SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 3, 2018
DAVE & BUSTER’S ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
|
Delaware (State of incorporation) |
001-35664 (Commission File Number) |
35-2382255 (IRS Employer Identification Number) |
2481 Manana Drive
Dallas TX 75220
(Address of principal executive offices)
Registrant’s telephone number, including area code: (214) 357-9588
Check the appropriate box if the Form 8-K filing is intended to simultaneously satisfy the reporting obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act |
| ¨ | Soliciting material pursuant to Rule 14a-12 of the Exchange Act |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) Exchange Act |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) Exchange Act |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
¨ Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
| Item 2.02. | Results of Operations and Financial Condition. |
The information contained in Item 2.02 of this Current Report on Form 8-K, including the Exhibit attached hereto, is being furnished and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. Furthermore, the information contained in Item 2.02 of this Current Report on Form 8-K shall not be deemed to be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended.
On April 3, 2018, Dave & Buster’s Entertainment, Inc. (the “Company”) issued a press release announcing its fourth quarter and fiscal year end 2017 results. A copy of this Press Release is attached hereto as Exhibit 99.
| Item 9.01. | Financial Statements and Exhibits. |
| (d) | Exhibits. |
| 99 | Press release dated April 3, 2018. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| DAVE & BUSTER’S ENTERTAINMENT, INC. | ||
| Date: April 3, 2018 | By: | /s/ Jay L. Tobin |
| Jay L. Tobin | ||
| Senior Vice President, General Counsel | ||
| and Secretary | ||
EXHIBIT 99
 |
For Investor Relations Inquiries: Arvind Bhatia, CFA Dave & Buster’s Entertainment, Inc. 214.904.2202 |
Dave & Buster’s Delivers Fourth Consecutive Year of Record Performance
Achieves New Revenue, Net Income and EBITDA Highs on Double-Digit Growth in Fiscal 2017
DALLAS, April 3, 2018 (GLOBE NEWSWIRE) — Dave & Buster's Entertainment, Inc., (NASDAQ:PLAY), ("Dave & Buster's" or "the Company"), an owner and operator of entertainment and dining venues, today announced financial results for its fourth quarter 2017, which ended on February 4, 2018. The Company also issued its guidance for the full year 2018.
Key highlights from the fourth quarter 2017 (14 weeks) compared to the fourth quarter 2016 (13 weeks) include:
| § | Total revenues increased 12.9% to $304.9 million from $270.2 million. |
| § | Opened five new stores compared to four new stores. |
| § | Comparable store sales (13 weeks) decreased 5.9%. |
| § | Net income of $35.6 million, or $0.85 per diluted share ($25.6 million, or $0.61 per diluted share excluding the net tax benefit under the Tax Cuts and Jobs Act), vs. net income of $27.4 million, or $0.63 per diluted share. |
| § | EBITDA increased 4.3% to $70.8 million from $67.9 million and Adjusted EBITDA increased 10.7% to $82.5 million from $74.5 million. |
| § | Pre-opening costs increased $4.1 million to $9.1 million from $5.0 million. |
| § | The extra week in fiscal year 2017 generated approximately $19.7 million in revenue, $0.9 million in net income, $3.4 million in EBITDA, and $4.3 million in Adjusted EBITDA. |
Key highlights from the full year 2017 (53 weeks) compared to the full year 2016 (52 weeks) include:
| § | Total revenues increased 13.4% to $1.140 billion from $1.005 billion. |
| § | Opened 14 new stores compared to 11 new stores. |
| § | Comparable store sales (52 weeks) decreased 0.9%. |
| § | Net income of $120.9 million, or $2.84 per diluted share ($110.9 million, or $2.60 per diluted share excluding the net tax benefit under the Tax Cuts and Jobs Act), vs. net income of $90.8 million, or $2.10 per diluted share. |
| § | EBITDA increased 12.4% to $268.5 million from $238.8 million and Adjusted EBITDA increased 15.8% to $302.7 million from $261.5 million. |
| § | Pre-opening costs increased $8.3 million to $23.7 million from $15.4 million. |
“2017 was another outstanding year for us as we delivered double-digit revenue, Net Income and EBITDA growth. Our primary growth vehicle and the biggest driver of value continues to be opening stores that offer excellent returns in the face of a more intense competitive environment. However, recent sales trends in our comparable stores have been disappointing and we are working diligently to re-build momentum by evolving the brand,” said Steve King, Chief Executive Officer.
“While results were below our guidance in early December, we remain confident in our long-term prospects. We have a strong track-record of disciplined growth and our operating team continues to execute well in a more challenging environment while recognizing the need to adapt and adjust. In terms of margins, we delivered relatively flat EBITDA margins for the full year despite a slight decrease in comparable store sales and significantly higher pre-opening expenses associated with our strong lineup of 2018 stores,” said Brian Jenkins, Chief Financial Officer.
Share Repurchase Activity
During fiscal year 2017, we repurchased approximately 2.6 million shares of our common stock for $151.9 million. Cumulatively, as of March 28, 2018 we had repurchased approximately 3.7 million shares for $202.8 million. As of the same date, we had $97.2 million remaining under our current share repurchase authorization.
Review of Fourth Quarter 2017 Operating Results
Total revenues increased 12.9% to $304.9 million in the fourth quarter of 2017 (14 weeks) from $270.2 million in the fourth quarter 2016 (13 weeks). The additional 14th week increased total revenue by $19.7 million. Across all stores, Food and Beverage revenues increased 10.0% to $138.6 million from $126.0 million and Amusement and Other revenues increased 15.3% to $166.3 million from $144.2 million. Food and Beverage represented 45.5% of total revenues while Amusements and Other represented 54.5% of total revenues in the fourth quarter 2017. In last year’s fourth quarter, Food & Beverage represented 46.6% of total revenues while Amusements and Other represented 53.4% of total revenues.
Comparable store sales (13 weeks), decreased 5.9% in the fourth quarter 2017 compared to a 3.2% increase in the same period last year. Our comparable store sales decrease was driven by a 6.4% decrease in walk-in sales and a 2.9% decrease in special events sales. Comparable store sales in Amusements & Other decreased 4.2% and in Food & Beverage decreased 7.8%. Non-comparable store revenues (13 weeks) increased $29.7 million or 67.5% in the fourth quarter 2017 to $73.6 million.
Operating income decreased to $42.5 million in the fourth quarter of 2017 (14 weeks) from $44.7 million in last year's fourth quarter (13 weeks). The additional 14th week increased operating income by $1.4 million. As a percentage of total revenues, operating income decreased approximately 260 basis points to 13.9% from 16.5%.
Net income increased to $35.6 million, or $0.85 per diluted share (41.7 million diluted share base), in the fourth quarter of 2017 (14 weeks) compared to net income of $27.4 million, or $0.63 per diluted share (43.4 million diluted share base), in the same period last year (13 weeks). The additional 14th week increased net income by $0.9 million. Net income in the fourth quarter of fiscal year 2017 included a net tax benefit of $8.0 million or $0.19 per diluted share related to revaluation (non-recurring) of our deferred tax positions and $2.0 million or $0.05 per diluted share related to the lower statutory tax rate under the Tax Cuts and Jobs Act of 2017. Net income excluding these net tax benefits would have been $25.6 million, or $0.61 per share in the fourth quarter of 2017.
EBITDA increased 4.3% to $70.8 million in the fourth quarter 2017 (14 weeks) from $67.9 million in the same period last year (13 weeks). The additional 14th week increased EBITDA by $3.4 million. As a percentage of total revenues, EBITDA decreased approximately 190 basis points to 23.2% from 25.1%. Adjusted EBITDA increased 10.7% to $82.5 million in the fourth quarter of 2017 (14 weeks) from $74.5 million in the same period last year (13 weeks). The additional 14th week increased Adjusted EBITDA by $4.3 million. As a percentage of total revenues, Adjusted EBITDA margin decreased approximately 60 basis points to 27.0% from 27.6%.
Store operating income before depreciation and amortization increased 8.1% to $94.3 million in the fourth quarter 2017 (14 weeks) from $87.2 million in last year's fourth quarter (13 weeks). The additional 14th week increased store operating income before depreciation and amortization by $5.1 million. As a percentage of total revenues, Store operating income before depreciation and amortization decreased 140 basis points to 30.9% from 32.3%.
Development
We opened five stores during the fourth quarter in Brandon (Tampa), Florida; Woodbridge, New Jersey; Auburn, Washington; White Marsh (Baltimore), Maryland; and Bayamon, Puerto Rico for a total of fourteen stores for the year. Total capital additions (net of tenant improvement allowances) during fiscal year 2017 were $183.0 million.
We are confirming our plan to open a total of fourteen to fifteen new stores in fiscal 2018, including two 17K format stores, representing unit growth of 13% to 14%. These openings will skew towards the first half of the fiscal year, large store format and existing markets for our brand. During the first quarter of fiscal year 2018, we have already opened four stores in Rogers, Arkansas (our first 17K format store); Memphis, Tennessee; Wayne, New Jersey; and Anchorage, Alaska. We plan to open two additional stores in Madison, Wisconsin and Rosemont, Illinois during the first quarter.
Financial Outlook
We are providing our initial financial outlook for fiscal 2018, which ends on February 3, 2019:
| § | Total revenues of $1.20 billion to $1.24 billion |
| § | Comparable store sales decrease in the low-to-mid single digits (on a comparable 52-week basis) |
| § | 14 to 15 new stores |
| § | Net income of $95 million to $110 million |
| § | Effective tax rate of 23% to 24% (including the estimated impact of the Tax Cuts and Jobs Act of 2017) and diluted share count of approximately 41 million shares |
| § | EBITDA of $255 million to $275 million |
| § | Total capital additions (net of tenant improvement allowances and other landlord payments) of $170 million to $180 million |
Conference Call Today
Management will hold a conference call to discuss these results today at 4:00 p.m. Central Time (5:00 p.m. Eastern Time). The conference call can be accessed over the phone by dialing (323) 794-2551 or toll-free (800) 239-9838. A replay will be available after the call for one year beginning at 7:00 p.m. Central Time (8:00 p.m. Eastern Time) and can be accessed by dialing (412) 317-6671 or toll-free (844) 512-2921; the passcode is 2222392.
Additionally, a live and archived webcast of the conference call will be available at www.daveandbusters.com under the Investor Relations section.
About Dave & Buster’s Entertainment, Inc.
Founded in 1982 and headquartered in Dallas, Texas, Dave & Buster's Entertainment, Inc., is the owner and operator of 110 venues in North America that combine entertainment and dining and offer customers the opportunity to "Eat, Drink, Play and Watch," all in one location. Dave & Buster's offers a full menu of entrées and appetizers, a full selection of alcoholic and non-alcoholic beverages, and an extensive assortment of entertainment attractions centered around playing games and watching live sports and other televised events. Dave & Buster's currently has stores in 37 states, Puerto Rico, and Canada.
Forward-Looking Statements
The statements contained in this release that are not historical facts are forward-looking statements. These forward-looking statements involve risks and uncertainties and, consequently, could be affected by our level of indebtedness, general business and economic conditions, the impact of competition, the seasonality of the company's business, adverse weather conditions, future commodity prices, guest and employee complaints and litigation, fuel and utility costs, labor costs and availability, changes in consumer and corporate spending, changes in demographic trends, changes in governmental regulations, unfavorable publicity, our ability to open new stores, and acts of God. Accordingly, actual results may differ materially from the forward-looking statements, and the Company therefore cautions you against relying on such forward-looking statements. Dave & Buster's intends these forward-looking statements to speak only as of the time of this release and does not undertake to update or revise them as more appropriate information becomes available, except as required by law.
Non-GAAP Measures
To supplement its consolidated financial statements, which are prepared and presented in accordance with GAAP, the Company uses the following non-GAAP financial measures: EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Store operating income before depreciation and amortization, and store operating income before depreciation and amortization margin (collectively the "non-GAAP financial measures"). The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The Company uses these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. The Company believes that they provide useful information about operating results, enhance the overall understanding of our operating performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. The non-GAAP measures used by the Company in this press release may be different from the measures used by other companies.
DAVE & BUSTER'S ENTERTAINMENT, INC.
Condensed Consolidated Balance Sheets
(in thousands)
| February 4, 2018 | January 29, 2017 | |||||||
| (audited) | (audited) | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 18,795 | $ | 20,083 | ||||
| Other current assets | 76,112 | 55,521 | ||||||
| Total current assets | 94,907 | 75,604 | ||||||
| Property and equipment, net | 726,455 | 606,865 | ||||||
| Intangible and other assets, net | 375,668 | 370,264 | ||||||
| Total assets | $ | 1,197,030 | $ | 1,052,733 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Total current liabilities | $ | 207,825 | $ | 177,797 | ||||
| Other long-term liabilities | 216,310 | 178,856 | ||||||
| Long-term debt, net | 351,249 | 256,628 | ||||||
| Stockholders' equity | 421,646 | 439,452 | ||||||
| Total liabilities and stockholders' equity | $ | 1,197,030 | $ | 1,052,733 | ||||
DAVE & BUSTER'S ENTERTAINMENT, INC.
Consolidated Statements of Operations (Unaudited)
(in thousands, except share and per share amounts)
| 14 Weeks Ended | 13 Weeks Ended | |||||||||||||||
| February 4, 2018 | January 29, 2017 | |||||||||||||||
| Food and beverage revenues | $ | 138,626 | 45.5 | % | $ | 126,001 | 46.6 | % | ||||||||
| Amusement and other revenues | 166,287 | 54.5 | % | 144,181 | 53.4 | % | ||||||||||
| Total revenues | 304,913 | 100.0 | % | 270,182 | 100.0 | % | ||||||||||
| Cost of food and beverage (as a percentage of food and beverage revenues) | 36,038 | 26.0 | % | 31,174 | 24.7 | % | ||||||||||
| Cost of amusement and other (as a percentage of amusement and other revenues) | 18,591 | 11.2 | % | 16,726 | 11.6 | % | ||||||||||
| Total cost of products | 54,629 | 17.9 | % | 47,900 | 17.7 | % | ||||||||||
| Operating payroll and benefits | 69,114 | 22.7 | % | 62,213 | 23.0 | % | ||||||||||
| Other store operating expenses | 86,883 | 28.5 | % | 72,835 | 27.0 | % | ||||||||||
| General and administrative expenses | 14,393 | 4.7 | % | 14,343 | 5.3 | % | ||||||||||
| Depreciation and amortization expense | 28,319 | 9.3 | % | 23,197 | 8.6 | % | ||||||||||
| Pre-opening costs | 9,120 | 3.0 | % | 5,024 | 1.9 | % | ||||||||||
| Total operating costs | 262,458 | 86.1 | % | 225,512 | 83.5 | % | ||||||||||
| Operating income | 42,455 | 13.9 | % | 44,670 | 16.5 | % | ||||||||||
| Interest expense, net | 2,592 | 0.8 | % | 1,412 | 0.5 | % | ||||||||||
| Loss on debt refinancing | - | 0.0 | % | - | - | |||||||||||
| Income before provision for income taxes | 39,863 | 13.1 | % | 43,258 | 16.0 | % | ||||||||||
| Provision for income taxes | 4,223 | 1.4 | % | 15,891 | 5.9 | % | ||||||||||
| Net income | $ | 35,640 | 11.7 | % | $ | 27,367 | 10.1 | % | ||||||||
| Net income per share: | ||||||||||||||||
| Basic | $ | 0.88 | $ | 0.65 | ||||||||||||
| Diluted | $ | 0.85 | $ | 0.63 | ||||||||||||
| Weighted average shares used in per share calculations: | ||||||||||||||||
| Basic shares | 40,568,751 | 42,215,285 | ||||||||||||||
| Diluted shares | 41,699,060 | 43,369,754 | ||||||||||||||
| Other information: | ||||||||||||||||
| Company-owned and operated stores open at end of period | 106 | 92 | ||||||||||||||
The following table sets forth a reconciliation of net income to EBITDA and Adjusted EBITDA for the periods shown:
| 14 Weeks Ended | 13 Weeks Ended | |||||||||||||||
| February 4, 2018 | January 29, 2017 | |||||||||||||||
| Net income | $ | 35,640 | 11.7 | % | $ | 27,367 | 10.1 | % | ||||||||
| Add back: Interest expense, net | 2,592 | 1,412 | ||||||||||||||
| Loss on debt refinancing | - | - | ||||||||||||||
| Provision for income taxes | 4,223 | 15,891 | ||||||||||||||
| Depreciation and amortization expense | 28,319 | 23,197 | ||||||||||||||
| EBITDA | 70,774 | 23.2 | % | 67,867 | 25.1 | % | ||||||||||
| Add back: Loss on asset disposal | 658 | 546 | ||||||||||||||
| Share-based compensation | 1,910 | 1,163 | ||||||||||||||
| Pre-opening costs | 9,120 | 5,024 | ||||||||||||||
| Other costs | (4 | ) | (141 | ) | ||||||||||||
| Adjusted EBITDA | $ | 82,458 | 27.0 | % | $ | 74,459 | 27.6 | % | ||||||||
The following table sets forth a reconciliation of operating income to store operating income before depreciation and amortization for the periods shown:
| 14 Weeks Ended | 13 Weeks Ended | |||||||||||||||
| February 4, 2018 | January 29, 2017 | |||||||||||||||
| Operating income | $ | 42,455 | 13.9 | % | $ | 44,670 | 16.5 | % | ||||||||
| Add back: General and administrative expenses | 14,393 | 14,343 | ||||||||||||||
| Depreciation and amortization expense | 28,319 | 23,197 | ||||||||||||||
| Pre-opening costs | 9,120 | 5,024 | ||||||||||||||
| Store operating income before depreciation and amortization | $ | 94,287 | 30.9 | % | $ | 87,234 | 32.3 | % | ||||||||
DAVE & BUSTER'S ENTERTAINMENT, INC.
Consolidated Statements of Operations (Audited)
(in thousands, except share and per share amounts)
| 53 Weeks Ended | 52 Weeks Ended | |||||||||||||||
| February 4, 2018 | January 29, 2017 | |||||||||||||||
| Food and beverage revenues | $ | 494,816 | 43.4 | % | $ | 452,140 | 45.0 | % | ||||||||
| Amusement and other revenues | 644,975 | 56.6 | % | 553,018 | 55.0 | % | ||||||||||
| Total revenues | 1,139,791 | 100.0 | % | 1,005,158 | 100.0 | % | ||||||||||
| Cost of food and beverage (as a percentage of food and beverage revenues) | 127,600 | 25.8 | % | 114,946 | 25.4 | % | ||||||||||
| Cost of amusement and other (as a percentage of amusement and other revenues) | 69,072 | 10.7 | % | 65,354 | 11.8 | % | ||||||||||
| Total cost of products | 196,672 | 17.3 | % | 180,300 | 17.9 | % | ||||||||||
| Operating payroll and benefits | 256,724 | 22.5 | % | 228,827 | 22.8 | % | ||||||||||
| Other store operating expenses | 334,546 | 29.4 | % | 287,322 | 28.6 | % | ||||||||||
| General and administrative expenses | 59,565 | 5.2 | % | 54,474 | 5.4 | % | ||||||||||
| Depreciation and amortization expense | 102,766 | 9.0 | % | 88,305 | 8.8 | % | ||||||||||
| Pre-opening costs | 23,746 | 2.1 | % | 15,414 | 1.5 | % | ||||||||||
| Total operating costs | 974,019 | 85.5 | % | 854,642 | 85.0 | % | ||||||||||
| Operating income | 165,772 | 14.5 | % | 150,516 | 15.0 | % | ||||||||||
| Interest expense, net | 8,665 | 0.7 | % | 6,985 | 0.7 | % | ||||||||||
| Loss on debt refinancing | 718 | 0.1 | % | - | - | |||||||||||
| Income before provision for income taxes | 156,389 | 13.7 | % | 143,531 | 14.3 | % | ||||||||||
| Provision for income taxes | 35,440 | 3.1 | % | 52,736 | 5.3 | % | ||||||||||
| Net income | $ | 120,949 | 10.6 | % | $ | 90,795 | 9.0 | % | ||||||||
| Net income per share: | ||||||||||||||||
| Basic | $ | 2.93 | $ | 2.16 | ||||||||||||
| Diluted | $ | 2.84 | $ | 2.10 | ||||||||||||
| Weighted average shares used in per share calculations: | ||||||||||||||||
| Basic shares | 41,276,314 | 41,951,770 | ||||||||||||||
| Diluted shares | 42,583,009 | 43,288,592 | ||||||||||||||
| Other information: | ||||||||||||||||
| Company-owned and operated stores open at end of period | 106 | 92 | ||||||||||||||
The following table sets forth a reconciliation of net income to EBITDA and Adjusted EBITDA for the periods shown:
| 53 Weeks Ended | 52 Weeks Ended | |||||||||||||||
| February 4, 2018 | January 29, 2017 | |||||||||||||||
| Net income | $ | 120,949 | 10.6 | % | $ | 90,795 | 9.0 | % | ||||||||
| Add back: Interest expense, net | 8,665 | 6,985 | ||||||||||||||
| Loss on debt refinancing | 718 | - | ||||||||||||||
| Provision for income taxes | 35,440 | 52,736 | ||||||||||||||
| Depreciation and amortization expense | 102,766 | 88,305 | ||||||||||||||
| EBITDA | 268,538 | 23.6 | % | 238,821 | 23.8 | % | ||||||||||
| Add back: Loss on asset disposal | 1,863 | 1,533 | ||||||||||||||
| Share-based compensation | 8,916 | 5,828 | ||||||||||||||
| Pre-opening costs | 23,746 | 15,414 | ||||||||||||||
| Other costs | (333 | ) | (73 | ) | ||||||||||||
| Adjusted EBITDA | $ | 302,730 | 26.6 | % | $ | 261,523 | 26.0 | % | ||||||||
The following table sets forth a reconciliation of operating income to store operating income before depreciation and amortization for the periods shown:
| 53 Weeks Ended | 52 Weeks Ended | |||||||||||||||
| February 4, 2018 | January 29, 2017 | |||||||||||||||
| Operating income | $ | 165,772 | 14.5 | % | $ | 150,516 | 15.0 | % | ||||||||
| Add back: General and administrative expenses | 59,565 | 54,474 | ||||||||||||||
| Depreciation and amortization expense | 102,766 | 88,305 | ||||||||||||||
| Pre-opening costs | 23,746 | 15,414 | ||||||||||||||
| Store operating income before depreciation and amortization | $ | 351,849 | 30.9 | % | $ | 308,709 | 30.7 | % | ||||||||
For Investor Relations Inquiries:
Arvind Bhatia, CFA
Dave & Buster’s Entertainment, Inc.
214.904.2202
arvind_bhatia@daveandbusters.com