Drive Shack Announces Second Quarter 2020 Results

Provides Business & Financial Liquidity Update

NEW YORK–(BUSINESS WIRE)–Drive Shack Inc. (the “Company”) (NYSE: DS) today reported its financial results for the second quarter ended June 30, 2020. The Company also provided an update on the impact of the COVID-19 pandemic on its business, together with measures the Company has taken to reduce cash expenditures.

Despite the challenging environment, the Company experienced quite a bit of positive momentum in the second quarter. We reopened all of our golf courses and our Gen 2.0 Drive Shack venues in West Palm Beach, Richmond and Raleigh,” said Hana Khouri, Chief Executive Officer. “Our operators have done a remarkable job navigating the public health crisis. Due to COVID, we have implemented additional safety measures across all of our venues and courses to ensure that we are providing our guests with experiences that prioritize their health and safety.”

Khouri continued, “We have seen strong demand since reopening our traditional and entertainment golf businesses. Our courses and venues have proven to be the ideal setting for guests to socialize and make memories with friends while social distancing. The key differentiator is our outdoor, open-air format, with defined suite-style bays partitioned by protective dividers at our Drive Shack venues, and naturally limited on-course guest overlap at American Golf courses. We believe that these factors will ultimately set us up to emerge from the COVID-19 environment as a leader in the leisure space.”

Business Update

The Company began the second quarter with operations suspended across all of its entertainment golf venues and substantially all of its owned, leased and managed traditional golf courses. By the end of June, all of its traditional golf courses, and all but one of its entertainment golf venues, resumed operations. Across the traditional golf courses open for the full month of June, which excludes the courses located in New York and Texas, private course Membership Sales increased 32% and Member Rounds increased 20% compared to June 2019. During the same period, public course Green Fee & Cart Fee Revenue increased 10% compared to June 2019, despite available tee times decreasing 32% due to locally mandated restrictions. During the second quarter, our traditional golf business generated total revenue of $30 million. This comes to $22 million after adjusting for managed course expense reimbursements, of which $12 million was generated in June.

The Company’s entertainment golf business reopened its locations in West Palm Beach, Richmond and Raleigh on May 15, May 29, and June 26, respectively. Across 85 collective days of operations, the three entertainment golf venues generated total revenue of approximately $2 million and took less than 21 days on average to breakeven following their reopening.

The Company’s reopening strategy included a focus on safeguarding the health of its employees, guests and communities, with supplies and protocols intended to keep guests and employees safe and comfortable, including transparent bay partitioning, enhanced distancing, temperature checks, complimentary personal protective equipment, and complying with local safety mandates.

Financial Liquidity Update

As of July 31, 2020, the Company had approximately $12 million of unrestricted cash on hand compared to approximately $14 million as of April 30, 2020. As the Company resumed its traditional and entertainment golf operations in the second quarter, it reopened its venues and courses with a re-positioned labor model designed to improve operational and financial performance. As resumed operations made headway, we were able to quickly generate sufficient cash flows to meet current venue and course level operating expenses, with cash flows from both businesses turning positive shortly thereafter.

As part of its cash preservation strategy initiated at the onset of the closure periods, the Company has deferred or reduced a portion of its rent payments and entered into payment plans with a number of vendors. In addition, the Company has continued to defer payment of the 2019 annual employee bonuses, suspend quarterly cash dividends on its preferred stock, and construction on its entertainment golf venues and traditional golf courses remains paused.

Second Quarter Results (unaudited)

Three Months and Six Months Ended June 30, 2020 compared to the Three Months and Six Months Ended June 30, 2019

($ in thousands, except for per share data):

 

Three Months Ended

 

Six Months Ended

June 30, 2020

June 30, 2019

 

June 30, 2020

 

June 30, 2019

Total revenues

$

32,100

 

$

71,615

 

 

$

93,235

 

 

$

125,567

 

Loss applicable to common stockholders

$

(40,921

)

$

(14,354

)

 

$

(59,678

)

 

$

(30,349

)

 

Loss applicable to common stock, per share

 

 

 

 

Basic

$

(0.61

)

$

(0.21

)

 

$

(0.89

)

 

$

(0.45

)

Diluted

$

(0.61

)

$

(0.21

)

 

$

(0.89

)

 

$

(0.45

)

For the three months ended June 30, 2020, the Company reported a loss of $41 million, or ($0.61) per share, compared to a loss of $14 million, or ($0.21) per share, in the corresponding period of the prior year.

For the six months ended June 30, 2020, the Company reported a loss of $60 million, or ($0.89) per share, compared to a loss of $30 million, or ($0.45) per share, in the corresponding period of the prior year.

Conference Call Wednesday, August 5, 2020

Management will hold a conference call to discuss these results Wednesday, August 5th at 9:00 a.m. Eastern Time. The conference call can be accessed over the phone by dialing 1-866-913-6930 (from within the U.S.) or 1-409-983-9881 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference conference ID “6638268.”

A copy of the earnings release will be posted to the Investor Relations section of Drive Shack Inc.’s website, http://ir.driveshack.com.

A simultaneous webcast of the conference call will be available to the public on a listen-only basis at http://ir.driveshack.com. Please allow extra time prior to the call to visit the website and download any necessary software required to listen to the internet broadcast.

A telephonic replay of the conference call will also be available two hours following the call’s completion through 11:30 P.M. Eastern Time on Wednesday, August 19, 2020 by dialing 1-800-585-8367 (from within the U.S.) or 1-404-537-3406 (from outside of the U.S.); please reference conference ID “6638268.”

Additional Information

For additional information that management believes to be useful for investors, please refer to the presentation posted on the Investor Relations section of the Company’s website, http://ir.driveshack.com. For consolidated information, please refer to the Company’s most recent Quarterly Report on Form 10-Q or Annual Report on Form 10-K, which are available on the Company’s website, http://ir.driveshack.com.

About Drive Shack

Drive Shack Inc. is a leading owner and operator of golf-related leisure and entertainment businesses.

Forward-Looking Statements: The Company cautions that this release contains forward-looking statements, including, without limitation, statements relating to our expected results of operations and the impact on our business and operations of the COVID-19 pandemic. Forward-looking statements involve risks and uncertainties. Accordingly, actual results may differ materially from the forward-looking statements, and the Company therefore cautions you against relying on such forward-looking statements. Future factors that could cause actual results or other expectations or intentions to differ from those included in forward-looking statements include, without limitation, the uncertain and unprecedented impact of the COVID-19 pandemic on our business and operations and the related impact on our liquidity needs; our ability to continue as a going concern; our ability to access other funding sources; the potential imposition of government-mandated and voluntary shutdowns relating to the COVID-19 pandemic; the level of customer demand during the onset and continuance of the COVID-19 pandemic and thereafter; the economic impact of the COVID-19 pandemic and related disruptions on the communities we serve; our overall level of indebtedness and leverage; general business and economic conditions; the impact of competition; the seasonality of the Company’s business; adverse weather conditions; guest and employee complaints and litigation; labor costs and availability; changes in consumer and corporate spending; changes in demographic trends; changes in governmental regulations; unfavorable publicity, our ability to open new venues, and acts of God. The Company intends these forward-looking statements to speak only as of the time of this release and does not undertake to update or revise them as more appropriate information becomes available, except as required by law.

Consolidated Balance Sheets

(dollars in thousands, except share data)

(Unaudited)

June 30, 2020

 

December 31, 2019

Assets

Current assets

Cash and cash equivalents

$

12,638

 

$

28,423

 

Restricted cash

 

2,974

 

3,103

 

Accounts receivable, net of allowance of $967 and $1,082, respectively

 

3,651

 

5,249

 

Real estate assets, held-for-sale, net

 

16,975

 

16,948

 

Real estate securities, available-for-sale

 

2,985

 

3,052

 

Other current assets

 

13,977

 

17,521

 

Total current assets

 

53,200

 

74,296

 

Restricted cash, noncurrent

 

267

 

438

 

Property and equipment, net of accumulated depreciation

 

178,732

 

179,641

 

Operating lease right-of-use assets

 

203,359

 

215,308

 

Intangibles, net of accumulated amortization

 

16,039

 

17,565

 

Other investments

 

 

24,020

 

Other assets

 

5,476

 

4,723

 

Total assets

$

457,073

 

$

515,991

 

Liabilities and Equity

Current liabilities

Obligations under finance leases

$

5,860

 

$

6,154

 

Membership deposit liabilities

 

14,457

 

10,791

 

Accounts payable and accrued expenses

 

34,374

 

25,877

 

Deferred revenue

 

23,633

 

26,268

 

Real estate liabilities, held-for-sale

 

5

 

4

 

Other current liabilities

 

27,375

 

23,964

 

Total current liabilities

 

105,704

 

93,058

 

Credit facilities and obligations under finance leases – noncurrent

 

12,061

 

13,125

 

Operating lease liabilities – noncurrent

 

175,048

 

187,675

 

Junior subordinated notes payable

 

51,187

 

51,192

 

Membership deposit liabilities, noncurrent

 

95,913

 

95,805

 

Deferred revenue, noncurrent

 

6,783

 

6,283

 

Other liabilities

 

1,709

 

3,278

 

Total liabilities

$

448,405

 

$

450,416

 

Commitments and contingencies

Equity

Preferred stock, $0.01 par value, 100,000,000 shares authorized,

1,347,321 shares of 9.75% Series B Cumulative Redeemable Preferred Stock, 496,000

shares of 8.05% Series C Cumulative Redeemable Preferred Stock, and 620,000

shares of 8.375% Series D Cumulative Redeemable Preferred Stock, liquidation

preference $25.00 per share, issued and outstanding as of June 30, 2020 and December 31, 2019

 

61,583

 

 

61,583

 

 

Common stock, $0.01 par value, 1,000,000,000 shares authorized, 67,212,362 and

67,068,751 shares issued and outstanding at June 30, 2020 and December 31, 2019,

respectively

 

672

 

 

671

 

Additional paid-in capital

 

3,177,883

 

 

3,177,183

 

Accumulated deficit

 

(3,232,925

)

 

(3,175,572

)

Accumulated other comprehensive income

 

1,455

 

 

1,710

 

Total equity

$

8,668

 

$

65,575

 

Total liabilities and equity

$

457,073

 

$

515,991

 

Consolidated Statements of Operations (unaudited)

(dollars in thousands, except share data)

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

2020

 

 

2019

 

 

 

2020

 

 

 

2019

 

 

Revenues

 

 

 

 

 

Golf operations

$

29,675

 

$

57,386

 

 

$

78,300

 

 

$

102,092

 

 

Sales of food and beverages

 

2,425

 

 

14,229

 

 

 

14,935

 

 

 

23,475

 

 

Total revenues

 

32,100

 

 

71,615

 

 

 

93,235

 

 

 

125,567

 

 

Operating costs

 

 

 

 

 

Operating expenses

 

33,224

 

 

58,720

 

 

 

87,591

 

 

 

106,443

 

 

Cost of sales – food and beverages

 

829

 

 

3,904

 

 

 

4,484

 

 

 

6,601

 

 

General and administrative expense

 

6,368

 

 

13,607

 

 

 

16,186

 

 

 

25,226

 

 

Depreciation and amortization

 

6,682

 

 

5,122

 

 

 

13,476

 

 

 

10,046

 

 

Pre-opening costs

 

270

 

 

1,700

 

 

 

822

 

 

 

2,879

 

 

(Gain) loss on lease terminations and impairment

 

(3,125

)

 

118

 

 

 

(2,333

)

 

 

4,206

 

 

Total operating costs

 

44,248

 

 

83,171

 

 

 

120,226

 

 

 

155,401

 

 

Operating loss

 

(12,148

)

 

(11,556

)

 

 

(26,991

)

 

 

(29,834

)

 

 

 

 

 

 

Other income (expenses)

 

 

 

 

 

Interest and investment income

 

135

 

 

265

 

 

 

265

 

 

 

608

 

 

Interest expense, net

 

(2,591

)

 

(1,795

)

 

 

(5,336

)

 

 

(3,947

)

 

Other income (loss), net

 

(24,422

)

 

 

127

 

 

 

(24,055

)

 

 

5,614

 

 

Total other income (expenses)

 

(26,878

)

 

 

(1,403

)

 

 

(29,126

)

 

 

2,275

 

 

Loss before income tax

 

(39,026

)

 

(12,959

)

 

 

(56,117

)

 

 

(27,559

)

 

Income tax expense

 

500

 

 

 

 

 

771

 

 

 

 

 

Net Loss

 

(39,526

)

 

(12,959

)

 

 

(56,888

)

 

 

(27,559

)

 

Preferred dividends

 

(1,395

)

 

(1,395

)

 

 

(2,790

)

 

 

(2,790

)

 

Loss Applicable to Common Stockholders

$

(40,921

)

$

(14,354

)

 

$

(59,678

)

 

$

(30,349

)

 

 

 

 

 

 

Loss Applicable to Common Stock, per share

 

 

 

 

 

Basic

$

(0.61

)

$

(0.21

)

 

$

(0.89

)

 

$

(0.45

)

 

Diluted

$

(0.61

)

$

(0.21

)

 

$

(0.89

)

 

$

(0.45

)

 

Weighted Average Number of Shares of Common Stock Outstanding

 

 

 

 

 

Basic

 

67,111,843

 

 

67,029,610

 

 

 

67,090,805

 

 

 

67,028,364

 

 

Diluted

 

67,111,843

 

 

67,029,610

 

 

 

67,090,805

 

 

 

67,028,364

 

 

 

 

Contacts

For Investor Relations Inquiries:
Austin Pruitt

Head of Investor Relations

646-585-5591

[email protected]

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