December 6, 2016

Dave & Buster's Entertainment, Inc. Announces Third Quarter 2016 Financial Results

Achieves Net Income of $10.8 Million and Diluted EPS of $0.25 
Delivers 5.9% Increase in Comparable Store Sales and 42% Adjusted EBITDA Growth 
Raises Full Year 2016 Guidance

DALLAS, Dec. 06, 2016 (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 third quarter 2016, which ended on October 30, 2016. The Company also raised its guidance for the full year 2016.

Key highlights from the third quarter 2016 compared to the third quarter 2015 include:

  • Total revenues increased almost 19% to $228.7 million from $192.8 million.
  • Comparable store sales increased 5.9% vs. an 8.8% increase.
  • Opened two new stores compared to one new store opening and one store relocation.
  • Net income of $10.8 million, or $0.25 per diluted share, vs. net income of $4.6 million, or $0.11 per diluted share. 
  • Adjusted EBITDA*, a non-GAAP measure, increased 42% to $48.9 million from $34.5 million. As a percentage of total revenues, Adjusted EBITDA increased approximately 350 basis points to 21.4% from 17.9%.

* A reconciliation of Net Income, the most directly comparable financial measure presented in accordance with GAAP, to Adjusted EBITDA, is set forth in the attachment to this release.

"Dave & Buster's delivered exceptional quarterly results and we are pleased to be increasing our annual guidance. Our strength was broad-based as we experienced momentum across the country and throughout the quarter. We generated a 5.9% increase in comparable store sales during the third quarter, lapping an 8.8% increase from the prior year, and 14.7% on a two-year stacked basis. Our comparable store sales growth has now exceeded the competitive casual dining benchmark for 18 straight quarters.  Guests responded well to the conclusion of our 'Summer of Games' promotion, along with our subsequent football-related promotions," said Steve King, Chief Executive Officer.

"Once again, we set new records for third quarter revenue, net income, and adjusted EBITDA. We have also now delivered 25 consecutive quarters of Adjusted EBITDA growth on a trailing twelve months basis, representing a compound annual growth rate of 20% and margin expansion of 1,100 basis points over that same time period.  Our third quarter margin improvement represented our best performance this year as we continued to leverage our operating costs and benefitted from the ongoing mix-shift to the higher-margin amusement category," added Brian Jenkins, Chief Financial Officer.

"We now expect to open eleven new stores this year of which six are in new markets for our brand. This exceeds the upper-end of our initial target of nine to ten store openings. Our development pipeline is more robust than ever before and we remain well positioned over the long term to capitalize on the changing retail dynamics affecting big box operators and malls. During 2017, we are projecting eleven to twelve new store openings, representing unit growth of 12% to 13%. Our long-term target for annual unit growth is 10% or more and we continue to foresee a 200+ store opportunity in North America alone," King concluded.

Review of Third Quarter 2016 Operating Results

Total revenues increased nearly 19% to $228.7 million from $192.8 million in the third quarter 2015. Across all stores, Food and Beverage revenues increased 13% to $101.3 million from $89.8 million and Amusements and Other revenues increased 24% to $127.3 million from $102.9 million. Food and Beverage represented 44.3% of total revenues while Amusements and Other represented 55.7% of total revenues in the third quarter 2016. In last year's third quarter, Food & Beverage represented 46.6% of total revenues while Amusements and Other represented 53.4% of total revenues.

Comparable store sales increased 5.9% in the third quarter 2016 compared to an 8.8% increase in the same period last year. Our comparable store sales growth was driven by a 5.7% increase in walk-in sales and a 7.6% increase in special events sales. Non-comparable store revenues increased $26.2 million or 106% in the third quarter 2016 to $50.9 million.

Operating income increased to $18.7 million in the third quarter of 2016 from $9.5 million in last year's third quarter. As a percentage of total revenues, operating income increased approximately 330 basis points to 8.2% from 4.9%.

Net income increased to $10.8 million, or $0.25 per diluted share (43.3 million diluted share base), in the third quarter of 2016 compared to net income of $4.6 million, or $0.11 per diluted share (42.9 million diluted share base), in the same period last year.

Store-level EBITDA* increased 34% to $59.6 million in the third quarter 2016 from $44.5 million in last year's third quarter. As a percentage of total revenues, Store-level EBITDA increased approximately 300 basis points to 26.1% from 23.1%.

Adjusted EBITDA* increased 42% to $48.9 million in the third quarter 2016 from $34.5 million in the same period last year. As a percentage of total revenues, Adjusted EBITDA increased approximately 350 basis points to 21.4% from 17.9%.

Development

In fiscal 2016, we now intend to open a total of eleven new stores (vs. ten to eleven stores previously guided) including eight large and three small store formats.  We currently have nine stores under construction. 

We opened two stores during the third quarter in Summerlin (Las Vegas), Nevada and Fresno, California for a total of seven stores during the first three quarters of the year. During the fourth quarter, we have already opened three stores in Toledo, Ohio; Silver Spring (Washington, D.C.), Maryland and Oakville (Toronto, Ontario) and plan to open one additional store in Daly City (San Francisco), California.

Total capital additions (net of tenant improvement allowances and other landlord payments) are now expected in the $148 million to $153 million range (vs. $130 million to $140 million previously) and include development costs for store openings, six remodeling and related projects, new games and maintenance capital.

In fiscal 2017, we intend to open a total of eleven to twelve new stores. These openings will skew both toward the large store format and new markets for our brand.

Financial Outlook

We are raising our financial outlook for fiscal 2016, which ends on January 29, 2017:

  • Total revenues of $998 million to $1.003 billion (vs. $983 million to $995 million previously).
  • Fourth quarter comparable store sales increase of 2.5% to 4.5%.
  • Annual 2016 comparable store sales increase of 3.1% to 3.6% (vs. 2.25% to 3.25% previously).
  • Effective tax rate remains 36.5% to 37.5%.
  • Net income of $86.5 million to $88.5 million (vs. $80 million to $85 million previously).
  • Diluted share count of approximately 43.2 million.
  • Adjusted EBITDA of $265 million to $268 million (vs. $254 million to $260 million previously).

For fiscal 2017, we expect low double-digit growth in total revenue, net income, and Adjusted EBITDA. We plan to give more comprehensive guidance for next year on our fourth quarter 2016 conference call which is expected to be held in late March 2017.

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 (719) 325-2430.  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 (858) 384-5517; the passcode is 9033299.

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 91 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 "Fun American New Gourmet" 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 33 states 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 and Store EBITDA (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 past financial 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 Company also believes that these measures provide useful information to investors regarding our operating performance and our capacity to incur and service debt and fund capital expenditures and are used by many investors, analysts and rating agencies as a measure of performance. In addition, Adjusted EBITDA is consistent with that reported to our lenders to allow for leverage-based assessments. The non-GAAP measures used by the Company in this press release may be different from the methods used by other companies.

 
DAVE & BUSTER'S ENTERTAINMENT, INC.
Condensed Consolidated Balance Sheets
(in thousands)
 
     
ASSETS October 30, 2016 January 31, 2016
  (unaudited) (audited)
Current assets:    
     
Cash and cash equivalents $14,724  $25,495 
Other current assets  51,130   84,585 
     
Total current assets  65,854   110,080 
     
Property and equipment, net.  608,546   523,891 
     
Intangible and other assets, net  369,586   369,730 
     
Total assets $1,043,986  $1,003,701 
     
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
     
Total current liabilities $190,585  $156,647 
     
Other long-term liabilities  163,582   170,800 
     
Long-term debt, net  270,451   329,916 
     
Stockholders' equity  419,368   346,338 
     
Total liabilities and stockholders' equity $1,043,986  $1,003,701 
     

 

 DAVE & BUSTER'S ENTERTAINMENT, INC. 
 Consolidated Statements of Operations (Unaudited) 
 (in thousands, except share and per share amounts) 
           
   13 Weeks Ended 13 Weeks Ended 
   October 30, 2016 November 1, 2015 
           
 Food and beverage revenues$101,343   44.3% $89,826   46.6% 
 Amusement and other revenues 127,316   55.7%  102,927   53.4% 
 Total revenues 228,659   100.0%  192,753   100.0% 
           
 Cost of food and beverage (as a percentage of food and beverage revenues)  26,560   26.2%  23,575   26.2% 
 Cost of amusement and other (as a percentage of amusement and other revenues)  15,581   12.2%  12,842   12.5% 
 Total cost of products  42,141   18.4%  36,417   18.9% 
 Operating payroll and benefits 55,034   24.1%  48,048   24.9% 
 Other store operating expenses 71,888   31.4%  63,762   33.1% 
 General and administrative expenses 13,506   5.9%  12,640   6.6% 
 Depreciation and amortization expense 22,864   10.0%  20,032   10.4% 
 Pre-opening costs 4,553   2.0%  2,395   1.2% 
 Total operating costs 209,986   91.8%  183,294   95.1% 
           
 Operating income 18,673   8.2%  9,459   4.9% 
           
 Interest expense, net 1,578   0.7%  2,184   1.1% 
           
 Income before provision for income taxes 17,095   7.5%  7,275   3.8% 
 Provision for income taxes 6,340   2.8%  2,721   1.4% 
 Net income $10,755   4.7% $4,554   2.4% 
           
 Net income per share:         
 Basic$0.26    $0.11    
 Diluted$0.25    $0.11    
 Weighted average shares used in per share calculations:         
 Basic shares 42,061,235     41,241,274    
 Diluted shares 43,327,812     42,938,502    
           
           
 Other information:         
 Company-owned and operated stores open at end of period 88     77    
   
           
 The following table sets forth a reconciliation of net income to Adjusted EBITDA for the periods shown: 
           
   13 Weeks Ended 13 Weeks Ended 
   October 30, 2016 November 1, 2015 
           
 Net income $10,755   4.7% $4,554   2.4% 
 Add back:  Interest expense, net 1,578     2,184    
 Provision for income taxes 6,340     2,721    
 Depreciation and amortization 22,864     20,032    
 EBITDA 41,537   18.2%  29,491   15.3% 
              
 Add back:  Loss on asset disposal 514     296    
 Share-based compensation  1,668     969    
 Pre-opening costs  4,553     2,395    
 Change in deferred amusement revenue and         
 ticket liability  586     414    
 Transaction and other costs  (5)    933    
 Adjusted EBITDA $48,853   21.4% $34,498   17.9% 
           
 EBITDA$41,537   18.2% $29,491   15.3% 
 Add back:  General and administrative expenses 13,506     12,640    
 Pre-opening costs 4,553     2,395    
 Store EBITDA$59,596   26.1% $44,526   23.1% 
           

 

 DAVE & BUSTER'S ENTERTAINMENT, INC. 
 Consolidated Statements of Operations (Unaudited) 
 (in thousands, except share and per share amounts) 
           
   39 Weeks Ended 39 Weeks Ended 
   October 30, 2016 November 1, 2015 
           
 Food and beverage revenues $326,139   44.4% $292,604   46.2% 
 Amusement and other revenues  408,837   55.6%  340,163   53.8% 
 Total revenues  734,976   100.0%  632,767   100.0% 
           
 Cost of food and beverage (as a percentage of food and beverage revenues)  83,772   25.7%  76,235   26.1% 
 Cost of amusement and other (as a percentage of amusement and other revenues)  48,628   11.9%  43,682   12.8% 
 Total cost of products  132,400   18.0%  119,917   19.0% 
 Operating payroll and benefits  166,614   22.7%  147,121   23.3% 
 Other store operating expenses  214,487   29.1%  188,769   29.7% 
 General and administrative expenses  40,131   5.5%  38,985   6.2% 
 Depreciation and amortization expense  65,108   8.9%  58,247   9.2% 
 Pre-opening costs  10,390   1.4%  7,754   1.2% 
 Total operating costs  629,130   85.6%  560,793   88.6% 
           
 Operating income  105,846   14.4%  71,974   11.4% 
           
 Interest expense, net  5,573   0.8%  9,057   1.4% 
 Loss on debt retirement  -   0.0%  6,822   1.1% 
           
 Income before provision for income taxes  100,273   13.6%  56,095   8.9% 
 Provision for income taxes  36,845   5.0%  19,426   3.1% 
 Net income $63,428   8.6% $36,669   5.8% 
           
 Net income per share:         
 Basic $1.52    $0.90    
 Diluted $1.47    $0.86    
 Weighted average shares used in per share calculations:         
 Basic shares  41,863,932     40,775,253    
 Diluted shares  43,234,767     42,677,807    
           
           
 Other information:         
 Company-owned and operated stores open at end of period  88     77    
   
           
 The following table sets forth a reconciliation of net income to Adjusted EBITDA for the periods shown: 
           
   39 Weeks Ended 39 Weeks Ended 
   October 30, 2016 November 1, 2015 
           
 Net income $63,428   8.6% $36,669   5.8% 
 Add back:  Interest expense, net  5,573     9,057    
 Loss on debt retirement  -     6,822    
 Provision for income taxes  36,845     19,426    
 Depreciation and amortization  65,108     58,247    
 EBITDA  170,954   23.3%  130,221   20.6% 
                   
 Add back:  Loss on asset disposal  987     1,165    
 Share-based compensation  4,665     2,590    
 Pre-opening costs  10,390     7,754    
 Change in deferred amusement revenue and         
 ticket liability  5,490     5,131    
 Transaction and other costs  68     2,219    
 Adjusted EBITDA $192,554   26.2% $149,080   23.6% 
           
 EBITDA $170,954   23.3% $130,221   20.6% 
 Add back:  General and administrative expenses  40,131     38,985    
 Pre-opening costs  10,390     7,754    
 Store EBITDA $221,475   30.1% $176,960   28.0% 
           


For Investor Relations Inquiries:
Arvind Bhatia, CFA
Dave & Buster's Entertainment, Inc.
214.904.2202
arvind_bhatia@daveandbusters.com


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