DS - Earnings call transcript Q3 2020

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Operator

Good morning. My name is Brandi, and I’ll be your conference operator today. At this time, I would like to welcome everyone to the Drive Shack’s Third Quarter 2020 Earnings Conference Call. [Operator Instructions] Today’s call is being recorded. At this time, I would like to hand the call over to Kelley Buchhorn, Head of Investor Relations. Ms. begin. may you Buchhorn,

Kelley Buchhorn

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

will differ and remarks it materially turn With Nichols. encourage annual I point today forward-looking investor our Financial website, risk may supplement so include and me I that call is press disclaimers from results the these already. you Executive those would made to in you SEC. Hana. to IR over Hana Joining out to and have statements. you encourage download done Chief in and on would our to like Officer, if considered quarterly Actual We that supplement release posted the the review We’ve contained by and reports Khouri; Mike today to to now we filed an now certain review investor like statements. Officer, factors the our Chief not with

Hana Khouri

morning, Thanks, Kelly. everyone. today. us Good joining for Thanks

get we couple introduce to you added recently like going, team. to a we’ve people the of all to I’d Before

First CFO. Nichols, our Mike is new

the who’s bit added of Shack We’re knowledge he’s going Smith, Head recently Relations Head of a for Investor both Chuck Drive her on J. our to and and Kelly running board lot know We’ve Golf. a and is really most experience Penney. also great for brings add recently as quite with experience our have of happy to you’ve board here, HR C. American new come newly appointed Mike on team. to heard Buchhorn, Also of Kelley Investor Relations. as

with of and have really we’re happy knowledge the of to them individuals and All experience bring deal to these great us. team,

that also full for quarter So March for not quarter. but first courses from the exception were a standpoint. QX pivotal open and a a Orlando a of quarter with business It people since the our venues perspective, our from was only was company,

our driven decline $XX.X Our company completing down with sale brought for to current cash goals San event liquidity as in Orlando of by mainly date a revenue. announce XX% ability QX of that million December. performed million major on reopen and of of one of were the We on strategic path this hold, proceeds. to given funding pleased on to restart strategic also us to operations. as initiatives target relates $XX $XX total very revenues Rancho and were other it in XX/XX of previously has well in the a to with I’m Joaquin that development net million, we XXXX, with This our only QX delivered to

to the our venues turn I’ll So first Page X. to on deck

of business, XX. On we the and American our Golf one now XX managed lease course, side own

four Raleigh, currently golf side, On venues and Palm Beach. in Richmond operate we Orlando, the entertainment West Shack Drive

are We and entertainment for our golf Randall’s venues venues. to Puttery Dallas leases committed in in for Island our New Charlotte and and Orleans

shortly. for I’ll pipeline a Puttery more detail Puttery our plan go XX of that on into developed future exploring we’ve are we Additionally, venues. for targets over

X Page now. to Turning

Drive with Also industry navigated that outdoor limited for both disruption, offering partitioned us consumer our that COVID-XX as emerged natural our to something courses and bays suite-style American we’ve Shack have on-course both COVID-XX very As and activities our has outdoor by is AGC open space. facilities. at really competitors guest clear is led and through overlap. This Golf physical at activity social a have brought Shack in preference a an outrank we Drive air distancing. format leader the limited we’ve shift that guests. about it’s really overlap What provide in other

so people golf venues courses they do feel and and safely. can our get to that have been really So able to

we’ve executed how Turning COVID to to Page priorities our X. in the environment. new growth discuss want I

a only venues our unrestricted reported million and for were courses cash all of As closed. having the We XX. of of substantially $XX July majority QX on reminder, of hand as

on we focus to on two restabilize able to reaching broad business COVID, the plan. response COVID through which focused generating being were our get and measures a us As really business out to in preserving to liquidity on the crisis, and future carry then order

liquidity, very a Since measures about to these aggressive preserving first measures preserve the approach very to we and when maintain. closures The we a have of in was which continue thoughtful all but and accomplished successfully March, implementing liquidity. generating took

our venues lowering ways sacrificing field expenses the Over XX% by and to of and identify across capital ability fixed our our and last and We year. diligently to spending operate lowering costs, effectively. expenditures costs reduced Shack worked labor Drive around focused reduce safely AGC five without fixed last QX versus to on we months, significantly

October, mentioned, in Rancho cash closed million As we net also generated sale which proceeds. of the approximately of $XX

which shortly. new the our environment execute our This promotions, venue which ways venue launching along – reservations, increase adjusting focus new greater current packages current on innovative and business, the So focused environment CFO path positioning single-bay discuss new critical drive growth measure to We Mike continue for event then restabilize includes to on to detail like deliverables plan, our ourselves financing and revenue. response to I’ll to priorities. second with advancing in level, the openings, is we traffic developing. to At our was and

up momentum public in which we COVID green XX%, that our rounds of X. fee traditional a poised available a environment. activity and see over Golf results highlight on in – last advance this as XX%. top demand were months, all unwavering and our Compared saw it this believe quarter, to year, can QX courses fees actions leisure revenue for growth despite the cart year American times a in these golf closed we QX for from exceptional to and marked last of courses AGC’s up of reinforce Page the As tee last result daily you reduction After reopening in taken plans business, several XXXX. the continued for quarter

On were up XX% the member private side, rounds total private were XX%. sales and up

in Thus across mentioned. QX each produced has any results. really just results XXXX stronger far, really, proud I category in of We’re quarter these

the revenue. official million and side limitations for at on Golf X. the given Shack and $X.X capacity Drive Page We’ve of despite on venues to venue generated sizes group On look you Entertainment business, of results our both QX QX comparison

quarters You can revenue up QX of Total really at the most see levels. this Drive levels. total our of QX around year. of Walk-in is Shack revenue across the averaging XX% this upward trend for XX% revenue venues revenue of made

COVID, guests give your into very to we our the contributed initiatives to this which and traffic space interaction, detail moving has to Our environment. want directly to the in which later team quarter. been games safe. our through ways physically venues, focused creating I on discuss success active differentiation order competitors. been get that Even these for I’ll safe innovative greater is active. be turn air presentation. in our drive outdoor in climate our shown guests to is safety safety put our this attention for we’ve feel a to or in now get sure like Unlike protocols our the Drive XX. make Shack Drive has have already on open social developed standards provide Shack scarcity place partially have since many on to across out, a arcades, dividers been in bay and able bars Page enhanced which venues our current notable of These rigorous have the traditional page and additional we’ve began and COVID controlled, opportunity the evolved measures

happy XX Page We’ve in December. to and coming I’m good of now. soon Orlando Moving when inquiries day’s number had say targeting and opening we’re to asking that would an open a date

on that various increase and As revenue visits to awareness venues, gear along events. brand we driving launching to the we up reopen, with and promotions will initiatives focused

integrate We’re to with surrounds developer XX-square-mile the local partnering venue with the master-planned our city that the community. of further

and offer packages, success including that Orlando similar, local to also We plan Game XX. community, of well one our about we special event our discounts Orlando the local which to can as COVID a that as spoke event now. driving employees. environment, Pass Orlando a do big in We Play integrating plan for music be that be featuring with with believe promotions residents, the experiences, identical able I to not airport We key and which have latest new promotions venues. a other will excited live for in in to you we’re doing with artists do revenue new programmed if Page currently success on on we’ve promotions launching outlined recent had see

event small targeting Our launched on our traffic event teams across in revenue. hyper-focused seen XX mid-September developing promotion Shack and two-bays of of group the increasing locations. beverage from Drive positive very generate to X-bay groups package new the this to since smaller been our results guests’ spend. new minimum lets encourage We This increased special drive times far, have offers, with four revenue and advance bookings We’ve help in with gatherings initiative. food reserve launching so

innovate groups to to on Our offerings smaller COVID focus ways in focusing will by creating entertain ways our event on new a continue be environment, safely. to

minimum, very As been part announce times. needs. our basis part our event – plan of a the To our reservation need of single-bay reservations, these been on call-ahead provide to packages having we’ll booking really of in the group while platform that long they have we’ll predictability Also very have and excited only evolve to a December. our constantly offered date, seamless we with successful, visibility reservations. guest experience, bookings experience launch for two-bay for more a guests wait advanced and to single-bay the we’ll to have online Rolling solve improve reservations our new them ongoing allow don’t and labor we’re efforts bookings, to as avoid out enhance to smaller for packages

now ways our XX on and a this supplement, compete been in engage. innovating has focus us new to Page to guest quarter Moving for big the for

repeatable locations, really which to is golfers. developing towards is players less competitive at doing avid two for use competitions, new We’re which Shack which Open, Shack serious Hunt tournament Drive Drive and model initially currently we’ll Monster geared with the the non-golfers. more and going target launch Then all a Challenge,

really planning experiences. guests We’re early guests. new to that stages of our will socially also new offer groups competition by competitive and engage allow of technology fun to competitively ways in want the in-venue and between We providing different for

greater to to in Puttery. I’d I talk switch speak The like venues And plan. So our gears and about our development about want first, to detail now

with Turning before high excited progress announce to the no that the publicly we’re made included some in seen has or to we’ve appendix. the one Puttery; Page renderings we’ve XX, resolution

remind Dallas due completion potential shorter status. that XX, you’ll to expand is two store Drive Puttery Manhattan, the wouldn’t This Page as fit. we’ve caused, the In near an permitting the times, venues full are Orleans in and in we urban opening advancing has New national availability extremely with COVID less and Charlotte uncertainty permitting Dallas, plan New of process capital Just and begin development as items soon. we for path risk leaving plan real will focused intention documents to critical plan in outline The year. everyone, well venue disruption we future the on is format to this designed vast on-hold complete cores time, on Puttery estate, Shack venues the more and where with Orleans the Puttery XXXX. on At been to of shell we and Puttery On committed keep next five Despite track to yields. building development venues underway. development Charlotte the see higher we our are in and the debut to construction format

start even the So cost with The around getting no million generating are costs store out first revenue will more format after that cost This $X additional with on ranging an $XX to built. venues to stores of million us TI, believe we are and substantially $X the build really two between and months. requirement. we from $X nine compelling the to Shack will quickly. million. per a laid $X numbers remind to that EBITDA Drive six estimated can XX. everyone, to around $XX be and To are to reallocate allow EBITDAs our be to behind pivot lower. capital We million the million establish $X million build, time with could Page million million expected to to $XX capital proof-of-concept Puttery Puttery Puttery

and While build much take longer with returns generating are much to overhead slower. the revenue become still great numbers, the venues lower or higher these and costs, much

substantially Moving liquidity has to XX, now sale Page of the our position better grown Rancho. with

the By hand. to cash experience. we our the venues seven October Puttery we plan our secure million to us of for in we need Orleans As eliminate get order the $XX of on-hold, Puttery proof-of-concept order $XX plan on which XX, of From remaining raise in leaving an had New new capital unrestricted five on to to get venues. in XXXX, million will to build capital, fund there of Puttery additional need

we normalized world, and the value assets. in a meaningful have of While sources of our liquidity

We currently for options various XXXX. funding are exploring capital new in

I over comes Before Mike, I’m over how to Puttery want plans now. next XXXX I growth in hand XX this we our it together the as quickly to months XX experience. advance our for with on Page recap

mentioned to by open seven XXXX. is the end I earlier, our stores As goal of Puttery

an of growth experience and the $XX Puttery our of around we produces we plan, over achievable for is million. run At results. our a total path through the Mike that out With of hand I’ve $XXX expect go We a run along the enterprise XX EBITDA. to $XX over to it provides times are growth expect to just to cost believe projected laid with project value I our million generate both the rate advancing of that, with We highly trajectory this the will approximately XXXX and venues, profitable. economics Puttery multiple, million

Mike Nichols

Hana, Thanks, and morning, good everyone.

of a trends throughout Shack the generated given golf $X.X revenue levels. This very For AGC All start building an of basis, entertainment was of compared both showing million company our $X financial quarter On to business the presentation, QX. X.X XX% expected momentum revenue XXXX walk-in from QX At or courses revenue reduction XX. XXXX, segment open circumstances. on $XX of represents decrease and results X.X off XX% business the unique venues and venues those million. sides with we Drive total Gen which generated following Page were the entire were our for I’ll level, averaging million the our Gen on QX positive unit some with third

revenue X.X the XX% total Gen However, levels highlighting QX reduced revenue. of event of averaged impact

not full reminder, a were venues quarter open As our for XXXX. X.X Gen the during

have report. So to results versus not we did venue year same prior

million, or traditional revenue, by revenue $XX On to in decrease reimbursements $XX.X of to generated side, managed the approximately million which we course million million This excluding driven down compared the largely the $XX event QX QX compared of XX% is or is golf XXXX. $XX XX% XXXX.

the had result and and October, sell in pandemic QX company decrease compensation realigned unrestricted hand reported continued million our from year, our of from represents remaining $X $XX shutdown. our $XX unrestricted July, at final the one savings was side, our spending a $X of compensation reduced of million largely course This the corporate shutdown, proceeds want implemented during We XXXX. an of pandemic net SG&A XX% On in sale San significantly we total and million point at increase the Year-to-date primarily during efforts an lower or $XX of to on of as SG&A our and increase in in assets. $XX of of of million make in we came of preserve is golf QX in million, increase the QX I The To cash expense cash this from XX% cash. $XX.X end reduction the divestment QX pandemic result the measures. million our shutdown approximately million Rancho we cash liquidity. Joaquin October. to emerged operations on from cost expense of team as year-over-year, of

on turn our Hana back it we’ll evaluating With our plans new development closing to for report definitive options we we remarks. I’ll are terms. that once complete As that, have Hana and for mentioned, to currently capital

Hana Khouri

and Thanks, today. turn over I’d thank for love for that, all us operator questions. the joining Mike, to With you it to

Operator

from you. Wold the [Operator And Riley. of of Instructions] Thank your comes question first Eric line B.

Eric Wold

need to first I urban – morning. from questions guess financing the the Thank you into on sale guess that in initially, funding you golf wanted of include next or additional into Orleans, XXXX couple the heard New of does for course something be that then, of play? mentioned kind in couple locations the through that Would the the year half $XX also the Puttery when you. Good openings you And Orleans that gives separate. to million of A XXXX. with back you also another correctly, just get financing thought I of come funding I Hana, New

Hana Khouri

I’ll Puttery’s have question, Orleans. Eric, number I’ll take be turn and financing to Thanks that how additional you? we are first for at stab comments. that over million your Mike of five pipeline, the include any it To to in would type does not for this question. The $XX the other additional complete answer raise a the for New

we’re to two $XX our other then first that we So proof-of-concept, additional are get absolutely five. the able be you the sitting would correct venues, where get Puttery through today, for will million be

So that does New not include Orleans.

your know In Mike’s can for, at add anything have working of XXXX been that right know, I business. has question, finance of few fund really you a in I lot Mike? at been a looking now we’re terms hard weeks know to we various opportunities opportunities don’t and of at for to different if and now ways don’t terms board looking I on the us.

Mike Nichols

from we open require part Well, additional Puttery’s is of that will flows an XXXX. the XXXX going the generated to in from come certainly look, cash financing that

answer a flow financing. going new the of is, combination cash be and to really So it’s capital

Eric Wold

with on-hold that continue? Is is to just city? the deadline solely a for construction would which Perfect. you financial chance not New agreement there kind And at need restart there Orleans reasons of one then does or follow-up, is your for a

Hana Khouri

we’re COVID, a now today seen soon, locations. these need living living So world, because with That in proof-of-concept going the have hopefully obviously there’s In Puttery really we’re level as if to all operating right get on-hold for really great it sometime uncertainty right we’re but that questions. of we the not. it’s with away now. It is is

to that to by to fact given that the that wanted our So of capital us given pivoting of business we’re model really proof-of-concept. two get for reallocate over opening venues, the we first XXXX important XX them Puttery to largely upwards

financial, So, strategic. partially partially yes,

intend We think And up Puttery’s I two time. first we on construction? restart that on to is and terms In really internally question, these when focus do reevaluate at We a is Eric so. was, and now when of, it running timeline your would to to no. need right answer there getting the would then like second

Eric Wold

Perfect. A nice job getting it. appreciate results. this quarter Great on. everything going with I

Hana Khouri

Thanks Thanks. They Eric. to our a team. great did Thanks, job.

Operator

BTIG. Your of comes next from line Peter Saleh question of

Peter Saleh

seeing, you’re Great. any what the the this want on success impact about it question. to that? maybe had kind to venues? be two-bay what Can launch comment What that, of of like September. taking Thanks a to looks to for – the October, some the with for you continue off, just you least a ask you margins saw from of at launch the you I start do the package, if the expect month success bit of on the little sort in around that’s details in

Hana Khouri

very of I Peter, very, these packages. pleased launch great am questions. the with

many events And comfortable the do and congregating people wayside, in corporations to they’re of just groups are remote. don’t not large not have kind fallen them, many businesses So necessarily because the obviously, some but by so are not in nowadays, corporate really of cases. want

success. we this, seen we’ve launched So tremendous

to these your with first answer success packages question. continued seen have We

success our we’ve lot lot this to to folks are want we to the events. significant with continuing in without it But out that fact being during of a that large and a have the expect go on QX, scale revenue events ways innovate can impact try We of necessarily a offer holidays. other to seen given we

so we success in area expect So innovation to from and we it great should to far, further expect continue us. see this

Peter Saleh

least run you to Can XXXX, as been what three have units talk rate expect that open we be all volumes the at about the you and operational? maybe exit unit

Mike Nichols

a revenue From standpoint?

Peter Saleh

Yes.

Mike Nichols

in you’ll revenue for a are revenue standpoint, total the think see quarter. $X million in the running over Well, from that a little venues I at

merged that to from completely. expect COVID We we up ramp as

So rate those numbers based out QX I QX at you take run think percentage can forward. of and extrapolate go against as their we

Hana Khouri

correctly, sometime it rate And numbers. rate million that we’re and if our asking have modest I’m XXXX opening considering a run run are you’re included in December, for expecting understanding question EBITDA venues $XX Peter, in in Orlando it’s we about amount, included your next from We’ve year. but

Peter Saleh

All right. Okay.

Orlando just will flow So of give Or can what’s a can just just we will expected a year neutral cash talk that is be around bit changed? type little positive now? about – bit be and Is Orlando from you a expectation maybe venue? Orlando your more a details cash more this still that little of

Hana Khouri

working you a not cash the very, to Yes. breakeven be want Obviously, be say. modest to too green expecting hard point what and we’re Right I’ll very we know, it to amount positive. positive flow get very now we’re But in the is there. over far

process that in that and can venue to working opening and of we’re do in and pull prior into levers more make to putting what we’re of to of revisit we obviously what we’ve order a December. kind can successful. we’ll things in And to the and change our place Now, see continue more it, towards into we put lot even place

some an anticipating of also putting additional draw. We’re Orlando courses as form these into mini-golf

committed we it. not first, open to date – we haven’t going do capital get everything a into that funnel We see to yet. more However, how want before we’re to is

Peter Saleh

very Thank you right. All much.

Hana Khouri

Of course.

Operator

to have Buchhorn At to [Operator remarks. the back any no call Kelley do we closing turn question? further Kelly over At would this for I’d like Instructions] now Okay. like showing to call back I’m time, another to – this I’m I turn over questions. time, the sorry,

Kelley Buchhorn

thank you. next look catching forward And we up Thank in today. quarter. for and to dialing Brandi. like you, us you with we’d to joining everybody Thank And

Operator

Thank call. today’s you. conclude That conference does

disconnect. now may You

Drive Shack (DSHK) 4 Nov 202020 Q3 Earnings call transcript