PLAY - Earnings call transcript Q3 2017 | Dave & Buster's Entertainment, Inc.

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Operator

Good day and welcome to today’s Dave & Buster’s Incorporated Third Quarter 2017 Earnings Conference Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Jay Tobin, Senior Vice President and General Counsel. Please go ahead, sir.

Jay Tobin

Thank you, Melissa and thank you all for joining us.

are Financial Chief Officer. today Brian Officer; call Chief Jenkins, the Steve Executive King, and On After from comments Mr. King and Mr. Jenkins, take we your to questions. will be happy & copyrighted. This Entertainment is being on of call recorded and Dave is behalf Buster’s

items the on under to like facts. XXXX. which Before we risks of various website of our uncertainties be in to your are and the Private discussion from should be begin published responses that actual based All Any to subject to fact which on our at remarks uncertainties, certain statements daveandbusters.com not to differ could risk items Relations cause the our discussed, SEC, statements results, factors the may Investor are forward-looking Reform the the Securities attention been our filings and and with call events Litigation has company’s are future results Information such our in on section. anticipated. such meaning I’d Act historical and available your entirely of considered the to questions, forward-looking which those relating within

released comparable depreciation In results measures amortization, Investors addition, today our website. references before include EBITDA, afternoon, which GAAP our EBITDA the reconciliation is Accepted this review announcement our should which measures and defined income the operating contained are non-GAAP will adjusted financial under not to that store Principles. also are to available Generally remarks and Accounting earnings these on of in

to Steve. I’ll Now, the call over turn

Steve King

I strategic wide walk opportunity. four Today, everyone. to and performance third dive on few before efforts itself. I'll new you quarter our our and questions. participation high-level thoughts conference Jay like our highlight through conclude priorities call. you space of the in significant we updating in update quarter afternoon, pipeline good our up your it your our financial I'll will before I'd strategic by development to sharing appreciate and store begin you, open highlights you Brian into Thank our by priorities the key We review and key quarterly a

the content Amusement, visit. for our on differentiating our but And on strengthening portfolio be primary business First the from we and continues remain it's continually competition. it the category focused growing, to

up games line about best later. be up the XXXX Our is that shaping I'll to little talk and more a

Second, we're and by improving momentum speed segment our service. to committed reigniting the product F&B alignment of in

fourth, want Third, long-term. the returns, steps to and over remove also friction growth store guest unit taking we're strong to and we to new the experience continue by drive

the a for few for quarter. highlights Now

where difficult hard the EBITDA Maria an quarter on challenges, third the up Harvey Irma the quarter QX We impact storm. remarkably comparisons, had While the and Rico approximately the includes Puerto on from XX double which have mainland the was revenue a by to excluding of we by proud Hurricanes weather comps store estimated scheduled and XX%, including about X% impact down X.X% did and points well, during revenue were of basis estimated digits. open the work. all grateful and for their its and incredibly grew our I'm teams

and Our for following closed Florida stores in Huston the hurricanes. the several markets the days remained

experienced parts stores consumers softness distracted Texas other In temporary gas by addition, in our were as shortages. of

trends. year's lacked on two including Amusement we same QX, and comparison performance of a to sales same QX X.X% during in comp sales was base fact recall an may QX, the of improvement three-year You year respect This year our toughest relatively store in store XX.X%.

efforts. significant category did pressure following redirected of the businesses events see and for hurricane some release the as special their dollars rescue Our discretionary

looks is fourth quarter. strong to year. for The comparison seasonally events special and rebounding faced business addition, good In last tough the a

non-comp were of stores. once us we operated broad performance revenue confidence contribution and appeal non-comp stores Their demonstrates overall store brand again continued performance impressive strong of remains growth Our quarter, the our XX the new model. our XXX giving the of to new third and during our in

Next, quarter. some the drivers touch the in key on I'll of

Games Space in Summer of our highly including Largest a Spider-Man, of comprised Also, $XX marketable lineup we among $XX.XX the NFL year Sundays, and this and card. Alien, the season Despicable Mondays six Invaders recognizable power the with for content others. Pacman and was Our promotion [indiscernible] for World’s ran Me, Thursdays first at

$XX but promotion release we movies is Injustice of ahead anticipated basis of League. launched one the quite at most year as This of game recall, basis. on our the cards this you card. higher had successfully on As promotion lower that we price for November the the year us dollars of were of profit we've exclusive a point it flat non-redemption year gross power surprisingly Arcade essentially the Not $XX.XX last similar year-over-year incidence October, In features action. gives the Justice collection a with an saw a on-screen a interactive engaging control

terms for In XXXX EBITDA. low we revenue to mid-teens speaking, our continue and expect in broadly growth guidance of

the opening, and more overall detailed reflect and financial additional investment environment elaborate the still Brian? including his in the pre-opening in a slightly. update guidance provide in Brian will impact on were remarks. of these the new our delayed prepared soft three quarter However, lowering for storms to changes Puerto stores Rico

Brian Jenkins

afternoon everyone. good and Steve Thanks

to country me were slight the Including also members experience. decline across Let headwinds margins while improving would the comparable a focus performance and us both strong maintain for our deliver that thanking financial in the the hurricane low sales. EBITDA also EBITDA by up team guest on store have enabled been begin revenue despite we to able relentless execution double-digits,

some prior $XX.X disruption XX the are that points million prior quarter and That’s the $XXX following year. -- of XX These revenues contributions revenues following on basis stores from estimated increased store the during $XXX.X comp earlier million Total to the million. Hurricane delayed including while million from and included XX quarter disruption opening opened note million million the our the for fell the we increased up our by $XX.X newer of from X.X% hurricanes highlights in unfavorable Revenues total an Rico impact results stores that with third Please quarter. sales October mid-January for in million on from to are an quarter comparable Maria Puerto revenue. other from quarter for million from caused $X during $XXX.X non-comp X.X% year here up which one strong the to us to sales the caused our the in Now from the of that’s $X in estimated $X.X year. due stores. the

category more while entertainment sales profitable as Food continued shift total our X.X%. mix collectively Amusements and Turning to Beverage business sales. Other and The increased to grew XX.X%,

XX.X% focus revenues, promotional During the reflecting of the a of the year increase period, strategy. a continuing reflecting from and quarter, point represented XXX-basis our third and Amusement primary long-term prior total Other trend

in the down down sales, sales breaking fell X.X% our with decrease X.X% events line business Now comp X.X%. walk-in was in essentially while our special [indiscernible]

this following respectively. Now of of our from an includes unfavorable basis closed points and and impact the Harvey markets estimated as weather remained stores Irma Texas Florida XX hurricanes I mentioned in as several

temporary while addition, hurricanes, impacted In softness shortages. which the directly with of stores gas not our as experienced many consumers [grappled] Texas by

outperformed. Houston the hurricane, markets of impact the Excluding

on cards had California In our impact of an addition, stores. unfavorable wild some

strong Our quarter special events business note. a began on the

nature the hurricanes, However, segment bit to more softened a also for a to prior were took longer and events difficult bounce discretionary significantly due business X.X% from back. lapping comparison it the the following a of the Special positive year.

this down business of X.X% XX% this our of in last were sales, our X.X% and we category. bar year strongest food and year while Amusements in lapped our comp as Amusements In Again, Steve we QX to comp X.X% put perspective, and lapped rose category mentioned X.X% respectively. terms from over in

third expectations. the and line quarter, competition the on was while system cannibalization our significant and During our impact in with of stable

were and percentage approximately mix. to margins sales stores. last flat In Beverage XX.X in in year, growing costs as mix reflecting was of basis pricing, in as food and XX of a Amusements sales a costs and costs, increased inflation XX improved sales new decline bev and million by a terms offset than total higher points F&B Food third and the of percentage margin X.X% Food more commodity compared of points and pricing quarter as Amusements sales Beverage basis improved slightly of X.X%

of store were in basis operating increase merchandise. were price includes a operating XX.X% moderate year-over-year. a our full XXX.X XXXX, as we of of operating points points Total other XX basis year and Amusement revenue, million as flat store higher benefits expenses, XX Other operating store and towards a was games For driven This percentage and in and simulation expect sales last Amusement was shift commodity year. place. game play payroll WIN! Cost and a by than of expenses expenses in lower or percentage which

strong inefficiency points benefit and operating cost year-over-year. X.X% the wage on comp, about will inflation better our stores. Lower the claim Amusement this basis Our incentive and offset a higher of at improvement. underlying our they key leverage This focus for on sales mix payroll partially was drivers by reliable hourly XX was medical non-comp and typical

XX G&A year. efficient growth returns XX% before flat higher incentive the by basis store operating this decrease costs driven marketing non-comp for XX.X sheet representing depreciation of and are stores operating growing stores, compared XX.X%. occupancy as higher based year-over-year, support to of last of points were to XXX basis Other quarter, a at compensation base And compensation. labor our a as continued balance million expenses not perform XX.X were our amortization lower million comp essentially well headcount more by the prior Store as non-comp year-over-year as are points was higher offset to our was than well generating was and X.X% million, sales, and a perspective. matured store higher percentage Our reflecting to from XX.X our share year base but income increased excellent of as primarily store expenses as base expenses.

revenues, Pre-opening impact to of plan year-over-year G&A pending the QX related opening, As to up basis due opening costs growth. next XX sales X.X X.X in primarily overall million, as expenses that’s our on a well to as XXXX, store of to percentage increased points leverage million from were year. higher due for

X.X Our rate million. grew million. XX.X that’s for up to due X.X% while interest margins And the debt well adjusted driven added last increases million, million LIBOR EBITDA levels. of higher as by XX.X% X.X from to as in to flat, XX.X higher EBITDA increased quarter debt year, the cost underlying grew Net were expense to

In related addition, we incurred quarter. debt to $XXX,XXX the approximately expenses refinancing during

and effective was in adoption the to favorable XX.X% the in last the XX.X% third X.X reflected decrease tax million the of reduced $X.X impact which rate prior $XXX,XXX rate effective to accounting compared quarter from standard the The increased the adoption a our outstanding of transactions, related by the shares income to Our year. point quarter. payment from year for quarter percentage new provision tax compared based share by

not reminder, this taxes. a cash new effect As of implementation our does have on incremental any standard the

However, the prior the of a EPS significantly it the compared and to on last new diluted as per we This impact have favorable stock indicated for refinancing shares. million $X.XX tax per in magnitude would of effective exercise. calls diluted accounting million $XX.X share the XX.X shares. standard million of share share does XX.X have increase generated $X.XX debt year share depending year, of our base been third or impact the diluted net of the on $X.XX reduce net We count a share. or of and quarter timing $X.XX income our and per option of on rate million the of can $X.XX based $XX.X payments unfavorable excluding on share base income this share

for the quarter resulting times our end recent minute. Turning facility in X refinancing expanded just leverage of just on capacity borrowing $XXX over of the million. outstanding $XXX credit by a had At our to we sheet debt balance which of our low over million with the

time, flows growth We total last million have available we pursue in also both value via return in X.X X.X position as the make we with $XXX.X of to risk have to well week, approximately to the are the balance common this At our program. to or under the our repurchases investment buyback strong have Year-to-date flexibility store our high stock for million development. shares $XXX shares fortunate as a to in $XXX.X cash same return shareholders. to healthy million sheet of still as repurchased million million, our brings inception

Turning now our outlook. to

of update you some points. on elements key Before me guidance, let our two of highlight the critical

That on and year $X.X million from excludes and sales Hurricanes on any First, business guidance estimated our now full insurance. $X impact million an includes potential unfavorable interruption EBITDA. Harvey, from Maria of Irma recoveries

EBITDA preopening $XXX update, $X additional items, range from of these range guidance revising Second, million, pipelines in we compared this primarily XX guidance midpoint now new our in guidance. of are the $XXX our from full to includes at Due to strong year part million by stores. million our to million driven September is which expenses an our the to down prior $X

However, of this guidance in impact it team's expenses, the challenging and with ability and execution, respond revised in hurricanes on preopening our a light our the pleased focus and strong environment. are investment swiftly higher reflects of we believe in to

at sales hurricanes, the projected guidance. revenues $X.XX This start bookings of to to store X% a a mid-January events is compared to down billion Puerto looks $X.XX to this billion appear $X.XX flat and still targeting XX of delayed new expected to than large the and special impact this impact of Now our Rico store to reflecting from expected quarter. plan the are seasonally guidance the opening strongest markets format Trends week for including some solid including reflects have of of projected stores in under $X.XXX Puerto to range our opening on XX new so X.XX% third total store, a be prior Comp stores quarter point. of We’ve billion the Rico and XX and now the prior billion, from comp for of details, of growth brand. our far, opened recovering expected From construction as we’re and has reduced basis guidance ahead the up X%. hurricanes XXXX towards to already the in year comparable a year. year, sales perspective, skewed our development openings, and fourth XX-week slower our between be

million includes the standard rate of accounting share-based based net the payments. effective year-to-date to related projecting our to impact million of are on income $XXX $XXX XX.X% We to of tax This guidance XX%. new

However, we is timing some and included QX benefits since in and volatility. largely have control tax the excluded any our future potential XXXX of out of is magnitude

driven XX.X prior also of the net guidance our after additions impact of and tenant share share shares planned low repurchases. prior to guidance to a end at We count We $XXX for $XXX our payments $XXX million, of up that’s stores and by on of pipeline million diluted capital additional other million estimate million due project next landlord to $XXX strong of from of year. approximately million additional the pre-spend new allowances

to XXXX, while in share Finally, position detailed like high-level guidance year. would yet we preliminary are upcoming on the for we a view not to provide our

First, revenue respectively. our last recall million will XX-week This in as in one you please year approximately have by year, to EBITDA week impacts next about unfavorably we that XXXX and compared million $X XXXX. think and $XX

might We stores Also, plan seen plan and you have Next, two XXXX press square the we as of our XX new includes shortly, are XX,XXX format you exciting XX,XXX XXXX. feet. new a to and add stores at to smaller XX very new store Steve excited pipeline. our strong from hear release to will in to have open in

modeling is please in typical mind than format revenue this For lower small to smaller and purpose, generate expected as per that a keep unit. result store are our

With revenue low to that, turn Steve expect to growth XXXX. Finally, EBITDA in double-digit over to to the growth low final we remarks. and back call some high double-digit single deliver will make I

Steve King

you, store Thank opportunity that our activities and our development now would in like review I Brian. recent and to long-term area. upcoming

openings. response the with pleased recent very store our are We

Washington including in In one New yesterday Tampa, in North As which at and third in just we which Baltimore, is during Carolina. opened Florida is far, Auburn four the one near stores, quarter we one in opened Jersey the fourth located Seattle, Brandon, Marsh, Woodbridge, of White mentioned east so stores Pineville, store we new one Maryland. just two quarter and near

us. and Washington states for Jersey new New the are way by

stores new the is are D&B, a year out mentioned, already in stores to scheduled open our store, in this presence. XX representing for where we’ll Rico reopen of year markets brand growth Brian have The about X we markets stores located Puerto As in X round comprised mid-January. now XX%-unit with which

on XX,XXX that times new XX or and we XXXX. we and In per stores approximately providing in currently including less and between visibility square expect stores are stores total XX with feet that a two a terms under small stores in of this growth characterize significant XX,XXX We construction feet, into well the XX,XXX square remaining of four that are year’s are large them. store eight have XX our footage, class, XX,XXX the leases, that XXXX

strategic will in remarks. I my fourth spend a beginning Next, prepared our mentioned I bit on priorities

offering We our proprietary will well visibility exclusive, by gains. Amusement adding and strengthening platform proprietary will as It on opportunity non-exclusive focus offering for as particular years. is for enable basis. to exclusive half first continue into on to emphasis yet. propriety includes titles differentiate will best our with we content XXXX offering shaping on our reality rotate our great the be and emerging that on our up to us virtual XXXX, several game this In a our and capitalize of It’s line-up

of platform that this well-known feature use tied VR XXXX. titles properties will in a experience to incorporate We couple to

of the with The good our and QX in-depth to to really the full focus dining quantitative experience. was groups conducting about strategy. path enjoy service F&B and news our right majority a now that Turning research confirms guests qualitative determine testing initial research is forward. vast

on items simpler than particularly from [indiscernible] greater snackable. us. that guests, that a adults they and we focuses call are speed of shareable do expect Or that ones However, young young value more the offering service menu a prefer

several such we emphasizing respect as we during the television on We Combo, Play down the our of which pared to testing Eat are stores. midst a promotions of and With are menu quarter. in in advertised value,

We simplification are and menu the of speed improving redesign in area. service positive through kitchen

is and at vast our dining table same this guests and enjoy alternative offering tested of our successfully. of pay we’re fortunate experience as and by table begin smartphones new casual be the We’ll unlock that to time. majority [box], inside for Separately, casual an us. [indiscernible] weight quick room, a year improve our testing position to both addition, testing signs service in able believe In turns options we’re into the the the given is while full technologies pay that that the our if a can mechanism delivery we potential offer next

I think fully the in path time is F&B realize this but this implementing a focus take us. and strategy will clearly some for

to our The [indiscernible] that technology, third for to [indiscernible] strategic their for frictions leveraging and arcade buying including better And games strategic weight but several continues identified cards [indiscernible] with is our is room, goods dining We ordering guest the of the we’re meaning to as in flow frees the experience. and enable control that growth guests. points XX% cost paying as well We have up us check food, more-unit moving personalized one their the and the the want priority more friction front that or long-term. implement the us and over to priority is staff desk, solutions fourth our drive guest area. including in at activating

of essentially openings Puerto for new has stores new with and the XXX our Also, date. cost locations the year stores addressable end and why release. have recent to first This we're years. fiscal the us XX XXX our long-term our that and in pleased the performing format the that's performance process Our we the Canada By strong stores of in press target very in line market store earnings half alone. operating United our our in cash Rico and our well excluding bolstered stores in of are generate small stores across highlighted of strong Canada confidence our stores, return. States we'll XXXX, to continue XXXX with cash in XXXX of

low format This included long-term. we to and EBITDA will million returns smaller markets which to small that plan excluding to XX,XXX than store less Preliminary, TI Speaking AUVs called this the feet. some of XX%, a say in original XX cash demand feet us from XXs not around a on be in locations exciting margins changed We XX,XXX format. XX,XXX fixed anticipate such will XX smaller we're of to what typical our capitalize $X potential format over we the million $X $X were cash investment on store XX,XXX see level now square help to cash steady of than for at the million XXX. the state for of we of square store in new currently

in In open year. to fact, we're this is Northwest which right early Arkansas Arkansas under store on format Rodriguez, new first track our next

to opportunities approach are mitigate will disciplined apply in this incremental and risk the respect We our typical present. execution to optimistic that to order with

is pipeline continue that solid measured dedicated and stores to stronger we're a we of primary new our is stores store growth on widespread cash We'll mentioned and to vehicle at volume, vision. than level margins to great continues that execution. open opportunities building that smaller Including new ever strong industry our have execute store have Our returns. needed format be that continued team confident now averaging cash larger, outstanding our leading pace the before. and ensures even I

as So, in space large opportunity. positioned and are brand experiential an wide conclusion, uniquely we have a

strong competitive pipeline, differentiate vision. of advantage executes offering having gaining on a sheet new the healthy have capital very is that combination a necessary and store Our our and unbeatable balance

the in lines experience, accelerated you friction appreciate reinvigorating momentum you. Q&A. and in include over for We while support. your and always Amusement priorities growth removing our open driving time And strategic XX%-unit long-term. four beverage continued at food to Thank category, operator, we'll our guest business the this Our return the

Operator

question And come Bartlett from Certainly. first Instructions]. Jake SunTrust. our from will [Operator

Jake Bartlett

for Thanks Great. question. taking the

set a quarter. bit if fourth little on can wondering I'm the you First, help

digits. start in pretty range or also store can Your Help down then the the XXX implied could you what be fourth help and pretty quarter on like slow sale. narrow what It quarter. just it's same understand negative has wide deep been to the to attribute basis single points comment to? low Looks are us And roughly. guidance any that about expectations your territory are range

Steve King

think right the Jake, low quarter. it’s QX of ended Well with and start single-digit I storms quarter little kick fourth positive the It was our slow by you guide slightly bit a We I some of mean decline have for for that softer. and it sort to a off stuff. driven

we So, brought down. have guidance our

As XX% comp at years down business, are to magnitude XXXX of of we look it three growth our that XXXX period over we was XX%. at time, casual dine

So performance those straight in those three X% years about very, comp strong in years. averaging outperformance that, very collective multi-year three over

solid. have trying up pretty these coming we are range our to some we some here around and So, some so that go. given are some Bookings, sales now and to have tough weeks of biggest weeks the are bookings we holidays compares right recovering have guide. in performance ourselves big we that But of

Jake Bartlett

for -- you back Okay. there material is last I know New Halloween holidays, about a when be to impact How and XXX-point, also gave the that Saturday seemed year. it be about And I think about Guy a Christmas Years. Good should thinking then for

quarters. may and there’s last Bowl as in So, up us be there help the know I trailing Super well out eight

quarter? or be of So, how us help through to the your out that’s impact just rest may comps play going the understand

Steve King

early weekend helpful is these get to some going us. specifics am Again, Years the to front of impact us are from Well the Jay in impact, New on I not But coming of move Christmas to of we with the away some had here are specify positive are big in but weather I and there into January, dependencies. that’s that. weeks. number up don’t want a December put There

Jake Bartlett

a quick. And real Okay.

recall, you quite box, well. and the that towards movement the work as as didn’t On I tried it smaller before

smaller for towards You is sweet now from [impedes] the available this were now also you It locations, like moved away doing And it? box? a are then anchor shift box for the years that for Why be ago. the trying What’s you to smaller seems time very in what around? number different profit new spot wanting developers are the wise. the them of

Brian Jenkins

smaller different of arcade midway. to want a Sports them way is question which Last a we it. time, about me about like going attached early on different just with D&B the building think it let we’ve laid us we we we there, and will essentially returns, took generate model of in doing But to to dining is special right Well effective around. more one essentially, your terms stores. see have proportionally that’s last five excited that and room, we shrunk we things the space have a and stores. answer in foot events and time the a of compared just have time and And that, events of had this or it’s can to D&B time what’s think and theme our out first straight have I focus we be sure kind of was all are in oriented in we’re this but really particular kind in towards we new five we stores make of everything the to dining arcade we what a embedded what volumes the how and way better is these couple XX,XXX-square a to we’re that have of that’s of in of going we most midway that’s our markets. you going arcade have the are much to XX,XXX-square about And are an are had or for some square now, tackle everything manifested in size traditional malls. looks the kind that which In forth room And we format to doing special we in smaller. essentially rest that we foot and in just terms instead a XXX itself this going try of what want separate same dining a current the to we feet. I those what Sports that was And have think to doing

market large how exactly see addressable is. So, the

Operator

Farmer come Our next Wells from Jeff will question from Fargo.

Jeff Farmer

beverage and food strategies. You mention did several guys

pay execute you So, just don’t see the think you quickly upon beverage business? opportunity mobile and food you ask and there as you can help what guys how highlight that, if can order you and out something is

Steve King

as think Jeff. process a see it I we two-step

think I the something bigger table. the first low. it’s testing we’re understand But on like make that, to table phone think But pay pretty adoption pay of just at truly is on of at all, mobile we really your we rate that. sure the the kind mobile opportunity short-term that that and

we that, And have so, testing have we we begun on as it speak. from tables

we’re adoption of not how vision ability think going of technology that of that, the what I there would question the also that XX-XX that can in excited have because do a an with be, obviously, to is of our surveys number will things a be about you or somebody them in faster the estate of think process. of could longer it ordering, that a which the the element And is somethings someone size in real as will order an we’re so activating by to space, smartphone staff including of they’re even what kind us the I because not important then the is somebody's for do going to for but excited sitting in on really short-term. and enable of process, that you a wording things, looking to the there of do we’re maybe may well. one paying people enable and that to different be are an us us is somethings checkout other XX% But area obviously create the go on for get of our things enable of, particularly top that rates guest terms phone enable it’s term, of view Our get opportunity a in games about it, it’s to enabled number on

Jeff Farmer

Thank you.

Just follow-up. one unrelated

the sounded pointed of but basis encroachment things. terms stable us color like a same-store XXX of you two sales those points any give cannibalization Are it XXX. can you pretty of be they So, the color Any quarter-over-quarter, headwinds would in helpful. combined magnitude to and sense

Brian Jenkins

is it impact numbers at providing often an same out happening it's inprecise market. have science, the call same those time to anticipated to cannibalization. because We We somewhat the quarter, Yes. difficult start master competition each in both the

of our is on estimate, hesitant we but is you give The the our start a self-opening to you dial spend in help through a about About are a weren’t there own Event comp back of a those based think us quoting a perspective, to and is competitors you headwind market. our our trying to heard self. some there analyze number scientific that course QX to but a Main TopGolf is lot significant we So, we’re, reality from little third time we of I of might us. stores impacted two ’XX of And this. and who by of if have it’s brave it, -- ’XX, talk for QX significant one being

or So has that's a significant Event number either of Main where stores opened. D&B

even two talking ago, an years the it's not insignificant going like we that the We has to feel weren't years don't over a near about it's term. in this. grown So, is moderate headwind, it headwind

one and and guys. we year think to but entertainment keep it's think growing those have Main that the Event is returns and we in TopGolf are don't are said, we think going our moderate space attracts And best-in-class. slowed one competitors showing come there and that like down there we XX money. And I the feel is just invested being two I competitors of part space We has not some more in I of think money dining as our more

in We of beast. a and have sort leading I'm that, not put industry goal that's a AUVs different but top to the going

stores. folks lower what these have capital. attract the operators have think of ROI running of we most like in And an best these feel We our country, we

going to we going don't the it's So, away, have first think we're do but to feel go think I team respond to on time. the but we competition feel we like

Jeff Farmer

apologize, I that. just up a on quick follow Yeah,

this either like So, this over system you the year similar if a take said you back the to but the It of quarter will a were forward, quarter or expected two, trailing sounds cannibalization the impacted or encroachment? by to moving third or be theoretically period. of system been level roughly fourth we a be impacted

Brian Jenkins

started this really of year. would be we When somewhere, talking TopGolf to -- really about have to I and their numbers Event started has store those and last back Main 'XX. in half it expand growth

year. Steve which been on even radar. bit in his little different in We've a And the skew of mentioned not our think our topic markets years 'XX, towards this slightly but not in the this was we're 'XX. is store base So, tracking competition, remarks a the year kind it meaningful existing but I next next 'XX was now, to right year for going

year look So, you into remarks. see headwind again, there think is if next cannibalization don't little And more we declining going our at forward. I competition a moving

Operator

Jefferies. Our Barish from next question from will Andy come

Andy Barish

actually Hey, kind of inefficiencies labor on way. leverage labor anything you expense line operating did I with quarter. than year-over-year? comps and kind of mean shifting went is negative that the disruption. Is guys. got But other what There or all you the other the do the some get of store kind leverage other the there in to

Brian Jenkins

I focus, mean remarks, a hard fantastic A the job working quarter. did from in in been said and lot as the the [indiscernible] in labor really our of I hourly a team operations dialing we've

in actually been our line much the any hourly So, this really or year-over-year on that hadn't we and quarter year. were case favorable

the So, comp declined.

and we satisfaction, guest [indiscernible] in So, in I up, mentioned past went remarks polls my guest as improved.

because is both but going down we bonus, that’s and in year-over-year of a coming it’s this see stores. just in for our G&A burn did that incentive really non-comp guide as ongoing expense money has was expanded. of if we to down having in it experience So, our comp guide stores furniture later as -- we net also if saved on in quarter be in in that it and year it was natural keep There but that and And so good are lever and and in are Labor year this good we every came out around ongoing been well really numbers we quarter trying the And you we actually some bonus are way think not as in fantastic down and the opening. about to we us. you as the particularly are field. wondering here, in all G&A this bonuses really our three dial a then quarters

operating bps On the store expenses of XXX other decline.

We have been talking about the occupancy thing while. for a

But higher that protect so our some [indiscernible] that much that. our we an on a of at to marketing in they spent indicated the in in much in a incremental it’s big case money the invest that view we hang on five, spend now in did home and cost. compared it is well, And occur in even bit are and We showing investment a think trying profit quarter is stores. the kind but it wouldn’t as to But occupancy of I de-leverage the that’s bps stores to did just sales, event of more opening on kind in in legacy to of We sports we money number. win an some money did and some the did spend new venue too rent about the a build reputation as we we XXX of over to doing sort not half call we say business year did have I watch the well as terms additional occupancy of marketing conference call expected that more really quarter. invest to marketing

Andy Barish

for stage there the are And margins EBITDA of as year? obviously slightly a pushes even obviously or looking early at to to flat of of Okay. kind sort are Are implying the again then pulls new with into of sort ‘XX headwind. lower you store this anywhere you and to at mean I think efficiencies before

Steve King

going to am I hesitate.

with our on to were the going what prepared stick guide. are remarks We

some the on towards I mix, more I of some does margin line point April and items guide openings. cover rolling would call our and some store or our the fiscal imply of Andy. erosion stuff cost, to end new will But occupancy year We specific high-level that think heavily overall potential

more as cost and structure. those more of the are last we We and out is stores a years what have those grow. is it view like XXX we that’s just don’t our got and stores just it growing year, in the negative still in XX structural returns XX two of this a long-term We and it of are we as built difference

We are going to keep growing.

little these some We MSAs. of build and the XXs of are going to smaller XX to some

the When we legacy we that’s our excited those But to margins We they kind are do. of to us stores. to same see excited going about going not as come those. the to set are what are have potential of

doing kinds to those stores. not We’re and going those be of margins

Operator

Sharon Zackfia next Blair. from with Our come will question William

Sharon Zackfia

you and couple Combo questions. guess Eat during Play I & I the of know televised marketed quarter.

tangential saw a keeping loaded value with maybe hoped? you as question. how specifics is was about was just was And question in message then think through more breaking I’m that? And a So, you what response then you wondering, there, rate a consumers good what the it do with and and had or understand, kind you this of as I

up to that now? tax you a is right tell XX to should -- XX to the in number us XXXX, XX, good plug-in expect to normally rate you step are For we the or

Steve King

going was to it thought XX. I be

Brian Jenkins

Yes.

to guided for rate tax XX% XX.X% was full year. So, the

XX% should excluding thinking that the directionally simplification to to XX.X% the related share-based of impact You be payment.

be the credit is of it's and option what with terms net or in shelter to Steve's control significant predict can’t bring getting income, give to and on to of in numbers my terms next exercises, points. going without So, we number in basis control. of this guide out are really year the year I we’re going a our including because XXX-XXX a

want that. to don’t So, I predict

the about it rate talking next it, down numbers don’t impact at true after depends We’re have set up. want year. to option going numbers, means EPS big goes the comparisons. But we numbers that can really to goes We look rollover it be income next expense pre-that, in But net year. have credit the so the on that to that

Steve King

that sales. see couple with honest of on you, an Again, did ran in for be Yes. meaningful what we or it We the weeks. terms marketing anything a increase & the lift in we didn’t Play was Eat with test question there a overall for either in penetration of To Combo. as

kind a impact significantly relates the it So, as to that board can promotion of we’re drawing back to sales. value

in a revenue of even uptake combination that, longer You standpoint. fairly for we in serious can F&B huge that what package. in particular and saw is a in quarter Eat You also side again, Can terms discount from didn’t ran All the say see wings, of in which And penetration terms we a

relates as So, you we at value to in it coming XXXX with different something will be messaging.

Sharon Zackfia

is Is where going the XXXX? something in there anything to planned really holidays it hear we��re or more value for around

Brian Jenkins

amount really message. in think hear to over value holidays not now have more XXXX, the We the as update of always some an we’re between value I featuring respect you Amusements. with

a Now message message we to food I which side, will for you number not value and you’re there. significant on is have don’t play for you, But just value beverage think going the see games x there. a

Operator

from Long Jaffray. Next, we'll a take Piper Joshua from question

Joshua Long

markets back able format prior units support otherwise be of the as format? to to circle go into opportunity larger And the if wouldn't that to for Wanted we on existing an Steve should taking thanks or just or stores. store Great, my some thinking smaller question. about those maybe backed to be newer the

Steve King

for size. Those The and this format. are of about way we thinking current XX when said in remarks that our we new deemed the too we're stores prepared small had between small markets XX new

that this those for on small a could way stores us. volume that those doing a Having got again, thought as I think had return. might chance comments alluded markets this new we is we we do, these much that to better depending So stores of there little said completely of ones how my about if some are in bit originally that

format. about small we're to early early thinking with are completely tell way new days we've been to XX So that's these our the again, current that XX markets it, but in

Joshua Long

we in there got technology in just move that's yet. we've the the or past about think Great, maybe time And as then talked maybe right about virtual the hadn’t that's reality, it something wasn't that the to helpful. that

changed midway. process what from trying the or of either down kind standpoint more we that start about of makes that come to bogging of where being kind for a test? as people turning buckets investing still hit in over So now What's the to that's how and the gain be it on to the terms all should there you're able getting as sense thinking technology in returns do

Steve King

couple that do I we one is have One at person of more think a the platform we multiplayer there figured can things. that out than time. a same

of driver of all time. play single the past a at Some first either shooter, sort person with what a single we've was experimented are stuff in that that person essentially

to we've is going we something platform launch, able we've but be we're so, on. some different think save amazed, we're give with to to away come it's time, a here content same it's rotate to able don't too that much been up we because that And way and to not a want a at the for I multiplayer the

attended. two are the those that significant be it So will of think are things we

of And So, amount with I oriented of think be there a it. about an is associated it will labor more piece. attraction would small

redemption the of of be game simulator there be a in Although will will -- kind sense like than but like a is it it a more game. it's interactive

Joshua Long

And the still keep of for that allure definitely could normal to some up you should sell through or an power that helpful. But something dropout? there the want think participate That's in of the release. this card we

Brian Jenkins

an now incremental we've and this on the card. testing on spend little a done we've So, made power it

Operator

Brian Our James. Vaccaro Raymond next come from will question with

Brian Vaccaro

event third of I'm your performance guess recent that that out? obviously. back driving what seems evening. you is curious But off your start a there recent versus that be Thank stabilized something the bit you circle is driving I relative good have dining you to trends. are in and piece is moving that a casual quarter. there of Wanted through in industry think point you sluggish trend special differential comp performance, a to on and might one as differential mentioned And some and weaker in this tougher else the you

Steve King

mild getting as swing didn’t not really typically it question start so -- [indiscernible]. to I probably to that far a Jay’s weather. start relates winter in don’t are of We our on is favorable feel think I on what the we like say terms is a QX fall to and

helping may So, what be be casual might dining us. for opposite

I think is what find. you may

Brian Vaccaro

speak recent your non-mall mall are you Okay, in you versus the in alright. And locations also what to can quarter? of terms seeing

Steve King

divergence stores We -- but split the the continue some much terms you stores then non-mall The they have of to compares have to mall when they of -- versus not underperforming see but in in compares. terms again slightly. mall non-mall much tougher back

are look point sort overall at you two years lagging and XXXX a they back if at bit. three with years inline So, of this back

Brian Jenkins

I traffic so destination, sees but would to then casual be We like necessarily mall malls better. not not struggling, to be for that people would to be negative We and stronger comps, like see dining see do us, us to one that might there’s just come to come least guy to us. to like the we’re and say at mean I visit would mall helpful

see So, traffic we quite and would like that helps. to

Unidentified Analyst

like our -- seasonality, large over the been factors be tighter impacting confirm a there at could quite that at relationship has -- be on small out base, performance you Alright, one little that’s in here can more that? just last new have And and its on the you color I that comp front. the marketing if But average one unit in non-comp quarter that quarter math. there bit to any question. least Curious looks on the on quarters the if the compare a like sales weekly sales in you spread versus last least helpful are wind at the third which unit say the that. few And if look that versus

Steve King

our the up of building we than are which a XX think store are communicate and mean between that we reality have development latter, million small The XX and then to system. for in our that we of are are sales are have to average that the state current between. lower of smalls eight between million the been. of in guiding Of building sort do we somewhere targeting steady whole in XX are And X roughly up, in has the do and first is we state that’s of XX,XXX million I that to large -- I somewhere XX we trying to we are format do these that door only steady cycle our been are large stores true stores non-comp and to seven trying base, have all them we going what are

that’s this I during be -- I And at opened been be nine we’ve may would coming what the going fourth as of opened think most to-date this the only I So, larges say stores look we of are true skewed large year, about are those to-date quarter. year. stores you piece nine in while then the of kind am said are of large, our most to here that’s have [indiscernible] the talking four the

comp don’t at the but say, not is be a based to rise and our comp for to AUVs base So on their to impacting current are surprise its that submitted. and Again, us. whole mix on focused to AUV we be return investment the brands we story expect

Brian Vaccaro

last the for And one me.

saw fourth If contraction. you the seem this EBITDA can expansion fourth of margin imply, are quarter, third look your meaningful guidance you quarter preopening it it’s you openings. EBITDA margin you and EBITDA Thank of guidance, outside a other takes embedded to puts you. in we’ve in know line. quarter I line? would of maybe got at bit on through negative your the positive implied the pretty But comp, little implied walk pretty that had Again, some

Steve King

Yes.

of leverage anticipate guide, The year-to-date. going you in the some number of to item see If changes end our you’re top to to favorable quarter. one, are We bps year-to-date. deleveraging kind our go big fourth relative of margin be we’ve marketing XX will that marketing, compression margins

number -- investment up year-to-date, costs. And other around, is on fairly it pre-opening, it’s of and relative we it’s to our drag -- going strong to in say an stores. drag trend new date, margins, is as to about But increase I we number costs, going pre-opening the kind very So significant to a significant would but gross that’s view Amusements of QX. we’ve guided pre-opening probably year-to-date that by that of in as increase just to is been Again, be favorable the million it's $X item around a side, the related basis. there on increased pipeline

in too too. this the We we not the side are margin hesitant what see strong that on inflation on and QX. aggressive simulation more to the on we’re are And we margin, a of shift have lot seen as gross mix are heels do gross we of and our food on be project that we on projecting being commodity

those the the year-to-date from are big So of margin. what the causing that kind we separation QX implied are versus of items see kind

Brian Vaccaro

Brian. And ’XX in guidance the

follow-up Just while you you a quarter. guidance talking the in on about an food also inflation inflation? in costs expect read Can you’re give wage early on what and ’XX food fourth the

Brian Jenkins

to going items the all I think of guidance. hesitate in to we’re against getting the

Steve King

guide going fourth to We’re quarter. on

Brian Jenkins

get when We’ll next some year our to Yes. other specific line on guide call. items we April

Operator

with And from Steve Anderson next Maxim we’ll a question take Group.

Steve Anderson

the ’XX comments. stores, side local would on you some some about that food efforts about beverage but ask [indiscernible] I the some in pursuing and some markets? in and local there to like not in on have that want business others the a marketing maybe of of be margins But store something the question is

Steve King

for think stores to do we promotion it a of have do amount and test in a we’ll of local But allow not latitude strategy. the a part some is And wouldn’t on certain our though XXXX that I others. large basis. markets I say

Operator

come will Strelzik from from Markets. question next Our Capital BMO Andrew

Andrew Strelzik

actually for thanks things. two have quick the Hey taking question I

Amusement footage. footprint and these as a a been? your those back bev type mix to you thinking you're about you square of opportunity the about the food smaller retrofit of given enhance back even of stores stores those kind thought existing the maybe looking Have you -- smaller this the about stores could side Have to stores gone footprint could trends or new kind where about going how and to changes? the about change foreshadowing of be have First, stores? to larger more talking thinking maybe some just thinking within at fast kind the Are a other some casual any

Steve King

thought So discussed it yes, it. we we've

side. But most Amusement think feel that's capacity Amusement I that we the sales with et we today's level of have part, for comfortable that the cetera. with the on

some at you volumes areas another don't the say and of what choose. take Amusement some of terms we want of the the to and I But any in continue do to may a at instances think what have impact grow have one, some do that business. could. midway other that's think of off lot number to stores the some of the XX,XXX we same enough shot the kind like you But have And that that it. have is might box point would take think if we stores that. we you look you seeing what ability sales And put if the at worth increasing trade to to testing we and plans I see within a you have beauty with space make casual does you'll the some would reallocate something in then of wanted to and to other

Andrew Strelzik

characteristics much. That's stores? the did smallest you the great. you footprint very can I Okay, just to guess that And you you're at the And to the that number maybe Thank talk about process out, XX that you the helpful. markets number? of question, looking thought come my other wondering behind for I'm put XX how

Steve King

from thinking DMAs SMAs range low-XXX so or really we're in call it that average. or up a to So, about smaller size X

adjustable range, really the the smaller in we could with small market market I current a size the address than thought there. it's somewhere think X of format. of our we and is that X

at go sort that try we how how probably stores. we that's get factors population selected thought spend looking really and those thought get the different we're a that's why we sales have And than those we we number of those, to we why some that's at of and collected So but things, that determine and $X.X of and thought XXX that didn't we at get that, and where level, of that some we million to $X smaller collected we million there. tourist those we of level could can those tax some of could

Operator

the our back call further time. turn over We at for no closing to speakers like I'd remarks. questions or to this And have any additional

Steve King

joining to from results it for Thank you much That's We early in today. April. call end. Great. look the the our forward fourth reviewing quarter very with you

Operator

That does conclude participation. our your conference for today. Thank you for

Dave & Buster's Entertainment (PLAY) 6 Dec 172017 Q3 Earnings call transcript