Drive Shack Inc. Announces First Quarter 2022 Financial Results and Preferred Stock Dividends for Second Quarter 2022
First Quarter 2022 Total Company Revenue of $69 Million, Up 13% Compared to First Quarter 2021; Led by Increased Event Sales and New Puttery Venues
Drive Shack Inc. (NYSE: DS), a leading owner and operator of golf-related leisure and entertainment businesses, today reported its financial results for the first quarter ended March 31, 2022.
“2022 is off to an incredible start. Our Drive Shack and American Golf businesses continue to generate solid earnings and we are gaining a clear proof of concept with our two Puttery venues, both delivering sales results and profitability margins ahead of our expectations this quarter,” said Drive Shack Inc.’s President and Chief Executive Officer Hana Khouri. “We continue to experience strong momentum at our venues and courses as our walk-in business has largely normalized. Total event revenue is up meaningfully to last year’s first quarter and the demand for future events remains exceptionally strong across our entire brand portfolio.”
Khouri continued, “We are investing our capital towards the development of new Puttery venues as we believe Puttery presents the best path forward for near-term growth. We are on track to open seven locations by the end of 2022, with our next venue planned to open in Washington DC’s Penn Quarter next month, followed by our Houston and Chicago locations which are planned to open in the third quarter. There is a large addressable market in the venue-based entertainment business – we are aggressively pursuing new leases for venue openings in 2023 and beyond and are currently in active discussion with landlords on multiple sites across the country. We are focused on optimizing our capital structure to support our development plans and remain centered on driving growth and profitability in our business for years to come.”
First Quarter 2022 Financial Highlights
Total revenue for the first quarter this year was $69.0 million, an increase of $7.9 million or 12.9%, compared to $61.1 million in the same period last year.
The Company’s entertainment golf business, comprised of both Drive Shack and Puttery venues, generated total revenue of $14.2 million in the first quarter 2022, an increase of $6.0 million, or 72.4% compared to $8.2 million in the first quarter 2021. The increase to last year was due to a $1.6 million increase in total revenue at the Company’s four Drive Shack venues, with $1.3 million of the increase driven by higher event revenue this year. Additionally, the Company’s two Puttery venues generated total revenue of $4.4 million in the first quarter this year. As a reminder, the Company debuted its first Puttery venue in The Colony, Texas in September 2021 and opened its second Puttery venue in Charlotte, North Carolina in mid-December 2021.
For the first quarter 2022, the Company’s traditional golf business, American Golf, generated total revenue of $54.6 million, an increase of $1.8 million or 3.3% compared to total revenue of $52.9 million in the first quarter 2021. Total revenue included $13.0 million of managed course expense reimbursements in the first quarter this year compared to $13.8 million in the first quarter last year. The increase in total revenue was primarily due to higher event sales this year.
Operating loss for the first quarter 2022 was ($18.4) million, a decrease of $10.5 million in profitability versus an operating loss of ($7.9) million for the first quarter 2021. The change to last year was primarily due to impairment charges on the building and fixed assets for the Drive Shack venue located in New Orleans following the Company’s decision to primarily invest capital spend into the development of future Puttery venues and as such, it plans to pursue alternatives for its New Orleans location. The impairment charges in the first quarter last year related to the Company’s assets at its former corporate office.
Consolidated net loss was ($18.9) million for the first quarter this year compared to consolidated net loss of ($10.9) million in the same period last year.
Adjusted EBITDA was $1.0 million for first quarter 2022 compared to Adjusted EBITDA of $2.7 million for first quarter 2021.1 Last year, Adjusted EBITDA included approximately $1.3 million from five American Golf courses that the company exited after the first quarter last year. Additionally, the Company has made strategic investments in headcount and other related expenses throughout 2021 to support the development and growth in Puttery, and approximately $1.0 million of incremental expense related to these investments was realized in the first quarter this year that had yet to be incurred in the first quarter last year.
As of March 31, 2022, the Company had cash and cash equivalents of $44.1 million compared to $58.3 million as of December 31, 2021. The decrease was primarily due to capital expenditures associated with the development of future Puttery venues.
Summary Financial Results (unaudited)
Three Months Ended March 31, 2022 compared to the Three Months Ended March 31, 2021 ($ in thousands, except for per share data):
| Three Months Ended | ||||
| 2022 | 2021 | |||
| Total revenues | $68,982 | $61,091 | ||
| Operating loss | ($18,392) | ($7,875) | ||
| Consolidated net loss | ($18,913) | ($10,904) | ||
| Loss applicable to common stockholders | ($20,361) | ($12,299) | ||
| Loss applicable to common stock, per share | ||||
| Basic | ($0.22) | ($0.15) | ||
| Diluted | ($0.22) | ($0.15) | ||
| Adjusted EBITDA1 | $1,019 | $2,731 | ||
1 Adjusted EBITDA is a non-GAAP financial measure. For definitions and reconciliations of non-GAAP results please refer to the exhibit to this press release.
Preferred Stock Dividends
The Board of Directors of the Company declared dividends on the Company’s preferred stock for the period beginning May 1, 2022 and ending July 31, 2022. The dividends are payable on August 1, 2022, to holders of record of preferred stock on July 1, 2022, in an amount equal to $0.609375, $0.503125 and $0.523438 per share on the 9.750% Series B, 8.050% Series C and 8.375% Series D preferred stock, respectively.
About Drive Shack Inc.
Drive Shack Inc. is a leading owner and operator of golf-related leisure and entertainment businesses focused on bringing people together through competitive socializing. Today, our portfolio consists of American Golf, Drive Shack and Puttery.
| Drive Shack Inc. and Subsidiaries | ||||||||
| Consolidated Statements of Operations (unaudited) | ||||||||
| (Dollars in thousands, except share data) | ||||||||
| (unaudited) | ||||||||
| March 31, 2022 | December 31, 2021 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 44,068 | $ | 58,286 | ||||
| Restricted cash | 3,985 | 3,480 | ||||||
| Accounts receivable, net | 5,405 | 5,563 | ||||||
| Real estate securities, available-for-sale | 3,655 | 3,486 | ||||||
| Other current assets | 31,577 | 30,034 | ||||||
| Total current assets | 88,690 | 100,849 | ||||||
| Restricted cash, noncurrent | 216 | 798 | ||||||
| Property and equipment, net of accumulated depreciation | 172,002 | 179,260 | ||||||
| Operating lease right-of-use assets | 198,926 | 181,915 | ||||||
| Intangibles, net of accumulated amortization | 13,509 | 13,430 | ||||||
| Other assets | 6,374 | 6,538 | ||||||
| Total assets | $ | 479,717 | $ | 482,790 | ||||
| Liabilities and Equity | ||||||||
| Current liabilities | ||||||||
| Obligations under finance leases | $ | 5,186 | $ | 5,400 | ||||
| Membership deposit liabilities | 18,039 | 18,039 | ||||||
| Accounts payable and accrued expenses | 33,310 | 34,469 | ||||||
| Deferred revenue | 23,323 | 26,301 | ||||||
| Other current liabilities | 29,375 | 26,524 | ||||||
| Total current liabilities | 109,233 | 110,733 | ||||||
| Credit facilities and obligations under finance leases - noncurrent | 8,867 | 9,075 | ||||||
| Operating lease liabilities - noncurrent | 183,302 | 166,031 | ||||||
| Junior subordinated notes payable | 51,172 | 51,174 | ||||||
| Membership deposit liabilities, noncurrent | 105,749 | 104,430 | ||||||
| Deferred revenue, noncurrent | 10,864 | 10,005 | ||||||
| Other liabilities | 1,716 | 1,487 | ||||||
| Total liabilities | $ | 470,903 | $ | 452,935 | ||||
| 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 March 31, 2022 and December 31, 2021 | $ | 61,583 | $ | 61,583 | ||||
| Common stock, $0.01 par value, 1,000,000,000 shares authorized, 92,362,845 and 92,093,425 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively. | 921 | 921 | ||||||
| Additional paid-in capital | 3,232,912 | 3,233,608 | ||||||
| Accumulated deficit | (3,289,237 | ) | (3,268,876 | ) | ||||
| Accumulated other comprehensive income | 1,163 | 1,163 | ||||||
| Total equity of the company | $ | 7,342 | $ | 28,399 | ||||
| Noncontrolling interest | 1,472 | 1,456 | ||||||
| Total equity | $ | 8,814 | $ | 29,855 | ||||
| Total liabilities and equity | $ | 479,717 | $ | 482,790 | ||||
| Drive Shack Inc. and Subsidiaries | ||||||||
| Consolidated Statements of Operations (unaudited) | ||||||||
| (Dollars in thousands, except share data) | ||||||||
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Revenues | ||||||||
| Golf operations | $ | 55,284 | $ | 53,161 | ||||
| Sales of food and beverages | 13,698 | 7,930 | ||||||
| Total revenues | 68,982 | 61,091 | ||||||
| Operating costs | ||||||||
| Operating expenses | 55,139 | 48,870 | ||||||
| Cost of sales - food and beverages | 3,361 | 2,104 | ||||||
| General and administrative expense | 9,063 | 7,982 | ||||||
| Depreciation and amortization | 6,193 | 6,245 | ||||||
| Pre-opening costs | 747 | 556 | ||||||
| Loss on lease terminations and impairment | 12,871 | 3,209 | ||||||
| Total operating costs | 87,374 | 68,966 | ||||||
| Operating loss | (18,392 | ) | (7,875 | ) | ||||
| Other income (expenses) | ||||||||
| Interest and investment income | 201 | 153 | ||||||
| Interest expense, net | (2,646 | ) | (2,626 | ) | ||||
| Other income (loss), net | 2,645 | (61 | ) | |||||
| Total other income (expenses) | 200 | (2,534 | ) | |||||
| Loss before income tax | (18,192 | ) | (10,409 | ) | ||||
| Income tax expense | 721 | 495 | ||||||
| Consolidated net loss | (18,913 | ) | (10,904 | ) | ||||
| Less: net income attributable to noncontrolling interest | 53 | — | ||||||
| Net loss attributable to the Company | (18,966 | ) | (10,904 | ) | ||||
| Preferred dividends | (1,395 | ) | (1,395 | ) | ||||
| Loss applicable to common stockholders | $ | (20,361 | ) | $ | (12,299 | ) | ||
| Loss applicable to common stock, per share | ||||||||
| Basic | $ | (0.22 | ) | $ | (0.15 | ) | ||
| Diluted | $ | (0.22 | ) | $ | (0.15 | ) | ||
| Weighted average number of shares of common stock outstanding | ||||||||
| Basic | 92,254,084 | 82,558,881 | ||||||
| Diluted | 92,254,084 | 82,558,881 | ||||||
| Drive Shack Inc. and Subsidiaries | ||||
| Adjusted EBITDA Non-GAAP Reconciliations (unaudited) | ||||
| (Dollars in thousands) | ||||
| Three Months Ended March 31, | ||||
| 2022 | 2021 | |||
| Net Loss | ($18,913) | ($10,904) | ||
| Income tax expense | 721 | 495 | ||
| Other (income) loss, net | (2,645) | 61 | ||
| Net interest expense | 2,445 | 2,473 | ||
| Operating loss | (18,392) | (7,875) | ||
| Depreciation and amortization | 6,193 | 6,245 | ||
| Loss on lease terminations and impairment | 12,871 | 3,209 | ||
| Pre-opening costs | 747 | 556 | ||
| Other items1 | (400) | 596 | ||
| Adjusted EBITDA | $1,019 | $2,731 | ||
| (1) | For the three months ended March 31, 2022 and 2021, other items include (i) corporate severance of $172 and $130, respectively; (ii) transactional G&A of $121 and $196, respectively; and (iii) stock-based compensation of ($693) and $270, respectively. |
