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Dave & Buster's Entertainment Inc. Announces Third-Quarter 2016 Financial Results

by Dave & Buster's Press Release
Posted On: 12/7/2016

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TAGS: Dave & Buster's Entertainment Inc., Dave & Buster's 2016 third quarter, Steve King, Dave & Buster's revenue

PRESS RELEASE

Source: Dave & Buster's Entertainment Inc. | Released: Dec. 6, 2016


Achieves Net Income of $10.8 Million and Diluted EPS of $0.25
Delivers 5.9% Increase in Comparable-Store Sales and 42% Adjusted EBITDA Growth
Raises Full-Year 2016 Guidance

DALLAS--Dec. 06, 2016 (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 2016, which ended on October 30, 2016. The Company also raised its guidance for the full year 2016.

Key highlights from the third quarter 2016, compared with the third quarter 2015 include:

Total revenues increased almost 19% to $228.7 million from $192.8 million.
Comparable store sales increased 5.9% vs. an 8.8% increase.
Opened two new stores compared to one new store opening and one store relocation.
Net income of $10.8 million, or $0.25 per diluted share, vs. net income of $4.6 million, or $0.11 per diluted share.
Adjusted EBITDA*, a non-GAAP measure, increased 42% to $48.9 million from $34.5 million. As a percentage of total revenues, Adjusted EBITDA increased approximately 350 basis points to 21.4% from 17.9%.

* A reconciliation of Net Income, the most directly comparable financial measure presented in accordance with GAAP, to Adjusted EBITDA, is set forth in the attachment to this release.

"Dave & Buster's delivered exceptional quarterly results and we are pleased to be increasing our annual guidance. Our strength was broad-based as we experienced momentum across the country and throughout the quarter. We generated a 5.9% increase in comparable store sales during the third quarter, lapping an 8.8% increase from the prior year, and 14.7% on a two-year stacked basis. Our comparable store sales growth has now exceeded the competitive casual dining benchmark for 18 straight quarters. Guests responded well to the conclusion of our 'Summer of Games' promotion, along with our subsequent football-related promotions," said chief executive Steve King.

"Once again, we set new records for third quarter revenue, net income, and adjusted EBITDA. We have also now delivered 25 consecutive quarters of Adjusted EBITDA growth on a trailing twelve months basis, representing a compound annual growth rate of 20% and margin expansion of 1,100 basis points over that same time period. Our third quarter margin improvement represented our best performance this year as we continued to leverage our operating costs and benefitted from the ongoing mix-shift to the higher-margin amusement category," added Brian Jenkins, Chief Financial Officer.

"We now expect to open eleven new stores this year of which six are in new markets for our brand. This exceeds the upper-end of our initial target of nine to 10 store openings. Our development pipeline is more robust than ever before and we remain well positioned over the long term to capitalize on the changing retail dynamics affecting big box operators and malls. During 2017, we are projecting eleven to 12 new store openings, representing unit growth of 12% to 13%. Our long-term target for annual unit growth is 10% or more and we continue to foresee a 200+ store opportunity in North America alone," King concluded.

Review of Third Quarter 2016 Operating Results

Total revenues increased nearly 19% to $228.7 million from $192.8 million in the third quarter 2015. Across all stores, Food and Beverage revenues increased 13% to $101.3 million from $89.8 million and Amusements and Other revenues increased 24% to $127.3 million from $102.9 million. Food and Beverage represented 44.3% of total revenues while Amusements and Other represented 55.7% of total revenues in the third quarter 2016. In last year's third quarter, Food & Beverage represented 46.6% of total revenues while Amusements and Other represented 53.4% of total revenues.

Comparable store sales increased 5.9% in the third quarter 2016 compared to an 8.8% increase in the same period last year. Our comparable store sales growth was driven by a 5.7% increase in walk-in sales and a 7.6% increase in special events sales. Non-comparable store revenues increased $26.2 million or 106% in the third quarter 2016 to $50.9 million.

Operating income increased to $18.7 million in the third quarter of 2016 from $9.5 million in last year's third quarter. As a percentage of total revenues, operating income increased approximately 330 basis points to 8.2% from 4.9%.

Net income increased to $10.8 million, or $0.25 per diluted share (43.3 million diluted share base), in the third quarter of 2016 compared to net income of $4.6 million, or $0.11 per diluted share (42.9 million diluted share base), in the same period last year.

Store-level EBITDA* increased 34% to $59.6 million in the third quarter 2016 from $44.5 million in last year's third quarter. As a percentage of total revenues, Store-level EBITDA increased approximately 300 basis points to 26.1% from 23.1%.

Adjusted EBITDA* increased 42% to $48.9 million in the third quarter 2016 from $34.5 million in the same period last year. As a percentage of total revenues, Adjusted EBITDA increased approximately 350 basis points to 21.4% from 17.9%.

Development

In fiscal 2016, we now intend to open a total of eleven new stores (vs. ten to eleven stores previously guided) including eight large and three small store formats. We currently have nine stores under construction.

We opened two stores during the third quarter in Summerlin (Las Vegas), Nevada and Fresno, California for a total of seven stores during the first three quarters of the year. During the fourth quarter, we have already opened three stores in Toledo, Ohio; Silver Spring (Washington, D.C.), Maryland and Oakville (Toronto, Ontario) and plan to open one additional store in Daly City (San Francisco), California.

Total capital additions (net of tenant improvement allowances and other landlord payments) are now expected in the $148 million to $153 million range (vs. $130 million to $140 million previously) and include development costs for store openings, six remodeling and related projects, new games and maintenance capital.

In fiscal 2017, we intend to open a total of eleven to twelve new stores. These openings will skew both toward the large store format and new markets for our brand.

Click here to see Dave & Buster's complete third-quarter 2016 announcement and condensed consolidated balance sheets.


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