Q4 2019 Earnings Call

Ladies and gentlemen, you couldn't hold pretty David todays even bolsters entertaining incorporated fourth quarter 2019 earnings conference call.

This time yards didn't make additional participants do you plan to be anyway momentarily. We appreciate your patience. She please.

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Good afternoon, everyone.

Even busters Entertainment incorporated fourth quarter 2019 earnings results Conference call.

First of all I would like to apologize for anybody wonderful new stores.

On today's conference.

Today's call is being close to.

Chief Executive Officer.

To remind everyone that this call is also being recorded.

Favorable for replay beginning later today.

I would now like to trying to comfortably Mr., Scott Goldman Chief Financial Officer.

Please go ahead.

Thank you, Saudi and thanks for joining us today, joining me on todays call.

Ryan Jenkins, Chief Executive Officer, it's called being recorded on behalf of Dave and Busters Entertainment incorporated Endoscopy right.

Before we begin I, just got down to compete results.

The call your attention to that back I didn't know remarks, certain items, maybe discuss what could not entirely based on historical facts.

Any of these items should be considered forward looking statements related to future events within the meaning that the private Securities Litigation Reform Act at 99.

Oh, such forward looking statements are subject to risks and uncertainties, which could cause actual results could differ from dogs and cats.

Information on the Grace will spot because in certain games have been publishing a filings with the FCC, which are available on our website at www Dot, Dave and Busters Dot com under the Investor Relations section.

Our fourth any current report on form 8-K filed today with the Securities and Exchange Commission, it's something that you lighting supposedly provided by the after you seem to delight.

Oh, that's something to keep talking like Union report on form 10-K for up to 45 games.

Nobody does not currently poor among other factors the temporary shutdown of all the company stores in the labor disruptions to the company, which did not.

That's a figure that series of actions by management.

I think these actions related to the company's outlook for the next 12 months of liquidity exploring financing opportunities and seeking further probably at least somewhat vendors as well as completion will be it the company's 2019 financial statements.

Well I'll, probably might you figures that we will reference to there should be considered preliminary until such time as we thought it was 10-K.

In addition, our remarks today maybe include references to EBITDA adjusted EBITDA in store operating income before depreciation and amortization, which I think investors.

Find them, a generally accepted accounting principles.

That's or should we be big reconciliations of non-GAAP measures to comparable GAAP results Kingdom Commencements released this afternoon, which is also available on our website.

I will turn the call told us about.

Good afternoon, and thank you for joining our call today, which is taking place hunger completely different circumstances.

Any other couldn't for seem just a few short weeks ago.

And we're all aware global Cobot my team and then it.

It's created a challenge unlike anything up company.

Three or the United You Academy has previously experience.

I want to emphasize that I've always said they don't doctors.

We deeply value the health and safety and her team members gap.

Each of the communities in which we operate.

Our Hearts go out to all of our team members and guest.

Who are bearing so much the gift cards.

I'm going to Scott to very briefly review the highlights of our preliminary fourth quarter.

For your company like team the goal.

After that I'll cover the numerous steps we've taken help mitigate negative impact of the ongoing code that 19 pandemic honor because.

Our prepared remarks women comprehensive and trends like what we can share at this time as a result, we will not be taking any questions today.

[noise] now I'll turn the call over to Scott.

Thank you Brian during the fourth quarter total revenues increased 4.6% compared with the prior year period, given by strong contributions almost 37 non comparable stores, partially offset by 4.7% decrease on a comparable stores breaking down comp sales are walking sales decline.

Well its special done sales were up slightly.

In terms of category comp sales I'm using them.

It was 4.1% wont see baggage decreased 5.5% within food and beverage we decreased 5.9% in the bar business decreased 4.8%.

Total cost of sales was 9.8 million in the quarter decreasing 53 basis points as a percentage of sales.

Average cost was 14 basis points favorable that's a percentage of sales primarily driven by price increases and the positive mix impact.

Instead of using another was 71 basis points favorable as a percent himself unbearably governed by capability in the cost of redemption items.

Payroll and benefits expense as a percent of sales was 23.9% or 10 basis points higher year over year due to the unfavorable impact of approximately 4% wage inflation.

Leverage on comp sales any impact of non comp stores.

Other store operating expenses were 31.2% of the person sales up 110 basis points year over year.

Your occupancy costs will give them by higher rent costs associated with lease renewals marketing costs were higher as a percentage of sales you average associated with lower cost.

<unk> expenses were 20.4 million.

27% from the prior year, mainly due to consulting expenses.

The offset by declines and stock based compensation. That's it for some sales GMH seems to have in four basis points.

EBITDA increased 1% to 72 million it was 21% of sales, while we didnt see all sports 80 cents per share versus 75 cents per share in the prior year.

EBITDA was negatively impacted during the quarter or charges totaling <unk> million.

Outside advisory fees, which translated into negative effect of 2.5 million net income or 11 cents per diluted share.

Additionally, in last year's fourth quarter, you, but I was negatively impacted by 1.2 million due to sales and use tax adjustments, partially offset by approximately 400000 dollar benefit due to insurance proceeds related to our Puerto Rico store.

This translated into a negative impact of approximately 650000 on net income for two cents per diluted share.

Excluding the effects of these discrete guidance in both quarters EBITDA increased 6% the 77.4 million from suddenly see money.

Recapping full year generally good record revenues of 1.26 billion increase of 7.1%, including the successful hoping 16 stores.

Same store sales decreased 2.6% and we generated EBITDA of 280.5 million, which was a slight increase from last year.

Shifting to the balance sheet, we had approximately 648 million about getting better at quarter end, resulting in leverage of approximately two times adjusted EBITDA per our credit facility.

During the quarter, we declared a cash dividend that 16 cents for sure and had no share repurchase activity.

With that I would like to thank you for your interest, Dave and Busters, and I will now turn the call back over to Brian.

Thank you Scott.

I thought leading company in our industry, we want or 2020 focused on implementing a number of exciting strategic initiatives to further improve our competitive position and drive enhanced performance.

Along with the rest of World Poker quickly change.

To recap the path and Bob has the covert 19 threat level began to escalate we experienced significant declines in our traffic nationwide, you're getting the week of merchandise.

That weekend several state for now the first mandatory shutdown all restaurants and bars.

Talking about 15% of our stores.

Other state quickly followed on by Friday March 20 up.

You had closed all 137 stores.

This when they are dealing fluid situation, but we are monitoring closely while complying with all federal state and local health and safety guidelines.

Well as government mandate.

At this time, we are unable to predict when mandated shutdown periods may conclude.

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Oh I went to our business may recover after reopening.

Our objective today.

To help you understand the steps we're taking.

Third the company's capital maintaining operating liquidity.

Preserved the critical store, we start capabilities necessary to safely walk in our stores in the circumstances allow.

Over the past three weeks you have been thoughtfully and quickly implementing a comprehensive plan with one simple goal.

The next door.

Basically if we can.

So that we can welcome back out for low team members.

Well not games back on.

Bring falling back into the communities we serve.

We believe we'll be very important as a company emerges from the endemic.

Put us in the best position to achieved that goal and recognizing that all of our stores are temporary close.

We have had to make some very tall.

It's very decision.

Our plan has four primary focus areas.

First.

In order to conserve capital, we reduce plant 2020 capital spending by 70% to approximately 65 million nearly 55 million of this has already been incurred with the remainder primarily contingent on the pace of store openings.

These reductions include temporarily halting all construction on the remaining 14 stores. We had originally planned to open during 2020.

They also include curtailed capital spending on all strategic initiative store remodel gain information technology and store maintenance.

Note that we had already opened one store in March in Chattanooga, Tennessee immediately before the temporary shutdown.

Second.

We made significant reductions in patent operating expenses.

Given the unprecedented circumstances, where we currently pay.

The temporary closure of our stores.

We made that extremely difficult decision to place all of our more than 14000 store L. team members foam for all.

In addition.

We degree store management personnel and corporate staff by nearly 90%.

Reduce the compensation of our senior leadership team by 50%.

We also differ.

Hey, not the bonuses and the board suspended cash compensation all director for the remainder of the year. Finally, we significantly reduce plans for operating expenses DNA and marketing for them.

In addition to those significant reductions we looked at all other areas of the business for additional opportunities to preserve our financial flexibility.

Me too our third focus area capital allocation.

On that front.

We're gratified management's recommendation that span, both the quarterly dividend and share repurchase program.

Then the dividend will consist of approximately 5 million of cash each quarter.

We have not repurchased any shares since September 2019, I do not plan to do so for the foreseeable future.

Our fourth and final focus area is off balance sheet.

In the corn environment preserving liquidity is of Paramount importance.

Well, we drew down the remaining funds available under our existing revolving credit facility, including those bonds. The company had approximately 100 million dollar cash on hand as of March 31st.

As a result of the aggressive action, we have taken and while we remain in full temporary shutdown mode. We've reduced our shutdown period expense burn rate to approximately six and a half a million dollars per week.

It's consists of 3.3 million in rent and occupancy step and 3.2 million in store operating expenses and GNS.

In addition, our weekly but service, it's approximately <unk> point $7 million.

We have also stopped virtually all capital projects and are aggressively managing our working capital deficit by extending payment terms in an effort to limit additional cash outflows.

And we continued to look for additional savings across all of those areas.

We are also in active discussions with landlords and vendors to identify ways to further reduce cash outlays extended payment terms and the pain other payment confession.

That's an example, we have notified our landlords that we do not plan to make our April that payment.

Represents about 50% of the previously mentioned expense bone right.

We're also in discussions with lenders and outside debt and equity providers to amend necessary turns our credit facility and those are supplement our liquidity.

Given the early stages of these discussions we are not in a position today to the Jeff the benefit of these actions.

Due to the combined effects of the kind of environment and the fact is that just outlined we're also not in a position to provide guidance for fiscal 2020 at this time.

Despite the unprecedented disruption pepsico's at 19, Pembina has brought to our industry that fuel business.

We are sustained by the strength of our and during brand and our incredible people.

As a reminder, 2019, we achieved record sales and EBITDA results eclipsing, our recent expectation and pasture result.

We remain the leading Cabot category defining brand in our industry.

Our attractive store model has consistently generated industry, leading by them and EBITDA margins over many years and too many economic cycle and none of this would have been possible without our people.

Our entire leadership team is focused on navigating through this unprecedented environment.

While the aggressive actions weve taken are extremely difficult. We believe that are necessary for the long term health of the company will help position us to safely we opened our stores and emerge on the other side of this crisis and an even stronger competitive position.

Before closing with call.

I want to extend special thanks to those team members across the country, who are working tirelessly for Dave and Busters.

As well as our team members, who are now on furlough, we deeply value your passion for the company and your efforts that have personify the brand have produced industry, leading adult men economic cycles.

We understand the uncertainty created by the unexpected temporary closure of our stores and with you and where families. Good health and safety throughout this difficult time.

I'm proud to be apart as Dave and Busters team. We are acutely aware of the importance of doing our part also responsible business to support social gifting thing in the global effort to mitigate the spread of code at 19.

The same time nothing will blame me and this management team worked Youre in a day, we opened our stores and welcome back our team members and look at.

Everyone can get back to working hard and having fun together.

Thank you for your continued support of Dave and Busters and that concludes today's call.

Thank you again for your support and get investors. We appreciate your participation you may now disconnect.

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