DS - Earnings call transcript Q4 2019

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Operator

Good morning. My name is Crystal, and I will be your conference operator today. At this time, I would like to welcome everyone to the Drive Shack's Fourth Quarter and Full Year 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 session. at given be will that time. Instructions is call being recorded. Today's

like the of call At Relations. this to hand would I begin. may Head time, over to Austin Pruitt, you Ms. Investor Pruitt,

Austin Pruitt

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

Executive Chief me and Accounting Chief Khouri, Interim here and President; Chief Hana are and Joining Officer. Officer Larry today Financial our Officer Goodfield, our

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

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

And now, to over I Hana. would call like the turn to

Hana Khouri

for quarter thank fourth joining and Shack's everyone morning you Good Drive call. earnings

about transition very Hammarley is a with a get to David bit that We but I'm and announce Drive started, part I named our after was we will to of exciting today announce to no be to Shack. CFO. financial Larry the company. that Goodfield Interim services a pleased have Larry before year, from quarter company's want quite talk organization operating a longer predominantly key an

resource role as Larry and organization. Officer the with function. touched Larry year, will of Fortress continued past growth and Shack time I Accounting that for confident has and in focused has to on Chief the Fortress accounting the his part in finance Treasurer. every virtually he For time his projects Throughout leading Shack, be several a and throughout with his Drive great Drive am the addition

discuss Larry. hand start I with over of to across and move highlights, quarter then to our on it going business. will summary short then fourth results a to updates now I'm the

was into a evolution year for XXXX company as completed company. really and we venue significant and a eatertainment us So QX development our really based a quarter from

generated three yields We the to in putting entertainment launched we million the XX% around margins and really XXXX. massively our XX% to us launch was of second half $XX last What golf new XX% transition for that stores in year, on of pace of that Drive call Core big-box achieve of EBITDA stores Shack. the us successful marked

As in would a After revamping we specific beta in reminder, technology as going we Orlando our we XXXX. some out enhancements Gen time our Orlando site outfield. that where launched This X.X back later into Gen venue site roll in and X.X Shack spent we to the and venues enhancements new first served our our venues. Drive in with tested launching

we've new really the putting which Urban made that enhanced the also that entertainment. the are are in launching progress experience Box, QX and will tech with our with pleased we We in coming weeks, feature

well final on for by and have XXXX. end leases locations across of to us This venues U.S. multiple the Texas We in the other Charlotte, our the stage and Dallas, Carolina are the in negotiations puts North way opening signed of

Finally, and we business our the growth. of time a capital plan help to developing spent quite a bit fund

the industry continue Core first focus XXXX. here and to stores Turning Shack open simple. to to and venues, we focus, to having year operational talk the to fully one about to Page launch per our the really on two Urban We building focus three end X and going our want is by are at Box “eatertainment” of successfully Drive the

the for The across is what the of but real actually state great in of is a representation the in place. entertainment big estate and X, U.S. The the U.S. Page map doing every the a U.S. on space, shows reality market availability venues great that we a pretty is are vast

with, we've in that So do the the but see try around green dark you'll states map on highlighted plan we all them. get to to started of to

this in Box Urban which of for Charlotte this addition previous versions from the shortly. confirmed Texas notable detail locations North I two map will the One is are Dallas more in difference in speak Carolina. to the and now

Turning venues to as Shack about Box our Core well Urban venues. Page X Drive we talk as our

that beta venues X XXXX; Virginia; QX of is Orlando, XXXX. that our Palm Raleigh, in North QX have opened We in Florida Beach, site which West Richmond, operation; of and Carolina Florida XXXX; opened opened that in currently in

later Orleans in venues; XXXX. which have New XXXX four Chicago and slated Beach we Manhattan, committed which opening in XXXX; both open in is year; Newport opening Additionally this to to other are year next

down to Texas we in one that about venues, two I one venues Urban North have committed earlier, and Charlotte Moving Box spoke the Carolina. in Dallas

the in We venues United third as sell multiple are currently in across active future XXXX fill well slots. the negotiations to States slot as to that

that our pipeline venues see right, growth. We are and Box ahead, company's we accelerating on entertainment you'll bottom pace active an the the Urban of have focused as of we look on very

serious to support have national initiative. our are grown about expanding this pipeline We the footprint we and

key for the In Charlotte, coming months ahead. across multiple openings years These both situated in across other sites Dallas announced are sites addition are at the locations to new and markets we and in now pipeline the constantly optimal we in negotiating number venues for deals negotiation announce have continue a U.S. the will U.S. contracts new of With over to active States of United XX venues across Box signed. we are growing Urban under an as they we locations. Right future the

wanted to Page I behind On math spend these the venues. about talking a minute X,

build is Urban venues and more to Drive end least outline, if XX just of not First plus Shack at our venues the four additional goal by to Box Core XXXX.

of Shack yields Core to $XX the million $XX for XX%. $X include costs to with million $X of targets Our of EBITDAs and to million development Drive site-level venues million development XX%

$X million development to of sites yields across to of will of development XX%. cost. expect to our the many of the reduce our XX% $XX are nature we further expect current costs incentives potential million Due market, of million EBITDAs the tenant build gross site-level million considering, For and Urban $X to retail with we we $X Box,

lower build boxes ability Core The the existing store is go and development top our driven line significantly combined yields into smaller urban our strong and with to spaces, cost to high relative by size to deliver to stores. revenue margins

a minute On just going plan. Page talking spend capital X I our bit about to am a little

goals will just three require in towards areas. XXXX, can believe $XXX development we that which about we really growth used be the we went mind, in With finance will million. our that over do and internally This

construction the the of New completion Orleans is and box the of urban openings the and first three The venues.

lastly, that asset is construction open financing continuation the it of believe The fund to slated We Core successfully help combination development XXXX. internally will sales, some of through for of committed in to in beginning do and the other the sale-leaseback. fund this boxes part finance second we phases assets. the urban And of can on a

in turning here. This to talk I mind and we around this excited to Page goals. want about X, With get about what is Drive really Shack's

or box more more and urban to We envision eight by venues want XXXX. end Core First, being or XX operating venues. XX we this around more open of and Shack have or Drive the venues

urban Core EBITDA EBITDA at $X and XXXX, we $XXX million doing really box With the each by golf which million end to of $X targets entertainment of the of around $X $X million looking are doing venues to in million each is of EBITDA incredible.

different Second, expertise of to in categories to and Drive space. pursue has entertainment a Shack number we use team the want extensive the knowledge that the

a is this really The possibilities entertainment entertainment umbrella. for that excited a into we multibillion exist under of space dollar is golf space, and all the foray other industry us about broad while are that

never social and by we really see In with reflect ways of experiences tons preferences to This demanding money socially experience more the has picture, entertainment last big people on spend witnessed to seekers back volume of everywhere things. immersive segments the need unique changing, versus of interact something largest a [ph] we the incredible couple the multifaceted is connection. The years consumer on united step of we with been have power probably billions preferring potential. for profound. When

Drive of really team's our unparalleled those unique consumer for us drive on, for and means changing are it a and with at demand growing there's lifestyle, The up, all the industry active touched more I desire Added insatiable And world preferences our increasing strength. Shack. trends experiences, business. opportunity these tailwinds experience for innovate, play our for to to

turning spoke now to development venue last opened I'm XX. venues We've that year. about to operations to we and switch I Page want gears our and the

Richmond margins achieve XX%. generated $XX around of of on of Raleigh Beach across total West a which of that results. XXXX generate revenue look In report those to and have put to venues exceptional of we million. in they to about venues yields $XX In pleased these we're EBITDA total will Palm the half XX% pace second had to these XX% them expect we and XXXX million revenue our As

enhance pleased quarter, ways one Page scoring. our new focuses and mode target at to looking and we while improve are thus another game Looking success experience. new the for Darts on by guest call we're in XX, new reporting Hotshot Just always for out of testing our Since the we're far, we which venues we've venues game further that rolled

rolling quarter. a Our goal to new game continue every out is

the flexibility, a which around As is not to built a but allows on modification, with want is games, build what bit reminder, in-house guests creation of based and what new of our games gaming software us allowing easily quite also only us trend.

be driver out same-store of been to and in our new roll us growth update, software and the allow to gaming will key we future. consistently a designed year-over-year games, which Our sales believe refresh,

and number incorporate on certain enhancements made ensure We've items lower We to margin to operational execution and that have have updates eliminated guest help items. narrowed menu consistent beverage and menu high feedback efficiencies. quality the increase food the our of also

new we these the this incorporated menu changes have officially week. earlier into launched We which

that QX. roll working diligently is the This the long venues. reservations the experiencing through of to And popularity finally, are of we our alleviate times out by help going end wait online to guests are

spaces in strategically we're flexible and But which fifth across be venues. different the to physical we'll the event a notably design reallocated Later that the more this multiple We've of in minute. patios. areas, incorporating the optimize space more Core year, aesthetics talk outdoor generating going open will our venue and Orleans, to venue revenue about our venue creating New previous than

Speaking of Shack's turning development. XX Orleans to New new to venue and Drive Page

Our are actually development simple. goals pretty

our smart want we First, site be selection. about to

break or Second, want we and construction to timeline below time the compress the lastly, we from opening on even. budget. And period to shorten be want to

Florida. to building operating locations Shack Richmond, across in in key simultaneously We is strategy Carolina; develop Core Urban U.S. Florida; four Shack Orlando, Virginia; markets Palm while the Box North Drive the venues currently and West Our Drive Beach, venues have Raleigh,

New in open later construction under venue year. Orleans that's one slated have We to this

have Manhattan, across Chicago, additional Illinois; Core in sites three California; Newport We XXXX all and Beach, opening committed York, and New XXXX.

Urban have plan in I Charlotte year. be to of As we earlier, will three Box which two later venues, open this Dallas mentioned and

this excited about. experience, Box. the XX, mini page, competitive about as On is through It's going people using on next our golf really the This bringing the anchor. technologically together Page Urban we're socializing, focus enabled newest experience all to

and bar. We beverage entertainments experience our and cocktail going are to The venues combining upscale technology and for engaging unique that create X-hole surround craft and multiple guests. putting feature putting to a courses with are food elevated an other

We've bars high incorporated with The course please designed playing. are shared culinary that specifically elevated consumption and menu with offerings a tastes. friends focuses while unique convenient to that menu drinks cater be to feature variety wide multiple that on quality of on

really under these. Throughout there, full together one renderings on photos a page that provide see of roof. worth right going on spaces one XX, are come VIP you of about nights of lounges, we're locations and and actually The to are patios the multiple venue, all side to our bars, entertainment the outdoor excited

life are here, We incredible in-house helping working external team. talent breathe with experience. on both well partners have tons We're folks of this into to our really relevant who that have our as some experience select as

financial. the Now turn so I'm about can Larry, to over to he going it talk

Lawrence Goodfield

Great. you all And to speak to pleased this Thanks, Hana. morning.

plan about Page as company you the to Hana value for potential took of EBITDA we in Turning $XXX think we development estimate million approximately business, XXXX the through. based XX, total the upon

$XX American approximately XX Shack's So to eight of $X.X Core million in of million at venue, venue, of per $XXX company then $X about an subtract Boxes summary, add million total total million. per of EBITDA Drive million EBITDA, $XX EBITDA Urban golf bringing SG&A generating EBITDA

which enterprise And highlights Shack's growth to a $X [indiscernible] when we business, XX trading other value us. consider between the Drive believe XX potential generally entertainment of times of to high approximately multiples that's significant of billion, our to businesses, exciting and upside

I'd for like to Before the it highlights upon some financial back turn quarter. to touch I Hana,

mentioned Hana from venues contributed couple location, our QX as was foremost, of QX in after X.X a renovations, revenue revenue, generation that XXX,XXX for and golf. $XX $XX First million Drive for about earlier, Shack's closed for months Orlando in million which our from traditional plus

will of And X%. traditional days about decrease well I our traditional our the note It something it the as XXXX, despite resilient. this industry, them. of QX decrease that versus at as says golf QX weather slight few manage months XXXX courses, first been we about thing Only playable were how revenues to golf members golf great attachment whilst of has is in XXXX good

gain in approximately continue sales, a final sold $XX included we converted And management the golf collect other to with item, three management the which recognized agreements and income. and two for we traditional three million, $X.X will fee. is one Of properties of million,

have With traditional we these assets in portfolio. two golf sales, own remaining our

And to Hana closing with it I'll turn that, for remarks. back

Hana Khouri

Thanks, XXXX, the Shack Larry. company us drives as In accomplished In apart forward. a team entertainment will we XXXX later a that in our something closing, fourth And for company's be will by opening year, the of team we and a and venues of of a sets portfolio. carried Drive momentous believe amount months. in us year the three venues second, third incredible, entertainment our this double span

team, of that exciting. months to and the been an fast for six what future. work we've extraordinary the our lay have It's incredibly foundation hard able past of paced The will be tenacity commitment, been because and

Austin Pruitt

Okay, would Q&A begin operator, please. to we like

Operator

now for will I Q&A. open the call

of the Our first question with comes from line Aaron Hecht JMP.

is line open. Your

Aaron Hecht

you? are how Hana, Hi,

Hana Khouri

are you? good. Hi How

Aaron Hecht

my Good. Thanks questions. taking for

Hana Khouri

Yes.

Aaron Hecht

the hit Obviously, pretty these been have hard coronavirus by markets fears.

supply Any can development go potential any years. could the you delays of You give complete chain, or risk color of the on there lot next is on happen, to project deliveries? do a guys have couple over of think that impact thoughts me you

Hana Khouri

Yes, procurement of Shack's We the from the on to a standpoint confident our this. that putting lot side, to ability question. need great our Core And a that's the be of have for in stuff fulfill venues actually a able been into thought we're we're very buying. in Drive any

in-house that VP, materials right majority When at look in-house we're closely architects, is and well kind products materials as the any and are - that being are currently working Box don't that external the we're we Urban available, our as looking venues, anticipate who The as procurement that chain of very looking at with things of readily sourcing our both we're at issue are we well as now. supply with. there things

risk, the place a to in great feel to we try but really always that. about have So, we really, yes, mitigate plan

Aaron Hecht

whatnot where a that's enough in just So this there markets in pricing it rather optionality and at there's risk time any this unavailable is make field far sounds product seeing have on unavailable. point? or products that more changes this that so you to you actual design be if Are like the point tangible in results than become are at seen you've have that need the

Hana Khouri

have that anything. think don't just a around around Box We've I this meetings seen done specific Urban we series topic. of internally Yes, and the really

week the the We this options coverings. the long any have of we lack from have our very now, of our list to certainly a seen for or available a due in in everything computer of wallpaper technology to availability. yet future, went We change problem as our become of through us not to right earlier a a need a design should but

Aaron Hecht

Yes.

Hana Khouri

that about backups. feeling we it, And we were good do have but really

Aaron Hecht

you side, how can XXXX, you about? are allowed where leverage there's lot just do you're then is Got after And that thoughts but of guess Obviously, a – thinking comfortable your you. the there far what also calculation, options in terms in that around of normalize on metrics the kind company it ways I Got to of to leverage kind the feel you go? development taking stand you. of financing so

Lawrence Goodfield

site-level thinking We're of based and around to of good five Yes, at four to sites start EBITDA. our on some Aaron. looking we're financing morning, times financing at off

Aaron Hecht

on Okay. eight in have and sheet those for of in Urban succeed the projections you that the targets you the pro XX traditional think if the the you the there delivery on able Is balance you have hit hit Boxes and the or outside to going on that listed place you development Drive Shack's, other and based of be considered forma to do guidance to place is be numbers to options supplement? be need three financing

Lawrence Goodfield

deck which financing again. is the of on pretty the where is Hannah going is can we venue borrow the a on keep aside sales. to We companies is is industry pretty for and we have doing. that's combination golf our asset doing the based at good estate. putting really we're we They're borrow a lease that simple hard debt we this attractive. our Aaron, flows, in asset it Larry but see about include I way backs, the we feel both. In is that two moment plan traditional and during class, believe business, mentioned year-end sale mentioned and to based portfolio our Yes, financings assets, financing it remaining our can the are what real thinking cash

thinking So that's it. sort about of how we're

Aaron Hecht

I in will Got you. back the appreciate I queue. time. jump the

Hana Khouri

Thank you.

Operator

Austin further turn concludes call session. there now questions. the back you. And I question-and-answer Thank That to any Pruitt today's remarks. are no will further for

Austin Pruitt

We for forward conference updating after QX. today's call. in participating you to Thank you all look

Operator

gentlemen, and conference today's call. concludes for this Ladies you Thank participating.

disconnect now may You

Drive Shack (DSHK) 6 Mar 202019 Q4 Earnings call transcript