Q3 2019 Earnings Call
Ladies and gentlemen.
Dave Dave and Busters.
Third quarter 2019 earnings call at this time Youre still make additional participants will be determined momentarily.
She patients you'll see placement in the line.
Good afternoon, everyone welcome to the Dave and Busters Entertainment third quarter 2019 earnings Conference call.
Today's call is being close to that Dan Jenkins, Chief Executive Officer.
I'd like to remind everyone does this call is being recorded and will be available for replay beginning later today.
I would now like to turn the conference over to Mr., Scott Bowman, Chief Financial Officer.
Oh I get your opening remarks.
Thank you all for joining us joining me on today's call a blank drinking <unk> Chief Executive Officer. After call me for Mr. Tankers, They must still be happy to take your questions. It's called being quoted him because he has the gating document it's being incorporated into spot.
Before we begin or discussion on the results I'd like to call your attention to the fact that my remarks, you know respond to questions just certain items, maybe get scratch, which are not entirely based on historical.
And your these I didn't should be considered forward looking statements relating to future events within the meaning that the Cardinal Securities Litigation Reform Act, making that.
Oh its forward looking statements are subject to risks and uncertainties, which could cause actual results again, we don't anticipate.
Yes. It makes it on the various factors and uncertainties had been publishing requiring could be I think C, which are available on the website at www, Dave and Busters Dot com under the Investor Relations section.
Additionally box they won't be references to EBITDA adjusted EBITDA.
Operating income before depreciation and amortization financial matters that are not to form are generally accepted accounting things [laughter] investors should be viewed a reconciliation of these non-GAAP measures for the comparable GAAP results contained in the earnings announcement released this afternoon, which is also available on the website.
Ken all over to Brian [laughter], Good afternoon, and thank you for joining our call today to discuss third quarter results and our outlook for the business.
The quarter total revenue increased by 6% led by continued strong performance from our new stores.
While we continue to drive meaningful progress in our business and overall strategy or comp sales declined 4.1% inline with the run rate trends, we shared on our last earnings call. That's we continued to see softer comps in our music business and impacts from increased competition across the markets we serve.
Sure.
No one could turn to our near term priorities, which we outlined on our Q true Q2 earnings call as we remain laser focused on the execution of these priorities and continue to make progress on many fronts.
Although these initiatives will take time, but before we realize we are encouraged acquire progress to date and feel confident the actions, we're taking will drive meaningful improvement value creation and long term success for the business.
Now, let me share some specific updates on these priorities.
We are progressing well on our first priority of revitalizing our existing stores, we have rolled out our massive 43 foot while wall L. BBB screens to 35 stores to be into the third quarter and it rolled out another 13 wall since the end of the quarter, surpassing our initial target of 35.
We also completed other upgrades to rare reenergize, our dining area and to facilitate customer engagement.
Well all screens give us the capability to become the Premier sports viewing destination in these markets and provide a tremendous opportunity to increase guest frequency and food and beverage attachment overtime.
We are seeing a permanent somebody stores already know, there's more opportunity had to fully realize the potential as these great assets.
Our next step in this initiative involved in programming of content on these screens to maximize local interest and to generate greater incremental traffic and viewership for example in select stores. We are now testing lot of activities around key sporting events.
Such as professional in college football, which we expect to build community and drive increased store traffic.
Another important component of our revitalization initiative is refreshing our menu and James offering and we're excited about the opportunities in these areas.
Work started with in depth customer research, which has provided valuable insights to guide our strategic path forward, we know that our guests want new novel food and beverage offerings as well as games that encouraged social interaction and funk.
For our they walk through we are evaluating options based on this research along with input from the industry, leading consulting firm to help inform future changes.
As a first step we will be testing that more acceptable food offering in our trade, which will feature nuke snackable menu options and select locations for our core menu offering we will continue to evaluate and enhancements including.
Are they more simplified 30 item and then you add the introduction of several new signature insurable items, we will update progress as we move forward.
On the games perspective, we are increasingly prioritizing James encouraged social interaction and fun among larger groups of people, including the planned introduction of new multi player arcade games.
Of new multi player virtual reality platform.
In the plant has seen a physical GLAIC games on select locations.
Our focus on multiplayer games, we are building a robust social aspect into how we enable our guests to play.
Our second priority building deeper guest engagement began with the successful launch of our new mobile App in October .
At the end of October November we have recorded over 600000 guest count do our new App and generated over $14 million, an amusement revenue from the purchase of digital power cards on the.
To put that in perspective for you we had less than 800000 active guest accounts prior to the launch of the gap.
We're extremely excited about the long term benefit the building our customer database, including a significant revenue we expect to drive from the App overtime in the near term, we will be able to communicate to customers directly one on one directly through email text push notifications to more effectively reach our guest longer.
Churn our learnings from this platform will allow us to be much more targeted and it will be supported by significantly improved loyalty program to give our guests increase value then incentive to return.
Looking forward, we will continue to add functionality to our app to come back more effectively with our gas.
And reduce friction in our stores as an example, a one of the exciting near term enhancements, we will be introducing pay at the table Omniab forecast in the first half of next year.
This will be a significant leap forward in reducing friction for gas and improving efficiency by streamlining the payment process.
We also remain focused on our third Ferrari disciplined cost management, we have reduced cost in several areas and continue to realize operational efficiencies in our stores and corporate office and remain on track to achieve 15 million and annualized savings and plant. These savings are helping to fuel our growth.
As we have reinvesting dollars into technology business analytics, and marketing, including digital efforts.
Turning to our forthright, we remain committed to deploying capital to the highest return opportunities. We continue to invest in high returns stores, which we believe it's vital and driving top line sales and return on invested capital.
Since our last call we have made significant progress and continue to optimize our store size. According to market potential. We are officially redesigning our store layouts by reducing the back of house and kitchen areas, while optimizing the sports viewing and arcade areas to provide the best overall guest experience.
We believe these initiatives will solidify opportunities for future growth.
And also allow us to maximize future margins in fact, we have already revisit afford previously underwritten stores in our 2021 class and have a re size them to maximize margin a return potential while preserving revenue capacity.
As I mentioned last quarter, we will manage the pace of new store growth in order to maximize returns and to enable our teams to focus their efforts on advancing our store revitalization efforts.
Although we will not give detailed 2020 guidance until our next earnings call I will tell you that we expect new store unit growth to be slightly lower in 2020, that's compared to the 20 Twond 2019 class.
As always we will continue to monitor the situation ensure we are making the right business decision and will remain open minded about the pace of new unit growth 2021 and beyond.
Finally.
After funding on your store growth in other high return projects. Our priority is to continue returning capital to shareholders.
In the form of share repurchases in dividends.
Year to date, we ever turn more than 300 million to shareholders and expect repurchases dividends will continue to be an important pillar of our capital allocation plans in 2020 and beyond.
We will continue to carefully balance our long term capital needs, while maintaining a prudent balance sheet in terms of leverage.
Over the past several months, we have dedicated significant time and effort to better understand our customer to help inform and shape our strategy.
We believe this work will generate significant benefits and enhance shareholder value going forward and we're encouraged by early signs, especially in our guest engagement initiative, which is advancing rapidly.
As we move forward, we will continue to make sound decisions based on a rigorous test and learn process.
To help ensure success as we expand.
On a larger scale. Additionally, these initiatives will serve as a solid foundation as we further refine our strategic plan to do our annual planning process.
Which will be informed by much of the work that has already been completed or there will be completed in the coming month.
We expect to share more details on this plan as a part of our next earnings call.
Before I turn call over to Scott I'd like to discuss recent change within our IR Department as many of you know during the quarter, our senior director Investor Relations Arvind Bhatia made the personal decision to pursue another professional opportunity we would like to thank arvind for his many contributions to Dave and Busters and wish him.
All the best and his future endeavors. We are currently in the process of transitioning investor relation services to an outside advisory firm.
Now I'll turn the call over to Scott to discuss the quarters highlights our financial performance and 2019 updated guidance.
He brining good afternoon, everyone.
I forget that spending a few minutes discussing a highlight to the third quarter, followed by financial performance and then finish with it really bad.
For the past at key achievements in the third quarter and usually said, we launched our proprietary VR title called Terminator floating the fate, which quickly established itself as well most popular selections are proprietary platform.
We also expanded or test of large format mall at play of the our system into two additional stores name or for the fourth quarter you have already launched a new six pay arcade waiting game called out wheels came on the road and then it's already a top 20 game based on what the wine and can pay the point.
That said it will be available exclusively at Dave and Busters through the end of the calendar year.
Finally in keeping with the objective is delivering more competitive good games in the profit the whole inevitable modern take on the classic being a Paul Paul Paul Lock out. This is a competitive multiplayer game that utilizes mechanical elements in place early CLP technology.
Liberal title that is both in the style getting off to the moment.
Admissions team has great confidence what part of planes between 20, and we look forward to communicating future launches.
We think big beverage two of our recent off mange, the grilled chicken avocado Lance Sandwich ends up in New York strip I think we needed a topical categories. In addition to items from their summertime only time only offering that you make it my time thinking have now underway onto the beverage menu innovations, we note that our customers compete.
I would expect more novel food and beverage offerings.
And we'll continue to enhance and innovate a menu.
In terms of what they call marketing campaign launched our commitment wings and $10 Tellapart promotions on Sundays, Mondays and Thursday, just apples, Dave and Busters at the place to watch football.
In October we also watching your mobile App, which included at the motion for customers to download the app.
The first two months you also resulted in $14 million revenue.
Sure mental blown their customer database. We're also testing other nuances and you have to optimize profitability and exemptions and so far we're seeing great response.
Going forward, we'll continue to test me promotions to bring value to Odessa, leveraging technology and personalized messaging complete engagement.
With respect to new stores, we opened 40 locations in the quarter have opened one additional stores since quarter end. This brings our total the 15 new stores to be here and we expect open one additional still in the fourth quarter totaled 16, new locations for the full year.
He's still little things for the us see towards large format stores split between new and existing markets. Looking ahead, we continue to see significant opportunity and have a strong pipelines available market continued to grow their store base.
We'll continue to evaluate these available markets and ensuring that our store size matches market opportunity.
Made significant progress in our efforts to make their new store last more fishing with will help preserve a strong returns.
The ended the year, we plan to have 136 locations and continue to believe a long term opportunity was 230 to 250 locations in the U.S. in Canada.
Now, let me turn while financial highlights.
During the third quarter total revenues increased 6% driven by strong contribution from about 35 Noncomparable stores.
This was partially offset by 4.1% decrease on a comparable stores, which was consistent with our run rate at the time of her last earnings call increased slightly as the quarter.
[noise], we communicated on a lot Jones call each bank weakness in the news that's mainly due to the goal over the last year's VR launch is paying improved slightly towards the end of the quarter, but we need to headwind.
In addition, whether it had an unfavorable impact of approximately 120 basis points on comps and competitive intrusion and cannibalization continue to be headwinds.
Looking at overall sales by category amusement and other grew 7%, including Doug which grew 4.1%.
In another represented 58% of total revenues during the quarter, an increase of 50 basis points in mix from the prior year period.
Breaking down comp sales are walking sales declined 4.6% how special events were up slightly.
In terms of category comp sales amusement and other declined 3.9% well food and beverage declined 4.4%.
Within food and beverage food declined 4.9% in the bar business declined 3.6%.
Total cost of sales was 52.2 million in the quarter and increased 10 basis points as a percentage there.
This is mainly due to an inflexion didn't beverage well music cost was flat as a percentage sales.
Embedded costs 60 basis points unfavorable as a percent of sales mainly driven by the impact up on them that means promotion and costs related to a shift at the beaches within up our offerings.
Just to kind of was partially offset by the positive impact of 1.7% deep biking, and 1.9% in beverage pricing.
Cost of amusement and other as a percent of samples compared to last year.
And by the positive impact of 1.9% in pricing and a shift to simulation games.
Offset by higher cost associated with our I'd power.
I couldn't payroll and benefits expense as a percent of sales was 25.4% well 10 basis points higher he will be good due to the unfavorable impact for approximately 4% wage inflation de leverage on top stores and the impact of non comp stores.
I just to operating expenses were 300 basis points year over year.
Occupancy costs, given by I won't cost associated with police fuels.
Marketing costs were driven primarily by digital television and digital marketing to drive traffic into promote on mobile initiative.
<unk> expenses of 16.2 million will that be per cent for the flywheel fucking in case it to support it will be installed base any pekin legal cost.
Our consulting expenses.
These costs were partially offset by tight expense controls and reduction in incentive compensation expense.
As a percent of sales DNA increased eight basis points.
EBITDA decreased 13.5% to 49 and was 13.3% and scale bought the levy P.S. with two cents per share versus 30 cents per share in the play here.
EBITDA was negatively impacted during the quarter like charges totaling 15 million related to ongoing litigation in corporate restructuring costs, which translate into a negative effect that 2.6 million on net income.
Thanks per diluted share.
Additionally, in last year's third quarter, Eva benefited from a 2.2 lane insurance, we probably related to our Puerto Rico store.
She gets translated into a benefit at 1.4 million net income.
People, Okay centsper diluted share.
Excluding the effects will be discreet items from both quarters EBITDA declined 1.4% 40.2 million <unk> 42.8, yet.
Shifting to the balance sheet, we had approximately 656 million of outstanding debt equivalent, resulting loved makes up approximately 2.3 times EBITDA, which is within our targeted leverage range of 2.0 to 2.5 times EBITDA.
We purchased approximately 2.4 million shares in the third quarter, the $97 million and had approximately 173 million remaining under the existing authorization at the end of the cool.
Additionally, we declared a quarterly cash dividend up 16 cents, okay during the quarter, which represented a 7% increase over prior quarter.
Turning now to guidance based on recent trends wouldn't anymore at fiscal year 2018 guidance as follows.
Total revenues are expected to be in the range at 1.847 billing to 1.3 by 4 billion.
This compares to prior guidance of 1.338 going to 1.39 billion.
Second growth of 6% to 7% versus the prior year.
We now expect full year comps to be in the range of 93% negative 2.5%.
This compares to previous guidance negative being a half percent negative 2%.
If injecting net income to be in the range of 94 million to 98 point versus prior guidance, but 91 million 219.
Guidance is based on an effective tax rate of 21.5% to 22%.
Prior guidance up 22% to 22.5%.
Finally, EBITDA is expected to be in the range of 275 million to 280 million versus prior guidance at 272 million to 280 to that.
Thank you for your interest and Dave and Busters, now I will turn the call back over to Brian .
Well, thank you Scott.
I'm confident we are on the right track to capitalize on our leadership position in a rapidly growing and highly competitive market.
Just because we've done over the past 37 years, we will continue to succeed by investing in innovation and enable us to deliver unmatched entertainment engagement and satisfaction for our guests.
2020 is setting up to be a year of exciting changes and new experiences for our customers and our team is energized by the potential we see in our business.
I'd like to close by thanking the entire Dave and Busters team for their focus and hard work as they strive to delight our guest every day.
As always we appreciate our shareholders for your continued support and interest and Dave and Busters now we would be happy to answer your questions. Cody. Please open the lines for Q and <unk>.
Absolutely if you'd like to ask a question. They sing my pressing star one in your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is enough to layer signal to reach our equipment. Once again that is star one if you'd like to ask a question.
Well take our first question from Andy Barish with Jefferies. Please go ahead.
Hey, guys I, just a couple of things first on the.
The content, how do you see you know VR app, there kind of a year and a half now I'm looking forward to 2020 is it going to continue to be.
So when a new titles or or kind of harvesting.
You know a little bit of what you have been and.
How how do you think it's you know it's performed in terms in terms of driving incremental customer visits.
Well as we said on the call part of our crusher.
Our captive shares than the rollover the dark so I sort of overall contributor to the business, it's not as powerful as it was when we first launch the platform, but we still like the platform. It does allow us to introduce proprietary content and so it's still in the mix as our plans that we have is at 20 twond.
Andy will have likely will have two titles that will launch next year and so I don't think you'll see us a rolling out a three a year on that platform in fact were.
We're looking at a two alternate platforms right now well have to and tests that are different form factor.
So yeah, we are looking to to widen and that a little bit and so we're not gonna be.
Huh.
Just solely focused on on.
The current platform yeah.
Okay, and then just secondly on labor in the quarter you know really.
You know kind of kept that in line and flattish you know is there anything you know sort of idiosyncratic to the quarter. As we started looking at you know some of the cost cutting or anything we should be aware of you know for the Threeq, you, especially given its kind of about <unk>.
Seasonally low quarter aware you did hold the line pretty well on on that on that expense and considering the comps.
Well as we indicated on last quarter call, we could implement some cost reductions in in the core in the prior quarter and some of that was focused her out off peak labor as well as some centralization or special event sponsored so.
We were we were successful in accomplishing that and as Weve because you mentioned are.
You know hourly labor was actually just slipped slightly was actually slightly better on a quarter year over year. Despite you know comp pressure and overall labor was just slightly worse.
And that's with some onetime charges related to that restructuring so.
The team just really did a fantastic job and implementing those cost reduction initiatives at the same time are.
Our guests Polska sat scores you know really stayed right in line with the prior year. So.
It's a good outcome overall.
Thank you.
Welcome.
Thank you all know move onto next question from Nicole Miller with Piper Jaffray.
Thank you very much good afternoon.
Two questions. The first is around the prepared commentary talking about.
The sports as an opportunity and it kind of sounds like you're taking what you had remodeled PTC kinda revitalizing it and I was wondering if that's the way to think about it in essence, what do you activating so are you activating the consumer discovering you or.
You.
Discovering new relapse consumer or something else all together. Thank you.
[noise]. Thank you Nicole.
I'll just just to clarify load that you were assessed necessarily at were.
Activating the old sportswear, we we invested and a new sports area took some of our dining rooms, the coal and put in a these 43 foot L.E.D. screens. So we're introducing that cost new technology, new energy into art.
Dining rooms religious C met our position is one of the best in innovative sports viewing destinations in this country.
So what we are now working on his programming around that asset they're they're great assets. So we are we're looking at some programming around that.
Specifically right now we have in test in a couple of stores lives hosted events where local.
Radio.
So celebrities as well as some.
And then you sporting sports celebrity So we'll see how that goes what we are we're looking to leverage disease with asset in a broader way then we have in the past.
Like that's maybe enough I'm not so getting it right out of office apologizing, which move on but it's supplementing you know the work that you had been recently done and then activating essentially programming again my words that yard space. When did you learn from the previous remodel and let's call. It the probably the only billiards area sorry, very generally that's leading you to conclude.
As you know taking another chunk to use it for this kind of similar.
Well in our view he gave back to some of their revitalization efforts.
Under with back and earlier in the decade.
We viewed the sports offering as a very strong.
Big component of that effort, yeah, while we're changing the physical plant look and feel can be a little more modern and contemporary we were also adding the watch element and we recognize that are currently our dining rooms or the least visited space in our in our full Walt.
What we were seeking to do with spring and.
Asset into that area bring energy to the space.
ER location in the store that guest would want to go visit and really those efforts to drive SMB attachment rate.
And not have it before they get location that is.
At least desired location in our store. So I think the tool and we saw good success with that in our Dallas score as we as we made that improvement there and I think it will take time to bill, but we believe we're very encouraged by this asset the are and what we're gonna be able to deal with that overtime.
Okay. Thank you that's very helpful. In just a second last question what other snackable options in the our catering midway.
It's not ordering platform attack attached out is there any technology do you have to order from the restaurant Ariad eventually be kind of evolved and app in anyway anything along those lines possible.
Ah. This first the first locations, where we are standing up the this idea of today.
Food court with Snackable there'll be roughly five Ah things that you couldn't purchase along with.
Beer selection as well the signature drink from from this location within the I paid.
You will be ordering it from a person so there won't be technology involved other than normal Pos.
At this stage.
Okay. Thank you very much.
You're welcome you know.
Actually I know some Jake Bartlett with Suntrust.
Great. Thanks for taking my question, Brian you mentioned that Terminator or maybe what you got the Terminator has.
Ah mixed very higher has been a a popular VR platform I'm also though the while walls you rolling those out to traditional stores and you actually the quarter you see like like regional for improving it would you give any commentary on the current trends and whether that be improvement has continued.
Kinda like like you had last quarter.
Oh, well, who you know obviously, where we were excited about how quickly we were able to scale.
But while all improvement that we've set about to accomplish over the course of the quarter. We met our goal of 35 and pushed onto a few more units again very very early on and than that initiative terms of.
Hello, again build community around that asset but.
And Terminator has risen till the second most popular title the Jurassic World still number one.
Very strong IP and Jurassic world, but so both of those I'm really kind of late in the quarter you know the assets as a while all over the course of Declawed quarter Terminator late in the quarter.
As we sit here today.
We're essentially in terms of comp performance, where essentially in line with where we.
And that Ah Ah.
Our two three or two three results at around down 4%, so or tracking right are consistent with our guidance here and yeah. We got some very big weeks in front of us with a holiday season, which we're very excited about biggest weeks from the year.
Our in front of us and where you know believable shaping up a a good Christmas season here.
Got it and what we could terminate or freely recently launch can you use that.
You know we would still have some staying her throughout the holiday season, I guess with my question as you lap Ragen Frost of which I don't think mixed very high but just just how do you view your current content and into holiday season versus versus last year spreads.
Well I can look like I saw a term terminators is more successful than Dragon falls water from the prior year in my view.
So and we're not actually featuring that from a big way on our and our immediate at this moment so.
I'm not sure if I was it's I would call it a push.
And as I actually think about sort of.
In last question just on on the content for 2020, a a you mentioned two more VR names. It sounds like some of these multi player platforms or are in cash or would you describe them as.
Maybe beyond test in your platforms that could really have a have a meaningfully impacting 2020 I'm just trying to understand what would what how confident you are them on the content for 2020.
Well the to the our attractions that we haven't tests right now it was actually tested both of them into and 29 team and.
There and four stores right now we've seen some you know great potential was actually both to the platform. They are both multi player.
Attractions are there both lend themselves to itself you know socialization competition collaboration.
Things that were looking to try to scale.
In terms of our mix of entertainment offerings, both very high energy.
So you know where we haven't made a final call on.
Many we're gonna do it's highly likely that will do some of the either or both of these attractions and 2020, we haven't made a filing stimulation very unlikely that that we would scale it across entire thing.
Got it bodes big format, what I'm in particular is a very big four and a high profile game.
That's a.
Pretty big amount of spacing or in a lot of pay it's also very impactful looking HM.
So well, we'll make that determination here in the first part of the year on how far we're going on and welfare that little more broadly on the next call Inc.
It could just to get to establish kinda tag onto that so to that I mentioned, the a hot wheels game that performing really well you know, but again. It's it is just been rolled out and then the palm game, which I will admit I do remember the original.
Yeah, that's that's a different game, but a multi player as well and just talking with the nations, England. They came to the shows and conferences and they they are probably more excited than there had been in a little while just on the opportunity out there in the new games that are coming out. So it does seem like there's more content available out there and yeah, we do.
What has been in quite a few things in the Hopper appreciate that we're excited about that we think we'll have a pretty solid lining up you know that's beginning to next year.
They can area. We've you know it's tack on that little bit a week, we will be focusing on multiplayer games large away all that.
Maybe some single player games will be heavily focused as we look at.
The games that are available out there aren't on prioritizing those games or multiple players can play.
Great Great you just got last question on their prior guidance had included anything to new eating onetime charges or there is no longer contemplated or how should we think of those.
Ah, yes, so that to me and one time trying to gauge that was you know that's one at that time of what we thought that we would see.
What I would say that we feel like Weve taken most of these charges you know at this point.
And so we feel like because what we're talking a core for.
Based on your kind of getting past most of the restructuring.
Okay. Thank you very much.
Yes I.
Thank you Jason.
Thank you as you know some Jeff summer with Gordon Haskett.
Great. Thanks bigger picture question starts I'm just curious how is your strategy has evolved to combat a lot of this and competitive approach and you've seen over the last several years or are you doing anything differently in the markets other than most.
Impacted by encroachment.
Well I [noise].
Just work, we're really focused on overarching strategy refreshed right now for the entire brand you know, we're we're as I said before we're not going to stop the onslaught of investment coming into the space.
Competitive.
In terms that are they're building in and around US you know we are focused on is our strategy and what we're doing and we're picking a comprehensive look at the business right now in partnership with.
Jack Henry events to really helped us revitalize the brand and earlier in the decade, we have going through a fairly comprehensive I'm out of work around.
In death customer research really trying to understand.
Our core consumer attitudes that really drive the behaviors and obviously they were trying to drive is more guests coming through the door and most frequently so that's really informing our strategy as we think about what we're trying to accomplish from a food perspective that is right. It is getting.
And rise to some of these test and learn pilots that we're putting in place with a few sense of urgency right now which on the food pharma is around refreshing the menu with some of those preferences. This notion of signature shareable items. We have and then you change that were currently putting than past around that.
The snackable accessible idea that that I mentioned earlier, so we're attacking that right now from against perspective, we know our guest a really really looking for social games. So that is why we are emphasizing multiplayer games right now that happens for a little while but we are happy.
That is why we are on testing a physical gain.
Oh opportunity in our stores and what I'd say physical games I'm really talking about.
Large format, China, Sangha Twister, shuffleboard cornhole, some of those games and bringing that into a space.
To allow for our guests to socialize together with friends and family. So well and then it is also this work is in forming the look and feel bookstore from hospital revitalization plan for rent, we where a number of ideas, we have around store layout or number one and maximizing our while all right now.
Now.
Creating some spaces that are more conducive for social interaction.
If you think about our K today.
You know you're out we played and often here and you're doing it alone. So we're really looking at trying to.
I have our food Dove and entertainment options collide. So we can.
Increase our penetration across the brands to work working with urgency.
Across the entire brand to activate these plans right now.
Okay. That's helpful. Just a follow up on that in terms of the dot work with what's Jackman in revitalization programs you pursued in the past can you just.
Remind us what type of capital commitment did those programs require and I realize that with a while wall you've already putting capital to work, but in terms of.
Theoretically what could lay ahead or lie ahead in terms of future capital commitment if jackman decides to do something I'm, a little bit more aggressive.
Well I've heard first I want to clarify you know what we move forward with is what the company is kind of go forward with in terms of what we feel like a strategically correct.
The Jackman team as it was a great partner for us to help us amplify some of the ideas that we have so.
Fundamentally these would be our calls and what we thought we decide to based off some rigorous test and learn that we are in acting and putting in place right now.
The prior activity and revitalization effort, we were spending in the neighborhood of about two and half million dollars a store but.
That case, we were touching a lotta elements of our stores, we called it daughter, Bard and we were touching the outside so we don't expect full scope of this to be in that same Zip code.
Okay, and just last one would be for more breeze, but outside of unit development. I think you guys largely was held your first look at.
Slide 20 guidance, what's nice released its interest or do you provided some revenue gross and EBITDA growth numbers, but folks do you know not from a structural standpoint are there any factors in play that.
Oh, well either lead to another year of EBITDA margin contraction or allow you to sort of break discipline of EBITDA margin contraction as you moving down 20.
Oh, that's that's a good that's a good question gap and a lot of what we're talking about today.
Really.
Focused on getting comp store sales going into right direction and investing in high return stores and if he focused on those keep names and we have you know solid initiatives behind both of those you know, especially the comp store peaks.
We feel like that's the best path, you know to EBITDA margin expansion and so that's what we're really getting God.
Alright, thank you.
Yeah.
Thank you we'll take our next question from and just translate with BMO capital markets.
It is actually going on for Andrew So I think you touched on this or whatever but just wondering if you cannot maybe give us any additional insights on what sorts of data you're collecting can.
And it sounds like you're already doing some this already but I just kind of curious what do you think the timeline will be to sort of fully leveraging a that data for things like more targeted advertising.
He offers and any other strategic initiatives overtime.
Good question, Dan We're Super excited very very optimistic about our mobile app on but really that's given us.
For to bring in first party data and away that we've we've never had in history. This brand so.
I'm very successful launch the national locks in October .
I think if you heard my prepared remarks, you know weve.
Gained about over 600000, new guest accounts and I say guest counts that means we have a email address and I phone number.
And that compared to about 800000 active gas accounts that we had previously and I want to say after that means they either came into the store and purchased and or played a game. So.
Significant movement and too short months, so very very encouraged by that.
We have seen higher forgot spend by the guest that download the app and bye.
I've seen a better frequency, we're measuring frequency of visits for our after users relative to the other controlled way it.
And we've seen more recharge activity as you may recall, one of the capabilities of the App is to do a quick recharge on your phone without having to go to a person or that are key also.
And you know we're now while we're still trying to get guest acquisition onto the platform and we'll continue to to really drive that build a bigger database we are.
Rapidly cavity and into using that the database to reach our gas kind of more targeted relevant manner. So we have often doing began to do email contacts that.
Ah are different depending on the guest behaviors and how to work with augusta's.
Low on their shifts and Hadnt and then for a while then we might slip on then offer if I guess has a lot of chips still on their card and hadn't done and then we're just we encourage revisit so that's an area that we are I'm really trying to develop and build out right now.
As you May remember from the last call that is also an area, where we're reinvesting some of these cost savings in terms of a team and technology and tools to allow us to really capitalize on what I just database, it's very exciting for us right now.
Great. That's that's really helpful. And then you know maybe just kind of building off you kind of touched on adding additional functionality.
As you kind of you know move along with that over time, obviously pay at the table. It sounds like something that's it's going to be on bigger than official are there any other specific functionality for you guys and kind of maybe targeted as maybe longer term additions to the I'm just wondering if there's anything incremental there.
Yeah, we actually have Oh.
A number of capabilities that are in the pipeline and.
We're looking to build out overtime on yeah, well on what I really want to mention right. Now is the one that's near term, which is a pay at the table capability of the App because that is close them right now, but yes, we have a number of other things that were looking to features.
Looking to that half of the half overtime can make it.
Even more relevant for the guest and I'm driving day funding them in a in a better way.
Yeah, I think I think the important thing to be able to take away. It's just that you know when we get done yet and the team put all their thoughts together I mean, it it was long term in nature and so yeah. The platform that we chose you know definitely had a longer term not roadmaps and in mind and so.
We can continue to make enhancements and.
An increase of functionality over time, so that's that's a big piece of it so as a customer database goes and we you know you need to add more functionality on the athlete shapes no see better returns from it but it definitely has the platform to eat out and we have a pretty robust roadmaps.
Great. Thank you for taking the question.
Good afternoon.
Thank you will kick in his question from Stephen Anderson with Maxim Group.
That's a good afternoon, and a sort of reference or something you a rough as mentioned on the call about the up.
About the easier comparisons year over year as news on the obvious things on the food side of business, but are you see how do you see also the views inside the business, where you saw so aggressively better comps as a core progress.
Progressed, and a you mentioned weather as well once it seems you didn't match.
I guess he has hurricane impact up from Hurricane story now that.
Yeah sure so.
You know me I couldn't be side as you get to kind of look at quarter end, even looking forward [noise].
We had you know some benefits in the core because you know we had arranged promotion.
For a period of time on Sunday Mondays and.
Thursday, which we could not had in the prior quarter because they came in with the quarter. We had a few days [laughter] most part chiefly due rolling over and I know weve promotion on those few dating and probably there's some good benefit I think I'd be looking at Ti for a we get athlete, we'll have more of a like for like.
And promotion on billings, and so that will make.
No a little bit tougher compares to up Andy.
If you flip that around on the eastern side.
Yeah, we started to see some improvement, especially in the quarter and.
So that's encouraging so as we get into the fourth quarter, we're thinking that that will continue somewhat in the as you know some conclusions.
Why that is going up a lot of it is what we've been talking about you know what the mobile apps and just gain more awareness in so yeah, that's pretty tight so that you know that we'll be continuing into fourth quarter. We think we do have you know some tougher comparison in fourth quarter.
So we're also taking into account.
Great. Thank you.
Thank you will take on his question.
Chris So cool with Stifel.
Hi, Thanks, it's actually a public on for Chris.
Just curious whats been the average sales lift at locations with a while walls are you seeing any common factors among allocation center, you know maybe doing better than others.
First of all it's it's really early on we you know we go things over the quarter over quarter feedback from the stores is doing really fantastic. We have some stores that are foreign are really really well in Boston, we want to go.
Make sense effect, they have new awards [laughter], but it's early but as a class there on a slightly better pretty close another controls what I'd say right now so it's not knock it out of the Paul yet or water flows with what we're going to be able to deal with this asset.
Okay, great. Thanks, a second questions just.
You've called out weak late night Ah Daypart sales in the past. This is still the case and do you believe has anything to do with customers kind of saying in ordering third party delivery and de view that as a risk to the day part for the company at all.
Well just two questions in there I just in terms of all our daypart it.
Our weakest day part continues to be like like really well.
And that's been continuation for will probably two to two years now.
I don't know that I attribute or call sales pressures to.
At home all doing delivery ordering I am I right now we attribute much more to competitive intrusion.
Where are we can actually see markets, where we're performing very very well stronger close the stores performed well and then we have impacts from a competitive intrusion into that so I I don't attribute.
A bigger pressure being delivered.
You know were ordered entertainment.
That you know primarily people visit us for our entertainment offering on game offerings that first and foremost obviously, we'd like to get more the food occasion, but so I.
I think that part of it delivers not not not particularly significant.
Okay, great. Thanks, and just you know last ones speaking at a competitive intrusion looks like a lot of competitors are going to kind of accept lower margins to offer more value than the largest player in the segment right. Now do you think that eventually that dynamic will make it kind of difficult to recover immersion, even with improving you know same store sales performance or do you believe it's just a matter of.
You know increasing the sales.
Well I don't I don't you know our our checks on a watch our competitors are offering in terms of pricing a comparative to us I don't know I don't view us as being a balanced with our competitive set I I do you do that they may not look.
Very good from a margin perspective, but I think that's a lot more due to their operating model meaning.
A lot of competitors have broader offering with a lot of attended attractions, which put a lot of quest for on the.
Margin profile, so and that's why we're very careful about.
When they make a decision to add an attraction that requires some attend that or something like that we want to make sure that feels very incremental and it's going to be I'll talk about it falls right before we actually going into it.
Great. Thanks, Thanks for taking my questions.
Sure. Thank you want.
And what's Gonna stone like asking questions you know from Brian can you. Please send Raymond James.
Hi, Thanks, and good evening.
Wanted to circle back in awhile walls, and she or what's the average cost of the Wow law and was that the primary reason for the increasing capex guidance for the year.
[noise] I'll take the first and then I'll hand, it over to Scott on the second.
I I said on the last call I really didn't want to disclose the while all investment are now for four or we have a couple of a.
Providers.
Oh water supply and what about equipment right now and I think we've been successful and getting some very attractive.
Purchase price the as we've installed those so are you know for competitive reasons that I don't really care to.
Put all the exact number on that.
So.
Yeah. When you look at the overall no capex you need to increase and the Guy I'm dead lot walls or do they were I'm, a big portion of that.
But we also had a couple other thing just from a timing perspective, you know relating to.
Landfill just for one of the future stores tend moved up into.
This year than we had a sale leaseback transaction that will get pushed into early next year. So.
The pieces to that equation.
Okay, and I think he said 35 units that you've completed a lot of all in with 14 more planned for 19 has a decision made to be a yet to roll it further into 2020.
Well just clarify quietly we.
You know like hats off to our core development team and really purchasing team who are able to scale 35 units over the course of all of our third quarter and well what I said, if we've actually gone another 13 over the course so far.
Over the course of Q4, we have three more on path. So that will take us to 51 units since.
You know, obviously week to week fix some of the stores that were they can accommodate that's kind of asset and at this point, we've scaled up to a level that work on a little going through broker time, a little though we're going to look we're going to turn our attention to leveraging that asset that's left.
So our plan for a moment.
All right understood and then Scott on the 3.3 million dollar charge that you highlighted in the third quarter could you map that between the different line items, how much in DNA, how much in labor, how much and other op ex if it was maps to those three lines.
Oh, Hey, you know they the bulk of it will be yes other store.
Operating expense.
And he has the Scott will be that they most of that and then you know a a small portion of it.
Maybe better there to that in that will fall into operating payroll and benefits and DNA.
Yeah.
You know without the kind of restructuring charge.
Our.
Operating labor and benefits at the store level.
We would have actually been slightly favorable year over year.
Okay.
Some itself so.
Yeah, that's about two thirds at world the following that and they're still operating.
Okay. Thank you.
But.
Thank you assess conclude today's question answer session licensing the conference back over to management for any additional for closing remarks.
Well. Thank you very much for your time this afternoon, and we look forward to reviewing our fourth quarter results with you in April .
We also wish everyone, a safe and happy holiday season, and look forward to seeing that water. There are many dnbi locations, there saying publicly.
<unk>.
Thank you that does conclude today's conference.
<unk> for your participation and you may now disconnect.
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