Dave & Buster's Entertainment, Inc. (NASDAQ:PLAY) Q4 2016 Earnings Conference Call Transcript

Mar 28, 2017 • 05:00 pm ET

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Dave & Buster's Entertainment, Inc. (NASDAQ:PLAY) Q4 2016 Earnings Conference Call Transcript

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Presentation
Operator
operator

Good day, everyone, and welcome to the Dave & Buster's Inc. Fourth Quarter 2016 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Jay Tobin. Please go ahead, sir.

Executive
Jay Tobin

Thank you, Dana, and thank you all for joining us. On the call today are Steve King, Chief Executive Officer; and Brian Jenkins, Chief Financial Officer. After comments from Mr. King and Mr. Jenkins, we will be happy to take your questions. This call is being recorded on behalf of Dave & Buster's Entertainment Inc. and is copyrighted.

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

Now I'll turn the call over to Steve.

Executive
Steve King

Thank you, Jay, and good afternoon, everyone. We appreciate your participation in our year-end conference call and your continued interest in Dave & Buster's. Today, I'll review the quarterly highlights and provide an update on our current initiatives and plans. Brian will walk through the key financials and initial 2017 guidance, and then I'll come back and discuss our development and remodeling efforts before we take your questions.

Q4 capped off another strong year for Dave & Buster's. We surpassed an important milestone as full-year sales exceeded $1 billion for the first time. I want to take this opportunity to thank and congratulate all of the D&B team members on this accomplishment. Their passion and dedication to the brand is the key reason for our continued success and why I'm more excited today about our future prospects than ever before.

Despite a challenging casual dining environment and a calendar shift that proved slightly worse than we expected, D&B's differentiated experience across our four platforms, Eat, Drink, Play and Watch, continued to provide some insulation against these trends during the fourth quarter. We delivered an industry-leading comparable store sales growth of 3.2%, close to the midpoint of our guidance, and our non-comp stores continued to perform exceedingly well.

We grew total revenues by more than 15% and operating income by more than 17% during the quarter. Of the 92 stores we operated during the quarter, 26 of those stores or 28% were non-comp stores. Their strong performance demonstrates the broad appeal of our brand as we work towards building out our North American store potential of over 200 stores. I want to point out that during the first full year of operation, our 2015 class of stores generated nearly a 52% first year cash-on-cash return, significantly above our target.

Our promotional strategy is to lead with entertainment, and once guests are in our stores, we want to sell them the complete experience, including our Food and Beverage offering. As we mentioned before,