DS - Earnings call transcript Q2 2019

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Operator

Good morning. My name is Christy, and I’ll be your conference operator today. At this time, I would like to welcome everyone to the Drive Shack’s Second 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’d to this Relations. call over At the Investor to like of hand time, Head Austin Pruitt, go sir. Please ahead,

Austin Pruitt

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

our today new Hammarley, President. Financial me Board; here Chairman the Hana Wes are Joining Officer; our and Edens, of David Chief our Khouri,

supplement you not an investor on so. to already if posted which encourage our We’ve we have download you done website,

out certain considered in differ you SEC. quarterly and remarks contained point statements. will to supplement forward-looking statements. with may the filed today our reports encourage like results include and factors investor in materially and would I our disclaimers that release to the review We by to annual made press risk Actual review those from these the

And over call turn now to Wes. to would I the like

Wes Edens

spend supplements David. and turn of over Great. and I Thanks, number page Hana the Austin. two just couple Welcome to everyone. and to and and I’ll highlights flip to through them just a of the call We’ll will go minutes

So Shack. first, are X.X the top soon. times opening Generation venues here at very for exciting us of Drive list,

opening Richmond XXth opens three over got Palm August. today of Raleigh August, We have the is months. and so up West X.X venues, of Raleigh, next the Beach actually on the Xth

our X.X. we’ll version less than two have weeks So

to the the to on running into is and changes the you to get you is X.X to liking venues version significant then have up see it because This and yourself You’ll you everything. proof-of-concept, improve it themselves. great allows business, gets chance generates I

about have improved we And it. think dramatically on we everything really

of technology, the we’ll in far and new by leader but talk a about, ball which world. the technology away Trackman, golf So

exclusive with partners them. We’re

are excited that. about We incredibly

advancements to then beverage. and major regionalized made and games food the have We

X.X site back had the our technology, in very, and these beverage. also that it with whole to really us go across the offerings retrofit of and to both allows So site be gaming suite and take different, very food Orlando,

effect, all next get in months. in going sites so to the of the new four X.X several you’re here And open course

an of over company. of time rest report really this have think course the on to for exciting So we the it’s year. We’ll great the things

of innovation is with there very starting. this. of densely thing company really like the for we Secondly, And to we market the had focused large natural think heartbeat are started NFL-like that is places we populated, which because business. are the the cities, are with, significant We and do And to think growth other what are sites our adjacencies the start we what these so opportunities large large that’s adjacencies. on

the well the on works down. is focused oriented, technology, thing is smaller great great a food centers here, slightly around So which newest with Box, bay, Mid-Size, are which beverage. actually the XXX,XXX and Urban small we that indoor, population it putting and format,

we then offerings very We use will Taking smaller smaller are expand think and markets develop we about very, company excited to dramatically. the the potential that these the these same we large box, in expertise grow we the to this. applied to

logical tremendous Hana what something but think is that promise we it will looking product walk in what of and raw economics think the of a through it we’re at and for the it’s both nature us. very we existing also has of all, our extension

the year in courses, of $XX the golf be and properties couple of through a now million largely expect will transformation and terms the and the but We’ve million we manager, sell closed us. proceeds. in will behind another through this, generated company another proceeds, course the four course update David gross $XXX of walk Liquidity owner of this to in

rock pile a that’s of kind the up the assets. cleaning So of existing

that. about happy are very We very,

on like I’d our in experienced kind side. operating same introduce very themselves, sites of version thing X.X to management we but of the fashion a X.X similar Hana, the to to Lastly,

So the people getting us us the sets doing. having us expand into business and the world, and retool we organization, in goal which become and proof-of-concept skill in with management add organization most the relevant back then the that the team to allows go help that’s best for really are

of add it we’re we're at parallels levels. substantially because League. I of and take the had from that’s And experience core you much a highest organization it, compete English here going I in the of because personal with the very the want your process very Shack. think the to Championship Premier then between And a at this doing that existing going you into and to so there’s through Drive lot

So come have in the industry. Ken We either a year that terms who’s people a or for a eatertainment the And from vast, big in was are added landscape our about of leadership tremendous XX majority approximately people. of ago. people that us person competitive of a vast May these one have came are step individuals. them in experience that had competitors of in in The then

highly our experience. expired now in experienced of my noncompete has She my personal we has us a the last year. other one of competitors been of here. the had person Staff skilled August a join around Hana So It with of as to addition tremendous one really is have She The on with wealth for businesses last to playbook me a Chief worked that at for a comes and workforce. Hana. very, very first.

all she has are was operations over very relevant. of So years created over she the used that done things XX playbook at opened long personally that There’s that five list Topgolf, the a in openings. we think those globally, sites

that she us. we have of now across people joins the kind plus are that think we the excited XX organization. that so Hana the extremely with And that And list complete we

absence. He’s completely, great soon a us company. us. as a expires. her job been of has note leave with unrelated week being a noncompete came for completely addition who us, Hana the to He And ago Board was a tremendous a an to for take force as the to done came personal it On planned coincident asked Ken in about

period So Ken brief for stepped period it’s of has of time. a We back time. hope a

We’re obviously He’s a two handiwork. of addition innovation and been of has open see than a his in going you’re here the here him. done to new going all that that deeply lot to in wonderful he less are supportive weeks are these venues

best great and and that. about wish but So have that hope we good we him update feel a nothing we’ll that the we on

senior feel then with the everything we incredibly on and But food the good leadership the Hana offerings technology and throughout now both of management it. the teams President, that but rest else side exist the about as

the with over So that, Hana. let call me to turn

Hana Khouri

so Wes. I I’m early excited their I you, to feel like Drive in join more be at Thank Shack story joining the perfect and really couldn’t time.

an largely transformation Our complete. business to golf is from operator a and entertainment course owner traditional

we to owned end more Shack year, the courses year, had end pipeline. of development two own and one last of and golf XX only Shack the have By we Drive this At even sites with operating four courses Drive golf in expect Orlando. in the operating

major on We’re of three verge openings. the

our Raleigh said. venue Then Palm after in We’re Wes Richmond the open turn as the weeks and Beach West around we going finally thereafter, coming in shortly then fall. in to Richmond shortly open

Urban by If years, We five concept, to few development an end operating have which look Box we sites, additional new includes our economics for shortly. which expect new over three open to XX at analyzing of have over and seven we will ahead next discuss and next our sites in are currently pipeline the the development I potential year. the

to smart our construction the want to period development Our simple. from want site be even. timeline about below compress goals and be time opening want budget break are really to on we We selection. to We or and shorten the

into which we XXXX exclusive our expected the Orlando of successfully guest held and and really high by venues really PGA test technology experience. the has layout our best gaming believe pros allowing our entered It’s we improve product the especially regard operational us to ball as in partnership beta Trackman, to and world. in opening. tracking We ahead is offering, experience really technology, with served site an those

we also durable enhanced in play beverage Simultaneously, feature redesigned new and soon food outfield game the effects has after We’ve a and will more provide have out a which intuitively more rolled menu, as turf. to Orlando as seasonal use said, continue will offering. future our in retrofitted Wes and be innovations. These enhancements, to new back to beta test the we will these local site to and into Orlando lighting continue

months thrilled number and to we’re with Raleigh, Shack the operating the for to key and West has been three priority next and a Richmond innovation. be will Palm Drive While continue us over of quadruple

dense, that It’s an highly the going large not newest excited We development indoor today form you product that’s the urban ideal would concept Drive for to Box Shack are where that Urban locations really see be of to format. typical we have trafficked, called fit. announce

XX,XXX to it's entertaining an and our then going concept going a you super know square When So compared feet. about compare importantly, be boxes, and beverage over other to hospitality including the – This footprint pudding love our Shack, feet. will be all to that that Most square and great Drive and fun. you the food leverage elevated are technology key is those really XX,XXX just features the concept. two technology around offering, with paired

and of our make and will will – a stores The Urban both third easier compared our it will full our faster to to build size. cost Box be of be about full it size

We to $X and expect build to between the generate revenue. $X million million about new million format to and in cost $X

to XX-bay the priority. While develop an continue will the size mid Box, remain we'll equal Urban facilities

in both formats debut of XXXX open to have expect We by and to stores these XXXX. expect XX

David going through over for our to the outlook. you results I'm future turn and to quarter that, take it With our to

David Hammarley

Thanks Hana.

of about by talk average generated $X.X spend first visitors going Orlando, revenue, million I’m XXX,XXX operations in we've $XX. about per in about driven First where visit our with to year an

at food to at at XX% has look and events XX%. driven you beverage If XX% been our BayPlay with by date, and revenue about

there Over the with events as think really Orlando has focused been Hannah at will the about design. we're for of unit And improve the and past sales with some And two we've help moving innovations XX% been Trackman economics enhancing forward. doing, X.X range walk-in Orlando this XX%. of mentioned, as enhancements accounted months we looking on the including at we've

experience think operating plus Golf and of golf golf to Turning our is in company. course has our for asset we the business, as XX a this you traditional key American years know, business

Newport us two key that sites excited us, it in played had role going fact unlock and really leverage In for that Randall's a helping forward. we're Island Beach. And development to

golf course sales, our of for courses – today In XXXX. XX million sold $XXX as of approximately of sold beginning terms approximately we've own we've

end the sell our courses, our This owned sales by of within own projected courses us Over million will the of the XX $XX [indiscernible] of $XXX year. that additional four is next few for this to we across months, be million portfolio. the gets XX we an started $XXX in goal expect to proceeds which million of

two courses in we said, upside. million that As remain total include value previously have million the you proceeds, when $XX of to development approximate $XX

will to way assets continue best monetize move explore that, we forward. the those We to as

end West and Palm Beach overall expectations I like months starting with today, to economics the EBITDA and In to to them unit summarize coming in our in the our future XXXX. Richmond expect Before Raleigh, we I'd plan we generate for revenue consistent business. open

for $XX of and to to for to Drive cost build full million economics include Shack sized unit those size $X forward, $XX a entertainment stores mid million million Top and the $XX Box. Moving full Box. million mid-size million Urban line with revenues to our for to $X $X be million $XX stores our and million will Urban for million size for $X

XX%. will and XX% EBITDA overall, And stabilized between margins be

course stabilized $XXX for We with EBITDA sales XX%. margins approximately those $XXX by expect golf our to of year completing transformation, economics complete in owned for business traditional XX% million. end revenues will XX believe million the business the golf to to we After be course XX

and Our move will fund course forward. proceeds beginning capital financing owned to are be the of golf development sales to business options CapEx we our QX currently exploring

total X% XX% SG&A company our revenues to expect by company As previously, XXXX. of between be we mentioned and

excited very product innovation the moving are from we X.X the and the today, discussed. focus on company and to X.X Wes the about at looking Hana Overall, business

that, to over With the I'll it for operator questions. turn

Operator

Kelly you. Instructions] of Thank George [Operator you question Imperial And have Capital. from a

George Kelly

Hi Thanks questions. for taking my guys.

Wes Edens

Thanks George.

George Kelly

hear hopefully So sorry soon. he to about Ken, returns

for a few you. questions just So

through that can XXXX? you take you to the First us open expect sites in of all,

Wes Edens

Sure.

George Kelly

coming announced next? you've know seems so I Once locations are which process, that lot in they're of ones like a

Wes Edens

America. Yes, so open in talk which Bloomington, about the that of three expect Texas, that New I near specifically today Houston, is to are Minneapolis Orleans Mall can Stafford, which we the and is

George Kelly

Okay.

the Urban of Box. openings store format, your Urban then, talking about and the new few next And years, new today quite discussion you a few those are Okay. projected there's the and about, the just in for

talk that's for about that? what's and – So you stores about those the it to excited of being smaller challenging so find sites sort if weighted And could towards why wondering heavily why you're or mix going larger into is mid-sized the format stores? so

Wes Edens

it's Hey Wes. George,

give openings. a timelines agree large you bit Hannah. through development couple look and get land, me an it of you Let a time the go a and overview think construction from then turn a to the site process, when But I years little of for stores piece process, I'll of permitting at the it's selection, over on a make

it of a like terms But it plus little can the So less City, to quick it really amazing can also say the be even about be if New and a as York planning happen. bit are make XX really, to going talking permitting. we that actually in to months, years you you're a two number fortunate an all right, which least, but when place be is site years of think as takes

The will to big a we in think has to we think, be actually, Urban The sites, the little a The that bit smaller one the is the permit the footprint is development smaller. level easier build. bit and and last, economics is stores. timeline less considerably cities, Box very similar smaller sites, mid little

a in fits turns what minimum of we are characteristics. a feet, it for little those And walked a square something looking of a has, so probably XX,XXX and that range. feet, that through as it, Hana there's square it is that So but in of The XX,XXX bit. representative America really show maximum economics lot we out, space

retail just store, permitting clothing for The if drug fit really, a is different than about you tenant. whatnot. a the really or process permitting is No a that talking store, process or are really a out

you So you a significant have don't timeline. don't permitting restaurant, have a

the there's the that up from going, time identification of the less, the and think large XXXs sites. obviously months. doors format think little and can be opening sites And the number day that available, are be an XXXs in of kind believe, we little we of to but finalized bit as our And that comparable, So once a and thousands end and economics, of nine will at total market. the we to we very number for as comparable that, of are the asset

the you And all think the the so greatest it be sites And you the expression which brand small build may I have things. large your, this sites provide awareness, proof technology, entertainment, get all. all of of restaurant up different these concept,

better. is logical thing very So be it's exciting really, what really we – couldn't and extension it’s and kind of actually it's a our brand think of

And Hana I know lot a you thoughts about have of this.

Hana Khouri

still as bar And activity really once an why go think, nowadays was. participate when think, are this is People want I sitting people and folks a into. I going brand. true be as stay across these an gives to said, being concept alternative interesting able more Shack a put And to think, – there's lot I lot Wes while to spaces America this the a just not at are I to about they that Yes, in we as out. popular able think this, of there's craving social interaction excited opportunity it empty in so to Drive

George Kelly

The kind helpful. long-term would of golf Okay, the couple expect that course XX was? just that's XX you other timeline number whatever Then or what a to questions. sales,

Wes Edens

months do so most our give the going, say conversations is months an long George. answer hard sensitive. something I expect that we of But, next It's one the courses would six is we probably in those have on to hope. probably but to to that's term. can on – give XX It guidance two always I

George Kelly

Okay.

everything. me, from you conference if and Okay. I And then questions appreciate Wes or don't the on David, question know call I taking Wes, last and being and this

you're to you Can that to considering, when just any it started going give that curious new would your about more how of or expect have of dialogue update pipeline about there? and kind if I'm announce So you've financing you with stores. is

David Hammarley

Yes too. There's we've of the the industry that's conversations. work done been preliminary bunch beneficial had also in a is

it. are leaseback again think, which on the the venues, whether they financing very days expand open, as And or I straight are opens now, our from exponentially. as options think, with out sale people running, financing familiar it's they open So soon X.X financing and next as version I XX in as soon

between end lot the the and stuff to come. so to on of year, for we’re going the existing and have financing the side to you'll show of of And pay course I of the now kind how news stuff think, a

George Kelly

Thank Okay. you.

Operator

Instructions] are questions, no call. will [Operator more we If the there end

Hana Khouri

Thank you.

Operator

conference conclude This you. Thank call. does today's

You may now disconnect.

Drive Shack (DSHK) 6 Aug 192019 Q2 Earnings call transcript