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Dave & Buster's (PLAY) Stock Rallies on Q2 Earnings Beat

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Shares of Dave & Buster's Entertainment, Inc. (PLAY - Free Report) rallied 7.9% following the company’s better-than-expected results in second-quarter fiscal 2018. Both the top and bottom lines improved year over year. Over the past year, shares of Dave &Buster’s have gained 19.7%, outperforming the industry’s rally of 7.3%.

Earnings came in at 84 cents per share surpassing the Zacks Consensus Estimate of 74 cents by 13.5% in the reported quarter. The bottom-line figure also increased 18.3% on a year-over-year basis. Results were aided by solid revenues generated from the Food and Beverage as well as the Amusement and Other segments.

Detailed Revenue Discussion

Quarterly revenues of $319.2 million outpaced the consensus mark by 0.8%. The top-line figure also increased 13.7% from the prior-year quarter.

Overall comps declined 2.4% in the second quarter, against an increase of1.1% in the year-ago quarter. The decline in comps can be attributed to a dip of 2.6% in walk-in sales offset by a 0.1% increase in special events sales. However, the company remains confident about returning to growth despite decline in comps.

Non-comparable store revenues in the reported quarter increased 99.6% from the year-ago quarter to $78.8 million.

Food and Beverage revenues (40.8% of total revenues in the second quarter) increased 9.7% year over year to $130.2 million, while Amusement and Other revenues (59.2%) rose 16.6% to $188.9 million.

However, comps at the Food and Beverage segment fell 4.1% in the reported quarter. Further, Amusement and Other witnessed a comps decline of 1.2%.

Dave & Buster's Entertainment, Inc. Price, Consensus and EPS Surprise


Operating Highlights


In the reported quarter, operating margin increased roughly 50 basis points (bps) year over year to 14.4%.

Net income in the second quarter totaled $33.8 million, up from $30.4 million in the prior-year quarter. Adjusted EBITDA increased 16.7% to $82.4 million compared with $70.6 million in the same period last year. However, EBITDA margin decreased 100 bps year over year.

Balance Sheet

As of Aug 5, 2018, cash and cash equivalents were $22.4 million compared with $18.8 million as of Feb 4, 2018.

Long-term debt totaled $346.9 million at the end of quarter, down from $351.2 million at the end of 2017. During the second quarter, the company expanded share repurchase authorization by $100 million and initiated quarterly dividend of 15 cents per share.

During the second quarter, the company repurchased roughly 729,000 shares for $33.7 million, with an additional 212,000 shares for $11.3 million through Sep 11, 2018. Cumulatively it had repurchased 4.8 million shares for $253.1 million.

Store Development

Dave & Buster’s had launched five stores during the second quarter. Currently, the company has eight stores under construction.

Fiscal 2018 Outlook Raised

Dave & Buster’s expects 2018 revenues in the range of $1.230-$1.255 billion, up from the previously guided range of $1.200-$1.240 billion.

Comps are anticipated to decrease by low-single digits as compared with the prior expectation of comps decline by low to mid-single digits.

Net income is anticipated to come in between $101 million and $111 million, up from the prior guidance of $95-$110 million.

The company maintains that it will open 14 to 15 new stores, representing 13% to 14% unit growth in fiscal 2018.

Zacks Rank & Peer Releases

Dave & Buster’s carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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