Club Insider

ClubCorp Reports Record Third Quarter Results, Tightens 2015 Outlook and Accelerates Club Reinvention

Posted: October 15, 2015 in Chains

ClubCorp - The World Leader In Private ClubsClubCorp – 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 third quarter ended September 8, 2015. The third quarter of fiscal 2015 and fiscal 2014 consisted of 12 weeks. Year-to-date results of fiscal 2015 and fiscal 2014 consisted of 36 weeks. All growth percentages refer to year-over-year progress.

Third Quarter Results:

Revenue increased $50.9 million, or 24.9%, to $255.4 million for the third quarter of 2015.

Adjusted EBITDA increased $9.6 million to $54.9 million, up 21.2%, driven by solid performance at same-store clubs and from increased revenue at new and recently acquired clubs.

Same Store Clubs. Same-store revenue was up $3.3 million, or 1.7%, driven primarily by higher dues revenue; while same-store adjusted EBITDA grew $1.9 million, or 3.6%, due to increased revenue and favorable operating expenses as a percentage of revenue. Same-store flow-through was 57%.

New or Acquired Clubs. New clubs opened in 2014 or clubs acquired in 2014 and 2015 contributed revenue growth of $44.6 million and adjusted EBITDA growth of $9.7 million.

FY15 Year-to-date Results:

Revenue increased $139.6 million to $721.2 million, up 24.0%, reflecting solid same-store revenue growth, and the addition of Sequoia Golf and several other recently acquired clubs.

Adjusted EBITDA increased $27.1 million to $154.0 million, up 21.3%, driven by an increase in dues and upgrade revenue at same-store clubs and favorable operating expenses as a percentage of revenue at same-store clubs, and additional revenue contribution from new and recently acquired clubs.

Same Store Clubs. Same-store revenue was up $13.4 million, or 2.3%, driven primarily by higher dues revenue up 3.9% and food & beverage revenue up 2.8%, offset by golf operations revenue down 0.7% year-to-date. Same-store adjusted EBITDA grew $8.4 million, or 5.5%, resulting in same-store flow-through of 62%. Additionally, year-to-date, same-store golf and country clubs (GCC) and business, sports and alumni clubs (BSA) adjusted EBITDA margins are up 80 basis points and 100 basis points to 30.1% and 18.1%, respectively.

New or Acquired Clubs. New clubs opened in 2014 or clubs acquired in 2014 and 2015 contributed revenue growth of $118.1 million and adjusted EBITDA growth of $25.9 million.

Quotes:

Eric Affeldt, President and Chief Executive Officer: “We delivered another record quarter with strong same-store growth in both dues and food and beverage revenue, and our golf operations revenue improved slightly after two consecutive quarters of decline. Our acquisitions are performing well with revenue surpassing our underwriting estimates, and we anticipate performance at these clubs to continue to ramp. Additionally, we have decided to accelerate our reinvention at several clubs acquired with Sequoia Golf. We are not increasing the total reinvention capital committed to Sequoia clubs, but instead we are pulling forward investments that we had planned for 2016. We believe this added investment in 2015 will minimize member disruption as we head into 2016 and continue to build on a sound foundation for future growth. We look forward to a strong finish to this year, and continued execution by all members of our team.”

Curt McClellan, Chief Financial Officer: “We delivered strong revenue and adjusted EBITDA growth this quarter driven by continued execution of our three-pronged strategy. On the organic growth front, we continue to see expansion of our O.N.E. offering and similar programs with increased member participation now at 49%. We continue to execute our reinvention strategy and we are accelerating reinvention at several of our Sequoia clubs in anticipation of next spring’s golf season. Total 2015 ROI and expansion capital of $60 million includes approximately $10 million of accelerated capital investment for the reinvention of Sequoia clubs. Our drive to $300 million in adjusted EBITDA by the end of 2018 remains unchanged. As a reminder, this target hinges on our ability to achieve 10-15% cash on cash returns on nearly $390 million of capital employed on our 2014 and 2015 acquisitions. Additionally, this target assumes no incremental acquisitions. We have seen nothing to change our assumptions here, and remain confident in the execution of this strategy.”

Segment Highlights:

Golf and country clubs (GCC):

GCC total revenue of $211.0 million for the third quarter of 2015 increased $46.2 million, up 28.0%, compared to the third quarter of 2014.

GCC adjusted EBITDA was $58.1 million, an increase of $11.3 million, up 24.2%.

GCC adjusted EBITDA margin was 27.6%, a decline of 80 basis points versus the third quarter of 2014 due primarily to lower adjusted EBITDA margins at recently acquired clubs.

Same-store revenue increased $2.5 million, up 1.5%, driven primarily by increases in dues revenue up 3.4%, and food & beverage revenue up 1.4%, offset by a decline in other revenue. Golf operations revenue was up 0.1% year-over-year.

Same-store adjusted EBITDA increased $1.9 million, up 4.1%, due largely to increased dues and food and beverage revenue, and favorable variable payroll expenses as a percentage of revenue.

Same-store adjusted EBITDA margin improved 80 basis points to 29.6%.

Recently acquired GCC clubs contributed revenue growth of $43.7 million and adjusted EBITDA growth of $9.4 million.

Business, sports and alumni clubs (BSA):

BSA revenue of $40.6 million for the third quarter of 2015 increased $1.7 million, up 4.3%, compared to the third quarter, 2014 driven by growth in both same-store and new and acquired clubs.

BSA adjusted EBITDA was $6.0 million, an increase $0.3 million, up 5.0%.

BSA adjusted EBITDA margin was 14.8%, a 10 basis point margin improvement versus the third quarter 2014.

Same-store revenue increased $0.8 million, up 2.2%, driven by increases in dues revenue and a slight increase in food and beverage revenue.

Same-store adjusted EBITDA was flat versus the third quarter 2014.

Same-store adjusted EBITDA margin declined 30 basis points to 15.0% due primarily to higher payroll related expenses as a percentage of revenue.

New or recently acquired BSA clubs contributed revenue of $0.9 million and adjusted EBITDA of $0.3 million.

Other Data:

O.N.E. and Other Upgrades. Including memberships acquired with the Sequoia Golf acquisition, as of September 8, 2015, approximately 49% 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 September 8, 2015, the Company offered O.N.E. at 152 clubs.

Reinvention. In 2015, ClubCorp plans to invest a total of approximately $60 million on ROI and expansion capital. This amount includes approximately $10 million of planned reinvention capital for Sequoia clubs that is being pulled forward from 2016 into 2015. As of September 30, 2015, the Company had completed reinvention elements at 19 existing and recently acquired clubs, and has another 13 clubs in active construction, and several more in design or awaiting permitting. Combined, the Company is on track to add reinvention elements at approximately 30 clubs in 2015.

Acquisitions. Year-to-date in 2015, ClubCorp has added eight clubs via acquisition with 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. As of September 8, 2015, ClubCorp owns or operates 158 golf and country clubs representing approximately 200 18-hole equivalents. Additionally, the Company owns or operates 48 business, sports and alumni clubs.

Membership. Total club memberships, excluding managed clubs, as of September 8, 2015 were 175,162, an increase of 29,528, up 20.3%, over memberships at September 9, 2014. Same-store golf and country club memberships, excluding managed clubs, decreased 0.1%, while total golf and country club memberships, excluding managed clubs, increased 32.8%. Same-store business, sports and alumni club memberships, excluding managed clubs, declined 1.4%, while total business, sports and alumni club memberships, excluding managed clubs, increased 0.5%. Total club memberships, including managed clubs, as of September 8, 2015 were 184,891.

Levered Free Cash Flow. Levered free cash flow over the last four quarters was $108.2 million, an increase from $99.2 million a year ago.

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. For fiscal year 2015, the Company is tightening its outlook on revenue and adjusted EBITDA. The Company now anticipates revenue in the range of $1.04 billion to $1.06 billion and adjusted EBITDA in the range of $232.0 million to $236.0 million. The current outlook implies year-over-year revenue growth of 18-20% and year-over-year adjusted EBITDA growth of 18-20%.

As a reminder, the Company has a stated objective to reach $300.0 million in annual adjusted EBITDA by the end of 2018 through the combination of organic growth and reinvention. Additionally, this target assumes no incremental acquisitions. The Company continues to reaffirm this target with no changes to the underlying assumptions as presented on our first quarter earnings release, dated April 30, 2015, and represented in today’s earnings presentation that may be found on our investor relations website at ir.clubcorp.com.

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