DS - Earnings call transcript Q1 2019

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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 First Quarter 2019 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. at given be will that time. Instructions is call being recorded. Today’s Thank you. I like this Investor the call At Relations. hand of over would Head to time, Pruitt, to Austin Please go ahead.

Austin Pruitt

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

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

that already We certain to download if to we encourage have posted you will like today an made would investors have remarks supplement done not include on point I out our website, which statements. so. you forward-looking

and differ call Our actual the SEC. the from results over release to in the these by I quarterly statements. now, our And annual risk in encourage may and like to review reports materially to filed the to those presentation, turn and contained review considered with you investor Ken. would press We factors disclaimers our

Ken May

QX Thank to Welcome you, our call. Good morning, Austin. earnings everybody.

today. our have and got joining our lot things American to am and been where of and we us. and are good and We talk going to what a at to defines going goals Golf with XXXX summary a Appreciate QX I discuss short you just going start the follow-up team. with about tell done QX results those. by Dave has the with you is initiatives to

inserted leadership appropriate. functional area been business have you much thought been can’t and we every little every level, again I where restructured has far have had been and done, facet has I tell of As a for high – and this to here months been summary David at or how There as keep six now. a and new I imagine of a restructuring. changes lot restructuring

of so leadership is in have team as the some have in seen right my what here. I we And good business, never years XX

love company. level, where at are high so, we And we as a

plan. on to execute – poised begin executing are our We

guy, FedEx delays we do FedEx At airplanes and going am the we remind you we going focus we locations do. out are for trucks around we to very, and We I since more. I minute world. what and launching focus say very XX execute, Just a see you, have to years we having these two open are as begin much quality as for terminated flight three people so rolling and us

that I goal want presence to our interactive the remains golf content. an into as same, business the entertainment has expand Our Dining and industry great Entertainment

quarter. had want locations XXXX. as second things to We far open we ready wanted get three our get QX, to next first done half As we to three of this really the in

significantly We how very, to have very and better like going they we very are are going that strong. Orlando and April. up we They up on them are focus opened up opening bullish, hopefully, and open doing well to than last laser be

So is are teams those of are in in place and we open. focused and everybody process getting a

much to too so too design and new third build spending improve The place. reducing be leaders is continue thing our the build real to Quite on in that. in we robust processes speeding which improve about focused which was the They had We that. build second we excited to and them, build them, was and new long processes we going estate in taking costs and put pipeline. reduce venues a we it to venues. we are on frankly, our place and the to and us our costs area construction velocity done to so wanted up speed And were

the We're deals winning team country. across real has estate work. Our done incredible all

we one to really be today come. They there lot more a we have announced well. are and ones XX announced, of doing Some will will

that priorities plan level macro you three the focusing to on. up back be going XXXX, give we Now will for I’ll

and things so had weren’t lot some place, of synergies Prior to begin and overhead and we synergies home. Traditional to old two one to harvest taking redundant and as the structures Drive at processes First and we putting segments. a purchasing I to is operational opportunities started growth between Golf courses Shack Drive Dave firewall American Golf to we're of advantage our relooking a Shack our fund Chinese was between those that in and such sell there and derive

do attractive and achieve and of was customer have said was a and budget, Venues time The improving just and on to Shack’s as delivering the be second more high and second on talking quality footprint about to that. already, Golf Entertainment real facing thing with grow it by capabilities the Drive And will team is at third locations I on unit our level back that. economics thing operational house I estate

the pleased sold our more for So our into in but strides approximately selling going are let’s to go course. liquidity. there. all under $XXX detail back proceeds own we Nearly we very and selling substantial contracts we are with courses of few short-term will or at be were in golf David made in have a expected where minutes, million

as working funding additional wanted $XX that. and $XX Ultimately, business. sell for on net Entertainment million how to Golf estimate proceeds also to our plan value platform million the growth and in courses we a will long-term of we the to We from serve to two are accomplish

for do is priority and very to The it grow our Entertainment second footprint quickly. XXXX Golf

to remind Randall's New announced fights. competition outside Texas we Beach, XXXX onwards. you, wonderful are open Beaverton, able have were of Downtown A All our California, Louisiana, Newport Oregon We get. wanted site and one, was Chicago, in York locations Orleans, a previously We've wonderful site Grade Land, in that in in outside Portland. to that New Island of a Houston six To Sugar

want already of hope A go forward those so America are Bloomington. one, And is on announcing to six, We either we five that. This we will own, in this we it ground them is our Minneapolis, minutes it we add killer is as the Mall from XXXX. suburb we location, to so, with excited the in to as and or a another then about signed. it’s today deals were location year on Minnesota get public And continue later of quarterly Grade it calls break early be a going and

we Palm Beach, Orleans and plan we as then XXXX. sites are and are under Raleigh, Carolina, second, we As under market. stated New break in development, sites far locations that are the Virginia West Richmond, later to this New earlier Orleans fourth second opened and in construction, of our ground North are be committed to will Florida, as half and third year the Those

XXXX as our as operational As capabilities, quarter. three priorities, news as of the big far is this part the far for

We the have days this. on XX last spent working

a pro tracking are for leading even is vendor excited to in – it. a world Trackman. XX% not the of use Trackman are partnership world practice announce that the we them. We pro with Most PGA renowned behind Trackman ball a having tour

USA, so Memphis, as top as the Trackman equipment I broadcast the world such Channel, companies driving be have next the retrofitting top manufacturers this our locations of to universities we with and Australia ESPN, say the that. these China, will largest such far Stanford, and Titleist soon world will three and we And is installing particular a as the trusted we in as will games then such of in be the is Golf partner Orlando the technology and open team University as, Duke the as be and thereafter so technology. TrackMan and world's International that Taylormade

a of As really have work on far that. done as new lot venue design, we

is design complete. our almost Venue Bay XX Our

We I LA excited [ph] finishing to work and he we wasn't His , crews have him tried pleased Shack to at a one announce Stadium Stadium that. hired to Stadium, of Cowboy as lucky of his week at force. come We've work He starts design. up that all are I to designers projects Topgolf, Whiten about He's from in is as to able been helped well to leading Monday. the notable hiring him. and and country him the he architecture up Drive hire Rams we going the our on get enough so in design head just

our this. totally far He as hired beverage, food to veteran a menu. and operations over our is hospitality improve food industry As all we experience and

We have menu. redesigned our

starting rolling then have in locations June that will out and will all particular it our new menu. We be

I want while but to opportunities, conclusion, say brand growing near-term building are capture to in actions that, footprint So just necessary nationally. we our taking and the

going so to hear We and be are doing. very I are to we excited as over and very but bullish more think, to excited about we coming you investor quarters, are what about the where are come

about going to and it turn with to Golf. numbers into I So, go American David some to that, talk am over

David Hammarley

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

the on the of first of update overall business. review For and the we overall prospects generated and are and my on provide sales Golf for progress an performance pleased provide results, the progress core We company on venue to growth a total improve. ramp-up status Entertainment revenues prepared Orlando the and sale I update In beyond. our the basis QX continues in own will with solid short, our XXXX brief remarks,

also have courses. We golf own further made progress selling our

inflection As business is point. at a an model reminder, our

entertainment within is opening business. Traditional liquidity Golf generating Our our on are that Golf fund we venues. selling new American plan growth by own golf we focused courses To the growth this

past a make let and interpreting XXXX is of continue the and $XX said XX to we less the an year-over-year Our next XXXX to strategic sold quarter changing compared quarters we On quarter the and of QX of for the changing beyond. provide in overall results. results approximately as will XXXX. business execute golf in generated me total revenues, QX $XX. meaningful being mix XXXX as That the end of basis QX primarily first due plan. is our overview XXXX This several Decline company courses in million revenue

generated increased in by total the In segment, have year-over-year XXXX, XXXX we XXXX, the venue compared venue April to by performance driven visitors. revenue, quarter. in Orlando XX%, this don't our XX% a first comparable to Turning in we $X.X Golf QX million revenue increase QX Orlando’s Entertainment so opened in

quarter. traffic Orlando this venue excited about are increased We the our to

to revenue of events. accounted of for XX% to total split of revenues, XX% XX% compares event accounted for events and that The Walk-in with business of XX% three in local QX. walk-in strongest As demand This corporate sales revenue our our we've QX's activated a the events during typically grassroots visitor the further the and QX grow venue, of QX a brand next focus marketing Southeast year. of across Ultimately, mix team per on events sponsorships we $XX sites driven spent first versus QX, strategic to business in golf will this a slightly and benefit awareness. entertainment per by lower be have a we year, overall as quarter than walk-in was given generally this holidays. percentage the spent higher the visitor revenues. expect down open the of $XX

For played industry QX April California. for largely our our in of golf based. down in QX remainder same-store versus was much average Golf, were where year, the X% Based weather in prior our were metrics, our geographies, course optimistic California the we revenues The revenue weather rounds in are favorable year. on Traditional driven about industry than worse by is XX% California, down so of Traditional for more the especially XX% Golf major courses,

continue our Club, membership growth up public Players We be membership to new consistent with on by program, XX%. course

same-store or clubs capacity, rates courses, increase near by total dues For X%. private the revenue despite member increasing X% by golf average we at being our member membership

have courses XX million the for we of today, terms of for of since own since total XXXX, XXXX. million course a including start of sales, our the In $XX five sold of courses beginning golf $XXX as

of own to additional goal of total We approximately golf expect complete next the million our original sales few courses the end the in in to XXXX. in course $XX which in XX months, sale were The the XX proceeds $XXX million $XXX proceeds by own million us of gets portfolio. course an of the

development value For estimate long-term the remain that range $XX more million $$XX we courses own value, upside. to including of have two potentially a million

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

XX managed of American eight May and of XX XXth portfolio properties. the owned, consists As Golf leased

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

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

world-class Drive months. have team assembly over Ken last progress Shack a made few we said, As the to great

a other we team forward us to cost business enable the that hired than few relatively dramatically hires. have will the base we We a anticipate scale up corporate need select steady and strategic moving

Entertainment cost we've the to implement Golf across efficiencies Golf Golf businesses. frontloaded have the we team While our plan Traditional support to growth and Entertainment for also started business,

We X% have With revenues started to to few place, in as company team office under the Team largely business back structure. operating to expect and of down we overall such XX% functions scales our our to and handful of integrate costs the years One cost next accounting up. as scale G&A over the total IT

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

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

we forward expected to level up $XX to venue are per be approximately new $XX economics sites. between market. revenues of Target the characteristics site each million size stabilized the driven and Ramp target months. $XX unit be million following are for $XX of economics individual level will million expect the of the to build of be by XX% Shack to cost site EBITDA entertainment margins Moving Drive the anticipated to with six cost million unit take should Topline target the to and XX%.

of with million. golf complete to gross our proceeds sales own end, expect year of of by We $XXX total the the XX XX courses

course proceeds CapEx will through golf of developing our own XXXX. needs the Our sales beginning fund

American the G&A options a portfolio, X% Golf XXXX that largely site growth beyond. Traditional to lease improve and and turn in financing and execute expect for operational growth operator Total company In lease be approximately confident of revenues over various total in is exploring through plan primarily momentum and we taking company are for completing margin business XX% actions beyond. to course XX% million XXXX have to generate we both With XXXX our will the own are entertainment stabilized will by our beyond. to business it created onwards. strong to We of our golf managed XXXX portfolio our accelerate to XX% that, to the and I'm expected questions. capabilities revenues EBITDA After our closing, level from I of $XXX Golf transition

Operator

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

George Kelly

questions. Hi, guys. Thanks for taking my

David Hammarley

Hi, George.

Ken May

Hi, George.

George Kelly

something couple make venues? you'll big would So if you first could a promote be to just wondering did prior on I you seems why you talk that -- change, what be like be, something such will it brand, it they that mean, Trackman, I get have that will a and and the was bring you'll visible that your more about, didn’t is

Ken May

Yeah. George, appreciate the question.

to XXX mean, about are We – international Trackman. they're they for excited they They I we be I will with known using move Trackman -- forward. to not we promote right batten I technology. the our to but don’t our previous game the it accuracy was technology provider want their expectations, up brand base our camera-based precision have location delivering, in Copenhagen, so and partners being was -- their recently of are and is and they engineers all there our and it work and is did out are as about brand their

TrackMan to level like the to visited so their has their as we several much better And experience, on Hamburg, take are high works, golf it works, location what accuracy. of so rates I guest our extremely read it’s a higher technology as Germany far stories, range, a going in because the feel game that driving and

We our are games. pleased with

Shack We select change versus going feel in we never good rollout with to back be to some. we to year to shape trying our our and to games continually new having technology get are games their them the static that are to able come new change. going and the our be of like We reasons so Drive people gains are integration that to developers, fresh keep game experience throughout

George Kelly

mean, all hearing having players? of levels And strategy if right, am Trackman not your cool. cool. I far addition of as Very of sort that Very as change will for I the games

Ken May

all, are anything, our to at games forward. Not if we going enhance going

into technology you We to But I locations. upon are a kids play, are now you if you going game open how going three development to will that game. trying based to be to kid, mean, we are want next we busy is hard these integrate it platform short to our play and have games really right them as game, us see a are once want built, at go you

If XXX fine. and me you yard like shot, golfer the average hit you're want an to that’s

want great we great to you. games are you you driver for the while and to have If golfer will play back

the to our of so to it's game, the is be just it people necessarily build where And we a platform want golf, able XX% non-golfers game for meet it. happens some they golf guests to are not and are and

to us forward. And are I so think see our experience you going going enhance

George Kelly

And work? one per Trackman for kind is not that of that is have do of then look other some is But how course, is and with it some -- stuff. unit specifics, is but. fee you like, question or partnership Okay. What just – asking what last I that does how

Ken May

deal. long-term this, They Drive costs mean, Trackman. We what we because specifics with the were to so very is with that pleased are I get drops technology and technology using got – it Shack we Yeah. -- signed I let I'll say can’t a build into we I But our a it, prior the that. versus with can

exclusivity have got things that. We such as

it. we're excited about So

George Kelly

Okay.

That’s Okay. helpful.

Okay.

topic. then different So

And not U.S. Topgolf through part and if about could you there you -- through Minneapolis, how am picked out talk How you choose of an and can example there market then selection many the there. for what wondering sort small sort only walk is, about chose, about the in just be can better you understand the think you anything if market locations. venues would how you of I secondary that and it and walk you you, between that how as you anyone attracted of could, work concept, else just of was Just site why that that’s the could be helpful? maybe

Ken May

Okay.

we me is that too they there are but told popped the up there and This as Minneapolis, we but be very affluent opened would and Minneapolis. the I our to mean, so up years ago site a it Mall doing location access very, probably, As heavy I very Minneapolis, you of not competition long say, if far three on cold, well. near and been hot was recently, working right and on suburbs of America haven't some in this is

for And the part. year per $XXX,XXX mean, to XX like demographics, so year XX old, we a it searching there we -- and to up popped are lot years XX in this them of I years are

looking of space office We A there space office are a there. for and is Grade also lot

business. that event would drive that -- so helps And our

that’s it. And competition it, two drove we things deal, us at very and it on so the those signed we the are us in how looking we to quickly got – we and jump –

great us. And so location be it’s to going for a

sizes. these as far into like and I shapes of we different be potential can’t there hundreds specifics, of could As but – go all feel

are design about. design XXX to We then we Bay and options that that international at are talk going XX our there we currently looking different an on opportunity are forward. up and And Bay we starting beyond are is working finishing

getting people inquiries that We us go about to want international. a are quite few

that at opportunity go that resource so as and will well. And after point some we

be will XXX of there forward, XXXs world Shack going forward. of like mean, the I going these around Drive So,

George Kelly

Okay.

to right – that the is just I can you is and heard then targets The And my established, that next about that I you Cool. the do that wondering open make you right? sure Okay. just next that expect to low what’s more last specific want question. them few this you've be track to expect opening, are when

Ken May

and late to Yeah. late thinking. our between October. be current going August That’s It’s

George Kelly

Okay.

Thanks guys. Okay. for my taking Really appreciate questions. all the information

Ken May

Thanks.

David Hammarley

Thank you.

Ken May

from George. hear Thanks, you. to Good

David Hammarley

Thanks. Thank you.

Operator

there more for conference If Instructions] [Operator will quarter call. the participating we questions, are Shack’s you first XXXX Thank earnings no in end call. Drive

disconnect. now may You

Drive Shack (DSHK) 10 May 192019 Q1 Earnings call transcript