DS - Earnings call transcript Q4 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning. My name is Lorie, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Drive Shack's Fourth Quarter and Full Year 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the prepared remarks we will have a question-and-answer period. is call Today’s Instructions] being recorded. [Operator you. Thank this over to I like Investor would call the hand to Austin At Relations. time, Pruitt, of Head Please ahead. go

Austin Pruitt

like Drive Lorie, welcome earnings you, and morning, I Thank good call. you fourth Shack's would to quarter XXXX everyone. to

here our Executive Joining David today Officer; Ken Financial Chief our Officer. are and May, me Chief Hammarley,

forward-looking like that have an investor already presentation annual we reports call remarks filed download statements. in to investor and disclaimers you to have will posted now, the with the review statements. May. and presentation not which include quarterly SEC. out those factors you We Actual differ if so. would the We by our turn to And like the done to made to today would review in results over and our I press encourage these certain materially I on Ken release our point considered you risk to forward-looking encourage website, from contained may

Ken May

Austin. you, conference to us. Drive joining you everybody. Good Welcome quarter appreciate We call. Shack’s fourth morning, Thank

of of American XXXX and going a goals and excited be time bit and to As going really QX summary to I to happening we will here. some to our lot that plans of a those are Shack Golf and XXXX things think joined has and of hear summary you about. changes, we There excited of our on spend there. a here things that been investors lot a be morning, Dave will November and give business give be little recall, but a might for which results David in and detailing and this is I’m we’re of Drive exciting changes

how am it. an it’s excited very As background, be you experience Drive Shack, to know incredible by I can’t to just you at I far I’m tell as begin humbled

At bottom world. I the over started center I had XX operations there. my all moved delivering way years billion package world. years had of people spent last And different unloading up. $X airplanes with At my FedEx. XX I where As moving in-charge I was I their XX,XXX ran my trucks X,XXX control point, world-wide and at background, XX locations. roughly the point, have FedEx I the the during as where had of was XX,XXX and people, had packages operations one job I far I’ve and where Kinko's, there one around all in revenue, then CEO U.S. there of assignments

there, we locations there, are guess period tenure how my we go I hard that a went we people great XXX where lot very that lot opened a During locations up over know – had the experience culture X,XXX of weren’t I through a there, an money of applicability We of locations really up is, locations from of when of carrier, you a we lot to open and making working who XX-month lot help me job and fast. associates work people to was XX. When seven of a enjoyed to built incredible the my FedEx really associates is that seven there, went and and there. they experience to has me of precision were known helped Drive and and XX,XXX went up CEO from people at And Topgolf. it’s Shack. in going here to execution for my last so

entertainment company our business eatertainment interactive into to at want industry my that golf what knowledge as our rapidly and growing apply the at a I Drive trying minutes and Topgolf We and And experience eager an I content. continue so, at few gained we’re want FedEx on and to do apply spend to dining I’m to to goals. to with expansion great Shack.

and the long-term. operational for results golf our for priorities far going courses growth driving out optimize plan Drive execution, to As between own selling Shack’s and laid segments. to Number intermediate we’ve fund synergies to the one the traditional be three two for our as is, we’re

Secondly, will we operational backup of will attractive be customer And Shack’s print level unit growing our with at high locations. economics facing quality Drive each venues. and third, improving foot entertainment we house achieve by capabilities

bit go more of So, priorities. me detail into on little let each these

$XXX strides end. sold with have courses, In been to close which minutes. American we courses, contract year in XX golf additional made of by short, far an the will a as As Golf, under David highlight proceeds safer or own few monetizing have sales million day million just of so in a expected

to estimate for the platform on for also American growth funding the from at year an to Ultimately million work to the additional XX We the XX entertainment business. hats long a of Golf will in extraordinary. my plan two team term. past proceeds sell value over courses we Shack's they’ve serve this been has off these million as done And golf Drive

golf We're to fast. The focusing second growing nationally quickly. priority our entertainment grow footprint very on is very,

extraordinary than has Our job. even team could, and I they Ted thought is development have a Heilbron his the an is up as extraordinary, great job. done shaped team much and that pipeline assessment an just done faster it

they location are they negotiations forward, keeps four the to under four going is Portland all that today, and Illinois, so to quickly. into Texas, then Chicago California pipeline toward a Those new and And as contracts optimal but So of deal, add rolling, Beach signed, we continue in Houston is and on markets. will our entrance have building Newport new are – I’m very are announce we pipeline Oregon, executing of deals of and which contract. we under sites number California, markets downtown as sites these them across that are announce big them, is then the which thrilled situated Chicago, quality all robust

of fourth process sites buildings Palm our three are in of and in quality third, and All West going in as being Raleigh, up and open of sites Richmond. in under the half far up we Beach the As trade Those the are finished. second, areas. second will those development, year,

of have From VP ensure I hand-in-hand ensuring acute store both head with leading to and up entertainment and defied up. to both working stacked and interest experienced dozens golf of [Indiscernible] are with We open other new our they veterans have these and these filled on plain development both businesses to you will a openings the experience our hope construction [indiscernible] end operations and with that teams up new handoff pick of we multi-unit facilities. players. begin

that. we will comfortable very fourth we in in quarter, breaking our ground execute location upon In I'm Orleans. the can that New so, be And new

will excited in to Island, begin on We’re range begin XXXX. about at American Randall's Golf venue, operating spring starting flagship and we the driving will New construction York our that then which City

to Third, our box new I size. talk like would about

to for to going a that out that’s we all in competition. XX of months rolling this We’re box be something over the tier target time leap is four be us Bay it NSAs. last of to going We the allow these allow going to venues spend us smaller the lot in X to feel like untapped and

most expect the will within stores, markets addressable we the the the common will be grow, And have is this cost. as average format our across is design United the three build as I'm XX-bay I capabilities. which building double that an incredible was operational down nearly will most it proud that that States, team. Priority built thing we and bring think, Specifically, we our

a and team put that to new type together is to dozens X, locations. in before, beverage, across and these opened done these our sales. hired in about risk there the of learning functional earlier hard built before team. site this veterans new and and and so and or development, then have development, and X that area there, to who every second to in a dramatically functional particular event areas our has done We’ve close We with that we’ve dropped none new in very also working functionaries, the and executional first been people these team something just people industry-leading we’ve site I leadership our The IT, all I we’re referenced store improve because think have operations of that food up [roadside] this had know-how. hired has Orlando, And opening

you The is different second You strategy. that When company, Because the them and have almost have company. differently incent now under and And golf a a were company? and capabilities you take much just brand know the operational that month we thing that guest. what’s differently, as them entertainment entertain as guests. David to of care we happy an employees I changes, hire entertainment started, an are we to employees entertained and people train

that start as go L&D efforts, new you're on so excited entertain that’s out what that to our I’m we’re we in And see about flair going materials marketing and to our come focusing and very forward. to

the and Third, be with venue feel foremost new design, a on venue. most with entertainment the the our side evident shift of first will

box. we're As I mentioned, redesigning actively our

way journey. Beyond for every the our along the venues size, in it accounts enhance we will consumer's step

as walking feel want our venue, door and As to car into guest excitement the soon opens, our Shack. feel we like Drive party. into we’ll a And walking from overflowing the energy

to you the to not our offerings. spaces us venue that entire throughout look constantly innovate Additionally, create if base allows the just

New the and sites You location. Orleans in can specifically place expect our for to see first would XXXX structural one in changes opening be in beyond,

opening aggregate, guest. throughout this We’ve we’ve tweaks for [to a year, aesthetics] venue give our made to building sites a that For the will generate changes thoughtful cosmetic some atmosphere different made makeover. the don't

to mentioned Specifically, how train totally it I a people development and earlier this. in training, we and will expert hire do more And hiring be we were how and hired leading we’ve learning trendier, relevant. on people. and edgier, we revamping

difference we next become We is in have this edgier, three will as are an better like open be process processes that And will guests a of and for and feel changed if fun so entertainer and rolled we everyone. our the where those gets so, better they up big word locations. being out key feel everyone, a the for attitude, for these developed new like experience, we

a On the we have hired side, Chef. corporate food beverage and

We percentage from food working our food are of totally the starts that made with on scratch. execution that’s

our So, backup developing then and our It kitchens, on. going fresh on move house working approach so operations supports us you being those our that and technology menu more see things to the into and goes are are executing towards it. to

this rolling in working our in will all industry. that design will result trends which also My we this that Orlando breakeven a brand organizational in the on In the focused on very are very, and target more is, in substantial after believe structure, a EBITDA specifically, changes we locations, next which new be we of these three of expect improved will identity menu streamlined We’re to economics. conclusion by key all year. a strong our be next out operations, year and in are confident food factors functional achieving generate and revenue Orlando

to that to ensure is nationally. I'm new the and turn over a moment York New the team part in actions The City. American that I are concrete a proud before want doing Golf and footprint thank to take very at brand be business, capture our can while teams our venue all to building exceptional necessary Dave, I of management support ambassadors we’re So, near-term motor all our in opportunities our taking of it to Orlando and [team]. this They the hardworking in growing to we

so come. We what’s about to excited are

XXXX He’s David. over So, turn to that, over going with going to American go I’m to and it Golf.

David Hammarley

and Ken. us joining you, call. everyone for morning the on Thank Good thanks

a prepared owned with solid quickly and the generated on and I’ll results short, our full-year fourth but course a company are our sales give The on performance of the overall on slower-than-expected, growth review provide prospects Orlando our we in venue status perspective beyond. brief in quarter progress, golf the remarks, for you XXXX For and update a my first was total revenues entertainment progress. ramp-up basis. In bit pleased for overall we XXXX,

quarter current ended point chunk the the own additional note, business point. in sales we of well. courses to to for detail a models the closing sales substantial to our year golf our go also high on as continuing a before One call is had an out that numbers We the with inflection

ultimate agreements courses business. Golf we and traditional less creating traditional the by course our past in our next short, new with open meaningful into additional makes business. golf American In will golf recurring the we venues. mentioned, quarter our golf changing we’ve for liquidity several changed fund within to in plan. year-over-year as this our sales result revenue overall growth, XXXX process, our interpreting buyers execute As also streams significantly several XXXX. and this generating Ken entertainment To This continue strategic management business quarters we’re entered new that Through selling is own goal with

in a fourth Additionally, quarter on makes standard flat company year-over-year million $XXX side overview in revenues. for let being which the On results. that an less new the standard things, total to full-year a XXXX XXXX said, give more implemented After With accounting of financials XXXX. XXXX, basis, was was technical of comparable. all and GAAP generated the full-year changes, full-year we accounting adjusting XXXX approximately compared me

For since venue in in golf our year-over-year the XXXX. don't Orlando comparable segment, performance April we discuss entertainment opened first Shack have Drive to

average In compares XXXX per per average Orlando revenues to with QX terms of in XXXX of million million revenues with the visit in of venue $X.X in $XX. performance, absolute $X.X This $XX. generated spend spend visit QX

new enhanced events up that corporate moving sales the by we are implement marketing X%, including will business events increase also QX, forward. walk-in a new quarter the business drive a incremental a historically In event November/December, The approximately visitors. by positive Orlando from the be topline and driver to the on strategies month per recruit start visitors. focus show in helped driven mostly XX% walk-in such average results trends, optimistic we to continue digital initial visit for targeting, spend and programming in event as Our

us over will a topline several lot the ramp leadership new venue to that each up we and new continue performance that quarter. As the several mentioned, Ken confidence and of have implementing then financial operational last capabilities team give Orlando strategies hired its weeks, a

venue million margin will XX%. to markets at build. format revenue EBITDA will to Ken to approximately million said, XX-bay lower a at stabilized be of economics $XX our into allow new this As tap more an cost in Target venue $XX for

updated versus and Our been previous slightly outlook. improved the economics have XX to XXX-bay are

revenues at from XX% million target approximately million to We to margin. have revenue $XX at increased million to $XX $XX margin in our $XX XX% million XX% to an

Ken stated, have significant business. entertainment expansion we golf As for plans our

three XXXX, we will We year, venues have this thereafter. and over to venues This open each by the open that five U.S. means XX XXXX, to three across plan XX new year to in five

year. focus traditional Moving a on to overall portfolio golfs, traditional it up revenues to revenues the down bad prior sold X% up given versus X% up were year. On were weather. full-year of same-store makes on playable our days played year numbers our and basis, despite in were this same-store to impact sense public our QX prior X%, X% golf the XXXX, performance courses versus Rounds to being primarily courses due

Additionally, our in grew XX% Players membership course public program, by golf, our Club, membership public XXXX.

[indiscernible] raise member private our we courses, golf member at the average near despite by to capacity, or For our were X%. able dues being

$XX million to year, in owned We gets sales to million us sales total are million million gets $XXX course sales sales months, full-year golf proceeds golf For we the the in of of additional million of XXXX to $XXX original another guidance end our of XXXX. by sold golf $XX public total course in for of owned bulk proceeds QX. XX in few in closing $XX which closed still course the additional which courses owned portfolio. a of to of million course expect $XXX XX our which the approximately that The an next owned $XX XXXX, the complete end our compares program, million to-date. this $XXX for January of goal by us with million we’ve in for prior our Since full-year sales,

$XX million our more to that value range tightened owned long-term have For the million guidance $XX two estimated to development including remaining value, compared we’ve $XX of $XX upside, potentially million, to to XXXX the courses million.

the We range updated these the after individual depth markets. have redevelopment for two the evaluating courses of in courses potential sales two proceeds their in upside more geographic

We in monetization will XXXX. of the continue to these courses remaining two explore

traditional certain eliminating our includes combining across ways than This immediately, and rather businesses. efficiencies Drive see combining office driving leveraging on entire and focusing Golf forward overlaps, functional Americans focused also aspects platform back some the are individual of teams straight efficiency businesses. to many leaders platforms improve and and on Shack. technology We entertainment golf across we golf Most company by

Similarly, continue crucial Drive profits leverage years more courses in golf skills York the will require plus we key both XX the traditional to American will play winning experience and municipal Island to City. played Shack course revenues look entertainment in Golf’s American add experience drive role to business. to These New in enhance management Additionally, for unlock sites Golf a which flagship often of Drive course operations Randall's gaming or and strong plays. to golf of Shack’s we that technology excellent relationships,

year-end owned, Golf As XX and XXXX, of properties. leased, managed XX XX consists of the American portfolio

to owned leased growing for our be the goals this Our largely management business the monetizing continue properties, optimizing business. operations, and

In addition, both proposition Drive be ability our we driving leverage Shack’s unique of our gaming a technology on growing courses will segments ranges business. in believe value golf to

today, Before for the I to business. future our like I’d expectations end summarize

We We in from revenues sites flow site continue to Orlando XXXX a revenues three XXXX five cash and our to and onwards in its in XX and XXXX, second to to at XXXX, than half and five EBITDA flow in Shack them generate us by more Drive anticipate to plan and and Raleigh, putting the of in XXXX. seven breakeven expect sites XXXX XXXX. open sites ramp expect up new Beach We Richmond starting to generation to meaningful Palm in West sites the open cash beyond. perspective and

the our build and versus $XX will outlook. the improved to characteristics venue be market. XX% site level to with Topline between geographic previous the and Moving to million we and of unit by driven of individual target are million cost be size of $XX million EBITDA expected to anticipated to cost XX%. slightly to million be are stabilized forward, revenues expect our $XX margins economics be per Target $XX the

We owned of all, million courses, by course expect the owned our include XXX year-end with golf sales, remaining million, which already closed. have which, total to of two bulk but of XXX the proceeds XXXX complete growth

monetization continue to two remaining explore the will in courses We the XXXX. of

and largely annual million in portfolio, use golf it in will in we over proceeds Drive stabilized In platform golf. to operator create I’ll in improve that, are entertainment as beyond. accelerate the beyond. our approximately $XX Golf our and are managed portfolio we We for our free turn from questions. XXXX lease a a growth that these Shack the cash to of and million flow momentum primarily business actions of both lease will and taking XXXX expect for I’m to to After American completing and net confident transition growth strong operational $XXX generate traditional owned revenues capabilities With closing, over XXXX starting for our the the business

Operator

Instructions] Thank Kelly Your question Imperial Capital. George comes of you. first of from line [Operator the

George Kelly

taking the call. on provided for questions, that the Thanks conference guys. added appreciate you I Hi detail my and all

Ken May

George. Thanks

David Hammarley

George. Thanks

George Kelly

on could. a few and for targeting me, now, expand questions so smaller to site, that, know, – I sort just of you're So, just that first if new looking you you and about understand metros

about how new when been a forward? regional new So, do I sort strategy remember entertainment you're locations. the picking Is clustering And expectation Topgolf locations? that think of going the still beforehand you of had

Ken May

thank question. you George, for the

clustering. will be doing not We regional

footprint. the on focusing national be to going We’re

where we estate to go opportunistic to might we in the certain There the where not, where competition is be we the going intention. – that not. to where be is is closer deals We’re like our competition real be population see markets would might

we're very a but And be tactical, it forward, so, scale. on we’re will be going smart what going national about very doing to

George Kelly

are game you some just more how Okay, the major give mean of the are okay. you with current of or about format. they different? changes sort And then, what Got it's and contrasting structural the detail biggest are else, to any the in whether you. changes mentioned any anything – Orlando, the What the just the about can technology I – location

Ken May

know, our second on is the So, main you bar – is now the main know, right that, thing is you floor.

earlier, down to walking it going – come like you you’re like first be into walking you’re the We’re moving to in floor. a I – to we When that party. in, said want feel

down we It better into walk biggest bar it an going main experience box are into going that things the take when you yet. not and that will the moving to that will so, be we’re prepared the – forward. And talk a They to change. even creating it make other energy to even are added a building be about

George Kelly

all three next is that be the locations of Okay. under between, look And will development, will already fair? this similar – kind the in

Ken May

to, look know, it, of – available be They is far started, things will the you like David out move bars to pivot and pretty much steel the and coming at were around and when us, the to actually but that too to I ground not we were along. so ability they

And some to going type aesthetic building. doing the to so, changes we’re be

past. We programming differently, in days Certain you’ll anything]. be will the building the programmed be nights a It will structural the the week, those see aesthetic will than that of changes will [than be and of the be the buildings. it of week, biggest I two bit to certain programming think certain it more and – parts we’ve different little been

George Kelly

to future monetized? where legacy implication portfolio are there or maybe okay. be and one proceeds time What that about the the And any of about net of I expected is you there financing just of that – the kind then cash? last the then, – with more tax can Okay, legacy any that’s is portfolio. And still sales question golf – – you Can understand ones? just all these – in you sales the me and is of debt gross left for are any of properties

David Hammarley

Sure.

last question first. me Let the take

on position we on the away portfolio, moved one our that that from debt There $XX is is, million you roughly balance know, have business. You legacy know, sheet.

$XX We you top think and of medium is that. so long-term about know, that the value that’s a million, covers long-term – that. play. to so, staying we’re on that And We’ve

courses, the liquidity, million on as range million, the think our golf of we proceeds million to gave – cash have know, $XXX terms and we about of In course of gross overall debt to I know, and you million out take cash that, you XXX hand had of hand, adding we XXX that XX $XXX about, off gives against around you which would us we’ve of million gross of the the already roughly that of XXX those paid which to million. of proceeds

aggressive we year, as our And development think fund so, financing going that, about we’re know we plans, we market in the have, to order you in growth. next know, the starting going be to

We’re confident with performance. the operational

financing We’re vehicles discussions in so preliminary to go that economics we’ve drive that have around the types going – venue starting the used golf sales. financing will unit necessary and that of have our been we’ve have course some already that to to best open out the get we utilized after growth to have of we’re and incremental

George Kelly

you. thank Okay,

Ken May

George. Thanks,

Operator

fourth and call. no are today’s questions, will for XXXX Thank participating all. earnings quarter Drive there [Operator Shack’s we you If full-year Instructions] in conclude further conference

disconnect You have lines now may a and day. wonderful your

Drive Shack (DSHK) 14 Mar 192018 Q4 Earnings call transcript