Good afternoon, everyone. Welcome to the Dave & Buster’s Entertainment Incorporated Second Quarter 2019 Earnings Results Call. Today’s is being hosted by Brian Jenkins, 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 Arvind Bhatia, Senior Director of Investor Relations for opening remarks.

Thank you, Lisa and thank you all for joining us. On the call today are Brian Jenkins, Chief Executive Officer and Scott Bowman, Chief Financial Officer. After comments from Mr. Jenkins and Mr. Bowman, 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 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 item 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 will turn the call over to Brian.

Thank you, Arvind. Good afternoon, everyone, and thank you for joining our call today to discuss second quarter results and our outlook for the business. For the quarter, we reported record results, increasing revenue by 8%, EPS by 7% and EBITDA by 5%. We have built a high margin business that generates strong free cash flow, which when combined with our strong balance sheet has enabled us to return more than $200 million in share repurchases and dividends, and reduced our float by almost 13% as at the end of the second quarter.While we continue to profitably grow our business and return significant capital to shareholders, our comp sales results came in below expectations as last year's VR launch proved difficult to match and our promotions were not as effective as we had anticipated. We also face headwinds from adverse weather and the continued impact of competitive intrusion and cannibalization. Later, Scott will provide more details on these factors and additional highlights on the quarter in his prepared remarks. But first, let me share with you what we're seeing in the market and our approach to managing the business to maximize value for shareholders.There is no question that we are in an attractive and growing category as consumers continue to increase spending on experiences. As a leading brand that delivers immersive experiences, we are in a great position to capitalize on this favorable secular trend. At the same time, this trend and our success has attracted many more players in the space and the overall market today is quite fragmented and competitive. Over the past 18-months, we've made important progress on several fronts including enhancements to our food and beverage offerings and the introduction of more immersive games including our industry-leading VR platform.As part of our focus on operational excellence,…

Thank you, Brian and good afternoon everyone. I'll begin by spending a few minutes discussing a highlight to the second quarter, followed by our financial performance and then finish with our full-year guidance. First, our key achievements in the second quarter. In Amusements, we strengthened our VR library with the launch of our fourth proprietary title Men in Black: Galactic Getaway. In addition, during the summer we launched several exciting games including [Centipede], 100 tickets, Ring Talk and Basketball Pro. These titles have all tested well with their guests and initial read on the performance has been positive.Within F&B, the summer we introduced Hawaiian-themed limited time offer we call [iron vibe] that include craveable entrees like smoky barbecue bacon, Hawaiian ribs, aloha ginger salmon and crispy Hawaiian chicken sliders. For upcoming October menu, we will introduce new items including a grilled chicken avocado ranch sandwich and drunken New York strip while removing a few slower moving items. We will continue to enhance and innovate offerings in F&B as we know this will be an important contributor to our go forward success.In terms of our marketing campaigns, during Q2, we continue to run our unlimited wings and unlimited video games promotion on Thursdays as we did in Q1. In addition, we tested two promotions highlighting food and game combos. Favorable combos which we ran for four weeks followed by -- and unlimited play combo. Collectively, these value-oriented campaign did not resonate with our guests as well as we had anticipated. Going forward, we will continue to test new promotions to bring value to our guests and increasing their leverage digital marketing to communicate our message.For Q3, we will also bring back our 90 menu line and limited range from multiple game days during the football season. This promotion now includes a…

Thank you Scott. Our decision to reset guidance was not taken lightly. And was taken in context of what we've seen in the marketplace since our last earnings call and the recent comp trends Scott mentioned. We have many reasons to be encouraged for the back half of the year. But at the same time, we are cognizant of recent volatility and potential risk. As such the midpoint of our revised guidance assumes no near-term improvement from current trends and the upper end of our guidance assumes modest impact of initiatives starting in Q4.I'd like to close by thanking our team for their dedication and hard work as we focus on our five near-term priorities, namely revitalizing the existing stores, building deeper guest engagement, managing cost to fuel organic growth; investing in high return opportunities and returning capital to shareholders. As always, we appreciate our shareholders for your continued support and interest in Dave & Buster's. Now we'd be happy to answer your questions during Q&A. Lisa, please open the lines.[Operator Instructions]

Our first question from Andrew Barish with Jefferies.

Hey, guys. I'm just wondering if you could give us a little bit more color on sort of the nonimpacted stores and maybe an update on the percentage of the system you think is impacted. The question is, are you seeing deterioration kind of in the core that hadn't been impacted by competition, which is leading to some of the other changes that you discussed today.

Well, I'll answer the first question about impacted stores. The base of stores impacted by either competition or cannibalization did grow in the quarter, Andy, from 40% in Q1 to 45% of our store-base, comp base in Q2. So, we did see an acceleration of impacted stores, but that's not the only factor here in the second quarter. We mentioned on a call, the rollover of VR was a significant factor for us, lapping of that platform launch last year with Jurassic World. We underestimated the impact on traffic in our view and weather was not particularly great for us in the quarter.We estimated about 80 bps of pressure in the quarter, and we mentioned that a little bit actually on the Q1 call as we started off in May. We had some difficult weather around Memorial Day weekend and then we had some weeks in July. So, there are a number of factors, but definitely competitive landscape is something that continues to accelerate in our view.

Our next question comes from Sharon Zackfia with William Blair.

Hi, good afternoon. I guess I'd be interested in hearing more about the WoW Walls and if you could quantify any kind of lift you saw there in Dallas, whether it related to traffic or food and beverage attached. And maybe compare or contrast that initiative versus prior remodeling initiatives you did around D&B sports and so on.

Well, we're very excited about the WoW Wall. We, as you know, began that test in late 2018 in our Dallas store, a 50-foot LED screen really re-energizes, brings a whole new energy to that space. It's a very contemporary look. It's latest and greatest technology LED panels, high resolution. So, we're combining that Wow Wall kind of technology with some improvements in furniture, flooring, and other elements to really revitalize the dining experience. And our view is that is one of the great pass towards further F&B penetration, drive people into that space that is today highly underutilized, our dining rooms today, it brings a whole new experience and we have seen outside [ph] performance. And I really want to get into the specifics of Dallas here, but it is one of our top performing stores right in the top couple of stores in terms of performance in our system, and F&B in particular is performing very well. So, we like the look and we like what it does to the energy of our brand, and we like what we see with this investment.

Can I just ask a follow-up? I mean is it fair to think that those comps are positive in Dallas, and then when you complete a Wow Wall, I mean is there a big initial lift or is it something to build?

Well, they are definitely positive. It's one of our top two the three performing stores in the system. So it is a highly positive store in our system. And we did this, we made this improvement in I think was December of 2018. Initially, we really didn't advertise that. It did build over time, building awareness. So, it did take a little time to be noticed for what we had invested there, but it's impressive and the difference here is we are going to invest in our third quarter in digital media to drive awareness of this offering. So, we will be investing to build that awareness.But I do think it does take time. As I mentioned, our frequency is fairly low as a brand, less than 2x. So, I think it does build over time, but we feel very confident in what this is going to do and add to the brand experience.

Our next question comes from Joshua Long with Piper Jaffray.

Great, thanks for taking my question. Wanted to circle back to the VR, you said -- you mentioned a couple times the difficulty in lapping last year's rollout. So, I am curious how you're thinking about VR? And if it's a function of awareness or if it's content or what you are learning about how the consumer is engaging with that VR platform? And then also I wanted to see if you might be able to provide an update in terms of pricing. I know we had talked about some optionality in terms of higher pricing into our bundling offers with the VR, and any sort of latest updates in terms of what you learned there.

Thanks Josh for the question. Well, clearly, we learned a few things as we lap that introduction of a platform in many ways. We introduced the roller coaster last year with both platform and a very popular title in Jurassic World, and that proved to be difficult to match and roll over. The trial – the per capita lift that we saw with that launch was impressive and the rollover was difficult. We'll begin to move away from some of that outside performance as we get farther away from the summer. But we still have great aspirations for that platform. It is a platform that allows us to introduce new content, proprietary content and movies so to speak, new experiences and we're excited about the launch of Terminator with an IP that we secured.It's going to launch in and around the time of the launch of the movie in November. We really like what this game is going to deliver. And as you asked the notion of bundling is something that we expect to pivot into as we head into this launch of Terminator. We have built at this point five really great experiences, and our media campaign as we launch Terminator is going to not only launch and feature Terminator, but we are going to tie in the breadth of experiences that we've built in this library.

We'll take our next question from Jeff Farmer with Gordon Haskett.

Great, thank you. I appreciate the comments on lapping the VR launch, but can you provide a little bit more color on that the day part, week part trends? Any type of customer demographic factors that might also be weighing on sales for you guys.

It's similar, Jeff, to what we have seen over the last more than four quarters. Our strongest state partners earlier in the launch day part over the course of the quarter. And we continue to have our toughest day part late night.

Okay and then in terms of the incremental costs associated with the mobile app introduction. I'm just curious how much of those costs are already flowing through the income statement or if there are more to come?

Well, they are flowing through our capital guide as well as some incremental expense associated with our technology team. So they are reflected our efforts as it relates to 20 and teen are reflected. So you have anything, Scott.

Yes. One thing I'll add to that, yes, most of that is flowing through I think what you'll see as I mentioned in Q3 that they are from a marketing standpoint we will kind of over index on marketing in Q3 to promote the rollout of the mobile app, as well as continued rollout of this Wow Walls.

All right. Just one final follow-up here. I think the amusement same-store sales number came up, but did you guys share the level of menu pricing and pricing that was captured within that amusements same store sales number?

Yes. So amusement pricing was up about 3% for the quarters.

Our next question comes from Jake Bartlett with SunTrust.

Great. Thanks for taking the question. My first question was about on the engagement with -- maybe I have written this down wrong, but Jackman Entertainment or Jackman. And I think you referred to it as a strategic refresh. So I'm just -- I'm trying to understand what that might mean for just your mix of games? Or just maybe a little detail on what that's going to entail.

Well, we're very excited about working with the Jackman team again. We are really taking a comprehensive look at our portfolio. Our offering as we think about our brand and revitalizing the brand, we had a very, very successful partnership with Jackman and his team dating back two years of really 2010 and 2014. And they were very instrumental in the success that we had in revitalizing the brand and some of the outperformance that you --that we had in the years of 2014 and beyond. So we're really excited about working with them again. They're a very bright team. They're in my view better today than they were a decade ago. And we're really optimistic about some of the initiatives that are going to come out of that work.This is not a thing that happens overnight. We work with this group for three to four years on and but it did result in new offerings, new approaches to our business. And that's what this process is about. And we are early on here, but really excited about this project.

Got it. And then you mentioned with the Terminator VR release in November, I'm interested to hear what else is on the docket, especially the kind of important holiday season. And whether we should expect kind of similar cadence from last year with Dragonfrost being launched before the holidays. And I also just want to give larger question about content. And I'm wondering whether because you potentially more exclusive focus on VR for last year and half since Halo, is that an attachment of some of the gains that you are -- your core consumer appreciates?

That's a great question, Jake. We are focused on delivering a balance of titles. Clearly, with the launch of the platform on the VR platform does offer us a great opportunity to introduce proprietary titles. And we have leaned in on that obviously over since we introduced the platform mid of last year. So we're still looking at the cadence of how many. We obviously did three this year, but we're evaluating that cadence. But it is not at the detriment of introducing other highly popular titles. We introduced I think Scott in his remarks mentioned some of the titles that we introduced over the course of this summer that are very popular interests that resonate well with guests that bring new experiences.So we're not solely focused on the arts a piece of the introduction of games, but it does one that is able to command a pretty good spot on our TV campaign and in our media message. So but it's not -- we are abandoning all games here. We are working to deliver multiple game.

Got it. And then last question. The unlimited wings and then now the $10 Power Card. It still different than last year with the unlimited gameplay. Do you see much risk around that? Or was that something we -- something you've done both before, but I just want to gauge any level of risk around kind of making that switch.

Well, another great question. We do -- we continue to work on our promotional tool kit. Really kind of test and learn approach here. We did make the pivot here to a $10 card. That's the way this offering started back when we initially introduced it. We have optionality to think about it differently, but based on some of the per cap impacts related to the unlimited video, we are going to open the year with what we feel like is a very compelling offer on the heels on unlimited wing offer combined with a power card. And we're excited to start the year with it. As you recall last year, we didn't have these wing promotion, unlimited wing promotion running the first half of the football season or so.So this year will be starting with that in combination with this Wow Walls investment in a large nucleus of stores and we think that's going to make for a powerful combination.

Got it. I have actually had one other quick question. I apologize for that, but it sounds like there's some variability around development on the back half of 2020 into 2021. Your comments about the store size though, should we expect beyond just the success of 17K format stores, should we expect a greater mix of smaller stores? Is that going to be a little more certain than maybe how many you do in the year?

Well, I'll take the first question or lap for other questions first around store format size. We -- the 17K or the Corpus for example is really, we are excited about what that store is able to produce in terms of volumes margins and returns. So we have discussed the fact that we are beginning to enter into smaller DNA, smaller market sizes. So we have always been looking for a flexible format and one that can deliver great returns. So we like this format because as we think about some of these smaller markets where we may have thought about putting a 30K box in and you can look at our model, our target out there for our 30K, putting in a 19K they can do $1 million, it’s going to deliver superior return.So we're excited about what that means as we get really more into our 2021 class and beyond, not able to impact too much in our 2020, we have been under it for quite some time. So we like the format. We like what it shows and what it means for enhancing our margins as we finish out our addressable market and continue to march down that road. As it relates flexibility, we're heavily focused on revitalizing these stores. We have about 130 plus store chain right now. And we are highly focused on investing, reinvesting in that starting with this Wow Walls.So we are trying to maintain some flexibility. And when I say that I'm really talking about our late 2020 openings and into 2021 to give us flexibility in terms of the pace. As we look at that revitalization effort and what that means in terms of demands on the team.

We'll take our next question from Jon Tower with Wells Fargo.

Awesome, thanks. And I appreciate all the color around the near-term initiatives and particularly around the unit growth side. But I was hoping to focus a little bit on the sales drivers in the existing store base. Two things and they're kind of related. First on the Wow Walls, can you discuss what you kind of envision for these walls over time? I know it sounds like I'll be trying to drive more traffic to the dining room area around sporting events, but can it also be used for e-gaming events and stores and other initiatives that you might be able to do.And then separately, but somewhat related a larger bar and grill competitor that's focused on the sports viewing space announced an initiative into sports betting during-- it was actually on Friday. So I'm curious given the fact that you're pre engaging with the Jackman team, are you considering that -- would you even put that on the table as an option in the future if the relationship or the consultancy with Jackman kind of point you in that direction? Thank you.

Thanks Jon. As it relates to first to WoW Walls and really the sports betting question they kind of go in some ways a little hand-in-hand. Our view is that our dining rooms based on the square foot that we've allocated to spaces and the utilization rate that we get today that it speaks to a need to revitalize the area. So the WoW Walls is our answer to that. We are looking to bring a whole new energy to the space. These are very, very large screens. We have ability, capital allocation ability to scale this. It's going to be combined with improving some of it, as I mentioned some of the flooring and some of the furniture to create a really a new experience. Bring energy to an area that lacks that today.So we're excited about what that means and how we might as you said leverage that and use that in other ways than just sports. We have been working and testing a number of things around eSports, did a few events in the month of May and June with partner. So we think as we improve this offering it will bode well for how we might be able to leverage that both in our eSports leanings, as well as what it may mean in terms of our position with partners and the sports betting arena. We're open minded to that world. We are open minded at the partnerships, we're aware of the wild announcement here. And we think that could represent an attractive opportunity down the road. Right now though we're focused on the five priorities I mentioned today.

We will take our next question from Andrew Strelzik with BMO Capital Markets.

Hey, good afternoon. My first question as you kind of reflect on some of the missteps on the food side, some of the whether it's promotional constructs or value that maybe haven't resonated as much as you would have expected. What have you learn from that? And how are you kind of changing your approach going forward? And more broadly, what is your work, your kind of consumer insights suggest drives the F&B decision for your guest. I guess what I'm trying to get at is longer-term beyond the Wow Walls kind of what structurally changes the performance of the F&B business longer term?

That's a great question. Right now I mentioned a statistic in my prepared remarks that we are attaching our penetrating about 50% of our guests is buying a food and beverage item in our store. So it does represent a great opportunity for us. We have a lot of square-foot dedicated to this area. In my view, it could be utilized better. We're committed to improving and the comps here and that does mean to us continuing to create a fresh and new menu. We've talked about our simplification efforts and so we're going to continue to look at that further refine our menu.We've introduced a number of LTOs to create a new experience and our guests at scores have improved both from a food quality perspective, as well as speed of service. The awareness challenge still exists. So in our view one of our biggest near-term opportunities right now is to drive guests in the door and drive F&B penetration by having an area that is immersive and that is why we are right now heavily focused on the wow, the physical plant nature of our dining rooms by bringing in an experiential element. We're really pleased with what we've seen in the Dallas lift. This doesn't mean we're not going to continue to look at our F&B offering over time.We certainly will, but we believe investing in the dining room physical plant right now as we continue to work our menu is the biggest near-term opportunity we have.

We'll take our next question from Stephen Anderson with Maxim Group.

As you evaluate your recent results, it's certainly some of the oppressed talking about the increased public consumers' crossings a bit less confident. From a higher level, what do you -- what's your read on the guest right now versus what your read was maybe three or six months ago?

Breaking up, Steve, you was asking about the consumer, is that the question?

Yes. Whether you sense that the consumer has maybe a little bit less confidence in what you've seen maybe in the last three to six months.

Well, I think that consumer is overall still very healthy. I know there's been some movement around with some of the tariffs, the noise and some of that stuff, but we still feel like we have a very healthy consumer, unemployment is still very low. And we have a lot of confidence in our ability to reach more of them through the things that we're doing and drive more frequency at the same time.

So, yes, I'll just tackle under that. I think overall the consumers in a pretty good shape from an economic standpoint. I think some of these uncertainties can wait from time to time, but I think the outlook is fairly good especially with the unemployment picture and some wage growth. I think we're doing pretty well. There are some headwinds on the expense side, but I think the uncertainty and the environment will kind of ebb and flow, but we feel like the economic health of the customer is really good right now.

As well income.

Yes.

We'll take our next question from Joshua Long with Piper Jaffray.

Right. Thanks. Wanted to follow up just as a clarification, you mentioned couple times about I guess the optionality in your real estate pipeline. And then I think later as a response to someone's question you said that that doesn't in terms of say the 17,000 square foot stores. There's really not an opportunity to layer more of those in earlier. That's really a kind of a 2020 or 2021 opportunity. Is that the right way to think about it, Brian?

We actually have a couple of units that were in our pipeline in 2020 in the 19K format. So we have a couple in our -- in that 2020 class that were already planned. The pivoting that we see potential for really is a 2021 there are a couple of those that we are -- we evaluating right now in terms of what the proper size is. And then obviously as we begin to underwrite into 2022, this will be a key part of our decision-making as we again optimize the size of the store to our market sales potential. Because we just really like what we see in Corpus and its ability to generate some really big numbers at various -- with a very efficient box, much smaller back of the house. So it's kind of where we stand on that.

We will take our next question from Brian Vaccaro with Raymond James.

Thanks and good evening. I just wanted to circle back on the recent comp trend. And I think you said July and August down 4.5%. And just trying to get a better understanding of what we think might be driving that incremental weakness. Is there anything as you look beneath the surface, anything to add amusement versus F&B segment comps, days or week maybe geographic or mall versus non mall that might help explain some of the incremental softness?

Well, Brian, July and August were -- both of them were down in the mid 4% range. We -- that the comments that I made about difficulties in Q2 which relates to VR rollover, continued into August so that is definitely a part of it. And weather played a part as well. We saw weakness up the Mid Atlantic and Eastern Seaboard and the competition continues to grow. I mentioned that we are expecting right now 80 units this year on the names that we're tracking. That's up from 60 or maybe I didn't mention this. That's up from 60 last year, so lot of the headwind is continuing to grow.I said we're optimistic about what we're doing in our pipeline to work to offset that. And that's related to our efforts and heavy focus on revitalizing our existing stores and working on building better guest engagement, which is a big opportunity for this brand right now.End of Q&A

And this does conclude the question-and-answer session. I would like to turn the call back over to Brian Jenkins for any additional or closing remarks.

Well, thank you for your time this afternoon. We look forward to reviewing our third quarter results with you in December. Thank you.

And that does conclude today's presentation. Thank you for your participation. You may now disconnect.