Drive Shack (DS) Reports Q4 Loss of $0.07, Revenues Miss

Drive Shack (NYSE: DS) reported Q4 EPS of ($0.07), versus ($0.38) reported last year. Revenue for the quarter came in at $66.29 million versus the consensus estimate of $76.03 million.

“In 2018, we took a big step in our transition from a traditional golf company to a full-fledged entertainment business with great golf content. We now look forward to a transformative 2019, as we quadruple the number of our golf entertainment venues. Expansion into dining and entertainment is our top priority, and we continue to invest in identifying new Drive Shack locations, building them quicker, and improving the customer experience for our guests,” said Ken May, Chief Executive Officer.

“We generated $115 million in gross proceeds from the sale of 15 owned golf courses and repaid $102 million of debt. As we continue to monetize our golf courses, these proceeds will serve as the platform for growth for our entertainment golf business where we are targeting 20 open units by 2022,” said David Hammarley, Chief Financial Officer.

Financial Outlook

Our FY 2019 expectations and stabilized targets are as follows:

• Drive Shack Orlando site is targeted to break even from a cash flow perspective in 2019 and continue to ramp up its revenues and cash flow generation in 2020 onwards
• Raleigh, West Palm Beach, and Richmond planned to open in the second half of 2019
• Plan to open 3 to 5 new sites in 2020 and 5 to 10 sites in 2021 and 2022
• Targeting over 20 sites by 2022
• Stabilized target Drive Shack entertainment unit economics:
  • Cost to build between $20 to $35 million across the varying markets and relevant venue formats
  • Top-line revenues anticipated to be $15 to $25 million with target EBITDA margins of approximately 25%-30%
• Complete the remaining short-term course sales by end of 2019 with total gross proceeds of approximately $175 million from 24 of 26 owned courses
  • Continue to explore the monetization of the remaining 2 owned courses in 2019
• Stabilized traditional golf business to generate revenue of approximately $175 million and target annual free cash flow of over $10 million in 2020 and beyond

For earnings history and earnings-related data on Drive Shack (DS) click here.

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