Provides Business & Financial Liquidity Update

Drive Shack Inc. (the “Company”) (NYSE: DS) today reported its financial results for the third quarter ended September 30, 2020. The Company also provided an update on the business, as well as measures it has taken to sustain liquidity.

“We are pleased with our third quarter results as we see our venues and courses continue to build momentum over the year. Both of these businesses delivered positive financial results in the quarter, even with the challenges we continue to face with local restrictions and mandates with large group gatherings,” said Chief Executive Officer Hana Khouri. “Over the past several months, we have aggressively managed costs to strengthen our financial position and implemented measures to preserve cash and sustain our liquidity. We also delivered on a large strategic goal with closing the sale of our Rancho San Joaquin traditional golf course in October for nearly $34 million in net cash proceeds. We’ve taken actions to re-stabilize our business amid the current environment and believe we are positioned to advance the growth plans we laid out earlier this year.”

Khouri continued, “Our teams have been highly engaged in innovating and developing new promotional offers geared towards smaller group gatherings in our Drive Shack venues to help drive traffic and generate increased revenue. We debuted our new 2-bay package in mid-September to encourage small event bookings in all Drive Shack locations and since our launch, the early response by our guests has been positive. We plan to further this momentum by launching our online reservation platform in December. We are also excited to announce that we have developed a plan to reopen our Orlando venue next month. I look forward to sharing more details on our upcoming earnings call.”

Business Update

The strong momentum and demand for traditional golf continued throughout the third quarter. New full golf membership sales increased 48% and member rounds increased 36% on our five private courses compared to the third quarter 2019. During the same period, green and cart fee revenue increased 15% on our 31 public courses compared to the third quarter 2019, despite available tee times decreasing due to locally mandated restrictions. Overall, our traditional golf business generated total revenue of $60 million in the third quarter 2020, which includes $15 million of managed course expense reimbursements. AGC’s total revenue decreased by $11 million compared to the third quarter 2019, largely due to event revenue, which decreased by almost $11 million during the same period.

The Company’s entertainment golf venues in West Palm Beach, Richmond and Raleigh reopened during the second quarter and remained open throughout the third quarter. Despite venue capacity restrictions and group size limitations, the three venues generated total revenue of approximately $6 million during the third quarter. The Company expects to reopen its Orlando venue in December 2020.

Financial Liquidity Update

As of October 31, 2020, the Company had approximately $44 million of unrestricted cash on hand compared to approximately $12 million as of July 31, 2020. This increase is primarily due to the sale of the traditional golf course, which generated cash proceeds of $33.6 million. The Company maintained initiatives put in place earlier this year, including a re-positioned labor model designed to improve operational and financial performance, which yielded significant benefits in the third quarter as our operations generated positive cash flows at both the venue and course level.

The Company continues to focus on strengthening its financial position to ensure it has ample liquidity and flexibility to successfully execute its growth initiatives for 2021.

 

Third Quarter Financial Results (unaudited)

Three Months and Nine Months Ended September 30, 2020

compared to the Three Months and Nine Months Ended September 30, 2019

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

 

 

Three Months Ended

 

Nine Months Ended

September 30, 2020

 

September 30, 2019

 

September 30, 2020

 

September 30, 2019

Total revenues

$

66,465

 

$

74,682

 

 

$

159,700

 

 

$

200,249

 

Loss applicable to common stockholders

$

(10,807

)

$

(13,414

)

 

$

(70,485

)

 

$

(43,763

)

Loss applicable to common stock, per share

 

 

 

 

Basic

$

(0.16

)

$

(0.20

)

 

$

(1.05

)

 

$

(0.65

)

Diluted

$

(0.16

)

$

(0.20

)

 

$

(1.05

)

 

$

(0.65

)

For the three months ended September 30, 2020, the Company reported a loss of approximately $11 million, or ($0.16) per share, compared to a loss of approximately $13 million, or ($0.20) per share, in the corresponding period of the prior year.

For the nine months ended September 30, 2020, the Company reported a loss of approximately $70 million, or ($1.05) per share, compared to a loss of approximately $44 million, or ($0.65) per share, in the corresponding period of the prior year.

2020 Third Quarter Earnings Conference Call Details

Management will host a conference call to discuss these results on Wednesday, November 4th at 9:00 a.m. Eastern Time. The conference call can be accessed approximately ten minutes prior to the scheduled start of the call by dialing 1-866-913-6930 (from within the U.S.) or 1-409-983-9881 (from outside of the U.S.) and referencing conference ID “6882066.”

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, November 18, 2020 by dialing 1-800-585-8367 (from within the U.S.) or 1-404-537-3406 (from outside of the U.S.) and referencing conference ID “6882066.”

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 statements regarding Drive Shack Inc. (together with its subsidiaries, “Drive Shack”, “we” or “us”) in this earnings release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by the use of forward-looking words such as “outlook,” “believes,” “expects,” “by”, “approaches”, “nearly”, “potential”, “continues”, “may”, “will”, “should”, “could”, “seeks”, “approximately”, “predicts”, “intends”, “plans”, “estimates”, “anticipates”, “target”, “goal”, “projects”, “contemplates” or the negative version of those words or other comparable words. Any forward-looking statements contained in this presentation, including statements regarding the expected development schedule and timing of specific milestones for our facilities, including The Puttery and Drive Shack venues, our expected and the remaining cost for our development projects (both individually and in the aggregate), the expected capabilities of our development projects once completed, our intentions to make use of capital or free cash flow and our future financial position and liquidity are based upon our limited historical performance and on our current plans, estimates and expectations in light of information (including industry data) currently available to us. The inclusion of this forward-looking information should not be regarded as a representation by the Company or any other person that the future plans, estimates or expectations contemplated by us will be achieved. These statements are subject to a number of factors that could cause actual results to differ materially from those described in the forward-looking statements, many of which are beyond our control. We can give no assurance that its expectations regarding any forward-looking statements will be attained. Accordingly, you should not place undue reliance on any forward-looking statements made in this earnings release. Factors that could cause or contribute to such differences include, but are not limited to, the risk that our construction schedules will take longer than we expect, that our expectations about the consumer demand for our product will not prove accurate, that our operating or other costs will increase or our expected remaining costs for development projects underway increases. Such forward-looking statements speak only as of the date of this earnings 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 the Company's expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.

 

Consolidated Balance Sheets

 

 

 

(dollars in thousands, except share data)

 

 

 

 

 

(Unaudited) September 30, 2020

 

December 31, 2019

Assets

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

13,314

 

 

$

28,423

 

Restricted cash

 

 

2,904

 

 

 

3,103

 

Accounts receivable, net of allowance of $899 and $1,082, respectively

 

 

3,670

 

 

 

5,249

 

Real estate assets, held-for-sale, net

 

 

17,016

 

 

 

16,948

 

Real estate securities, available-for-sale

 

 

3,027

 

 

 

3,052

 

Other current assets

 

 

14,861

 

 

 

17,521

 

Total current assets

 

 

54,792

 

 

 

74,296

 

Restricted cash, noncurrent

 

 

286

 

 

 

438

 

Property and equipment, net of accumulated depreciation

 

 

175,014

 

 

 

179,641

 

Operating lease right-of-use assets

 

 

198,458

 

 

 

215,308

 

Intangibles, net of accumulated amortization

 

 

15,329

 

 

 

17,565

 

Other investments

 

 

0

 

 

 

24,020

 

Other assets

 

 

5,610

 

 

 

4,723

 

Total assets

 

$

449,489

 

 

$

515,991

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

Current liabilities

 

 

 

 

Obligations under finance leases

 

 

6,583

 

 

 

6,154

 

Membership deposit liabilities

 

 

14,815

 

 

 

10,791

 

Accounts payable and accrued expenses

 

 

38,964

 

 

 

25,877

 

Deferred revenue

 

 

15,351

 

 

 

26,268

 

Real estate liabilities, held-for-sale

 

 

5

 

 

 

4

 

Other current liabilities

 

 

30,452

 

 

 

23,964

 

Total current liabilities

 

 

106,170

 

 

 

93,058

 

Credit facilities and obligations under finance leases - noncurrent

 

 

12,435

 

 

 

13,125

 

Operating lease liabilities - noncurrent

 

 

171,592

 

 

 

187,675

 

Junior subordinated notes payable

 

 

51,185

 

 

 

51,192

 

Membership deposit liabilities, noncurrent

 

 

97,943

 

 

 

95,805

 

Deferred revenue, noncurrent

 

 

7,385

 

 

 

6,283

 

Other liabilities

 

 

3,154

 

 

 

3,278

 

Total liabilities

 

$

449,864

 

 

$

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 September 30, 2020 and December 31, 2019

 

 

61,583

 

 

 

61,583

 

 

 

 

 

 

 

 

 

 

Common stock, $0.01 par value, 1,000,000,000 shares authorized, 67,227,944 and 67,068,751 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively

 

 

672

 

 

 

671

 

Additional paid-in capital

 

 

3,178,319

 

 

 

3,177,183

 

Accumulated deficit

 

 

(3,242,337

)

 

 

(3,175,572

)

Accumulated other comprehensive income

 

 

1,388

 

 

 

1,710

 

Total equity

 

$

(375

)

 

$

65,575

 

 

 

 

 

 

Total liabilities and equity

 

$

449,489

 

 

$

515,991

 

 

 

Consolidated Statements of Operations (unaudited)

   

(dollars in thousands, except share data)

   

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2020

 

2019

 

2020

 

2019

Revenues

 

 

 

 

 

Golf operations

 

$

58,766

 

$

60,797

 

 

$

137,066

 

 

$

162,889

 

Sales of food and beverages

 

 

7,699

 

 

13,885

 

 

 

22,634

 

 

 

37,360

 

Total revenues

 

 

66,465

 

 

74,682

 

 

 

159,700

 

 

 

200,249

 

Operating costs

 

 

 

 

 

Operating expenses

 

 

54,993

 

 

63,454

 

 

 

142,584

 

 

 

169,897

 

Cost of sales - food and beverages

 

 

2,170

 

 

3,856

 

 

 

6,654

 

 

 

10,458

 

General and administrative expense

 

 

7,916

 

 

12,755

 

 

 

24,102

 

 

 

37,981

 

Depreciation and amortization

 

 

6,853

 

 

5,723

 

 

 

20,329

 

 

 

15,769

 

Pre-opening costs

 

 

227

 

 

4,350

 

 

 

1,049

 

 

 

7,229

 

(Gain) loss on lease terminations and impairment

 

 

302

 

 

1,872

 

 

 

(2,031

)

 

 

6,077

 

Total operating costs

 

 

72,461

 

 

92,010

 

 

 

192,687

 

 

 

247,411

 

Operating loss

 

 

(5,996

)

 

(17,328

)

 

 

(32,987

)

 

 

(47,162

)

 

 

 

 

 

 

 

 

Other income (expenses)

 

 

 

 

 

Interest and investment income

 

 

135

 

 

191

 

 

 

400

 

 

 

799

 

Interest expense, net

 

 

(2,896

)

 

(2,061

)

 

 

(8,232

)

 

 

(6,008

)

Other income (loss), net

 

 

(157

)

 

 

7,341

 

 

 

(24,212

)

 

 

12,955

 

Total other income (expenses)

 

 

(2,918

)

 

 

5,471

 

 

 

(32,044

)

 

 

7,746

 

Loss before income tax

 

 

(8,914

)

 

(11,857

)

 

 

(65,031

)

 

 

(39,416

)

Income tax expense

 

 

498

 

 

162

 

 

 

1,269

 

 

 

162

 

Net Loss

 

 

(9,412

)

 

(12,019

)

 

 

(66,300

)

 

 

(39,578

)

Preferred dividends

 

 

(1,395

)

 

(1,395

)

 

 

(4,185

)

 

 

(4,185

)

Loss Applicable to Common Stockholders

 

$

(10,807

)

$

(13,414

)

 

$

(70,485

)

 

$

(43,763

)

 

 

 

 

 

Loss Applicable to Common Stock, per share

 

 

 

 

 

Basic

 

$

(0.16

)

$

(0.20

)

 

$

(1.05

)

 

$

(0.65

)

Diluted

 

$

(0.16

)

$

(0.20

)

 

$

(1.05

)

 

$

(0.65

)

Weighted Average Number of Shares of Common Stock Outstanding

 

 

 

 

 

Basic

 

 

67,212,532

 

 

67,040,692

 

 

 

67,131,827

 

 

 

67,032,519

 

Diluted

 

 

67,212,532

 

 

67,040,692

 

 

 

67,131,827

 

 

 

67,032,519

 

   

 

Investor Relations (646) 585-5591 ir@driveshack.com

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