March 28, 2017

Dave & Buster's Achieves Fourth Quarter Net Income Growth of Over 19%

Delivers Fourth Quarter Adjusted EBITDA Growth of 16.5% As Comparable Store Sales Increase 3.2%

Surpasses $1 Billion Annual Sales Milestone

DALLAS, March 28, 2017 (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 2016, which ended on January 29, 2017. The Company also issued its guidance for the full year 2017.

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

  • Total revenues increased 15.4% to $270.2 million from $234.2 million.
  • Comparable store sales increased 3.2%.
  • Opened four new stores compared to four new stores.
  • Net income of $27.4 million, or $0.63 per diluted share, vs. net income of $23.0 million, or $0.53 per diluted share.
  • Adjusted EBITDA*, a non-GAAP measure, increased 16.5% to $74.5 million from $63.9 million.
  • As a percentage of total revenues, Adjusted EBITDA increased 30 basis points to 27.6% from 27.3%.

Key highlights from the full year 2016 compared to the full year 2015 include:

  • Total revenues increased 15.9% to $1.005 billion from $867 million.
  • Comparable store sales increased 3.3%.
  • Opened eleven new stores compared to ten new stores.
  • Net income of $90.8 million, or $2.10 per diluted share, vs. net income of $59.6 million, or $1.39 per diluted share.
  • Adjusted EBITDA*, a non-GAAP measure, increased 25.8% to $261.5 million from $207.8 million
  • As a percentage of total revenues, Adjusted EBITDA increased 200 basis points to 26.0% from 24.0%.

* 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. Please note that beginning in the fourth quarter of 2016 we revised our calculation of Adjusted EBITDA to exclude adjustments for changes in deferred amusement revenue and ticket liabilities.

"For the quarter, Dave & Buster's generated a 3.2% increase in comparable store sales, lapping a 6% increase from the prior year, for an impressive 9.2% growth on a two-year stacked basis. Our comparable store sales growth has now exceeded the competitive casual dining benchmark for 19 straight quarters. We also reached an important milestone during the quarter as full year sales exceeded $1 billion. As proud as we are of this accomplishment, we are even more excited about our growth prospects in the future," said Steve King, Chief Executive Officer.

"We grew revenue by 15.4% and net income by 19.2% during the fourth quarter. Our consistent performance and industry-leading margins position us well for our next growth phase. At the same time, our free cash flow and strong balance sheet allow flexibility to return value to shareholders in additional ways, including share repurchases. To that effect, during fiscal year 2016, we executed $29 million in share repurchases under our current $100 million share repurchase program," added Brian Jenkins, Chief Financial Officer.

"We expect to open eleven to twelve new stores this year, representing 12% to 13% unit growth. Similar to last year, these openings will skew toward the large store format and new markets for our brand. Our development pipeline is robust and we remain well positioned over the long term to capitalize on the changing retail dynamics affecting big box operators and malls. Our long-term target for annual unit growth continues to be 10% or more and we foresee a 200+ store opportunity in North America alone," King concluded.

Review of Fourth Quarter 2016 Operating Results

Total revenues increased 15.4% to $270.2 million from $234.2 million in the fourth quarter 2015. Across all stores, Food and Beverage revenues increased 11.3% to $126 million from $113.2 million and Amusement and Other revenues increased 19.2% to $144.2 million from $121.0 million. Food and Beverage represented 46.6% of total revenues while Amusements and Other represented 53.4% of total revenues in the fourth quarter 2016. In last year's fourth quarter, Food & Beverage represented 48.3% of total revenues while Amusements and Other represented 51.7% of total revenues.

Comparable store sales increased 3.2% in the fourth quarter 2016 compared to a 6.0% increase in the same period last year. Our comparable store sales growth was driven by a 3.5% increase in walk-in sales and a 1.7% increase in special events sales. Non-comparable store revenues increased $30 million or 79% in the fourth quarter 2016 to $68.2 million.

Operating income increased to $44.7 million in the fourth quarter of 2016 from $38.1 million in last year's fourth quarter. As a percentage of total revenues, operating income increased approximately 20 basis points to 16.5% from 16.3%.

Net income increased to $27.4 million, or $0.63 per diluted share (43.4 million diluted share base), in the fourth quarter of 2016 compared to net income of $23 million, or $0.53 per diluted share (43.1 million diluted share base), in the same period last year.

Store operating income before depreciation and amortization increased 13.4% to $87.2 million in the fourth quarter 2016 from $76.9 million in last year's fourth quarter. As a percentage of total revenues, store operating income before depreciation and amortization decreased 50 basis points to 32.3% from 32.8%.

Adjusted EBITDA* increased 16.5% to $74.5 million in the fourth quarter 2016 from $63.9 million in the same period last year. As a percentage of total revenues, Adjusted EBITDA increased approximately 30 basis points to 27.6% from 27.3%. As noted earlier, this excludes changes in deferred amusement revenue and ticket liabilities of $2.8 million and $2.5 million in the fourth quarters of fiscal years 2016 and 2015 respectively. These changes were included in our previous Adjusted EBITDA definition and guidance.

Share Repurchases

During fiscal year 2016, our board approved a $100 million share repurchase program. Under this authorization, we repurchased 567,000 shares during the fiscal year for $29 million. This includes 396,000 shares repurchased during the fourth quarter. As of the end of fiscal year 2016, we had $71 million remaining under this authorization.

Development

We opened four stores during the fourth quarter in Toledo, Ohio; Silver Spring (Washington, D.C.), Maryland; Oakville (Toronto), Ontario; and Daly City (San Francisco), California for a total of eleven new stores for the year. Total capital additions (net of tenant improvement allowances and sale-leaseback proceeds) during fiscal year 2016 were $146 million and included development costs for store openings, six remodeling and related projects, new games and maintenance capital.

During the first quarter of fiscal year 2017, we have already opened three stores in Carlsbad, California; Columbia, South Carolina; and Overland Park, Kansas. We currently have six stores under construction in Tucson, Arizona; New Orleans, Louisiana; Alpharetta, Georgia; Myrtle Beach, South Carolina; McAllen, Texas and Bayamon, Puerto Rico.  

Financial Outlook

We are providing our initial financial outlook for fiscal 2017, which includes 53 weeks and ends on February 4, 2018:

  • Total revenues of $1.155 billion to $1.170 billion
  • Comparable store sales increase of 2% to 3% (on a comparable 52-week basis)
  • 11 to 12 new stores
  • Net income of $101 million to $105 million
  • Effective tax rate of 36% to 37% and diluted share count of 43.2 million to 43.4 million, excluding the impact of FASB Accounting Standard, ASU 2016-09. The implementation of this new standard could significantly reduce our effective tax rate and slightly increase our diluted share count, dependent on stock option exercises
  • EBITDA of $270 million to $277 million
  • Total capital additions (net of tenant improvement allowances and other landlord payments) of $156 million to $166 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 (719) 325-2360 or toll-free (888) 587-0611.  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 7448438.

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 95 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, 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)
 
     
ASSETS January 29, 2017 January 31, 2016
     
Current assets:    
     
Cash and cash equivalents$  20,083 $  25,495
Other current assets   55,521    84,585
     
Total current assets   75,604    110,080
     
Property and equipment, net   606,865    523,891
     
Intangible and other assets, net   370,264    369,730
     
Total assets$  1,052,733 $  1,003,701
     
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
     
Total current liabilities$  177,797 $  156,647
     
Other long-term liabilities   178,856    170,800
     
Long-term debt, net   256,628    329,916
     
Stockholders' equity   439,452    346,338
     
Total liabilities and stockholders' equity$  1,052,733 $  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
  January 29, 2017 January 31, 2016
         
Food and beverage revenues$  126,001  46.6% $  113,237  48.3%
Amusement and other revenues   144,181  53.4%    120,978  51.7%
Total revenues   270,182  100.0%    234,215  100.0%
         
Cost of food and beverage (as a percentage of food and beverage revenues)    31,174  24.7%    28,522  25.2%
Cost of amusement and other (as a percentage of amusement and other revenues)    16,726  11.6%    14,371  11.9%
Total cost of products    47,900  17.7%    42,893  18.3%
Operating payroll and benefits   62,213  23.0%    53,008  22.6%
Other store operating expenses   72,835  27.0%    61,417  26.3%
General and administrative expenses   14,343  5.3%    14,615  6.2%
Depreciation and amortization expense   23,197  8.6%    20,413  8.7%
Pre-opening costs   5,024  1.9%    3,807  1.6%
Total operating costs   225,512  83.5%    196,153  83.7%
         
Operating income   44,670  16.5%    38,062  16.3%
         
Interest expense, net   1,412  0.5%    2,407  1.1%
         
Income before provision for income taxes   43,258  16.0%    35,655  15.2%
Provision for income taxes   15,891  5.9%    12,705  5.4%
Net income $  27,367  10.1% $  22,950  9.8%
         
Net income per share:        
Basic$  0.65    $  0.55   
Diluted$  0.63    $  0.53   
Weighted average shares used in per share calculations:        
Basic shares  42,215,285      41,548,060   
Diluted shares  43,369,754      43,097,656   
         
         
Other information:        
Company-owned and operated stores open at end of period 92     81   
 
         
The following table sets forth a reconciliation of net income to Adjusted EBITDA for the periods shown:
         
  13 Weeks Ended 13 Weeks Ended
  January 29, 2017 January 31, 2016
         
Net income $  27,367  10.1% $  22,950  9.8%
Add back: Interest expense, net   1,412       2,407   
Provision for income taxes   15,891       12,705   
Depreciation and amortization   23,197       20,413   
EBITDA   67,867  25.1%    58,475  25.0%
Add back: Loss on asset disposal   546       246   
Share-based compensation    1,163       1,519   
Pre-opening costs    5,024       3,807   
Transaction and other costs   (141)      (151)  
Adjusted EBITDA*$  74,459  27.6% $  63,896  27.3%
         
*Beginning in the fourth quarter of 2016 we revised our calculation of Adjusted EBITDA to exclude adjustments for changes in deferred amusement revenue and ticket liabilities. This change was made in order to conform to recent SEC guidance regarding non-GAAP measures and has been applied to all periods presented. The change in deferred amusement revenue and ticket liability was $2,807 and $2,456 in the fourth quarters of fiscal year 2016 and 2015 respectively.
         
The following table sets forth a reconciliation of operating income to Store operating income before depreciation and amortization for the periods shown:
         
  13 Weeks Ended 13 Weeks Ended
  January 29, 2017 January 31, 2016
Operating income $  44,670  16.5% $  38,062  16.3%
Add back: General and administrative expenses   14,343       14,615   
Depreciation and amortization   23,197       20,413   
Pre-opening costs   5,024       3,807   
Store operating income before depreciation and amortization$  87,234  32.3% $  76,897  32.8%

 

DAVE & BUSTER'S ENTERTAINMENT, INC.
Consolidated Statements of Operations (Audited)
(in thousands, except share and per share amounts)
         
  52 Weeks Ended 52 Weeks Ended
  January 29, 2017 January 31, 2016
         
Food and beverage revenues$  452,140  45.0% $  405,841 46.8%
Amusement and other revenues   553,018  55.0%    461,141 53.2%
Total revenues   1,005,158  100.0%    866,982 100.0%
         
Cost of food and beverage (as a percentage of food and beverage revenues)    114,946  25.4%    104,757 25.8%
Cost of amusement and other (as a percentage of amusement and other revenues)    65,354  11.8%    58,053 12.6%
Total cost of products    180,300  17.9%    162,810 18.8%
Operating payroll and benefits   228,827  22.8%    200,129 23.1%
Other store operating expenses   287,322  28.6%    250,186 28.8%
General and administrative expenses   54,474  5.4%    53,600 6.2%
Depreciation and amortization expense   88,305  8.8%    78,660 9.1%
Pre-opening costs   15,414  1.5%    11,561 1.3%
Total operating costs   854,642  85.0%    756,946 87.3%
         
Operating income   150,516  15.0%    110,036 12.7%
         
Interest expense, net   6,985  0.7%    11,464 1.3%
Loss on debt retirement   -  0.0%    6,822 0.8%
         
Income before provision for income taxes    143,531  14.3%    91,750 10.6%
Provision for income taxes   52,736  5.3%    32,131 3.7%
Net income $  90,795  9.0% $  59,619 6.9%
         
Net income per share:        
Basic$  2.16    $  1.46  
Diluted$  2.10    $  1.39  
Weighted average shares used in per share calculations:        
Basic shares  41,951,770      40,968,455  
Diluted shares  43,288,592      42,783,905  
         
         
Other information:        
Company-owned and operated stores open at end of period 92     81  
 
         
The following table sets forth a reconciliation of net income to Adjusted EBITDA for the periods shown:
         
  52 Weeks Ended 52 Weeks Ended
  January 29, 2017 January 31, 2016
         
Net income $  90,795  9.0% $  59,619 6.9%
Add back: Interest expense, net   6,985       11,464  
Loss on debt retirement   -       6,822  
Provision for income taxes    52,736       32,131  
Depreciation and amortization   88,305       78,660  
EBITDA   238,821  23.8%    188,696 21.8%
Add back: Loss on asset disposal   1,533       1,411  
Share-based compensation    5,828       4,109  
Pre-opening costs   15,414       11,561  
Transaction and other costs   (73)      2,068  
Adjusted EBITDA*$  261,523  26.0% $  207,845 24.0%
         
*Beginning in the fourth quarter of 2016 we revised our calculation of Adjusted EBITDA to exclude adjustments for changes in deferred amusement revenue and ticket liabilities. This change was made in order to conform to recent SEC guidance regarding non-GAAP measures and has been applied to all periods presented. The change in deferred amusement revenue and ticket liability was $8,297 and $7,587 in fiscal year 2016 and 2015 respectively.
         
The following table sets forth a reconciliation of operating income to Store operating income before depreciation and amortization for the periods shown:
         
  52 Weeks Ended 52 Weeks Ended
  January 29, 2017 January 31, 2016
         
Operating income$  150,516  15.0% $  110,036 12.7%
Add back: General and administrative expenses   54,474       53,600  
Depreciation and amortization   88,305       78,660  
Pre-opening costs   15,414       11,561  
Store operating income before depreciation and amortization $  308,709  30.7% $  253,857 29.3%

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


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