DALLAS, Sept. 05, 2017 (GLOBE NEWSWIRE) -- Dave & Buster's Entertainment, Inc., (NASDAQ:PLAY), ("Dave & Buster's" or "the Company"), an owner and operator of entertainment and dining venues, today announced financial results for its second quarter 2017, which ended on July 30, 2017.

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

  • Total revenues increased 14.9% to $280.8 million from $244.3 million.
  • Opened four new stores compared to two new stores.
  • Comparable store sales increased 1.1%.
  • Net income of $30.4 million, or $0.71 per diluted share, vs. net income of $21.5 million, or $0.50 per diluted share.
  • Earnings per diluted share were $0.59 when excluding a favorable impact of $0.16 per diluted share from implementing FASB Accounting Standards Update 2016-09 (“ASU 2016-09”) related to share-based payment transactions, and an unfavorable impact of $0.04 per diluted share related to a litigation settlement expense.
  • EBITDA increased 11.5% to $64.0 million from $57.4 million or 15.9% excluding the litigation settlement expense.  
  • EBITDA margin decreased 70 basis points to 22.8% from 23.5% or increased 20 basis points to 23.7% excluding the litigation settlement expense.  
  • Repurchased approximately 1.0 million shares for $67.2 million.
  • Recognized approximately $6.8 million reduction to our provision for income taxes as a result of the excess tax benefits generated by option exercises in accordance with ASU 2016-09, which was adopted in the first quarter. Implementation of the new standard also increased diluted shares outstanding by approximately 418,000 shares.

“Our thoughts and prayers go out to everyone affected by hurricane Harvey, including many Dave & Buster’s employees who have been significantly impacted. We are working to help get them back on their feet as soon as possible. Our three stores in Houston reopened Friday after remaining closed for several days. In terms of the quarter, Dave & Buster’s disciplined real estate strategy and differentiated product offering continue to pay off. We delivered another successful quarter of revenue growth driven by double-digit unit expansion and positive comparable store sales, a testament to the underlying strength of the brand. Our non-comp store base is performing well and we are very pleased with our recent store openings. Meanwhile, our comparable store sales growth has now exceeded the competitive casual dining benchmark for 21 consecutive quarters,” said Steve King, Chief Executive Officer.

“Q2 represented another quarter of strong performance as revenue and EBITDA increased 14.9% and 11.5% respectively. In addition, excluding a litigation settlement, we grew EBITDA by nearly 16% and EBITDA margins by 20 basis points. Our recent debt refinancing improved our capital structure and financial flexibility, enabling us to invest in new store growth and return value to shareholders for years to come,” added Brian Jenkins, Chief Financial Officer.   

“Through today, we have opened eight stores and have an additional nine stores under construction. We now expect to open fourteen new stores this year, representing 15% unit growth, an increase over our previous guidance of twelve new stores. We remain committed to driving 10% or more unit growth over the long-term and continue to foresee a 200+ store opportunity in the United States and Canada alone,” King concluded. 

Share Repurchase Activity

We repurchased approximately 1.0 million shares of our common stock for $67.2 million during the second quarter of 2017 and cumulatively we have repurchased 2.1 million shares for $127.1 million. At the end of the second quarter, we still had nearly $73 million remaining under our current buyback authorization.   

Litigation Expense

During the second quarter 2017, we recorded a $2.6 million litigation settlement expense within general and administrative expenses. This litigation settlement expense recognized in the current quarter resulted in approximately 90 basis points reduction in our reported operating income and EBITDA margins over the same period last year. 

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

Total revenues increased 14.9% to $280.8 million from $244.3 million in the second quarter 2016. Across all stores, Food and Beverage revenues increased 10.2% to $118.7 million from $107.7 million and Amusement and Other revenues increased 18.6% to $162.1 million from $136.7 million. Food and Beverage represented 42.3% of total revenues while Amusements and Other represented 57.7% of total revenues in the second first quarter 2017. In last year’s second quarter, Food & Beverage represented 44.1% of total revenues while Amusements and Other represented 55.9% of total revenues.

Comparable store sales increased 1.1% in the second quarter 2017 compared to a 1.0% increase in the same period last year. Our comparable store sales growth was driven by a 1.1% increase in walk-in sales and a 1.9% increase in special events sales. Non-comparable store revenues increased $34.1 million in the second quarter 2017 to $61.1 million.

Operating income increased to $39.2 million in the second quarter of 2017 from $36.0 million in last year's second quarter. As a percentage of total revenues, operating income decreased 80 basis points to 13.9% from 14.7%. Excluding the litigation settlement expense, operating income increased 10 basis points to 14.8%.

Net income increased to $30.4 million, or $0.71 per diluted share (42.8 million diluted share base). Net income, excluding the $0.16 per share favorable impact of ASU 2016-09 and the $0.04 per share unfavorable impact of the litigation settlement, was $0.59 per diluted share. This compared to net income of $21.5 million, or $0.50 per diluted share (43.3 million diluted share base), in the same period last year.

EBITDA increased 11.5% to $64.0 million in the second first quarter 2017 from $57.4 million in the same period last year. EBITDA increased 15.9% excluding the litigation settlement expense. As a percentage of total revenues, EBITDA decreased approximately 70 basis points to 22.8% from 23.5%, and excluding the litigation settlement, EBITDA increased 20 basis points to 23.7%.

Store operating income before depreciation and amortization increased 15.4% to $85.3 million in the second quarter 2017 from $74.0 million in last year's second quarter. As a percentage of total revenues, Store operating income before depreciation and amortization increased 10 basis points to 30.4% from 30.3%.  

Development

In fiscal 2017, we now intend to open fourteen new stores, compared to our previous guidance of twelve stores, including ten large and four small store formats. We currently have nine stores under construction. We opened four stores during the second quarter in New Orleans, Louisiana (a new state for us); Alpharetta, Georgia; Myrtle Beach, South Carolina; and McAllen, Texas. To date, five out of the eight stores opened this year were in new markets for our brand.

Total capital additions (net of tenant improvement allowances) during fiscal 2017 are now expected to be $182 million to $192 million, up $16 million from prior guidance, reflecting our increased target for 2017 new store openings as well as a strong 2018 pipeline.   

Financial Outlook

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

  • Total revenues of $1.160 billion  to $1.170 billion
  • Comparable store sales increase of 1% to 2% (on a comparable 52-week basis) (vs. 2% to 3% previously)
  • 14 new stores (vs. 12 new stores previously)
  • Pre-opening expenses of approximately $21 million
  • Net income of $109 million to $113 million (vs. $107 million to $111 million previously)
  • EBITDA of $270 million to $276 million (compared to $276 million to $282 million previously)
    • Primarily driven by higher pre-opening expenses and the litigation settlement
  • Diluted share count of 42.6 million to 42.8 million (vs. 43.2 million to 43.4 million previously) (including the year-to-date impact of ASU 2016-09)
  • Effective tax rate of 30.5% to 31% (compared to 34.5% to 35.0% previously)
    • Effective tax rate and net income guidance for full year 2017 includes a $10.1 million reduction in our year-to-date provision for income taxes resulting from the implementation of ASU 2016-09. The requirements of this standard will likely further reduce our effective tax rate depending on future stock option exercises. Our guidance excludes any potential future impacts of ASU 2016-09 on our effective tax rate

Conference Call Today

Management will hold a conference call to discuss these results today at 4:00 p.m. Central Time (5:00 p.m. Eastern Time). The conference call can be accessed over the phone by dialing (719) 457-2615 or toll-free (877) 419-6590.  A replay will be available after the call for one year beginning at 7:00 p.m. Central Time (8:00 p.m. Eastern Time) and can be accessed by dialing (412) 317-6671 or toll-free (844) 512-2921; the passcode is 8776372.

Additionally, a live and archived webcast of the conference call will be available at www.daveandbusters.com under the Investor Relations section.

About Dave & Buster’s Entertainment, Inc.

Founded in 1982 and headquartered in Dallas, Texas, Dave & Buster's Entertainment, Inc., is the owner and operator of 100 venues in North America that combine entertainment and dining and offer customers the opportunity to "Eat, Drink, Play and Watch," all in one location.  Dave & Buster's offers a full menu of "Fun American New Gourmet" entrées and appetizers, a full selection of alcoholic and non-alcoholic beverages, and an extensive assortment of entertainment attractions centered around playing games and watching live sports and other televised events.  Dave & Buster's currently has stores in 34 states and Canada.

Forward-Looking Statements

The statements contained in this release that are not historical facts are forward-looking statements. These forward-looking statements involve risks and uncertainties and, consequently, could be affected by our level of indebtedness, general business and economic conditions, the impact of competition, the seasonality of the company's business, adverse weather conditions, future commodity prices, guest and employee complaints and litigation, fuel and utility costs, labor costs and availability, changes in consumer and corporate spending, changes in demographic trends, changes in governmental regulations, unfavorable publicity, our ability to open new stores, and acts of God.  Accordingly, actual results may differ materially from the forward-looking statements, and the Company therefore cautions you against relying on such forward-looking statements.  Dave & Buster's intends these forward-looking statements to speak only as of the time of this release and does not undertake to update or revise them as more appropriate information becomes available, except as required by law.

Non-GAAP Measures

To supplement its consolidated financial statements, which are prepared and presented in accordance with GAAP, the Company uses the following non-GAAP financial measures: EBITDA, EBITDA margin, Adjusted EBITDA, Adjusted EBITDA margin, Store operating income before depreciation and amortization, and store operating income before depreciation and amortization margin (collectively the "non-GAAP financial measures"). The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The Company uses these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. The Company believes that they provide useful information about operating results, enhance the overall understanding of our operating performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making.  The non-GAAP measures used by the Company in this press release may be different from the measures used by other companies.

 
DAVE & BUSTER'S ENTERTAINMENT, INC.
Condensed Consolidated Balance Sheets
(in thousands)
 
     
ASSETS July 30, 2017 January 29, 2017
  (unaudited) (audited)
Current assets:    
     
Cash and cash equivalents$20,596 $20,083
Other current assets 66,109  55,521
     
Total current assets 86,705  75,604
     
Property and equipment, net 652,211  606,865
     
Intangible and other assets, net 371,343  370,264
     
Total assets$1,110,259 $1,052,733
     
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
     
Total current liabilities$195,022 $177,797
     
Other long-term liabilities 198,917  178,856
     
Long-term debt, net 293,980  256,628
     
Stockholders' equity 422,340  439,452
     
Total liabilities and stockholders' equity$1,110,259 $1,052,733
     


 DAVE & BUSTER'S ENTERTAINMENT, INC.
 Consolidated Statements of Operations (Unaudited)
 (in thousands, except share and per share amounts)
          
   13 Weeks Ended 13 Weeks Ended
   July 30, 2017 July 31, 2016
          
 Food and beverage revenues$118,689  42.3% $107,672 44.1%
 Amusement and other revenues 162,062  57.7%  136,658 55.9%
 Total revenues 280,751  100.0%  244,330 100.0%
          
 Cost of food and beverage (as a percentage of food and beverage revenues)  30,473  25.7%  27,573 25.6%
 Cost of amusement and other (as a percentage of amusement and other revenues)  17,978  11.1%  16,535 12.1%
 Total cost of products  48,451  17.3%  44,108 18.1%
 Operating payroll and benefits 64,453  23.0%  55,203 22.6%
 Other store operating expenses 82,529  29.3%  71,069 29.0%
 General and administrative expenses 16,762  6.0%  13,585 5.6%
 Depreciation and amortization expense 24,847  8.9%  21,434 8.8%
 Pre-opening costs 4,546  1.6%  2,932 1.2%
 Total operating costs 241,588  86.1%  208,331 85.3%
          
 Operating income 39,163  13.9%  35,999 14.7%
          
 Interest expense, net 2,063  0.7%  1,885 0.7%
          
 Income before provision for income taxes 37,100  13.2%  34,114 14.0%
 Provision for income taxes 6,744  2.4%  12,602 5.2%
 Net income $30,356  10.8% $21,512 8.8%
          
 Net income per share:        
 Basic$0.73    $0.51  
 Diluted$0.71    $0.50  
 Weighted average shares used in per share calculations:        
 Basic shares 41,460,651     41,870,680  
 Diluted shares 42,830,873     43,283,834  
          
          
 Other information:        
 Company-owned and operated stores open at end of period 100     86  
  
          
 The following table sets forth a reconciliation of net income to EBITDA and Adjusted EBITDA for the periods shown:
          
   13 Weeks Ended 13 Weeks Ended
   July 30, 2017 July 31, 2016
          
 Net income $30,356  10.8% $21,512 8.8%
 Add back:  Interest expense, net 2,063     1,885  
 Provision for income taxes 6,744     12,602  
 Depreciation and amortization 24,847     21,434  
 EBITDA 64,010  22.8%  57,433 23.5%
 Add back:  Loss on asset disposal 239     303  
 Share-based compensation  2,386     1,637  
 Pre-opening costs  4,546     2,932  
 Other costs  (607)    52  
 Adjusted EBITDA $70,574  25.1% $62,357 25.5%
          
          
          
 The following table sets forth a reconciliation of operating income to store operating income before depreciation and amortization for the periods shown:
          
   13 Weeks Ended 13 Weeks Ended
   July 30, 2017 July 31, 2016
          
 Operating income $39,163  13.9% $35,999 14.7%
 Add back:  General and administrative expenses 16,762     13,585  
 Depreciation and amortization 24,847     21,434  
 Pre-opening costs 4,546     2,932  
 Store operating income before depreciation and amortization$85,318  30.4% $73,950 30.3%
          


 DAVE & BUSTER'S ENTERTAINMENT, INC.
 Consolidated Statements of Operations (Unaudited)
 (in thousands, except share and per share amounts)
          
   26 Weeks Ended 26 Weeks Ended
   July 30, 2017 July 31, 2016
          
 Food and beverage revenues$248,500  42.5% $224,796 44.4%
 Amusement and other revenues 336,399  57.5%  281,521 55.6%
 Total revenues 584,899  100.0%  506,317 100.0%
          
 Cost of food and beverage (as a percentage of food and beverage revenues)  63,175  25.4%  57,212 25.5%
 Cost of amusement and other (as a percentage of amusement and other revenues)  34,261  10.2%  33,047 11.7%
 Total cost of products  97,436  16.7%  90,259 17.8%
 Operating payroll and benefits 129,643  22.2%  111,580 22.0%
 Other store operating expenses 164,897  28.2%  142,599 28.2%
 General and administrative expenses 31,740  5.4%  26,625 5.3%
 Depreciation and amortization expense 48,775  8.3%  42,244 8.3%
 Pre-opening costs 9,017  1.5%  5,837 1.2%
 Total operating costs 481,508  82.3%  419,144 82.8%
          
 Operating income 103,391  17.7%  87,173 17.2%
          
 Interest expense, net 3,917  0.7%  3,995 0.8%
          
 Income before provision for income taxes  99,474  17.0%  83,178 16.4%
 Provision for income taxes 26,322  4.5%  30,505 6.0%
 Net income $73,152  12.5% $52,673 10.4%
          
 Net income per share:        
 Basic$1.75    $1.26  
 Diluted$1.69    $1.22  
 Weighted average shares used in per share calculations:        
 Basic shares 41,744,101     41,765,280  
 Diluted shares 43,182,918     43,217,406  
          
          
 Other information:        
 Company-owned and operated stores open at end of period 100     86  
  
          
 The following table sets forth a reconciliation of net income to EBITDA and Adjusted EBITDA for the periods shown:
          
   26 Weeks Ended 26 Weeks Ended
   July 30, 2017 July 31, 2016
          
 Net income $73,152  12.5% $52,673 10.4%
 Add back:  Interest expense, net 3,917     3,995  
 Provision for income taxes  26,322     30,505  
 Depreciation and amortization 48,775     42,244  
 EBITDA 152,166  26.0%  129,417 25.6%
 Add back:  Loss on asset disposal 884     473  
 Share-based compensation  4,449     2,997  
 Pre-opening costs  9,017     5,837  
 Other costs  (375)    73  
 Adjusted EBITDA $166,141  28.4% $138,797 27.4%
          
          
          
 The following table sets forth a reconciliation of operating income to store operating income before depreciation and amortization for the periods shown:
          
   26 Weeks Ended 26 Weeks Ended
   July 30, 2017 July 31, 2016
          
 Operating income$103,391  17.7% $87,173 17.2%
 Add back:  General and administrative expenses 31,740     26,625  
 Depreciation and amortization 48,775     42,244  
 Pre-opening costs 9,017     5,837  
 Store operating income before depreciation and amortization $192,923  33.0% $161,879 32.0%
          


For Investor Relations Inquiries:

Arvind Bhatia, CFA
Dave & Buster’s Entertainment, Inc.
214.904.2202
arvind_bhatia@daveandbusters.com

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