Double-Digit Unit Growth Planned for FY 2019

DALLAS, Dec. 11, 2018 (GLOBE NEWSWIRE) — Dave & Buster’s Entertainment, Inc., (NASDAQ:PLAY), (“Dave & Buster’s” or “the Company”), an owner and operator of entertainment and dining venues, today announced financial results for its third quarter 2018, which ended on November 4, 2018.

Key highlights from the third quarter 2018 compared to the third quarter 2017 include:

• Total revenues increased 12.9% to $282.1 from $250.0 million, or 15.4% on a comparable week basis*
• Opened one new store, the same as in the third quarter of last year
• Comparable store sales decreased 1.3%
• Net income of $11.9 million, or $0.30 per diluted share, vs. net income of $12.2 million ($9.7 million on a comparable week basis), or $0.29 per diluted share ($0.22 on a comparable week basis)
• EBITDA increased 1.0% to $46.0 million from $45.6 million, or 11.0% on a comparable week basis
• Adjusted EBITDA decreased 2.7% to $52.7 million from $54.1 million, but increased 4.6% on a comparable week basis
• Launched Connect 4 Hoops and House of the Dead: Scarlet Dawn, and laid the groundwork for the December release of Dragonfrost, our proprietary virtual reality title   
• Repurchased 437,000 shares for $25.0 million. As of December 4, 2018, we have cumulatively repurchased 5.1 million shares for $275.6 million under our $400 million authorization

*Comparable week basis: Fiscal 2017 was a 53-week year, resulting in a one-week calendar shift in fiscal year 2018. During the third quarter of 2018, this calendar shift had an unfavorable impact on total revenue of $5.5 million, Operating Income of $4.2 million, Net Income of $2.5 million, EPS of $0.07 per share, EBITDA of $4.1 million, Adjusted EBITDA of $3.8 million, and Store Operating Income before Depreciation & Amortization of $3.8 million, due to seasonality (one fewer higher-volume “summer week” this year versus last year)

“Driven by strong unit growth, we delivered record top line results for the third quarter. Comparable store sales improved sequentially as we continued to make progress on our key strategic priorities. With the  2017 class of stores on track to generate one of our best cash-on-cash returns in recent history, we are more confident than ever in our ability to drive double-digit unit growth and benefit from the large opportunity ahead,” said Brian Jenkins, Chief Executive Officer.

“We are increasing the lower end of our 2018 guidance on key metrics. During the third quarter, in addition to continuing to invest in the business, we paid our first-ever quarterly cash dividend and repurchased additional shares. These actions reflect our strong commitment to enhancing long-term shareholder value,” said Joe DeProspero, Interim Chief Financial Officer.

Share Repurchase Activity

During the third quarter of 2018, we repurchased approximately 437,000 shares for $25.0 million, with an additional 149,000 shares for $8.8 million through December 4, 2018 during the fourth quarter. As of the same date, cumulatively, we have repurchased 5.1 million shares for $275.6 million under our $400 million share repurchase authorization. 

Review of Third Quarter 2018 Operating Results Compared to Third Quarter 2017

Total revenues increased 12.9% to $282.1 million from $250.0 million in the third quarter 2017, or 15.4% on a comparable week basis. Across all stores, Food and Beverage revenues increased 10.3% to $118.8 million from $107.7 million, and Amusement and Other revenues increased 14.8% to $163.3 million from $142.3 million. Food and Beverage represented 42.1% of total revenues, while Amusements and Other represented 57.9% of total revenues in the third quarter 2018. In last year’s third quarter, Food & Beverage represented 43.1% of total revenues, while Amusements and Other represented 56.9% of total revenues.

Comparable store sales decreased 1.3% in the third quarter 2018, the same as in the comparable period last year. Our comparable store sales decline was driven by a 0.7% decrease in walk-in sales and a 6.9% decrease in special events sales. Comparable store sales in Amusements & Other increased 1.5% but decreased 5.0% in Food & Beverage. Non-comparable store revenues increased $43.1 million, or 135.5%, in the third quarter 2018 to $75.0 million, also on a comparable week basis.

Operating income decreased to $15.5 million in the third quarter of 2018 from $19.9 million ($15.8 million on a comparable week basis) in last year’s third quarter. As a percentage of total revenues, operating income decreased 250 basis points to 5.5% from 8.0%, or 90 basis points on a comparable week basis.

Net income was $11.9 million, or $0.30 per diluted share (39.9 million diluted share base) in the third quarter of 2018 compared to $12.2 million, or $0.29 per diluted share (42.3 million diluted share base) in the third quarter of 2017. On a comparable week basis, net income was $9.7 million, or $0.22 per diluted share in the third quarter of 2017.

EBITDA increased 1.0% to $46.0 million in the third quarter of 2018 from $45.6 million in the third quarter of 2017. As a percentage of total revenues, EBITDA decreased 190 basis points to 16.3% from 18.2%. On a comparable week basis, EBITDA increased 11.0% and as a percentage of total revenue was down 70 basis points.

Adjusted EBITDA decreased 2.7% to $52.7 million in the third quarter of 2018 from $54.1 million in the third quarter of 2017. As a percentage of total revenues, Adjusted EBITDA decreased 300 basis points to 18.7% from 21.7%. On a comparable week basis, Adjusted EBITDA increased 4.6% and was down 190 basis points as a percentage of total revenue.

Store operating income before depreciation and amortization increased 1.8% to $65.8 million in the third quarter 2018 from $64.6 million in last year’s third quarter. As a percentage of total revenues, store operating income before depreciation and amortization decreased 260 basis points to 23.3% from 25.9%. On a comparable week basis, store operating income before depreciation and amortization increased 8.2% and was down 160 basis points as a percentage of total revenue.  

Development

In fiscal 2018, we are on track to open 15 new stores, representing 14% unit growth, at the top end of previous guidance. These store openings include 11 large, two small and two 17K format stores, and slightly skew towards new markets for our brand. We currently have 12 stores under construction.

We opened one store during the third quarter in Harrisburg, Pennsylvania. During the fourth quarter, we have already opened stores in Milford, Connecticut and Birmingham, Alabama, which is a new state for us. Later this month, we plan to open our final store for the year in Corpus Christi, Texas, which will be our second 17K format store.

In fiscal 2019, we expect to open 15 to 16 new locations and do not plan to renew the lease for one of our older stores, representing net unit growth of approximately 12%, consistent with our target of 10%+ annual unit growth.

Financial Outlook

We are raising the lower end of guidance on key metrics for fiscal 2018, which ends on February 3, 2019:

• Total revenues of $1.243 billion to $1.255 billion (vs. $1.230 billion to $1.255 billion previously)
• Comparable store sales (on a comparable 52-week basis) decrease of low single-digits (unchanged)  
• 15 new stores (vs. 14 to 15 stores previously)
• Net income of $106 million to $113 million (vs. $101 million to $111 million previously)
• Effective tax rate of approximately 22% (vs. 24% previously) and diluted share count of approximately 40.2 million shares (vs. 40.3 million previously)
• EBITDA of $268 million to $277 million (vs. $263 million to $277 million previously)
• Total capital additions (net of tenant improvement allowances and other landlord payments) of $179 million to $189 million (unchanged)

For fiscal 2019, we expect high single-digit growth in revenue and mid-to-high single-digit growth in EBITDA. We will provide more comprehensive guidance for next year on our fourth quarter 2018 earnings conference call, which is expected in early April 2019.

Conference Call Today

Management will hold a conference call to discuss these results today at 4:00 p.m. Central Time (5:00 p.m. Eastern Time). The conference call can be accessed over the phone by dialing (323) 994-2093 or toll-free (888) 254-3590. 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 7663920.

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 120 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 entrées and appetizers, a complete 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 39 states, Puerto Rico, 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		November 4, 2018			February 4, 2018
		(unaudited)			(audited)
Current assets:
Cash and cash equivalents		$	19,717		$	18,795
Other current assets			82,474			76,112
Total current assets			102,191			94,907
Property and equipment, net			800,724			726,455
Intangible and other assets, net			375,349			375,668
Total assets		$	1,278,264		$	1,197,030
LIABILITIES AND STOCKHOLDERS’ EQUITY
Total current liabilities		$	228,386		$	207,825
Other long-term liabilities			256,403			216,310
Long-term debt, net			368,164			351,249
Stockholders’ equity			425,311			421,646
Total liabilities and stockholders’ equity		$	1,278,264		$	1,197,030

	DAVE & BUSTER’S ENTERTAINMENT, INC.
	Consolidated Statements of Operations (Unaudited)
	(in thousands, except share and per share amounts)
			13 Weeks Ended						13 Weeks Ended
			November 4, 2018						October 29, 2017
	Food and beverage revenues		$	118,807		42.1	%		$	107,690		43.1	%
	Amusement and other revenues			163,332		57.9	%			142,289		56.9	%
	Total revenues			282,139		100.0	%			249,979		100.0	%
	Cost of food and beverage (as a percentage of food and beverage revenues)			31,163		26.2	%			28,387		26.4	%
	Cost of amusement and other (as a percentage of amusement and other revenues)			17,571		10.8	%			16,220		11.4	%
	Total cost of products			48,734		17.3	%			44,607		17.8	%
	Operating payroll and benefits			71,309		25.3	%			57,967		23.2	%
	Other store operating expenses			96,267		34.1	%			82,766		33.1	%
	General and administrative expenses			15,043		5.3	%			13,432		5.4	%
	Depreciation and amortization expense			30,574		10.8	%			25,672		10.3	%
	Pre-opening costs			4,740		1.7	%			5,609		2.2	%
	Total operating costs			266,667		94.5	%			230,053		92.0	%
	Operating income			15,472		5.5	%			19,926		8.0	%
	Interest expense, net			3,321		1.2	%			2,156		0.9	%
	Loss on debt retirement			–		0.0	%			718		0.3	%
	Income before provision for income taxes			12,151		4.3	%			17,052		6.8	%
	Provision for income taxes			295		0.1	%			4,895		1.9	%
	Net income		$	11,856		4.2	%		$	12,157		4.9	%
	Net income per share:
	Basic		$	0.30					$	0.30
	Diluted		$	0.30					$	0.29
	Weighted average shares used in per share calculations:
	Basic shares			38,892,288						41,077,206
	Diluted shares			39,855,648						42,250,611
	Other information:
	Company-owned and operated stores open at end of period			118						101
	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
			November 4, 2018						October 29, 2017
	Net income		$	11,856		4.2	%		$	12,157		4.9	%
	Add back:  Interest expense, net			3,321						2,156
	Loss on debt retirement			–						718
	Provision for income taxes			295						4,895
	Depreciation and amortization expense			30,574						25,672
	EBITDA			46,046		16.3	%			45,598		18.2	%
	Add back:  Loss on asset disposal			120						321
	Share-based compensation			1,757						2,557
	Pre-opening costs			4,740						5,609
	Other costs			6						46
	Adjusted EBITDA		$	52,669		18.7	%		$	54,131		21.7	%
	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
			November 4, 2018						October 29, 2017
	Operating income		$	15,472		5.5	%		$	19,926		8.0	%
	Add back:  General and administrative expenses			15,043						13,432
	Depreciation and amortization expense			30,574						25,672
	Pre-opening costs			4,740						5,609
	Store operating income before depreciation and amortization		$	65,829		23.3	%		$	64,639		25.9	%

 

	DAVE & BUSTER’S ENTERTAINMENT, INC.
	Consolidated Statements of Operations (Unaudited)
	(in thousands, except share and per share amounts)
			39 Weeks Ended						39 Weeks Ended
			November 4, 2018						October 29, 2017
	Food and beverage revenues		$	388,804		41.6	%		$	356,190			42.7	%
	Amusement and other revenues			544,713		58.4	%			478,688			57.3	%
	Total revenues			933,517		100.0	%			834,878			100.0	%
	Cost of food and beverage (as a percentage of food and beverage revenues)			101,181		26.0	%			91,562			25.7	%
	Cost of amusement and other (as a percentage of amusement and other revenues)			60,248		11.1	%			50,481			10.5	%
	Total cost of products			161,429		17.3	%			142,043			17.0	%
	Operating payroll and benefits			217,939		23.3	%			187,610			22.5	%
	Other store operating expenses			284,432		30.5	%			247,663			29.6	%
	General and administrative expenses			45,461		4.9	%			45,172			5.4	%
	Depreciation and amortization expense			87,129		9.3	%			74,447			8.9	%
	Pre-opening costs			17,121		1.8	%			14,626			1.8	%
	Total operating costs			813,511		87.1	%			711,561			85.2	%
	Operating income			120,006		12.9	%			123,317			14.8	%
	Interest expense, net			9,406		1.1	%			6,073			0.7	%
	Loss on debt retirement			–		0.0	%			718			0.1	%
	Income before provision for income taxes			110,600		11.8	%			116,526			14.0	%
	Provision for income taxes			22,815		2.4	%			31,217			3.8	%
	Net income		$	87,785		9.4	%		$	85,309			10.2	%
	Net income per share:
	Basic		$	2.23					$	2.05
	Diluted		$	2.18					$	1.99
	Weighted average shares used in per share calculations:
	Basic shares			39,314,271						41,521,802
	Diluted shares			40,257,231						42,888,659
	Other information:
	Company-owned and operated stores open at end of period			118						101
	The following table sets forth a reconciliation of net income to EBITDA and Adjusted EBITDA for the periods shown:
			39 Weeks Ended						39 Weeks Ended
			November 4, 2018						October 29, 2017
	Net income		$	87,785		9.4	%		$	85,309			10.2	%
	Add back:  Interest expense, net			9,406						6,073
	Loss on debt retirement			–						718
	Provision for income taxes			22,815						31,217
	Depreciation and amortization expense			87,129						74,447
	EBITDA			207,135		22.2	%			197,764			23.7	%
	Add back:  Loss on asset disposal			813						1,205
	Share-based compensation			5,771						7,006
	Pre-opening costs			17,121						14,626
	Other costs			127						(329	)
	Adjusted EBITDA		$	230,967		24.7	%		$	220,272			26.4	%
	The following table sets forth a reconciliation of operating income to store operating income before depreciation and amortization for the periods shown:
			39 Weeks Ended						39 Weeks Ended
			November 4, 2018						October 29, 2017
	Operating income		$	120,006		12.9	%		$	123,317			14.8	%
	Add back:  General and administrative expenses			45,461						45,172
	Depreciation and amortization expense			87,129						74,447
	Pre-opening costs			17,121						14,626
	Store operating income before depreciation and amortization		$	269,717		28.9	%		$	257,562			30.9	%

For Investor Relations Inquiries:

Arvind Bhatia, CFA
Dave & Buster’s Entertainment, Inc.
214.904.2202
[email protected]