Jay Tobin - Senior Vice President and General Counsel Steve King - Chief Executive Officer Brian Jenkins - Chief Financial Officer.

Andy Barish - Jefferies Sharon Zackfia - William Blair Nicole Miller - Piper Jaffray.

Please standby, we are about to begin. Good afternoon, everyone. And welcome to the Dave & Buster’s Incorporated Third Quarter 2015 Earnings Results 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, Noah, 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 both Mr. King and Mr. Jenkins, we will open the call for your questions. This call is being recorded on behalf of Dave & Buster's Entertainment Incorporated 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 maybe 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 www.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 which 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..

Thanks, Jay, and good afternoon, everyone. We appreciate your participation in today’s quarterly conference call and your interest in Dave & Buster's. As you might imagine, we're extremely pleased with how 2015 is progressing.

We are delighted that the flow-through from our robust comparable store sales along with strong revenue contributions from newer stores has enabled us to set a new bar performance for store level EBITDA and adjusted EBITDA margins during the third quarter.

And based upon our record-setting year-to-date results we are raising our 2015 annual guidance for the third consecutive quarter. Brian will walk you through the details and then provide some key topline metrics for 2016 shortly.

In the meantime, let me say this, we attribute our exceptionally result and momentum to our highly differentiated business model, which provides guests with numerous ways to be entertain while enjoying great food and drink -- and drinking one of a kind beverages.

Our guests continue to recognize unique experience that Dave & Buster's provide especially when compared with conventional casual dining. We remained the only national competitor in our space and provide an experience that’s highly customizable and cannot be replicated at home.

Overall, comparable store sales rose 8.8% and that includes a negative 110 basis point calendar shift, because of Halloween and that is up against an 8.7% increase in the prior year.

We also extended our outperformance relative to Knapp-Track to 14th consecutive quarters, with approximately an 830 basis point differential over the affected 13-week period.

On a two-year basis we accelerated comparable store sales sequentially with the 17.5% gain during the third quarter, compared to a 16.7% gain in the second quarter and a 14.6% gain in the first quarter.

And once again, we exhibited strength across day parts, days of the week, weekend and most geographies, demonstrating the power of our Eat Drink Play and Watch branding. Within our comparable store sales gain our primary driver was walk-in sales, which grew 9.4% and marks the clear reflection of our core demographic appeal.

While our special events business increased 3.9%, our highest rate of growth thus far this year.

On the marketing front, we wrapped up our popular Summer of Games promotion during the third quarter with the focus on Angry Birds game, which was an exclusive launch for us in August before transitioning to football-related messaging tied to our D&B Sports branding in September and October.

The latter included an All You Can Eat Wings Special for the first three Sundays and Mondays and NFL season for $19.99 with the bonus $10 power card. The promotion was hugely popular with our guests, but it did have a negative impact on cost of good sales.

Still we thought the investment in kicking off the first three weeks of the NFL football season with a compelling offer with a great way to build awareness for Dave & Buster's as a destination for one-of-a-kind sports viewing and it could have a positive implications for building this brand for this entire series and beyond -- season and beyond, excuse me.

Our media strategy consisted of an additional week of cable advertising focused on D&B Sports while in August we also had greater focus on kids-related channel such as Nickelodeon than in the prior year.

And while targeted messages to our younger guests, only a small subsection of our national cable advertising buy, we did experience a lift in kid entrées and sales growth in off-peak day parts when normally we see more families.

Some of our new items included Bang Bang Chicken, Pepperoni Pretzel Pull-Apart and Short Rib & Cheesy Mac Stack Sandwich, while the new beverage options included our new line of Glow Kone Limeade. Comp food sales rose 7.3% and comp beverage sales increased 12.1%.

Our electronic ticket conversion initiative was also completed early in the third quarter and was the primary driver of the 170 basis point improvement in amusement cost of sales.

Our guests have clearly embraced a change with an opt in rate of approximately 90% and our guest satisfaction scores in the amusement area continue to remain strong even after the conversion.

Also as mentioned on our prior call, we have seen an increase in simulation game play, because of this transition, resulting in fewer ticket issued and lower redemption costs. We can’t say definitively that this trend will continue, but it is directly correlated to the rollout.

And now we'll hear from Brian who will walk you through the numbers in a bit more detail..

Thank you, Steve and good afternoon, everyone. Well, needless to say, I echo Steve’s excitement and how pleased we are with our performance to date and where we’re headed. Let’s now review our third quarter results and then discuss our increased outlook for 2015 and preliminary thoughts on 2016.

For the 13-week period, total revenues increased 17.9% to $192.8 million, that’s up from $163.5 million in the prior year. Revenues from our comparable stores increased 8.8% to $152.4 million, up from $140 million while revenues from our non-comparable stores increased 72.7% to $40 million, that’s up from $23.2 million in the prior year.

Now as a reminder, a store does not enter the comparable base until it is open at least 18 months as of the beginning of each fiscal year and store is closed as of the end of the reporting period are removed from the comparable base.

As a result, although we had 60 stores in our comp base in the first half of 2015, it is dropped to 59 for Q3 and Q4 because of the closure and relocation of our Buffalo store.

Also, please note that the year ago quarter included $2 million in revenues from two stores that have since closed, namely our Bethesda, Maryland store during the third quarter of last year and Farmingdale, New York store that closed in the first quarter of this year.

With respect to category sales, we continue to experience our total sales mix shift to the more profitable gaming side of our business as total amusement and other sales grew 20.7% while food and beverage collectively increased 14.9%.

During the third quarter, amusements represented 53.4% of total revenues, reflecting 120 basis point increase from the prior year period. Despite the 1.1% Halloween calendar headwind that Steve mentioned, we generated a strong 8.8% increase in comparable store sales. Now breaking that comp down a bit, amusements rose 11.2%.

Food sales increased 7.3% while our bar business grew 4.1%, for a combined food and beverage increase of 6.2%.

We believe that our continued investment in games, which featured the exclusive introduction of angry birds at the start of the quarter is helping to fuel our strong amusement business and the transition to our D&B sports offering with the kickoff of the football season has resonated with our growing sports viewing depth.

Total cost of sales was $36.4 million in the third quarter and as a percent of sales improved 90 basis points. Our food and beverage costs were 30 basis points higher than last year and in line with our expectations reflecting in part the all-you-can-eat-drink promotion as Steve mentioned.

Food commodity inflation for the quarter was about 2.5%, driven primarily by increases in beef and poultry while approximately 2.5% in food pricing partially offset these pressures.

Please note that the full year commodity inflation remains between 3% and 4% reflecting elevated protein cost that will be lower in the back half of the year compared to the first and we look forward to further release as we move into 2016.

Cost of amusement and other were 170 basis points lower than last year, reflecting lower paper ticket cost, driven by our e-ticket initiative and a reduction in redemption costs that Steve explained.

Total store operating expenses in the third quarter, which includes operating payroll and benefits and other store operating expenses were $111.8 million.

And as a percentage of revenue decreased 160 basis points year-over-year to 58% of sales as we leveraged our marketing, occupancy cost and many other fixed expenses on the strong comparable store sales growth.

We experienced wage inflation of about 2% during the third quarter, which we believe is a little lower than many of our competitors and was in line with our expectations, resulting out a significant factor in our operating payroll and benefit costs, which improved 30 basis point.

Although we experienced leveraging on a store management labor line, we did see incentive compensation increase due to our outperformance in the quarter. Store level EBITDA was $44.5 million for the quarter, reflecting growth of 32.5% compared to $33.6 million last year, an improvement of 250 basis points to 23.1% of sales.

This is the highest store level EBITDA margin we have ever generated during the third quarter period. G&A expenses were $12.6 million, an increase of $1.2 million compared to last year but as a percentage of revenues were 40 basis points lower at 6.6%.

The increase in dollars was primarily a function of incremental public company costs and also expenses associated with our international development initiatives.

Pre-opening cost totaled $2.4 million compared to $3.7 million in 2014, reflecting the timing of new store openings relative to last year and included the Buffalo relocation which was completed during the third quarter.

Recall again that for a large format while we typically spend about $1.4 million while for a small format stores we spend around $1 million and all but one of the stores this year are in the large format like last year, it was little more mix.

Taken all together, our adjusted EBITDA grew 40.3% to $34.5 million and margins rose roughly 290 basis points to 17.9%, representing another record quarter performance.

Net interest expense for the quarter fell to $2.2 million, that’s down from $6.1 million in the prior year and that was driven primarily by the lower interest rate under our recapitalized debt and also the reduction in debt level due to our debt repayment that followed our IPO and recent refinancing.

One other item to note as it relates to our capital structure, in mid-October, we entered into an interest rate cap agreement on $200 million, or approximately 56% of our outstanding debt that capped our LIBOR interest rate at 3% over the full-year term.

This will result in an incremental $920,000 of interest expense on a mark-to-market basis through 2019. And while this is not a full blown hedge, we do consider this a fairly inexpensive means to protect against rising interest rates.

We generated net income of $4.6 million, or $0.11 per share on a diluted share base of 42.9 million shares compared to a net loss of $4.6 million, or loss per share of $0.13 in the third quarter of last year on our share base of 34.9 million shares.

On a pro forma basis, which we believe provides the best baseline view of the business, net income improved to $5 million, or $0.12 per diluted share compared to a net loss of $2.3 million in 2014. We have included in our press release, a reconciliation of our GAAP results to our pro forma results. Turning now to our annual outlook.

We are once again raising some of our guidance metrics to take into account our performance to date, our senior credit facility refinancing, as well as our transaction costs related to our secondary offering. Recall that our fiscal 2015 year ends on January 31, 2016 and is a 52-week period.

Total revenues are now expected between $857 million and $861 million, that’s up from our previous range of $844 million and $853 million. Our full year comparable store sales growth has been raised to 8.5% and 9% from our previous range of 6.5% to 7.5%.

Recall that in the fourth quarter, we are lapping our most challenging year ago comparison of 10.5% and our special events business represents a more significant portion of our sales mix than at any other time of the year. And while we have delivered consistent growth in this category, it’s certainly not been as strong as our walk-in business.

Also we are facing a holiday timing shift of Christmas and New Year's Eve toward the weekend, which is a little more onerous this year compared to the prior year period. We continue to expect eight to nine new stores of which seven have already opened this year-to-date.

In addition, we also relocated one existing store in Buffalo, New York, during the third quarter. Adjusted EBITDA is now expected to be between $207 million and $209 million. The high end of the range is up $6 million from the previous range of $199 million to $203 million.

Our effective tax rate is expected to range from 34.5% to 35.5% and our pro forma net income is now expected between $59 million and $60.5 million, which does include interest expense savings that were taxed for this year because of our refinancing and does exclude $6.8 million pretax write off of debt issuance costs associated with our previous credit facility and also excludes some transaction cost associated with our secondary offerings.

The high end of this range is approximately $5.5 million or 10% higher than our previous range of $52.5 million to $55 million. Diluted share count is expected to range from 42.8 million shares to 42.9 million shares, it’s up just lightly from previous guidance.

And finally, we have increased and narrowed our range on net capital additions after 10 allowances to be between $144 million to $249 million, primarily due to higher expected pre-spend on our 2016 class of new stores.

Finally, while we’re not yet in the position to provide detailed guidance related to 2016, we do feel it is important to relay our preliminary view on the upcoming year. Coming off this record year at Dave and Buster’s, we believe that move towards more normalized growth is most likely for 2016.

We anticipate delivering results that are above our long-term financial targets of approximately 10% growth in revenue and low double-digit growth in adjusted EBITDA respectively. That said we will provide specific guidance for 2016 when we report our fourth quarter 2015 results.

In terms of development, we are projecting nine to 10 store openings in 2016 that we expect will strike a more even balance between large and small format than the 2015 class, which included only one small format store. With that, I'll turn the call back over to Steve to make some concluding remark..

Thank you, Brian. I want to reiterate, we couldn’t be happier in terms of how 2015 is shaping up, while we've achieved so far as we look forward to a strong finish in the fourth quarter. We have a great team and great brand and great future at Dave & Buster's.

Before I go further into development, I thought I first discuss our ongoing remodeling efforts, which we believe are critical to us taking brand to the next level, so that we can be viewed as the destination of choice for one-of-a-kind dining, entertainment in our existing -- for our existing guest as well as new guest alive.

This year we’ve already completed three comprehensive remodels. We’ve enhanced five additional stores with D&B sports lounges and also improved the sports viewing in a number of other stores.

Over 70% of all stores now have the sub branded D&B sports, which is a major component of any remodel but of course, not the only thing that we’re touching when we’re going and remodel the store. Looking to next year, we’re planning six comprehensive remodels and enhancing three additional stores with D&B sports lounges.

By the end of 2016, we intend to be substantially complete with our sports related remodeling projects. Turning to development, as Brian mentioned, we planned to open eight to nine stores this year and have opened seven as of today. In the third quarter, we opened a store in Edina, Minnesota, which is in the Twin Cities area of Minnesota.

And in the fourth quarter, we’ve opened in Friendswood, Texas, which is ever of Houston, as well as Glendale, Arizona in the Phoenix area. We’ll be opening in Springfield, Virginia, which is in the Greater DC area in a couple of weeks and follow those according to the plan in San Antonio, Texas some time in January.

San Antonio would be our ninth and final opening of the year of 2015. We also had one store relocation, as Brian mentioned, our store in Buffalo, New York. We kept our older store open some about three days before that new store opened and so that is in addition to that eight to nine new store guidance.

As I mentioned last quarter, the great visibility with respect to development, 17 time leases for stores to open in 2016 and thereafter. Today, we’re less than the half our way towards our ultimate objective of operating more than 200 stores in North America over the long-term.

Finally, we announced in late October that we launched an international development initiative and trying to master development agreement for the Middle East for seven stores over the seven year period.

This franchise-based agreement provides Dubai-based Apparel Group with the rights to develop Dave & Buster's brand within the six country region and company encompassing the UAE, Bahrain, Kuwait, Oman, Qatar and Saudi Arabia.

We feel that the Apparel Group is going to be a great partner for us as they have a stellar reputation operating the 1,000 retail stores and restaurants that they have into more than 50 brands.

And while we don't have any additional agreements to announce at this time in the near-term, we’re in discussions with several different parties across various geographies. We’re interested in learning more about our Eat Drink Play and Watch positioning.

Above all, we think that the tremendous popularity of the D&B experience will resonate with audience across many countries and will therefore continue to pursue additional international licensing and/or joint venture agreement. So, on that exciting note, we are now ready to take your questions. Operator, please open the lines for questions..

Thank you. [Operator Instructions] And we’ll take our first question from Andy Barish with Jefferies..

Hey, guys. Just wanted to check on sort of what you would view as the key drivers to kind of ‘16 growth above the long-term target. I know you’ve got a huge amount of momentum right now but -- and you don’t want to talk about specific yet.

But what we kind of think about is as that the key elements that are driving your confidence in the ‘16 outlook?.

Andy, I think, you said it that we have great momentum right now and that we anticipate some of that to carry into particularly the first part of 2016. And as always, we’re looking at different ways to get incrementally better across the Board.

So we’re going to have some additional marketing, we’re going to have some additional marketing twist and tactics. But I would say that the biggest reason is the momentum that we’re carrying right now is in our confidence and being able to exceed again that long-term guidance number that we talked about..

And how do you -- how are you looking at and feeling about new store productivity as sort of incremental driver versus your pro forma at this point?.

Well, I think, that we’re not really changing that all that much. I mean, we’re saying roughly 10% unit growth is going to generate a little bit less than 10% sales growth because we are -- we do have a number of those smaller stores in the mix.

As Brian mentioned, it’s going to be more even bounce next year than what was this year where we only did one small store.

So we would expect that those new stores are going to be relatively evenly spread across the year, probably, than a little more evenly spread across the year than they were this year, which should provide us in that kind of high single-digit growth or -- for new stores.

But that’s what we have said before in terms of the way we anticipate that that’s going to flow..

Thanks, guys..

We will take our next question from Sharon Zackfia with William Blair..

Hi. Good afternoon. So just two questions….

Good afternoon, Sharon..

Hi. I am calling you from the sunny Caribbean..

Okay. We can’t really..

We isn’t there..

Yeah. The sun setting now so not the sun anymore..

Okay..

On G&A it looks really low this quarter, pretty low year-over-year growth, you backed up a transaction expenses.

And I was just wondering if you had any shift on the timing in G&A at all that’s worth mentioning?.

Not really. Last year we outperformed so early this year. We had both our incentive comp heading towards max payout, because of the high performance level, so and last year it was a little more measured over the course of the year. We are still targeting $52 million to $53 million of reported G&A.

So I would just kind of keep that in your thought process..

Yes..

Got it. Okay.

So that’s reported as now pro forma?.

Yes. I mean, the only thing we are backing out -- really out of G&A is the secondary costs, which I think is about $150 million to the third quarter, so you could….

Okay..

… perform that out in terms of the pro forma results..

Great.

[Indiscernible] as well?.

Yes. I will just say I was going to reiterate more or less what Brian said, last year we saw more acceleration in the second half of the year which drove the overall performance both on the comp basis and EBITDA basis.

Again, this is all about how you prove it in the comp, this year it was clear very early on that we are going to be close to the [max] and we begin improving at that rate very early in the year..

Okay. Perfect. And then in the fourth quarter, I know you mentioned the holiday stuff, I don’t know, if you have any estimate on what that might do in the same-store sales.

And I was just curious on Star Wars, I mean, do you think, the Star Wars movie is good thing or a bad thing for your business like you kind of see it both ways, but I am interested in your history with the big movie opening like that what am I need for Dave & Buster's?.

I will take the second one first. We have been unsuccessful in correlating blockbuster movie openings with our comparable store sales. Meaning, it literally has no correlation when we grow in our process. So I'm not really anticipating that Star Wars is going to be any different.

I mean, we do have the Star Wars Battle Pod game that we rolled out earlier this year. But there's really not a very effective way to talk about that for us. So I don’t think we are really going to get any balance per se from that.

So I think that it will -- it is an event and we have a lot of stores that are very near because of their, where they are located is very near movie theaters, they tend to benefit from this kind of thing with is a blockbuster movie.

We got other stores that are nowhere near a theater and they probably move a little bit and that’s my thesis for awhile. We don’t see any correlation between the two where we would just don't -- they are just not correlated to those blockbuster movies..

Okay. The first part of the question around holiday shift, obviously, it remains to be seen what the impact of that is. But it’s -- we think it’s going to be less than a percentage point. So it’s a number that’s that what it directionally lower than that hopefully.

And I think, probably, the bigger number is thinking through the special event versus walk-in mix issue, because obviously the fourth quarter is by far the largest special events quarter any of our four quarters just to give you some perspective on that.

On a year-to-date basis at the -- our special event business is around in the mid-9% range, I think, it’s 9.2% and in the fourth quarter you are carrying 16% or so.

So and as we’ve indicated, we’ve not seeing the kind of walk-in strength and special events does not shuffle producing the same kind of strength as our walk-in business which has been just phenomenal this year. We take that right.

We like the strong walk-in business, but they will have some impact on our -- I think our reported comp in the fourth quarter..

Okay. Great. Thank you..

We’ll take our next question from the Nicole Miller with Piper Jaffray..

Thank you. Good evening.

On the development for next year to 97 stores, are these going to be in new -- or you would call it new market that will be -- how many are going through existing market?.

They skew more towards new market, I believe next year, looking at some of our compatriot here..

I don’t know what they did this year..

We clearly skewed more in the existing markets and I slipped around. I want to say roughly four of them are existing, six new..

Okay. Great. And then just on the private party business, can you talk about if that’s driven more by a corporate or social. And then what are you seeing so far for a holiday booking? Thanks..

Well, I’ll take the first part -- the second part first which is we don't typically disclose or we haven’t in the past that we disclosed where we are in booking and whatnot. But I’ll let Dolf answer the question on kind of where we introduced social versus corporate..

Our experience is that there were about 55% corporate and 45% social in non-profit. So the non-profit will include schools. We do quite a bit with walk-in event in summer. So it’s about 55%-45%..

Is strength still coming from both stores, they’re evenly split and their performance is similar?.

That mix hasn’t changed dramatically in the last number of quarters..

Great. Thanks so much..

[Operator Instructions] and with no further questions at this time, I'd like to turn the call back over to Steve King for any additional or closing remarks..

Thank you, Noah. As a final note we’re planning to present at the ICR conference in January. So we may see some of you there, but if not, we look forward to speaking to you again when we release our results from the fourth quarter towards the end of March. We appreciate your continued support and interest in Dave and Busters. Have a good afternoon..

And that does conclude today's conference. Thank you for your participation..