Dave & Buster's Entertainment Inc (PLAY) 2015 Q4 法說會逐字稿

Good afternoon, everyone, and welcome to the Dave & Buster's Incorporated fourth-quarter 2015 earnings conference call. Today's call is being hosted by Steve King, Chief Executive Officer. I would like to remind everyone that this call is being recorded, and will be available for replay beginning later today. Now, I would like to turn the conference over to Jay Tobin, Senior Vice President and General Counsel, for opening remarks. Sir, please go ahead.

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

Before we begin our discussion of the Company's results, I'd like to call your attention to the fact that in our remarks and our responses to your questions, certain items may be discussed which are not based entirely on historical facts. Any such items should be considered forward-looking statements, and relating to future events within the meaning of the Private Securities Litigation Reform Act of 1995. All such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated.

Information on the various risk factors and uncertainties has been published in our filings with the SEC, which are available on our website at daveandbusters.com, under the Investor Relations section. In addition, our remarks today will include references to adjusted EBITDA, store level EBITDA and pro forma net income, 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.

Thank you Jay, and good afternoon everyone. We appreciate your participation in today's quarterly conference call, and your continued interest in Dave & Buster's. 2015 was another record-setting year for our brand, with revenues, adjusted EBITDA and adjusted EBITDA margins all reaching new milestones. In fact, the great momentum we experienced through the first three quarters continued through the fourth quarter as well, resulting in a performance that was well ahead of our expectations, despite tough comparisons and some weather related setbacks.

Our fourth quarter -- and for that matter, the entire year -- is indicative of what sets Dave & Buster's apart from conventional casual dining, a uniquely customizable experience that always provides guests something new across our four platforms: Eat, Drink, Play & Watch. Only at Dave & Buster's can guests enjoy the latest and greatest games, the best viewing areas for live sporting events, great food, and one-of-a-kind beverages under one roof, at a great entertainment value. Brian will walk through the financial details and then provide our guidance for 2016, but first, I'd like to discuss fourth-quarter highlights and turn the call over to Dolf, who will discuss our 2016 plans.

On the top line, we grew total revenues by more than 13%, inclusive of a 6% increase in comparable store sales, which was at the high end of our implied guidance. Within our comparable store sales gain, our primary driver was walk-in sales, which grew at 6.9%, while our special events business increased 1.8%, which we attribute in part to more competition in some of our markets. We were also delighted that the flow-through from our comparable store sales teams, along with the revenue contributions from newer stores, enabled us to set a new bar of performance for store-level EBITDA and adjusted EBITDA margins during the fourth quarter. The metrics were also aided by improving food costs, as well as better than anticipated strength in the opt-in rate for our e-ticket initiative, and as a result, significantly lower redemption cost.

On the marketing front, early in the quarter, we focused on sports and football related messaging, tied to our D&B sports branding. Towards the end of the football season, we focused on holiday-themed promotions, and introduced a new, limited time, exclusive SpongeBob game. Our media strategy consisted of national cable advertising, focused on D&B Sports, and during selected periods, kid-related channels such as Nickelodeon and Cartoon Network. And while targeted messages to younger guests is only a small subsection of our cable advertising buy, we did experience a lift in kid entrees, and sales growth during day parts when we normally see more kids.

Comparable-store sales were negatively impacted by an estimated 110 basis points because of Winter Storm Jonas, which took place Friday through Saturday in late January, and dumped 3 feet of snow in parts of the mid-Atlantic and Northeast. Over part of that weekend, we closed 10 stores, a couple of which we closed for more than a day. But overall, we had 18 stores that were significantly impacted. Despite this challenge, we were able to extend our [out] performance, relative to Knapp-Track, to 15 consecutive quarters, with an approximately 600 basis point differential over the affected 15 week period.

There were also two calendar shifts of note during the fourth quarter, but they essentially offset each other. The first, we were negatively impacted by the Christmas and New Year's shift from -- to Friday from Thursday, but this was counterbalanced by Super Bowl, which moved into the first quarter of 2016 from the fourth quarter of 2015. Although the Super Bowl is the quintessential sports viewing event in any calendar year, it is also the single biggest at-home party day of the year, and while this day has improved for us with the introduction of D&B Sports, it's still a slower than average weekend. On a two-year basis, comparable-store sales rose 16.5%, which was down sequentially from the 17.5% gain in the third quarter. However, if you take into account the weather impact, the two-year stack metric would have been about the same as what we had in our third quarter.

You may also recall that we rolled out a new menu in October, which we discussed on our previously quarterly call, and it has garnered positive feedback for items such as Bang Bang Chicken, Pepperoni Pull-Aparts, and our Glow Kone drinks. As you probably already know, menu innovation is a hallmark of our brand, and our guests always appreciate that there's a new entree, appetizer, dessert or beverage to experience at Dave & Buster's. It also speaks specifically about the popularity of some of these new menu items that we've introduced over the past couple of years, and how it's affected our sales mix. The clear take-away is that guests respond positively to new culinary and beverage experiences. This has in turn resulted in comp food and comp beverage sales that have long exceeded Knapp-Track.

Lastly, as referenced earlier, our electronic ticket conversion resulted in a 250 basis point improvement in the quarter in cost of sales. The opt-in rate for guests is over 90%, and since completing the conversion early in the third quarter, amusement satisfaction scores remain quite strong. An increase in simulation game play has also resulted in fewer e-tickets issued and lower redemption costs. And while there can be no assurance that the trend will continue, they have certainly correlated directly to the rollout.

Looking ahead, we are excited by what 2016 holds for our business. Let's now hear a little bit from Dolf on some of our key 2016 initiatives for growing top line, and also increasing our profitability.

Thanks, Steve. Dave & Buster's clearly has great momentum, but we're always looking at different ways to become better across the board. This afternoon, I'd like to touch on what we're doing to build sales and further improve operating margins, so that we can elevate our brand and business to the next level. More specifically, I'm going to discuss how we're going to refine initiatives that have worked so well for us in the past, and then layer and new initiatives we believe will drive results in 2016.

From a guest target perspective, our emphasis remains on play-together young adults. 21 to 39 year olds are our core target, given their interest in exploring new amusements as well as new food and beverage offerings. They also have a passion for sports viewing in a social setting. In addition to this audience, we have tried to appeal to two secondary targets, which are families, who visit us on a walk-in basis, and corporations having party events. We will continue our strategy of targeting all of these groups, with new news of interest to them. This will involve at least three launches per year of new games, new food and new drinks that are all marketed on national TV and complemented with a limited time offer, to build excitement and a call to action.

With respect to amusements, we launched a number of new games this past year, with a higher emphasis than ever before on links to other entertainment properties, such as movies. Examples of this include the Star Wars Battle Pod and Jurassic Park. Whenever possible, we're launching new games under a window of exclusivity, which means guests can only enjoy the game at D&B for an exclusive number of weeks or months. We have also run games promotion such as playing new games for free for a limited time, which provides our guests with more fun and greater value.

This year, we will build on these practices, and have a number of exciting, visually impactful games lined up, many of which are linked to either movie or video game franchise themes. In 2016, new game titles will include Luigi, of Mario Brothers fame, Ghostbusters, an enhanced version of the Star Wars Battle Pod, and Star Trek. In each of these cases, we have exclusive windows where these games will only be found at D&B for some length of time. We are also excited to explore the possibility of promotions, enabled by our new e-ticket technology, which has colored power card swipes. Today at D&B, you will see green swipes on the redemption games and blue swipes on the simulators. Promotions aimed at these different categories have the potential to feature certain games or play types, and we will capitalize on this new capability in 2016.

Turning to food and drink, as you may know, we launched new, quote, Fun American New Gourmet, unquote, food and beverage options, at the same time as we launched the new games, so that we're always conveying new news on multiple fronts to our audiences. We know that all of our guests, but especially our play-together young adults, are very attracted to new experiences and new sensations. Our R&D and marketing teams, led by CMO Sean Gleason, have done an outstanding job in the development and marketing of new products. In fact, 35% of total food sales consist of items that were introduced in the last four years. This includes 58% of burger category sales, four out of seven burgers, and 31% of appetizer category sales. In 2015, we were pleased with the success of the Hottie Burger, the Buffalo Wing Burger, and the Brookie Tower Dessert. These products were all designed with great taste, visual impact for TV and fun in mind.

Also in 2015, we were pleased with the expansion items we added to our proven drink platforms, such as the Corona Rita, Mojito, and Snow Cone lines. We also added new platforms such as Glow Kones and Tiki drinks. And just to give you some context for the importance of innovation to our beverage sales mix, 17 of the top 40 cocktails we introduced in the last -- were introduced in the last four years, since 2012, and this represents over 40% of cocktail sales having been introduced in that timeframe.

In 2016, we will be introducing even more new drinks under these proven platforms, and we will also pilot and test additional platforms, such as dry ice vapor drinks. In addition, we will introduce nonalcoholic snow cones and/or [helix] glass lines, aimed at our family audience. Regarding special events, this category amounted to 11% of overall sales in 2015. And although this represented a modest growth rate on the heels of an even stronger walk-in business, it still grew 2.8%.

In Q4, we upgraded and modernized the party room decor in 20 stores across the country. The timing of this upgrade was such that we do not have conclusive numbers yet with regard to the exact impact of this investment, but we know anecdotally that we have reduced the visual disparity between our remodeled spaces and these older showrooms. Another important move made in the fourth quarter was to launch our upgraded website. Site navigation for guests was made more intuitive, and the site is much more functional for those on mobile devices. These improvements serve both the walk-in as well as our special events guests.

Turning to Watch, which is what we call the sports viewing part of our business, of the seven promotional windows we run each year, two are focused on sports. For both March Madness and football season, we target sports viewers by advertising on sports channels, notably ESPN. We involve sport show hosts, and create food and drink items and promotions aimed at the sports viewing audience. For example, we ran all-you-can-eat wings during the beginning of football season and on Super Bowl Sunday, in order to see Dave & Buster's as the place to watch sports on TV.

We also continue to test technologies and in-store programming to elevate the sports viewing experience. One example is the Tunity technology, which allows viewers to listen to audio for any and all of our different TV screens through their personal phone, or on a speaker box at their table. We know that big screens and high-definition visuals are important to our guests, and are therefore committed to providing great sports viewing in all stores across the country. We are continuously evaluating the quality of our TV packages, and have a process where we upgrade these over time. This applies to legacy stores, and is also incorporated into our thinking as we execute our remodels.

I'd like to share with you now some thoughts regarding our margin improvement, and also quality initiatives. In these, we have shown great discipline in controlling costs, which has in turn yielded adjusted EBITDA margin growth. As Steve referenced earlier, we launched our e-ticket innovation and rollout, which led to multiple benefits, including reduced amusement COGS, higher guest feedback scores, and an increase in simulator play.

I'd like to also make a point regarding labor cost management. Along with others in our industry, we face upward pressure with regard to labor costs. We also remain committed to opening new stores according to our plan and the guidance we have provided our investors. Combined, these factors require us to take a highly disciplined approach to managing labor. In 2016, we will be re-certifying all store management teams on labor management practices, to ensure that we utilize our labor forecasting and scheduling tools as optimally as possible.

Effective new store openings, comparable store sales growth and improving margins have been, and will continue to be, our key areas of focus. Our training and incentive compensation programs are designed to optimize performance from all managers in the Company, and align our efforts in each of these areas. We also continue to keep a close eye on the impact of new initiatives and new product rollouts on the guest experience. In 2015, we were able to drive improvement in guest scores in each of the areas of guest enjoyment, food and beverage quality, games played, sports viewing and staff attentiveness. This year, we will be repeating those programs and initiatives that worked well before, while enhancing them so that they are even more impactful for our guests.

In closing, I would just like to emphasize that in 2016, we remain committed to ongoing innovation to keep our concept fresh, entertaining and differentiated. And now, we will hear from Brian, who will walk you through the numbers.

Thank you Dolf, and good afternoon everyone. Let me begin by just thanking our D&B team members across the US and in Canada, for delivering yet another impressive fiscal year and fourth quarter here at Dave & Buster's. Once again, through their hard work, they enabled us to exceed our revenue, adjusted EBITDA and pro forma net income guidance in a meaningful way. Furthermore, despite the weather headwinds that Steve mentioned, we were also able to deliver comp sales at the top end of our guidance range.

For the quarter, total revenues increased 13.1%, to $234.2 million. That's up from $207.1 million in the prior year. Revenues from our comparable stores increased 6%, to $180.3 million, up from $170 million, while revenues from our non-comparable stores increased 46.3%, to $55.5 million. That's up from $37.9 million in the prior year. These strong results were despite weather headwinds, softer but still positive comps in the state of Texas, and some cannibalization due to the fact that eight of our new stores in 2015 opened in existing markets.

In addition, the four store openings in the fourth quarter were later this year, relative to the three store openings in the previous year. This resulted in fewer operating weeks from our newest locations, on a year-over-year basis. Now, as a reminder, a store does not enter the comparable base until it has been open at least 18 months, as of the beginning of each fiscal year, and stores closed as of the end of the reporting period are removed from the comparable base. We had 59 stores in our comp base during the fourth quarter.

With respect to category sales, we continued to experience a total sales mix shift to the more profitable gaming side of our business, as total amusement and other sales grew 16.3%, while food and beverage collectively increased 9.9%. During the fourth quarter, amusement and other sales represented 51.7% of total revenues, reflecting a 140 basis point increase from the prior-year period. Breaking down the 6% increase in comp, amusements rose 8.5%, food sales increased 3.6%, while our bar business grew 3.2%, for a combined food and beverage increase of 3.5%.

Turning to cost, total cost of sales was $42.9 million in the fourth quarter, and as a percentage of sales, improved 160 basis points. Food and beverage costs as a percentage of F&B sales were 20 basis points lower than last year. Our food commodity inflation was flat for the quarter, while approximately 2.2% in food pricing drove improved margins versus the prior year. Please note that the full-year commodity inflation was about 3.5%, but we look for that to moderate in 2016, and are projecting a flat to 1% increase in commodities.

Cost of amusement and other were 250 basis points lower than last year, reflecting lower paper ticket costs driven by our e-ticket initiative, and a reduction in overall redemption costs, as Steve mentioned. Note that we will begin to lap the e-ticket initiative in the second quarter of this year, and will have completely cycled over it by the beginning of our third quarter. Total store operating expenses in the fourth quarter, which includes operating payroll and benefits and other store opening -- I'm sorry, store operating expenses, were $114.4 million, and as a percentage of revenue, decreased 160 basis points year over year, to 48.9% of sales.

Similar to the prior quarter, we leveraged our marketing occupancy and labor related costs on the strong comparable store sales growth. Our operating payroll and benefit cost improved 120 basis points, as we experienced leverage on both hourly and store management labor, and also had a favorable year on overall medical claims. We experienced wage inflation of approximately 3% during the fourth quarter, primarily due to the higher minimum wage rates in both California and New York. As we look ahead, we are projecting wage inflation of approximately 3% to 4% in 2016, which is higher than the 2.5% experienced in 2015.

Store level EBITDA was $76.9 million for the quarter, reflecting growth of 25.7% compared to $61.2 million last year, an improvement of 320 basis points, to 32.8% of sales. This is the highest store level EBITDA margin we have ever generated during a fourth quarter.

G&A expenses were $14.6 million, an increase of $1.5 million compared to last year, but as a percentage of revenues were 10 basis points lower, at 6.2%. The increase in dollars was primarily driven by better than expected performance, resulting in higher stock-based compensation.

Pre-opening costs totaled $3.8 million compared to $1.6 million in the 2014, reflecting the number, the timing and the size of our new store openings relative to last year. Recall, a larger format store typically incurs about $1.4 million in pre-opening costs, while our smaller format stores incur about $1 million. All four of our fourth-quarter 2015 openings were large format stores, whereas in the previous year, we had one large format and two small format stores.

Taken all together, our adjusted EBITDA grew 28.9%, to $66.4 million, and margins rose roughly 340 basis points, to 28.3%, representing another record quarter for us. Net interest expense for the quarter fell to $2.4 million, from $5 million in the prior year, and that was driven by our lower interest rate under our recapitalized debt, as well as reduced debt levels due to the debt repayments that followed our May 2015 refinancing. We generated net income of $23 million. That's $0.53 per share, on a diluted share base of 43.1 million shares, compared to net income of $14.7 million, or $0.34 per share, in the fourth quarter of last year.

Now, on a pro forma basis, which we believe provides, really, the best baseline view of the business, our net income improved to $22.8 million, or $0.53 per share on a diluted basis, compared to net income of $14.1 million in 2014. We have included, in our press release, a reconciliation of our GAAP results to these pro forma results.

Now turning to our outlook, as we referenced on our third-quarter conference call, we view 2016 as a year of more normalized growth, coming off the two best years of growth in the past decade for D&B. Still, we anticipate delivering results that are above our long-term financial targets of approximately 10% growth in total revenues and low double-digit growth in adjusted EBITDA.

With this in mind, we're issuing the following annual guidance for 2016, which ends on January 29 of 2017. Total revenues are expected between $967 million and $987 million. We anticipate comparable store sales growth of 2% to 4%, with stronger expected growth in the second half of the year, given the tougher comparisons we faced in the first half. Note that we will have 66 stores in our comp base for FY16. From a development perspective, we are targeting 9 to 10 new store openings, and we expect to deliver adjusted EBITDA ranging from $243 million to $251 million.

Our effective tax rate is expected to range from 36.5% to 37.5%, and we are projecting net income in the range of $74 million and $80 million, with a diluted share count between 43.3 million and 43.5 million shares. And finally, we are planning net capital additions, after tenant allowance and landlord payments, of $120 million to $130 million, driven by our development cost for our new store openings, our remodeling projects, as well as new games and maintenance capital.

With that, I will turn the call back over to Steve to make some final remarks.

Thank you, Brian. I want to touch first on the ongoing remodeling program, and then transition into an update on new store development. In 2015, we completed three comprehensive remodels, which includes adding D&B Sports branding elements, along with updates to the exterior of the dining room, the bar and the front lobby. We also enhanced an additional five stores with D&B Sports lounges, and improved the viewing in several other stores.

Over 70% of all locations feature this D&B Sports branding. By making these changes, we're continuing to take these facilities to the next level, really attracting guests to come more often and enticing new guests to experience a one-of-a-kind dining and entertainment destination. This year, we're looking at six comprehensive remodels, and enhancing three additional stores with D&B Sports lounges. By the end of 2016, we intend to be substantively complete with our sports-related remodeling projects.

Turning to development, in the fourth quarter, we opened four stores: Friendswood, Texas in the Houston area, Glendale, Arizona in the Phoenix area, Springfield, Virginia in the great in Washington DC Metro, and San Antonio, Texas. For the full year, we opened a total of 10 stores, including the Buffalo, New York re-lo. In 2016, our plans call for, as Brian mentioned, 9 to 10 stores, of which one has opened, and an additional five are under construction. Four store openings will be in markets where we already have a brand presence, and if we hit the top end of the range, six store openings are in new markets for D&B.

In terms of square footage, we will continue to use the entire range between 25,000 and 40,000 square feet. Three stores will be 30,000 square feet or less, essentially our small stores. Three will be 40,000 square feet or more, our very largest stores. And the remaining three or four stores will be between 32,000 and 36,000 square feet. During the first quarter, we opened in Rochester, New York, We also plan to open in El Paso, Texas. Both of those are in that mid 30,000 square foot range. And Capitol Heights, Maryland, also in the first quarter, [which precedes] the Washington DC, which will be a large 40,000 square foot unit.

Looking ahead to the second quarter, we're planning to open a small store in Florence, Kentucky, in the Cincinnati area, another small store in Little Rock, Arkansas. Both Kentucky and Arkansas will be new states for the brand. We're also under construction in Summerlin, Nevada, near Las Vegas, which is one of four or five additional stores that we plan to open in the back half of the year.

By year end, we will have about 90 stores operating across 33 states, compared to a long-term goal of over 200 stores in North America. In other words, despite how far we've come, we still believe we have a long way to go. Internationally, you will recall that we have a development agreement signed for the Middle East, and we would expect the first opening to be sometime in FY17. We are also pursuing signing additional agreements for other parts of the world, where we think our D&B experience and brand mantra of Eat, Drink, Play and Watch can flourish.

So to conclude, we had a strong finish in the fourth quarter, to top off a fantastic year. We have big plans for 2016, and we are excited by what's to come. Our great brand, led by a great team, give me confidence that Dave & Buster's has a great future in store. We appreciate your continued support and interest in Dave & Buster's. So with that, we are now ready to take your questions.

Operator, could you please open the line for questions?

(Operator Instructions)

Joshua Long, Piper Jaffrey.

Great, thank you. Wanted to see if we might be able to talk about the new game pipeline or platform that you have that you mentioned earlier in the call, in terms of being able to tie in with movies. Is that something that you will be able to market against, and highlight that exclusivity? Or will it show up in the advertising, just in the normal scope of highlighting your amusement offering?

We do intend to feature those games on television, and we will be able to talk about exclusivity if, in fact, we've gotten that organized for any given game. So yes, that's something we intend to expand upon, versus what we even did in 2015.

Great, thanks. And then in terms of the new food and drink introductions, can you talk about the ability, or the impact from brand-new items, to contrast against the platform extensions? It seems like you've done a good job, in terms of bringing out not just one item, but bringing out something that you can create platform extensions around. So just curious if that's something we should expect to see going forward, in this year as well? And any commentary you might be able to provide, in terms of how those platform extensions have been working for you as a strategy?

We are extremely pleased with the new platform extensions, and we will continue to push forward with those. As I referenced earlier, we have several lined up for 2016, and we are confident that they are going to be great additions to the roster. They complement what is a strong stable of older and more proven items, favorites from over the years.

But we do not intend to slow down on the new product introduction, because we recognize that that creates fun and excitement, and very squarely goes against what play-together young adults are looking for, which is something new and experiential each time they come to D&B.

That's helpful, thank you. And then last one for me. In terms of the remodels planned for 2016, that color was helpful. Was curious if you could remind us what you have been spending on each? Either comprehensive, or just an enhancement, in terms of CapEx, and what's built into guidance?

Yes, I will take that. We guided $120 million to $130 million net capital. There's about $24 million of that number that's related to what we would call ROI oriented capital. Of that, about $15 million is investments we plan to make on fixed full remodels, as well as three D&B sports lounges. So we're going to do six full remodels, three D&B Sports touches across the platform this year. So it's a little bit higher number then was spent actually in 2015.

Got it. And then going forward, you will be essentially done with your rollout of the D&B Sports, or at least [Steve knows] that you're going to be touching with that. And so that aspect, that piece of the CapEx, should come down into something more normalized, just more on the R&M side? Is that a good way to think about it?

I think so, Josh. I think that we will be substantively complete. There may be a store or two that we elect to do, going forward, but I don't think it will be at the same sort of volume that we have done -- that we're planning to do this year, or even what we did last year. As I said, just a store or two, and then it will roll into the ongoing maintenance of what we're spending to maintain our stores.

I just -- a little color. I mentioned $15 million of the $24 million. We do plan to continue to invest in the special event space. Dolf mentioned that in his remarks. We touched about 20 of them in 2015. So we've earmarked some dollars to go in and improve a number of other stores next year, as well as trying to round out the remodel of our winner's circle to win conversion, which we largely completed. But have a number of additional stores we need to do, to finish that up. So those are a few other things we're doing to the facilities next year -- or I guess this year.

In 2016.

Yes.

Understood. Thank you for the time today.

Thanks, Josh.

Sharon Zackfia, William Blair.

Hi, good afternoon. A couple of questions. I know you mentioned Texas, and I know everybody has been worried about Texas. Just curious if you've seen any stabilization in Texas? And if there's any category, in particular, that you'd call out as being more weak? Whether it's amusements or beverages or food? And then secondarily, on the color coding of the games, blue and green, can you talk about when we will start to see advertisements, where you try to market the simulation versus the non-simulation? And how we should expect that to evolve?

I will take the second one first, and let Brian do a few notes here, on the former question, and let him take that one. But in terms of the color coding of the games, we view that as an opportunity. There are a couple technical things that we needed to get done, in order to facilitate the rapid deployment, and changing back-and-forth of those colors.

We have finished that technology enhancement that we needed to do, and stand ready to start experimenting with a couple of different ways to utilize that. But I would expect to see testing on that, certainly here towards the end of the first quarter, and into the second quarter of 2016.

Yes, just on the Texas question, we don't typically make a practice of talking about states and geographies that much. But there has been so many questions around the state of Texas, and the impact of oil and gas in that part of the country, that we felt like we wanted to talk about it a little bit here today. And the reality was, in our fourth quarter, we were positive. It was not 6% positive. It trailed the overall chain, but it was still nose up, let's say.

I would not say that that trend has improved. Part of the situation in Texas, for us, that make it a little hard to read of whether it's the oil or something else, we opened three stores in our 2015 class, in three of our markets in the state of Texas, one in San Antonio, one in Houston and one in Dallas. So we know we are impacting our sales a little bit, as well as the oil and gas, but I would not say we have seen it improve.

Okay, great, thank you.

Andrew Strelzik, BMO Capital Markets.

Good afternoon, everyone.

Hey, Andrew

I'm just wondering, as I'm looking at these year-over-year increases in the store-level EBITDA margins, can you give us a sense for what, at the top end of that distribution, those -- the store-level EBITDA margins look like? And have you continued to see the same levels of improvement there, as the consolidated levels?

I think we're seeing improvement across the portfolio. We've never really talked about by [decile] or whatever we're getting, from a margin improvement standpoint. But we do continue to see improvement across the spectrum.

One of the things that drives that, in 2015, was the comp store sales performance. And I think we said before, we had broad participation, in terms of comp store sales performance, and that was one of the key drivers, in terms of metric, in addition to the e-ticket and some of those sort of things. But that comp was really very broad, in terms of its overall participation, both from volume of stores, as well as the geography of stores and days of the week, and all of that sort of stuff. So we see a lot of -- we see broad participation once again.

And then on the real estate side, there's a lot of commentary within the industry, tightening or loosening or whatever. Wondering what you guys are seeing -- obviously going after different box size -- if you are seeing a loosening, or more sites available, or less sites available, relative to 12 months ago?

There's a lot of sites available right now, especially for our size. And I think that the big changes there are things like Sears coming online, and saying they are going to dispose of hundreds of stores. And while we may not want to go to every Sears, there's probably a handful of Sears that would make sense for us to take a portion of, and subdivide, their huge spaces. So we wouldn't be able to take the whole thing, but us, in conjunction with a few other retail owners or entertainment facilities, might be willing to take down some of that.

Some Macy's have come online, Sports Authority declared bankruptcy. So there's a lot of real estate coming online in our size. The only other thing I will say is, malls are not dead. Actually, our mall stores are performing well, and we get that question periodically, but the mall stores are performing well. So I think that mall developers are pivoting towards a bit more entertainment, as they are going out to try to replace these folks. And so we are an attractive alternative for them.

And then my last question, it sounds like, and over the last 18 months or so, you continued to evolve the marketing strategy, in terms of the number of spots, and where you are focusing some of that. Is -- from a marketing perspective, should we expect any changes in the levels of marketing? Or is it really just a continued evolution of the strategy, and the different points within the box that you are highlighting, in terms of the strategy there?

I think we're going to continue to focus on new, new, new. I think those are the -- when we say new, new, new, we are saying we are going to try to introduce new food, new beverage and new games at the same time, and feature those on television. We are adding some additional weight during the course of 2016. It's probably a week or two. We haven't locked in for sure, on exactly what we're going to do, but it's going to be towards -- in the second half of the year, for sure. It will be Q3, Q4.

Last year, we added one week of television -- what I'm saying, last year -- 2016 -- or excuse me, 2015, we added one week of television during the football timeframe. And then the only other thing I would say is, we are always tweaking what we are spending against, and we have been allocating a bit more towards family networks, Nickelodeon, Cartoon Network, and some of those sort of things. And we've had good success with that. And it's relatively inexpensive, from a marketing standpoint, from a points per -- cost per points influence. So we continue to do it.

In a very targeted way, targeted times of the year, i.e. we are looking to do it like right now, over spring break time frames, we're out there with a kid's message. But three or four weeks from now, we will be off of that, and we won't be on that [kids much]. We'll come back with it over the summer, when you see a lot of kids out of school.

Great, very helpful, I appreciate it.

Thank you.

(Operator Instructions)

Brian Vaccaro, Raymond James.

Just wanted to circle back on the fourth-quarter comp trends, if I could. Can you give some color on, say, the strongest day parts or days of the week? And are you still seeing outsize growth during the peak sports viewing periods? The Saturday/Sunday period, you mentioned that promotion?

We -- our strongest day parts were really lunch and afternoon for us, and Sunday was a very strong day, probably one of the highest percentage days we had for the quarter. We are actually a little weaker in late night in the fourth quarter. So -- and that stands to reason. We were focused heavily on sports in the first part of the quarter, and shifted to some of the holiday times, so the lunch afternoon day parts were places where we had some strength.

Yes, all right, that's helpful. Shifting gears to the amusement side, I wanted to just ask about the level of promotion on the amusement side, and how you were executing that strategy with your email club users, specifically. Can you speak to the success you've had with things like the winner's circle, and other promotions? And how you're using that, or how you intend to use that as you move through 2016?

We continue to reach out to that loyalty database on a fairly frequent basis, multiple times a month, with various offers. As they use them, we can do some customization around that. But in general, we are hitting them fairly consistently, in terms of the timing that we're doing, across a given month or a given quarter.

(multiple speakers) And I think we said this before, but we tend to lead with the amusements promotional activity. And we think that's the lowest cost of sales to us. It's the least expensive way for us to give a value to the consumer, and so they tend to respond well to things like $10 of free game play for $10 -- if you buy $10. Or $20, in some cases, of free game play, if you buy $20. And so those are the types of promotions that A, have a relatively limited cost to us, and they generate a visit, are very lucrative.

Yes, understood. Just one more quick one, if I could. Brian, sorry if I missed this, but the pricing, by segment, I think you said 2.2% on food. But what was the pricing in the beverage segment for the quarter? And then if you have a blended, that would be great?

Yes, it was -- you got it right on 2.2% for food, 1.7% for bev, 0% for amusement, and a weighted average of 1 percentage point, which is the same for the year to date. So quarter and year to date were both 1 percentage point of effective price.

Okay, and how should we think about pricing in 2016, in light of the labor cost trends you mentioned on the call?

I think what we have said is, we are probably going -- this year, in food, we were up 2.6% for on a full-year basis, that we are going to probably be something in that range, 2.5% to a little more. But it will be likely be focused on some of these markets, like California, New York, where we see some of the labor pressure, is where we will top-spin the pricing up a little bit, to try to cover some of the pressure we see on the wayside.

Yes, understood, okay. And then is there an extra operating week in 2017?

We are in our 2016. It ends on February -- I'm sorry, January 29 -- now I've forgotten the date -- of 2017. It's is a 52-week year.

Are you asking about the following year?

I'm asking about 2017, because we all have to publish 2017 estimates. Just wanted to make sure we're all on the same page on an extra week or not. It looks like there might be, but --

2017 -- yes, I am getting the nod -- is a 53-week year.

Excellent. Thank you very much.

Thanks, Brian.

And at this time, I'd like to turn the conference back over to Mr. King for any additional or concluding remarks.

I just want to thank you again for your continued interest in Dave & Buster's. We look forward to speaking with you again in early June, when we will be announcing our first-quarter results. Thanks, everybody.

And ladies and gentlemen, that does conclude today's presentation. We do thank everyone for your participation.