Founder)

I deduce from your comment that it's not in each quarter that the other segment is P&L positive.

Greg Feehely (Director of Investor Relations)

Yeah.

Speaker 8

Yeah.

Nick Jones (CEO and Founder)

Okay. My final question. Maybe you referenced it and I missed it. I had some technical difficulties. Can you give us an update on the CFO search, please?

Speaker 8

Yes, I can. We are very close to finding, Humera's successor, and we'll be announcing in the next few weeks. We've done a huge search globally, with Humera involved. We're obviously very sad that this is Humera's last call, but we'll be announcing our new CFO in the next three to four weeks.

Joe Greff (Managing Director, Equity Research)

Great. Thank you, everybody.

Operator (participant)

There are no further phone questions. I will turn the call back over to management for any web questions.

Speaker 8

Nick, we have no online questions at the moment.

Nick Jones (CEO and Founder)

You know, I mean, you know, I want to talk about, you know, there's a lot in the news at the moment about potential recession. You know, I just wanna sort of talk about our experiences with recessions in the past. As you think, we've been going for 27 years, and there have been a few of them. What we found, particularly in the last one in 2008, that actually members didn't give up their membership. They ended up using the houses more.

You know, they expected good value when they came to the houses. One thing they didn't want to give up because they realized it was a home away from home, and they also realized that to give up their membership, there was an incredibly long queue to get back in. I just wanna assure anyone who's on this call that, you know, we're not worried about a recession.

Operator (participant)

And there are.

Speaker 8

No more questions?

Operator (participant)

There are no further phone questions at this time. Mr. Nick Jones, CEO and founder, I'll turn it back to you for any closing remarks.

Nick Jones (CEO and Founder)

Well, my closing remarks are, you know, we're delighted to be back open again. It's what we do best. It's great to see our houses full. It's great to see our waiting lists get even bigger, even longer. It's fantastic to see the new houses open. It's very sad to see Humera go. I just want to personally say thank you. I want to say generally thank you to all our leadership team, Andrew, who's in the room with me, you know, for their constant support and help while we get this business, you know, flying on all cylinders. Thank you.

Humera Afzal (Former CFO)

Thank you all.

Operator (participant)

This concludes today's conference call. Thank you for your participation. You may now disconnect.