Good afternoon, everyone. Welcome to the Dave & Buster's Entertainment Incorporated Fourth-Quarter 2017 Earnings Results Conference Call. Today's call is being hosted by Steve King, Chief Executive Officer. I'd 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 call over to Jay Tobin, Senior Vice President and General Counsel, for opening remarks. Please go ahead.

Thank you, Ashley, 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 each of 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 Inc., and is copyrighted. Before we begin our discussion of the Company's results, I'd like to call your attention to the fact that in our remarks and our responses to your questions, certain items may be discussed which are not based entirely on historical facts. Any such items should be considered forward-looking statements and relating to future events within the meaning of the Private Securities Litigation Reform Act of 1995. All such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Information on the various risk factors and uncertainties has been published in our filings with the SEC, which are available on our website at www.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 quarterly and year-end conference call. Today, I'll begin by providing an overview of the fourth-quarter and full-year performance and update you on our key strategic priorities. Brian will delve into the financials and provide updated 2018 guidance. And then, finally, I'll conclude by sharing an update on our development efforts before we open it up to your questions. Looking at the full-year results, we grew revenue and EBITDA by low double digits, while keeping EBITDA margins relatively flat year over year. But unfortunately, after several years of significant same-store sales growth, we reported comps down about 1% for fiscal 2017. The fourth quarter proved to be a challenging sales environment for us, with comps declining by 5.9%. We did not anticipate the abrupt drop in momentum in the latter part of the quarter as we finished the fiscal year. To put this surprise in a bit of context, October, the last month of Q3, had modestly positive overall comparable-store sales. The most dramatic change in the trend was the slowdown in amusements. For the first nine months of the year in 2017, the amusements business performed well for us, with comps increasing about 4%, and on a two-year stack, our comps were up just under 11%. However, in the early part of the fourth quarter, we saw a slight softening, which we pointed out on our call in early December. At that point, we still expected trends to reverse during our seasonally strong weeks in December and January. Instead, the trends deteriorated further, and those soft trends have continued into the first quarter of this fiscal year. In retrospect, our new amusement offerings in the quarter proved less compelling than in the comparable period last year. Weather…

Thank you, Steve, and good afternoon, everyone. First, I want to thank our team members across the country for their continued hard work that enabled us to deliver our fourth consecutive year of record revenue, net income, and EBITDA. Over the past four years, we have significantly grown our EBITDA and expanded our margins on the shoulders of this team. We recently hosted our annual general managers' conference, and it was encouraging to see our team's passion for the D&B brand, and more importantly, the commitment and resolve we have to reverse the recent challenging comp-sales trends. Turning now to some of the highlights from the fourth quarter, which I will remind you, included 14 weeks this year versus 13 weeks in the year-ago period. The extra week in fiscal 2017 generated approximately 19.7 million in revenue, 0.9 million in net income, 3.4 million in EBITDA, and 4.3 million in adjusted EBITDA. For the quarter, total revenues increased 12.9% to 304.9 million due to strong contributions from our newer stores and the benefit of the extra week. Excluding the extra week, revenues were up 5.6%. On a 13-week basis, revenues from our 76 comparable stores fell 5.9% to 214.9 million, down from 228.3 million, while revenues from our 30 non-comparable stores, including five that opened during the quarter, increased to $73.6 million. That's up from 43.9 million in the prior year. Turning to category sales, amusement and other sales grew 15.3%, while food and beverage sales collectively grew 10%. During the quarter, amusement and other represented 54.5% of total revenues, reflecting a 110-basis-point increase from the prior-year period, continuing a long-term trend. Breaking down the 5.9% decrease in comp sales, our walk-in sales fell 6.4%, while our special events business was down 2.9%. In terms of category sales, amusements was…

Thank you, Brian. I'd like to review our recent and upcoming store-development activities as well as a little bit about the long-term opportunity. We continue to be very pleased, as Brian mentioned, with the response of our recent store openings. During the fourth quarter, we opened five new stores in Brandon, Florida, which is just east of Tampa; Woodbridge in northern New Jersey; Auburn, Washington; Baltimore, Maryland; and Bayamon, Puerto Rico, which you may recall was delayed by about a quarter. New Jersey, Washington, and Puerto Rico are all new states or territories for the brand. As Brian mentioned, in the first quarter so far, we've already opened four stores, including Rogers, Arkansas, our first 17K-format store, and stores in Memphis, Tennessee; Wayne, which is also northern New Jersey; and Anchorage, Alaska, which is a new state for us. The 14 to 15 new stores we plan to open this year represent about 13% to 14% unit growth, are comprised of eight stores in new markets for D&B, with the remaining stores located in markets where we already have a brand presence. As Brian mentioned, we currently have eight stores under construction and a total of 27 signed leases, providing us with significant visibility on new-store growth well into 2019 and early 2020. We're confident that we have a strong and dedicated team needed to execute on our vision of opening these stores. In terms of square footage, at the higher end of this range, we expect 11 large stores, including nine that are approximately 40,000 square feet, two that are between 30,000 and 40,000 square feet, and the remaining stores will be comprised of two small stores, again those are 25,000 to 30,000 square feet and two of our 17K-format stores. So in conclusion, we believe our white-space opportunity remains large. We're targeting 230 to 250 locations in the United States and Canada alone, including the 17K format. Our plan focuses on taking market share by driving unit growth at a consistent, measured pace. At the same time, we need to evolve the brand and continuously develop new reasons to visit by enhancing our offerings, improving the perceived value of our offering, executing well inside the box, and showing that we're reaching our audiences effectively. As always, we appreciate your interest in Dave & Buster's. And at this time, Ashley, would you please open the lines for Q&A?

Thank you. [Operator instructions] We'll take our first question from Jake Bartlett with SunTrust. Please go ahead.

I'm wondering if you can look back and just touch on kind of what the narrative was in the fourth quarter when you gave the quarter-to-date update around weather, around the new games over the holidays not being as successful. And then kind of moving forward into early first quarter here, it seems like weather has improved. You had some games that came out that you thought were going to be as successful or maybe even better more recently. What has changed? Do you have any sort of different view of what has been happening and what's been driving the deceleration? And how do you explain kind of staying in this kind of -- maybe if you could kind of quantify and help us where you are right now, but I'm assuming it's in this kind of mid -- negative mid-single digit comp trend right now.

So let me see if I can clarify. I think what we said when we were -- when we talked to folks in January, I think you're referring to, after we kind of pre-announced results was that we thought the major influences were really content first, followed by competitive intrusion and weather as the two things that were different from what we anticipated. I would say, first-quarter competitive intrusion and weather are not different from what they really were in the fourth quarter. The weather has not been our friend so far in this quarter. I think that during ICR specifically, one of the things that we were saying was that on a year-over-year basis, the early part of the first quarter was unlikely to show any kind of significant shift as we were rolling over what we thought was good content from last year was good content from this year. And that really, the best prospects to see a significant change in trajectory weren't going to come until the second quarter when we roll VR.

I thought you were talking about having a game that turned out to be Tomb Raider that was going to be about equally as successful to Walking Dead last year, and then you were going to come out with a game that you thought was going to do better than Pirates of the Caribbean, which had not been successful. So -- but it sounds like that the games you've put out so far have been less successful than they were a year ago. Is that the right way to think about it?

Well, they haven't driven any more traffic than what we rolled a year ago. In fact, our traffic trends -- based on what we're guiding, traffic -- and what we've said during this call, is traffic trends remain weak. So we haven't currently seen a turn as it relates -- as a result of the two piece of content that we rolled so far. And one of them has been out about two weeks just for what it's worth.

Do you blame that on the content? Or do you blame that on just your consumer being -- needing a little bit more to be inspired to come in?

Well, I think that the content is not such that it is driving the traffic that we anticipate that we'll get when we have something that's significantly different than what we've rolled in the past, which is, again, out to kind of VR in the second quarter. So I mean, do I lay it at the feet of -- I think in part, what we're trying to say in terms of the research in what guests are visiting us less and that sort of thing, there are issues here that are related to content, and there are issues that go broader than specifically content. And a lot of those surround, I would call them, less-attached-to-games guests than we've had in the past or less-committed-to-games guests than we've had that have been attracted to Dave & Buster's and that we've been able to attract to Dave & Buster's but are more critical of some of the other elements of the offering like F&B.

And just quickly following up on the virtual reality. You mentioned a title that you're going to -- you start launching it with a title or testing it with a title. What's the time frame in terms of when we can expect to know more about what you're offering is? And then you sounded like -- sounded like the second quarter but just at the tail -- the back end of the second quarter? Or how should we think about the roll-out of VR and how that could impact results?

I mean, we've continued to say midyear, and we'll announce the exact timing when we have the exact timing. I've mentioned it's under development. It's currently being written. We have an agreement for the IP. So we're confident that we're going to deliver it in midyear, but exact timing behind that is something that we'll wait until we have 100% line of sight to.

[Operator instructions] We will take our next question from Sharon Zackfia with William Blair. Your line is open.

I guess following up on virtual reality, can you give us any idea on how you're thinking about pricing virtual reality? And I think, previously, you had said it would not be utilized with the Power Card. It would be separate. I'm just wondering if that's still the case. And then in the guidance, I think you said you expected comps to get better just because comparisons are getting easier. Are you anticipating any specific benefit from VR?

So we have priced VR in test as a separate item for cash and credit without an ability to utilize it on the -- on your Power Card. Our intent in terms of how we intend to roll it is similar, although we're planning to offer the ability to purchase what we'll call an attraction chip, for lack of a better description, or a VR chip that you can put on your Power Card for a separate price, so it doesn't deplete the other chips that you use, the regular chips that you use, as a way for people to be able to activate VR or participate in VR. And we think that will just make it a little bit easier for us to manage from a throughput standpoint. And then in terms of have we or do we anticipate kind of incremental revenue from this. Our measurement when we tested it, and again, this was tested with generic content, was that there was overall -- and we didn't put it on television, by the way, just so that there was some incremental sales associated with it.

And then price points, are you comfortable discussing that?

We tested it at $5 per person. And I think we will roll with $5 per person. I mean, we may offer some promotional ways for you to get it at a lower price, but our thought is that we put it out at $5 per person and kind of see what kind of demand it generates.

And one last question on it. Is the launch going to be kind of around June? I know you said this summer. I don't know if we're technically thinking June or July or when.

Well, specifically, we haven't been specific. So I mean, we've said midyear over several times, so I think we will deliver it by midyear.

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

So my first question, there's been a lot of conversation, obviously, about virtual reality midyear and compares getting easier in the back half as one of the reasons that the comp trajectory might improve. There's a number of things that you're working on, so I guess can you help me understand what exactly the timing is of each of these initiatives that you kind of laid out for 2018? Understanding that this is kind of laying the foundation, but as we just think about the drivers and think about the different things that you're working on, can you lay out the timing of them?

Sure, I mean, as it relates to content, I think that kind of VR is the hero there, but we do have some other things in the pipeline that we think are marquis titles that truly will have the potential to be traffic-drivers, bigger names than Tomb Raider or Rampage that we've rolled out so far this year. So we're encouraged about the titles that we have for the balance of the year. We have already changed our menu in February. I view that as a longer-term initiative. I mean, we're really, we shrunk the number of items, and that's really an attempt for us over time to deliver better quality and faster speed. I don't think that that's the kind of thing that you get an immediate reaction to, but, again, a rather longer-term play in terms of when we would expect to see results from that. And then we have also called out that we intend to do a quick-casual test. That'll be sometime in the second half of the year. That will be tested in a couple of stores to start, so I wouldn't expect that that would have any kind of significant impact on 2018 other than perhaps to directionally give us an idea of where we could invest in 2019 in order to have an impact there. So that's a little bit about the F&B side. I'd say on quality that counts, we've already done the burgers. We intend to do the chicken as quickly as we can, as we roll out a contract, same with steak. So pulling out, or changing products where we think we can get credit, both from an absolute tasting point and from point so we can call it out in a way that will get some credit from the…

That's very helpful color. I appreciate that. My second question, as you've ramped up on an absolute basis the number of openings per year, presumably you're taking away some of your better managers at the store level to open those new stores, is there any sign that the ops have suffered in your existing locations that may -- and I don't know how to ask this delicately, but that maybe -- the management talent and the number has suffered at the existing stores in favor of the new stores, I guess, is the best way to say it?

So I think there's two parts to that question. Intuitively, I don't think there's any doubt that we have depleted some of the resources from our existing stores to the opening of new stores. I mean, it's part of the model how we want to open new stores with ideally a sitting GM going to the new store. I'll caveat that by saying the objective measures that we're seeing on execution don't appear to have been compromised by that. So -- and I mean by that, the 400,000-or-so guest-satisfaction surveys that we're getting don't seem to indicate that the overall level of execution is deteriorating. And in fact, it's increasing a little bit on a year-over-year basis. So even assuming there's some sampling error, it just doesn't seem to explain what we're seeing from a comp standpoint.

And we'll take our next question from Jeff Farmer with Wells Fargo. Please go ahead.

You touched on several of the amusement same-store sales headwinds, so, can you help us understand why amusement same-store sales fell so abruptly? I think you said, really, it's around the November time frame, so again trying to understand why it fell seemingly off a cliff. And then what caught you by surprise in terms of looking back at what happened over the fall into the early winter with amusement same-store sales?

I mean, I think I said in my opening comments, we didn't anticipate a drop in momentum in the latter part of Q4 as it related particularly to the slowdown in amusement, which had been running positive comps of roughly 4% for the first three quarters of the year. It -- we did not perceive that going into the fourth quarter that we were doing something dramatically different on amusement. Again, in retrospect, I guess Rock'Em, Sock'Em was a big, very compelling visual advertising method that we had in the fourth quarter of last year. But honestly, the amusement slowdown started before Rock'Em Sock'Em. So you would point toward something that's more cumulative in nature as opposed to discrete event in nature. And by that, I mean that if people were dissatisfied with content over the years -- over the year that you would advertise and maybe they're reacting to it in the fourth quarter when they were disappointed in previous quarters. And again, back to our frequency, it's relatively infrequent. A couple, three times a year on average, so you can see a situation where it may take time for people to react to a disappointment on the content side. So, again, I don't know that there's a clear-cut -- it was because of X that amusement sales dropped, but amusement sales between October and December were radically different on a year-over-year basis.

Then a lot of questions on VR moving forward, I guess as we get to the middle part of the year. But what gives you confidence and just another way to ask this question, but what gives you confidence that your proprietary gaming lineup will be more impactful in fiscal '18 than it was in fiscal '17 really, beyond VR?

Yes, well, moving beyond VR, we do not have any proprietary games planned for 2018. We did not have any proprietary games in 2017. We had proprietary games in 2016. We had exclusive games in 2017, but no proprietary games other than, I guess, Spider-Man technically was proprietary to us. But that was the only one that we had last year that was proprietary. So I think, first of all, I mean, VR, something visually much more impactful than what any one of the games that we rolled in 2017 was. And I think that as mentioned, we have multiple ways that we can utilize that platform with multiple elements of intellectual property. I think that intellectual property that we'll be rolling first will be one that will be extremely well-known. And actually the one we're doing in December that is extremely well-known as well. And so a part of it, in terms of the timing of this, has been that we wanted to roll it with some significant IP that would have -- be very compelling and be well-known from a consumer standpoint. So we weren't rolling it with a more generic platform that, I guess, some others are utilizing for VR.

I'd also add, I think some of the -- I mean, we tested the platform, the notion of this as Steve said earlier, generic content, and saw, without even advertising, pretty good uptake and penetration when we were operating that ride. I'll call it a ride because it's an emotion-based platform. So our feeling is that if we have compelling IP, we put it on TV, it's a great-looking platform. It's going to present very well in a TV spot, that it could be -- perform a lot better than our test environment when we were kind of testing the platform, which is generic content so.

Jeff, one other thing I'll add to this is I don't think anybody else is going to do this. And I think that we have a number of games that we have in our midways today that you can find in other competitors' environments. And so I think that our move toward proprietary is really an effort to differentiate our offering compared to theirs.

And we'll take our next question from Steven Anderson with Maxim Group.

Yes. I have a question about the -- your service initiative. And given that you've been studying the last couple of quarters, reducing some of -- trying to keep -- trying to control on labor costs, do you foresee yourselves having to add additional labor particularly during peak periods where service times have potential to increase? And then I have a follow-up.

Well, I mean, labor's been a focus for us for a long time, not just this year since we came to this company over a decade ago. Obviously, as the numbers shifted down and our comps came under pressure in Q4, our teams, our operating teams did what I would call a fabulous job reacting to that and sizing down the staff when our sales were softer. And Steve mentioned our guest-sat scores did not suffer. In fact, we improved. So the evidence isn't that we short-cutted the guest experience, at least in the data we have. We are and we've worked hard on -- we've talked about this a lot on recent calls, as we've grown the store base and have this big base of sort of immature new -- non-company stores. The gap between the non-comps and our comp base narrowed significantly in Q4. And, again, that's been a significant focus for the operating teams and some of our folks in finance and our regional folks to really try to dial them in quicker and the smallest gap we've had in a long time between those two in Q4. So I think those are good things. We do have a workforce-management system that we put in place, I believe it was back in 2010 that we used -- and have used for a long time. It was one of the most impactful pieces of technology at its time, and it helped us a lot. The fact is, though, we're upgrading, we're in the midst of actually upgrading that tool right now to a new platform that we like a lot better and we're in the midst of that. We'll be done with that sometime around midyear, but this will be a more real-time labor-management system that will allow us to react more in the heat of the battle in terms of dealing with staff and really optimizing the staff so that we aren't hurting -- putting the right people in the right place at the right time so that we aren't negatively impacting the experience. So it's something we're always focused on and we're investing in and putting money and people around putting this new tool in as we speak.

Well, the other question I wanted to ask also was on the value side of the food and beverage business and you may do well where you certainly have -- in the casual dining, look at quick service and a huge emphasis on discounting, whether it's two for $5 burgers or $7.99 or $9.99 dinners in casual dining. I just wanted to see if there's anything that you see, like a marry opportunity maybe in the -- on your Eat & Play Combo, maybe emphasizing that a little more or expanding that platform?

So you mentioned EPC but historically, EPC, or Eat & Play Combo, 1/2 Price Wednesdays, really, our happy-hour offering and playing new games for free, and actually the 20 for 20 have been a cornerstone of our value offering. Some are, honestly, not resonating as well as they once were. And you mentioned EPC, it's not getting the uptake that it was in the past. So we're working to recast that. For example, we're going to test a new version, we're currently testing actually, a new version of EPC where you choose your entree and then we discount the card. And I'd say, broadly over time, that's more what we've done, is we have discounted more on the amusement side than we have discounted on the food and beverage side. I say that, but we've always had a very attractive happy hour, 50% off cocktails and special prices on beer. Again, that's one that, in some of our research and focus groups, isn't resonating quite as well, because people don't really understand what that 50% off cocktails means. So, again, we're in the process of conducting a three, four, five happy hour, meaning every item is either $3, $4, or $5. And the good news about that is you can actually promote it digitally. You can't promote alcohol on linear advertising, but we're doing those tests because we do see a need to work on value. I mean, the research confirms that value is an issue that consumers bring up, but it seems more centered on overall quality and not so much on specific price. Although I just mentioned two things where we're going to really try to go after specific pricing in order to better communicate what those values are.

And we'll take our next question from Andy Barish with Jefferies.

Hey guys, I think you may have just answered the question, but I was interested in digging into a little bit more on the sort of non-game-attached consumer that you mentioned. I think that's probably about one-third of your customers and where the -- where the research is showing a larger disconnect taking place. And maybe it is primarily on value, but any other factors that you're seeing would be helpful.

I think it's both value and speed. We have a significant number of things. They'd like a different delivery mechanism. I think we mentioned that in the past, we've got a significant number of things, they'd rather see a quick-casual offering, some of them even a counter-service offering. But I think that it can be a complement to our full-service opportunity because we still have a majority that wants -- a significant majority, that want a full-service experience. But we are seeing those folks say, "I don't want to take as much time out to eat. I would prefer a way to eat in a quick-casual environment and I'd like it even better if I could order it on my phone and walk up and pick it up when it's ready." So we sort of envision what that -- part of what we have envisioned for a quick-casual offering is that our store, a complement to the full-service experience, where people who don't want to take the time to sit down, perhaps go on a list for a table and some of that sort of stuff at peak. We would be able to increase our attach rate by offering them something and having them either not eat before or not eat after they come to enjoy D&B.

And just a quick follow up on that. Did you mention that you're seeing that as a younger customer that is sort of demanding those?

I think that offering would be broad in terms of its appeal, but in terms of those who are, I'll call it, more disaffected, would be they skew younger.

And we'll take our next question from Brian Vaccaro with Raymond James. Brian, your line is open, if you can unmute yourself.

I'm sorry I'm still learning that mute button. Good evening, guys.

That was the best question yet, Brian.

That's all I had. So coming back on the recent sales trends, if I could, and I think you said the quarter to date remains soft, but with two months under your belt now, would you would be willing to put a finer point on what that means? Is that worse than the downside nine we just reported for the fourth quarter? Or any additional color you'd be willing to provide?

The answer is no, and I'll try to provide some color as to why no. This is the most volatile quarter on a week-to-week basis that we have. And I would say that the shifting of the holiday of Easter this year versus last year and all the rest of that creates a tremendous amount of noise in it. Not to mention which we did have a bunch of, as I mentioned earlier, I mean, I don't think the weather was any better to us in Q1 here than it's been in -- it was in Q4. But having said that, I just think it would not be meaningful or accurate to plug the number in the middle of a quarter here. And we're giving you guidance based on everything that we can see and know today, right. And we're giving you our best guess of what we think is going to happen. We'll know at the end of the quarter, and so will you, slightly after the end of the quarter, where it all shook out.

And just so I remember correctly, the shift in Easter earlier and shift in spring breaks, that's a benefit to the month of March, is that correct?

Yes, I saw some notes on casual dining doing really well in March, sounds like yes, they should have. That's a benefit.

All right. A couple of cleanup questions on VR, if I could. So you said $5 a play per person. I just wanted to confirm, is that initially still going to be offered during, sort of, the Thursday through Sunday period, is that still the plan?

Our plan is to offer it at peak times, so we haven't said exactly. I think during the initial roll-out, it's most likely to be advertised as kind of nights and weekends, but we may -- I mean, clearly -- we're going to adapt based on where there's demand for it because the labor associated with it is relatively low. I mean, you only need a couple of people that, kind of, pay for the labor per hour, so we may expand those hours depending on what the demand is. But early on, I think certainly nights and weekends, but then holiday weeks, I think, will be a no-brainer in terms of perhaps over the summer will be a no-brainer as well during the week. So we will monitor it and open as appropriate.

Yes, we'd like to have a reason to have it operate a large part of the week. And so yes, again, we'll see how it goes and all stores probably will not be created equal here. We have some stores that do huge volumes and the capacity of this is four-player platform, some stores actually will get two of them, so we will -- it won't be the same and necessarily in every store.

All right. That's helpful. And on the labor line, in the fourth quarter, it looks like the cost per week was down around 10%. And I know we saw some savings kick in starting in the third quarter obviously, but have there been new initiatives put in place, sort of, in recent months on top of what you were doing in the third quarter?

Well, Brian, you're asking about overall total labor here? Total operating labor, that's what you're speaking to when you're talking about an average?

Yes, just speaking about underlying labor cost trends in the fourth quarter versus the third quarter. And sort of I think in the third quarter, you said about it was -- specific then that you were seeing outside gains in new unit productivity sort of on that margin ramp. And have there been new initiatives in place maybe to fortify the existing asset base, just any color 4Q versus third quarter?

I don't know if I'd call it a new initiative. We are always focused on labor in the Company. But obviously, when comps came under pressure in Q3, we stepped up that focus so, a significant topic of discussion in terms of trying to dial in non-comp stores faster without damaging the experience, but dial them in to make -- to bring them more in line with our mature stores. So that's been a huge focus in the back half of 2017. But just to be clear, in my comments, when we talked about being 30 bps favorable in operating labor and benefits, there is a significant driver around incentive compensation in that number. Again, it's the self-correcting nature of our bonus program. So if we miss budget, in the Company, in the field, there's a correction there. So that's the most significant driver, followed just close behind by better hourly labor as a percent of sales, which is really impressive when you think about, again, comps being down as they were and this big growing base of non-comp stores. So I feel like we did -- the team did a great job as I said in my remarks. And then we actually deleveraged on management labor. So we have some big structure in these stores, management teams, that given the lower sales that we saw in Q4, actually was a deleveraging piece in that whole pie. So a couple of factors, but there's heavy focus on this. And that's why we are investing a significant amount of internal resources and dollars on putting in what we believe is a state-of-the-art workforce-management platform.

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

Sorry to go back to the fourth quarter, but I had previously been under the impression that weather was the biggest factor, albeit the quarter was not closed out at the time you talked to us in January, and it sounds in the commentary today like that is not the case. So it'd be very helpful if you could quantify the weather impact. Is that along the lines of 100 basis points, 200 basis points? How can we think about that?

So directionally, on the -- first of all, I think what we said at ICR multiple times was, No. 1 was content; No. 2 was weather; and No. 3 was the increase in competitive intrusion compared to what we were expecting. So weather was about 100 bps of that.

And then in terms of current trends, can very much respect the volatility for us to get margins modeled appropriately, are you implying that the segment of food and beverage comp is similar to 4Q and amusement is similar to 4Q? Or are you meaning to imply those have changed for some reason but the total-system comp is similar first quarter to date?

I'm not sure we were trying to give that level of specificity, but the directional trends are the same in terms of comp, in terms of our best in amusements, and kind of food and beverage trail that.

Clearly, the amusement-to food-and-bev gap narrowed. They still outperformed in Q4 but not near the level we've seen, obviously, in the first part of the year, and that's what we talked about at ICR that we saw a significant narrowing between our food and bev and amusement performance in Q4.

And then, all else equal, and I know they're certainly not, what kind of food and bev and what kind of amusement comp do you need to hold margins steady?

Well, I mean, our -- we've always talked about we need 2% to 2.5% comp growth in our comp set to, on a year-over-year basis, to maintain margin in our comp set. And then over the long haul, as we grow stores, that we could leverage G&A and marketing, as we continue and we -- that's evolved over time as we've seen the impact of our non-comp stores increasingly become a bit of a drag on our overall margins because occupancy costs are higher and they are not as labor-efficient. So that's sort of been offsetting some of the G&A and marketing leverage we've had over the years, there's this big growing non-comp base with higher structural costs. If you look at our guide, we're guiding a -- depending on what number you're picking, if you pick the high to the low, we're guiding kind of 140 to 230 bps year-over-year decline on what would be a negative comp so, and a one point comp is directionally around 40 bps. So every one point is about a 40 bps kind of impact on our business.

That's helpful. And just a final question. The guests, where are they going? And I'm trying to understand how you define your competition and rank it. Are they going home and playing these survivorship-type gaming games? Are they going golfing? Are they going to the movie? Retail actually had the strongest fourth-quarter holiday period on record since the great recession. Are they going shopping? Can you frame that up for us?

Well, the competitive environment is something that's rapidly changing for us. You've heard us talk about kind of the combined dining and entertainment landscape for, really, we started talking about it in the first part of 2016 if I remember right. Because prior to that, we really didn't see a whole lot of activity; today, we're tracking a couple of dozen names that are some form of dining and entertainment. And when we look at the past three years as we look at those names and how many stores they have opened, they've doubled their units. They're bigger, collectively, than us, that group of names. In our view, we're still the leader in this space. It's an attractive space. We're generating awesome returns, 50% plus, Year 1. Our view is that's attractive capital. There's a lot of folks looking to put money somewhere. There's been significant investment in this space, and we think it's not going to necessarily go away. It's going to be a headwind for us over the foreseeable future. So that's why Steve and we are talking about what we need to do to continue to evolve the brand, continue to launch compelling content, look at our execution levels, look at how the friction in our system, and, quite frankly, be the first mover in markets. If it's on our list of a potential good solid market in our total addressable market pipeline, to seize the day, so we're not really looking to slow down our counts. We want to be controlled in the growth, but we're really not looking to let a competitor come in and take the spot. So it's something that's evolving and we're tracking a lot of names. There's a lot of folks out there with a couple units in some form of value entertainment. You mentioned some of the categories, golf, dining, entertainment. So we've always talked about two big names but it's broader than that.

And we have a follow-up question from Jeff Farmer with Wells Fargo. Please go ahead.

When you guys do move ahead with the VR launch at some point midyear, will you be able to roll that out into the entire system at the same time? Or will that be a staggered roll-out over the balance of '18 and 2H '18?

It will be big bang, in short. Over 100 stores we'll be in. I think we're going to have to wrap it now. We're over time.

And that does conclude our question-and-answer session for today. I'd like to turn the conference call back over to Steve King for any additional comments.

I'll be brief. Thank you for joining us today. We look forward to reviewing our first-quarter results when we speak with you in early June. Thank you.

And that concludes today's conference call. We thank you all for your participation and you may now disconnect.