Dave & Buster's Entertainment Inc (PLAY) 2016 Q4 法說會逐字稿

Good day, everyone, and welcome to the Dave & Buster's Inc.

Fourth Quarter 2016 Earnings Conference Call.

Today's conference is being recorded.

At this time, I'd like to turn the conference over to Jay Tobin.

Please go ahead, sir.

Thank you, Dana, and thank you all for joining us.

On the call today are Steve King, Chief Executive Officer; and Brian Jenkins, Chief Financial Officer.

After comments from Mr. King and Mr. Jenkins, we will be happy to take your questions.

This call is being recorded on behalf of Dave and Buster's Entertainment Inc.

and is copyrighted.

Before we begin our discussion of the company's results, I would 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 EBITDA, adjusted EBITDA and store operating income before depreciation and amortization, which are financial measures that are not defined under generally accepted accounting principles.

Investors should review the reconciliation of these non-GAAP measures to the comparable GAAP results contained in our earnings announcement released this afternoon which is also available on our website.

Now I'll turn the call over to Steve.

Thank you, Jay, and good afternoon, everyone.

We appreciate your participation in our year-end conference call and your continued interest in Dave & Buster's.

Today, I'll review the quarterly highlights and provide an update on our current initiatives and plans.

Brian will walk through the key financials and initial 2017 guidance, and then I'll come back and discuss our development and remodeling efforts before we take your questions.

Q4 capped off another strong year for Dave & Buster's.

We surpassed an important milestone as full year sales exceeded $1 billion for the first time.

I want to take this opportunity to thank and congratulate all of the D&B team members on this accomplishment.

Their passion and dedication to the brand is the key reason for our continued success and why I'm more excited today about our future prospects than ever before.

Despite a challenging casual dining environment and a calendar shift that proved slightly worse than we expected, D&B's differentiated experience across our 4 platforms, Eat, Drink, Play and Watch, continued to provide some insulation against these trends during the fourth quarter.

We delivered an industry-leading comparable store sales growth of 3.2%, close to the midpoint of our guidance, and our non-comp stores continued to perform exceedingly well.

We grew total revenues by more than 15% and operating income by more than 17% during the quarter.

Of the 92 stores we operated during the quarter, 26 of those stores or 28% were non-comp stores.

Their strong performance demonstrates the broad appeal of our brand as we work towards building out our North American store potential of over 200 stores.

I want to point out that during the first full year of operation, our 2015 class of stores generated nearly a 52% first year cash-on-cash return, significantly above our target.

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

As we mentioned before, we drive traffic by featuring games, Food and Beverage, on national cable television with an immediate call to action, usually including an element of free game play.

Our initial guidance for 2017, including the 53rd week, is for low to mid-teens growth in revenue and EBITDA.

Brian will further elaborate on that topic in his prepared remarks.

Next, I'd like to share a few thoughts on amusements.

2016 was yet another successful year for this segment of our business, as strong content and messaging helped deliver amusement comps of 6.9% for the quarter and 6.5% for the full year.

On a 2-year stack, amusement comps were 15.4% for the quarter and 18.2% for the year.

With titles such as Star Trek, Tailgate Toss and Rock'Em Sock'Em Robots, our strategy evolved in 2016 to include proprietary comp trends exclusive to us forever.

We appreciate the work of our SVP of Amusements, Kevin Bachus and his team, as we continue to collaborate with our many game manufacturing partners to deliver on this strategy.

During the quarter, we completed the systemwide launch of Power Taps, our premium price RFID activation devices.

The assortment consists of RFID bracelets, pendants and wands, and guests can purchase these in place of Power Cards to activate our games.

As a reminder, we have relatively modest expectations for their impact on our business, and the adoption rate so far has been right in line with our projections.

On the marketing front early in the quarter, we focused on football-related messaging tied to our D&B Sports branding.

Later in the quarter, we focused on new news in the amusement segment, including games such as Tailgate Toss and Rock'Em Sock'Em Robots.

Overall, we invested in a few extra weeks of national cable advertising during the fourth quarter versus the comparable period from last year.

As we discussed in our last earnings call, we rolled out new Food and Beverage offerings during the month of October.

Menu innovation continues to be a hallmark of our brand, and our guests have responded favorably to recent introductions such as Carnivore Pizzadilla and smoked turkey melt as well as several new one-of-a-kind cocktails.

I want to thank our CMO, Sean Gleason and his team, for their ongoing creativity in bringing Dave & Buster's to life in our advertising and promotions.

Before I turn it over to Brian, I want to note that 2017 is already shaping up to be an exciting year for amusements, driven by compelling new content, including games based on some of the world's best-known movie properties.

This year will reflect the further evolution of our amusement strategy.

For competitive reasons, we plan to unveil additional details on the lineup as we promote our games over the course of the year.

Now let's hear from Brian who will provide a more complete financial update.

Thank you, Steve, and good afternoon, everyone.

Before I can do the numbers, I just want to join Steve in congratulating our many team members across the country.

Their tireless commitment to D&B has not only enabled us to surpass $1 billion in annual sales but also positions us well as we look forward to our next phase of growth.

Now in terms of the fourth quarter, total revenues increased more than 15% to $270.2 million.

That's up from $234.2 million in the prior year due to significant contributions from newer stores as well as a healthy performance in our comp store base.

Revenues from our 66 comparable stores increased 3.2% to $204 million.

That's up from $197.6 million, while revenues from our 26 non-comparable stores, including 4 that opened during the quarter, increased 79% to $68.2 million.

That's up from $38.2 million in the prior year.

Turning to category sales.

The mix shift to our more profitable entertainment business continued as total amusement and other sales grew 19%, while Food and Beverage collectively increased 11%.

During the fourth quarter, Amusement and Other represented 53.4% of total revenues, reflecting a 170 basis point increase from the prior year period as we continue to feature and to promote the entertainment aspect of our brand.

Now breaking down the 3.2% increase in comp sales.

Our walk-in sales grew 3.5%, while our special events business increased 1.7%.

In terms of category sales, amusements rose 6.9%, while our Food and Bar business was down 0.4% and 0.9%, respectively.

We were able to extend our outperformance relative to Knapp-Track to 19 consecutive quarters, and on a 2-year stack basis, our comparable store sales growth was 9.2% as we cycled over a strong prior year comp of 6%, including a healthy F&B comp of 3.5%.

The impact of cannibalization and competition moderated slightly and was in line with the level we had anticipated.

Weather was favorable on a net basis as the rollover of last year's Storm Jonas was partially offset by this year's winter storms.

The impact of holiday calendar shifts was slightly worse than anticipated, and our Texas stores underperformed the system, hampered by a mild winter weather and some continued volatility in those markets.

In terms of cost, total cost of sales was $47.9 million in the fourth quarter and as a percentage of sales, improved 60 basis points.

Food and Beverage cost as a percentage of food and bev sales improved 50 basis points compared to last year as we benefited from food commodity deflation and approximately 2.8% in food pricing and 1.9% in bev pricing.

We expect that deflation will moderate, and our preliminary estimates for 2017 are for a relatively flat commodity cost.

Cost of amusement as a percentage of Amusement and Other sales was 30 basis points lower than last year.

Total store operating expenses, which includes operating payroll and benefits and other store operating expenses, were $135 million.

As a percentage of revenue, store operating expenses were 50% or 110 basis points higher year-over-year.

Our operating payroll and benefits costs were 40 basis points higher year-over-year due to hourly wage inflation of about 5% during the quarter and a growing mix of non-comp stores.

Our non-comp stores continued to perform very well for us and are generating excellent returns.

However, from a labor perspective, as we've mentioned before, they are not as efficient as our mature comp store base, and they also have higher occupancy cost.

Our store expenses were 70 basis points higher year-over-year due to increases in both marketing and insurance costs.

Store operating income before depreciation and amortization was $87.2 million for the quarter, reflecting growth of 13% compared to $76.9 million last year.

And as a percentage of sales, this was a decrease of 50 basis points year-over-year to 32.3%.

G&A expenses were $14.3 million, slightly lower than last year, and as a percentage of revenues were 90 basis points lower at 5.3% as we leverage these costs against our overall sales growth.

In terms of dollars, increases in labor costs at our corporate headquarters were more than offset by lower compensation expenses related to the departure of our former COO.

Pre-opening costs totaled $5 million as compared to $3.8 million in 2015, reflecting both the timing and the number of new store openings relative to last year.

I would ask you to recall that for large-format stores, we're typically spending about $1.4 million, and for small format stores, we spend a little over $1 million.

Our EBITDA grew 16% to $67.9 million, and margins improved roughly 10 basis points, while adjusted EBITDA grew 17% to $74.5 million.

Please note that beginning in the fourth quarter of 2016, we revised our calculation of adjusted EBITDA to exclude adjustments for changes in deferred amusement revenue and ticket liability.

This change was made in order to conform to recent SEC guidance regarding non-GAAP measures.

Just want to point out that the change in deferred amusement revenue and ticket liability amounted to $2.8 million in our fourth quarter this year compared to $2.5 million in the year-ago period.

And for the full year, the amount was $8.3 million this year compared to $7.6 million in 2015.

Based on the previous definition, adjusted EBITDA would have been $77.3 million for the fourth quarter and $269.8 million for the fiscal year 2016.

This compares favorably to our most recent adjusted EBITDA guidance of $265 million to $268 million for the year.

Net interest expense for the quarter fell to $1.4 million.

That's down from $2.4 million in the prior year, and that's driven by lower interest rate under our recapitalized debt as well as reduced debt levels.

We generated net income of $27.4 million or $0.63 per share on a diluted share base of 43.4 million shares compared to net income of $23 million or $0.53 per share in the fourth quarter of last year on a diluted share base of 43.1 million shares.

Turning to the balance sheet for just a minute.

Our current capital structure and strong free cash flow gives us a lot of financial flexibility here.

At the end of the quarter, we had just under $265 million of outstanding debt on our credit facility, resulting in low leverage of about 1x, with available borrowing capacity of $219 million.

Our capital allocation strategy remains focused on investing in growth via new store development.

At the same time, our free cash flow and strong balance sheet provides us flexibility to return value to shareholders in additional ways, and that includes share repurchases.

Recall that we have a $100 million share purchase program in place through the end of FY 2018, and under this current authorization, we repurchased about 396,000 shares during the fourth quarter, bringing our total inception-to-date repurchases to approximately 560,000 shares or $29 million.

As both our performance and leverage improves, we will continue to evaluate the appropriate strategy to maximize shareholder value.

Turning now to our outlook.

As I referenced on our third quarter call, we view 2017 as a year of more normalized growth coming off another record year.

Our long-term financial targets are for low double-digit annual growth in both revenue and EBITDA.

With this in mind, we are issuing the following annual guidance for 2017 which is a 53-week year for us.

Our year end is February 4, 2018.

Total revenues are expected to range from $1.155 billion to $1.17 billion.

Comp store sales growth on a comparable 52-week basis is projected between 2% and 3% for the year, in line or slightly above our long-term target.

Note that we will have 76 stores in our comp store base for fiscal 2017.

From a development perspective, we are targeting 11 to 12 new store openings, which will skew towards large-format stores and new markets for our brand.

EBITDA is expected to range between $270 million and $277 million.

And please note that while we will continue to report adjusted EBITDA, we are no longer providing guidance on that metric.

We believe adjusted EBITDA provides useful information to our investors regarding our operating performance, but EBITDA is the more commonly used metric among analysts following the company.

We are projecting net income in the range of $101 million to $105 million based on an effective tax rate of 36% to 37%, and a diluted share count of 43.2 million to 43.4 million shares.

This excludes the impact of the newly effective accounting standards related to share-based transactions.

While the implementation of this new standard in 2017 will not affect our cash taxes, it could significantly reduce our effective tax rate and slightly increase our diluted share count.

This will be dependent on the timing and the magnitude of stock option exercises, which could vary significantly quarter-to-quarter.

Since this is largely out of our control, we have excluded this impact from our guidance.

I also want to point out that our 53rd week is a Super Bowl week.

With the introduction of D&B Sports this day has -- most certainly has been improved a lot for us.

However, it still remains one of the biggest at-home party days of the year.

As such, we expect the 53rd week to be a slower-than-average week for us.

And finally, we are projecting net capital additions after tenant allowances and other landlord payments of $156 million to $166 million, driven by development costs for our new stores, several 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'd like to review our recent and upcoming store development activities and our remodeling program.

We're very pleased with the response to our recent store openings.

During the fourth quarter we opened 4 stores: a store in Toledo, Ohio; another in Silver Spring, Maryland, near Washington, D.C.; Oakdale, Ontario, which is a suburb of Toronto; and Daly City, just outside of San Francisco, for a total of 11 new stores in fiscal year 2016.

In 2017, as Brian mentioned, we plan to open 11 to 12 new stores, which will equate to unit growth of about 12% to 13%.

As a reminder, the long-term target is for 10% or more new store growth, including a combination of large and small formats.

In the first quarter, so far, we've already open stores in Carlsbad, California; Columbia, South Carolina; and Overland Park, Kansas, and plan to open 1 additional store in Tucson, Arizona during the first quarter.

Including the Tucson store, we currently have 6 stores under construction and a total of 26 signed leases.

At the same time, we're constantly refining our processes to ensure greater efficiency during preopening in the first 90 days of opening phases.

We remain focused on having buildings and teams that are ready to handle the typically high-volume opening weeks in new stores.

Of the 11 to 12 new stores planned in 2017, 6 to 7 stores will be in new markets for D&B, with the remaining stores located in markets where we already have a brand presence.

In terms of square footage, as I've said before, we continue to use the entire range of between 25,000 and 45,000 square feet.

We expect 6 or 7 stores this year to be -- are approximately 40,000 square-foot stores, essentially the very large stores, while 1 will be between 31,000 and 35,000 square feet, and the remainder will be 30,000 square feet or less, our smaller stores.

Our position as a sought-after entertainment and dining concept continues to strengthen.

An increasing supply of real estate combined with mall owners' emphasis on entertainment and dining over traditional fashion retail means that we're seeing more opportunities than ever before, which enables us to be even more selective on picking the best sites for our brand as we advance towards our long-term target of 200 -- more than 200 units in the U.S. and Canada.

We also anticipate our -- first of 7 licensed stores in the Middle East will open sometime in fiscal 2018.

We remain excited about our partner in Dubai, and we're working on signing additional agreements for other geographies outside of North America as well.

During 2017, we'll have an opportunity to remodel 4 additional stores following the extension of their lease terms in 2016.

If you exclude these stores, our remodeling work is now really substantially complete.

So in conclusion, we had a strong quarter, a strong year.

We reached a key milestone.

Our sales surpassed $1 billion, and we remain highly confident in our long-term outlook.

As always, we appreciate your continued support and interest in Dave & Buster's.

At this point, operator, would you please open the line for questions.

(Operator Instructions) We'll take our first question from Jake Bartlett with SunTrust.

Firstly, I just wanted to make sure I understand what's included in your EBITDA guidance.

It's different than it had been so I just want to make sure.

I mean, for instance, does it include losses on asset disposal?

Or is this a pure EBITDA as we've calculated?

Jake, it's a pure EBITDA calculation.

No add-backs.

Calculated straight off the P&L here.

If you look to the press release, you'll see a definition of EBITDA in it.

So you're essentially taking net income, adding back interest, taxes and depreciation and amortization in the calculation.

Got it.

Okay.

And then in terms of your same-store sales, one question I've gotten is -- was -- what are people doing for Food and Beverage?

They're coming in to play games.

How do you explain the differential, the kind of the widening separation of amusement same-store sales and then Food and Beverage same-store sales?

Are people literally just eating before they come?

Or how would you explain that?

I think there's a couple of things.

First of all, this is not a new trend.

This trend -- this gap has existed every quarter during the course of this year and even going back before this year.

I think there are some macro trends in eating that are having an impact on this, including things like we are seeing more appetizers being purchased as opposed to what one might construe as regular entrées, if you will.

So I think it's, in part, behavioral, but I think the entire industry is suffering somewhat from pretty sluggish performance as it relates to Food and Beverage sales.

Knapp, Black Box closed negative for the quarter.

And I don't think -- again, that's been fairly consistent over the last couple of quarters.

I'm not sure there's really a good explanation for exactly why that is other than less differentiation throughout casual dining.

And we clearly have a component of our business that imparts that.

As we've said before, we intend to continue to lead with an advertising and promotional message that's focused on amusements.

And as such, we expect that, that's going to be the highest comp contributor again in 2017.

Okay.

And then, looking at your guidance for the last 2 years for same-store sales, the initial guidance was first, 3% to 4%, and then 2% to 4%.

It's a little lower this year, yet you seem fairly confident in the -- your pipeline of promotions on the gaming side or in the amusement side.

Why the somewhat lower outlook this year versus years past?

Is it -- have you -- is there anything you're seeing year-to-date, for instance?

What are the drivers for that?

No, I think we've said consistently that we're going to move towards that longer-term guidance, which is the kind of low single-digit comp, and we think this, once again, is another move slightly towards that longer-term guidance.

We know we have some headwinds.

Some of them are self-inflicted in the form of cannibalization, where we're going into existing markets where we know will have an impact on some of the stores.

And we know we have some headwinds from competition, and we're taking that into account in this guidance.

Okay.

And then lastly, you mentioned you have signed leases of 26.

Is that the same as what you had at the end of the third quarter?

I think that's my count, but maybe there's something that's changed there.

But my question really is around -- it sounds like you have an accelerating number of signed leases, 26 versus 19 last year, yet the pace of your unit growth is not increasing that much.

And so I'm just trying to assess what the increase in signed leases could mean for the actual number of unit growth that you're going to eventually open.

I think it's greater visibility and clarity into our pipeline.

We clearly can see well into 2018 what we expect to open and even into many of the stores that we think we'll open in '19.

And we'll take our next question from Nicole Miller with Piper Jaffray.

Two quick questions.

How should we expect the cadence of the comp to be throughout the year?

In prior years, you did have tough compares or volatile compares, but as you move towards the longer-term range, perhaps things would be more smooth.

So taking into account the current tough -- maybe what are the pluses and minuses as you enter and as you exit the year, please?

First of all, we're not guiding quarterly comps, so just to be clear on that.

I think you do point out that we did have some things that we've rolled over in the course of the last year that we've called out that were -- may create some volatility from a quarter-to-quarter basis, but we're really not guiding quarterly comps.

All right.

And from a -- when you look back in that last year and you had, I think, 1 or 2 extra weeks of marketing, do you have a couple of extra weeks you could throw in this year?

And then you did comment on the box office, which, I think, is interesting.

I think there's something like 4x the family films coming this year.

Would you tie in with games or would you potentially -- and I know you don't want to get specific for competitive reasons, but would you potentially also tie-in Food and Beverage like you did last fiscal year?

I guess, the direct answer there is yes, we plan to tie-in with the movies this year.

We already have those arranged.

As I mentioned, we want those to be announced in conjunction with when we've rolled out the games and those movie titles are coming out, but we do have some of those already arranged.

And we will have some Food and Beverage that are connected to that.

More beverage than on the food side.

It's really easier for us to execute that.

On the -- you asked a question about media, I think, also.

We had -- we have indicated that we expanded on media weeks over the course of this year, added some weeks, as Steve mentioned, in the fourth quarter.

At this point, we are not really planning on additional media weeks next year.

You can kind of think about sort of the same number of media weeks with just -- so we're back in a little bit of a leverage kind of situation again, which is a good thing.

And we'll take our next question from Sharon Zackfia with William Blair.

A couple of quick questions.

On the other operating expenses in the quarter, I think the first quarter, that I can remember, you kind of deleveraging that, and I know you called out marketing and its trends.

So I was just wondering if you could give us some more insight on what happened on the insurance side and whether that was expected or if there was something unusual there?

Yes.

I think in the third quarter, when we gave our guide, we indicated that we'd be thinking about sort of the implied margins in the fourth quarter, implied sort of flat margins, and that's exactly kind of what we had here.

And we saw pressure on labor, and we sort of indicated that as wage rates are hovering around 5% for us and we have more and more these non-comps, 26 of them at the end of the year, that's putting pressure on the labor front, about 40 bps of margin decline.

In reference to the higher insurance claims or higher insurance costs, that's really -- we're self-funded on both GIO and worker's comp.

So it's really a situation where we -- it was less favorable than prior years.

We typically have enjoyed some favorable reserve adjustments with our actuary in the fourth quarter; it was just a little less favorable.

Still lower than the average quarter.

It's just not quite as favorable as in the past, so that's that situation.

And as I mentioned, marketing, because we added additional weeks, we deleveraged on marketing about 30 bps.

Typically, we leverage on the marketing side.

So we made some investments in terms of advertising in the fourth quarter and that put some pressure on the margins as well.

So when you think about 2017, I don't know if you expect that 5% labor inflation to continue.

Is that a good number to use for 2017?

And if so, kind of what comp do you think you would need to kind of hold that line item?

Well, I think if you look at our guide, we're, in general, guiding toward a flattish-type margins next year.

The EBITDA margin was -- it's implied as sort of flat.

So the things that helped fuel the significant margin improvement this year, which was about 200 basis points for us in terms of EBITDA margin expansion, some of those things are going away.

Cost of goods -- we had significant fuel from eTicket early on in commodity deflation.

We were improved by about 90 basis points just on that this year.

We're now talking about sort of flattish commodity costs, and we're rolling -- we've completely rolled over eTicket, so there's not a whole lot of margin expansion on the cost of sales front.

We do anticipate labor to move to the negative side next year.

So it's a pressure point to our P&L moving into 2017, largely on the heels of wage rate.

That said, we expect wage rate to moderate a little bit.

We were near 5% this year for the full year.

California and New York are the 2 states that we expect to have less pressure in because we're not seeing the same kind of minimum wage increase that New York had.

About 50% increase last year, and California rates about half as much as last year.

So we're getting a little bit of moderation on the wage rate in our view, but we still think it's going to be a pressure point above what we've seen in the historic -- history of this company.

So it's going to be a pressure point.

And then we do anticipate next year to see higher occupancy cost, facility cost, as we have this non-comp base that's growing.

And the rents of today are not the rents of our legacy older stores, so -- and we're getting great returns on them.

We think it's a good story.

So we're going to keep building them, keep shooting for these big, high returns, but it does put pressure on the margin profile of the company.

And that's why we're basically projecting sort of flattish overall margins.

So we have pressures.

G&A and marketing, we expect to leverage next year.

Perfect.

And then just one last question on cannibalization.

I don't remember if it was you, Brian, that mentioned it or Steve.

Is the cannibalization planned for '17?

Is that kind of similar to past years?

Will it be expected to be higher?

Is it something more on the back half versus the first half?

Any kind of insight into the cannibalization would be helpful.

I think, as Steve mentioned, we were skewed this year.

I'm talking -- the '16 class towards new markets, and it was a bigger issue.

Cannibalization was a bigger issue early in 2016 because of -- really, more so the '15 class, which was -- for the most part, all this '15 class was opened -- they were opened in existing markets, so we saw pressure early into 2016 from that.

The '17 class profile looks a heck of a lot like the 2016 class.

So I'm not sure that we see a significant difference moving into 2017 on the cannibalization front.

And we'll take our next question from Andrew Strelzik with BMO Capital Markets.

Just my first question, would you be willing to quantify the impact of the calendar shift that you mentioned?

And also, we've been hearing a lot about tax refunds and potentially Easter shifts.

How should we think about that as we go into this year?

So let me take the second one first.

So the good news with the way our quarter falls is everything falls in the first quarter.

But clearly, that tax shift was a noticeable event in terms of that delay.

Again, theoretically, this all should come out in the wash in the course of the quarter, and kind of we'll see what the impact of a later Easter by 3 weeks is when we get to the end of the quarter.

We have not forecast that as any kind of big headwind for the quarter.

It's just really a timing difference of when things come to us.

And then the question on last year was...

I think he was asking a question on calendar shift.

I don't know that we want to -- there's a lot of -- a little arc around trying to figure out the calendar shift.

I would just say this.

We -- as we look at how December and November numbers ran for -- I'm sorry, December and January performance ran for us, the calendar shift did hurt us by more than we anticipated, and the flip side was -- also, we had the weather impacts.

So we did rollover Storm Jonas.

I think we pointed out last year that was about 1.1% hit to us.

So we had, really, 2 things happening for us in the fourth quarter.

We actually rolled over and actually had a good net weather situation.

Wasn't quite the one-one because we had some winter storms this year as well.

But the calendar shift was higher than the weather good guy, so it was a net -- between the 2, the calendar shift and weather, there was a drag on performance in the quarter.

Okay.

And then with respect to the guidance, I guess if I look at the low end of the EBITDA guidance and then the low end of the net income guidance, I'm having a little bit of trouble bridging the 2. Is there something abnormal in terms of the rate of increase, either in D&A or maybe even you're baking in something on the interest expense side that, that might be throwing that off?

Or is that just a me issue?

Well, I think if you -- our guide does assume a store differential, for one.

So it can drive changes to pre-opening -- and which would be on the EBIDTA guide, so that's okay, but it would -- could change depreciation-type numbers and could affect our effective tax rate as well.

Chip credits, essentially are -- could be a flat number, so the effective rate of tax can vary depending on the range of operating performance, also.

So there are some changes that could happen between EBITDA and net income that you need to think about.

I want to just add, the last store's depreciation just would be lower -- on the low end of this case.

Okay.

I got you.

If I could squeeze one more in.

I just wanted to know about the plans for share repurchase and deploying the capital to share repurchase.

Obviously, free cash flow's growing.

You did a little bit of it this year.

Are there any thoughts around doing more than just dilution, getting a little bit more constructive on that side in terms of capital deployment?

I mean, I think it's a topic that we are regularly discussing with our board is -- kind of what is the right level of leverage for this company, what is the right amount of return to shareholders, et cetera.

We don't have anything to share today.

We'll take our next question from Brian Vaccaro with Raymond James.

I just wanted to start with a couple of questions on the comps.

Steve, obviously, there's a lot of volatility for the broader industry through the period, but can you speak to the underlying trends that you think you saw through the quarter?

I'm just trying to parse out the multitude of weather and calendar shifts and incremental marketing weeks.

Can you just give us some sense of the cadence through the quarter?

I'm sorry.

I missed that very last detail.

The sense for the cadence for the quarter?

Yes.

Just the monthly cadence through the quarter as you see your business sort of trending through the quarter.

I think last quarter you mentioned you were off to a "good start," and so just curious, sort of some color on the monthly cadence as the quarter progressed, and trying to parse through all these calendar shifts, et cetera.

I think to Brian's -- first of all, I don't think that the -- I would characterize the month-to-month-to-month within the quarter as not meaningful because of all of the various shifts that we've already talked about.

So the holiday shift was clearly depressing this December.

We know that Jona was favorable for January, and we've talked about all those things.

So I would say in general that we felt like -- again, to Brian's point -- aside from the fact that we probably underestimated the severity of the impact from the 2 holidays ending up on the weekend -- and again, it was not a huge mess but we underestimated that a little bit -- the quarter pretty much came as we expected it.

Okay.

All right.

And Brian, you mentioned the impact of competition, I think, you said, moderated in the fourth quarter.

How are you thinking about that, everything you know about what that competitive landscape looks like?

How are you thinking about that as the tail -- or the headwinds to your business as you move into '17?

Is it similar to where it's been?

Getting a little worse?

Getting a little better?

How are you thinking about that directionally?

That's a good question.

Obviously, we've talked about Topgolf and Main Event in the past.

Both of those brands opened up quite a few stores in 2016, most of them in our markets.

Between the 2 of them, they opened 16 stores in our fiscal year.

13 of those were in our markets, so we definitely are seeing them.

They're growing at directionally a combined rate of about 35% unit growth, so pretty aggressive growth.

I would say Topgolf appears to have not opened quite as many stores as they originally anticipated.

I think they opened 7. I think early in the year, we were thinking they were going to open 10.

I think 2 of them slid a little bit.

So we definitely see them growing in the mid-30% range right now.

We sort of see the same estimates moving into 2017, so kind of a -- both of them kind of 35% growth on a combined basis.

So I'm not sure it represents more drag -- and we expect most of those are going to be in our markets, when you look at the list that we see.

So they're going to be in our DMAs.

We're going to feel them.

I'm not sure it's at a higher rate than what we see right now, but we'll see.

We talked 4 -- we're curious about the honeymoon in particular of Topgolf and how they'd do in year 2 and year 3 and whether we claw back on them over time, so -- and their recent acceleration is -- Well, their acceleration of store growth is fairly recent, so I think that's yet to be seen.

So right now, we're not necessarily thinking it's going to be a whole lot worse unless we see them really start to accelerate their pace up in the 40%-plus from what we see on Topgolf, because as I mentioned, that may be harder -- easier said than done, so...

Okay.

All right.

That's helpful.

And you mentioned 10 -- I think it was 10 units that will be entering the comp base this year.

Any change in the impact on your comp trends based on the units that will be entering the comp base versus the impact that there has been on your comps?

No.

I mean, as we've said before, I mean, we adjust our comp base once a year, at the beginning of the year.

So a store is 18 months, or has been opened 18 months or more when we move it into the comp base, and we're really -- that's really trying to get by this honeymoon period that we talk about, which is generally the first 26 weeks of operation of the store.

So we don't really anticipate that, when stores move into the comp set, that it's going to have some undue drag or influence on our overall comp performance.

Possible you might have a week or 2, but from a -- in terms of anything material, we don't anticipate any significant drag on cost.

Okay.

And then, just last one, in terms of your guidance and the impact of the extra week, I know you said it's a little bit of a below-average sales week or that's your expectation, but can you give us -- can you quantify either the EBITDA or EPS impact that you expect for the year or what's embedded in your guidance?

Yes.

I would -- you could take our -- the guidance range we provided and obviously divide by 53 weeks and you're going to get a number.

What we're -- what I was trying to say in my comments is that we would expect that 53rd week to be lower than average because of the fact that Super Bowl Sunday is -- happens to be that 53rd week, so -- And that Sunday, while it's better than past Super Bowls before we had D&B Sports, it is a depressed day; it's an at-home viewing day for that sporting event, so it's a slower-than-average Sunday in a pretty significant way.

So -- and then from a margin perspective, the way I would think about that is when you look at our overall EBITDA at, what, 23 point -- I forgot the number -- 23.8% or whatever it is for the year.

If you -- you're -- we're going to -- you're going to need to fully load that 53rd week with all fixed costs, operating costs of the business.

So you're not going to get the -- you're going to have G&A, rent, occupancy, all elements of the P&L in it.

And since it's a lower-than-average week, you're going to -- it's going to be a lower-than-average margin.

That's the way I would think about that.

Okay.

And you also included an extra week of depreciation as well?

Everything.

Everything.

That GAAP accounting thing.

All the GAAP accounting things.

(Operator Instructions) We'll go next to Steve Andersen with Maxim Group.

Thank you for pointing out the -- some of the regional differences.

I want to get a little bit more color on that.

You said Texas seems a little bit slow.

First question is, are those stores comping positively?

And you've -- have you noticed any other regional differences in -- on your footprint?

First of all, there are regional differences.

Most of the regional differences tend to get driven, for us, at this point, by weather.

Although, I think we called out on our last call that the ones that were not particularly subject to weather like California and Florida were doing well for us.

More specifically than that, we haven't said a lot.

Texas was very close to the average in the third quarter.

It fell off quite a bit, actually, in the fourth quarter and was negative for the quarter.

And gentlemen, at this time, I'd like to turn the call back to you for any additional or closing remarks.

Once again, we want to thank you for your participation in today's call, and we look forward to sharing our first quarter results with you in early June.

Have a good afternoon.

And that does conclude today's conference.

Thank you for your participation.

You may now disconnect.