ClubCorp Reports Record First Quarter Results, Raises 2015 Outlook and Announces Multi-Year Drive to $300 Million Adjusted EBITDA
Posted: April 30, 2015 in Chains
ClubCorp – The World Leader In Private Clubs
DALLAS, TX – ClubCorp – The World Leader in Private Clubs (NYSE: MYCC) – announced financial results for its fiscal-year 2015 first quarter ended March 24, 2015. The first quarter of fiscal 2015 and fiscal 2014 consisted of 12 weeks. All growth percentages refer to year-over-year progress.
First Quarter Results:
Revenue was up $36.3 million, or 21.9%, to $202.1 million for the first quarter of 2015.
Adjusted EBITDA increased $6.9 million to $38.9 million, up 21.4% from increased revenue and lower club payroll and operating expenses as a percent of revenue.
Same Store Clubs. Same-store revenue was up $4.6 million, or 2.8%, due primarily to higher dues revenue and increased food & beverage spend; while same store adjusted EBITDA grew $3.7 million, or 8.6%, due to increased revenue and favorable operating expenses as a percent of revenue.
New or Acquired Clubs. New or acquired clubs in 2014 and first quarter 2015, contributed revenue growth of $29.3 million and adjusted EBITDA growth of $6.1 million.
Quotes:
Eric Affeldt, president and chief executive officer: “We are confident that our three pronged growth strategy of organic growth, reinvention and acquisitions will continue to add long-term value to our members and shareholders. We are not only raising full-year guidance, but also laying out a framework to drive annual adjusted EBITDA to $300 million in 2018. We believe this objective can be achieved from our existing portfolio of clubs and recent acquisitions, by implementing our existing plans for reinvention and from continued execution of our organic growth initiatives. Achieving this objective does not assume any further acquisitions, instead any additional acquisitions would be incremental to this target.”
“The eight clubs we have acquired since the beginning of the year underscore our strategy to consolidate market share across a very fragmented industry. We are very excited to have established a golf & country club presence in Chicago, where we already have two highly successful business clubs. Likewise, we have expanded our footprint across the southeast with a small portfolio acquisition of six properties in the second quarter. All of these clubs fit nicely within our existing network and provide members enrolled in our O.N.E. product with world-class golf and many other member benefits that remain unmatched in our industry.”
Curt McClellan, chief financial officer: “Our record results for the first quarter continue to demonstrate our ability to execute our strategy while driving revenue and prudently managing operating expenses. We are very pleased with the continued progress of our Sequoia Golf acquisition, and now believe we have achieved approximately $5 million of the $4 to $6 million in projected annualized cost synergies. Additionally, we continue to see wide adoption of our O.N.E product, including 42% enrollment at our newly acquired clubs. Our raised outlook for the balance of the year reflects our confidence based upon our membership growth to date, first quarter results and ability to execute, reinvent and integrate newly acquired clubs. Due to our pace of completed acquisitions, traction on organic growth and plans for reinvention, we are now teed up to drive toward $300 million of annual adjusted EBITDA in 2018.”
Segment Highlights:
Golf and country clubs (GCC):
GCC total revenue of $159.0 million for the first quarter of 2015 increased $31.2 million, up 24.5%, compared to the first quarter of 2014.
GCC adjusted EBITDA was $45.0 million, an increase of $8.7 million, up 23.8%.
GCC adjusted EBITDA margin was 28.3%, a decline of 20 basis points versus the first quarter of 2014.
Same store revenue increased $3.0 million, up 2.3%, driven primarily by increases in base and upgrade dues revenue, and a la carte food and beverage revenue, offset by a decline in golf ops revenue.
Same store adjusted EBITDA increased $2.7 million, up 7.3%, due largely to increased dues and a la carte food and beverage revenue, and favorable variable payroll expenses.
Same store adjusted EBITDA margin improved 140 basis points to 30.0%.
New or acquired GCC clubs contributed revenue growth of $28.3 million and adjusted EBITDA growth of $6.0 million.
Business, sports and alumni clubs (BSA):
BSA revenue of $41.0 million for the first quarter of 2015 increased $2.6 million, up 6.9%, compared to the first quarter 2014 driven by solid growth in both same store and new and acquired clubs.
BSA adjusted EBITDA was $7.5 million, an increase $1.1 million, up 17.9%.
BSA adjusted EBITDA margin was 18.4%, a 170 basis points margin improvement versus the prior year.
Same store revenue increased $1.6 million, up 4.2%, driven by increases in dues and private event revenue.
Same store adjusted EBITDA increased $1.0 million, up 15.4%, due to increased revenue, and improved food and beverage and retail margins.
Same store adjusted EBITDA margin improved 180 basis points to 18.5%.
New or acquired BSA clubs contributed revenue of $1.0 million and adjusted EBITDA of $0.1 million.
Other Data:
O.N.E. and Other Upgrades. Excluding memberships acquired with the Sequoia Golf acquisition, as of March 24, 2015, approximately 47% of our memberships were enrolled in O.N.E or similar upgrade programs, as compared to approximately 46% of our memberships that were enrolled in similar upgrade programs as of December 30, 2014. Including memberships acquired with the Sequoia Golf acquisition, as of March 24, 2015, approximately 44% of our memberships were enrolled in O.N.E. or similar upgrade programs, as compared to approximately 39% of our memberships that were enrolled in similar upgrade programs as of December 30, 2014. As of March 24, 2015, the Company offered O.N.E. at 128 clubs.
Reinvention. In 2015, ClubCorp plans to invest a total of $48-53 million on major reinvention projects at approximately 30 clubs, including 13 same-store clubs, certain clubs obtained in the acquisition of Sequoia Golf, and many of the Company’s recent single-club acquisitions, and its most recent portfolio acquisition of six clubs.
Acquisitions. Year-to-date in 2015, ClubCorp has added eight clubs via acquisition of two properties just north of Chicago, Illinois, Ravinia Green Country Club and Rolling Green Country Club; and six clubs in the southeast United States, Bermuda Run Country Club in Bermuda Run, North Carolina, Brookfield Country Club in Roswell, Georgia, Firethorne Country Club in Marvin, North Carolina, Ford’s Colony Country Club in Williamsburg, Virginia, Temple Hills Country Club in Franklin, Tennessee, and Legacy Golf Club at Lakewood Ranch in Bradenton, Florida. In total, ClubCorp now owns or operates 160 golf and country clubs representing 200 18-hole equivalents. Additionally, the Company owns or operates 49 business, sports and alumni clubs.
Membership. Total club memberships, excluding managed clubs, as of March 24, 2015 were 169,601, an increase of 29,937, up 21.4% over memberships at March 25, 2014. Same store golf and country club memberships, excluding managed clubs, increased 1.2%, while total golf and country club memberships, excluding managed clubs, increased 32.8%. Same store business, sports and alumni club memberships, excluding managed clubs, increased 0.3%, while total business, sports and alumni club memberships, excluding managed clubs, increased 3.7%. Total club memberships, including managed clubs, as of March 24, 2015 were 180,081.
Free Cash Flow. Free cash flow over the last four quarters was $112.1 million, an increase from $83.0 million a year ago.
Capital Structure. Following our first quarter, on April 7th the Company closed its multi-club portfolio acquisition of six golf properties from sellers Stratford Golf Partners and Accord Golf Capital for a combined purchase price of just under $44 million, and the acquisition was funded from existing liquidity sources.
Company Outlook:
The following guidance is based on current management expectations. All financial guidance amounts are estimates and subject to change, including as a result of matters discussed under the “Forward-Looking Statements” cautionary language which follows, and the Company undertakes no duty to update its guidance. Reflecting the effect of its eight acquisitions this year, the Company is raising its guidance for the full year. For fiscal year 2015, the Company now expects to deliver revenue in the range of $1.03 billion to $1.06 billion and adjusted EBITDA in the range of $230.0 million to $240.0 million. This outlook fully integrates our acquisition of Sequoia Golf and the stub period for all remaining announced acquisitions. As a result, the current outlook implies year-over-year revenue growth of 16-20% and year-over-year adjusted EBITDA growth of 17-22%.
Additionally, the Company believes it can reach $300 million in annual adjusted EBITDA in 2018 through the combination of organic growth, reinvention and acquisitions the Company made in fiscal 2014 and thus far in fiscal 2015. This target reflects our long-term objective of 5-7% adjusted EBITDA growth from organic growth and same store reinventions, plus 10-15% returns on invested capital applied to new acquisitions. The Company measures return on invested capital as incremental adjusted EBITDA in year three following the deployment of acquisition capital. For instance, in 2014, the Company invested $280 million to acquire 55 clubs and plans to invest approximately $41 million to reinvent and renovate these properties, for which the Company anticipates this capital to return 10-15% incremental annual adjusted EBITDA in 2017. Likewise, thus far in 2015, the Company has invested approximately $56 million to acquire eight clubs and plans to invest approximately $12 million to reinvent and renovate these properties, for which it expects to deliver 10-15% returns in 2018. Furthermore, this target does not require a change to the Company’s capital structure, nor assume any further acquisitions to achieve this number. Instead, any additional acquisitions would be incremental to this target.
