Good afternoon, everyone. Welcome to the David Busters Entertainment, Inc. 3rd Quarter 2019 Earnings Conference Call. Today's call is being hosted by Brian Jenkins, Chief Executive Officer. I'd like to remind everyone that this call is being recorded and will be available for replay beginning later today.
I would now like to turn the conference over to Mr. Scott Bowman, Chief Financial Officer. Please go ahead with your opening remarks.
Thank you, Cody, and thank you all for joining us. Joining me on today's call are Brian Jenkins, Chief Executive Officer. After comments from Mr. Jenkins and myself, we will be happy to take your questions. This call is being recorded on behalf of Dave and Buster's Entertainment Incorporated and is copyrighted.
Before we begin our discussion on the company's results, I'd like to call your attention to the fact that in our remarks and our responses to questions, certain items may be discussed, which are not entirely based on historical facts. Any of these items should be considered forward looking statements 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.daveinvestors.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.
Good afternoon and thank you for joining our call today to discuss Q3 results and our outlook for the business. For the quarter, total revenue increased by 6% led by continued strong performance from our new stores. While we continue to drive meaningful progress in our business and overall strategy, our comp sales declined 4.1%, in line with the run rate trends we shared on our last earnings call as we continue to see softer comps in our amusements business and impacts from increased competition across the markets we serve. Now I'd like to turn to our near term priorities, which we outlined on our Q2 earnings call as we remain laser focused on the execution of these priorities and continue to make progress on many fronts. Although these initiatives will take time to be fully realized, we are encouraged by our progress to date and feel confident the actions we are taking will drive meaningful improvement, value creation and long term success for the business.
Now let me share some specific updates on these priorities. We are progressing well on our first priority of revitalizing our existing stores. We have rolled out our massive 43 foot Wow Wall LVV screens to 35 stores through the end of the Q3 and have rolled out another 13
walls since the end of
the quarter, surpassing our initial target of 35. We also completed other upgrades to reenergize our dining areas and to facilitate customer engagement. The Wow Wall screens give us the capability to become the premier sports viewing destination in these markets and provide a tremendous opportunity to increase guest frequency and food and beverage attachment over time. We are seeing improvement in some of these stores already and know there is more opportunity ahead to fully realize the potential of these great assets. Our next step in this initiative involves the programming of content on these screens to maximize local interest and to generate greater incremental traffic and viewership.
For example, in select stores, we are now testing live activities around key sporting events, such as professional and college football, which we expect to build community and drive increased store traffic. Another important component of our revitalization initiative is refreshing our menu and games offering and we're excited about the opportunities in these areas. This work started with in-depth customer research, which has provided valuable insights to guide our strategic path forward. We know that our guests want new and novel food and beverage offerings as well as games that encourage social interaction and fun. For our menu offering, we are evaluating options based on this research along with input from an industry leading consulting firm to help inform future changes.
As a first step, we will be testing our more acceptable food offering in our arcade, which will feature new snackable menu options in select locations. For our core menu offering, we will continue to evaluate enhancements, including tests at a more simplified 30 item menu and the introduction of several new signature and shareable items. We will update progress as we move forward. From a games perspective, we are increasingly prioritizing games that encourage virtual interaction and fun among larger groups of people, including the planned introduction of new multiplayer arcade games, a test of new multiplayer virtual reality platforms and the planned testing of physical games in select locations. Through our focus on multiplayer games, we are building a robust social aspect into how we enable our guests to play.
Our 2nd turn, building deeper guest engagement, began with the successful launch of our new mobile app in October. Through the end of November, we have recorded over 600,000 guest counts through our new app and generated over $14,000,000 in amusement revenue from the purchase of digital power cards on the app. To put that in perspective for you, we had less than 800,000 active guest accounts prior to the launch of the app. We're extremely excited about the long term benefits of building our customer database, including the significant revenue we expect to drive from the app over time. In the near term, we will be able to communicate to customers directly 1 on 1, directly through email, text and push notifications to more effectively reach our guests.
Longer term, our learnings from this platform will allow us to be much more targeted and will be supported by a significantly improved loyalty program to give our guests increased value and incentives to return. Looking forward, we will continue to add functionality to our app to connect more effectively with our guests and reduce friction in our stores. As an example, one of the exciting near term enhancements, we will be introducing pay at the table on the app for our guests in the first half of next year. This will be a significant leap forward in reducing friction for our guests and improving efficiency by streamlining the payment process. We also remain focused on our 3rd priority, disciplined cost management.
We have reduced costs in several areas and continue to realize operational efficiencies in our stores and corporate office and remain on track to achieve $15,000,000 in annualized savings. As planned, these savings are helping fuel our growth as we reinvest these dollars into technology, business analytics and marketing, including digital efforts. Turning to our 4th record, we remain committed to deploying capital for the highest return opportunities. We continue to invest in high return stores, which we believe is vital in driving top line sales and return on invested capital. Since our last call, we have made significant progress and continue to optimize our store size according to market potential.
We are efficiently redesigning our store layouts by reducing the back of house and kitchen areas, while optimizing the sports viewing and arcade areas to provide the best overall guest experience. We believe these initiatives will solidify opportunities for future growth and allow us to maximize future margin. In fact, we have already revisited 4 previously underwritten stores in our 2021 class and have resized them to maximize margin and return potential while preserving revenue capacity. As I mentioned last quarter, we will manage the pace of new store growth in order to maximize returns and to enable our teams to focus their efforts on advancing our store revitalization efforts. Although we will not give detailed 2020 guidance until our next earnings call, I will tell you that we expect new store unit growth to be slightly lower in 2020 as compared to the 2019 class.
As always, we will continue to monitor the situation, ensure we are making the right business decisions and will remain open minded about the pace of new unit growth in 2021 beyond. Finally, after funding our new store growth and other high return projects, our 5th priority is to continue returning capital to shareholders in the form of share repurchases and dividends. Year to date, we have returned more than $300,000,000 to shareholders
and expect repurchases and dividends will continue
to be an important pillar of our capital allocation plans in 2020 beyond. We will continue to carefully balance our long term capital needs, while maintaining a prudent balance sheet in terms of leverage. Over the past several months, we have dedicated significant time and effort to better understand our customer to help inform and shape our strategy. We believe this work will generate significant benefits and enhance shareholder value going forward And we're encouraged by early signs, especially in our guest engagement initiative, which is advancing rapidly. As we move forward, we will continue to make sound decisions based on our rigorous test and learn process to help ensure success as we expand on a larger scale.
Additionally, these initiatives will serve as a solid foundation as we further refine our strategic plans through our annual planning process, which will be informed by much of the work that has already been completed or that will be completed in the coming months. We expect to share more details on this plan as a part of our next earnings call. Before I turn the call over to Scott, I like to discuss recent change within our IR department. As many of you know, during the quarter, our Senior Director of Investor Relations, Arvind Bhatia, made the personal decision to pursue another professional opportunity. We would like to thank Arvind for his many contributions to Dave and Buster's and wish him all the best in his future endeavors.
We are currently in the process of transitioning Investor Relations Services to an outside advisory firm. Now, I'll turn the call over to Scott to discuss the quarter's highlights, our financial performance and 2019 updated guidance.
Thank you, Brian, and good afternoon, everyone. I'll begin by spending a few minutes discussing the highlights of the 3rd quarter, followed by our financial performance and then finish with our full year guidance. First, our key achievements in the 3rd quarter. In Amusement Studios, we launched our 5th proprietary VR title called Terminator: Guardian of Fate, which quickly established itself as one of the most popular selections on our proprietary VR platform. We also expanded our test of large format multiplayer VR systems into 2 additional stores during the quarter.
For the Q4, we have already launched a new 6 player arcade racing game called Out Wheel: King of the Road and it is already a top 20 game based on its design and competitive play. This title will be available exclusively at Bay's Investors through the end of the calendar year. Finally, in keeping with the objective of delivering more competitive group games, we're in the process of rolling out a forward modern take on the classic game of Pong called Pong Knockout, This is a competitive multiplayer game that utilizes mechanical elements in place of early CLT technology to deliver a title that is both nostalgic and up to the moment. Admissions team has great confidence about product planning for 2020 and
we look forward to communicating future launches.
With including beverage, 2 of our recent offerings, the grilled chicken avocado ranch sandwich and drunken New York strip, I quickly moved to the top of the category. In addition, 2 items from our summertime limited time only offering, which should make it My Tighe and Hurricane, have now earned their way onto the beverage menu on a permanent basis. We know that our customers continue to expect new and novel food and beverage offerings and will continue to enhance and innovate our menu. In terms of our Q3 marketing campaigns, we launched our Only Mid Wings and $10 Power Park promotions on Sundays, Mondays, Thursdays to establish state investors as the place to watch Coca Cola. In October, we also launched a new mobile app, which included a promotion for customers to download the app.
In the 1st few months, the offer resulted in $14,000,000 of revenue and has been instrumental in growing our customer database. We're also testing other new offers in the app to optimize profitability and redemption. And so far, we're seeing great response. Going forward, we'll continue to test new promotions to bring value to our guests, leveraging technology and personalized messaging to improve engagement. With respect to new stores, we opened 4 new locations in the quarter and have opened 1 additional store since quarter end.
This brings our total to 15 new stores for the year and we expect to open 1 additional store
in the Q4 for a
total of 16 new locations for the full year. These store openings for the year are skewed towards large format stores and are split between new and existing markets. Looking ahead, we continue to see significant opportunity and have a strong pipeline of available markets to continue to grow our store base. We'll continue to evaluate these available markets and ensure that our store size matches the market opportunity. We've made significant progress in our efforts to make our in store layouts more efficient, which will help preserve our strong returns.
By the end of the year, we plan to have 136 locations and continue to believe our long term opportunity is 230 to 250 locations in the U. S. And Canada. And now let me turn to our financial highlights. During the Q3, total revenues increased 6%, driven by strong contribution from our 35 non comparable stores.
This was partially offset by a 4.1% decrease in our comparable stores, which was consistent with our run rate at the time of our last earnings call and improved slightly as the quarter progressed. As we communicated on our last earnings call, we experienced weakness in amusements, mainly due to the rollover of last year's ER launch. This trend improved slightly towards the end of the quarter, but remained a headwind. In addition, weather had an unfavorable impact of approximately 120 basis points on comp and competitive intrusion and cannibalization continued to be the Fed win. Looking at overall sales by category, amusement and other grew 7%, and food and beverage grew 4.9%.
Newswain and other represented 58% of total revenues during the quarter, an increase of 50 basis points in mix from the prior year period. Breaking down comp sales, our walk in sales declined 4.6%, while special events were up slightly. In terms of category comp sales, amusement and other declined 2.9%, while food and beverage declined 4.4%. Within food and beverage, food declined 4.9% and the bar business declined 3.6%. Total cost of sales was $52,200,000 in the quarter and increased 10 basis points as a percent of sales.
This was mainly due to an increase in food and beverage, while amusement cost was flat as a percent of sales. Food and beverage cost was 60 basis points unfavorable as a percent of sales, mainly driven by the impact of our unlimited installation and costs related to our shift to fresh juices within our bar offerings. This decline was partially offset by the positive impact of 1.7% in food pricing and 1.9% in beverage pricing. Cost of amusement and other as a percent of sales was flat compared to last year, driven by the positive impact of 1.9% in pricing and a shift to simulation gains, offset by higher costs associated with the new RFID power card. Operating payroll and benefits expense as a percent of sales was 25.4% or 10 basis points higher year over year due to the unfavorable impact of approximately 4% wage inflation, deleverage on comp stores and the impact of non comp stores.
Other store operating expenses were up 300 basis points year over year. Higher occupancy costs were driven by higher rent costs associated with lease renewals and higher marketing costs were driven primarily by additional television and digital marketing to drive traffic and to promote our mobile app initiative. G and A expenses of $16,200,000 were up 8% from the prior year, reflecting increases to support a growing store base and increase in legal costs and higher consulting expenses. These costs were partially offset by tighter expense controls and reduction in incentive compensation expense. As a percent of sales, G and A increased 8 basis points.
EBITDA decreased 13.5 percent to $40,000,000 and was 13.3% of sales, while diluted EPS was $0.02 per share versus $0.30 per share in the prior year. EBITDA was negatively impacted during the quarter by charges totaling $3,300,000 related to ongoing litigation and corporate restructuring costs, which translated into a negative effect of $2,600,000 on net income or $0.08 per diluted share. Additionally, in last year's Q3, EVRAB benefited from a $2,300,000 insurance recovery related to our Puerto Rico store, which translated into a benefit of $1,400,000 on net income or $0.03 per diluted share. Excluding the effects of these discrete items from both quarters, EBITDA declined 1.4% to $43,200,000 from $43,800,000 Shifting to the balance sheet, we had approximately $656,000,000 of outstanding debt at quarter end, resulting in leverage of approximately 2.3x EBITDA, which is within our targeted leverage range of 2.0x to 2.5x EBITDA. We repurchased approximately 2,400,000 shares in the 3rd quarter for $97,000,000 and had approximately $173,000,000 remaining under the existing authorization at the end of the quarter.
Additionally, we declared a 5th quarterly cash dividend of $0.16 per share during the quarter, which represented a 7% increase over the prior quarter. Turning now to guidance. Based on recent trends, we're narrowing our fiscal year 2019 guidance as follows. Total revenues are expected to be in the range of 1 point $347,000,000,000 to $1,354,000,000 This compares to prior guidance of $1,338,000,000 to 1,359,000,000 dollars reflecting growth of 6% to 7% versus the prior year. We now expect full year comps to be in the range of negative 3% to negative 2.5%.
This compares to previous guidance of negative 3.5% to negative 2%. We are projecting net income to be in the range of $94,000,000 to $98,000,000 versus prior guidance of $91,000,000 to 100,000,000 dollars Guidance is based on an effective tax rate of 21.5 percent to 22% versus prior guidance of 22% to 22.5%. Finally, EBITDA is expected to be in the range of $275,000,000 to $280,000,000 versus prior guidance of $272,000,000 to 2.80 $2,000,000 Thank you for your interest in Dave and Buster's. Now, I will turn the call back over to Brian.
Well, thank you, Scott. I'm confident we are on the right track to capitalize on our leadership position in a rapidly growing and highly competitive market. Just as we've done over the past 37 years, we will continue to succeed by investing in innovations that enable us to deliver unmatched entertainment, engagement and satisfaction for our guests. 2020 is setting up to be a year of exciting changes and new experiences for our customers and our team is energized by the potential we see in our business. I'd like to close by thanking the entire Game and Buster's team for their focus and hard work as they strive to delight our guests every day.
As always, we appreciate our shareholders for your continued support and interest in Dave and Buster's. Now we would be happy to answer your questions. Cody, please open the lines for Q and A.
Absolutely. Will take our first question from Andy Barish with Jefferies. Please go ahead.
Hey guys. Just a couple
of things. First
on the content, how do you see VR
after kind of
a year and a half now looking forward to 2020? Is it going to continue to be sort of new titles or kind of harvesting a little bit of what you have? And how do you think it's performed in terms of driving incremental customer visits?
Well, as we said on the call, part of our pressure in the back half of this year has been the rollover in the yard. So as an overall contributor to the business, it's not as powerful as it was when we first launched the platform. But we still like the platform. It does allow us to introduce proprietary content. So it is still in the mix of our plans as we head into 2020.
Andy, we will have luckily we will have 2 titles that we will launch next year. And so I don't think you will see us rolling out 3 a year on that platform. In fact, we're looking at 2 alternate platforms right now, have 2 in test that are a different form factor. So we are looking to widen the net a little bit. And so we're not going
to be
just solely focused on the current platform we have.
Okay. And then just secondly on labor in the quarter,
really kind of kept that in line and flattish. Is there anything sort of idiosyncratic to the quarter as you started looking at some of the cost cutting or anything we should be aware of for the 3Q, especially given it's kind of a seasonally low quarter where you did hold the line pretty well on that expense considering the comp?
Well, as we indicated on last quarter call, we did implement some cost reductions in the prior quarter and some of that was focused around off peak labor as well as some centralization in our special event sponsors. So, yes, we were successful in accomplishing that. And as we mentioned, our hourly labor was actually just slightly better on a quarter year over year despite comp pressure and overall labor was just slightly worse and that's with some one time charges related to that restructuring. So the team just really did a fantastic job in implementing those cost reduction initiatives. At the same time, our guest PULS guest stat scores really stayed right in line with the prior year.
So it was a good outcome overall.
Thank you.
Welcome.
Thank you. We'll now move on to our next question from Nicole Miller with Piper Jaffray.
Thank you very much. Good afternoon. Two questions. The first is around the prepared commentary talking about the sport as an opportunity. And it kind of sounds like you're taking what you had remodeled previously to kind of revitalizing it.
And I was wondering if that's the way to think about it. In essence, what are you activating? So are you activating the consumer discovering you or are you discovering a new or lapsed consumer or something else altogether? Thank you.
Thank you, Nicole. Well, just to clarify a
little bit, it's not necessarily
that we're activating the old sports area. We invested in a new sports area, took some of our dining rooms, Nicole, and put in these 43 foot LED screens. So we're introducing that new technology, new energy into our dining rooms, really just seeing that our position as one of the best and innovative sports viewing destinations in this country. So what we are now working on is programming around that asset. They are great assets.
So we are looking at some programming around that. Specifically, right now, we have been testing a couple of stores live hosted events with local radio celebrities as well as some in venue sports celebrities. So we'll see how that goes. But we are looking to leverage this asset in a broader way than we have in the past.
But that's maybe and if I'm not still getting it right, I'll just apologize and we can move on. But it's supplementing the work that you had recently done and then activating essentially programming. Again, my words, not yours. But what did you learn from the previous remodel of, let's call it, the billiards area, sorry, very generally that's leading you to the conclusion of taking another chunk to use it for this kind of similar purpose?
Well, in our view, if you date back to some of the revitalization efforts that we underwent back early in the decade, we view the sports offering as a very strong big component of that effort. While we were changing the physical plant look and feel to be a little more modern, contemporary, we were also adding the watch element. And we recognized that currently our dining rooms are the least visited space in our 4 walls. And what we were seeking to do was bring in new asset into that area, bring energy to the space, have it be a location in the store that guests would want to go visit and really in an effort to drive F and B attachment rate and not have it be the location that is the least desired location in our stores. So I think this will and we saw good success with that in our Dallas store as we made that improvement there.
And I think it will take time to build, but we
feel very encouraged by this asset and what we're going to be able to do with it over time.
Okay. Thank you. That's very helpful. And just a second and last question. Around the snackable options in the Arcade or Midway, is there going to be an ordering platform attached to that?
Is there any technology? Do you have to order from the restaurant area? Could this eventually become enabled in the app in any way? Anything along those lines possible?
The first locations where we are standing up, this idea of food cart with snackable, it would be roughly 5 things that you can purchase along with beer selection as well as the signature drink from this location within the arcade. You will be ordering it from a person. So there won't be technology involved other than normal POS at this stage.
Okay. Thank you very much.
You're welcome. We'll hear now from Jake Bartlett with SunTrust.
Great. Thanks for taking the question. Brian, you mentioned that Terminator or maybe with Scottsdale, the Terminator has mixed very high or has been a popular VR platform. Also the Wow! Wall, you're rolling those out to traditional stores.
And you exited the quarter, it seemed like results were improving. Would you give any commentary on the current trends and whether that improvement has continued kind of like you had last quarter?
Well, honestly, we were excited about how quickly we were able to scale the Wow! Wow! Improvement that we had set about to accomplish over the course of the quarter. We met our goal of 35 and pushed on to a few more units. Again, very, very early on in that initiative in terms of how we, again, build community around that asset.
And Terminator has risen to the 2nd most popular title. Jurassic World is still number 1, very strong IP in Jurassic World. So both of those really kind of late in the quarter. The assets and the while also over the course of the quarter terminator late in the quarter. As we sit here today, we're essentially in terms of comp performance, we're essentially in line with the way we ended our Q3 results at around down 4%.
So, we're tracking right consistent with our guidance here
And we have some very big weeks
in front of us with our holiday season, which we're very excited about, biggest weeks in the year are in front of us and we believe we're shaping up to have a good Christmas season here.
Got it. And with the Terminator fairly recently launched, I mean, is that will it still have some staying power throughout the holiday season? I guess, is my question as you lap Dragonfrost, which I don't think mix very high, but just how do you view your current content in the holiday season versus last year's for instance?
Well, I think Dragon's Terminator is more successful than Dragonfrost was in the prior year in my view. And we are not actually featuring that in a big way on our media at this moment. So I'm not sure I would call it a push as
you think about it.
And last question just on the content. For 2020, you mentioned 2 more VR names. It sounds like some of these multiplayer platforms are in test or would you describe them as maybe beyond test in platforms that could really have a meaningful impact in 2020? I'm just trying to understand what how confident you are on the content for 2020?
Well, the 2 VR attractions that we
have in test right now, we actually tested both
of them in 2019 and they're in 4 stores right now. We've seen some great potential with actually both of these platforms. They are both multiplayer attractions. They both lend themselves to socialization, competition, collaboration, things that we are looking to try to scale up in terms of our mix of entertainment offerings, both very high energy. So we haven't made a final call on how many we're going to do.
It's highly likely that we'll do some of the either or both of these attractions in 2020. We haven't made a final determination. Very unlikely that we would scale it across the entire chain. There is a big format. One of them in particular is a very big format, high profile game, takes a pretty big amount of space in our case.
It's also very impactful looking. So we'll make that determination here in the 1st part of the year on how far we're going to and we'll share that a little more broadly on that on next call.
And Jake, this is Sal. I'll just kind of tag on to that. So the few that I mentioned, the Hot Wheels game that filmed really well out of the gate and it has just been rolled out. And then the Pong game, which I will admit, I do remember the original. That's a different game, but multi player as well.
But then just talking with the nuisance team, I mean, they've been to the shows and conferences and they're probably more excited than they have been in a little while just on the opportunity out there and the new themes that are coming out. So it does seem like there's more content available out there. And we do have quite a few things in the hopper for next year that we're pretty excited about. So we think we'll have a pretty solid lineup as we get into next year.
So, Ken, let's add on to that a little bit. We will be focusing on multiplayer games largely. All that maybe some single player games will be heavily focused as we look at the games that are available out there on prioritizing those games where multiple players can play.
Great. Great. And Scott, last question. The prior guidance had included, I think, $2,000,000 in one time charges. Are those no longer contemplated?
Or how should we think of those?
Yes. So the $2,000,000 in one time charges, that was an estimate at that time of what we thought that we would see. What I would say is that we feel like we've taken most of those charges at this point. And so, we feel like the charges that we took in the quarter were based on kind of getting past most of the restructuring that we went through.
To. We'll hear now from Jeff Farmer with Gordon Haskett.
Great, thanks. Bigger picture question to start. I'm just curious how your strategy has evolved to combat a lot of this competitive encroachment you've seen over the last several years. Are you doing anything differently in the markets that have been most impacted by encroachment?
Well,
Jeff, we're really focused on overarching strategy refresh right now for the entire brand.
As I said before,
we are not going to stop the onslaught of investment coming into the space, the competitive entrants that are building in and around us. What we are focused on is our strategy and what we are doing and we are taking a comprehensive look at the business right now in partnership with Jackman Reinvent who really helped us revitalize the brand earlier in the decade. We have gone through a fairly comprehensive amount of work around in-depth customer research, really trying to understand our core consumer and the attitudes that really drive the behaviors. And obviously, what they we're trying to drive more guests coming through the door and more frequently. So, that's really informing our strategy as we think about what we're trying to accomplish from a food perspective that is giving rise to some of these test and learn pilots that we are putting in place with a huge sense of urgency right now, which on the food front is around refreshing the menu with some of those preferences, this notion of signature shareable items.
We have menu change that we are currently putting in test around that. The snackable, accessible idea that I mentioned earlier. So we are attacking that right now from a games perspective. We know our guests are really, really looking for social games. So that is why we are emphasizing multiplayer games right now.
It has been for a little while, but we are ramping that up. That is why we are testing
a physical game
opportunity in our stores. And when I say physical games, I am really talking about large format, Giant Jenga, Twister, shuffleboard, cornhole, some of those games and bringing that into a space to allow for our guests to socialize together with friends and family. And then it is also this work is informing the look and feel of our store from a store revitalization program. There are a number of ideas we have around store layout. Number 1, maximizing our Wow!
Wall right now and creating some spaces that are more conducive for social interaction. If you think about our arcade today, you're out, you play and often you're doing it alone. So we're really looking at trying to have our food, bev and entertainment options collide so we can increase our penetration across the brand. So we're working with urgency across the entire brand to activate these plans right now.
That's helpful. Just to follow-up on that in terms of that work with Jackman and the revitalization programs you pursued in the past. Can you just remind us what type of capital commitment did those programs require? And I realize that with the Wow Wall, you've already put some capital to work. But in terms of theoretically what could lay ahead or lie ahead in terms of future capital commitment if Jackman decides to do something a little bit more aggressive?
Well, first, I want to clarify. What we move forward with is what the company is going to move forward with in terms of what we feel like is strategically correct. The Jackman team is a great partner for us to help us amplify some of the ideas that we have. So fundamentally, these will be our calls and what we decide to do based off some rigorous test and learns that we are enacting and putting in place right now. The prior activity and revitalization effort, we were spending in the neighborhood of about $2,500,000 a store.
But in that case, we were touching a lot of elements of our stores. We called it door to bar and we were touching the outside. So we don't expect the scope of this to be in that same zip code.
Okay. And just last one would be far more brief. But outside of unit development, I think you guys largely withheld your first look at FY 2020 guidance with tonight's release. Think historically you provided some revenue growth and EBITDA growth numbers. But focusing on that from a structural standpoint, are there any factors in play that would either lead to another year of EBITDA margin contraction or allow you to sort of break this run of EBITDA margin contraction as you move into FY 2020?
That's a good question, Jeff. And a lot of what we're talking about today is really focused on getting comp store sales going in the right direction and investing in high return stores. And if we focus on those two things and we have solid initiatives behind both of those, especially the comp store piece, we feel like that's the best path to EBITDA margin expansion. And so that's what we're really getting behind. All right.
Thank you. Thank you.
We'll take our next question from Andrew Shcrestlich with BMO Capital Markets.
Hey, this is actually Dan on for Andrew. So I think you touched on this a little, but just wondering if you can maybe give us any additional insights on what sorts of data you're collecting to the app? And it sounds like you're already doing some of this already, but I'm just kind of curious what you think the timeline will be to sort of fully leveraging that data for things like more targeted advertising, loyalty offers and any other strategic initiatives over time?
Good question, Dan. We're super excited, very, very optimistic about our mobile app. This really has given us a filter to bring in 1st party data in a way that we've never had in the history of this brand. So, very successful launch, the national launch in October. I think if you heard my prepared remarks, we've gained about over 600,000 new guest accounts.
And when I say guest accounts, that means we have an email address and a phone number and that compared to about 800,000 active guest accounts that we had previously. And when I say active, that means they either came into the store and purchased and or played a game. So significant movement in 2 short months. So very, very encouraged by that. We have seen higher per guest spend by the guests that download the app and buy.
We have seen better frequency. We are measuring frequency of visits for our app users relative to the other control base and we have seen more recharge activity. As you may recall, one of the capabilities of the app is to do a quick recharge on your phone without having to go to a person or a kiosk. And we're now while we're still trying to get guest acquisition onto the platform and we'll continue to really drive that, build a bigger database. We are rapidly pivoting into using the database to reach our guests in a more targeted relevant manner.
So, we have been doing beginning to do email contacts that are different depending on the guest behaviors. In other words, if the guest is low on their chips and hadn't been in for a while, then we might give them an offer. If a guest has a lot of chips still on their card and hadn't been in, then we encourage a revisit. So that's an area that we are really trying to develop and build out right now. And as you may remember from the last call, that is also an area where we are reinvesting some of these cost savings in terms of a team and technology and tools to allow us to really capitalize on what this database is very exciting for us right now.
Great. That's really helpful. And then maybe just kind of building off that, you kind of touched on adding additional functionalities to the app as you kind of move along with it over time. Obviously, at the table, it sounds like something that's going to be obviously very beneficial. Are there any other specific functionalities that you guys have kind of maybe targeted as maybe longer term additions to the app?
Just wondering if there's anything incremental there?
Yeah. We actually have a number of capabilities that are in the pipeline and we're looking to build out over time on the app. The only one I really want to mention right now is the one that's nearest term, which is pay at the table capability of the app. That is close in right now. But yes, we have a number of other things that we're looking to features.
We are looking to that path of the app over time to make it even more relevant for the guests and drive engagement in a better way.
Yes. I think the important thing to take away is just that when we designed the app and the team put all their thoughts together, I mean it was long term in nature. And so the platform that we chose definitely had a longer term roadmap in mind. And so we can continue to make enhancements and increase the functionality over time. So that's a big piece of it.
So as our customer database goes and we continue to add more functionality on the app, we should see better returns from it, but it definitely has the platform to do that and we have a pretty robust roadmap ahead of us. Great. Thank you for taking the question. Thank you, Dan. Thank you.
We'll take our next question from Stephen Anderson with Maxim Group.
Good afternoon. And just wanted to reference something you mentioned on the call about the easier comparisons year over year. I think it was on the food side of the business, but are you have you seen it also in the amusement side of the business where you saw a progressively better comp as the core progressed? And you mentioned weather as well, see if you can get any kind of hurricane impact from Hurricane Dorian out of that?
Yes, sure.
So on the F and B side, as you kind of look at the quarter end and even looking forward, we had some benefit in the quarter because we had our Wings promotion for a period of time on Sunday, Mondays and Thursdays, which we did not have in the prior quarter. It's a great tailwind of the quarter. We had a few days up, but for the most part Q3 and we were rolling over in a no wing promotion on those few days in the prior year. So we did get some benefit. I think as you look into Q4, we did have we'll have more of a like for like promotion on the wings.
And so that will make a little bit tougher compares for F and B. If you flip that around on the amusement side, yes, we started to see some improvement, especially at the end of the quarter and so that's encouraging. So as we get into the 4th quarter, we're thinking that that will continue somewhat. And we have some concrete reasons of why that is and a lot of it is what we've been talking about with the mobile app and just gaining more awareness. And so that's pretty exciting.
So that will be continuing into Q4, we think. We do have some type of comparison in Q4. So, we're also taking that into account.
Okay. Thank you. You. We'll take our next question from Chris O'Cull with Stifel.
Hi. Thanks. It's actually Alec on for Chris. Just curious, what's been the average sales lift at locations with Wow! Walls?
Are you seeing any common factors among the locations that are maybe doing better than others?
First of all, it's really early on. We built these over the course of the quarter. Feedback from the stores has been really fantastic. We have some stores that are performing really, really well. Boston happens to be one of them.
Maybe it makes some sense if they have nearly 1. But as a class, they're slightly better pre post meta control is what I'd say right now. So not get out of the park yet. We are encouraged with what we are going to be able to do with this asset.
Okay. Great. Thanks. Second question is just you've called out week late night daypart sales in the past. Is this still the case?
And do you believe that has anything to do with customers kind of staying in and ordering third party delivery? Do you view that as a risk to the daypart for the company at all?
Well, two questions in there. Just in terms of our daypart, our weakest daypart continues to be late night, really.
And that's been continuation for really the prior 2, 3 years now. I don't know that I attribute our comp sales pressures to at home ordering or delivery ordering. Right now, we attribute much more to competitive intrusion where we can actually see markets where we are performing very, very well, strong liquor stores that perform well and then we have impacts from a competitive intrusion event. So I don't attribute our bigger pressure being delivered. We are an entertainment event primarily.
People visit us for our entertainment offering, our game offering that's 1st and foremost. Obviously, we would like to get more of the food occasion. But I think that's part of it. So I think that is not particularly significant.
Okay, great. Thanks. And just last one, speaking of the competitive intrusion, it looks like a lot of competitors are willing to kind of accept lower margins to offer more value than the largest player in the segment right now. Do you think that eventually that dynamic will make it kind of difficult to recover margin even with improving same store sales performance? Or do
you believe it's just a
matter of increasing the sales?
Well, I don't our checks on what our competitors are offering in terms of pricing, comparative to us. I don't view us as being out of bounds with our competitors. But I view they may not look very good
from a margin perspective, but I think that's
a lot more due to their operating model, meaning a lot of the competitors have a broader offering with a lot of attended attractions, which put a lot of pressure on their margin profile. And that's why we're very careful about when we make a decision to add traction that requires an attendant or something like that, we want to make sure that it feels very incremental and it's going to be a traffic driver for our brand before we actually lean into it.
Great. Thanks. Thank you for taking my questions.
Sure.
Thank you. We'll hear now from Brian Makario with Raymond James.
Thanks and good evening. Just wanted to circle back on the Wow Walls and could we share what's the average cost of the Wow Wall and was that the primary reason for the increase in CapEx guidance for the year?
I will take the first and then I
will hand it over to Scott on the second.
I said on the last call, I really didn't want to disclose the drywall investment amount per store. We have a couple of providers that are supplying that equipment right now. And I think we've been successful in getting some very attractive purchase price as we have installed those. So for competitive reasons that I don't really care to provide the exact number on that.
Yes. When you look at overall CapEx, the increase in the guide, dead lot walls really were a big portion of that. But we also had a couple other things just from a timing perspective relating to the land purchase for one of our future stores kind of moved up into this year and then we had a sale leaseback transaction that will get pushed into early next year. So there are a couple of other pieces to that equation.
Okay. And I think you said 35 units that you completed the Wild Wall Inn with 14 more planned for 2019. Has the decision made to be yet to roll it further into 2020?
Well, just to clarify, Brian, we
I have talked to our development team and really purchase team team who were able to scale 35 units over the course of our Q3. And what I said is we've actually done another 13 so far over the course of Q4. We have 3 more on path, so that would take us
to 51 units. Obviously, we picked some of the stores that
were they can accommodate this kind of asset. And at this point, we've scaled it to the level that we're going to for a period of time. And we're going to turn our attention to leveraging that asset. That's what our plans are at the moment.
All right. Understood. And then, Scott, on the 3 point $3,000,000 charge that you highlighted in the Q3, could you map that between the different line items? How much in G and A? How much in labor?
How much in other OpEx if it was mapped to those three lines?
The bulk of it will be other store operating expense and that will be most of it And then a small portion of it, maybe about a third of that will fall into operating payroll and benefits and G and A.
Yes. I'll tell you that without the kind of restructuring charge that we incurred in operating labor and benefits at the store level, we would have actually been slightly favorable year over year as a percent of sales. So,
yes, that's 2 thirds of it will fall into other store operating. Okay. Thank you.
Thank you. That does conclude today's question and answer session. I'd like to turn the conference back over to management for any additional or closing remarks.
Well, thank you very much for your time this afternoon. And we look forward to reviewing our Q4 results with you in April. We also wish everyone a safe and a happy holiday season and look forward to seeing you at one of our many D and B locations very soon. Have a great night.
Thank you. That does conclude today's conference. Thank you all for your participation and you may now disconnect.