Good afternoon, everyone, and welcome to the Dave & Buster's Incorporated Third Quarter 2016 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, Don 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 & Buster's Entertainment Incorporated 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 also available on our website at daveandbusters.com under the Investor Relations section. In addition, our remarks today will include references to adjusted EBITDA and store EBITDA, 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 quarterly conference call and 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 raise guidance and then I'll discuss our development and remodeling efforts before we take your question. We are pleased to report a very strong third quarter. We delivered industry leading comparable store sales growth of 5.9%. Our comp store sales continued to perform exceedingly well and we expanded margins significantly as we leveraged our operating costs. Although we are certainly not immune to the macroeconomic environment, the uniquely customizable experience we provide across four platforms; eat, drink, play, and watch, provides us with some degree of insulation from casual dining term and that certainly played out this quarter. As we mentioned before, our strategy is to lead with entertainment the most differentiated part of our offering. This helps to separate us from the competition especially as we add proprietary content. Our objective is to drive traffic by featuring games, food, and beverages on national cable television with immediate call back action which usually includes an element of free game plan. Once guests are in stores, we want to sell them the complete experience including our F&B offering, but we consciously are not doing anything that would shift revenue to food and beverage at the expense of amusement sales. For the quarter itself, we grew total revenues by nearly 19%, net income was $10.8 million driven by a 42% growth in adjusted EBITDA and a 350 basis point improvement in adjusted EBITDA margin. Of the 88 stores we operated during the third quarter, 22 stores or 25% of the total were non comp stores. Their…

Thank you, Steve and good afternoon everybody. Before walking through the numbers, I just want to thank our many team members across the country. They are clearly our greatest assets and standard bearers of the service levels, programs that drive our sales and profit growth on a daily basis. Their commitment to Dave & Buster's is a key reason we are in a strong position to deliver on our improved annual guidance for all key metrics. Now in terms of the third quarter, total revenues increased almost 19% to $228.7 million that's up from $192.8 million in the prior year due to contributions from newer stores, as well as strong performance in our comp store base. Revenues from our 66 comparable stores increased 5.9% to $177.4 million, that's up from $167.6 million while revenues from our 22 non-comparable stores including two that opened during the quarter increased 106% to $50.9 million, that's up from $24.8 million in the prior year. Turning to category sales, the mix shift to our more profitable entertainment business continued as amusement and other sales grew 24%, while food and beverage collectively increased 13%. During the third quarter, amusement and other represented 55.7% of total revenues, reflecting a 230-basis-point increase from the prior year period. Now breaking down the 5.9% increase in comp sales, our walk-in sales grew 5.7% while our special events business increased 7.6%. In terms of category sales, amusements rose 10.4%, while our food and beverage business was up 0.8% and 0.6% respectively. We were able to extend our outperformance relative to Knapp Track to 18 consecutive quarters, and our gap to Knapp widened versus the second quarter. On a two-year-stack basis, our comparable store sales growth accelerated to 14.7%, an improvement compared to the trend in the first half of the year.…

Thank you, Brian. I would like to review our recent and upcoming store development activity and some of the remodel program. We are pleased to the response to our recent store openings during the quarter, we opened two stores, a store at Fresno, California and a store in Summerlin, Nevada which is a suburb of Las Vegas, Nevada is a completely new state for us. In the fourth quarter, so far we have opened stores in Toledo, Ohio; Silver Spring, Maryland outside of D.C., and Toronto, Ontario, Canada. In fact we opened that store today. We remain focused on having buildings and teams ready to handle the typically strong opening weeks that we have in our new stores but at the same time, we are constantly replanning our process into greater efficiency during this pre-opening and the first 90 day opening process. While we have previously guided to between 10 and 11 openings as Brian mentioned, we are now confirming 11 store openings for the year, of these 11 stores, six are in new markets for D&B and five stores are in markets where we already have a brand presence, while it is early our 2016 class of stores is performing quite well. Our position as a premier sought after entertainment and dining concept enables us to tap into an increasing supply of real estate that meets our criteria and gives us confidence that our long-term goal of 200 stores in North America has been in our reach between well known Big-Box retailers and department stores announcing closings and mall owners emphasizing entertainment, as well as dining options versus traditional fast and retail in their redevelopment plans, we are very well positioned and can therefore be selective in choosing the best buys for our brand. As a reminder, we are…

[Operator Instructions] And we will take our first question from Jeff Farmer with Wells Fargo.

Thank you. You did touch on it, but relative to your expectations across traffic mix, week per trend, that is regional trends, any other essential sales components, where did you see Q3 same-store sales outpace your expectations by the greatest level?

I guess I would share a little bit in terms of - we didn't share any of our day part data on it, so far in the call. We saw a very strong performance in the launch and after doing day part, it clearly outperformed dinner and late night for us, and we think it in terms of day or week Monday, Wednesday and Saturday, Sunday were all very strong base for us, and we were out there promoting D&B Sports as well as some great new game titles, so we thought like we had a good line of product, when you see it, when you look at the comp performance and amusement, I mean we were up over double-digit growth, so feel very good about how the quarter shaped up for us.

And as a follow-up to the operating income margin, just margin expansion in general is quite sizable in the third quarter and year-to-date, but just beyond that the sales leverage that would come with the nice comp numbers, where do you see opportunities to deliver margin expansion as you head into 2017, what's still left out there for you guys on the margin front?

Well, clearly that’s just been an excellent year not only in the quarter but year overall, we’ve seen very strong margin growth for the company 350, 350 basis points for the quarter and it is around 270 year-to-date in terms of adjusted EBITDA margins, so very strong year, lot of the fuel of this has been the e-ticket initiative which was a big number. So, as well as commodity deflation has been helpful, so that fuel we’re rolling over, we’ve indicated that we’re rolling over that Q4 even more so, there is limited runway left on either of those items at this point. So that’s been very helpful for us in terms of fueling the year margins. This quarter, when we put up the 5.9, we had significant leverage on facility related cost. We’re also able to leverage marketing despite the fact that we did invest in a couple of extra weeks and leverage G&A. As we moved forward long term, we have indicated that margin opportunities are tougher to come by. We have moved our margins up 1100 basis points in the last six years and over the last decade it is like 1300 or plus basis points. So very strong margins, a lot of movement made for very healthy store base, made for very strong returns, it opens us up to the 200 stores that we targeted as a brand, so we are just on a very healthy place that way, but it is harder to come by, there is not an e-ticket running around every day, we’re more in the - that was the home run for us. We’re now more in the singles and the doubles looking for opportunities, we continue to do that but our long-term guidance for our margins is really maintaining our comparable store level margins based on kind of low-single digit comp, leveraging G&A, and leveraging marketing over time, and the new stores as I indicated in my comments today, they tend to be less efficient from a claim cost, labor, and cost of sales because they are not matured and we have a growing base on non-comp stores. We have 22 stores non-comp stores in our base of stores, like by end of this year will be 26, that puts some pressure on our margins, and our rents in the new stores tend to be a bit higher than some of our stores that have been in the system for a long time. So we’re trying to manage all that, but we think we’ve got a very strong margin profile with brand as it fits and we’re going to continue to look for ways to move the needle.

Thank you.

We’ll take our next question from Andy Barish with Jefferies.

Yes, hi guys. Just wondering I mean has there been a shift in the third quarter of this year, maybe at least debating it that it's just a less seasonally softer quarter with your Football viewing and watching component to the business now, is there something to kind of talk about there?

Well, I think as we have discussed previously, one of the objectives of going after our quarter was that it was seasonally our slowest quarter and that was that we saw a really good fit with viewership out of home being the strongest in the third quarter. So those two things dovetails quite nicely, people thought it's a logical extension for us, but to your point, it is getting to be less of a weak quarter than it was, it was still the weakest quarter of the year for us, but you dove back a couple of years ago, we certainly weren’t, we weren’t making very much money, in fact we’re sort of flattish on an overall earnings basis in the third quarter. We compare and contrast out with, making over $10 million, $0.25 a share, we’ve come a long lag [ph] from where we were a couple of years back.

I mean just following up on that a little bit, I think you didn’t see or couldn’t tell any impact from the lower, lower NFL ratings and when were the extra weeks of advertising in the quarter end and could you quantify that for us?

We’ve said - I’ll answer the last question first, first of all they were, what was, I think in September what was in October I mean, in terms of they were kind of spread out throughout the quarter. We like what we saw from it but just to be clear it wasn’t the driver for a 5.9% comp, what we did in those two quarters, two weeks where we advertise where we hadn’t last year and we said we’re going to be at a little less transparent about exactly what we’re doing from a marketing standpoint, we’ve got a lot of people out there, kind of copy what we’re doing and we don’t think it whose those to be overly specific other than to say, we’re happy with the results of that and also that we will continue to add some weeks into the fourth quarter, I think as Brian mentioned, we anticipate that may create some slight deleverage on the marketing line in Q4.

Thank you.

[Operator Instructions] We'll take our next question from Joshua Long with Piper Jaffray.

Great, thank you for taking my questions. Wanted to see if we might be able to talk about the proprietary games and then I’m wanting in there also the opportunity to kind of create new up sell opportunities with the RFID bracelets and warrants you mentioned. How do you think about or how should we think about dimensionalizing that in terms of where you’ve been historically and what kind of either contribution or mix in terms of percentages of games or promotions that should be going forward. Not trying to get to into the weeds but just seems like there is a big opportunity here with proprietary nature and really taking that, the next steps just trying to put that in context of where we’re coming from.

Yes, I think that is a game that we haven't on an exclusive basis for a limited period of time or proprietary games both of those can be strong for us and both of those are attractive to us in terms of ways that we want to kind of make our capital investment marketable and we spend that over - for a long time. Really that’s one of our key objective is we’re going to buy games, we’re going to refresh the midway content, we want to make sure that that content is what is such that we can make that marketable capital. So once again there is proprietary and exclusive games which give us that ability to advertise that, kind of only at Dave & Buster's message. Again as I mentioned in my remarks that we typically will care that with an opportunity to come in and play some of those for free. So going forward we're going to continue to look for those, does every game has to be proprietary or exclusive for us to buy it, no, the answer to that but certainly it would be a strong preference and it really is the way that we’re building the marketing calendar for 2017. We’re building the marketing calendar around the idea that we’re going to have a series of proprietary and/or exclusive games that we advertise over the course of the year. You had asked about RFID as well. I don’t want to overstate RFID, because it’s a single as Brian described earlier, I’m not talking about single digit comp influence, just to be clear it is a single in the baseball analogy, right. It's going to be additive, it's little early to say exactly how additive but we believe that by what we’re able to measure, the people who are buying these devices are putting at least as much on their card as anybody is who is buying a Power Card and we're getting $10 for one of these devices versus $2 per Power Card. So obviously it's a good trade for us, if we're willing to do it, it's easier way on activate the games kind of cool technology, it will take us a while to figure out how many people are going to bring these back versus not bringing back and all the rest of that. It's something that we're going to continue to pursue and continue to try to figure out ways to market and get it should be able to provide us with some incremental revenue and profitability.

That's helpful, I appreciate that. In terms of just the initial outlook on 2017 developments with the expectation that is skewed towards newer - larger stores in newer market, anything you point to just in terms of what the revenue dynamic of that look like maybe opening up a little stronger and then just given the newness in the new markets, do you feel your national brand awareness is at a point now where newer stores in newer markets might fairly might coverage over time?

I think that we still see very nice uptick in markets where we do not have any stores impact - some are great honeymoon in markets where we don’t have an interest. Having said that, we're kind of [indiscernible] land as well, where we are going to have a blend of margins small and some in between, and I would say even some of the large stores that we are building at close to 40,000 square foot range but not necessarily underwriting at the top end of the sales range. So, in terms of where do we think, we think it's going to be similar to this year where the logical number comes in somewhere like a blend between our small model and our large model.

Thank you.

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

Hi, good afternoon. So quick question on the amusement and the proprietary work you're doing there, I mean how do you assess kind of how much of Tailgate Toss helps comps for Star Trek, I mean it would be helpful to understand kind of what you look out to kind of figure out what it's really doing to the business. And then secondarily the normalization in Texas, how much do that benefit comps in the quarter?

Texas is easier to answer than the former, I mean Texas is up slightly less than the overall, so which was a material bounce back from where Texas was in Q1 and Q2.

It moved from being negative comp through positive comps for the quarter. So it's helpful but it is small piece for the 5.9 really.

It's something…

It is actually higher than that.

And to answer your question on the former, it's really, really, really hard to keep that stuff out of how much incremental traffic and door in any single game provides, I think we have found that we can move the needle with promotional activities at specific to games, now how much of it is around A, I would like to go to try to make games it is most interesting, I mean that is clearly what we are trying to do by trying to keep that out relative to overall kind of how the brand doing in some of that stuff, I think that's extraordinarily difficult to do.

I would say this, I mean going back historically and looking at the comps in our business and looking at how we have driven the amusement entertainment side of the business, five years ago 2012 when we first started the notion of putting games to work for us, making it marketable capital, taking delivery of games when we wanted or not when they were necessarily available, just available and try to put them on TV, that notion started to change the results and we could see it by putting the capital to work. What we are doing now feels like to me national evolution meaning it's even better to have games that is exclusive to us for a limited time. So we have done a number or those Kevin Bachus and his team work hard to do putting some of those titles, the notion of proprietary game are permanently ours, no one else could play Rock'em Sock'em or Star Trek, it's just a further evolution of that strategy and we think it's reason why you see kind of amusement comps we have. So the pinpoint, the specific launch of Star Trek or something like that that it moves the needle in one week kind of think it's broader than that.

Okay. Thank you.

For our next question we’ll go to Brian Vaccaro with Raymond James.

Good evening. Just a quick follow-up to start on Andy’s question around D&B Sports impact. In the past you talked about sort of year-on-year trends during that key Football viewing period, would you be willing to share how those periods performed in the third quarter?

I think Brian alluded to it, I mean he said that - I think Brian alluded to it I mean I don’t know that we, I think in the past we called out like a specific day is about like sometimes we called out Wednesday or Sunday or whatever, I think Brian alluded to like Saturday and Sunday were really good for us in the quarter but all what we’re doing with respect to of D&B Sports for us is that or some other elements there. Again clearly we were on television for the first kind of five weeks of the NFL season was All You Can Eat Wings, Thursday, Sunday, Monday we can figure out, how to do it effectively on Saturday. So I think one of our competitors went out on Tuesday with All You Can Eat Wings or half price wings so, we clearly we have some advantage but even during those time period we’re still seeing significant uptick and significant cross over to the amusement side of the equation.

Okay. And on that All You Can Eat Wings promotion, I understand the tweaks that you made in terms of the number of weeks in the price points versus last year, was the attachment rate up also despite that higher price points?

The attachment rate was down and we kind of have modeled out and expected that fully, the attachment rate was down…

But net positive for sales.

Yes. Net positive to us.

Okay, all right great. Just a couple on guidance if I could, first just starting on the fourth quarter comp specifically, can you quantify the headwinds from the Halloween Shift, I guess just suppressed Monday versus a normal Monday last year is that the right way to be thinking about it?

Yes, I mean it's obviously how we’re moving off the weekend as, was good for us in the third quarter we quantified 160 basis points related to the combination of number of things, Halloween was a piece of that, weather was also helpful to us but it's not a one day on a Monday, it's not an overly significant day some of the lowest - low starting day we have. So having to shift over, Halloween Shift to Monday is not, it's the negative impact but it's not a material negative impact. Q4 is going to be most likely more impact with buy what happens with Christmas and holiday and the fact that Christmas, New Year’s are going to shift over to the weekend Saturday, Sunday and that's a headwind for us. So we're - we’ll see how that all works out, there New Years day actually falls on a Monday so that probably helps that day but in general how Christmas is shifting for the weekend is not good for us.

But you are also - I guess lapping Hurricane Jonas impact last year as well and so…

We are 2.5 to 4.5, we tend to only more range in the fourth quarter and that's a two point range in our guidance. It’s a very healthy comp 2.5 to 4.5 given the environment that is out there, mid-point of that range is right square on our year-to-date performance, and we obviously came up a very strong Q3 number here that had a little tailwind from holiday and weather. We're shifting the Q4 that’s a big quarter for us, we had some big weeks coming up here around Christmas and holidays and we are more exposed to weather volatility in the fourth quarter just the way it works to get another Jonas or two of them, there is more exposure there, hopefully we don’t and then there is that the issue that I mentioned previously around just the holiday calendar shifting to the weekend and general market. So time will provide a little wider gap in the fourth quarter in a range here.

Sure, sure make sense. And taking with the fourth quarter if we could seems that your implied margin guidance or your implied EBITDA guidance for the fourth quarter and seems to imply store margin contraction and I guess excluding the impacts of differentials in comp trends obviously, I'm just trying to understand what might be driving that, is there anything in the fourth quarter that was unusually favorable last year that we should be mindful of, is there something maybe changing in terms of the weight on your model related to non-comp units, any color on that you might be able to provide would be helpful?

Yes, I mentioned we’re close to 270 basis points of adjusted EBITDA margin improvement year-to-date, 150 basis points of that - been driven and that gross margin and labor benefit. We do as I mentioned we’re going to rollover, 100 basis points of that good news in the fourth quarter. So actually we don’t have that fuel on the gross margin lines going into the fourth quarter. And labor, we expect some pressure in labor from wage inflation of around 5% in the fourth quarter and you mentioned the impact of non-comp stores, new stores that are not mature and are tend to be inefficient when particularly when they open, it's going to put, we expect to put pressure on our margins. In the fourth quarter going forward we’re going to open four stores, four large - three large stores, four stores in the fourth quarter and two that we opened in the third quarter. So, we’ve got a growing class of non-comp stores that as I said we’re really excited about the return, they’re strong and not all good news but they did put some pressure on the margin profile of the company.

All right, understood and then just last...

I forgot to mention marketing, marketing is a switch, we are - it has we have leveraged marketing on a year-to-date basis and well we’re not going to family dollars, we’re going to spend how many weeks we’re going to turn up that way from providing our entire marketing strategy for all here about it, we expect that to go to move from a leveraging line to a deleveraging line as we look to promote some of our new games.

All right, that’s very helpful. Last one on your 2017 guidance, does that include the benefit of the extra week?

No, in terms of that guidance be interrupted we expect to be at low double digit for those metrics I mentioned, sales, EBITDA net income excluding the impact of the 53 week and we will share what we expect that impact to be probably on our year end call at March.

All right, very helpful. Thank you.

[Operator Instructions] We’ll take our next question from Andrew Strelzik with BMO Capital Markets.

Hi, good evening. So, just kind of following up on you just went through some of that margin impacts of the fourth quarter, if I look at 2017 guidance your revenues are above your normal plan, your EBITDA growth is not is more in line with your normal plan, is it safe to assume that the same kind of dynamics are going to limit the margin expansion at 2017 or is it something else at high level that we should be aware of?

I would interpret it that way, those double-digit sales growth implies low double-digit EBITDA growth and they are actually similar numbers and not a whole lot of margin expense.

Okay. And secondarily as we're going into holidays here obviously there is a big change in the trajectory of your special events business, do you feel what was really the big driver of that, do you feel like we have kind of stabilized it's hard to reaccelerate there as we think about how that impacts the fourth quarter which is obviously more impactful than some of the other quarters for the special events business kind of what is really the big drivers there?

Couple of things, if you call didn't make a switch there of changing where that group was reporting clearly putting under marketing and we have made that switch sort of very end of last year, so that as we moved into this year from sort of being directed by the operating team to being directed by the marketing team and I think it's taken some number of months to really make some of the shift and changes that they wanted to make and have those threshold. Having said all that, it's the last small numbers, it's a relatively tiny quarter in terms of absolute dollars. So without a dramatic increase in the dollar amount, you can have a pretty big improvement in the percentage for quarter. Now having said that, we feel good about special events for the fourth quarter of what we are going to do but there is a lot of still in front of us to go.

Okay. And then I guess the last one from me, you made the commentary about the flexibility on the balance sheet. Have you started to think about what the right longer term kind of leverage profile is for the business, is that something that you might be looking to execute on kind of in the immediate term here, is that kind of just longer term optionality that you're thinking about?

I think it is one that we continue to think about and discuss with our board, we’re not prepared to really come out with anything specific at this time.

Okay, great. Thank you very much.

That concludes today's question-and-answer session. At this time, I will turn the call back to Mr. Steve King for any final remarks.

Okay, well thank you for listening in today. We look forward to sharing our 2016 year end results and as we mentioned comprehensive 2017 guidance on our fourth quarter call which will occur in late March. Good day.

This does conclude today's conference. Thank you for your participation. You may now disconnect.