PLAY - Earnings call transcript Q2 2018 | Dave & Buster's Entertainment, Inc.

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Operator

Good morning, everyone. Welcome to the Dave & Buster’s Entertainment Incorporated Second Quarter 2018 Earnings Results Conference Call. Today’s call is being hosted by Brian Jenkins, Chief Executive Officer. I’d like to remind everyone that this call is being recorded and will be available for replay beginning later today.

Now, I would like to turn the conference over to Arvind Bhatia, Director of Investor Relations, for opening remarks. ahead. go Please

Arvind Bhatia

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

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

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

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

Brian. call over Now, I will to the turn

Brian Jenkins

and Arvind. call Good for evening, Well, you our thank thank you, everyone, joining today.

our I know, has over Dave team proud you accomplished what of a decade of Buster’s that over ago, and I’m time. many & As joined

I’m a of As CEO to of track record success. the optimism, I our long sense commitment with assume filled role, continue

from energizing. future I passion many to visits, brand the and had of our the our store members hear extremely found their opportunity team for for recent my During excitement and

We landscape We changing an with innovate time, we entertainment have brand and a evolve propel build recognized height. competitive performance foundation of same XXXX strong, the as tracking quarter by made on the and with confidence growing comparable of XX%. to XXXX are and strategic our the leader EBITDA well-positioned well quarter new EBITDA in we revenue strong and class. At early space by a we to during grew store I��m to priorities. sequential our is need the performance pleased improvement We model. in the On and The to we’re second class a a our new and in store is progress comp our and XX% grew on by nearly urgency. sense and of nearly drove and X%. basis, remains encouraged XX% our by attractive meaningful we’ve by bolstering over results stores revenue sales

new metrics. key we capital expansion the dividend excited a quarterly time, share allocation same may are have are announce raising you including seen, authorization. of we performance to our on As initiation repurchase initiatives, the guidance of At and

four future, look on the As remain strategic laser-focused priorities. to we we

introducing are drive compelling offering we differentiation enhancing beverage. to greater food First, our by games evolving and new and

our a experience great of our on game badge intellectual us introduced to well-known launch has Near proud I’m with VR come. new to our D&B, history, as biggest quarter, was This marquee our deliver first is we the in quarter, Fireteam title, social Players able via and the share achievements our title industry-leading allow VR a of on has end towards with popular our a on plan And guests. and gameplay the Halo strong which of the elements player team Raven also a this very the World is This proprietary bodes the second for launched of game Microsoft been Waypoint platform, for account, unlocks well we platform. a to Jurassic and worked During on that end VR very are how their to Expedition, connecting guests. remain their together second for a to by Arcade that build Halo: launch which combines title property, to track VR our library sport Guest future years the response for website. year. been releases limited this opportunity feature. capitalize strong game special time to Xbox content and exclusive we on

introducing forward, As simplification and and accessibility compelling on proprietary, Within key social with continue content and exclusive the elements will when quality, look of themes combination we in games, possible. focus non-exclusive multiplayer to of F&B, emphasizing play. a we remain

ingredients, raw changes, In are and execution a quality, just making of not team’s excellent is on also but terms goal enhancing of flavor our but craveability. on with we the focus

week, as menu upgrades Just Burger, both offerings Nachos, included highlighting and that Cantina last in we food menu Impossible just a innovation. few beverage, examples Meatballs on [indiscernible] classic your Kobe out are new new and new new and our cocktails Marinara, our rolled ongoing handcrafted items such

all-natural callouts our as taste about rib, the speaks We we offering. to by and XX% and F&B such messaging chicken as of Simplification by menu, improving quality year, positively of presentation techniques this optimize as impact our our service used of speed simplification well will also in are hand-breaded the believe reduced earlier over-time. We we which chicken breasts. size slow-cooked menu using our

this of dinning view quick potential mechanism delivery in offering to terms complementary quarter casual the year inside accessibility, to this fourth the and In facility. casual a test as on our track we’re

guest model service number and service once At a ambassadors and operating guide changes, Our meet second including implemented our of entry and process, In deploy have many how of combination improve high-level, are times. on technology them a that primarily is priority to our at of our guests deployed inside stores. tested during stores solutions guests our friction people. A their experience. we large have peak stores, consist we reduce and of

initiative involves that seating of which improve times. hosted with Another the our busy results encouraging. the Also, improved introduced area guest is technology. that flow stores, facilitate during majority indicate sports in at to stores, Early guest in we lounge interaction have these metrics kiosk,

Moving to the technology front.

our We upgraded of a have third about point. this asset key at

RFID-enabled We’re fourth workforce implementing during midst in intend platform management the new of out the quarter. Cards roll to and Power our

the value. that bringing effect, is to audience and to our data – leverage to audience we look means, medium. we understanding reaching and news into communicating better. Our ensure better, right target beginning third To priority our target are customer new to our message and choosing This our are understand effectively ways sharpening

the to optimal us, media mix are continue also digital effectively. ensure including we for to reaching our We evaluate target

the optimistic of While linear mix we predominant of a over the to foreseeable media future, remain part our digital. is potential about likely remain

frequency During believe Play five our opportunity message in for weeks promoted Day continues that low the featured four, also three, Eat our Combo. All All Cocktails value offered quarter represent an brand. to but our quarter, We that Week primary our new our media Promotion. Happy I late and Hour & introduced Halo, relatively several with the VR and we for

unit with take biggest The higher of as frequency, better will strategic annually. working guest. loyalty a is which our XX% those or value of delivering more higher team us, drive growth priority the will While result this ultimately is over be into store and connectivity our ideas for we to could the utilization lean believe fourth time, long-term that driver

our We new are expanding pace our have dedicated footprint opening at execute store plan. strong a to a measured on and team

to returns, taking New on excellent even continue stores the on cash impact generate cash sales into system. existing the after account

response pleased store recent openings. very We’re our the with to

New five and Florence, City, we York; Fernando San a opened quarter, in state new second New new one us Staten Lake Massapequa, in and the Northridge, California; California; Valley. York; Utah stores, the During for there; Salt Island,

well on representing unit way are XX new to XX% growth. XX% this We opening stores year, to XX our

our two of stores The square year, As we nine two At format open square the small stores markets XXK stores in last stores and these large to terms range, the towards of expect will that call, are we new skew between footage. on XX,XXX and higher-end including the four this two new feet feet. mentioned stores. and comprise XX,XXX square our are that for will XX remaining of about brand XX,XXX

Looking currently new providing on total signed we leases, store growth XX early XXXX. forward, a and of have lot of us visibility XXXX into a

and Our locations the Canada, including XXX to long-term in format the XX U.S. stores. XX to XXK of to target is open XXX

four front about at are on priorities relevant brand the guests us. and focus the strategic investment in our an and in evolving Our of improving we are excited these among opportunity aimed

discuss to the turn CFO, our and over our guidance. performance to DeProspero, call updated I’ll financial Joe Interim Now

Joe DeProspero

and Thank everyone. morning, good you, Brian,

quoting and comparable guidance, higher adjusted last QX fiscal year, I financial of more provide million. to specifically, million, order me will and compared QX quarterly a that EBITDA year was picture more same results to let our results remind be of XX-week shifted our week. and sales EBITDA XXXX on Before a this you impact we $X.X our $X.X meaningful million year, our year, calendar this to Due this for less result, last summer XXXX has year performance, to of shift comp shift. as a basis week XXXX by week one discuss be calendar in I’ll and seasonality revenue one favorable volume business, our year. our adjusting of one this have our in and $X.X results a reported not In had More directly on week a

Turning of revenues week five store the comparable non-comp from of increased the $XX.X million stores XX.X% in driven year strong comparable from on million fell non-comparable XX On of second $XXX.X year up XX.X%, the Including on reported basis, year. from increased was $XXX.X XX down revenue stores, the XX% sales our store a in stores which $XXX.X the last up quarter. a X.X% million comparable Revenues our to represented prior QX by comparable contribution during million, million the in prior the to now from that highlights basis. quarter, week Total a $XX.X million, our to during opened base basis. week $XXX.X to versus some from quarter.

collectively grew and grew sales sales at Looking other X.X%. while overall by category, food amusement reported sales beverage and XX.X%,

quarter, Breaking the total X.X%, a amusement was prior our on our the basis, down special increase other continuing year walk-in XX.X% a slightly long-term from comp of During business period, reflecting positive. XXX basis comparable revenues, week fell represented points events sales and sales trend. while

category was X.X%, and X.X% food respectively. X.X% and beverage food of terms comp sales, down beverage, was was food and and X.X%. down business Within and In amusement down bar

to the combination greater During period headwind, a cannibalization sequentially of well last quarter, compared year. was same and the the competitive as both as intrusion

XX and of terms and of the new Total by sales X.X% offerings change was offset unfavorable our and Expedition offset XX was pricing basis basis was other Brian impact of decline of amusement offset In margins, utilization Food in amusement cost points Reality. $XX.X higher redemption last the points million amusement of Cost versus QX, beverage favorable year, in doing of and of was pricing. amusement investment Halo food sales content, a beverage year, games, and Jurassic beverage quarter, amusement based on mix including for of was reflecting increase VR burger higher sales XX higher last partially percentage well mix, percentage in impact prizes World in and impact commodity in last and including of and than shifting in sales by beverage and to new driven by points basis impact stores rates. X.X% product sales. same a partially the as our of mentioned, This of gameplay as percentage the period as newer simulation the was a food towards higher a a are the partially favorable food inflation, as and our and compared by as cost Angus other year. sales Virtual

and that our in Please less increase partially from labor a as our in stores, deleverage or cost related points about due resulting of higher wage Our to XX million store continued was media expenses the incremental tests year-over-year, before and operating XX.X%, in higher year, $XX.X Store in and X% from inflation, operating year-over-year digital payroll slightly amortization variances unfavorable impact points occupancy benefits XX.X%. sales percentage for basis to $XX.X in partially our non-comp and and basis VR efficient costs investment by perspective comp of inflation were store reflecting This media space. This quarter, offset the depreciation marketing tend costs Other set. relative expenses, a mind be year-over-year primarily stores by labor by launch. our income mature driven compared newer increase XX higher stores, of at our million in the to areas. store in base was offset small was higher to keep to and our was operating growth non-comp other last our improvements deleveraging stores. comp

sales, were from G&A to year, $XX.X expenses expense. million quarter margin of settlement points $X.X in million, year. Recall year-over-year XX.X%. percentage a second As the down XX declined litigation million a last $XX.X in prior the we recorded basis

this partially compensation lower approximately offset by was up increased Excluding headcount was X% expense, G&A as year-over-year, stock-based expense.

versus litigation million settlement was as with to $X.X of versus basis store in to lineup improved Pre-opening the more points our a XX XXXX. of as This pre-spending the points, associated were XXXX quarter excluding second basis million costs or openings year, year-over-year, G&A XXXX As $X.X the of expense. prior due increase primarily remaining openings. revenues, XXX well percentage expenses

$XX the As up the revenue, On a points due expense, consecutive X.X% up million, EBITDA the and last expense of $X.X XX and year. percentage were XX.X% week $X.X compared grew to resulting a LIBOR for prior the the X.X%. the higher same levels million increases versus quarter driven margins pre-opening and week marking adjusted basis by Adjusted excluding costs was year, EBITDA excluding prior year-over-year. up XX.X%, $XX.X by was a On basis versus million, basis to points EBITDA X.X%, settlement year, our in underlying comparable litigation interest growth. year, XXXX our to share from last increased litigation expense quarter up higher million Net XXnd also in prior XX settlement were the period basis year. rate. program EBITDA the XX.X% of average debt grew EBITDA from unfavorable comparable and of buyback

low XX.X of reflecting balance Shifting base the initiated the of future. new of capital times the resulting million million approximately EBITDA. $X.XX by we quarter, X.X for a effective share per was expanded $XXX our million of At the exercises, dividend reform. on end second quarterly per a lower XX.X%, sheet. We confidence offset rate lower $XX.X of strong of XX.X or last the $XXX driven position year million financial share income our shares. $XX.X for outstanding the of federal the option XXXX. generated under to statutory in of Earlier year income share end million, to net or and in week, We repurchase adopted we compared had $X.XX share by cash approximately $X.XX million, stock rate of quarter diluted Our shares, leverage tax base to debt, net tax partially quarter from of share benefits share XX.X% and a fiscal the period, on diluted initiatives, in compared year in ago authorization by tax this reduced per

quarter, we is with common shares million total our stock approximately approximately available, $XX.X the million. XX, inception-to-date as repurchased of million The the for of authorization. shares During including new still for XXXX X.X million, $XXX September $XXX XXX,XXX

new project $X.XX from now to are our the our store This key outlook year comp basis. higher a lower-end several million Revised at revenues compared higher for the quarter. and mid on be and billion, guidance in up increase comparable sales sales is down now expected a million we single single our to low guidance XX% the $X.XXX to the versus comp XX-week Total billion stores range basis XXXX, XX-week now Turning on second to sequential decline. fiscal non-comp at digits and guidance. We metrics. low during $XX at on guidance XX% outperformance raising to reflects upper-end to prior $XX of improvement previous digits are comparable our to

our continue sales we first-half, are new this under to a stores, confident far roll comparisons. be initiatives, guidance. XX Virtual including Reality, to XX two year stores gain target our including We so XXK traction remains better eight second-half to XX in to our expect and perspective, than stores. development and format open over this easier stores opened of we as comp new With construction, From

net We to up guidance. $XX.X of of from rate share a $XXX is income effective The increase, from $XXX an unchanged on diluted prior upper-end, guidance million prior which million. while are of of million. estimate projecting is range count at million, million. the based income $X the million Net approximately is $X lower-end a is guidance XX%, of $XX.X We down approximately

investments are We is million an from Brian increase of prior prepared EBITDA Net $X be the remarks. incremental initiatives, for guidance of the Revised additions fiscal the tenant while $XXX range capital at allowances prior million. to guidance. to $XXX projected upper-end, million year. unchanged lower-end million $X to discussed projecting guidance million The $XXX landlord up $XXX million EBITDA guidance, payments of reflects after in represents is other our and ongoing in his versus

I on to a of versus of respectively, approximately fiscal you million an that and XXXX want impact in the million, on full-year XXXX year $X less and remind Finally, $XX impact EBITDA basis. week revenue has unfavorable one

approximately $X.X and summer including XX unfavorable first-half million year, of $XX week. the revenue, year, less In EBITDA this to one impact $X.X million margin. will shift EBITDA on basis which on year, us. in mind one I of During QX and this points, This QX basis a of have tends the volume the EBITDA calendar that, this modeling on million margins, the back XX of purposes. points million impact the will to $X.X will The over Brian. for on period slower and and the have an unfavorable be Halloween, EBITDA shift $X.X approximately of on on will will Please back-half had revenue, million, and $X.X basis be the for XXX favorable turn less a million impact revenue, include EBITDA points With higher respectively. week week on keep call impact margins EBITDA

Brian Jenkins

Joe. Thank you,

company Let me team. this lead morning I’m by and to reiterating excited outstanding great honored how close this and

performance our evolving positively are communicating confident over new by improving and news time. on we that comp effectively our offering, will value, and our more sales We focusing service impact

sales, moving the combined We growth comp will shareholder double to capitalize expect our than come. store for count, drive our and to on more to opportunity with ability value years

support we always, continued Buster’s. in lines the & for appreciate your As please and Apriel, interest Dave Q&A. open

Operator

Thank you. Please Jaffray. [Operator Instructions] from And Miller first question go Nicole Piper take ahead. we’ll with our

Nicole Miller Regan

Thank and in bit of your commentary, your a you versus is how and VR that little exclusive you. Brian, and congratulations versus Good results. generic? library to maybe content, proprietary on is branded When generating something about important morning, recent a talked prepared have it

Brian Jenkins

first strongly Well, VR our of to Bachus, really on on platform. And some we hard that. like World. Kevin IP IP about. our proprietary put Games, of Head we deliver our very title Clearly, all, excited extremely the we first we featured of that worked And were felt Jurassic having we that idea proprietary

that’s do. has a that looking what our of desire, at what And this we’re the is release about end title. do set to another of So here with that’s to year and Kevin

on really view build what, to And and deliver. I working feel a time. titles one titles And we library will our Kevin a better that tested going will Jurassic our couple but of And what said, come in try the they’ll strong again, at We that’s time, diligently a they is over one drive we strategy to title new that again, year that, library gameplay, to we more generic-type they guests this lot time World something is like actually more over love one titles drive And a of that’s lean So repeat some of a and lot play, of more as those that’s can play is over year no we’re one if that’s would visit the have. and do. visit. and than the to repeat is into else back just one play not what and that only view a have of to time, library playing get while preference. we’ll will

So Buster’s. that a visit when capita comes we & spend drive guest per to Dave

will think capita, will content options we per consumption to that’s and adding strategy. overtime our help key So drive

Nicole Miller Regan

you. opportunistic And – just a is terms the talk And guess question. thank about and the development seem dividend from been extremely repurchase. certainly, I’m in a of And you’ve a or this it share like growth little obviously because the deployment? sorry, signals capital bit going initiation doesn’t of you final that now pipeline Could the capital, excess consideration with

flow that of units really So simply planned cash And you balanced you initiate is you. a comps back how of improving and this an deployment development shareholders? outlook the to lot a opening obviously allows then Thank big to capital well, dividend? do versus

Joe DeProspero

far Yes, Clearly, the us is concerned. as appreciate question. remains as Nicole, allocation new priority I one the capital for number development store spot

program leaned repurchase recent we have to per able value shareholders idea And implement into thought $X.XX a be our history. to our return share. dividend to be would share of We to another in

that activity. as we of time, of the our good we historical nearly have absolute you financial terms our some it’s about as repurchase rate But on as not position. In feel the same done dollars, impactful referenced, at

be have and way. deliver able that just one-time, relatively shareholders think of low great We in be to a we again, to over leverage new our value opportunity dividend once a to would

Brian Jenkins

feel any we don’t ability will like we’re way, Yes, strong financially. in very and – dividend this grow Nicole, to fix our we

to about not So here. development to curve kind we initiatives store might going that any do growth or set of

Nicole Miller Regan

Great. Thanks, again.

Joe DeProspero

Nicole. you, Thank

Operator

from go Barish Please Jefferies. from take ahead. question next our We’ll Andy

Andy Barish

Hey, guys. good morning,

competition your and continued markets new maybe store store perform is new on mostly if can you give cannibalization. particularly, returns comments wondering us considering well. mean, I to new year Just activity another this your layer and on

both jive sequentially you year-over-year? referenced, So and with how all that of the greater headwind kind does

Joe DeProspero

continues a headwind intrusion greater me, – remain Well, cannibalization competition for excuse us. and and to competitive

populated, skewed new We’re our stores some relatively of we’re markets, California slightly densely are New time, opening more But existing at the same including in York. in and them opening markets. locations towards of

at that at with touted. years our the the we look quarter pretty space. of over looking a And to of space. last time. at – it Few review is what see we it the And coming growing And before, rate what that kind headwind handful future we to success our slightly has to been a of into recent welcome year. some and will will competition ago, forward, competitors a we’ve We new versus based as entrants So some significant well. pipeline, that and into continue in tend has headwinds going we grown and as mentioned anticipate looked than given I significant we the more continue on it of they’re increase prior both

Andy Barish

meaning, sort And line in of sort of cost VR VR that what then with the Is originally your line that Is days attraction? just of a follow-up the of deployment been you week and been hours thought on up there. the in expected VR what utilization, that is and quick with running? labor sort you on and and

Brian Jenkins

often very middle Well, question attraction Andy. launch the of a – summer. the good during We that’s the

the way the time success bodes operational expected. of than depend the we I in happen We of it. actually we execution day sure to attraction lot vary. some may busy we So had wanted that mentioned the and to – and for on would were make some demand attraction. to experience operated who of the game. the the people that two a loading/unloading stores, store, think more of the We the we model think cases and the times year, mandate week very Actually, size the want that get had the in And towards I that happen we throughput

was field our our a was on the game uptime did and also strong. teams from feedback superb The job. think excellent guest in I So the very the just

is quarter. an than we’re make that more And the to expected in attraction did if even we going So attended. it it’s spend we not available labor

school on that, change kids was spark But of at wanted change. you summer, and we we it TV. year. and more featured launched someone course and night be up. operating out to was So that the go out can bit seek it. over a to quite of will We the to operated Obviously, it experience able The than model just on guests game It the weekends. will

Andy Barish

you. Thank

Brian Jenkins

bet. You

Joe DeProspero

Thank you.

Brian Jenkins

you Andy. Thank

Operator

next Sharon Blair. And Zackfia go we’ll ahead. from take our William question from Please

Sharon Zackfia

Hi, good morning.

a to million Do metrics Just year follow-up ticket give can secondarily, I the that’s you the on added it in question. on quarter? you the any us to think, think game be how How then in And I about kind on line $XX games. Andy’s commitments, last on VR greater of forward? there CapEx going the forward? a CapEx on Will do we about game guess, going that the have

Brian Jenkins

Yes.

get Really, on many a before, a but we units to done a per VR launch of paid that. exactly and the terms to time of in is want metrics this my specific that, this us. this in history call this – really here. on maybe somewhere we don’t had what utilization reveal the we was too cap Just want general, was how But in in first for we’ve one not the attraction don’t

we per a penetrate is on really Card cap saw is there So, and with to response. trying favorable play play chip every a Power this. attraction where for – This we’re sold,

some we from it helped do cap cap would to tell driver. was we also view Again, because traffic lifted. create our we it. it separation difficult and our But And response is what So which the because and it We traffic I – favorable F&B. is and create actually quarter. amusement we that helped will way what play. on would our it’s know really it, to like TV, actually a cap, through featured advertised little our guest like in done separation per per was it a have per feel the amusement F&B, some we felt very without the side tend technically it long said, the That from

Sharon Zackfia

the of game? CapEx the on then And

Brian Jenkins

year’s on our sorry. that going On through typically, what right I’m now. to next to I we capital, guide work This we’re we’re going plans know don’t capital do.

Next wrap that we year, the calendar we’ll here be doing year. up as

but – ever plan Jurassic largest launch of clearly, outlays spent we to launch we the we’ve World, titles. for first to this other So titles, one the have and platform on

significant as of many number this platforms we our that on may we was depending have out outlay of platform have a each significant of year, We of in the out the little tweak investment put stores. harder how we in store. units number have and portion VR whether we our some a on So lean we titles in

remember think, have, units. to two I that or actually have stores XX, We right now, I’m XX trying

we bit So into at platform next a the same little big the we investment year. next that won’t going but tweak have may level year,

Sharon Zackfia

Brian, game to investing Yes. on going seeing be been way question initiatives the probably CapEx I there I games flow? well. more you very more ensure been comments will and on and was you’ve in the more forward didn’t frame as thinking on my guess, I the proprietary, that whether under competition think you’ve new the line on

Brian Jenkins

at be Halo, It after our asked on question, investment game large definitely expensive a often great telegenic what’s more It’s games. to be campaign. That’s you Virtual like, marquee of our of tend like feel like have we the Reality, this strategy. the year more here. They media titles that really can’t strategy going to right I level right tend home.

under we’re we’re year. pipeline attractions like that on games the course through and feel have the cycled and a don’t investing I over we of of games So good

of driver, on talked pipeline we’ve right games important. primary we’re before, a As now. important for is is equally primary critically the visit, to it reason – growth working the that is for of and pipeline but is It XXXX reason our stores about new the pipeline the

Sharon Zackfia

Okay. Thank you.

Brian Jenkins

Thank you.

Operator

our Andrew And next we’ll Capital. take ahead. from Strelzik question Please go BMO from

Andrew Strelzik

Hey, good on morning. me. Two for questions VR

some the as The after theaters I’m you But around, with that, to the the like forward? look where retrial lot that anything one, that assuming other first like assess the even get going improve the VR post-launch launch as VR games performance pleased of components hung what with going evolve you that, things like look and to of kind forward how back advertising, opportunities game, was a the saw and maybe maybe number at better trial the you the of the game one? do you movie of TV And and fading could either from the two, see maybe number were of trial. kind areas or of

Brian Jenkins

Yes. in sold The – We the – cards pretty has here. it’s movie. post power attraction is momentum this the with relation utilization game pretty penetration rate, of to steady shifts the continued

on like we much again It we believe like So when the another we We have in that, go to I content. park our in be, got & ride you we we enjoy do visit library the when that know roller that staying as before that experience two I it’s they up as Buster’s. of testing one an one coaster feel least, World going those titles, we visit. think mentioned, continue guest at is experiences consume a theme you just is to additional long say and Jurassic when on a will Dave here to offer will power. thinking is If – people from visit, come as multiple to had build sometimes, and and titles, there more this build our

will the Jurassic built possibly And thinking We’ve a experiential platform title. liked out, as the as we repeat you and as IP. is little more World, well really that, then particularly, the title. game. fundamentally So, that itself, an it build definitely – made as comments here our first was was play library we get bit some We about our game on

to of learnings game, on some be this additional it’s particular the two actually would the do we ability experiential. think here releases and have I

to a the the having that competitive to you – you relative bit seat we production. more is person understand the little into flair, where ability think in I So that to next to you on next are in will things the sits lean something fit the and that

the are the on VR the be highly we variability guest to in front a all fact, spacing designed In have content. element, – production there’s where games currently in visible have

So an visit individual encourage per to plays we’re multiple really player. trying by

So experience they different it ways. in can see everything and

in the you in work. So, have evolve I see that some games upcoming the will we think us of

Andrew Strelzik

had savings X% some we’re squeeze I back-half, in mentioned that. here the And as if for going labor, as on friction the And last growth, just the I think one year. the more be you in in you very on that lapping cost That’s well helpful. can back-half outlook initiatives to some the of things wage of like and

the about really for the we or wage or growth, we should line just labor are So anything think investment the that that like about on back-half? any is hourly thinking incremental there

Joe DeProspero

Yes.

wage referenced, XX, and similar experiencing be been point, partially it Brian I are clearly, anticipate your labor on QX for in Reality, think, Virtual will we was happen going the that a launched we QX, that balance mean, X% to to only year. which as obviously inflation. will I We continue number. June in of incremental us forward, about it’s

on we headwinds on to stale. as concerned, mention It’s to some I been we stores. to that. far it, new labor labor new stores implementing thing partially those is offset And management consider performance quicker. new for labor declining some as – are of else I’ll QX, system benefit us were opening Something deleveraged our with our comp an comp one seen new call do and new a aside, and labor is, in as the that we stores, outperformance want an on initiative system level able to from management are some we’ve get And

the about think labor. to in things the year are of those So balance regarding

Brian Jenkins

It’s something and P&L game. simulation just that just for in impacts about understand comment us. need and additional think one terms a guys how the Reality of you of kind Andrew, probably Virtual to

cost no cost – has sales. of direct it So

feeds redemption like actually a kind game. the But of functions any of other profile does So non-redemption that it the profile cost game. labor redemption have

we provides little win big any So perspective, the view From certainly it’s margin for and us. while good pressure, profit very back-half. does it for us incremental put it in very a it we a think well and meaningfully a as

Andrew Strelzik

Thank much. you helpful. Very very

Brian Jenkins

bet. You

Operator

with our take Vaccaro from we’ll go James. Please Brian Raymond question next And ahead.

Brian Vaccaro

Good morning.

Just a couple of clarifications if I could.

I First, some cadence. couple the and more provide sort the historically, know to any you pre quarters, the around of and starting sales But launch, the with post maybe the saw context and last of cadence perhaps improvement VR could you quarter-to-date? haven’t provided of given the compared monthly comments you comps. on importance

Brian Jenkins

Brian. No,

not typically in to is that, or we expecting on quarter what is within the guidance first-half. in to related four have cadence have back-half trends. improvement comps said that We the relative But we the commented and our suggest are what

let you mentioned. said, we VR quarter. back-half was incremental obviously had tell now, through tougher XXXX, of and was meaningfully We’re VR – And a us over midway rolling second me Joe launched to the

comment want So would take those on I back just to why that. that’s they said all

Brian Vaccaro

enough. Fair to I Switching if right. margins, could. All the

the the On called maybe the or how much from quarter, on isolate quantify out the the put of perspective that pressure second the Could that how launch. dynamic just expect, you Reality line there pressure about some Virtual think labor you modeling should in line, sort component? that the we a you from impacted second-half

Brian Jenkins

a our a about Brian. with that in with labor on amusement our I drives is, again, other we’re structure redemption words, there our game. I are goods of labor – what on exactly, VR redemption the think that cost is our cost game. if – In But in Think redemption going game that. of on line – our build for there than to say associated exceeds cost know more you P&L for that don’t that cost would the associated not sales Again, VR P&L have you about

less think about typical into I again, hit. a like that. I game on contribution there’s think, than it P&L don’t that VR, would we’ll redemption margin So get

Brian Vaccaro

I range one last leverage about? much about capital at the there capacity, want ask the the ago, is increase we I you on that sheet haven’t maybe side. allocation, Okay, a you’re all about change balance basically then leverage right. it’s that So And how around? thinking believe, there and thinking know year seen comfort just on on debt the to and facility credit a new you’re

maybe level of just balance about how on sheet leverage? – Thank So thinking an you. you’re on update right the

Joe DeProspero

one the ones XXXX, us. we our it you low the increase thank first-half past that – or and far one But as of the recently the announced same leverage we much. “target We well has did Brian, ideal call very haven’t I’ll in We ratio”. we is activity pretty XXXX. repurchased this been currently share repurchase as leverage as year. in as really an Yes, significant in Hey, through in our sit for time, sub authorization not said disclosed, have at

something not announced. those some the again, that’s – once things ratio, of leverage a but give So that’s to target are we’ve

Brian Vaccaro

Thank along. All you. it right. I’ll pass

Joe DeProspero

Thank you, Brian.

Brian Jenkins

Brian. Thanks,

Operator

SunTrust. question Please go And with our take next we’ll Bartlett Jake ahead. from

Jake Bartlett

games expect to disclosing of games Great. about kind In impactful Can the historical of you the games without But bigger the And question. compared just talk cadence pace year how of new what of would game? they next rest year? kind of what be of you you you the or remainder of more the year? or frequent. for maybe of what content new the taking kind are? Thanks the to it less context Maybe in for pace be

Brian Jenkins

we’re IP. quarter, do other that on marquee I expect two the in and fourth as we’re title of right what the there XXXX work that we just going to know I that VR to on to a and than have this not we’re planned. today pipeline launch, of the for late titles quarter, comment launch that an have that are VR we’re to We’ve for bit, kind and each to every excited mentioned, we’re we mean, with starting additional year, got, other a focus on now – library we’ll build with is balance proprietary about year, next Well, do trying going to platform. we year specific with to going say, a the

making capital. path capital, So marketable our there when games began – of again, back that increasing we market and and this the

with packages buying games. were we So

right for are that and marquee as titles, this done well. bigger, what focus now we’ve year our Our next really is intent year better, and that’s

Jake Bartlett

Great.

VR you game So other the clarify, late marquee one just in are mean quarter that in year titles more then two VR? to this fourth

Brian Jenkins

Correct.

Jake Bartlett

but $X check, other traffic the and you been any less But VR amusement you’re charge spending, has on on I their VR can can kept commentary so been any on of whether crowded whether around or of the Okay. disclosing kind the loading evidence it we’ve – any don’t talk that trying to And think was accommodate just people spending without get impact they about kind that? there’s that. just people, cards, of out what

Brian Jenkins

incremental we mean, measuring to are are the I the we P&L believe doing don’t we on related – but to what specific be I what the we don’t is want be – Yes. VR, And to on analytics. again, spend.

incremental. We’re – our we we incremental. think given all meaningfully for targeting We don’t not – it essentially each believe analytics, $X it’s and we’re play

So amusements believe not per moved related capita and average spend sold it’s to that’s for the power drive card has incremental. but spend, we helping do all this,

it little if in is that And a what material of it’s all you so building believe I VR is, don’t to – any model take P&L because not assume way. out – crowding we you’re can’t should But side. on on bit it’s out your kind – hit it’s don’t not crowding we incremental, the amusement

Jake Bartlett

improved satisfaction? assuming Got just down perceiving changes And that menu it. back and metrics for they’re surveys about on you’ve are whether helping? experience your the front? and surveys to kind better made the and to progress they can a I guests And maybe of side the gauge you eye with more Are now on it. they seeing any trying elsewhere had surveys with but much in to getting there that’s table is after come there on any it good the with gauge anything Just impact experience simplifying how a customer think trying if VR, came that? the beverage of share on you Maybe – in turn, lastly, your food then time, and you’re like

Brian Jenkins

getting we’re beverage think food I and traction a the of on lot Well, front.

And XX% or have continuing we’re we VP got, who the in has even – the and is really I year. roughly I or how point. mentioned, we menu. reengineer and and to And four at food this simplified as think, the is to about tweak hard last might the of new we pursuing maybe beverage, We think he’s front I off energy so, at aggressively on working the that and in call, F&B early huge mentioned further. look here innovation months retained and hired

in on of upgrading we’ll a sensed before rolled is Speed We the came out But focus year. for here board. be our accounts. We are did we’ve of in investing quality and all-natural later definitely the service he year new a early steak chicken burger this us.

We complex have some fairly we dishes have. that

focused operationally has might received team. simplify our in by very well helpful, how kitchen. stores, we beverage very he towards on eye So keen think the a field our and He’s out, it’s which preparation, food, visiting I been the with

it’s still positive seen early just think menu. and front I launched and so opportunity I we new in get reaction. we’ve better traction think some the of what have here think We us seen And to are some we We’ve than we today.

tell time that the want dinning casual where that first to don’t and how They a the don’t take play one about leadership it’s on we to And mention, think some They a don’t there’s are thing test direction. I don’t So fast feel here early good will and little evolve, guests track they this our the offering, that there’s really the but think experience. of I still did least casual I our we want commitment. we to game at want least know – their to at time. portion want

be So the will test we fast launch arcade. here the are market. casual to Dallas to It approximate in first our step

a actually truck. Events a function We’re essentially, rooms food one of be and the will take it to I think, going of Special

shows food be with resonates taco. particularly that would research millennials street what Our

successful. The quarter. a we’re that, kind And Power to Card a in the traditional penetration taco, be we’re called casual It’s something horizon test read test going to increased extent the would we’ve to about our relative be we fast to and that twisted what’s will of concept. the tacos get that and penetration trucks to and talking So here going been honestly on food it’s want hope TNT food be street sold. fourth but again, lot, we that

accessibility, read would to offering see we’ll overtime. hope then other and increased because be this while to that for penetration makes little see, of roll that sense location out a that Our and would whether we due

Jake Bartlett

Great. Thank you very much.

Brian Jenkins

Thank you, Jake.

Joe DeProspero

you, Thank Jake.

Operator

And Please Group. Instructions] [Operator Anderson take Maxim with Stephen ahead. next question we’ll from go our

Stephen Anderson

follow-up. wanted most I VR to answered. Yes, my good But been of address I these of less business. questions to has morning, wanted beverage on food know side and and or more

food add of have going First Week the promotions you. from Eat & anything I contributed improvement you’re food and new kind Thank and beverage? if ask in to seeing value of to to beverage. All of the the incrementally in in I if ask an And all, improvement what comps not on to wanted wanted terms like Play you’re

Brian Jenkins

quarter Well, was there All we’ve the Every number an we offering of historically was Play did And Day. the we & Combo, not second Day, something done. And Eat had what, that’s weeks a think, for see. I in

was it think the impactful were pretty us I to for week days. and that our weekends solid relative

So more. we is really I do an increased drive I we’re & Buster’s good and think was Dave traffic, our promotional How That area space frequency it utilize that said offer. the focused think now. right a engine, on

We We’re visit. low fairly have. don’t frequent

dining treated We they meal not that casual frequency have. the a as of have We’re don’t the replacement.

have utilized. We boxes that are big under

of might use more. value kind of offerings and to and involve LPO So may I’ve spaces yet ideas our that’s And we’re into, try that going but we to lean as said, some how unlock a determined of – big parks on ideas think front. that the But be going pretty up entertainment. have we’re Theme I what really opportunity unlocked lot that’s to meaningful come some to here. folks in actually of with some

explore suffer price. then there’s said, going our to continue and is quality That maybe so there And is that, we’re that. to we – the

believe the doing, are menu. – we to quality changes we we So we’re making we if our are in which change

Our quality speak here. VP so numerator, to improving of the is Food

think we we that evolve So don’t price.

We’re it both from fronts. looking at

Joe DeProspero

Anything Steve? else,

Stephen Anderson

Thanks.

Brian Jenkins

you, Thank Steve.

Operator

Jon next go Please take with Wells Tower And we’ll ahead. Fargo. question our from

Jon Tower

Hey, thanks for taking the question.

agreements movie the is that titles, platform, it governor greater some Just slowing down with actual of or place right having again, the people your process? what launch? that is the to at what’s on the VR it this in company, content signing license Is

Brian Jenkins

I development the few I this IP of the quite air mean, is getting we mean Well, on balls front. first the and have into foremost in heavily games. the a we before lean

can just and I everything that can was we’re that depending more take sure alone, it’s IP, the standard that governor one that’s just build There games. that bigger and really VR, and if that the the who have to you takes take – as than generic way going our out sometime. that preference proprietary said, time. the But – there they on folks we building – the on IP are be IP, not that the be content they where number but is to both actual. Once But we’re, So do have going I I’m I to that – of have are we time want something not content. has

it I if secured. would move out pick some more we’re couple that, and – can working the So then talented with I could I the would a cycle, studios. folks quickly. we have of IP, development once there, getting up, And pipeline you getting that you And relatively say

Jon Tower

paper process idea of It urgency about test greater testing you. in VR years And, seems getting the pretty early on just several process in a actual yourselves getting having overall a as Brian, terms Thank discuss years? you evolved that had has company over as some And transcript launches. of now success in things how do then to the stores? And date. idea passed company. to comments to on your launch you about a in sense something Can that the like of good thinking versus maybe past faster you’ve with from Okay. see to even from and

Brian Jenkins

been We decade. Well, I’ve listen, – that’s a here question. a great

we constantly. We have at a very that pyramid all strategic business this deeply look and facets of

those happens and in ideas many, projects by thing, as we bring on We distracted the have but opportunities not by what getting to out might to do or we focusing corporate at are so the working a not simplify, faster here happens to big market that many can what try our office, only company. very field,

my So quicker, objectives yes, on of them bear that things to philosophically. matter to bring that is one I simplify focus just and here mean,

Jon Tower

Awesome. Great. Thank you.

Brian Jenkins

Thank you.

Joe DeProspero

Jon. you, Thank

Operator

today’s turn And I this the to conference for speakers closing to session. back any time, or today’s question-and-answer this concludes would like remarks. additional At

Brian Jenkins

great reviewing look Well, with thank guys you results We day. our and have for to quarter your you in time third you forward this December, a morning.

Operator

concludes for This We presentation. you today’s thank your participation.

now You disconnect. may

Dave & Buster's Entertainment (PLAY) 14 Sep 182018 Q2 Earnings call transcript