Drive Shack Delisted A Year Ago - Here is How They Are Doing
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Today At A Glance:
Drive Shack was delisted from the New York Stock Exchange a year ago. Their stock price is up 26% year to date. They operate three business units. One operates golf courses, and the other two are in the golf entertainment space. Traditional golf has performed well for Drive Shack, while golf entertainment is underperforming.
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Hey Golfers —
Drive Shack announced they were voluntarily delisting from the New York Stock Exchange last December. It’s been nearly a year — here is how they are doing.
To get started — below is a quick overview of what delisting entails.
Being delisted from an exchange can happen for a variety of reasons. One of the most common is share price — a share price of under $1 for an extended period of time increases the risk of not following the standards. Drive Shack’s share price dipped below $1 in September of 2022 and remained under that level until they were delisted.
Following public company results is important to get a pulse on the industry. Unfortunately — golf doesn’t have many public companies.
Acushnet
Callaway
Sacks Parente
Drive Shack trades on the OTCQX under the symbol DSHK. And their share price has had a roller-coaster of a year — currently up 26% for the year. But they are down 42% from a high in January.
Drive Shack’s most current financial results are for the second quarter. So we have six months of information — and it is a mixed bag from a performance standpoint.
Total revenues for the second quarter were $98.1 million — up 13.2%. And for the first six months, the total revenue checked in at $175.6 million — up 12.8%. Drive Shack’s performance is certainly respectable. Much of the growth is from what I would consider inorganic opportunities.
Drive Shack operates three businesses under its umbrella.
American Golf owns or leases 52 properties across seven states with 30,000 members — it is the primary revenue driver of Drive Shack. Revenue for American golf was up $5 million on the golf operations side for the second quarter.
Two items drove the revenue growth.
Added three golf courses — resulting in $2.5 million
Same-store revenue increased — resulting in $2 million
American Golf’s ability to drive growth in its same-store quarter over quarter is positive. And it falls in line with what we have seen in the industry.
American Golf saw an increase of $2 million or 19% in food and beverage revenue for the second quarter at its golf courses.
The Drive Shack business unit is a Topgolf competitor. Drive Shack operates four venues — and the results were not great for the second quarter. Its golf operations were down 4% for the second quarter to $4.8 million. Drive Shack has not opened a new venue since 2019 — so the number is the same venue revenue. For context — Topgolf was up 1% in the same period.
Drive Shack also saw a 5% decrease in the second quarter for food and beverage to $5.1 million. In the second quarter, food and beverage made up around 50% of revenue for Drive Shack’s four venues.
Drive Shack’s lackluster performance boils down to not enough traffic at its venues.
The Puttery business unit is indoor mini golf entertainment with eight venues in the United States.
Minneapolis
Kansas City
Chicago
Dallas
Houston
Charlotte
Pittsburgh
Washington DC
Drive Shack is focusing a lot of their energy on the success of Puttery.
Their revenue growth was good in the second quarter, primarily due to new venues opening. Revenue was $5.7 million — more than doubling quarter over quarter on its golf operations side.
And food and beverage revenue at Puttery was $3.8 million — up 81%.
But there is a concern at Puttery venues. Puttery can comp the same venue sales for its Dallas and Charlotte locations. And the food and beverage revenue was down $500,000 due to fewer walk-ins. These venues have been operating for two years — and starting to see a decline in traffic is not a great sign for the business's health.
Puttery is battling with competitor Puttshack to gain market share in the space. And if we have learned anything about commercializing golf entertainment — first to market is vital — as it was with Topgolf.
Puttshack is well capitalized after it received a $150 investment from BlackRock a year ago. To date, they have raised over $250 million.
Puttshack currently has ten venues in the United States and four in the United Kingdom. They have 12 venues in the pipeline in the United States compared to Puttery at two.
Puttery forecasted five new venues last year for 2023. To date, they have opened three of the five.
Rory McIlroy’s Symphony Ventures invested $10 million in Puttery in exchange for 10% equity in each Puttery venue opened through 2023. Rory invested in the summer of 2021 — and Puttery forecasted seven venues to be open or nearly complete by the end of 2021. They had only opened five new venues at the end of 2022.
Drive Shack’s share price has performed well for the year. And its revenue growth has been respectable. Although the revenue growth has primarily been inorganic.
American Golf has performed nicely for the company. But its four Drive Shack venues are underperforming, and Puttery seeing same venue food and beverages sales decline is a concern.
Drive Shack’s market cap is $38 million, which is around the cost of building one large Topgolf venue. And Drive Shack has four venues eight Puttery venues and owns or operates 52 golf properties.
Have yourself a great Monday. Talk to you next week!
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FYI - AGC has lost the management contract for all of the HKI America courses starting January 1. I think it is six private courses.