Dave & Buster's (PLAY) Stock Up On Q1 Earnings & Revenue Beat

Shares of Dave & Buster's Entertainment, Inc. (NASDAQ:PLAY) rallied 13.4% in after-hours trading yesterday, after the company reported better-than-expected results in first-quarter fiscal 2018. Both the top and bottom line also increased year over year. In the past year, the company’s shares have declined 31.1% against the industry’s rise of 4.6%.

Earnings came in at $1.04 per share surpassing the Zacks Consensus Estimate of 93 cents by 11.8% in the reported quarter. The bottom-line figure also increased 6.1% 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.

Let’s delve deeper into the numbers

Detailed Revenue Discussion

Quarterly revenues of $332.2 million outpaced the consensus mark of $321 million by 3.4%. The top-line figure also increased 9.2% from the prior-year quarter.

Overall comps declined 4.9% in the fiscal first quarter of 2018, comparing unfavorably with a 2.2% increase in the year-ago quarter. The decline in comps can be attributed to a 4.8% dip in walk-in sales and a 6.4% decrease in special events sales. However, the company remains confident about returning to growth despite decline in comps.

Non-comparable store revenues in the quarter increased 146.1% from the year-ago quarter to $44.2 million.

Food and Beverage revenues (42.1% of total revenues in first-quarter fiscal 2018) increased 7.7% year over year to $139.8 million, whereas Amusement and Other revenues (57.9%) rose 10.4% to $192.4 million.

However, comps at the Food and Beverage segment fell 4% in the quarter. Also, Amusement and Other witnessed a comps decline of 6.1%.

Operating Highlights

In the reported quarter, operating margin contracted roughly 350 basis points (bps) year over year to 17.6%.

Net income in the quarter totaled $42.2 million, marginally down from $42.8 million in the prior-year quarter. Adjusted EBITDA inched up 0.4% to $95.9 million compared with $95.6 million in the same period last year. EBITDA margin, however, decreased approximately 250 bps year over year to 28.9%.

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

Balance Sheet

As of May 6, 2018, cash and cash equivalents were $16.9 million compared with $18.8 million as of Feb 4, 2018.

Long-term debt totaled $339.6 million at the end of quarter, down from $351.2 million at the end of fiscal 2017. During the fiscal first quarter, the company repurchased 606,000 shares for $27.4 million.

Cumulatively, as of May 6, 2018, management repurchased approximately 4.1 million shares for $218.2 million. In second-quarter fiscal 2018, the company has repurchased additional 247,000 shares for $10.1 million through June 6, 2018.

Store Development

Dave & Buster’s had launched six stores during the fiscal first quarter. In the second quarter, the company has opened three stores and plans to open two more during the same period.

Fiscal 2018 Outlook

This Zacks Rank #3 (Hold) company reiterated its fiscal 2018 guidance. Dave & Buster’s continues to anticipate revenues in the range of $1.20-$1.24 billion. Comps are expected to decline in the low-to-mid single digits. Additionally, it expects to open 14 to 15 new stores.

Key Picks

Some better-ranked stocks in the same space are Wingstop Inc. (NASDAQ:WING) , Dine Brands Global, Inc. (NYSE:DIN) and Denny's Corporation (NASDAQ:DENN) . While Wingstop sports a Zacks Rank #1 (Strong Buy), Dine Brands and Denny's carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Wingstop has an impressive long-term earnings growth rate of 19.5%.

Dine Brands Global has reported better-than-expected earnings in the trailing four quarters, with an average beat of 7.8%.

Denny's has reported better-than-expected earnings in the preceding two quarters.

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