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): December 5, 2017

 

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 December 5, 2017, Dave & Buster’s Entertainment, Inc. (the “Company”) issued a press release announcing its third quarter 2017 results. A copy of this Press Release is attached hereto as Exhibit 99.

 

Item 9.01.Financial Statements and Exhibits.

 

(d)Exhibits.

 

99Press release dated December 5, 2017.

 

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: December 5, 2017 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 Announces Third Quarter Results and Introduces A New Smaller Store Format

 

Confirms 14 New Stores in 2017 and Strong 2018 Pipeline

New Store Format Expands Unit Potential By 10% to 20%

 

DALLAS, Dec 5, 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 third quarter 2017, which ended on October 29, 2017.

 

Key highlights from the third quarter 2017 compared to the third quarter 2016 include:

 

§Total revenues increased 9.3% to $250.0 million from $228.7 million.
§Opened one new store compared to two new stores.
§Comparable store sales decreased 1.3%.
§Comparable store sales in Amusements increased 1.1% and in Food & Beverage decreased 4.2%.
§Net income of $12.2 million, or $0.29 per diluted share, vs. net income of $10.8 million, or $0.25 per diluted share.
§EBITDA increased 9.8% to $45.6 million from $41.5 million.
§EBITDA margin was flat at 18.2%.
§Hurricanes during the quarter had an unfavorable impact on our comparable store sales growth, total revenue and EBITDA of approximately 50 basis points, $2 million and $0.7 million respectively. In addition, wildfires had an unfavorable impact on our California stores.

 

“Our team pulled through remarkably well in the face of unprecedented weather-related challenges in the quarter and difficult comparisons to last year. We continue to believe that the primary growth driver for the business is opening new stores with great returns. Our 2016 class of stores is trending very well, with returns close to 50%, in line with the first year returns for our recent classes of stores. While it is still early, we are also pleased with the results from our 2017 store openings, which reaffirms the concept’s broad based appeal. We continue to expect to open fourteen new stores this year, representing 15% unit growth. In addition, we are excited to announce a new smaller store format that expands our brand potential and extends our growth runway,” said Steve King, Chief Executive Officer.

 

“We delivered another quarter of strong financial performance despite significant hurricane headwinds. Both revenue and EBITDA increased over 9% and excluding the impact of weather would have been up low double digits. We are also very pleased with our operating team's focus on execution, which enabled us to maintain EBITDA margins, despite a slight decline in our comparable store sales, while also improving the guest experience,” said Brian Jenkins, Chief Financial Officer.

 

Share Repurchase Activity

 

Year-to-date, as of November 30, 2017, we had repurchased approximately 2.1 million shares of our common stock for $123.4 million and cumulatively we have repurchased 2.6 million shares for $152.2 million. As of the same date, we still had nearly $147.8 million remaining under our current buyback authorization.

 

Hurricanes and California Wildfires

 

 

 

 

During the third quarter, our stores in the Texas markets affected by hurricane Harvey and in the Florida markets affected by hurricane Irma remained closed for several days. In addition, we delayed our Puerto Rico store opening following hurricane Maria. We estimate these hurricanes had an unfavorable impact of approximately 50 basis points on our comparable store sales growth, $2 million on total revenue and $0.7 million on EBITDA. Separately, wildfires had an unfavorable impact on our California stores.

 

Review of Third Quarter 2017 Operating Results Compared to Third Quarter 2016

 

Total revenues increased 9.3% to $250.0 million from $228.7 million in the third quarter 2016. Across all stores, Food and Beverage revenues increased 6.3% to $107.7 million from $101.3 million and Amusement and Other revenues increased 11.8% to $142.3 million from $127.3 million. Food and Beverage represented 43.1% of total revenues while Amusements and Other represented 56.9% of total revenues in the third quarter 2017. In last year’s third quarter, Food & Beverage represented 44.3% of total revenues while Amusements and Other represented 55.7% of total revenues.

 

Comparable store sales decreased 1.3% in the third quarter 2017 compared to a 5.9% increase in the same period last year. Our comparable store sales performance was driven by a 0.9% decrease in walk-in sales and a 4.8% decrease in special events sales. Comparable store sales in Amusements and Other increased 1.1% and in Food & Beverage decreased 4.2%. Non-comparable store revenues increased $22.9 million in the third quarter 2017 to $52.4 million.

 

Operating income increased to $19.9 million in the third quarter of 2017 from $18.7 million in last year's third quarter. As a percentage of total revenues, operating income decreased 20 basis points to 8.0% from 8.2%.

 

Net income increased to $12.2 million, or $0.29 per diluted share (42.3 million diluted share base). Fully diluted earnings per share, excluding the $0.03 per share favorable impact of ASU 2016-09, and the $0.01 per share unfavorable impact of debt refinance, was $0.27. This compared to net income of $10.8 million, or $0.25 per diluted share (43.3 million diluted share base), in the same period last year.

 

EBITDA increased 9.8% to $45.6 million in the third quarter 2017 from $41.5 million in the same period last year. As a percentage of total revenues, EBITDA was 18.2% in this year’s third quarter as well as in the comparable period last year.

 

Store operating income before depreciation and amortization increased 8.5% to $64.6 million in the third quarter 2017 from $59.6 million in last year's third quarter. As a percentage of total revenues, Store operating income before depreciation and amortization decreased 20 basis points to 25.9% from 26.1%.

 

Development

 

In fiscal 2017, we intend to open fourteen new stores, including ten large and four small store formats. We currently have eleven stores under construction. We opened one store during the third quarter in Pineville, North Carolina. During the fourth quarter, we have already opened four stores in Brandon (Tampa), Florida; Woodbridge, New Jersey; Auburn, Washington; and White Marsh (Baltimore), Maryland. New Jersey and Washington are new states for us. We plan to open one additional store in Bayamon, Puerto Rico in mid-January. For the fiscal year, eight out of the fourteen new stores will be in new markets for our brand.

 

Total capital additions (net of tenant improvement allowances) during fiscal 2017 are now expected to be $195 million to $200 million, up from prior guidance of $182 million to $192 million, reflecting our 2017 new store openings as well as a strong 2018 pipeline.

 

In fiscal 2018, we plan to open a total of fourteen to fifteen new stores, representing unit growth of 13% to 14%. These openings will skew towards the large store format and existing markets for our brand.

 

We are excited to announce today a new smaller store format of 15,000 to 20,000 square feet to capitalize on demand in smaller markets not included in our original plan. Long term, we see potential to open 20 to 40 of these stores, including two that are part of our 2018 plan. This new format has the potential to expand our whitespace opportunity by 10% to 20% beyond the original target of 211 locations in the United States and Canada alone.

 

 

 

 

Financial Outlook

 

We are updating our financial outlook on several key metrics for fiscal 2017, which includes 53 weeks and ends on February 4, 2018:

 

§Total revenues of $1.148 billion to $1.155 billion (vs. $1.160 billion to $1.170 billion previously).
§Primarily driven by the impact of hurricanes, including a delay in our Puerto Rico opening; and reduced comparable store sales guidance
§Comparable store sales increase of 0.0% to 0.75% (on a comparable 52-week basis) (vs. 1% to 2% previously)
§14 new stores
§Pre-opening expenses of approximately $23 million (vs. $21 million previously)
§Net income of $110 million to $112 million (vs. $109 million to $113 million previously)
§EBITDA of $268 million to $272 million (compared to $270 million to $276 million previously)
§Diluted share count of approximately 42.6 million (vs. 42.6 million to 42.8 million previously) (including the year-to-date impact of ASU 2016-09)
§Effective tax rate of 29.5% to 30.0% (compared to 30.5% to 31.0% previously)
§Effective tax rate and net income guidance for full year 2017 includes an $11.4 million reduction in our year-to-date provision for income taxes resulting from the implementation of ASU 2016-09. The requirements of this standard will likely further reduce our effective tax rate depending on future stock option exercises. Our guidance excludes any potential future impacts of ASU 2016-09 on our effective tax rate

 

For fiscal 2018, we expect low-double-digit growth in revenue and high-single-digit to low-double-digit growth in EBITDA on a comparable 52-week basis. We plan to give more comprehensive guidance for next year on our fourth quarter 2017 conference call, which is expected in early April 2018.

 

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 9864852.

 

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 105 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 36 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, EBITDA margin, 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)

 

   October 29, 2017   January 29, 2017 
   (unaudited)   (audited) 
ASSETS          
           
Current assets:          
Cash and cash equivalents  $15,258   $20,083 
Other current assets   63,855    55,521 
Total current assets   79,113    75,604 
Property and equipment, net   686,858    606,865 
Intangible and other assets, net   371,226    370,264 
Total assets  $1,137,197   $1,052,733 
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
Total current liabilities  $207,127   $177,797 
Other long-term liabilities   204,580    178,856 
Long-term debt, net   299,940    256,628 
Stockholders' equity   425,550    439,452 
Total liabilities and stockholders' equity  $1,137,197   $1,052,733 

 

 

 

 

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 29, 2017   October 30, 2016 
                 
Food and beverage revenues  $107,690    43.1%  $101,343    44.3%
Amusement and other revenues   142,289    56.9%   127,316    55.7%
Total revenues   249,979    100.0%   228,659    100.0%
                     
Cost of food and beverage (as a percentage of food and beverage revenues)   28,387    26.4%   26,560    26.2%
Cost of amusement and other (as a percentage of amusement and other revenues)   16,220    11.4%   15,581    12.2%
Total cost of products   44,607    17.8%   42,141    18.4%
Operating payroll and benefits   57,967    23.2%   55,034    24.1%
Other store operating expenses   82,766    33.1%   71,888    31.4%
General and administrative expenses   13,432    5.4%   13,506    5.9%
Depreciation and amortization expense   25,672    10.3%   22,864    10.0%
Pre-opening costs   5,609    2.2%   4,553    2.0%
Total operating costs   230,053    92.0%   209,986    91.8%
                     
Operating income   19,926    8.0%   18,673    8.2%
                     
Interest expense, net   2,156    0.9%   1,578    0.7%
Loss on debt refinancing   718    0.3%   -    - 
                     
Income before provision for income taxes   17,052    6.8%   17,095    7.5%
Provision for income taxes   4,895    1.9%   6,340    2.8%
Net income  $12,157    4.9%  $10,755    4.7%
                     
Net income per share:                    
Basic  $0.30        $0.26      
Diluted  $0.29        $0.25      
Weighted average shares used in per share calculations:                    
Basic shares   41,077,206         42,061,235      
Diluted shares   42,250,611         43,327,812      
                     
Other information:                    
Company-owned and operated stores open at end of period   101         88      

 

 

 

 

The following table sets forth a reconciliation of net income to EBITDA and Adjusted EBITDA for the periods shown:

 

   13 Weeks Ended   13 Weeks Ended 
   October 29, 2017   October 30, 2016 
                 
Net income  $12,157    4.9%  $10,755    4.7%
Add back:  Interest expense, net   2,156         1,578      
Loss on debt refinancing   718         -      
Provision for income taxes   4,895         6,340      
Depreciation and amortization expense   25,672         22,864      
EBITDA   45,598    18.2%   41,537    18.2%
Add back:  Loss on asset disposal   321         514      
Share-based compensation   2,557         1,668      
Pre-opening costs   5,609         4,553      
Other costs   46         (5)     
Adjusted EBITDA  $54,131    21.7%  $48,267    21.1%

 

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 
   October 29, 2017   October 30, 2016 
                 
Operating income  $19,926    8.0%  $18,673    8.2%
Add back:  General and administrative expenses   13,432         13,506      
Depreciation and amortization expense   25,672         22,864      
Pre-opening costs   5,609         4,553      
Store operating income before depreciation and amortization  $64,639    25.9%  $59,596    26.1%

 

 

 

 

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 29, 2017   October 30, 2016 
                 
Food and beverage revenues  $356,190    42.7%  $326,139    44.4%
Amusement and other revenues   478,688    57.3%   408,837    55.6%
Total revenues   834,878    100.0%   734,976    100.0%
                     
Cost of food and beverage (as a percentage of food and beverage revenues)   91,562    25.7%   83,772    25.7%
Cost of amusement and other (as a percentage of amusement and other revenues)   50,481    10.5%   48,628    11.9%
Total cost of products   142,043    17.0%   132,400    18.0%
Operating payroll and benefits   187,610    22.5%   166,614    22.7%
Other store operating expenses   247,663    29.6%   214,487    29.1%
General and administrative expenses   45,172    5.4%   40,131    5.5%
Depreciation and amortization expense   74,447    8.9%   65,108    8.9%
Pre-opening costs   14,626    1.8%   10,390    1.4%
Total operating costs   711,561    85.2%   629,130    85.6%
                     
Operating income   123,317    14.8%   105,846    14.4%
                     
Interest expense, net   6,073    0.7%   5,573    0.8%
Loss on debt refinancing   718    0.1%   -    - 
                     
Income before provision for income taxes   116,526    14.0%   100,273    13.6%
Provision for income taxes   31,217    3.8%   36,845    5.0%
Net income  $85,309    10.2%  $63,428    8.6%
                     
Net income per share:                    
Basic  $2.05        $1.52      
Diluted  $1.99        $1.47      
Weighted average shares used in per share calculations:                    
Basic shares   41,521,802         41,863,932      
Diluted shares   42,888,659         43,234,767      
                     
Other information:                    
Company-owned and operated stores open at end of period   101         88      

 

 

 

 

The following table sets forth a reconciliation of net income to EBITDA and Adjusted EBITDA for the periods shown:

 

   39 Weeks Ended   39 Weeks Ended 
   October 29, 2017   October 30, 2016 
                 
Net income  $85,309    10.2%  $63,428    8.6%
Add back:  Interest expense, net   6,073         5,573      
Loss on debt refinancing   718         -      
Provision for income taxes   31,217         36,845      
Depreciation and amortization expense   74,447         65,108      
EBITDA   197,764    23.7%   170,954    23.3%
Add back:  Loss on asset disposal   1,205         987      
Share-based compensation   7,006         4,665      
Pre-opening costs   14,626         10,390      
Other costs   (329)        68      
Adjusted EBITDA  $220,272    26.4%  $187,064    25.5%

 

The following table sets forth a reconciliation of operating income to store operating income before depreciation and amortization for the periods shown:

 

   39 Weeks Ended   39 Weeks Ended 
   October 29, 2017   October 30, 2016 
                 
Operating income  $123,317    14.8%  $105,846    14.4%
Add back:  General and administrative expenses   45,172         40,131      
Depreciation and amortization expense   74,447         65,108      
Pre-opening costs   14,626         10,390      
Store operating income before depreciation and amortization  $257,562    30.9%  $221,475    30.1%

 

 

For Investor Relations Inquiries:

 

Arvind Bhatia, CFA

Dave & Buster’s Entertainment, Inc.

214.904.2202

arvind_bhatia@daveandbusters.com