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Drive Shack Announces First Quarter 2020 Results

Provides Business and Financial Liquidity Update

Drive Shack Inc. (the "Company") (NYSE: DS) announced financial results for the first quarter ended March 31, 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.

Hana Khouri, Chief Executive Officer and President of the Company, stated, "While it is undeniable that the pandemic presents us with a challenge like we have never seen, we used this as an opportunity to rationalize our business and adapt our operating model, leaving ourselves poised to reopen safely, responsibly and efficiently."

"We believe these measures, coupled with our relatively unlevered balance sheet, will distinguish us from other experiential businesses and provide a platform for solid growth going forward," Khouri continued.

Business Update

By the end of March, all 4 of the Company’s golf entertainment venues and 57 of 61 of its owned, leased or managed traditional golf courses were closed as mandated shutdowns and stay-at-home orders went into effect across the country.

As it prepares for reopening golf entertainment venues, the Company remains focused on safeguarding the health of its employees, guests and communities. It has invested in supplies and protocols intended to keep guests and employees safe and comfortable, including antibody testing, temperature checks, masks and gloves.

"While we cannot predict with certainty when state governments will give us the green light to reopen our Drive Shack venues, early indications suggest that some locations could be open as early as May 2020," said Khouri.

The Company’s traditional golf business is starting to show signs of resurgence. As of May 7, 2020, the Company has opened 31 of its 61 owned, leased or managed courses. Across the courses that are open, demand for traditional golf appears to be strong, as guests seek a social outlet that allows them to maintain distance.

Financial Liquidity Update

As of April 30, 2020, the Company had approximately $14 million of unrestricted cash on hand. In order to preserve cash savings, the Company furloughed over 4,000 employees across operations and the corporate office, deferred the payment of 2019 annual employee bonuses, temporarily suspended the quarterly cash dividend on the Company’s preferred stock and halted new construction. In addition, the Company is in discussion with all of its landlords relating to rent deferral and forgiveness.

First Quarter Results (unaudited)

 

Three Months Ended March 31, 2020 compared to the Three Months Ended March 31, 2019

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

 

 

Three Months Ended

March 31, 2020

March 31, 2019

Total revenues

$

61,135

 

$

53,952

 

Loss applicable to common
stockholders

$

(18,757

)

$

(15,995

)

Loss applicable to Common
Stock, per share

Basic

$

(0.28

)

$

(0.24

)

Diluted

$

(0.28

)

$

(0.24

)

For the three months ended March 31, 2020, the Company reported a loss of $19 million, or ($0.28) per share, compared to a loss of $16 million, or ($0.24) share, in the corresponding period of the prior year.

Conference Call Friday, May 8, 2020

Management will hold a conference call to discuss these results Friday, May 8th at 8:00 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 "6275653."

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, May 22, 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 "6275653."

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 "eatertainment" 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 global spread of the novel coronavirus outbreak. These forward-looking statements involve risks and uncertainties and, consequently, could be affected by the uncertain and unprecedented impact of the coronavirus 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 duration of government-mandated and voluntary shutdowns; the speed with which our venues safely can be reopened and the level of customer demand following reopening; the economic impact of the coronavirus and related disruptions on the communities we serve; our overall level of indebtedness and leverage; general business and economic conditions, including as a result of the coronavirus; 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, including as a result of the coronavirus; changes in demographic trends; changes in governmental regulations; unfavorable publicity, our ability to open new venues, and acts of God. Accordingly, actual results may differ materially from the forward-looking statements, and the Company therefore cautions you against relying on such forward-looking statements. 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)

 

March 31, 2020

 December 31, 2019

Assets

Current assets

Cash and cash equivalents

$

16,785

 

$

28,423

 

Restricted cash

 

3,041

 

 

3,103

 

Accounts receivable, net of allowance of $904 and $1,082, respectively

 

4,190

 

 

5,249

 

Real estate assets, held-for-sale, net

 

16,970

 

 

16,948

 

Real estate securities, available-for-sale

 

3,103

 

 

3,052

 

Other current assets

 

13,966

 

 

17,521

 

Total current assets

 

58,055

 

 

74,296

 

Restricted cash, noncurrent

 

513

 

 

438

 

Property and equipment, net of accumulated depreciation

 

184,219

 

 

179,641

 

Operating lease right-of-use assets

 

212,246

 

 

215,308

 

Intangibles, net of accumulated amortization

 

16,780

 

 

17,565

 

Other investments

 

24,365

 

 

24,020

 

Other assets

 

5,245

 

 

4,723

 

Total assets

$

501,423

 

$

515,991

 

 

Liabilities and Equity

Current liabilities

Obligations under finance leases

$

6,004

 

$

6,154

 

Membership deposit liabilities

 

10,784

 

 

10,791

 

Accounts payable and accrued expenses

 

31,242

 

 

25,877

 

Deferred revenue

 

25,118

 

 

26,268

 

Real estate liabilities, held-for-sale

 

4

 

 

4

 

Other current liabilities

 

23,367

 

 

23,964

 

Total current liabilities

 

96,519

 

 

93,058

 

Credit facilities and obligations under finance leases - noncurrent

 

12,468

 

 

13,125

 

Operating lease liabilities - noncurrent

 

185,802

 

 

187,675

 

Junior subordinated notes payable

 

51,190

 

 

51,192

 

Membership deposit liabilities, noncurrent

 

97,648

 

 

95,805

 

Deferred revenue, noncurrent

 

6,389

 

 

6,283

 

Other liabilities

 

3,496

 

 

3,278

 

Total liabilities

$

453,512

 

$

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 March 31, 2020 and December 31, 2019

 

61,583

 

 

61,583

 

Common stock, $0.01 par value, 1,000,000,000 shares authorized, 67,070,513 and
67,068,751 shares issued and outstanding at March 31, 2020 and December 31, 2019,
respectively

 

671

 

 

671

 

Additional paid-in capital

 

3,177,384

 

 

3,177,183

 

Accumulated deficit

 

(3,193,399

)

 

(3,175,572

)

Accumulated other comprehensive income

 

1,672

 

 

1,710

 

Total equity

$

47,911

 

$

65,575

 

 

Total liabilities and equity

$

501,423

 

$

515,991

 

Consolidated Statements of Operations (unaudited)

(dollars in thousands, except share data)

 

 

Three Months Ended March 31,

 

 

2020

 

 

2019

 

Revenues

Golf operations

$

48,625

 

$

44,706

 

Sales of food and beverages

 

12,510

 

 

9,246

 

Total revenues

 

61,135

 

 

53,952

 

Operating costs

Operating expenses

 

54,367

 

 

47,723

 

Cost of sales - food and beverages

 

3,655

 

 

2,698

 

General and administrative expense

 

9,818

 

 

11,619

 

Depreciation and amortization

 

6,794

 

 

4,924

 

Pre-opening costs

 

552

 

 

1,179

 

Impairment and other losses

 

792

 

 

4,088

 

Total operating costs

 

75,978

 

 

72,231

 

Operating loss

 

(14,843

)

 

(18,279

)

 

Other income (expenses)

Interest and investment income

 

130

 

 

344

 

Interest expense, net

 

(2,745

)

 

(2,153

)

Other income (loss), net

 

367

 

 

5,488

 

Total other income (expenses)

 

(2,248

)

 

3,679

 

Loss before income tax

 

(17,091

)

 

(14,600

)

Income tax expense

 

271

 

 

Net Loss

 

(17,362

)

 

(14,600

)

Preferred dividends

 

(1,395

)

 

(1,395

)

Loss Applicable to Common Stockholders

$

(18,757

)

$

(15,995

)

 

Loss Applicable to Common Stock, per share

Basic

$

(0.28

)

$

(0.24

)

Diluted

$

(0.28

)

$

(0.24

)

Weighted Average Number of Shares of Common Stock Outstanding

Basic

 

67,069,534

 

 

67,027,104

 

Diluted

 

67,069,534

 

 

67,027,104

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20200507006242/en/

Contacts

For Investor Relations Inquiries:
Austin Pruitt
Head of Investor Relations
646-585-5591
IR@driveshack.com