Q2 2022 Drive Shack Inc Earnings Call

Good morning, My name is correction and I will be your conference operator today.

At this time I would like to welcome everyone to drive Shack second quarter 2022 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 and instructions will be given at that time today's call is being recorded if you should need any operator assistance. Please press <unk>.

Star Zero at this time I would like to hand, the call over to Kelly Buckhorn CFO . Mr. Parker you may begin.

Thank you Christian and good morning, everyone I'd like to welcome you to drive Shack 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 Dot drive Shack Dot 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 Hana.

Thanks, Kelly and 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 strong demand for events.

Our four drive shack venues delivered total revenue of just over $11 million and wound down just slightly versus last year drove a strong events business with over $3 million in revenue this quarter.

We continue to gain proof of concept with <unk>, which continues to deliver results in line with our expectations for Q2, our two venues in the colony in Charlotte generated combined total revenue of $4 4 million.

Our newest patrie located in Dcs Penn quarter open to the public on June 21, and generated just about 100 K for few days. It was opened in the second quarter.

Total 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 continued 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 head count and other related expenses, we've made to support the development and growth in February .

We have a strong foundation in our core business with their drive shack venues in American golf courses and each continues to deliver exceptional results. We are extremely pleased with the performance of our two pet or even use the colony, which has been open now for 11 months and Charlotte, which has been opened for eight a.

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 penalty represents the best path forward for near term growth.

We now expect a total of four additional new country openings by the end of 2022 with Houston opening in Q3 in Chicago in early Q4 behind these Pittsburgh in Kansas City are planned to open in late Q4, we will in 2022 with a total of seven pottery venues opened and operating unexpected delays.

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.

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 32022, and we no longer have rights to use the premises with that we've removed the right of use asset and liabilities associated with it.

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 drive shack venue on Randalls Island in Manhattan, and believe it will deliver sales and EBITA margins well above any of our current drive shack in years.

So turning to the Jack as you will see on page six.

<unk>, Inc has undergone a significant transformation from traditional golf business to an entertainment operating company during the last four years during.

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 drive Shack Entertainment golf business with the four venues that we operate today in Raleigh, Richmond, West Palm Beach and Orlando.

We have since developed our newest entertainment golf experienced cutlery opening our first pet or 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 <unk> quarter Dcs Premier Entertainment Zone, a few weeks ago in late June we are underway to meeting our goal to open a total of 50.

Petr even used by the end of 2024.

Turning now to page seven for submarine timeline view of our courses and be news 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 in 'twenty managed courses.

As I just mentioned, we currently have four drive Shack entertainment golf venues located in Orlando, Raleigh, Richmond, and West Palm, we're committed to one additional lease in Manhattan on Randalls Island, which we expect to open in late 2023.

With <unk>. We currently operate three venues today located in the colony Charlotte and D C.

<unk>, we have committed to eight additional leases with four of those planned to open.

In Houston, Chicago, Pittsburgh in Kansas City later this year.

And 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 win you announced earlier this morning and Minneapolis.

There is a large addressable market for venue based for the venue based entertainment business, we have a robust pipeline of future Pud relocations, 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 and drive Shack Randalls Island is capital intensive we will balance the need to retain a strong balance sheet, while funding with future development and growth of battery based.

Based on the current level of operations and anticipated growth. We expect the 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 putting on page 10 of the deck. We currently have three put or even use 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 Dcs Penn quarter is about.

45 days and.

Given the DC was only open for a handful of days in the quarter, we are not providing a 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 EBITDA margins of 29%, which is in line with our expectations to date.

It is important to note here that the EBITA margin declines in Q2 are a direct result of a onetime inventory true up recorded this quarter for both the colony and Charlotte the adjustment was directly related to our point of sale system with speeding cost of sales information into our inventory system for net sales we have identified the root cause and have since <unk>.

May be 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 we've been 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 D. C location in a few moments, but let me quickly recap the quarter for both the colony in Charlotte.

The company delivered Q2 total revenue of $2 4 million driven largely by their walk in business at $1 9 million events, where half a million.

Which is ahead of their Q1 business as our teams continued to convert prospects into booked events.

<unk> 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 F&B spend per visit and the colony.

Charlotte event revenue was also $5 million this quarter was higher lead conversions versus Q1.

Taking a closer look at the life to date breakdown of the revenue mix between our Dallas and Charlotte being used we continue to see similar trends across both locations as we've outlined on page 11.

Walking gassy planet 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 E mail per reservation currently.

Likewise guess you 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.

The colony.

Can you use to trend around 28% higher on walk in visitors to date, then Charlotte Charlotte total spend to date per visit.

It is around 15% higher than the colony, which is largely driven by higher F&B spend per guest.

Gameplay of 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 large rooftop or illusion.

Charlotte has trended up to 36 minutes to play one of their $2 900 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 can prove out our concepts performa across the use 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. This solid performance to date in both the colony in Charlotte Police support the video economics, we put forward over two years ago, giving us even more confidence today that future poetry venues.

We will deliver similar if not better results as we learn and build the scale.

We are gaining a clear proof of concept for our <unk> brand and presents the best path forward toward near term growth and profitability.

We opened our newest sputtering and Dc'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, Dcs generated about 700 K in total revenue for their first 30, plus days with 55% from beverage and alcohol sales alone.

We're seeing very similar trends to the colony in Charlotte with online reservations trending at 60% for those who plan their visit and advance I'll call 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 our ECM Conservatory an illusion.

But our Dcs in a beautiful historic building and its former home of the International Spy Museum address any historic building, we were limited to the core structure of the site are designed our design teams did an amazing job laying out the flow the venue with plenty of seating and lounge areas throughout the building has very unique characteristics, which blends.

Well throughout the venue and integrates nicely with our design elements you definitely feel the vibe from the moment you step through the door, which showed 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 urgency.

If you get the opportunity to visit the DC area in the future. Please carve out time to visit that's being here in person and you definitely won't be disappointed.

Moving now to our drive shack business on page 13, our core venues generated just over $11 million in total revenue in Q2. This year down 400, K 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 Q.

Two of last year, all four venues posted higher than 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 strong events business separately, we continue to see a pullback enrichment 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 closer.

And we will provide results and updates on future calls.

Josh I totally new EBITA 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 into EBITA was $6 4 million down just 200 K versus year to date period last year.

<unk> once again led the group with Western right behind Orlando continues to perform well and year to date.

With revenue up 200, K, an EBIT of 100 K versus the same period last year, our drive shack venues are strong stable business with us for us.

And with the increasing demand and events, we expect them to continue delivering at or above that run rate projections.

Our American golf 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 total revenue for Q2 with 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 event.

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-19 restrictions that were still in place for indirect Tvs.

We continue to maintain a high membership right across our private clubs at 98% total capacity with the solid performance that of course has continued 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 plan, a large addressable market exists for venue based entertainment business and we continue to capitalize on this large scale opportunity as we maintain our focus and development plans on new pedigree 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 pottery 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.

Tabling is to identify low barrier markets to ensure development goals for future operate 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 the new size and number of courses to optimize margin and profitability returns.

Have real data from the colony, a larger venue with four courses and data from Charlotte a smaller venue with two courses further 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 then the colony, but.

With one less course at three <unk>.

Does have more seeding and large areas. So.

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 lease committed to 11 total cutter venues with three open today, we expect to open an additional four new pedigree venues throughout the remainder of 2022 with Houston opening next month, followed by Chicago, and early Q4, and Pittsburgh in Kansas City.

Later this year that will bring us to a total of five new pet or even use the new openings in 2022, ending the year with a total of seven.

We have recently experienced unexpected zoning licensing and permitting challenges outside of our control, causing slight delays in the opening schedule of a couple of venues originally planned to open this year.

As such both Manhattan in Miami, We will now open in early 2023, we expect 18 pedigree of the new 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 this will finalized 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 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 that we are taking the appropriate amount of time between builds in openings to remain thoughtful with our strategy and approach and making adjustments where needed given the current marketing conditions.

Market conditions rather.

While the obstacles presented by the strain on supply chain and GT labor are still present, and most recently 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 <unk> was and will continue to be the best path of growth for our company.

Page 18 outlines very clearly the illustrative Vinnie level economics for both our drive check and put our entertainment golf venues huddle.

Hunter 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 in our big box drive shack venue.

As a reminder, we expect to spend between seven and $11 million to build each pottery venue, taking approximately six to nine months to physically construct and plan to generate EBITDA of between two and $3 million each.

Compare that to a drive shack venue, where we expect to spend between $25 $40 million to build each venue, which takes approximately 18 to 24 months to complete and generates venue EBITDA of between $4 6 million.

Again, we are gaining a clear proof of concept as a results we are generating in our two primary venues are ahead of our expectations. Both the colony and Charlotte are providing proof with real results that are well within the unit economic range as seen here, we remain confident that our GC venue will also deliver revenue and EBITA results well within these ranges.

I will now turn it over to Kelly to give you a brief update on our Q2 financial results. Thanks, Kevin 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 EBIT sales, mainly at American golf and <unk> sales from our three venues in the colony Charlotte and most recently DC.

When we break this down the entertainment golf side of our business, which includes both drive shack and pedigree 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 drive 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 drive shack venues drove a strong event business were $3 2 million and total event revenue up $1 6 million or 106% versus Q2 last year.

Total revenue generated by our three Perry 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 or D. C location, which is again roughly opened 10 days in the quarter delivered approximately $100000 in total revenue.

For the year to date period through Q2, our venue in the colony delivered total revenue of $4 6 million Charlotte generated $4 $2 million and as I just mentioned DC at 100000.

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 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 with breath, which totaled $9 5 million up $7 2 million or 311% versus the second quarter last year as.

As Hana 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 preopening costs for new patrie venues strategic investments in head count and other related expenses to support the development and growth in pottery and the loss on lease termination following our decision to fully exit the drive shack in New Orleans lease effective June 32022.

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 <unk> 12 per share compared to last year's loss of $3 4 million or <unk> <unk> 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 head count and other related expenses to support the development and growth in pottery.

For reference GAAP to non-GAAP 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 contribution 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 31, 2021.

The decrease to year end was primarily due to capital expenditures associated with the development of future pedigree venues.

And finally, our board of directors declared dividends on the company's preferred stock for the period beginning August one 2022, and ending October 31 2022.

The dividends are payable on October 31, 2022 to holders of record on October three 2022, and with that I'll turn it back to Hana for closing remarks.

Thank you all for joining us today, and thanks, Kelly and I will now.

Ill hand, it back over to the operator for questions.

At this time, if you have a question. Please press star one on your telephone keypad. If at any point. Your question has been answered you may remove yourself from the queue by pressing star two.

To your question, we ask that you. Please pickup your handset to allow optimal sound quality.

We'll take our first question from Peter <unk> from <unk>.

Great Thanks, and good morning.

Just wanted to ask about development for 2022 and maybe beyond.

You guys of that.

<unk> unit that you just opened but you've also got the Houston Chicago.

Pittsburgh, Kansas City on deck for the balance of this year just trying to understand.

How much capital has been committed to those.

For additional units.

Are those four units how much of that is contingent upon you raising additional capital or the capital mostly allocated already for those units.

Hey, Peter Thanks for the question.

Capital is allocated to those units already.

So we don't 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.

Great. So the.

Development for 23 of them I guess is just probably more contingent upon the capital raises that how we should think about it.

In part and until you can chime in if he'd like Bay.

We were able to use a lot of the cash that we're generating from our existing businesses, both American golf drive shack, and our Pud locations to fund a portion of that development next year.

As I said last quarter, we are and have been actively.

Engaged in the.

In the capital.

Trying to get funded basically so we were looking at that 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.

Great that's very helpful.

And then just the venue level EBITDA margin for the pottery I think you guys give a little bit of color, but I was hoping you could give us a little bit more detail does bounce around a little bit.

<unk> 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.

Yeah, Great question. So first of all the EBIT decline for Perry.

We expect to be a one time event and we had.

A significant and material inventory true up that we had to take this quarter.

When we when we opened.

Pottery venues, we opened it with inventory system that we actually love and the operators Love. However, we realize.

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 you're bringing up events in our point of sale. It wasn't accurately are correctly pulling the recipes from our inventory system. So it wasn't depleting our inventory.

In a correct way to the point of sale was ringing it up correctly guessed recharged 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 Thats, what youre seeing.

I expect that on an on a run rate basis, the EBITA margins will be at least.

And 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 that true up occur and we're very confident it's unfortunate, but it's part of our growing and are growing pains and one of the learnings that we experienced.

Sure.

Great and then just.

Any changes to the concept that you're contemplating in terms of pricing bundles on changes to the menu or operating hours.

You have three units open.

Based on what you've learned on changes that you guys are contemplating on a go forward basis.

Yes, 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 are saying, we need like 20% to 25000 square feet before of course, it 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 sell.

For.

And go into smaller smaller units.

As long as it is in the right area.

As far as pricing goes the bump the thought of bundling is something that we are and have been actively looking at them.

Specifically on our softer days Monday, Tuesday nights, etc.

So we are looking at ways to kind of optimize and maximize our revenue by by doing some bundling or.

Or kind of pricing different pricing with the gameplay, so that and more to come on 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 sales it's very clear that people look at us as a.

Place to come and hang out and have a few drinks and have a great time, which we love and they are really enjoying our drinks we hope to have them enjoy our food just as much as the enjoying our drinks in the future.

And there will be some menu changes.

As we go into new markets and specifically see some of those changes in the New York City market.

That's due to a variety of reasons kitchen layout kitchen design.

<unk>.

Our own market research and what people want, but we don't plan on making large scale.

<unk> to the menus.

On a location by location basis, only where it makes sense.

Great and then just lastly.

Any thoughts on repeat visits for walk in guests pottery.

Have you had a chance to kind of look at that data.

That data.

Just trying to understand how often the average customer comes back.

Yeah right now.

Keep in mind, we haven't lapped the year in any of our locations.

For pottery, but we're at about 11% on repeat reservations with both the calling and Charlotte.

Which I think is a really strong number given the fact that we're not measuring year over year yet.

And so what that's telling us as people are actually returning to play.

To play a different course, perhaps the same course.

And then returning to kind of hang out and have have drinks with their friends.

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.

Great. Thank you very much very helpful I'll pass it along.

Thanks Peter.

Our next question comes from Alex Fuhrman from Craig Hallum.

Great. Thanks, very much for taking my question.

I wanted to ask about the return of the events business at.

At both of your concepts, but particularly at pottery.

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.

Can you talk about whats your pipeline for the back half of the year and when do you see events really kind of getting back to pre COVID-19 levels are they are they starting to get closer to there or is there still room to get to kind of where where do you think that that needs to be for your event business.

Hey, there thanks for the question so.

A couple of things to unpack there first I think Petr event.

Our absolutely where we we think they should be given the amount of time we've been.

Open and Barry locations and be the amount of time that we've just been in the market for general brand awareness.

When we opened the colony, obviously that was our very first one no one knew what the heck are pottery was.

We didn't really have any photos to show other than than renderings.

Which is effective but not nearly as effective as being able to you.

Sure.

See something tangibly right. This is what this is what <unk> actually looks like these are live photos or a walk through of our venue.

So we were very resourceful in the colony.

And I think that Thats, showing same as Charlotte and payment DC I'm starting to see the event business come back.

Pretty significant way.

And 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 pottery.

It is really kind of a more difficult mountain or hill decline because youre not only.

Youre not only new to the to the area, but they also have never really heard of the brand. So as we as we establish ourselves as a brand I expect it to get a bit easier.

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 are just flying high.

With event revenue right now.

And then I will just say one last thing about this which is that a lot of folks are traveling this year. They didn't travel last year, everyone was in there in their houses or maybe they maybe they went on a road trip, but they can take a ticket airplane anywhere and I think we've all seen the news about.

The airlines and the Crunch there under given the volume of travelers that they are seeing so.

We're seeing kind of this reverse kind of in effect right now where both our walk in is is a little bit down and our events. I think are are down a bit as well just due to the fact that people are are gone for the summer.

But we do expect to see that pick up and normalize during the back half of the year.

Okay that makes a lot of sense thanks for that.

And then if I could ask about the the game play statistics. It seems like you guys are doing a very good job of keeping track of kind of the throughput through the courses at all of your different locations 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. We're seeing is 30 minutes kind of the sweet spot that you're targeting.

I would say between 30 and 32 minutes in some of our some of our locations.

Charlotte, where we have two courses it does tend to take a little bit longer to get through the court. However.

There's also value in that rate when you're when you are paying them.

At premium to play a game with your friends and you don't you don't want it to take 10 minutes Ray 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.

We've learned that specifically in the colony and there is one course in particular that it doesn't take that long to go through.

Which is the illusion of course by the way people love it because it's very Instagram <unk> and millennials and Gen Z <unk> really love to go through there and they will come to the front desk and they'll say like wherever this picture was taken and they'll show like whole nine which is the black and White Hall. They say I just wanted to I just want to play that course, because they wanted to get their shot at the end of the course there.

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But it does take a much shorter amount of time to get through which.

It was unexpected we didn't know, but we're taking steps to.

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 and when you get to the 40 minute area that some people just feel like they can become really disengaged very quickly.

But keep in mind, we do have these unique.

Unique beverage offerings on each course, so our staff is pretty well well versed in this and very well trained to be able to go to the folks that might be waiting for their shot or for their next toll.

For the for the group in front of them to finished to be able to order one of the strengths that.

That kind of helps us.

Manage their their time, a little bit better.

Okay. That's great. Thanks, Hanna and look forward to seeing you guys here in the twin cities soon.

Yes, we can't wait exciting thank you so much.

We'll take our next question from Edward Reilly from Es.

Hey, guys. Thanks for taking my question.

I was wondering if you could help me understand the two 5 million <unk>.

Sequential increase in G&A.

Second quarter I'm wondering Tom.

How much of this was onetime in nature.

Yes, Youre talking about total corporate G&A.

Eddie.

Yeah, I would say when you look at last year, where we were as an organization in the first half of 2021.

We were really coming out of Covid.

Staffing levels were a little bit light across the corporate.

Spectrum.

We really started to build as we were building out salary in 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.

We did expect these increases.

And we planned for it as such so I would say, it's probably more kind of it getting.

Getting a little bit to normalized level versus maybe one time increases.

But I think youll start to see that kind of level off as you get through to the back half of this year, yeah just to elaborate on that.

This is a it's a one time kind of increase to get us to a normalized level. So you shouldnt expect to see.

Subsequent increases to that degree.

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In fact, we should we should be able to actually do better as we scale.

But we did need to add as you all have seen our revenue and 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 couldnt reach we use and be able to book those.

In this day and age after Covid.

People can't get a hold of somewhat to book an event. They are just going to go to the next place. So that was really important to us and we added a small bit there, but also we needed to add some.

G&A to really address our pipeline.

And we needed to be able to getting the venues or getting the sites.

The lease signed is only half 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 is actually able to train the staff. So that once we're able once we open them.

We're able to maximize revenue in that space.

So there were 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.

Okay, Great really appreciate the color there.

You mentioned the potential to monetize one of the.

What do you think youre able to.

Potentially so.

So therefore.

We're looking at everything so at this point nothing nothing is off limits.

We are not going to go into to and really granular detail here, but I can tell you. We we have a as you know we have very strong balance sheet, we have a number of assets that we could.

So and we're looking at all of that.

So there is a potential there too.

To be able to find a little bit of our growth or.

One of our growth.

And again as we get as we get more information as we make decisions in the coming weeks, we will be sure to put out or at least to let everyone know.

Okay great.

And then.

As it relates to the inventory through about $1 million.

Food and beverage gross margin decline.

Could be attributed to the <unk>.

Both partners support swing from Q1.

Yes, absolutely.

Event.

It's a slippery slope right events are usually really helpful for our cost of goods because.

You know thats folks.

By a package, that's what we bring in and really whether they use 100% of that package or consume 100% of that package or not.

Still counted as revenue towards our food and Bev cost.

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 that I think that was perfect.

Okay Awesome and then last one for me I'm just curious.

So what maybe prompted the change in real estate brokers for the part of our real estate services.

It's a great question.

The reason is that we changed.

There's a lot of reasons that the bottom line for us and for me was that we needed.

We needed.

To have a broader reach than what we had and with the with a broader reach.

More expedited timeline. It also comes with established landlord and broker relationships.

And that our regional broker may or may not have so I think when we when we did 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 and we have we have some firms now running analysis 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 with some kind of idea in our heads of what that timing looks like.

This new firm, we will absolutely be able to help us with that.

So that one we're announcing venues we can be more specific about when we expect them to open <unk>.

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