Drive Shack Inc.

Good morning. My name is Brittany, and I will be your conference operator today. At this time, I would like to welcome everyone to DriveShack's fourth quarter and full year 2021 earnings conference call. Currently, all lines have been placed on mute to prevent any background noise. After the prepared remarks, we will have a question and answer session. Instructions will be given at that time. Today's call is being recorded. If you should need operator assistance, please press star zero. At this time, I would like to hand the call over to Kelly Buckhorn, Head of Investor Relations and Treasury. Ms. Buckhorn, you may begin.

Thank you, and good morning, everyone. I'd like to welcome you to DriveShack's fourth quarter 2021 earnings call. Joining me today is President and Chief Executive Officer Hannah Corey and Chief Financial Officer Mike Nichols. We've posted the investor supplement to our investor relations website at ir.driveshack.com. If you haven't had a chance to download the presentation, please take the time to do so right now if you haven't done already. I'd like to point out that certain remarks made today will include forward-looking statements. Actual results may differ materially from those considered by these statements. We encourage you to review the disclaimers in our press release and investor supplement and to review the risk factors contained in our annual and quarterly reports filed with the SEC. And with that, I'd like to now turn the call over to Hannah.

Good morning, everyone. Thanks for joining us today. 2021 was a record year for DriveCheck, Inc. We reported the highest total annual revenue in three years, finishing 2021 with just over $280 million in revenue, which is $62 million above prior year. For 2021, we also delivered around $16 million in total company-adjusted EBITDA, the highest since transforming our traditional golf business into an entertainment company. For the fourth quarter, total company revenue exceeded $70 million and generated adjusted EBITDA of $2.5 million. The demand for traditional golf remains high, still even versus pre-COVID levels. In 2021, AGC did around $240 million in revenue, an increase of over $40 million versus prior year. Our private clubs remain at 99% membership capacity with a notable increase in total rounds and daily fee rounds of approximately 15% each over prior year. Revenue from green and cart fees is also up nearly 30% versus 2020. As you are all aware, 2020 was a hugely transformative year for the game of golf in terms of its rebounding popularity due to COVID. Based on the numbers we've generated, the game of golf is here to stay and will only continue to gain momentum with golfers and non-golfers alike. Our drive-shack venues outperformed our expectations in 2021, ending the year just over $41 million in revenue and $13.5 million in EBITDA, coming in slightly above our run rate projections in a non-COVID year. Orlando also broke even for the first time in its history. At the beginning of the year, the revenue was mainly being driven by walk-in guests, but the events business grew over the course of the year, and as regulations around gathering and groups loosened. In Q4, the four DriveShack venues generated almost $4 million in event revenue and $7.5 million in walk-in revenue. Our walk-in business this quarter was around 95% of our pre-COVID levels in Q4-19, while events were just over 75%. We've had great success in both AGC and DriveShack venues and courses coming out of COVID. We are seeing the same pattern with our puttery venues. Our venues in Charlotte and the Colony generated just under $3 million in revenue in Q4 and just under $4 million for the year. We currently have two puttery venues open with an additional seven planned openings for 2022. In addition to these venues, we're working through a large pipeline of additional venues for 2023 openings, most of which we will sign this year to get to our goal of 16 openings in 2023. There's a bit of history on our company on page six of the deck for those of you who are new to the story. Over the past three-plus years, DriveShack, Inc. has undergone a significant transformation from a traditional golf business to an entertainment operating company. During this time, we sold the majority of our owned course portfolio and converted a number of them into managed agreements to fund the growth of our entertainment golf business, namely to fund the development of our DriveShack venues that we operate today. We opened our first DriveShack venue in Orlando in April of 2018. We took our learnings from Orlando, specifically technology enhancements, and opened three Generation 2.0 venues in August, September, and October 2019. Those were in Raleigh, Richmond, and West Palm Beach. These three venues opened strong, significantly outperforming our 2019 expectations and beating their initial plans that year by 14%. We've since developed a new entertainment golf experience called Puttery, which is indoor tech-enabled putting within an immersive experience. We opened our first Puttery in the Colony just outside of Dallas in September of last year, followed by the opening of our Charlotte location three months later in mid-December of 2021. Our goal is to open a total of 50 Puttery venues by the end of 2024. Turning now to page seven for a summary and timeline view of our courses and venues. On the American golf side of our business, we held 55 courses across nine states in Q4, with one owned, 32 leased, and 22 managed courses. With our DriveShack Entertainment golf business, we currently have four venues in Orlando, Raleigh, Richmond, and West Palm. We are additionally committed to leases in New Orleans and Manhattan. With Puttery, we now have two venues open in the Colony, Texas, and Charlotte, North Carolina. In Q3, we reported leases in D.C., Miami, and Houston and stated we had an additional three venues on which we were nearing lease execution. Since then, we have added leases on an additional five venues in Chicago, Philadelphia, Pittsburgh, and New York City. And just earlier this morning, we announced a new puttery location in Kansas City, Missouri. We have a robust pipeline of future puttery locations we're actively pursuing in prioritized markets across the U.S. for 2022 and beyond. We are in active lease negotiation in several major markets and remain actively engaged with landlords and brokers in multiple markets across the U.S. I'll speak more to our development plans and timeline in a few moments. As I mentioned earlier, we debuted our first two puttery venues in 2021. We opened the Colony Texas on September 3rd and in Charlotte, North Carolina in mid-December. We were intentional about the size and number of courses in our first handful of venues so that we could prove out our concepts pro forma across venues of different sizes with different numbers of courses. The Colony venue is just under 21,000 square feet, spans two floors, and has four uniquely themed nine-hole courses. which we call Rooftop, Lodge, Library, and Illusion. It has three bars, a patio terrace, multiple lounges, and seating areas throughout. The Charlotte venue is 15,000 square feet, single story, with two courses, the conservatory and the library, two bars, multiple lounges, and an indoor-outdoor patio. Even with the difference in the square footage and number of courses at each of these venues, we've observed similar trends across both, and the guest response continues to be very positive. Looking at the charts on page nine from their opening through February of this year, the colony has generated nearly $5 million in revenue. The revenue mix of this $5 million was roughly 18% in event revenue, 9% in food revenue, and the remaining 73% split nearly evenly between game plan beverage sales. From opening in mid-December last year to February of this year, Charlotte generated nearly $2 million in revenue, with roughly 9% of that being event revenue, 32% of the revenue attributed to gameplay, 13% to food, and 46% to beverage. Both venues see that over half of their guests plan their visits in advance via our reservation platform. Alcohol sales comprise around 80% of the total F&B revenue per venue, and each nine-hole course takes an average of just over 30 minutes to play. We're extremely pleased with the strong performance in these venues to date, particularly with each generating positive venue-level EBITDA operating results in Q4. We're gaining proof of concept with each passing month, and we expect them to continue delivering well within the projected venue-level economics we put forward several quarters ago. Our four drive shack venues performed impressively last year as well, delivering record high annual revenue of $41.5 million. 33.5 of which was attributed to walk-in revenue and 8 million to events. With these record high revenue numbers, we also generated the highest annual venue-level EBITDA to date of 13.5 million. Again, Orlando broke even in 2021, delivering its first-ever positive venue-level EBITDA. Our drag shack venues are a strong, stable business for us, and with the increasing demand with events, we expect them to continue delivering at or above their run rate projections. The great results we're seeing from our DriveShack locations are indicators that our walk-in business has largely returned to normalized pre-COVID levels, with events also continuing their post-COVID rebound. You can see the trend illustrated on page 11 of the deck. In 2021, DriveShack venues generated a total of $33.5 million in walk-in revenue versus $21.7 million in 2020. Event revenue for 2021 was $8 million versus $3.6 million in 2020. As I mentioned earlier, the four DriveShack venues generated a $7.5 million in walk-in revenue, which was approximately 95% of pre-COVID levels of $8 million in Q4 of 2019, while events were almost $4 million and just over 75% of Q4 2019 levels of nearly $5 million. Given that Q4 was our opening quarter in a pre-COVID world, we are confident that our 2022 results are showing signs of revenue rebounding from COVID-19. The momentum of our traditional golf side of our business has continued throughout 2021 with total revenue excluding management fee reimbursement of 182.4 million. As you can see on page 12, this was a 26% increase versus 2020. Both our public and private courses outperformed 2020 numbers with revenue from green and cart fees up nearly 30% and total rounds at private courses up 15% versus 2020. We continue to maintain 99% capacity at all of our private membership-based clubs, and event revenue across both private and publics was up 185% year-over-year, coming in at almost $16 million in 2021. As we turn now to page 14, over the course of 2022, we expect to open seven additional puttery venues. In addition to the two venues that are open today, we currently have eight additional leases signed in D.C., Houston, Miami, Chicago, Philadelphia, Pittsburgh, New York City, and as of this morning, we announced our tenth puttery venue in Kansas City, Missouri. Behind these, we have a robust pipeline of other venues in lease negotiation and the LOI process. We want to ensure that we are very clear and as transparent as possible when it comes to communicating the number of venues we expect to open and when we expect to open them. We've learned quite a bit from the openings process last year and want to ensure we have taken the appropriate amount of time between builds and openings to be thoughtful about our strategy and approach given the current market conditions. While the obstacles presented by the strain on supply chain and GC labor are still present, we are very confident that the seven venues in 2022 is attainable and realistic. The map on page 15 shows a visual representation of the states across the U.S. where we either have an existing entertainment golf location or are evaluating for a possible location. Our current U.S. coverage includes nearly 40 prioritized markets and around 20 future markets for a total U.S. capacity of just under 60 markets across the United States. When we look at the projected venue level economics that we put forward several quarters ago, we remain confident that Puttery was and will continue to be the best path of growth for our company. Page 16 outlines the illustrative venue level economics for both Puttery and DriveShack. Puttery is an adjacency to our current business, and as you can see here, gives us the ability to grow quickly with less capital risk and higher returns than a big box DriveShack venue. With puttery, we expect to spend seven to 11 million to build each venue. We expect it to take approximately six to nine months to physically construct and generate a venue-level EBITDA between two and three million dollars. Comparing that to a drive shack venue where we expect to spend between 25 and 40 million to build each venue, taking approximately 18 to 24 months to complete and generating venue-level EBITDAs of between four and six million. These are both great results, but The early results that we're seeing in our puttery venues in both the colony and Charlotte are also proving that we're well within these economic ranges and targets that we've provided. I will turn it over to Mike now to take you through our capital strategy and financial results.