Drive Shack Inc. Announces Third Quarter 2022 Financial Results and Preferred Stock Dividends for Fourth Quarter 2022

Third Quarter 2022 Total Company Revenue of $89 Million, Up 16% Compared to Third Quarter 2021; Led by Increased Event Sales and New Puttery Venues

American Golf Event Revenue up 51% and Drive Shack Event Revenue Up 22% Compared to Third Quarter 2021

Puttery Venues Delivered Total Revenue of $6.6 Million in Third Quarter 2022

Drive Shack Inc. (the “Company”) (NYSE: DS), a leading owner and operator of golf-related leisure and entertainment businesses, today reported its financial results for the three and nine months ended September 30, 2022.

“Our sales results this quarter reflect the strong momentum we continue to see across American Golf and Puttery. Drive Shack’s performance was slightly lower than last year driven mostly by weather,” said Drive Shack Inc.’s President and Chief Executive Officer Hana Khouri. “Event revenue this quarter is over $3 million higher than prior year. We have seen the demand for future events across both the corporate and social categories continue to rise, which will translate into strong revenue results in the back half of this year.”

Khouri continued, “Puttery delivered another quarter of great results, with event revenue trending ahead of our expectations. Puttery Houston opened on September 16th, and while they are still in their initial stages of operations, their key metrics are aligning closely to our other venues. Our newest Puttery opened on November 4th in Chicago, IL. We continue to gain a clear proof of concept with our Puttery brand. There are five additional venues committed and scheduled to open in 2023.”

Third Quarter 2022 Financial Highlights Total revenue for the third quarter 2022 was $88.7 million, an increase of $12.3 million or 16.1%, compared to $76.4 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 $16.7 million in the third quarter 2022, an increase of $5.4 million, or 47.4% compared to $11.3 million in the third quarter 2021. Total revenue at the Company’s four Drive Shack venues totaled $10.1 million in the third quarter this year compared to $10.5 million in the same period last year. While slightly down to last year, the four Drive Shack venues drove a solid events business with $2.5 million in total event revenue this quarter, up $0.4 million or 22% versus the third quarter last year. Additionally, the Company’s four Puttery venues open at the end of the third quarter this year generated total revenue of $6.6 million compared to $0.8 million in the same period last year. As a reminder, the Company debuted its first Puttery venue in The Colony, Texas in September 2021, which was open for one month in the third quarter 2021.

For the third quarter 2022, the Company’s traditional golf business, American Golf, generated total revenue of $71.8 million, an increase of $6.7 million or 10.4% compared to total revenue of $65.1 million in the third quarter 2021. Total revenue included $16.4 million of managed course expense reimbursements in the third quarter this year compared to $14.7 million in the third quarter last year. The increase in total revenue was primarily due to higher event sales this year of $9.0 million, up $3.0 million or 51% versus the same period last year.

Operating loss for the third quarter 2022 was ($5.2) million compared to an operating loss of ($5.9) million for the third quarter 2021. The improvement to last year was primarily due to the addition of new Puttery venues and a reduction in overall general corporate expenses, including payroll. Consolidated net loss was ($7.1) million for the third quarter this year compared to consolidated net loss of ($8.9) million in the same period last year.

Adjusted EBITDA1 was $7.0 million for third quarter 2022 compared to Adjusted EBITDA1 of $3.4 million for third quarter 2021. The change to last year was primarily related to the addition of new Puttery venues and a reduction in overall general corporate expenses, including payroll.

As of September 30, 2022, the Company had cash and cash equivalents of $11.7 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 and Nine Months Ended September 30, 2022 compared to the Three and Nine Months Ended September 30, 2021 ($ in thousands, except for per share data):

Three Months Ended Sept. 30,

Nine Months Ended Sept. 30,

 

 

2022

 

2021

 

2022

 

2021

 

 

 

 

 

 

 

 

 

Total revenues

 

$88,674

 

$76,366

 

$244,344

 

$211,337

Operating Loss

 

($5,191)

 

($5,921)

 

($29,942)

 

($12,744)

Consolidated Net Loss

 

($7,131)

 

($8,866)

 

($35,610)

 

($21,739)

Loss applicable to common stockholders

 

($8,547)

 

($10,246)

 

($39,735)

 

($25,909)

 

 

 

 

 

 

 

 

 

Loss applicable to common stock, per share

 

Basic

 

($0.09)

 

($0.11)

 

($0.43)

 

($0.29)

Diluted

 

($0.09)

 

($0.11)

 

($0.43)

 

($0.29)

Adjusted EBITDA1

 

$7,044

 

$3,365

 

$12,648

 

$14,000

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 November 1, 2022 and ending January 31, 2023. The dividends are payable on January 31, 2023, to holders of record of preferred stock on January 2, 2023, 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.

2022 Third Quarter Earnings Conference Call Details Management will host a live conference call to discuss the Company’s 2022 third quarter results on Monday, November 21, 2022 starting at 9:00 a.m. Eastern Time. A simultaneous webcast of the conference call will be available to the public on a listen-only basis on the Company’s investor relations website at https://ir.driveshack.com, along with the supplemental slide presentation. The conference call may be accessed by dialing 1-800-343-5172 (from within the U.S.) or 1-203-518-9856 (from outside of the U.S.) ten minutes prior to the scheduled start of the call and referencing conference ID “DSQ322.”

A telephonic replay of the conference call will be available after 12:00 p.m. Eastern Time on Monday, November 21, 2022 through 11:59 p.m. Eastern Time on Monday, November 28, 2022, and may be accessed by dialing 1-888-274-8334 (from within the U.S.) or 1-402-220-2326 (from outside of the U.S.).

Additional Information For additional information that management believes to be useful for investors, please refer to the presentation posted on the Company’s investor relations website, https://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/A, which are available on the Company’s investor relations website, https://ir.driveshack.com.

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.

Forward-Looking Statements: Certain statements regarding Drive Shack Inc. (together with its subsidiaries, “Drive Shack”, “we” or “us”) in this 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 release, including statements regarding the expected development schedule and timing of specific milestones for our facilities, including Puttery and Drive Shack venues, future revenues including from event sales, 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 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, our ability to remediate the material weakness disclosed in our most recent Quarterly Report on Form 10-Q,  and the effect of the COVID-19 pandemic on our business and financial results. For a discussion of some of the risks and important factors that could affect 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 most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q. In addition, new risks and uncertainties emerge from time to time, and it is not possible for the Company to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this 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.

Non-GAAP Financial Measure Adjusted EBITDA is not a measurement of financial performance under generally accepted accounting principles in the United States ("GAAP") and should not be considered in isolation or as an alternative to GAAP financial measures. We believe this non-GAAP financial measure, as we have defined it, provides a supplemental measure of financial performance of our current operations at our entertainment and traditional golf venues. This measure excludes items that we believe are unrelated to the day-to-day performance of our current golf entertainment or traditional golf venues, including one-time pre-opening costs associated with new venue openings, corporate severance payments, (gain) loss on lease terminations and impairment, stock-based compensation, depreciation and amortization and other income (which does not include revenue from golf entertainment or traditional golf venues). This non-GAAP financial measure is presented so that investors have the same type of financial data that management uses in evaluating the financial performance of the Company.

The principal limitation of this non-GAAP measure is that it excludes significant expenses and income that are required by GAAP to be recorded in our financial statements. A reconciliation is provided for the non-GAAP financial measure to our GAAP net income/(loss). Investors are encouraged to review the related GAAP financial measures and the reconciliation of the non-GAAP financial measure to our GAAP net income/(loss), and not to rely on any single financial measure to evaluate our business.

Adjusted EBITDA. We define Adjusted EBITDA as GAAP net income (loss), adjusted for income tax expenses, other income (loss), interest expenses, interest and investment income, depreciation and amortization, gain (loss) on lease terminations, impairment and other losses, pre-opening costs and certain other non-recurring items (including corporate severance payments, transactional G&A and stock-based compensation).

DRIVE SHACK INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share data)

 

(unaudited)

 

 

 

September 30, 2022

 

December 31, 2021

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

11,655

 

 

$

58,286

 

Restricted cash

 

4,348

 

 

 

3,480

 

Accounts receivable, net

 

5,852

 

 

 

5,563

 

Real estate securities, available-for-sale

 

2,041

 

 

 

3,486

 

Other current assets

 

35,123

 

 

 

30,034

 

Total current assets

 

59,019

 

 

 

100,849

 

Restricted cash, noncurrent

 

216

 

 

 

798

 

Property and equipment, net of accumulated depreciation

 

186,125

 

 

 

179,260

 

Operating lease right-of-use assets

 

192,167

 

 

 

181,915

 

Intangibles, net of accumulated amortization

 

12,657

 

 

 

13,430

 

Other assets

 

5,507

 

 

 

6,538

 

Total assets

$

455,691

 

 

$

482,790

 

 

 

 

 

Liabilities and Equity

 

 

 

Current liabilities

 

 

 

Obligations under finance leases

$

4,847

 

 

$

5,400

 

Membership deposit liabilities

 

20,847

 

 

 

18,039

 

Accounts payable and accrued expenses

 

40,416

 

 

 

34,469

 

Deferred revenue

 

15,469

 

 

 

26,301

 

Other current liabilities

 

28,246

 

 

 

26,524

 

Total current liabilities

 

109,825

 

 

 

110,733

 

Credit facilities and obligations under finance leases - noncurrent

 

6,773

 

 

 

9,075

 

Operating lease liabilities - noncurrent

 

179,732

 

 

 

166,031

 

Junior subordinated notes payable

 

51,169

 

 

 

51,174

 

Membership deposit liabilities, noncurrent

 

107,292

 

 

 

104,430

 

Deferred revenue, noncurrent

 

10,748

 

 

 

10,005

 

Other liabilities

 

2,816

 

 

 

1,487

 

Total liabilities

$

468,355

 

 

$

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 September 30, 2022 and December 31, 2021

$

61,583

 

 

$

61,583

 

Common stock, $0.01 par value, 1,000,000,000 shares authorized, 92,385,019 and 92,093,425 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively.

 

924

 

 

 

921

 

Additional paid-in capital

 

3,231,506

 

 

 

3,233,608

 

Accumulated deficit

 

(3,308,612

)

 

 

(3,268,876

)

Accumulated other comprehensive income (loss)

 

(834

)

 

 

1,163

 

Total equity of the company

$

(15,433

)

 

$

28,399

 

Noncontrolling interest

 

2,769

 

 

 

1,456

 

Total equity (deficit)

$

(12,664

)

 

$

29,855

Total liabilities and equity

$

455,691

$

482,790

DRIVE SHACK INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(Dollars in thousands, except share data)

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Revenues

 

 

 

 

 

 

 

Golf operations

$

70,872

 

 

$

62,257

 

 

$

193,732

 

 

$

177,170

 

Sales of food and beverages

 

17,802

 

 

 

14,109

 

 

 

50,612

 

 

 

34,167

 

Total revenues

 

88,674

 

 

 

76,366

 

 

 

244,344

 

 

 

211,337

 

 

 

 

 

 

 

 

 

Operating costs

 

 

 

 

 

 

 

Operating expenses

 

70,026

 

 

 

60,729

 

 

 

190,638

 

 

 

165,234

 

Cost of sales - food and beverages

 

4,985

 

 

 

3,696

 

 

 

14,134

 

 

 

8,951

 

General and administrative expense

 

8,572

 

 

 

9,685

 

 

 

29,190

 

 

 

25,697

 

Depreciation and amortization

 

6,819

 

 

 

5,823

 

 

 

19,144

 

 

 

17,852

 

Pre-opening costs

 

2,145

 

 

 

2,030

 

 

 

4,830

 

 

 

3,375

 

(Gain) loss on lease terminations and impairment

 

1,318

 

 

 

324

 

 

 

16,350

 

 

 

2,972

 

Total operating costs

 

93,865

 

 

 

82,287

 

 

 

274,286

 

 

 

224,081

 

Operating income (loss)

 

(5,191

)

 

 

(5,921

)

 

 

(29,942

)

 

 

(12,744

)

 

 

 

 

 

 

 

 

Other income (expenses)

 

 

 

 

 

 

 

Interest and investment income

 

220

 

 

 

190

 

 

 

636

 

 

 

502

 

Interest expense, net

 

(2,608

)

 

 

(2,626

)

 

 

(8,802

)

 

 

(7,964

)

Other income (loss), net

 

920

 

 

 

107

 

 

 

4,559

 

 

 

29

 

Total other income (expenses)

 

(1,468

)

 

 

(2,329

)

 

 

(3,607

)

 

 

(7,433

)

Loss before income tax

 

(6,659

)

 

 

(8,250

)

 

 

(33,549

)

 

 

(20,177

)

Income tax expense

 

472

 

 

 

616

 

 

 

2,061

 

 

 

1,562

 

Consolidated net loss

 

(7,131

)

 

 

(8,866

)

 

 

(35,610

)

 

 

(21,739

)

Less: net income (loss) attributable to noncontrolling interest

 

21

 

 

 

(15

)

 

 

(60

)

 

 

(15

)

Net loss attributable to the Company

 

(7,152

)

 

 

(8,851

)

 

 

(35,550

)

 

 

(21,724

)

Preferred dividends

 

(1,395

)

 

 

(1,395

)

 

 

(4,185

)

 

 

(4,185

)

Loss applicable to common stockholders

$

(8,547

)

 

$

(10,246

)

 

$

(39,735

)

 

$

(25,909

)

 

 

 

 

 

 

 

 

Loss applicable to common stock, per share

 

 

 

 

 

 

 

Basic

$

(0.09

)

 

$

(0.11

)

 

$

(0.43

)

 

$

(0.29

)

Diluted

$

(0.09

)

 

$

(0.11

)

 

$

(0.43

)

 

$

(0.29

)

 

 

 

 

 

 

 

 

Weighted average number of shares of common stock outstanding

 

 

 

 

 

 

 

Basic

 

92,385,019

 

 

 

92,085,846

 

 

 

92,339,823

 

 

 

88,938,344

 

Diluted

 

92,385,019

 

 

 

92,085,846

 

 

92,339,823

88,938,344

Drive Shack Inc. and Subsidiaries

Adjusted EBITDA Non-GAAP Reconciliations (unaudited)

(Dollars in thousands, including footnote)

Three Months Ended Sept. 30,

Nine Months Ended Sept. 30,

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Consolidated net loss

 

($

7,131

)

 

($

8,866

)

 

($

35,610

)

 

($

21,739

)

Income tax expense

 

472

 

 

616

 

 

2,061

 

 

1,562

 

Other (income) loss, net

 

 

(920

)

 

 

(107

)

 

 

(4,559

)

 

 

(29

)

Net interest expense

 

2,388

 

 

2,436

 

 

8,166

 

 

7,462

 

Operating loss

 

($

5,191

)

 

($

5,921

)

 

($

29,942

)

 

($

12,744

)

Depreciation and amortization

 

6,819

 

 

5,823

 

 

19,144

 

 

17,852

 

(Gain) loss on lease terminations and impairment

 

 

1,318

 

 

 

324

 

 

 

16,350

 

 

 

2,972

 

Pre-opening costs

 

2,145

 

 

2,030

 

 

4,830

 

 

3,375

 

Other items1

 

 

1,953

 

 

 

1,109

 

 

 

2,266

 

 

 

2,545

 

Adjusted EBITDA

$

7,044

 

$

3,365

 

$

12,648

 

$

14,000

 

 



(1)

For the three months ended Sept. 30, 2022 and 2021, other items include (i) corporate severance of $389 and $50, respectively; (ii) transactional G&A of $1,454 and $461, respectively; and (iii) stock-based compensation of $110 and $598, respectively.

For the nine months ended Sept. 30, 2022 and 2021, other items include (i) corporate severance of $799 and $180, respectively; (ii) transactional G&A of $1,897 and $833, respectively; and (iii) stock-based compensation of ($430) and $1,532, respectively.

 

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Investor Relations Kelley Buchhorn Interim Chief Financial Officer Drive Shack Inc. [e-mail]

Media Lisa Case Marketing Director Drive Shack Inc. [e-mail]