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spk00: Good morning. My name is Gretchen, and I will be your conference operator today. At this time, I would like to welcome everyone to DriveShack's second quarter 2022 earnings conference call. Currently, all lines have been placed on mute to prevent any background noise. After the prepared remarks, you'll have a question and answer session. Instructions will be given at that time. Today's call is being recorded. If you should need any operator assistance, please press star zero. At this time, I would like to hand the call over to Kelly Buckhorn, CFO. Ms. Buckhorn, you may begin.
spk01: Thank you, Gretchen, and good morning, everyone. I'd like to welcome you to DriveShack, Inc.' 's second quarter 2022 earnings call. Joining me on the call today is President and Chief Executive Officer Hannah Corey. We've posted the investor supplement to our investor relations website at ir.driveshack.com. Please take a moment to download the presentation now if you haven't had a chance to do so 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, and 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.
spk02: Thanks, Kelly. Good morning, everyone. Thanks for joining us today. Our sales results this quarter reflect the strong momentum we continue to see across our entire brand portfolio. We delivered nearly $87 million in total company revenue, up $13 million or 17% compared to Q2 last year. Our core business remains solid, with our 53 American golf courses delivering $71 million in total revenue, coming in at $8.5 million above last year's same quarter, driven by a strong demand for events. Our four drive shack venues delivered total revenue of just over $11 million, and while down just slightly versus last year, they drove a strong events business with over $3 million in event revenue this quarter. We continue to gain proof of concept with Puttery, which continues to deliver results in line with our expectations. For Q2, our two venues in the Colony and Charlotte generated combined total revenue of $4.4 million. Our newest puttery, located in D.C.' 's Penn Quarter, opened to the public on June 21st and generated just above $100K for the few days it was open in the second quarter. Total event revenue in Q2 was $14 million and is up significantly at over $10 million to last year, with more than $7 million of the increase coming from private event sales at American Golf. We've 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. Adjusted EBITDA for the quarter was $4.6 million, which was $3 million below last year's second quarter, which was expected with the strategic investments in headcount and other related expenses we've made to support the development and growth in putter rates. We have a strong foundation in our core business with our drive shack venues and American golf courses, and each continues to deliver exceptional results. We are extremely pleased with the performance of our two puttery venues, the Colony, which has been open now for 11 months, and Charlotte, which has been open for eight. Our proof of concept is clear with these two venues, both delivering sales results slightly ahead of their plan and generating profitability margins well within the expected unit economic range. There's a large addressable market in the venue-based entertainment business. We continue to invest capital towards the development of new venues as Puttery represents the best path forward for near-term growth. We now expect a total of four additional new Puttery openings by the end of 2022, with Houston opening in Q3 and Chicago in early Q4. Behind these, Pittsburgh and Kansas City are planned to open in late Q4. We will end 2022 with a total of seven Puttery venues open and operating. Unexpected delays of permitting, zoning, and licensing have pushed both the Miami and Manhattan opening dates to early 2023. We have recently partnered with a new national broker, and together we are aggressively pursuing new leases for venue openings in 2023 and beyond. I'll speak more to this in just a few moments. As a reminder, we made the decision last quarter to no longer pursue the development of our drive shack venue in New Orleans. During Q2 of this year, we entered into a lease termination agreement with the landlord, effective June 30, 2022, and we no longer have rights to use the premises. With that, we've removed the right of use asset and liabilities associated with this site from our balance sheet, and when coupled with the fees associated to exit the lease, we recorded a $2 million net loss on lease terminations this quarter. We plan to continue developing our DriveShack venue on Randall's Island in Manhattan and believe it will deliver sales and EBITDA margins well above any of our current DriveShack venues. So turning to the deck, as you will see on page six, DriveShack Inc has undergone a significant transformation from traditional golf business to an entertainment operating company during the last four years. During this time, we sold the majority of our own course portfolio, converting a number of them into managed courses. and using the proceeds to help fund the growth and development of our DriveShack Entertainment Golf business with the four venues that we operate today in Raleigh, Richmond, West Palm Beach, and Orlando. We've since developed our newest entertainment golf experience, Puttery, opening our first Puttery in the Colony just outside of Dallas in September of last year. Our second venue opened in Charlotte in mid-December of 2021, and most recently in Penn Quarter, D.C.' 's premier entertainment zone, a few weeks ago in late June. We are underway to meeting our goal to open a total of 50 puttery venues by the end of 2024. Turning now to page 7 for a summary and timeline view of our courses and venues. On the American golf side of our business, we held 53 courses across nine states at the end of Q2, with one owned, 32 leased, and 20 managed courses. As I just mentioned, we currently have four DriveShack Entertainment golf venues located in Orlando, Raleigh, Richmond, and West Palm. We are committed to one additional lease in Manhattan on Randall's Island, which we expect to open in late 2023. With Puttery, we currently operate three venues today located in the Colony, Charlotte, and D.C. Behind these, we have committed to eight additional leases with four of those planned to open in Houston, Chicago, Pittsburgh, and Kansas City later this year. The remaining four venues are expected to open in 2023 early and include our Manhattan venue located in the Meatpacking District, as well as Miami, Philadelphia, and our newest venue announced earlier this morning in Minneapolis. There's a large addressable market for the venue-based entertainment business. We have a robust pipeline of future puttery locations we are aggressively pursuing in several markets across the U.S. for openings in 2023 and beyond. I'll speak more to our development plans and updated timeline in a few moments. Let's turn now to our financial strategy on page eight. Our near-term growth strategy to develop new pottery venues in DriveShack Randall's Island is capital intensive. We will balance the need to retain a strong balance sheet while funding the future development and growth of pottery. Based on the current level of operations and anticipated growth, we expect that cash flows from operations, combined with other financing alternatives available, will be sufficient to meet our working capital and capital expenditure requirements. We expect to fund our current pipeline through debt financing and continue to actively explore the capital markets to meet our liquidity needs. Our objectives include diversifying financial sources through optimizing new debt financing, as well as strategically monetizing our remaining real estate securities. And under the right circumstances, the potential for asset sales where it makes sense. We continue to actively pursue a path that enables us to meet our growth objectives while maintaining a healthy balance sheet. We look forward to providing you an update as soon as we have more information to share. Moving now to an update on the operations of our business, starting with puttery on page 10 of the deck, we currently have three puttery venues open. It's hard to believe that our first venue in the colony is about a month away from celebrating its one-year anniversary. Charlotte has been open for nearly eight months now, and our most recent venue that opened in DC's Penn Quarter is about 45 days in. Given that DC was only open for a handful of days in the quarter, we are not providing their full results here. As you see on this slide, even with their market differences, both the Colony and Charlotte continue to perform relatively in line with one another. On a year-to-date basis through Q2, they're each generating over $4 million in total revenue and delivering venue EBITDA margins of 29%, which is in line with our expectations to date. It's important to note here that the EBITDA margin declines in Q2 are a direct result of a one-time inventory true-up recorded this quarter for both the Colony and Charlotte. The adjustment was directly related to how our point-of-sale system was feeding cost-of-sales information into our inventory system for event sales. We've identified the root cause and have since made the appropriate correction in our point of sale system, which took effect in Q3. Again, I want to reiterate that this is only related to how event sales are being captured in the point of sale and had no impact to our walk-in sales as this process is performing as designed. I'll give a quick update on our DC location in a few moments, but let me quickly recap the quarter for both the Colony and Charlotte. The colony delivered Q2 total revenue of $2.4 million, driven largely by their walk-in business at $1.9 million. Events were half a million, which is ahead of their Q1 business, as our teams continue to convert prospects into booked events. The colony continues to leverage variable operating expenses, including payroll, now that their business is normalizing. Charlotte delivered total revenue of $2 million, with $1.5 million in walk-in business, which continues to drive a higher FMV spend per visit than the colony. Charlotte's event revenue was also 0.5 million this quarter with higher lead conversions versus Q1. Taking a closer look at the life-to-date breakdown of the revenue mix between our Dallas and Charlotte venues, we continue to see similar trends across both locations as was outlined on page 11. Walking guests who plan their visit in advance via our online reservation platform continue to hold at around 60% at each venue. For online reservations that have been booked in advance to date, we are seeing that over 10% have been from repeat guest reservations. We believe this number is likely even higher, given that we only require one name and one email per reservation currently. Likewise, guests who may visit us for the first time via an event will show up as a new guest when they return with family and friends as a first-time online reservation. To date, liquor, beer, and wine sales comprise close to 80% of the total F&B revenue. The Colony continues to trend around 28% higher on walk-in visitors to date than Charlotte. Charlotte's total spend to date per visit is around 15% higher than the Colony, which is largely driven by higher F&B spend per guest. Gameplay at the Colony has held relatively steady at an average of just over 30 minutes to play one of their four nine-hole courses, the Library Lodge, Rooftop, or Illusion. Charlotte has turned it up to 36 minutes to play one of their two nine-hole courses, the library or conservatory. Again, we were intentional about the size and number of courses in our first handful of venues so that we could prove out our concepts for FORMA across venues of different sizes as well as number of courses. The venue-based entertainment business is a huge addressable market, and we're experimenting with the best mix of venue size and numbers of courses that will optimize margin and profitability returns. The solid performance to date in both the Colony and Charlotte fully support the venue economics we put forward over two years ago, giving us even more confidence today that future pottery venues will deliver similar, if not better, results as we learn and build to scale. We are gaining a clear proof of concept for our pottery brand and know it presents the best path forward to our near-term growth and profitability. We opened our newest puttery in D.C.' 's Penn Quarter near the end of June, and while they've only been open for just over a month now, I want to share some early metrics with you. Looking at the graphic on page 12, D.C. has generated around $700K in total revenue for their first 30-plus days, with 55% from beverage and alcohol sales alone. We are seeing very similar trends to the Colony in Charlotte, with online reservations trending at 60% for those who plan their visit in advance. Alcohol liquor sales are at 78% of total F&B spend and an average game time of just under 30 minutes to play one of their three courses, the Art Museum, Conservatory, and Illusion. Puttery, D.C. is in a beautiful historic building and is the former home of the International Spy Museum. As with any historic building, we were limited to the core structure of the site. Our design teams did an amazing job laying out the flow of the venue with plenty of seating and lounge areas throughout. The building has very unique characteristics, which blends incredibly well throughout the venue and integrates nicely with our design elements. You definitely feel the vibe from the moment you step through the door. We've shown a few pictures here for you, including the inside and the outside view of the building, as well as showcasing our newest themed course, the Art Museum. If you get the opportunity to visit the DC area in the future, please carve out time to visit this venue in person. You definitely won't be disappointed. Moving now to our DriveShack business on page 13, our four venues generated just over $11 million in total revenue in Q2 of this year, down $400K versus Q2 of last year. We saw strong demand for events this quarter with revenue of $3.2 million, up $1.6 million or double compared to event revenue in Q2 of last year. All four venues posted higher event revenue in this year versus the same quarter last year. However, in total, it was just not quite enough to fully offset the $2 million decline in walk-in revenue. Raleigh continues to lead and outperform all of our venues driven this quarter by a strong events business. Separately, we continue to see a pullback in Richmond's walk-in business. We've been assessing the market dynamics and have a team dedicated to implementing initiatives to drive increased brand awareness and revenue as we head into the back half of the year. We continue to monitor this closely and will provide results and updates on future calls. Dry Shack total venue EBITDA for Q2 was 3.7 million or 33% of sales compared to 4.6 million or 40% of sales in Q2 of last year. On a year-to-date basis, combined venue EBITDA was 6.4 million, down just 200K versus the year-to-date period last year. Raleigh once again led the group with West Palm Wright behind. Orlando continues to perform well and year to date with revenue up 200K and EBITDA up 100K versus the same period last year. Our drive shack venues are a strong, stable business for us, and with the increasing demand and events, we expect them to continue delivering at or above their run rate projections. Our American Gulf business continues to be a very strong and stable business as well, which continues to generate profitable earnings and returns year over year. As you can see here on page 14, American Golf's total revenue for Q2 was just over $55 million, excluding management fee revenue, and was up 12% to last year's second quarter. The momentum in our events business continues, with the event revenue up over 300% or $7 million versus Q2 of last year. The increase came primarily from higher events, driven in large part from the focused work our events team is doing to increase conversion rates across our courses. Tournaments also remain in high demand, and we see this as an opportunity for continued growth. Our walk-in business in Q2 of this year was 46 million, down slightly at 1.1 million below last year's Q2 levels. While our public and private courses were just below last year's levels across all metrics, we were up against a relatively strong quarter last year when demand for outdoor traditional golf was extremely high given the COVID restrictions that were still in place for indoor activities. We continue to maintain a high membership rate across our private clubs at 98% total capacity. With the solid performance that our courses continue to deliver, we believe the game of golf remains solid with momentum from golfers and non-golfers alike. Let's move now to our development plans. A large addressable market exists for a venue-based entertainment business, and we continue to capitalize on this large-scale opportunity as we maintain our focus and development plans on new puttery venue openings. When you look at page 16, we've laid out a visual representation of the states across the country where we have an existing entertainment golf location, as well as where we believe near-term opportunity exists for future puttery locations. Our target coverage includes around 75 markets today under our current strategy, with hundreds of potential new sites across the country to choose. We recently partnered with a new national broker that is highly experienced and knowledgeable across the country, Together, we've developed an enhanced strategy that will allow us to be more nimble in the site review and selection process, enabling us to identify low-barrier markets to ensure development goals for future openings are met. With the vast availability of potential new sites, we continue to experiment with different layouts to determine the best mix of venue size and number of courses to optimize margin and profitability returns. We have real data from the Colony, a larger venue with four courses, and data from Charlotte, a smaller venue with two courses. Both are generating similar returns to one another, and soon we will have clear data from our recently opened venue in D.C., which is a slightly larger venue than the Colony, but with one less course at three. It does have more seating and lounge areas, though. We are clearly gaining proof of concept in a huge market and are confident that we will continue to deliver within the expected ranges for sales and margin returns. Turning now to page 17 to discuss our new venue opening timeline. We are currently least committed to 11 total puttery venues with three open today. We expect to open an additional four new puttery venues throughout the remainder of 2022, with Houston opening next month, followed by Chicago in early Q4 and Pittsburgh in Kansas City later this year. That will bring us to a total of five new puttery venue openings in 2022, ending the year with a total of seven. We've recently experienced unexpected zoning, licensing, and permitting challenges outside of our control, causing slight delays in the opening schedule of the couple of venues originally planned to open this year. As such, both Manhattan and Miami will now open in early 2023. We expect 18 puttery venue openings in 2023, ending next year with a total of 25 venues open. We are aggressively pursuing new leases for openings in 2023 and beyond. We are in active discussions with landlords on several sites today and expect those will finalize in the coming weeks. Behind these, we have an active and expanding pipeline with a significant number of identified sites in various stages of market analysis. In partnership with our new national broker, we are identifying both low barrier and traditional markets for future sites, ensuring our development goals in 2023 are met. As I discussed last quarter, we will continue to be 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 are taking the appropriate amount of time between builds and openings to remain thoughtful with our strategy and approach and making adjustments where needed given the current market conditions. While the obstacles presented by the strain on supply chain and GC labor are still present, and most recently in zoning and permitting hurdles, we are working ahead of the challenges where possible to keep our development timeline on track. When you 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 18 outlines very clearly the illustrative venue-level economics for both our drive-check and Puttery Entertainment golf venues. Puttery is in 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 drive shack venue. As a reminder, we expect to spend between $7 and $11 million to build each puttery venue, taking approximately six to nine months to physically construct, and plan to generate venue-level EBITDA of between $2 and $3 million each. Compare that to a drive shack venue where we expect to spend between $25 and $40 million to build each venue, which takes approximately 18 to 24 months to complete and generates venue EBITDA of between 4 and 6 million. Again, we are gaining a clear proof of concept as a result we are generating in our two puttery venues are ahead of our expectations. Both the Colony and Charlotte are providing proof with real results that are well within the unit economic ranges seen here. We remain confident that our DC venue will also deliver revenue and EBITDA results well within these ranges. I will now turn it over to Kelly to give you a brief update on our Q2 financial results.
spk01: Thanks, Hannah, and good morning, everyone. Turning now to page 20 in the deck for a summary review of our financial performance for the quarter. For the second quarter, we generated total company revenue of $86.7 million, up $12.8 million, or 17.3%, compared to last year's second quarter total company revenue of $73.9 million. The increase to last year was primarily driven by higher event sales, mainly at American Golf, and puttery sales from our three venues in the Colony, Charlotte, and most recently, D.C. When we break this down, the entertainment golf side of our business, which includes both drive shack and puttery venues, generated total revenue of $15.7 million in Q2 this year, an increase of $4.1 million, or 35.6%, compared to $11.2 million in the second quarter last year. Our four drag shack venues generated total revenue of $11.2 million versus $11.6 million in Q2 last year. While total revenue was slightly down to last year, our drag shack venues drove a strong events business with $3.2 million in total event revenue up $1.6 million or 106% versus Q2 last year. Total revenue generated by our three Petri venues was $4.5 million this quarter, including events, and was led by the Colony at $2.4 million, followed by Charlotte at $2 million. Our D.C. location, which was again roughly open 10 days in the quarter, delivered approximately $100,000 in total revenue. For the year-to-date period through Q2, our venue and the Colony delivered total revenue of $4.6 million, Charlotte generated $4.2 million, and as I just mentioned, D.C. at $100,000. Walk-in business for both the Colony and Charlotte continues to pace slightly ahead of our expectations. On the traditional golf side of our business, American Golf generated total revenue of $70.8 million, including managed course reimbursements of $15.2 million. Excluding managed course reimbursements, American Golf's total revenue increased $6.2 million, or 12.5%, compared to total revenue of $62.3 million in Q2 last year. which included managed course reimbursements of $12.9 million. The increase in total revenue was primarily due to higher event sales this year, which totaled $9.5 million, up $7.2 million, or 311% versus the second quarter last year. As Hannah mentioned earlier, we are seeing strong momentum for future events across both the corporate and social categories as they continue to rise, which bodes well for strong revenue results in the back half of this year. Operating loss for the quarter was $6.4 million versus operating income of $1.1 million in Q2 last year. The change to last year was primarily due to increased pre-opening costs for new puttery venues, strategic investments in headcount and other related expenses to support the development and growth in puttery, and the loss on lease termination following our decision to fully exit the DriveShack New Orleans lease effective June 30, 2022. Consolidated net loss was $9.6 million for the second quarter this year versus a consolidated net loss of $2 million in the same period last year. And the net loss applicable to common shareholders this quarter was $10.8 million or $0.12 per share compared to last year's loss of $3.4 million or $0.04 per share. Total company adjusted EBITDA was $4.6 million for the quarter compared to $7.7 million in Q2 last year. The change to last year was expected and primarily related to the strategic investments in headcount and other related expenses to support the development and growth in puttery. For reference, gap to non-gap reconciliations have been provided on pages 23 and 24 of the earnings presentation that include the details of our entertainment and traditional golf segment venue and course EBITDA contributions for the second quarter and first six months of 2022 and 2021. Cash and cash equivalents as of June 30th, 2022 was 22.7 million compared to 58.3 million as of December 31st, 2021. The decrease to year end was primarily due to capital expenditures associated with the development of future Petri venues. And finally, our board of directors declared dividends on the company's preferred stock for the period beginning August 1st, 2022 and ending October 31st, 2022. The dividends are payable on October 31st, 2022 to holders of record on October 3rd, 2022. And with that, I'll turn it back to Hannah for closing remarks.
spk02: Thank you all for joining us today, and thanks, Kelly. I'll now hand it back over to the operator for questions.
spk00: At this time, if you have a question, please press star 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2. When posing your question, we ask that you please pick up your handset to allow optimal sound quality. We'll take our first question from Peter Sillay from BTIG.
spk04: Great. Thanks, and good morning. I just wanted to ask about development for 2022 and maybe beyond. I know you guys have the DC unit that you just opened, but you've also got Houston, Chicago. Pittsburgh and Kansas City on deck for the balance of this year. Just trying to understand how much capital has been committed to those four additional units. Are those four units, how much of that is contingent upon you raising additional capital, or is the capital mostly allocated already for those units?
spk02: Hey, Peter, thanks for the question. The capital is allocated for those units already. So we don't foresee any issues at all being able to get those open. I think we mentioned on prior calls that we had ample liquidity to be able to fund our development pipeline for this year. So I hope that answers your question.
spk04: Great. So the development for 23 then I guess is just probably more contingent upon the capital raises. Is that how we should think about it?
spk02: In part. you know, Kelly, you can chime in if you'd like, but we were able to use a lot of the cash that we're generating from our existing businesses, both American Golf, Dry Shack, and our puttery locations to fund a portion of that development next year. As I said, last quarter, we are and have been actively engaged in the capital. We're trying to get funded, basically. So, We were looking at debt. We're looking at our balance sheet. We're looking at basically everything across our business. And we have quite a few assets as well. So we're not we're not overly concerned about next year at all, given given the fact that we currently have an existing business that we could use the proceeds from in part.
spk04: Great. That's very helpful. And then just the venue-level EBITDA margin for the puttery, I think you guys gave a little bit of color, but I was hoping you'd give us a little bit more detail. It's bounced around a little bit and come down, I guess, pretty meaningfully this quarter versus last. Maybe just a little bit more color on what drove that. And then secondly, what do you expect – the run rate EBITDA margin to be for this concept on a go-forward basis?
spk02: Yeah, great question. So, first of all, the EBITDA decline for puttery, we expect to be a one-time event. We had a significant material inventory true-up that we had to take this quarter. When we When we opened Petri Venues, we opened it with an inventory system that we actually love and the operators love. However, we realized through this quarter that part of the part of the process wasn't working as it should have and that was primarily with the when we were ringing up events in our point of sale it wasn't accurately or correctly pulling the recipes from our inventory system so it wasn't depleting our inventory in a correct way so the point of sale was ringing it up correctly guests were charged correctly all of that was good but The back end system and the back end actual process where you bring up an item and it depletes from inventory so that you can actually correctly see your cost of goods, that was a bit broken. So we've rectified that. That is absolutely not going to be an issue in the future. However, we decided to go ahead and do the true up this quarter. And that's what you're seeing. I expect that on a run rate basis, the EBITDA margins will be at least in the 35% range. I think in our deck we gave the 25% to 40%. So we do expect and anticipate it to be around 35% moving forward. Again, we ran some of the numbers had we not had this true-up occur, and we're very confident. It's unfortunate, but it's part of our growing pains and one of the learnings that we experience. Great.
spk04: And then just any changes to the concept that you're contemplating, Hannah, in terms of pricing, bundles, any changes to the menu or operating hours now that you have three units open based on what you've learned? Any changes that you guys are contemplating on a go-forward basis?
spk02: Yeah, I think the biggest one that comes to mind is what I touched on in the presentation, which is the number of courses and the size of the box that we actually need. Peter, you've been along for the ride with us this whole time. So I think you remember in the early days, we're saying we need like 20 to 25,000 square feet, we need four courses, which is really indicative of what you see in the colony. But given Charlotte's numbers and their performance, I think that we have realized that we can actually search for and go into smaller units as long as it's in the right area. As far as pricing goes, the thought of bundling is something that we are and have been actively looking at. specifically on our softer days, Monday, Tuesday night, et cetera. So we are looking at ways to kind of optimize and maximize our revenue by doing some bundling or... or different pricing with the gameplay. So more to come on that for sure. As far as the menu, we've seen our food menu and our drink menu. People have had really, really, really strong positive feedback about that. We are looking and continue to look at ways that we can increase our food sales. It's very clear that people look at us as a place to come hang out and have a few drinks and have a great time, which we love. They're really enjoying our drinks. We hope to have them enjoy our food just as much as they're enjoying our drinks in the future. And there will be some menu changes as we go into new markets. You'll specifically see some of the changes in the New York City market. That's due to a variety of reasons, kitchen layout, kitchen design. our own market research and what people want, but we don't plan on making large-scale changes to the menus on a location-by-location basis, only where it makes sense.
spk04: Great. And then just lastly, any thoughts on repeat visits for walk-in guests at the puttery? Have you had a chance to kind of look at that data or gather that data? Just trying to understand how often the average customer comes back.
spk02: Yeah, right now, I mean, keep in mind we haven't lapsed a year in any of our locations for puttery. But we're at about 11% on repeat reservations with both the colony and Charlotte, which I think is a really strong number given the fact that we're not measuring year over year yet. So what that's telling us is people are actually returning to play a different course or perhaps the same course. and they're returning to kind of hang out and have drinks with their friends. You know, I don't know yet what we want that number to be. I think that the 11% range is really, really – I was pleased when I saw that number. I expect that number to only go up in the future, given that we'll have a year's worth of operating history. So our goal is always to build on year-over-year visits as well as as well as revenue. So we're definitely heading in the right direction there.
spk04: Great. Thank you very much. Very helpful. I'll pass it along.
spk00: Thanks, Peter. Our next question comes from Alex Furman from Craig-Hallam.
spk03: Great. Thanks very much for taking my question. Hannah, I wanted to ask about the return of the events business at both of your concepts, but particularly at Puttery. Has the event business been building as fast as you would have hoped? It looks like it was a big contributor, obviously, here in the second quarter. And can you talk about what's your pipeline for the back half of the year, and when do you see events really kind of getting back to – pre-COVID levels? Are they starting to get closer there? Is there still, you know, room to get to kind of where you think that needs to be for your event business?
spk02: Hey there. Thanks for the question. So a couple of things to unpack there. First, I think puttery events are absolutely where we think they should be, given the amount of time we've been, A, open in varied locations, and B, the amount of time that we've just been in the market for general brand awareness. So when we opened the colony, obviously that was our very first one. No one knew what the heck a puttery was. We didn't really have any photos to show other than renderings, which is effective, but not nearly as effective as being able to see something tangibly, right? This is what a putter actually looks like. These are live photos or a walkthrough of a venue. So, you know, we were very resourceful in the colony, and I think that that's showing. Same in Charlotte and same in D.C. I'm starting to see the event business come back in a pretty significant way. Anytime we go into a market and we're new in the market, which is really going to be happening to us for the next few years with puttery, it is really kind of a more difficult time mountain or hill to climb because you're not only new to the area, but they also have never really heard of the brand. So as we establish ourselves as a brand, I expect it to get a bit easier. But it is where we want it to be. We see it building, especially for Q4, the holiday events. We see corporate coming back in a big way. And we really see that across our drive shack properties, Raleigh specifically. they're just flying high with event revenue right now. And then I'll just say one last thing about this, which is that a lot of folks are traveling this year, right? They didn't travel last year. Everyone was in their houses or maybe they went on a road trip, but they didn't take an airplane anywhere. And I think we've all seen the news about the airlines and the crunch they're under given the volume of travelers that they're seeing. So, We're seeing kind of this reverse COVID effect right now where both our walk-in is a little bit down and our events, I think, are down a bit as well just due to the fact that people are gone for the summer. But we do expect to see that pick up and normalize during the back half of the year.
spk03: Okay. That makes a lot of sense. Thanks for that. And then if I could ask about the gameplay statistics, it seems like you guys are doing a very good job of, you know, keeping track of kind of the throughputs through the courses at all of your different courses. Is there a magic number based on what you've seen so far that you're targeting that really balances getting as many people as possible on the course as well as maximizing the value that the guests are seeing? Is 30 minutes kind of the sweet spot that you're targeting?
spk02: I would say, yeah, between 30 and 32 minutes. In some of our locations, like Charlotte, where we have two courses, it does tend to take a little bit longer to get through the course. However, there's also value in that, right? When you're paying a premium to play a game with your friends, you don't want it to take 10 minutes, right? You want to be able to enjoy it and really get to go through it. So 30 to 35 minutes, I think, is our sweet spot. You know, we've learned that specifically in the colony, there is one course in particular that it just doesn't take that long to go through, which is the illusion course, by the way. People love it because it's very Instagrammable. Millennials and Gen Zers really love to go through there, and they'll come to the front desk and they'll say, like, wherever this picture was taken, and they'll show, like, hole nine, which is the black and white hole. They say, I just want to play that course because they want to get their shot at the end of the course, their photo. but it does take a much shorter amount of time to get through, which was unexpected. We didn't know, but we're taking steps to fix that in our future venues. So long story short, the 30-minute mark is what we aim for, but anything over 30 minutes I think is absolutely fine. When you get to the 40-minute area, that's when people just feel like, they can become really disengaged very quickly. But keep in mind, we do have these unique beverage offerings on each course. So our staff is pretty well versed in this and very well trained to be able to go up to the folks that might be waiting for their shot or for their next hole, for the group in front of them to finish, to be able to order one of these drinks. And that kind of helps us manage their time a little bit better.
spk03: Okay, that's great. Thanks, Hannah, and look forward to seeing you guys here in the Twin Cities soon.
spk02: Yeah, we can't wait. It's exciting. Thank you so much.
spk00: We'll take our next question from Edward Riley from EF Hutton.
spk05: Hey, guys. Thanks for taking my question. I was wondering if you could help me understand the $2.5 million sequential increase in G&A in the second quarter. I'm wondering how much of this was one time in nature?
spk01: Yeah, you're talking about total corporate G&A, Eddie?
spk05: Yes.
spk01: Yeah. I would say, you know, when you look at last year, where we were as an organization, the first half of 2021, you know, we were really Coming out of COVID, certain staffing levels were a little bit light across the corporate spectrum. We really started to build, as we were building out Kettery and the development and growth plans there, we really started to build up in the back half of last year, coming out of Q3 and Q4 and certainly coming into this year. You know, we did expect these increases, you know, and we planned for it as such. So I would say it's probably more kind of at getting a little bit to normalized levels versus maybe one-time increases. But I think you'll start to see that kind of level off as you get through to the back half of this year.
spk02: Yeah, and just to elaborate on that, yeah, it's a one-time kind of increase to get us to a normalized level. So you shouldn't expect to see subsequent increases to that degree. In fact, we should be able to actually do better as we scale. But we did need to add, as you all have seen, our event revenue has gone up. We actually needed people to support that. So we made the decision to add a couple of folks on before they got to the point where they couldn't reach leads and be able to book those. Because in this day and age after COVID, if people can't get ahold of someone to book an event, they're just gonna go to the next place. So that was really important to us. So we added a small bit there, but also we needed to add some to really address our pipeline. We needed to be able to, you know, getting the venues or getting the sites as the lease signed is only half of the battle. The other half is actually, A, being able to construct it and having people to be able to oversee our general contractors and B, having the team on the ground that's actually able to train the staff so that once we open, we're able to maximize revenue in that space. So there were a number of additions that we did need to make, but again, you should not expect to see that kind of increase quarter over quarter.
spk05: Okay, great. Really appreciate the color there. You mentioned the potential to monetize one of the pieces of real estate you guys have. What do you think you're able to potentially sell that for?
spk02: We're looking at everything. So at this point, you know, nothing is off limits. We are not going to go into really granular detail here, but I can tell you we have a, as you know, we have a very strong balance sheet. We have a number of assets that we could sell, and we're looking at all of that. So there's a potential there to be able to find a little bit of our growth or a whole lot of our growth. And again, as we get more information and as we make decisions in the coming weeks, we will be sure to put out a release to let everyone know.
spk05: Okay, great. And then as it relates to the inventory true-up, I was wondering if the food and beverage gross margin decline could be attributed to that inventory true up. Looks like it decreased about 5% sequentially from Q1.
spk02: Yeah, absolutely. Events, it's a slippery slope, right? Events are usually really helpful for our cost of goods because You know this, folks buy a package, that's what we ring in, and really whether they use 100% of that package or consume 100% of that package or not, it's still counted as revenue towards our food and bev costs, or the game, but specifically speaking about the food and bev packages. So yes, it can absolutely be attributed to the one-time true-up. Again, a significant learning for us and one that we do not expect to repeat because we have things in place now that are going to mitigate a lot of that. Kelly, do you have anything to add?
spk01: No, I think that was perfect.
spk05: Okay, awesome. And then last one for me. I'm just curious as to what maybe prompted the change in real estate brokers for the puttery real estate strategies.
spk02: It's a great question. The reason that we changed, there's a lot of reasons, but the bottom line for us and for me was that we needed to have a broader reach than what we had. With the broader reach comes more expedited timelines. It also comes with established landlord and broker relationships that a regional broker may or may not have. So I think when we made this adjustment, we did it because we were really looking at our pipeline as well as our timeline. And we were, frankly, getting a little bit tired of the surprises. We have some firms now running analyses on over 80 markets for us in terms of permitting, zoning, and licensing and what the anomalies in each market might be so that we can more appropriately complete our pipeline with some kind of idea in our heads of what that timing looks like. So this new firm will absolutely be able to help us with that so that when we're announcing venues, we can be more specific about when we expect them to open versus thinking we know when they're going to open and then having to get through, you know, 15 or 16 significant hurdles in order to make those dates happen. There's plenty of real estate out there. That is one thing that we are not short of, which is great. We have so much opportunity. It just really came down to being able to prioritize where we went and when.
spk05: Okay, great. Thank you. Appreciate the color there.
spk00: Thank you. It appears that we have no more questions at this time. I will now turn the program back over to Kelly Buckhorn for any additional or closing remarks.
spk01: Thanks, Gretchen. And we'd like to thank everybody for joining us today. You know, and as always, we're around. If you have any additional follow-up questions, just reach out. And we look forward to speaking to you next quarter, if not before. Have a great day.
spk00: Thank you, ladies and gentlemen. This concludes today's conference. You may now disconnect.
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