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Drive Shack Inc. (DSHK)·Q4 2021 Earnings Summary

Executive Summary

  • Q4 2021 revenue was $70.5M (+17.0% YoY), with adjusted EBITDA of $2.5M; updated 8‑K later increased Q4 operating loss by $1.5M due to lease termination expense, taking diluted EPS to $(0.12) versus $(0.11) initially .
  • Entertainment segment revenue nearly doubled YoY to $14.0M; Puttery contributed $2.8M as both venues generated positive venue-level operating results, while Drive Shack walk‑in revenue reached ~$7.5M in Q4 (95% of pre‑COVID Q4’19) .
  • American Golf (traditional) delivered $56.5M, driven by higher public green/cart fees and event revenue; cash ended at $58.3M .
  • Development plan revised: 2022 Puttery openings guided to seven (majority in H2) versus prior 13 target; debt financing target updated to ~$75M in Q2 2022 (vs prior ~$85M in Q1 2022), a potential sentiment overhang until funding is secured .
  • 10‑K filing delayed to incorporate the Q4 update; adjusted EBITDA unchanged by the restatement—an important non‑GAAP stability point .

What Went Well and What Went Wrong

  • What Went Well

    • “Both Puttery locations generated positive venue-level operating results this quarter and we remain extremely pleased with their strong performance…” (CEO, press release); entertainment revenue +95% YoY; Puttery $2.8M in Q4 .
    • Drive Shack venues posted ~$7.5M walk‑in and ~75% of pre‑COVID event levels in Q4, indicating normalization of core demand and improving event pipeline .
    • American Golf resilience: higher public green/cart fees, daily fee rounds, and event revenue supported $56.5M segment revenue in Q4 .

  • What Went Wrong

    • Q4 operating loss widened YoY to $(7.9)M (updated), driven by $1.9M catch‑up maintenance, ~$1.5M lease termination costs, and absence of 2020 rent abatements; consolidated net loss was $(10.0)M (vs +$9.9M LY on a golf‑course sale gain) .
    • Adjusted EBITDA fell to $2.5M (from $5.3M LY) as preopening costs increased and SG&A normalized post‑COVID furloughs .
    • Guidance recalibration: 2022 Puttery openings cut to seven (vs prior 13); timing dependence (H2‑weighted) and need for ~$75M debt capital may constrain investor confidence near term .

Financial Results

MetricQ2 2021Q3 2021Q4 2021
Revenue ($USD Millions)$73.879 $76.366 $70.528
Diluted EPS ($USD)$(0.04) $(0.11) $(0.12)
Operating Income (Loss) ($USD Millions)$1.053 $(5.921) $(7.881)
Consolidated Net Income (Loss) ($USD Millions)$(1.969) $(8.866) $(10.023)
Adjusted EBITDA ($USD Millions)$7.719 $3.254 $2.534
Segment Revenue ($USD Millions)Q4 2020Q4 2021
Total Company Revenue$60.287 $70.528
American Golf (incl. reimbursements)$53.1 $56.5
Entertainment Golf (Drive Shack + Puttery)$7.2 $14.0
Putteryn/a$2.8
Drive Shack Venuesn/a$11.2
KPIsQ2 2021Q3 2021Q4 2021
Drive Shack Walk‑In Revenue ($USD Millions)$10.1 $8.5 $7.5
Cash & Cash Equivalents ($USD Millions)$81.4 $63.9 $58.3
Adjusted EBITDA ($USD Millions)$7.719 $3.254 $2.534

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Company RevenueFY 2022~$320M target (Q3 call) Not reiterated in Q4; no revenue target provided Maintained/Unspecified
Course & Venue EBITDAFY 2022~$33M goal (Q3 call) Not reiterated in Q4 Maintained/Unspecified
Puttery OpeningsFY 202213 new (15 total by YE) 7 additional openings; majority in Q3/Q4; DC potentially end‑Q2 Lowered
Debt FinancingFY 2022~$85M, target Q1 2022 ~$75M, target Q2 2022 Updated (lower amount, later timing)
Preferred Stock DividendsQ1 2022 period (Feb 1–Apr 30)n/a$0.609375 (Series B), $0.503125 (Series C), $0.523438 (Series D) Declared

Earnings Call Themes & Trends

TopicQ2 2021 (Prior‑2)Q3 2021 (Prior‑1)Q4 2021 (Current)Trend
Supply chain & laborCOVID‑driven delays; material/labor shortages; time lines pushed Continued COVID/supply chain impacts; sequencing openings to incorporate learnings “Obstacles… strain on supply chain and GC labor are still present,” majority of 2022 openings H2 Persistent headwind; execution adapting
Events pipelineEvents $1.5M; sales org restructured; demand rising Corporate events returning; strong 2022 pipeline exceeding 2020 Drive Shack events ~75% of pre‑COVID; Charlotte to ramp from a late‑Dec open Improving sequentially
Puttery strategyUnit economics: $7–11M build, $2–3M EBITDA; first openings planned Colony opened; Charlotte imminent; target 13 opens in 2022 2 venues open; 7 opens planned (H2‑weighted); DC possibly end‑Q2; pipeline expanded (e.g., Kansas City) Scaling with moderated pace
Capital plans~$75M debt needed by early 2022 ~$85M targeted for Q1 2022 ~$75M targeted for Q2 2022 Timing deferred; amount reduced
F&B marginsn/an/aHigh alcohol mix (~80% of F&B) supports margins; sustainable as Puttery scales Favorable mix supports profitability
COVID impactNo pullback from Delta variant observed; safety protocols in place n/aNo material Omicron impact noted on Colony/Charlotte opening month Resilient demand

Management Commentary

  • “Our fourth quarter results reflect the strong momentum we continue to see across our entire brand portfolio… event revenue is up meaningfully… highest quarterly event revenue reported since pre‑COVID.” (CEO) .
  • “Both Puttery locations generated positive venue‑level operating results this quarter and… deliver well within our expectations.” (CEO) .
  • “We currently estimate that we will need approximately $75 million of additional capital… expect to finalize [debt] in the second quarter of 2022.” (CFO) .
  • “Walk‑in business… 95% of pre‑COVID levels in Q4’19, events just over 75%.” (CEO, Q4 call) .

Q&A Highlights

  • Confirmation that both Puttery venues (Colony and Charlotte) are EBITDA positive despite Charlotte’s partial quarter opening .
  • 2022 opening cadence: majority in Q3/Q4 with potential end‑Q2 opening for DC; emphasis on H2 timing .
  • Puttery revenue mix variations (gameplay vs beverage) expected to converge as Charlotte matures; location dynamics drive early mix .
  • Charlotte’s events should normalize as scheduling moves beyond the mid‑December opening window; space configuration supports events .
  • F&B margin durability: ~80% alcohol mix in Puttery; reduced Drive Shack menu and planned price increases to offset inflation .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2021 EPS and revenue was unavailable at time of query due to SPGI request limits; therefore, formal comparisons to consensus cannot be presented. Values retrieved from S&P Global were unavailable due to API limits.
  • Given the updated 8‑K restatement increased Q4 operating loss and diluted EPS by $0.01 and reduced FY 2021 diluted EPS loss by $0.02 (from share count correction), sell‑side models may need minor EPS adjustments; non‑GAAP adjusted EBITDA remained unchanged .

Key Takeaways for Investors

  • Entertainment momentum is real: Puttery positive venue‑level EBITDA and Drive Shack normalization (95% walk‑in vs pre‑COVID, ~75% event) support the competitive socializing thesis .
  • Q4 profitability pressure was driven by discrete items (lease termination, deferred maintenance, prior‑year abatements); underlying demand trends remained constructive .
  • Development pace moderated: seven Puttery openings planned in 2022, H2‑weighted; execution risk is concentrated in permitting, supply chain, and labor markets—watch DC timing as an early signal .
  • Funding is the near‑term catalyst: ~$75M debt financing targeted for Q2 2022—closure and terms will likely influence sentiment and capital allocation for 2023 builds .
  • Liquidity adequate for current plan ($58.3M cash at year‑end) but leverage will rise; monitor debt market access and cost .
  • Event mix recovery and high‑margin beverage sales are key levers for margin expansion at Puttery and Drive Shack; menu pricing actions can offset inflation .
  • The 10‑K delay and Q4 restatement sharpen the focus on controls, but adjusted EBITDA durability and segment growth limit operational impact .