Strength of New Venues Highlighted in Drive Shack Inc.’s Fourth Quarter 2019 Results

Generation 2.0 Drive Shack venues produce strong results, generated $15 million of revenue in second half of 2019

2 new Urban Box sites announced – Dallas, TX and Charlotte, NC

Expect to open 4 new venues in 2020

NEW YORK–(BUSINESS WIRE)–Drive Shack Inc. (NYSE: DS), a leading owner and operator of golf-related leisure and “eatertainment” venues, today reported its financial results for the fourth quarter and full year ended December 31, 2019.

The Company announced that during the fourth quarter of 2019 it successfully opened its third Generation 2.0 Drive Shack venue in West Palm Beach, FL on October 14th. In the second half of 2019, the three new Generation 2.0 venues generated combined revenue of approximately $15 million. The new venues have ramped up faster than anticipated and are expected to achieve EBITDA margins of approximately 25% and development yields of 10 to 15% in 2020.

“For the second straight quarter we see our Generation 2.0 venues produce exceptional results,” says CEO, Hana Khouri. “Our fourth quarter results highlight the strength of these new venues, as the venues significantly outpace the anticipated timelines to ramp up to target economics. This is a direct result of the talented and experienced leadership team we have in place. They’ve done a phenomenal job executing the plan and will continue to be a key differentiator, and driver for us, as we execute our growth plan across the next 50 entertainment venues.”

Additionally, the Company announced substantial progress in the development of its newest innovation, the “Urban Box,” including the announcement of new sites in Dallas, TX and Charlotte, NC. Three Urban Box venues are set to debut alongside Drive Shack’s New Orleans venue in the second half of 2020. The Company outlined its plans for growth, which include doubling the number of operating entertainment golf venues by the end of 2020. By the end of 2023, the company plans to operate a portfolio of nearly 60 entertainment venues, including 50 urban box venues and 8 core venues. 

The Company also announced the departure of David Hammarley, who served as Chief Financial Officer. Lawrence A Goodfield Jr., the Company’s Chief Accounting Officer and Treasurer, will also assume the role of Interim Chief Financial Officer.

Financial Results

Three Months Ended December 31, 2019 compared to the Three Months Ended December 31, 2018 and the Year Ended December 31, 2019 compared to Year Ended December 31, 2018 ($ in thousands, except for per share data):

 

   

Three Months Ended

 

 

 

Year Ended

 
   

December 31, 2019

   

December 31, 2018

 

 

 

December 31, 2019

 

 

 

December 31, 2018

 

Total revenues

   

$

71,815

 

   

$

69,286

 

 

 

 

$

272,064

 

 

 

 

$

314,369

 

 

Loss applicable to common stockholders

   

$

(16,671

)

   

$

(4,905

)

 

 

 

$

(60,434

)

 

 

 

$

(44,263

)

 

Loss applicable to Common Stock, per share

         

 

 

 

 

 

 

 

 

Basic

   

$

(0.25

)

   

$

(0.07

)

 

 

 

$

(0.90

)

 

 

 

$

(0.66

)

 

Diluted

   

$

(0.25

)

   

$

(0.07

)

 

 

 

$

(0.90

)

 

 

 

$

(0.66

)

 

For the three months ended December 31, 2019, the Company reported a loss of $17 million, or ($0.25) per share, compared to a loss of $5 million, or ($0.07) share, in the corresponding period of the prior year. For the twelve months ended December 31, 2019, the Company reported a loss of $60 million, or ($0.90) per share, compared to a loss of $44 million, or ($0.66) per share, in the corresponding period of the prior year.

Conference Call Friday, March 6, 2020

Management will hold a conference call to discuss these results Friday, March 6th 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 “8985335.”

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 Friday, March 20, 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 “8985335.”

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: Certain items in this Press Release may constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding Drive Shack Inc.’s (NYSE: DS; “DS Inc.” or the “Company” and “we,” “us” and “our,” as applicable) (a) statements relating to returns on our investments, (b) anticipated future sales of selected owned golf properties, including without limitation statements relating to the timing and amount of anticipated proceeds, (c) our plans and expectations to optimize the operation of, and grow, our existing leased and managed golf properties, (d) redeployment of cash from our generated liquidity, (e) targeted multiples, yields and returns, (f) our ability to terminate or restructure leases and (g) the Company’s current business plan and expectations relating to our Drive Shack venues, including (i) the number of venues that we may be able to develop, (ii) timing and frequency for opening venues, (iii) financial performance of these venues and capital expenditure costs, (iv) the growth of the golf, golf entertainment, and eatertainment industry and business, and (v) our ability to enhance technology. These statements are based on management’s current expectations and beliefs and are subject to a number of risks, trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements, many of which are beyond our control. We cannot give any assurances that management’s current expectations will be attained. For a discussion of some of the risks and important factors that could cause actual results to differ materially from such forward-looking statements, see the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s periodic reports filed with the Securities and Exchange Commission (“SEC”), which are available on the Company’s website (http://ir.driveshack.com). In addition, new risks and uncertainties emerge from time to time, and it is not possible to predict or assess the impact of every factor that may cause actual results to differ from those contained in any forward-looking statements. Accordingly, you should not place undue reliance on any forward-looking statements contained in this Press Release. Forward-looking statements speak only as of the date of this Press Release. We expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.

Non-GAAP Financial Information: This Press Release includes information based on financial measures that are not recognized under generally accepted accounting principles (“GAAP”), including EBITDA, EBITDA margin, and Development Yield. You should use non-GAAP information in addition to, and not as an alternative to, financial information prepared in accordance with GAAP, which is included in the Company’s filings with the SEC. The Company has not reconciled its EBITDA expectations set forth in this press release to net income (loss), as items that impact such measures are out of the Company’s control and/or cannot be reasonably predicted. Accordingly, a reconciliation is not available without unreasonable effort. The company has not reconciled EBITDA to net income (loss) in this press release because doing so would require unreasonable effort.

Past Performance; No Offer; No Reliance: Past performance is not a reliable indicator of future results and should not be relied upon as the basis for making an investment decision. This Press Release does not constitute an offer to sell, or a solicitation of an offer to buy, any security. Any such offer would only be made by means of formal offering documents, the terms of which would govern in all respects. You should not rely on this Press Release as the basis upon which to make any investment decision.

Cautionary Note regarding Estimated / Targeted Returns and Growth: Targeted returns and growth represent management’s view and are estimated based on current and projected future operating performance of our current locations and other targeted locations, comparable companies in our industry and a variety of other assumptions, many of which are beyond our control, that could prove incorrect. As a result, actual results may vary materially with changes in our liquidity or ability to obtain financing, changes in market conditions and additional factors described in our reports filed with the SEC, which we encourage you to review. We undertake no obligation to update these estimates. See above for more information on forward-looking statements.

Consolidated Balance Sheets

   

(dollars in thousands, except share data)

 

December 31,

 

2019

   

2018

Assets

     

Current assets

     

Cash and cash equivalents

 

$

28,423

 

   

$

79,235

 

Restricted cash

 

 

3,103

 

   

 

3,326

 

Accounts receivable, net

 

 

5,249

 

   

 

7,518

 

Real estate assets, held-for-sale, net

 

 

16,948

 

   

 

75,862

 

Real estate securities, available-for-sale

 

 

3,052

 

   

 

2,953

 

Other current assets

 

 

17,521

 

   

 

20,505

 

Total current assets

 

 

74,296

 

   

 

189,399

 

Restricted cash, noncurrent

 

 

438

 

   

 

258

 

Property and equipment, net of accumulated depreciation

 

 

179,641

 

   

 

132,605

 

Operating lease right-of-use assets

 

 

215,308

 

   

Intangibles, net of accumulated amortization

 

 

17,565

 

   

 

48,388

 

Other investments

 

 

24,020

 

   

 

22,613

 

Other assets

 

 

4,723

 

   

 

8,684

 

Total assets

 

$

515,991

 

   

$

401,947

 

       

Liabilities and Equity

     

Current liabilities

     

Obligations under finance leases

 

$

6,154

 

   

$

5,489

 

Membership deposit liabilities

 

 

10,791

 

   

 

8,861

 

Accounts payable and accrued expenses

 

 

25,877

 

   

 

45,284

 

Deferred revenue

 

 

26,268

 

   

 

18,793

 

Real estate liabilities, held-for-sale

 

 

4

 

   

 

2,947

 

Other current liabilities

 

 

23,964

 

   

 

22,285

 

Total current liabilities

 

 

93,058

 

   

 

103,659

 

Credit facilities and obligations under finance leases – noncurrent

 

 

13,125

 

   

 

10,489

 

Operating lease liabilities – noncurrent

 

 

187,675

 

   

Junior subordinated notes payable

 

 

51,192

 

   

 

51,200

 

Membership deposit liabilities, noncurrent

 

 

95,805

 

   

 

90,684

 

Deferred revenue, noncurrent

 

 

6,283

 

   

 

6,016

 

Other liabilities

 

 

3,278

 

   

 

5,232

 

Total liabilities

 

$

450,416

 

   

$

267,280

 

       

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 December 31, 2019 and 2018

 

 

61,583

 

   

 

61,583

 

Common stock, $0.01 par value, 1,000,000,000 shares authorized, 67,068,751 and 67,027,104 shares issued and outstanding at December 31, 2019 and 2018, respectively

 

 

671

 

   

 

670

 

Additional paid-in capital

 

 

3,177,183

 

   

 

3,175,843

 

Accumulated deficit

 

 

(3,175,572

)

   

 

(3,105,307

)

Accumulated other comprehensive income

 

 

1,710

 

   

 

1,878

 

Total equity

 

$

65,575

 

   

$

134,667

 

       

Total liabilities and equity

 

$

515,991

 

   

$

401,947

 

Consolidated Statements of Operations (unaudited)

(dollars in thousands, except share data)

 

   

Three Months Ended December 31,

   

 

Year Ended December 31,

 

 

 

   

2019

 

2018

   

 

2019

 

 

2018

 

Revenues

         

 

 

 

 

 

 

Golf operations

   

$

53,608

 

 

$

53,014

 

   

 

$

216,497

 

 

 

$

244,646

 

 

Sales of food and beverages

   

 

18,207

 

 

 

16,272

 

   

 

 

55,567

 

 

 

 

69,723

 

 

Total revenues

   

 

71,815

 

 

 

69,286

 

   

 

 

272,064

 

 

 

 

314,369

 

 

Operating costs

         

 

 

 

 

 

 

Operating expenses

   

 

59,409

 

 

 

57,043

 

   

 

 

229,306

 

 

 

 

251,794

 

 

Cost of sales – food and beverages

   

 

4,759

 

 

 

4,740

 

   

 

 

15,217

 

 

 

 

20,153

 

 

General and administrative expense

   

 

9,994

 

 

 

8,951

 

   

 

 

47,976

 

 

 

 

38,560

 

 

Depreciation and amortization

   

 

6,627

 

 

 

5,346

 

   

 

 

22,396

 

 

 

 

19,704

 

 

Pre-opening costs

   

 

1,811

 

 

 

435

 

   

 

 

9,040

 

 

 

 

2,483

 

 

Impairment and other losses

   

 

9,336

 

 

 

2,595

 

   

 

 

15,413

 

 

 

 

8,240

 

 

Realized and unrealized (gain) loss on investments

   

 

 

152

 

   

 

 

 

 

(131

)

 

Total operating costs

   

 

91,936

 

 

 

79,262

 

   

 

 

339,348

 

 

 

 

340,803

 

 

Operating loss

   

 

(20,121

)

 

 

(9,976

)

   

 

 

(67,284

)

 

 

 

(26,434

)

 

         

 

 

 

 

 

 

Other income (expenses)

         

 

 

 

 

 

 

Interest and investment income

   

 

156

 

 

 

412

 

   

 

 

955

 

 

 

 

1,794

 

 

Interest expense, net

   

 

(2,753

)

 

 

(3,699

)

   

 

 

(8,760

)

 

 

 

(16,639

)

 

Other income (loss), net

   

 

7,921

 

 

 

10,037

 

   

 

 

20,876

 

 

 

 

2,880

 

 

Total other income (expenses)

   

 

5,324

 

 

 

6,750

 

   

 

 

13,071

 

 

 

 

(11,965

)

 

Loss before income tax

   

 

(14,797

)

 

 

(3,226

)

   

 

 

(54,213

)

 

 

 

(38,399

)

 

Income tax expense

   

 

479

 

 

 

284

 

   

 

 

641

 

 

 

 

284

 

 

Net Loss

   

 

(15,276

)

 

 

(3,510

)

   

 

 

(54,854

)

 

 

 

(38,683

)

 

Preferred dividends

   

 

(1,395

)

 

 

(1,395

)

   

 

 

(5,580

)

 

 

 

(5,580

)

 

Loss Applicable to Common Stockholders

   

$

(16,671

)

 

$

(4,905

)

   

 

$

(60,434

)

 

 

$

(44,263

)

 

         

 

 

 

 

 

 

Loss Applicable to Common Stock, per share

         

 

 

 

 

 

 

Basic

   

$

(0.25

)

 

$

(0.07

)

   

 

$

(0.90

)

 

 

$

(0.66

)

 

Diluted

   

$

(0.25

)

 

$

(0.07

)

   

 

$

(0.90

)

 

 

$

(0.66

)

 

Weighted Average Number of Shares of Common Stock Outstanding

         

 

 

 

 

 

 

Basic

   

 

67,060,440

 

 

 

67,027,104

 

   

 

 

67,039,556

 

 

 

 

66,993,543

 

 

Diluted

   

 

67,060,440

 

 

 

67,027,104

 

   

 

 

67,039,556

 

 

 

 

66,993,543

 

 

             

 

Contacts

For Investor Relations Inquiries:

Austin Pruitt
Head of Investor Relations

646-585-5591

IR@driveshack.com

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