Soho House & Co Inc (SHCO) 2021 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. My name is Emma, your Chorus Call operator. Welcome and thanks for joining the Membership Collective Group Third Quarter Earnings Conference Call. (Operator Instructions)

I would now like to turn the conference over to MCG.

Thank you for joining us today to discuss the Membership Collective Group's third quarter financial results for 2021. Before we begin, I'd like to remind everyone that certain statements may be made during this call that are forward-looking. These forward-looking statements are subject to various risks and uncertainties and reflect our current expectations based on our beliefs, assumptions and information currently available to us. Although we believe these expectations are reasonable, we undertake no obligation to revise any statements to reflect changes that occur after this call. Description of these factors and other risks that could cause actual results to differ materially from these forward-looking statements are discussed in more detail in our filings with the SEC.

During the call, we also refer to certain non-GAAP financial measures. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results. Reconciliations to the most comparable GAAP measures are available in today's earnings press release which is available on the Investor Relations section of our website at www.membershipcollectivegroup.com.

(presentation)

Hello, everyone. Can I just say it's great doing it from New York and seeing the city flourish and our Houses reopen and get the buzz and the business which they are so accustomed to? And I also hope that everyone enjoyed seeing our new House in Paris. It's incredibly beautiful space and we're super excited about it.

I'm also delighted to welcome you all to the third quarter earnings call of the MCG. I'm going to take you through some of the highlights before handing over to Andrew and to Humera for all the detail.

The MCG, or Membership Collective Group, enables our members to connect with each other wherever they are in the world, either in our physical spaces or our digital platform. Q3 has been another strong quarter for us and we've loved welcoming our members back to our Houses, Scorpios Beach Club, The Ned and for this quarter The LINE and Saguaro Hotels. All of our sites are lively and buzzing. It's wonderful to see our Houses thriving once again. And, of course, it's a quarter which has also had its challenges.

As the impact of COVID-19 on our business has diminished, we have seen pressures from rising inflation, supply chain issues, and most pressingly, labor shortages at our site, albeit they have so far had a limited operational impact on us.

Before I continue, I want to pause and thank everyone who works at the MCG around the world for their passion, resilience and incredible hard work in facing the issues over the past few months. It means a lot to me.

Turning to membership, we have welcomed nearly 17,000 new members to the MCG in the last quarter. That's due to resuming membership intakes at our Houses, but also down to the strong growth of our newer memberships, Soho Friends, Soho Works and SOHO HOME+. Demand for our membership has remained incredibly strong as ever. Our waitlist has grown to just under 68,000 globally with every site having a waitlist to join.

When it comes to sales in our Houses, momentum has grown through the quarter. Whereas before it had been the U.K. leading the charge, I am delighted to see all the regions showing improving momentum, particularly through September. We've opened 2 new Houses in the quarter in Tel Aviv and Paris. We've also recently opened Soho House Rome in the San Lorenzo neighborhood.

You've had a glimpse of the Paris House. But we're equally as excited about Rome. It's a 10-story building with bedrooms, long-stay apartment, a Soho health club and the rooftop (inaudible) restaurant with views across the city. I have loved visiting these new Houses over the last few months and I know our members will love visiting them too. I also recently visited Austin in Texas and, my god, that is thriving.

On retail Soho Home had another great quarter with online sales up an incredible 116%. We've also opened our first flagship Soho Home Studio on the Kings Road in London which has got off to a flying start and we'll be opening a second studio here in New York this week. Scorpios Beach Club in Mykonos had a busy summer season. Despite ongoing capacity restrictions of The Ned, The LINE, the Saguaro Hotels all saw a strong rebound with increases in occupancy rate as customers enjoyed being able to travel again.

2022 will be another exciting year for the MCG as we open new Houses in Brighton, West Hollywood and Nashville in the first quarter and with 4 more sites to follow. We will also open our second Scorpios site in Tulum in Mexico as well as 2 new Ned properties. I'm incredibly excited to announce the Ned New York in Midtown. This is opening mid-2022. It has 167 bedrooms, a public bar and restaurant, plus a members-only Ned's Club. This growth is what the MCG is all about, continually increasing the value of our membership by adding new access and experiences for our incredibly loyal members.

And with that I'll hand over to Andrew to take you through some of the detail.

Thanks, Nick. I will talk more about our performance and momentum throughout the quarter, our profit recovery and MCG membership hitting an all-time high. Before I hand over to Humera for our financial performance in the quarter and outlook, I will spend time talking about our strategic growth plans at MCG and how we're progressing in the next 12 months.

I'll start with membership. It's at the heart of everything we do at MCG. Our global teams are here to give the best experience to our members and their guests. I'm pleased to report that total MCG membership increased by 16,700 in the quarter to 145,000 and 20% above 2019 levels. In the quarter, just around 1/3 of our total revenue came from recurring membership fees which grew to $51 million. This growth was driven by a combination of factors. The consistent high retention rates of Soho House members in line with historical averages. The resumption of membership intakes across all our Houses, all Soho Houses, even the oldest, have experienced an uplift in membership numbers adding to their profitability. Members continued to unfreeze membership with over 4,000 members unfreezing over the quarter and we expect this level of unfreezing to continue throughout Q4.

Our waitlist continued to grow to over 66,700 by the end of the third quarter with membership application outpacing the rate of membership intakes. Our newer memberships added additional 10,850 members across Soho Friends, Soho Works and SOHO HOME+. Our House members continued to provide us with the backbone for acquiring new Soho House Friends members. We had over 140,000 guests registering with us on the Soho House app when they visited the Houses as a guest as a member in the quarter. The exceptional membership performance contributed to a significant improvement in profitability with adjusted EBITDA turning positive in the quarter.

Moving on to In-House Revenues. We saw an acceleration of members using our Houses throughout the quarter with over 120% growth of In-House Revenues versus the third quarter in 2020. We really, really enjoyed welcoming our members back to all our Houses. Accommodation continued to rebound the group occupancy rate increasing to just below 70% with an average room rate increase of 35% despite ongoing restrictions in Europe and North America. Encouragingly, the weekly run rate of sales improved throughout the quarter and we're excited that our members can travel to North America again from this week.

As you can see from the video, the first time since the pandemic we hosted a full events program across all our Houses which live streamed on our Soho House app globally. From Fashion Week in Paris, [prior] events in New York to offsite well-being events in Toronto, our members enjoyed a wide range of events that blended music, art, fashion and the well-being woes.

I want to pause here and mention our membership credits. We issued membership credits when our Houses were closed during the pandemic as a one-time goodwill gesture to all our members. Our members have loved the credits being able to redeem them against food, beverage, accommodation as well as Soho Home. It was the right thing to do for our members. These credits were expired at the end of the September for the vast majority of our Houses and as you would expect, we saw a peak redemption activity in the last few weeks of September. Therefore, it was a one-off impact from credits on our financials in the quarter.

Since we've already recognized the cost of the membership credits program as an expense when they were issued to members when our Houses were closed, when credits are redeemed in the House, this sale is not included in our In-House Revenues which represents cash sales only. In Q3 alone credits with the face value of $21 million were redeemed by members equivalent to an estimated $12 million of potential gross profit if a cash sale have been made by those members, although these membership credits are not included in the revenue numbers we are sharing with you today.

At MCG we are a membership platform connecting members in our physical spaces and digitally globally. Every day we strive to make our members' lives better socially and in their work. We have a large addressable market for Soho House, Soho Home, The Ned and Scorpios to expand into. Our revenue growth plan focuses on a number of areas including, opening new Soho Houses with targets to open 5 to 7 per year across the world as we expand our global membership, launch and grow new membership types, including Soho Friends, Soho Works and the soon to be launched Soho House Connect membership, the expansion of other brands on MCG platform, including the Ned, Scorpios and LINE with a plan to open 1 to 2 sites per brand each year, the growth of our luxury interiors business Soho Home, both digitally and physically by Soho Home Studios and finally, our global efficiency program which Humera will talk more about.

In Q3, we continued to make good progress in all initiatives. We opened 2 Houses in the quarter, Tel Aviv and Paris, plus Rome in mid-October, bringing our total House openings to 6 this year in 4 new countries. These Houses collectively added over 1,500 new members. We've decided to move Brighton House into U.K. opening March along with other openings in Q1 in Little House West Hollywood as well as Soho House Nashville. As Nick mentioned, we are on track to 7 Houses in 2022 plus 2 Neds and a Scorpios, so a total of 10 new experiences for our members.

Now on to our new memberships. Our Soho Friends membership has grown to just under 18,000 members at the end of Q3 with just under 14,000 of these friends interacting in the membership through the Friends app. In the quarter, we opened a further 5 French studios across 5 cities, all using our existing spaces to offer creative space for members to visit, eat, drink, attend events, screenings as well as hosting their own events. These events range from creative workshops to music nights to charity exhibitions. The outlook growth for Soho Friends remains very strong, in particular, with over 350,000 guests now registered on the Soho House app, SH. APP.

Now to Soho Works. We welcomed an additional 1,370 members in the quarter and our occupancy in our offices now has grown to 95% globally. The business continues to flourish as more members have adopted the flexible approach to working using our lounge, office and meeting room spaces to develop their own networks and careers. We have recently launched the Soho Works app, allowing our Soho Works members globally to connect and collaborate.

Now on to Soho Home. Soho Home is our retail segment, which enables our members to bring the House home. The business had a stellar quarter with online sales of 116% and profit growth significantly outpacing sales growth. Our members loved our new assortments launching in the quarter, with an average order value increasing over 120% year-on-year and 95% of sales in the quarter at full price, with members making up more than 70% of all sales. The North American market was particularly strong with sales growth of 140% year-on-year. We opened our first Soho Home Studio in London, a 6,000 square-foot retail space showing our latest home collections as well as brands launched and owned by our members in our members galleries. This week, we will be opening our second Soho Home Studio here in New York. We continue to be excited about the opportunity for Soho Home.

Before I hand over to Humera, I will finish on our progress on our digital initiatives, the SH. APP or Soho House app. The Soho House app has 4 main focuses: all bookings globally, house pay, data content by our members and connect features for our members to grow their own networks, both work and socially. Throughout Q3, we made improvements to bookings and house pay functionality. We continued to see nice user growth in Q3, with we had over 93,000 active users with a daily usage increasing by 18% on the app. Whilst bookings and payments remained our most adopted features, our members are starting to use our recently launched Connect features, with over 20% of members actively connecting on a daily basis. We have some exciting improvements planned in Q4, which will improve our member experience on the SH. APP further. The resilient rate of increase in user numbers and engagement provides us with great confidence for the launch of Soho House Connect membership, which we can now expect to launch in early '22.

Before I pass it on to Humera, I want to thank our teams everywhere for all their hard work and commitment in delivering a great quarter's results in a challenging environment.

Thanks, Andrew. I'll now take you through the financial highlights from the third quarter of 2021. Firstly, our total revenue of $180 million increased by 57% compared with the third quarter of 2020. In the quarter, membership revenue, which, of course, is recurring revenue of $51 million was just under 30% of total revenue. This was driven by the growth in our total membership base, which Andrew has already spoken about. In-House Revenue in the third quarter rebounded strongly, increasing to $67 million. This increase was driven by strong demand from our members as well as select price increases across some of our food and beverage and accommodation offering.

Andrew has already mentioned it, but it's worth re-highlighting the impact of member credits in the quarter. As credits in the vast majority of regions have now expired, the remaining liability is now de minimis. Encouragingly, we saw an improving run rate in sales throughout the quarter, even after excluding any short-term uplift from member credits. And if we think of our exit rates out of the quarter, in September, the U.K. was trading at around 10% above comparative levels in 2019, with North America trading 10% to 15% below, although Europe still lagging at around 20% below. Other revenues of $62 million also showed a strong recovery, up 48% versus 2020, driven by the strength of Soho Home, Scorpios Beach Club as well as our public restaurants in the U.K. and North America. Other revenue also includes the management fees from The Ned in London, which saw a strong recovery in food and beverage outlets as well as in accommodation. Finally, in the third quarter, other revenue for the first time included the contribution from The LINE and Saguaro Hotels.

Moving to our profitability measures. House level contribution, which is defined as House revenues less in-house operating expenses, was $24 million for the third quarter of 2021. And House level contribution margin was 21%. Understandably, as volumes in houses rose, in-house operating expenses also increased. In line with the industry, we've seen inflationary pressures across our food and beverage, indirect costs and most notably, our labor base. As mentioned in Q2, we proactively increased wage rates in June to attract and retain the best labor. Therefore, the challenging labor market the industry is currently facing is so far having a limited operational impact on our business.

The food, beverage and accommodation price increases we have implemented, combined with ongoing efficiency programs have enabled us to partly offset the inflation pressures during Q3. It's worth noting here that we have only increased our prices gradually so that our members felt minimal impact. However, we believe we have more capacity to increase prices during Q4 and beyond to help offset inflation. In fact, our food and beverage cost ratios were 3% better than the same period pre-pandemic, notwithstanding inflationary pressures.

Other contribution, which we define as other revenues plus non-house membership revenue less other operating expenses, was $12 million compared to a loss of $3 million for third quarter 2020. This improvement was driven by strong growth of our other revenue, and in particular, the contribution from Soho Home, Scorpios and public restaurants. Adjusted EBITDA was $9 million, a significant improvement from the second quarter. Net loss was $76 million for the quarter.

As you know, we report our adjusted EBITDA fully burdened for growth, meaning that we include expenses that are associated with the growth of our business. The table in this slide shows some of these expenses. In the quarter, preopening was $5 million and related to the opening of new houses. Non-cash rent, which represents the difference between the rental costs in accordance with GAAP and the actual cash cost, was $1 million in the quarter, and deferred registration fees were $1 million. The capitalization table shows our position as at the end of Q3 2021.

In the quarter, we received $402 million in proceeds, net of fees from the IPO, which has provided us with a significantly strengthened balance sheet as well as funding to support our growth initiatives. During the quarter, as previously disclosed, we paid down our RCF facility of $98 million as well as repaying preference share payments totaling $20 million. In addition, we paid down a $7 million loan related to Soho House Hong Kong. Excluding financing, cash usage in the third quarter related to the impact of membership credits, the ongoing impact on capacity at our Houses as a result of COVID-19 related restrictions in some regions as well as settling deferred rent balances from Q2 2021. Furthermore, there was capital expenditure on our digital platform and routine capital expenditure to support the ongoing reopening of the houses.

Turning next to the near-term outlook. The performance of our business in the third quarter gives us confidence in the ongoing recovery of our business. Of course, COVID is still here and does create some uncertainty, particularly with rising cases again in some regions. However, the strength of our waitlist and rate of applications also underpin the future growth of our membership.

In terms of new houses, we now expect to open Soho House [right] in the first quarter of 2022, in addition to Little House West Hollywood and Soho House Nashville. The rest of our development pipeline remains on track for the remainder of 2022.

And with that, I'll hand back to Nick for an update on our House Foundations program as well as some closing comments.

Thanks, Humera. This quarter, we've made good progress on our ESG program, House Foundations. House Foundations is at the core of what we do and our members care deeply about the initiatives within it. We are committed to building an inclusive culture and helping to make the creative industries more accessible. This quarter, we have launched new membership cohorts across the world in Hong Kong, L.A., Chicago, New York and London. We currently have 423 mentees enrolled in the program across the world. This mentoring program pairs Soho House members with young people from under-representative backgrounds, helping them to grow their connections, confidence and experience, ultimately providing them with a route into a creative career.

Within our diversity and inclusion program, our Inclusivity Board has worked alongside our teams around the world to help shape a culture of Soho House through events, training and ongoing discussions. We've also launched the Soho Fellowship program that gives complementary Soho House and Soho Works membership to creatives who have financial barriers to accessing our spaces.

Can I thank both you, Andrew and you Humera for your great support in this last quarter, where, in summary, it's been a really strong quarter in challenging circumstances? And we and I are incredibly excited about the future and the growth potential of the MCG. And we're nothing without our members and I really would love to thank our members from the bottom of my heart. I also want to thank again our teams who have really worked incredibly hard in these challenging circumstances and also, our investors for all their support in the last quarter and their advice and their help and their encouragement. And I'm really excited about the coming quarters ahead.

(Operator Instructions) First question comes from the line of Joe Greff with JPMorgan.

Hopefully you can hear me okay.

It's Nick here from the MCG. Can you hear me?

Great. Yes, I can. I'm just hearing sort of a massive reverb here. So I'll ask a question. If you can hear me answer it, if not we can talk offline. So my question is this. Since the membership credits have expired, have you seen any change in spending visitation or utilization of Soho House behavior in October or November?

Thanks for that question. And I do want to just start -- it's Nick here. I'm here -- sitting here with Andrew and Humera. It was a beautiful day in New York. We walked the streets, and then we had a load of technical issues and I do apologize for that. It was not the start we wanted. But hopefully, you'll see a strong set of results there. But to answer that specific question, October and November, are we seeing people coming back to our Houses. Yes, we are. We're really seeing people come back to our Houses. They really are making up for lost time. They are obviously keen to meet friends, keen to have dinners, keen to have drinks and keen to get back to life how they remember it. So yes, is the answer.

Next question comes from the line of Steven Zaccone with Citi.

I was hoping you could talk about the labor shortages that you mentioned. I guess, how much is it impacting member experience right now, if at all? And I guess, how are you approaching this challenge? What are the strategies in place to ensure membership experience to fill up to your standard? And I guess, how long do you think this will be a bit of an issue for the business?

Steven, yes, I mean, like the whole industry, there have been labor shortages. And has that affected member experience, not really. In a few cases, we'd have to put our hand up and say maybe. But overall, it has not harmed the member experience. And because we've got such great teams who are happy to put extras in if necessary, it's all hands to date. The support officers have been out in the Houses. We've been doing everything to overcome this. And also, we've got loads of initiatives on how to try and overcome this. I mean we were half expecting this in the U.K. because of Brexit. So we had already set up a whole lot of plans in the U.K., recruiting from different industries, retail, airlines, et cetera, people we want are people we have, people who are good with people and people who are passionate and they don't necessarily have to come from the hospitality industry. So we've taken our net and made it much wider on where we're looking. And also the rate of pay, the hourly pay, [I think we're] pretty well right up there as industry leaders, our training programs, the opportunities that people have as we're a global business to move around and to flourish within the Soho House and MCG organization. So yes, it has been challenging, but we like a challenge, and we're trying to find all sorts of ways around it. Andrew, maybe you want to add to that.

I was going to jump in there, Nick. Just to add some more color, actually, in terms of increase in cost for us, we have actually increased our hourly rates in the U.K. between GBP1 to GBP2 per hour. And in the US, we've increased between $2 and $5 per hour. And we started doing that back in June because we could foresee that this was going to be a concern for the industry and for us. And those increases equate to about 10% to 15% increase in hourly wage rates for hourly staff. And we're seeing that pay off in terms of improved retention, improved spirit. And I think spirit is really important because happy staff is as happy members. So we're certainly seeing that pay off.

That's very helpful detail. The other question I had was on Austin, if you could talk about that opening in a bit more detail since it's -- I guess it's one of your first openings in the smaller metro market in the US. What have the learnings been thus far when it comes to awareness in that market, maybe House volumes out of the gate and then the projected timeline to profitability? Are there any learnings you can apply there to when you open Nashville next year and maybe more broadly, as you scale openings across smaller metro markets in the U.S.?

Well, Austin has been open for 4 months. I was recently able to [get -- visit it] from the U.K. and I must say what a brilliant job the team did without we been there. The design is fantastic. The team is really strong and the membership has grown incredibly quickly. And this is due to the fact that we had a very strong CWH, which is our Cities Without Houses program in Austin. So we started -- even though during the pandemic, we weren't able to do a lot of outreach out there like we normally do, we did have a very strong CWH, which meant that when we started founder membership applications, they did come piling in. And we are now very happy with how Austin is. It's an incredibly interesting membership there. I think we're heading towards over 2,000 members in Austin. By the end of the year, that will be even more. The rooms are open and busy. Occupancy is very good. And the difference between that and Nashville is that Nashville, obviously, we've got a longer runway now because we're not going to be caught up with COVID restrictions and not be able to do all our preopen activities. And we're starting our preopen activities in Nashville straight after this weekend. And that will then give Nashville -- again, Nashville has got a very strong CWH. So we do prefer a longer runway, and we have -- our Houses have had to work around not having that runway because of the pandemic, but we're showing strong growth in all the new Houses, which we've opened, which is not just Austin, but we've also opened in Tel Aviv, we've also opened in Paris. Hopefully, the technical issue allowed you to see the beautiful House in Paris and also we've recently opened in Rome. And we're seeing very, very strong demand for our membership. Maybe, Andrew, you want to add something?

Thanks, Nick. I would just reiterate the importance of CWH in our growth because it gives us a really high level of predictability when we open new Houses. And Nick obviously mentioned Austin, Rome, Paris and Tel Aviv, all of them opened with strong membership. All of them have been seeded 3 years before as CWH. And when we look ahead to our openings next year between 5 to 7 and in 2023, we've already got in every single location strong CWH membership. And that is part of our secret source, which allows us to be very confident and successful on hitting our membership growth targets from years 1 combined.

Your next question comes from the line of Shaun Kelley with Bank of America.

Can you hear me?

No technical issues just yet. (inaudible)

Okay. Yes, so I think when we're talking about the inflationary environment a little bit, Humera, it might have been you, you mentioned a little bit about the ability to take price or selectively take price in some categories. I was wondering if you could elaborate a little bit on that and just talk also about the guest behavior you're seeing at the houses, what are we seeing in terms of price increase versus the -- just overall usage or visitation being higher given demand levels and probably some pent-up demand.

So Shaun, yes, absolutely. We have started to increase our prices already. So across food and beverage, we've increased between 5% and 10%. It varies depending on the product and depending on the specific market. But between 5% and 10%, we've already started to increase our prices on F&B. I see that we have more capacity. I think we were potentially slow to move in the initial phases. But now we can see we still have pricing color on the F&B space. In terms of ADRs for room rates, we have increased those up by -- up to 30%, again, varies by sort of the region, varies by the occupancy rates that we've seen in particular Houses. But we can and have gone up by an additional 30%. We do also see more capacity coming forward in 2022. In terms of member behavior, Nick can add a bit more on that.

Yes. Our members incredibly understanding. They understand the inflation. They don't -- not expect it to be passed on to them. But we are very, very sort of respectful in that because people do want to come to a House and feel that there is value for money. But they also realize that their weekly shop is more expensive, and that translates into whenever they go out. And so members of understanding. It's not stopping a behavior once they're in the houses. And we also -- to offset this as well, Humera didn't touch on this. But our purchasing is much improved. We are not only -- we are negotiating hard with a new procurement team on all our products, which is also enabling us not to pass out all of it on to our customers and our members.

The other piece (inaudible) I should dwell on is membership prices and we haven't increased those throughout 2020 or 2021. And I'd expect that there's significant capacity to increase pricing on membership fees. And I think we can really justify that on the basis that the membership offering has become significantly richer with the 6 Houses that will be opening additional in 2021 and the wide digital offering that we have in place. So we have pricing power on that as well.

And maybe just as a quick follow-up then, as kind of we net all of these pieces together, would there be any real impact on, let's call it, your long-term margin targets? And I appreciate that there's a lot of moving pieces here. And also factored into that, any impact from some of the changes in mix? I think you're seeing some very strong results in some of your other revenue in home categories. So would any of that, I guess, when it kind of pulled all together, have any material impact on some of the long-term margin goals you've set out?

[Sure.] I'll take that. So we're still very confident in our long-term margin goals. You are right. Our serving business is growing rapidly. That's actually additive to total MCG from [1%] rate. We feel that we have actually more pricing power than we first thought across all of MCG, which we will be working through for 2022 and beyond. And then as Nick mentioned, if you think about in Q3, our actual margins at F&B level was 3.5% better than in 2019. We still think there's ways to go there, especially in our biggest region in North America. So in summary, we're pretty confident on where we're directing you guys on our margins, and we think there's actually some upside in that.

(Operator Instructions) The next question comes from the line of Stephen Grambling with Goldman Sachs.

I know it's a little bit early, but could you just give us any initial thoughts on kind of the 2022 outlook, specifically on how some of the new houses being planned and opened compared to perhaps those that have already been opened and any concrete investments we should consider that could impact margins in the near term as we consider the digital membership launch or other initiatives next year?

Stephen, I'll start where Humera will jump in. I mean, our plans for everything next year are very much on track. We've always said that we're going to be opening between 5 and 7 Houses a year on our low capital model and that is exactly the same. I think it was remarkable that the teams were able to open during COVID all the Houses that we've opened this year on our low capital model. And there is also a lot of opportunity out there since coming out of pandemic for potentially other sites as well. We know that nothing -- our members like nothing more than new Houses and new territories and it just adds an incredible amount of new interesting members to the global membership. So we're always on the lookout, but we're very happy with our development plan as it stands at the moment, and it's still very much on line to what we have said.

Thanks, Nick. I'll just add a little bit more color on that. So I think what you're trying to kind of assess is our margin going forward. So if you think about our Q3, we're very, very focused on retention rates and waitlist. So we're at record high at 94%. That will continue throughout 2022, '23 and beyond. Our waitlist is an all-time high and actually outpaced our intakes at 67,000. Those 2 are very, very strong metrics at MCG that gives us a high level of predictability and helps us with our margins. We're already at 30% recurring revenue. Members continued to freeze through Q3, and we resumed intakes in our existing houses in Q3's unfreezing. So all -- if you take all of that going into 2022 and what Nick said, we're very confident on opening our asset light, new locations on time within budget. We're very confident in our margins, but we don't want to give you a really concrete direction. But what we're saying is that we're very confident on Q3 on the outlook for '22.

Got it. And I guess, just very quick follow-up. Are there any kind of concrete investments that we should be thinking about from some of the new initiatives that you can kind of add some visibility on already?

Nothing has changed from when we talked to you on the investment ratios. The digital membership, the investment has already been built in because we've been doing it on our app globally for our existing members. So that's then going to be created into the digital membership and launched later next year. Our Soho Home business will continue to grow, but there's no extra capital investment in retail. And as Nick mentioned, our new Houses are asset light. So actually, there's no material change in our capital investment structure for 2022.

Next question comes from the line of Sharon Zackfia with William Blair.

I guess following up on the margin question, if I did the math correctly, I think the House level margin was in the high 20%s if you adjusted for the credits in the quarter. If you could confirm that? And then I guess I would love to get your thoughts on kind of how that House margin might progress here in the fourth quarter. I assume, given some of the inflationary dynamics, we'll see that moderate a bit, but would just be curious on your insight there. And then secondarily, in North America, I think you mentioned still about 10% to 15% below pre-pandemic levels. Can you kind of give some context on any regional variation you're seeing there?

Yes. Let me start with that first part about any regional difference. U.K., very strong. U.S., strong to getting very strong. Europe, slightly behind all that, but building. When there is no restrictions, our Houses are building very, very nicely. So we really do see the MCG and also The Ned, which you did have before lockdown, 40,000 customers would go through the ground floor and eat and drink every week. We're not quite back at that number, but we're not far off it. So the recovery is strong in all our regions, if not slightly behind in Europe. Humera?

And to pick up on your margin question, Sharon, yes, you're right. So to add back the effect of the credit sales would be good, and that would roughly get you to a high 20%s margin. I think the only piece I would temper on that is one would question if all of those sales would have occurred if they weren't credits available because clearly people had credit to spend and they needed to spend them. And so high 20%s is generous, I would say, mid-20%s would also be a good place to land on household contributions.

And just to follow up on the first question. I was actually asking about North America and whether you're seeing variations in regions across North America.

Sorry. No. I mean, as you know, Sharon, Miami has been strong throughout whole pandemic. New York is incredibly strong. I was down on the West Coast last week, very strong. Chicago has picked up nicely. Toronto, really strong. So -- and Austin, as I said, really, really impressive, what's going on in Austin, considering it's only been open 4 months. So we're very much liking what we're seeing.

Next question comes from the line of Thomas Allen with Morgan Stanley.

It's been about 6 months since you acquired The Line and Saguaro brand. Just any updated impressions there? And then any thoughts on additional acquisitions?

Yes. So in terms of The Line and Saguaro, it continues to perform well. We've achieved high occupancy rates and really, really good ADRs across that business. So it continues to be a positive contributor to our EBITDA. As you know, that's a management contract. And so that's pure upside for us. We expect that business to continue to perform well against sort of the comp set. In terms of going forward on acquisitions, continue to be opportunistic in terms of looking at transactions, things do come across our desk quite frequently. We look at them, but it's more opportunistic as opposed to a main part of our strategy.

Final question comes from the line of Ali Naqvi with HSBC.

Just in terms of the weight list, how do you expect that to flex over time with House openings? I mean, you've got 3 openings in Q1 next year. Would you expect the waitlist to go down? Or could you just sort of set the expectation, so we're not so surprised by it, please?

Thanks, Ali. I've been doing this for, I don't know, 27 years, and I've never ever seen such demand for our applications at this precise moment, not just only in our existing Houses, but also whenever we go into a new territory, the applications don't -- they don't -- we don't go to the existing waitlist. We create a new waitlist for all the new territories and they're proving to be incredibly strong. And I think membership is where it starts and where it finishes for us. And some people have subscribers, we have members. Some people have content, we have houses. And the more houses we open, the more members we get, and we're very happy with all -- we're delighted. The existing members are delighted when new houses come on board. So it's incredible to wait there. I think also, Ali, to add to that, after pandemic what we offer within the MCG and specifically Soho House is this real hybrid living and with Soho Works and with just Houses, people can pick and choose [indiscernible] of their lives, and we offer the facilities for them to be able to do that. I'm currently sitting in Soho Works and meatpacking in New York. The place is packed of people who might have been in a corporate office a year ago, and they will then go over to Soho has meatpacking for their lunch or early evening drink. So we really are seeing that the pre-pandemic way of living really suit what we're doing at Soho House.

Got it. And then just if I could follow-up quickly with another question. In terms of occupancy or volumes versus peak times and maybe mid-week, how does that compare versus pre-pandemic? And Humera, did you say that in-house was running at sort of 80% of 2019. Can I just get that?

Ali, I'll take that one. So I think if you take all our global bedrooms in Q3, we actually jumped up to a 70% occupancy. Back in 2019, we were running super high at 95%, and that's without any booking engines and it's all done on our own website and app. We see that continuing to grow throughout the quarters back to 2019 levels by Q1 as people start to travel more, especially now with the opening of North America for us BRICs. (inaudible) BRIC stations have been here, and that's fantastic for our occupancy in North America. So from a occupancy bedroom perspective, we feel very confident, and you can see in our Q2 numbers, it jumped. From a House occupancy perspective, we're pretty much back to, like Nick said, 2019 levels in most of our Houses. So we're pretty full. What we were able to do in Q3 we stalled our intakes in existing Houses. So we resumed our normal intakes, which is pre-pandemic, and that just adds to the profitability in each of our House. And that's a really key metric as we grow, that we can always add new interesting people to our existing Houses, which ultimately leads to increased profitability. So I hope that answers your question.

And just to clarify, I think you said is In-House 80% behind. It just is behind 80% of 2019. So it's a blend across the different regions. U.K. was 10% ahead. U.S. is -- North America is 10% to 15% behind, and Europe is still lagging at about 20% behind. So that's sort of the weighted [effort across the piece].

There are no further questions registered at this time, I would like to hand back to Nick Jones for closing comments.

Well, thank you very much and thank you for sticking with us during our early technical issues. My closing points is I think we've had a strong Q3. It's so brilliant seeing our members back in our Houses, laughing, smiling. It's great to see -- get back out on the road again and travel around our new Houses, be it in Paris and Tel Aviv and Rome and also the new opportunities in the future. And I know we've spoken about -- earlier about The Ned, and we're very excited to see The Ned come to New York. (inaudible) spectacular building, spectacular site to be able to bring back what we've done in London and the membership over here to -- will not only help London, but will also create a very successful [new Ned] here. So the membership is increasing everywhere, which is the key. Our digital transformation is happening at pace. Our members are really enjoying using the Soho House app. They're really enjoying connecting with each other in a physical House, but also they are really enjoying connecting digitally through the chat. They're enjoying the fact that they can book tables, the friction is becoming much easier for them. So yes, the member is -- they've been incredibly loyal to us, and we want to pay over the next 12 months and thereon after. Just keep on producing fantastic houses for them to enjoy adding more and more interesting people to our membership, which then will create this unique global, created membership of interesting people. So the future is good and exciting. I also want to obviously thank all my leadership team who have been incredible during this period of time. I'm sitting here with Andrew and Humera. But that's just a start, there are many, many more, which I'd like to thank. And I'd really like to thank all the investors because I am finding this whole going public experience really enjoyable, meeting smart people with ideas, with good questions, which just make us better. So I just want to thank everyone out who is doing that. So that is it for me. Next time, I promise -- well, I can't promise because I'm not very good on the technical side of things. But hopefully, there will be a much smoother introduction into our Q4 numbers and obviously hoping for a happy set of numbers as well. So thank you for me. Andrew, thank you for you.

Thank you, guys.

And thank you for me.