Seeking Alpha

Eagan218's  Instablog

Eagan218
Send Message
View Eagan218's Instablogs on:
  • Fiscal 2014 First Quarter Results - Earnings Call Transcript

    Operator: Good morning, ladies and gentlemen. Welcome to ClubCorp Holdings First Quarter Fiscal 2014

    Earnings Conference Call. As a reminder, today's call is being recorded. This call is being broadcast live from

    ClubCorp's website, and a replay will be available on the ClubCorp website after this call. During today's

    presentation, all participants will be in listen-only mode.

    At this time, I will turn the call over to Frank Molina, Vice President of Investor Relations and Treasury. Sir, you

    may begin.

    ......................................................................................................................................................................................................................................................

    Frank Molina

    Vice President-Investor Relations, ClubCorp Holdings, Inc.

    Thank you, Maureen. Good morning, everyone, and welcome to our first quarter earnings call. Joining me on

    today's call from ClubCorp are Eric Affeldt, our President and CEO; and Curt McClellan, our CFO.

    Before we begin, let me give you a quick update on our upcoming investor relations activities. On June 2, we will

    be at the Goldman Sachs Lodging, Gaming, Restaurant and Leisure Conference in New York City, and on June 4

    we will attend the Stephens Spring Investment Conference, also in New York City. On June 18, we will attend the

    Jefferies Global Consumer Conference in Nantucket. And then finally on June 25, we will host our annual

    shareholder meeting at our City Club in Los Angeles.

    Now turning to today's call, Eric will start our discussion, followed by Curt, who will review our first-quarter

    results. Following our prepared remarks, the conference will be open for a question-and-answer session, during

    which please limit your questions to one plus one follow-up.

    We will review our first-quarter fiscal 2014 results highlighted in our earnings release published yesterday evening

    and also contained with our Form 10-Q for the first quarter ended March 25, 2014. If you do not have a copy of

    our earnings release, it can be accessed on our Investor Relations portion of our website at ir.clubcorp.com.

    Please note that the first quarter of fiscal 2014 and first quarter of fiscal 2013 both consisted of 12 weeks. All

    growth percentages unless otherwise stated refer to our year-over-year progress.

    I would also like to remind all listeners that ClubCorp Holdings desires to take advantage of the Safe Harbor

    provisions of the U.S. Private Security Litigations Reform Act of 1995. Certain statements in this conference call

    maybe considered forward-looking statements within the meaning of that act. Such forward-looking statements

    are subject to risks, uncertainties and other factors which could cause actual results to differ materially from those

    expressed or implied by such forward-looking statements. For a list of these factors, please refer to the risk factors

    section in our 2013 Form 10-K filed with the SEC.

    Finally, our discussion may include certain non-GAAP financial measures. More information regarding our

    forward-looking statements and reconciliations of non-GAAP financial measures to the most comparable GAAP

    measures are included in our earnings release, in our SEC filings and on our Investor Relations website at

    ir.clubcorp.com.

    With that, let me turn the call over to Eric.

    ......................................................................................................................................................................................................................................................

    Eric L. Affeldt

    President, Chief Executive Officer & Director, ClubCorp Holdings, Inc.

    Thank you, Frank, and welcome again to ClubCorp Holdings 2014 first quarter earnings call. We are thrilled with

    our business results in the first quarter and the acquisitions we have made during the first four months of the

    year.

    On the latter, I am happy to announce the acquisition of two Tournament Player Clubs, TPC Michigan in

    Dearborn, Michigan, and the TPC Piper Glen in Charlotte, North Carolina. Similar to other acquisitions, we will be

    investing more than $1 million in reinvention element capital at each of these TPC properties.

    TPC Piper Glen is the site of two past Champions Tour events, while the TPC Michigan hosted the Ford Senior

    Players Championship for 16 years. We look forward to any for closer relationship with the PGA Tour and its

    exceptional brand. And we hope these two clubs will be the site for many member outings and future

    tournaments.

    Second, I'm very excited that Baylor University has asked us to create and operate the Baylor Club, an Alumni

    Club located within the new Baylor University football stadium currently under construction in Waco, Texas. This

    Alumni Club will be a focal point of the new stadium as it celebrates the rich history of the Baylor football program

    and Baylor University.

    Our Alumni Clubs have proven to be extremely popular venues for faculty and alums, and we expect nothing less

    from the Baylor Club. This quarter we also announced the opening and management of the Paragon Club of Hefei,

    a business club in Hefei, China. Located atop the Crowne Plaza Hotel, the Paragon Club of Hefei will provide

    extraordinary experiences to our local members, as well as the members of the ClubCorp family who travel

    internationally.

    In March, as you know, we acquired Prestonwood Country Club with two properties located in Dallas and Plano,

    Texas. Thus far, we are already seeing excellent trends there. One of ClubCorp's key differentiators is the ability to

    offer members access to our network and community of clubs. I am very pleased to report that since acquisition,

    over 400 existing Prestonwood members have signed up for our O.N.E. product.

    As a reminder, the O.N.E. product stands for Optimal Network Experience. O.N.E. or O-N-E encourages member

    usage at the member's home club where they receive a 50% discount on a la carte food. Members also receive

    complimentary privileges to our extensive portfolio of clubs and additional offerings at over 700 other clubs,

    resorts and facilities, both domestically and internationally.

    We continue to see great response to this product, and we expect this trend to continue not only at Prestonwood,

    but also at all of our newly-acquired clubs. As you can see, we've had a very busy start to the year. We're executing

    against our three primary growth strategies, those being organic growth, reinvention and acquisitions.

    Acquisitions are a key growth strategy for our business. Each one of these new clubs gives us the opportunity to

    grow our brand, attract new members, broaden our network and expand our geographical footprint.

    Since last May, we have acquired seven new clubs, added one international business club, and will open a new

    alumni club under development later this fall, expanding our portfolio of owned or operated clubs to 160 from 151

    clubs a year ago.

    Before turning it back to Curt, let me say something about our first-quarter financial results and our business in

    general. First, we had a great first quarter with revenues up 6.9% and adjusted EBITDA up 7.7% year-over-year.

    This demonstrates our ability to drive incremental growth through continued execution of our three growth

    strategies.

    As you know, we offer a differentiated leisure product that provides members and their families a place to

    recreate, socialize, network, and just spend time together. These clubs play an integral part in our member lives.

    Our ability to operate profitably and generate cash allows us to reinvent, modernize and amenitize our clubs.

    The result is an enhancement of ClubCorp's value proposition to both existing and new members. Reinvention

    drives usage and adds to the stickiness of our membership. As such, the momentum in this business continues to

    increase. Of the seven Golf and Country Club reinventions started this year, we have now completed projects at

    Firestone in Akron, Ohio and at Walnut Creek here near Dallas, Texas.

    I should add that during meetings with investors, we are often asked about the impact of weather on our business,

    as so many other businesses were negatively impacted in the first quarter. The single most important answer to

    this question is that first and foremost, we are a membership business.

    We generate more than 45% of our total revenues from monthly membership dues. Unlike other leisure

    businesses, it makes our revenue more stable, highly visible and recurring. As I mentioned earlier, there is

    growing demand and usage at our clubs.

    The result is an increase in dues and in all ancillary revenue centers. We also continue to see excellent demand for

    private events, which contributes to our strong food and beverage margins. Again, we're off to a very strong first

    quarter, and we remain very optimistic as we enter the peak season for the year.

    extraordinary experiences to our local members, as well as the members of the ClubCorp family who travel

    internationally.

    In March, as you know, we acquired Prestonwood Country Club with two properties located in Dallas and Plano,

    Texas. Thus far, we are already seeing excellent trends there. One of ClubCorp's key differentiators is the ability to

    offer members access to our network and community of clubs. I am very pleased to report that since acquisition,

    over 400 existing Prestonwood members have signed up for our O.N.E. product.

    As a reminder, the O.N.E. product stands for Optimal Network Experience. O.N.E. or O-N-E encourages member

    usage at the member's home club where they receive a 50% discount on a la carte food. Members also receive

    complimentary privileges to our extensive portfolio of clubs and additional offerings at over 700 other clubs,

    resorts and facilities, both domestically and internationally.

    We continue to see great response to this product, and we expect this trend to continue not only at Prestonwood,

    but also at all of our newly-acquired clubs. As you can see, we've had a very busy start to the year. We're executing

    against our three primary growth strategies, those being organic growth, reinvention and acquisitions.

    Acquisitions are a key growth strategy for our business. Each one of these new clubs gives us the opportunity to

    grow our brand, attract new members, broaden our network and expand our geographical footprint.

    Since last May, we have acquired seven new clubs, added one international business club, and will open a new

    alumni club under development later this fall, expanding our portfolio of owned or operated clubs to 160 from 151

    clubs a year ago.

    Before turning it back to Curt, let me say something about our first-quarter financial results and our business in

    general. First, we had a great first quarter with revenues up 6.9% and adjusted EBITDA up 7.7% year-over-year.

    This demonstrates our ability to drive incremental growth through continued execution of our three growth

    strategies.

    As you know, we offer a differentiated leisure product that provides members and their families a place to

    recreate, socialize, network, and just spend time together. These clubs play an integral part in our member lives.

    Our ability to operate profitably and generate cash allows us to reinvent, modernize and amenitize our clubs.

    The result is an enhancement of ClubCorp's value proposition to both existing and new members. Reinvention

    drives usage and adds to the stickiness of our membership. As such, the momentum in this business continues to

    increase. Of the seven Golf and Country Club reinventions started this year, we have now completed projects at

    Firestone in Akron, Ohio and at Walnut Creek here near Dallas, Texas.

    I should add that during meetings with investors, we are often asked about the impact of weather on our business,

    as so many other businesses were negatively impacted in the first quarter. The single most important answer to

    this question is that first and foremost, we are a membership business.

    We generate more than 45% of our total revenues from monthly membership dues. Unlike other leisure

    businesses, it makes our revenue more stable, highly visible and recurring. As I mentioned earlier, there is

    growing demand and usage at our clubs.

    The result is an increase in dues and in all ancillary revenue centers. We also continue to see excellent demand for

    private events, which contributes to our strong food and beverage margins. Again, we're off to a very strong first

    quarter, and we remain very optimistic as we enter the peak season for the year.

    related expenses were funded by $350 million of incremental senior secured term loans and bear interest at the

    greater of 4% or LIBOR plus 3%, and mature in 2020.

    Excess proceeds from the term loan were used to repay our outstanding balance on the credit revolver and to

    increase cash. We expect annual interest savings of approximately $13 million as a result of the redemption. At the

    end of the first quarter, we had $60.1 million in cash and equivalents, and total liquidity of $167.4 million, and the

    company was compliant with all of its debt covenants. Cash flow from operations was $29.5 million and we paid

    $7.6 million in dividends.

    Turning to segment results; first, Golf and Country Clubs, GCC total revenue was $127.8 million, an increase of

    $8.5 million or 7.1%. Same-store GCC revenue grew $4.5 million to $123.8 million, up 3.8%, driven by increases

    in base and upgrade dues revenue, private events, and a la carte food and beverage revenue, and golf green fees

    and retail revenues.

    Club reinvention and our O.N.E. or O-N-E product continue to drive member usage and grow revenue. In fact,

    membership penetration of upgrade products increased one percentage point to 44% at the end of the first

    quarter, up from 43% at the end of 2013.

    Same-store dues revenue increased $3 million to $66 million, up 4.7%, due to a higher base dues rate, an increase

    in same-store membership count, and nearly a 14% increase in upgrade revenues. Same-store food and beverage

    revenue grew $1.3 million to $23.9 million, up 5.6%, largely realized by increases in both private event and a la

    carte revenue.

    Same-store golf operations revenue increased $0.8 million to $23.9 million, up 3.4% compared to prior year, due

    largely to increased green fees and increased retail revenue. Adjusted EBITDA for same-store Golf and Country

    Clubs was $35.7 million, an increase of $3.1 million or 9.5%. The growth in first-quarter adjusted EBITDA was

    primarily due to increased revenue from dues and food and beverage, coupled with better food and beverage and

    retail margins.

    Same-store adjusted EBITDA margins in GCC improved 150 basis points versus prior year. This improvement was

    the result of lower payroll and operating expenses as a percent of revenue. Now turning to our Business, Sports

    and Alumni Clubs segment or BSA; first quarter same-store revenue totaled $38.4 million, an increase of $0.6

    million, up 1.6%, due mainly to an increase in food and beverage revenue.

    Same-store food and beverage revenue increased $0.5 million to $18.1 million, up 2.7%, largely due to increases in

    higher margin private event revenue. Same-store dues revenue increased by $0.3 million to $17.9 million, up

    1.7%, due to an increase in average dues per membership. Adjusted EBITDA for Business, Sports and Alumni

    Clubs was $6.4 million, an increase of $0.7 million or 12.7% due mainly to higher revenue, improved food and

    beverage margins and timing of certain operating expenses.

    Finally, corporate and other adjusted EBITDA was $2.2 million lower due to $1.5 million lower cash distributions

    from our purchasing co-op, Avendra received in the prior year and a $0.5 million increase in payroll including

    incremental payroll expense related to being a public equity filer.

    Now turning to our outlook, our club reinventions are progressing with several projects to be completed this June.

    We see momentum from same-store and newly-acquired clubs, positioning us well as we move into our busy

    spring and summer season. We have a balanced approach to our year-end guidance that weighs new input and

    potential risk factors. As such, our outlook for fiscal 2014 remains unchanged. We expect to generate revenue in

    the range of $830 million to $860 million and adjusted EBITDA in the range of $182 million to $190 million.

    As a reminder, our guidance estimates are based on current management expectations and maybe subject to

    change. Please refer to our forward-looking statements cautionary language in our earnings release and risk

    factors section of our 10-K. In closing, I'd like to reaffirm how pleased we are with our first-quarter results.

    That concludes our prepared remarks. We will now open the line for questions.

    ......................................................................................................................................................................................................................................................

    QUESTION AND ANSWER SECTION

    Operator: We will now begin the question-and-answer session. [Operator Instructions] Our first question is

    Randy Konik from Jefferies. Please go ahead sir.

    ......................................................................................................................................................................................................................................................

    Randal J. Konik

    Analyst, Jefferies LLC Q

    Great, thanks a lot. I guess Eric or Curt, when you look at the acquisitions in Prestonwood and then these TPC

    acquisitions, can you just give us some color or flavor of, are there any similarities or commonalities between

    these properties that you are looking for in these acquisitions, and/or differences that you can kind of share with

    us first?

    ......................................................................................................................................................................................................................................................

    Eric L. Affeldt

    President, Chief Executive Officer & Director, ClubCorp Holdings, Inc. A

    Yeah, Randy, this is Eric. We've discussed previously that the primary drivers for our focus in acquisitions are

    going to be population density and relative affluence in a 15-mile - 15-mile to 20-mile radius around each club. So

    that is certainly a factor that would be similar. The Charlotte example again we do a mosaic study of all of our

    acquisitions has great population density and affluence. Dearborn is a little bit different, in that it is a semi-private

    club. We do a tremendous amount historically there. I say we; the club has done a tremendous amount of outings

    business and corporate business. So it's a little bit different than Prestonwood or TPC Piper Glen, both of which

    are true private clubs. But apart from that, we look at them in similar fashion.

    ......................................................................................................................................................................................................................................................

    Randal J. Konik

    Analyst, Jefferies LLC Q

    Got it. And I guess a follow-up is ever since the IPO, the rate of acquisitions pace is really accelerating here. What

    can you attribute to that? Is it just the pipeline is even better than it was before or because you're public, you're

    getting more notice from these owners, or what is happening here? And can we expect - I think you said this last

    call that the pace can be expected to accelerate. What should we expect on that front? Thanks.

    ......................................................................................................................................................................................................................................................

    Eric L. Affeldt

    President, Chief Executive Officer & Director, ClubCorp Holdings, Inc. A

    Several factors have gone into the acceleration acquisitions. First, I should call out our business development team

    is doing an exceptional job of being even more proactive in reaching out to owners, who are not currently sellers.

    And in some cases through our proactive contact, they think about it a little bit longer and decide that they may

    actually want to do something. So our business development team is doing a great job.

    Secondly, as we discussed during the IPO roadshow, as the economy continues to improve there are lenders who

    are unnatural owners of properties. There are developers who are unnatural owners of properties. And as the economy improves, they feel that they are going to be able to get a better price, than when we were in the depths of

    the recession and of course, nobody wants to sell an asset when the economy is terribly weak. So those are the two

    factors that are contributing to the increase in our pipeline.

    As you know, we don't provide specific direction relative to the number of clubs we anticipate closing in the

    balance of the year or next year. But I can say that the pipeline remains as robust or more so, than when we spoke

    last time, and we look forward to additional acquisitions as the year progresses.

    ......................................................................................................................................................................................................................................................

    Randal J. Konik

    Analyst, Jefferies LLC Q

    Great, and then on my last question is more around I guess the business club side. Is there any kind of color you

    can provide around the membership count changes of alumni clubs versus just standard kind of business clubs?

    And then from a go-forward strategy perspective, are you going to be focused more attention on these alumni club

    opportunities or versus the standard kind of business club opportunities? How should we think about that part of

    your business? Thanks.

    ......................................................................................................................................................................................................................................................

    Eric L. Affeldt

    President, Chief Executive Officer & Director, ClubCorp Holdings, Inc. A

    Relative to membership changes, I don't think they're materially different between the two divisions. I do know

    and as we've previously announced, we have a major reinvention program going on currently at the University of

    Texas Club. I'm not looking at their specific numbers right now, but I would imagine it is having some impact on

    membership at that particular club while it is, quote, under construction.

    Relative to further growth in the alumni clubs, we love the segment because there is built-in purpose. You don't

    have to think too long or hard about why would you be a member at the UT Club or The Baylor Club or Texas Tech

    or Florida State. If you love those institutions, you want to be a member. So I do like that business a lot.

    However, as we have also said, inherently it is a little bit more difficult to open; A, because they are typically done

    in the case of Baylor in a brand-new almost $300 million football stadium, and that takes a while to get developed.

    And B, you are negotiating with, in some cases, athletic departments plus alumni departments plus the office of

    the President. So it tends to be a fairly complex and complicated negotiating process when you're dealing with

    large institutions like that.

    ......................................................................................................................................................................................................................................................

    Randal J. Konik

    Analyst, Jefferies LLC Q

    Got it. Thanks for the color. Thanks, guys.

    ......................................................................................................................................................................................................................................................

    Eric L. Affeldt

    President, Chief Executive Officer & Director, ClubCorp Holdings, Inc. A

    Thanks Randy.

    ......................................................................................................................................................................................................................................................

    Operator: Our next question is Carlo Santarelli, Deutsche Bank. Please go ahead.

    ......................................................................................................................................................................................................................................................

    Carlo Santarelli

    Analyst, Deutsche Bank Securities, Inc. Q

    Hey everyone, good morning. Would you guys mind - I know April is kind of that time a year for dues

    conversations and kind of passing along dues to the new clubs. I'm sure those discussions took place in the last

    economy improves, they feel that they are going to be able to get a better price, than when we were in the depths of

    the recession and of course, nobody wants to sell an asset when the economy is terribly weak. So those are the two

    factors that are contributing to the increase in our pipeline.

    As you know, we don't provide specific direction relative to the number of clubs we anticipate closing in the

    balance of the year or next year. But I can say that the pipeline remains as robust or more so, than when we spoke

    last time, and we look forward to additional acquisitions as the year progresses.

    ......................................................................................................................................................................................................................................................

    Randal J. Konik

    Analyst, Jefferies LLC Q

    Great, and then on my last question is more around I guess the business club side. Is there any kind of color you

    can provide around the membership count changes of alumni clubs versus just standard kind of business clubs?

    And then from a go-forward strategy perspective, are you going to be focused more attention on these alumni club

    opportunities or versus the standard kind of business club opportunities? How should we think about that part of

    your business? Thanks.

    ......................................................................................................................................................................................................................................................

    Eric L. Affeldt

    President, Chief Executive Officer & Director, ClubCorp Holdings, Inc. A

    Relative to membership changes, I don't think they're materially different between the two divisions. I do know

    and as we've previously announced, we have a major reinvention program going on currently at the University of

    Texas Club. I'm not looking at their specific numbers right now, but I would imagine it is having some impact on

    membership at that particular club while it is, quote, under construction.

    Relative to further growth in the alumni clubs, we love the segment because there is built-in purpose. You don't

    have to think too long or hard about why would you be a member at the UT Club or The Baylor Club or Texas Tech

    or Florida State. If you love those institutions, you want to be a member. So I do like that business a lot.

    However, as we have also said, inherently it is a little bit more difficult to open; A, because they are typically done

    in the case of Baylor in a brand-new almost $300 million football stadium, and that takes a while to get developed.

    And B, you are negotiating with, in some cases, athletic departments plus alumni departments plus the office of

    the President. So it tends to be a fairly complex and complicated negotiating process when you're dealing with

    large institutions like that.

    ......................................................................................................................................................................................................................................................

    Randal J. Konik

    Analyst, Jefferies LLC Q

    Got it. Thanks for the color. Thanks, guys.

    ......................................................................................................................................................................................................................................................

    Eric L. Affeldt

    President, Chief Executive Officer & Director, ClubCorp Holdings, Inc. A

    Thanks Randy.

    ......................................................................................................................................................................................................................................................

    Operator: Our next question is Carlo Santarelli, Deutsche Bank. Please go ahead.

    ......................................................................................................................................................................................................................................................

    Carlo Santarelli

    Analyst, Deutsche Bank Securities, Inc. Q

    Hey everyone, good morning. Would you guys mind - I know April is kind of that time a year for dues

    conversations and kind of passing along dues to the new clubs. I'm sure those discussions took place in the last

    economy improves, they feel that they are going to be able to get a better price, than when we were in the depths of

    the recession and of course, nobody wants to sell an asset when the economy is terribly weak. So those are the two

    factors that are contributing to the increase in our pipeline.

    As you know, we don't provide specific direction relative to the number of clubs we anticipate closing in the

    balance of the year or next year. But I can say that the pipeline remains as robust or more so, than when we spoke

    last time, and we look forward to additional acquisitions as the year progresses.

    ......................................................................................................................................................................................................................................................

    Randal J. Konik

    Analyst, Jefferies LLC Q

    Great, and then on my last question is more around I guess the business club side. Is there any kind of color you

    can provide around the membership count changes of alumni clubs versus just standard kind of business clubs?

    And then from a go-forward strategy perspective, are you going to be focused more attention on these alumni club

    opportunities or versus the standard kind of business club opportunities? How should we think about that part of

    your business? Thanks.

    ......................................................................................................................................................................................................................................................

    Eric L. Affeldt

    President, Chief Executive Officer & Director, ClubCorp Holdings, Inc. A

    Relative to membership changes, I don't think they're materially different between the two divisions. I do know

    and as we've previously announced, we have a major reinvention program going on currently at the University of

    Texas Club. I'm not looking at their specific numbers right now, but I would imagine it is having some impact on

    membership at that particular club while it is, quote, under construction.

    Relative to further growth in the alumni clubs, we love the segment because there is built-in purpose. You don't

    have to think too long or hard about why would you be a member at the UT Club or The Baylor Club or Texas Tech

    or Florida State. If you love those institutions, you want to be a member. So I do like that business a lot.

    However, as we have also said, inherently it is a little bit more difficult to open; A, because they are typically done

    in the case of Baylor in a brand-new almost $300 million football stadium, and that takes a while to get developed.

    And B, you are negotiating with, in some cases, athletic departments plus alumni departments plus the office of

    the President. So it tends to be a fairly complex and complicated negotiating process when you're dealing with

    large institutions like that.

    ......................................................................................................................................................................................................................................................

    Randal J. Konik

    Analyst, Jefferies LLC Q

    Got it. Thanks for the color. Thanks, guys.

    ......................................................................................................................................................................................................................................................

    Eric L. Affeldt

    President, Chief Executive Officer & Director, ClubCorp Holdings, Inc. A

    Thanks Randy.

    ......................................................................................................................................................................................................................................................

    Operator: Our next question is Carlo Santarelli, Deutsche Bank. Please go ahead.

    ......................................................................................................................................................................................................................................................

    Carlo Santarelli

    Analyst, Deutsche Bank Securities, Inc. Q

    Hey everyone, good morning. Would you guys mind - I know April is kind of that time a year for dues

    conversations and kind of passing along dues to the new clubs. I'm sure those discussions took place in the last

    economy improves, they feel that they are going to be able to get a better price, than when we were in the depths of

    the recession and of course, nobody wants to sell an asset when the economy is terribly weak. So those are the two

    factors that are contributing to the increase in our pipeline.

    As you know, we don't provide specific direction relative to the number of clubs we anticipate closing in the

    balance of the year or next year. But I can say that the pipeline remains as robust or more so, than when we spoke

    last time, and we look forward to additional acquisitions as the year progresses.

    ......................................................................................................................................................................................................................................................

    Randal J. Konik

    Analyst, Jefferies LLC Q

    Great, and then on my last question is more around I guess the business club side. Is there any kind of color you

    can provide around the membership count changes of alumni clubs versus just standard kind of business clubs?

    And then from a go-forward strategy perspective, are you going to be focused more attention on these alumni club

    opportunities or versus the standard kind of business club opportunities? How should we think about that part of

    your business? Thanks.

    ......................................................................................................................................................................................................................................................

    Eric L. Affeldt

    President, Chief Executive Officer & Director, ClubCorp Holdings, Inc. A

    Relative to membership changes, I don't think they're materially different between the two divisions. I do know

    and as we've previously announced, we have a major reinvention program going on currently at the University of

    Texas Club. I'm not looking at their specific numbers right now, but I would imagine it is having some impact on

    membership at that particular club while it is, quote, under construction.

    Relative to further growth in the alumni clubs, we love the segment because there is built-in purpose. You don't

    have to think too long or hard about why would you be a member at the UT Club or The Baylor Club or Texas Tech

    or Florida State. If you love those institutions, you want to be a member. So I do like that business a lot.

    However, as we have also said, inherently it is a little bit more difficult to open; A, because they are typically done

    in the case of Baylor in a brand-new almost $300 million football stadium, and that takes a while to get developed.

    And B, you are negotiating with, in some cases, athletic departments plus alumni departments plus the office of

    the President. So it tends to be a fairly complex and complicated negotiating process when you're dealing with

    large institutions like that.

    ......................................................................................................................................................................................................................................................

    Randal J. Konik

    Analyst, Jefferies LLC Q

    Got it. Thanks for the color. Thanks, guys.

    ......................................................................................................................................................................................................................................................

    Eric L. Affeldt

    President, Chief Executive Officer & Director, ClubCorp Holdings, Inc. A

    Thanks Randy.

    ......................................................................................................................................................................................................................................................

    Operator: Our next question is Carlo Santarelli, Deutsche Bank. Please go ahead.

    ......................................................................................................................................................................................................................................................

    Carlo Santarelli

    Analyst, Deutsche Bank Securities, Inc. Q

    Hey everyone, good morning. Would you guys mind - I know April is kind of that time a year for dues

    conversations and kind of passing along dues to the new clubs. I'm sure those discussions took place in the last The other main call out I would make in terms of what would we do in terms of issuing stock for acquisitions,

    certainly, being public gives an additional currency, so that is an option that is available to us. That will be

    something we will look at, each acquisition independently, and evaluate what we feel is best to do and what makes

    the most sense at that time. Eric, I don't know if you want to add anything to that?

    ......................................................................................................................................................................................................................................................

    Eric L. Affeldt

    President, Chief Executive Officer & Director, ClubCorp Holdings, Inc. A

    Yeah. Rick, I would just add that the probability or likelihood of issuing stock for an acquisition would largely

    hinge on - would probably not come, let me put it differently, would probably not come in one of these on one-off

    transactions like the two TPCs. It would probably be associated with a multi-course owner/operator investment if

    one should become available.

    ......................................................................................................................................................................................................................................................

    Curtis D. McClellan

    Chief Financial Officer & Treasurer, ClubCorp Holdings, Inc. A

    Correct.

    ......................................................................................................................................................................................................................................................

    N. Richard Nelson

    Analyst, Stephens, Inc. Q

    Good. Thanks for the color, and good luck.

    ......................................................................................................................................................................................................................................................

    Curtis D. McClellan

    Chief Financial Officer & Treasurer, ClubCorp Holdings, Inc. A

    Thanks.

    ......................................................................................................................................................................................................................................................

    Operator: Our next question is Chris Agnew, MKM. Please go ahead.

    ......................................................................................................................................................................................................................................................

    Christopher James Wallace Agnew

    Analyst, MKM Partners LLC Q

    Thanks very much. Good morning. I don't know if it is possible to generalize, but I was wondering what if any or

    the tangible financial or intangible benefits of a TPC course versus another TPC course? And I guess trying to work

    out or think through, are the economics slightly inferior but the intangible benefits outweigh over the longer term?

    Thanks.

    ......................................................................................................................................................................................................................................................

    Eric L. Affeldt

    President, Chief Executive Officer & Director, ClubCorp Holdings, Inc. A

    Chris, you sound like a golfer. The intangibles are quite --

    ......................................................................................................................................................................................................................................................

    Christopher James Wallace Agnew

    Analyst, MKM Partners LLC Q

    A bad one.

    ......................................................................................................................................................................................................................................................

    Eric L. Affeldt

    President, Chief Executive Officer & Director, ClubCorp Holdings, Inc. A

    Yeah, join the club. The intangibles are quite significant in acquiring the two TPC clubs. As most people in the golf

    industry know, I think the TPC as part of the PGA tour network is perceived to be the highest quality amongst any

    of the facilities in the United States and, in fact, internationally. And the PGA Tour has done a great job of building

    a brand that represents quality.

    So I think the announcement is going to have a great impact with our existing members at other clubs who will

    look at these TPCs again as superior products and definitely comparable to our top-flight products, a la Firestone

    Country Club or Mission Hills Country Club, which just hosted the Kraft Nabisco Championship; or Gleneagles

    here in Dallas and Coto de Caza in Southern California. And there are many, many clubs in our portfolio that are

    perceived to be tops in their respective markets. And I think the two TPCs will really resonate with our existing

    members.

    Let me just add one other thing, Chris. This does open the door, and David Pillsbury who is the president of the

    PGA Tour Network and I have known each other for many, many years and respect one another. This does open

    the door to more collaboration between our two companies. And I really look forward to that and I think Dave

    does as well.

    ......................................................................................................................................................................................................................................................

    Christopher James Wallace Agnew

    Analyst, MKM Partners LLC Q

    Thanks. But I guess as a follow-up to that, does that - because the quality of these courses and [indiscernible]

    (36:19) benefits, does that make the economics slightly different where they're either harder to make profitable or

    that just the return metrics are not going to be quite the same, but obviously the trade-off is worth it?

    ......................................................................................................................................................................................................................................................

    Eric L. Affeldt

    President, Chief Executive Officer & Director, ClubCorp Holdings, Inc. A

    No, I think they're comparable in terms of the mechanics of being able to acquire these clubs. These clubs

    interestingly enough were first purchased by another owner/operator entity from the PGA Tour. And so we are

    actually buying them not from the tour itself but with the brand of the TPC on them. So we look forward to

    improving what that other owner/operator group had done and making the clubs even more attractive obviously

    first to their existing members and consumers but also to ours who travel as well.

    ......................................................................................................................................................................................................................................................

    Christopher James Wallace Agnew

    Analyst, MKM Partners LLC Q

    Okay, got it. Thanks. And then if I could, one more just on your international strategy and you called out the club

    in Hefei. What do you need to do there? Do you need scale for the larger footprint? And maybe just - is that

    economic - what is your broader strategy? And you mentioned it is somewhere for your members to go. How

    many U.S. members sort of use that facility? Thanks.

    ......................................................................................................................................................................................................................................................

    Eric L. Affeldt

    President, Chief Executive Officer & Director, ClubCorp Holdings, Inc. A

    I would have to get back to you with the specifics of how many of our U.S. members use the Capital Club in Beijing

    as an example which we have had for many years. I do know a large number of our U.S. members travel to Mexico

    and utilize our golf facilities in Puerto Vallarta and Cozumel.

    Hefei obviously remains to be seen how many U.S. visitors they will have. It's clearly attractive for those

    international travelers. And frankly what is quite interesting is the number of Chinese nationals or Mexican

    nationals who are members at those clubs who come over to the States.

    Again, I'd have to get back to you with specifics as to what those numbers are but again we view this as optically

    very attractive for our members. It's not the core driver of why we would do a management contract or more

    management contracts in China or elsewhere meaning the core driver is not going to be U.S. visitors to those

    clubs. But just the opportunity to increase our international presence build the brand globally, which we think

    over time will be incrementally valuable to us.

    ......................................................................................................................................................................................................................................................

    Christopher James Wallace Agnew

    Analyst, MKM Partners LLC Q

    Excellent. Thank you.

    ......................................................................................................................................................................................................................................................

    Operator: Our next question is Shaun Kelly, Bank of America. Please go ahead.

    ......................................................................................................................................................................................................................................................

    Shaun C. Kelley

    Analyst, Bank of America/Merrill Lynch Q

    Thanks, good morning, guys. I was over on Google Maps trying to find out where Hefei actually is. But while I am

    looking that up, I guess what I was interested in, just as we think about acquisitions could you give us a little bit of

    color on - just on average and this isn't referring to the TPC clubs that you just acquired. But just on average, are

    the dues per member of these acquired clubs higher or lower than kind of your typical average club? And I'm sure

    there is a variance here, but I guess what I'm getting at is, is that a metric that typically you are able to drive

    materially higher as these start to mix into your overall revenues and EBITDA?

    ......................................................................................................................................................................................................................................................

    Eric L. Affeldt

    President, Chief Executive Officer & Director, ClubCorp Holdings, Inc. A

    Good question, Shaun. There is - I'm glad you used the term average. And while we do have an average across the

    portfolio the average ranges from $800 plus a month at some clubs to $300 a month at some clubs based on local

    market dynamics. So the acquisition of the TPCs or Prestonwood, we don't automatically take dues up or down in

    markets based on our overall national averages. It's really a highly localized phenomenon. So there is really

    nothing that we do instantaneously to drive dues up or down. It is really, again, a local phenomenon.

    I will say, and we said this earlier relative to Prestonwood, where we do see a positive impact in dues is when we

    introduce a program like the O.N.E. program, which historically has been upgrade dues, meaning we charge more

    for the privilege of travel benefits as well as home club benefits. And as we announced here today with over 400,

    which is close to half of existing Prestonwood members, have signed up for this upgraded product within the first

    45 days of the acquisition. It really bodes well for higher dues at that particular club.

    ......................................................................................................................................................................................................................................................

    Shaun C. Kelley

    Analyst, Bank of America/Merrill Lynch Q

    That is really helpful. And then I guess my second question would just be what are you guys seeing in terms of

    number of rounds played from your members right now? Obviously, some of the golf statistics are all over the

    map, and we continually get the question from investors about, well, what about the overall underlying golf

    business? But what are you guys seeing from your members particularly in your regions? Because I don't think

    you're really that indicative of maybe what the industry is seeing broadly?

    ......................................................................................................................................................................................................................................................

    Eric L. Affeldt

    President, Chief Executive Officer & Director, ClubCorp Holdings, Inc. A

    We don't disclose rounds, Shaun. I don't believe I can say. And two things, first of all the first quarter is our

    smallest quarter. The first quarter does typically include the weather that's not as conducive to playing a lot of

    golf. But with that said, I know we have disclosed historically at least during the IPO how many times a typical golf

    club member visits the club, I think we talk about rounds per member in a broader sense. That has not changed

    materially. So we're not seeing members either playing a lot more or lot less golf at this point.

    ......................................................................................................................................................................................................................................................

    Shaun C. Kelley

    Analyst, Bank of America/Merrill Lynch Q

    Perfect. Thanks a lot.

    ......................................................................................................................................................................................................................................................

    Eric L. Affeldt

    President, Chief Executive Officer & Director, ClubCorp Holdings, Inc. A

    Thanks, Shaun.

    ......................................................................................................................................................................................................................................................

    Operator: Our next question is Tim Conder, Wells Fargo Securities. Please go ahead.

    ......................................................................................................................................................................................................................................................

    Tim A. Conder

    Analyst, Wells Fargo Securities LLC Q

    Thank you. Regarding the acquisitions, and again it sounds like there is quite a bit more in the pipeline here,

    gentlemen. But could you just remind us typically a range, on either a revenue multiple that you pay here when

    you make the acquisition, and then clearly on the EDBITDA side, you wouldn't be doing it unless you saw some

    significant opportunity within a year or two. But within a year out, what would that then equate to in an EBITDA

    range? Just some additional color or anything specific on the two TPC acquisitions, if you could.

    ......................................................................................................................................................................................................................................................

    Eric L. Affeldt

    President, Chief Executive Officer & Director, ClubCorp Holdings, Inc. A

    Yeah, Tim, thank you. And you are now getting dangerously close to our secret sauce, so I have to be careful how I

    answer this question. We have not provided much in the area of multiples of revenue. We've talked about looking

    for clubs that do have larger revenue bases. Again, if I was to tell you a specific number, some of our competitors

    might change the way that they go out and try to look at buying clubs. So I won't give you a specific number.

    Relative to EBITDA growth, we have also said and I mentioned earlier that most of these clubs, at least compared

    to our portfolio, tend to be underperforming.

    We will typically see margin increases, again depending upon the club, depending upon the market, depending

    upon how much capital goes into it. We will typically see margin increases of 5% to 10% a year getting up to what

    our typical - and again, I am focusing on the Golf and Country Club division here. And as you know, our Golf and

    Country Club division runs about 29% operating margins. So again, without giving you the revenue base for a

    particular club, we would hope.

    And frankly have proven that over a three-year time period that the club will go from some number, in some cases

    losing money, in some cases breaking even, in some cases making a little bit of money, to approaching those 25%

    to 30% operating margins. Sometimes we get there quicker. We've done so with a couple of recent acquisitions,

    but again we tend to look at these things as taking three years to get close to what we would refer to as ClubCorp

    standards.

    ......................................................................................................................................................................................................................................................

    Tim A. Conder

    Analyst, Wells Fargo Securities LLC Q

    Okay, okay.

    golf. But with that said, I know we have disclosed historically at least during the IPO how many times a typical golf

    club member visits the club, I think we talk about rounds per member in a broader sense. That has not changed

    materially. So we're not seeing members either playing a lot more or lot less golf at this point.

    ......................................................................................................................................................................................................................................................

    Shaun C. Kelley

    Analyst, Bank of America/Merrill Lynch Q

    Perfect. Thanks a lot.

    ......................................................................................................................................................................................................................................................

    Eric L. Affeldt

    President, Chief Executive Officer & Director, ClubCorp Holdings, Inc. A

    Thanks, Shaun.

    ......................................................................................................................................................................................................................................................

    Operator: Our next question is Tim Conder, Wells Fargo Securities. Please go ahead.

    ......................................................................................................................................................................................................................................................

    Tim A. Conder

    Analyst, Wells Fargo Securities LLC Q

    Thank you. Regarding the acquisitions, and again it sounds like there is quite a bit more in the pipeline here,

    gentlemen. But could you just remind us typically a range, on either a revenue multiple that you pay here when

    you make the acquisition, and then clearly on the EDBITDA side, you wouldn't be doing it unless you saw some

    significant opportunity within a year or two. But within a year out, what would that then equate to in an EBITDA

    range? Just some additional color or anything specific on the two TPC acquisitions, if you could.

    ......................................................................................................................................................................................................................................................

    Eric L. Affeldt

    President, Chief Executive Officer & Director, ClubCorp Holdings, Inc. A

    Yeah, Tim, thank you. And you are now getting dangerously close to our secret sauce, so I have to be careful how I

    answer this question. We have not provided much in the area of multiples of revenue. We've talked about looking

    for clubs that do have larger revenue bases. Again, if I was to tell you a specific number, some of our competitors

    might change the way that they go out and try to look at buying clubs. So I won't give you a specific number.

    Relative to EBITDA growth, we have also said and I mentioned earlier that most of these clubs, at least compared

    to our portfolio, tend to be underperforming.

    We will typically see margin increases, again depending upon the club, depending upon the market, depending

    upon how much capital goes into it. We will typically see margin increases of 5% to 10% a year getting up to what

    our typical - and again, I am focusing on the Golf and Country Club division here. And as you know, our Golf and

    Country Club division runs about 29% operating margins. So again, without giving you the revenue base for a

    particular club, we would hope.

    And frankly have proven that over a three-year time period that the club will go from some number, in some cases

    losing money, in some cases breaking even, in some cases making a little bit of money, to approaching those 25%

    to 30% operating margins. Sometimes we get there quicker. We've done so with a couple of recent acquisitions,

    but again we tend to look at these things as taking three years to get close to what we would refer to as ClubCorp

    standards.

    ......................................................................................................................................................................................................................................................

    Tim A. Conder

    Analyst, Wells Fargo Securities LLC Q

    Okay, okay.

    Eric L. Affeldt

    President, Chief Executive Officer & Director, ClubCorp Holdings, Inc. A

    Yeah, Richard, this is Eric. Again, appreciate the question. And obviously we are thrilled to have Toyota moving to

    Plano. Their headquarters are actually kind of equidistant from three of our clubs in that local marketplace. So

    trust me, our membership directors at those three clubs are very excited to have lots of new prospects coming.

    And again, Texas has done a great job of recruiting business to our state, and we are very, very fortunate to have

    significant positions not only here in Dallas, but also in Austin and Houston as well. So that is going to be a very

    big positive for us as they get into moving their entire operation to Plano.

    ......................................................................................................................................................................................................................................................

    Operator: At this time, there are no more questions. I'll turn the call back to Eric Affeldt for any closing remarks.

    ......................................................................................................................................................................................................................................................

    Eric L. Affeldt

    President, Chief Executive Officer & Director, ClubCorp Holdings, Inc.

    Thanks everybody again for your participation. We look forward to speaking with you at our annual shareholder

    meeting. Hopefully, some of you can attend. That will be in Los Angeles at our brand-new City Club in Los

    Angeles. That will be in June; or on our second-quarter earnings call, which will occur toward the end of July. So

    thanks again, everyone, and hope you have a great weekend. By the way, tune into the Golf Channel tonight. I will

    put in a plug, as the LPGA is once again playing a tournament at one of our clubs, Las Colinas Country Club here

    in Dallas.

    ......................................................................................................................................................................................................................................................

    Operator: This concludes the ClubCorp conference call. You may now disconnect. Thank you for participating.

    May 05 6:30 PM | Link | Comment!
  • ClubCorp $MYCC Poised For Continued Growth

    Over the weekend Barron's had an article on ClubCorp citing the company is up over 30% since IPO in the fall. I believe $MYCC will continue to grow revenue and become EPS positive by the end of the year driving the stock price higher from here.

    Background:

    ClubCorp's home office is in Dallas and is the largest owner and operator of private golf and country clubs in the country. It owns or operates more than 150 golf and country clubs and business, sports and alumni clubs worldwide. Located in 25 states, the District of Columbia and two foreign countries, the company and the clubs in its network serve more than 360,000 members and employ approximately 15,000 peak-season employees.

    In 2006, KSL Capital Partners, a private equity firm, purchased the company, and owned 100% of it until the IPO. KSL still retains a 64% stake. CEO Eric Affeldt, a former principal at KSL, has led the company since the buyout.

    (click to enlarge)

    Operations:

    · $5,000 a year in dues at country clubs, and a little over $1,000 for business clubs.

    · High member-retention rates and recurring revenue from dues (50% of Revenue)

    · Retention rate of memberships is very high at 80.7% in 2012, and only dipped to a low of 78% in 2008. I view leaving the club as high cost of social status, and while members may cut back in other areas of their life, they do not want their peers to notice they are no longer at the club.

    · 30% of revenue is from sales of food and drinks

    · Country clubs are the larger, more profitable segment, contributing 77% of revenue and 83% of Ebitda.

    · 18,000 acres of owned real-estate

    · Diversification of revenue stream, but also strategic hubs (TX, CA) - this helps to mitigate impact of weather, but also drive value via synergies of location

    Analyst ratings in the last month have all been positive and I do not see any negative ratings:

    · Jefferies Group PT $27

    · MKM Partners PT $22

    · Citigroup Inc. PT $22

    The company has been using proceeds from IPO to reduce debt load and recently initiated a quarterly dividend of $0.12

    $MYCC continues to drive growth in three ways:

    Organic - focused growth at current clubs with targeted sales at young executives and legacy members

    · Additional focus of upgrade offerings, including the Optimal Network Experience, or O.N.E, of 43% of members, was up 3 percentage points from the prior year.

    · They are focusing on making it more compelling for you to still come to the club and spend money in some form

    · Provided you an incentive to go eat which everybody is still doing even if you are not playing golf

    · Testing some alternative O.N.E products in our business and sports club division to expand membership upgrades.

    Reinvention - Have completed 25 major reinventions of clubs, which drives increase memberships and traffic at location

    Acquisition - Highly fragmented market provides lots of opportunities for acquisitions and to drive synergies. They target 10 to 15% returns. Have 40 to 50 clubs that they are in some form or fashion in dialog with.

    Financials:

    2013 total revenues of $815.1 million, up 8% year over prior year; and adjusted EBITDA of $177.4 million, up 6.7% over prior year.

    Same store sales grew across all areas of the business showing strong and diverse growth. Keep in mind there was one extra week in the quarter

     

    Q4

    Growth $

    Growth %

    Revenue

    $269.9M

    up $30.4M

    12.70%

        

    Same Store Sales

    $258.3M

    up $20.6M

    9.70%

    Dues

    $117M

    up $11M

    10.50%

    Food

    $81M

    up $6.6M

    8.90%

        

    Country Clubs

    $194M

    up $16.2M

    9.10%

    Dues

    $92.3M

    up $9.2M

    11.10%

    Food

    $46M

    up $4.7M

    11.30%

        

    Alumi Club

    $64M

    up $4.4M

    7.30%

    There was a 2% increase in a la carte check average at country clubs, which means the members are spending about 2% more

    Also saw an uptick in visits and average check increased almost 6% in the business and sports club division

    $MYCC is now a cash taxpayer. So what are the strategies going forward?

    In the latest call Curt (NYSE:CEO) said - it makes sense to REIT the company, and that they are having very fulsome discussion with the board. There is however complexity and it certainly will take time to implement. Additionally, KSL's ownership does create obstacles with several of the structures. So from they are continuing to evaluate the capital structure with the board.

    Obviously a REIT is an area where they directly can improve the cash tax position in the future

    Heading strong in to 2014 $MYCC plans to invest another $20M in acquisitions with a targeted return of 10 to 15%. Of all the recent IPOs I really like ClubCorp as they have revenue & earnings growth, a great opportunity to continue to consolidate a fragmented market, and real assets to back up their valuation.

    Apr 20 10:49 PM | Link | Comment!
  • Facebook Like Fraud

    Last night I watched this video by Veritasium on Facebook Fraud. It is pretty eye opening. I had recently run a like campaign for one of my new ventures www.stockmarketshirts.com and it appears all of the likes I received came from click farms, only one person has engaged with my page.

    On average the people that liked my page had an additional 2000+ likes. This is absurd, no one likes this many things. I have been a user since 2004 and only have 67 likes.

    I will be filling with Facebook Support for a refund and will keep y'all posted on any outcome.

    Here is the complete list of people, location and number of likes each page had. The campaign cost me $25 to run.

     

    NameLocationLikes
    Grant GoetzPittsfield, Maine2,787
    Alexander MontgomeryBeaumont, Texas703
    Emanuel CastroVirginia Beach, Virginia879
    Mahogany Germichael SampsonCharlotte, North CarolinaHidden
    Tonya KimbellTurrell, Arkansas5,084
    Myrinah TurnerIndianapolis, Indiana729
    Jimi SmithNew Orleans, Louisiana1,993
    William GutierrezGuatemala City, Guatemala4,106
    Quiana Mzjuicy AtkinsGreenville, South Carolina4,794
    Wanda ThorneBuena Vista, Virginia1,568
    Pearl PerkinsReynoldsburg, Ohio410
    Felicia HarrisInkster, Michigan1,076
    Chris ThompsonFort Worth, Texas3,449
    Benn Hendricks Sr.Lima, Ohio1,286
    Violet Malenosky SeperRonco, Pennsylvania5,038
    Iris LopezHidden4,560
    Alice Jones Lucas-MeeksMemphis, Tennessee1,458
    Desera Danyell MaxwellCleveland, Ohio3,448
    Mia BartonHidden1,988
    Dora ValenzuelaHidden2,361
    Sheila Evans-smithRed Boiling Springs, Tennessee467
    Amber Latasha DanielClover, South Carolina3,564
    Lindsey McGowanAbilene, Texas891
    Aquete RompóBayamon, Puerto Rico429
    Roman LopezEl Paso, Texas1,529
    Domico GogginsOxford, Alabama1,477
     Avg2,243

    Disclosure: I am short FB.

    Additional disclosure: I was long FB this morning but have since sold and switch to puts

    Tags: FB, Fraud
    Feb 11 11:42 AM | Link | Comment!
Full index of posts »

StockTalks

More »
Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.