BBX Capital (BBX) Misses Q2 EPS by $1.15, Revenues Miss

BBX Capital (NYSE: BBX) reported Q2 EPS of ($1.96), $1.15 worse than the analyst estimate of ($0.81). Revenue for the quarter came in at $94.3 million versus the consensus estimate of $117 million.

Second Quarter 2020 Compared to Second Quarter 2019:

• Total consolidated revenues of $94.3 million vs. $245.7 million
• Net loss attributable to shareholders of $(35.8) million vs. $(11.6) million
• Diluted loss per share of $(1.96) vs. $(0.62) (1)
• Adjusted EBITDA of $(16.2) million vs. $33.1 million (2)
• Free cash flow of $12.2 million vs. $0.3 million (2)

Alan B. Levan, Chairman and Chief Executive Officer of BBX Capital Corporation, commented, “Our businesses have been significantly impacted by the COVID-19 pandemic, including the closure of Bluegreen’s sales operations and IT’SUGAR’s retail locations during most of the second quarter. However, we took various steps to manage liquidity and mitigate our losses despite significant declines in revenue. These included reductions in selling, general and administrative expenses and planned capital expenditures. We are pleased that we have reopened many of the previously closed operations. This continues to be an unprecedented event in the United States and globally, and it is currently impossible to predict the duration or severity of the pandemic or if and when the economy and many of our businesses will return to pre-pandemic levels. But we believe that we are executing a prudent plan of action in response to the current circumstances and will seek to continue taking appropriate actions as conditions develop in the future.

“During the second quarter, we also announced a proposed spin-off of all of our businesses other than Bluegreen into a separate, publicly-traded company, which would result in the company becoming a 'pure play' vacation ownership company through our investment in Bluegreen. We believe that the proposed spin-off reflects our commitment to building long-term value for our shareholders.

“As we have stated previously, our objective at BBX Capital is long term growth as measured by increases in book value and intrinsic value over time, and despite the challenging and fluid environment we find ourselves in, we remain committed to that goal,” Levan concluded.

COVID-19 Update

The disruptions arising from the COVID-19 pandemic and the recessionary economic environment had a significant adverse impact on the Company's financial condition and operations during the three and six months ended June 30, 2020.

On March 23, 2020, Bluegreen temporarily closed all of its VOI sales centers; retail marketing operations at Bass Pro Shops and Cabela’s stores and outlet malls; and Choice Hotels call transfer program. In connection with these actions, Bluegreen canceled existing owner reservations through May 15, 2020 and new prospect guest tours through June 30, 2020. Further, some of Bluegreen’s Club and Club Associate Resorts were closed. Beginning in mid-May 2020, Bluegreen started the process of recommencing its sales and marketing operations, and its resorts began to welcome guests as government mandates were lifted. By June 30, 2020, 64 Bass Pro Shops and Cabela’s stores (out of the 89 that were open in March 2020) were open, Bluegreen reactivated its Choice Hotels call transfer program, virtually all of its resorts were open, and 21 of its 26 VOI sales centers were open for sales to existing owners, one of which was open for sales to new prospects. As of July 31, 2020, 23 VOI sales centers were open for sales to existing owners, 17 of which were open for sales to new prospects. System-wide sales of VOIs were $30.9 million in July 2020. In addition, as of July 31, 2020, Bluegreen was marketing vacation packages at 85 Bass Pro and Cabela’s stores. However, increased COVID-19 cases in certain markets in July 2020 resulted in increases in cancelations of marketing guest stays (and consequently, new owner prospects), and it is impossible to predict whether this trend will continue or worsen or the extent of the adverse impact this may have on Bluegreen.

Recent construction activities remain ongoing at BBXRE’s existing projects, including its Beacon Lakes Community and multifamily apartment developments sponsored by the Altman Companies. In addition, following some disruptions in March and April 2020, sales at BBXRE’s single-family home developments have generally returned to pre-pandemic levels, while the Altman Companies has collected in excess of 95% of the rents at the multifamily apartment communities under its management through July 2020. However, the effects of the pandemic, including increased unemployment and economic uncertainty, as well as recent increases in the number of cases in Florida and throughout the United States, have impacted rental activities at the multifamily apartment developments sponsored by the Altman Companies, including a decline in tenant demand and in the volume of new leases at certain of its communities, which has resulted in an increase in concessions offered to prospective and renewing tenants.

BBX Sweet Holdings temporarily closed all of its IT’SUGAR retail locations in March 2020 and had reopened 85 of these locations as of June 30, 2020 (although 4 locations were subsequently closed as of July 31, 2020 as a result of governments reimplementing mandated closures). The reopened IT’SUGAR locations have achieved sales volumes at approximately 43-48% of pre-pandemic levels (as compared to the comparable period in 2019). There is no assurance that these sales volumes will improve or will not further decline, as the duration and severity of the COVID-19 pandemic and its effects on demand and future sales levels and the potential impact of the pandemic on consumer behavior, remain uncertain. IT’SUGAR has reached agreements for rent concessions with some of the landlords of its retail locations through June 30, 2020; however, it has not fully paid rent for many of its locations since April 2020 and remains in negotiations with many of the landlords of its locations relating to concessions for prior and future periods. There is no assurance that IT’SUGAR will be able to reach agreements with its landlords or that it will be in a position to meet its obligations under the terms of any of its lease agreements, as may be amended, in the future.

To date, Renin has not been significantly impacted by the COVID-19 pandemic, and it has continued to operate both of its manufacturing and distribution facilities, source various products and raw materials from China and Vietnam, and sell its products through various channels. Although Renin has experienced a decline in sales to certain customers as a result of concerns related to the pandemic, these declines have been offset by an increase in sales to customers through its retail and commercial channels, which resulted in improved sales during the second quarter of 2020 as compared to the same 2019 period.

Although the impact of the COVID-19 pandemic on the Company’s principal investments and management’s efforts to mitigate the effects of the pandemic have varied, BBX Capital and its subsidiaries have sought to take steps to manage expenses through cost saving initiatives and reductions in employee head count and to increase liquidity and strengthen the Company’s financial position, including maintaining availability under lines of credit, reducing planned capital expenditures, and suspending the payment of regular quarterly dividends. As of June 30, 2020, the Company’s consolidated cash and cash equivalents were $348.0 million, including $138.6 million held by BBX Capital and its subsidiaries other than Bluegreen.

For earnings history and earnings-related data on BBX Capital (BBX) click here.

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