Good afternoon, everyone. Welcome to the Dave & Buster's Entertainment, Inc. First Quarter 2018 earnings conference call. Today's call is being hosted by Stephen 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 over to Arvind Bhatia, Director of Investor Relations, for opening remarks. Please go ahead.
Thank you, Rebecca. Thank you all for joining us. On the call today are Stephen King, Chief Executive Officer, and Brian Jenkins, Chief Financial Officer. After comments from Mr. King and Mr. Jenkins, we will be happy to take your questions. This call is being recorded on behalf of Dave & Buster's Entertainment, 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 will turn the call over to Stephen.
Thank you, Arvind. Good evening, everyone. We appreciate your participation in our quarterly conference call. Today, I'll begin by providing an overview of our first quarter performance and speak about the organizational change we announced this afternoon. Brian will delve into the financials and update you on our 2018 guidance. I'll complete my remarks by discussing our development efforts before we open it up for questions. During the first quarter, we grew revenue by 9.2%, driven by continued strength in our non-comp and new stores. On a comparable week basis, revenue increased by 9.7%. Of the 112 stores we operated during the first quarter, 26 stores or 23% of the total were non-comp or new stores.
We opened six stores during the quarter, which was our fastest pace so far, and I am pleased to share that these openings include a few that have delivered some of the highest volume openings in our history. Their strong performance and contribution to our overall revenue growth continues to give us confidence in our model. Comparable store sales on a calendar basis declined 4.9% versus the year-ago period, a slight improvement from the trends in the first quarter, although clearly not where we want to be. While EBITDA was down about 2% on a reported basis for the quarter, it was up about 2% on a comparable week basis, excluding the 2017 use tax settlement. This is roughly in line with the midpoint of our full-year guidance of flat EBITDA year-over-year.
Let me update you on our four strategic priorities that are driving results over the intermediate to long term, which include amusements, F&B, improving service, and reducing friction in the guest experience, as well as driving 10% or more unit growth annually. Let me also remind you that we consider 2018 to be a year of recalibration as we lay the groundwork for evolving the brand. In terms of amusements, we launched our first two exclusive titles of the year, Tomb Raider and Rampage, during the quarter. Both titles are performing well for us. We are now in the midst of nationally rolling out our first proprietary VR title, Jurassic World VR Expedition. This is right in line with our target of a mid-year launch, and we remain excited about its potential. We are also on track to launch our second VR title towards the end of the calendar year.
Our plan, as we mentioned before, is to build a library of proprietary VR content that will enable us to capitalize on this opportunity for many years. In addition, we recently announced with Microsoft the launch of Halo: Fireteam Raven as a limited time exclusive arcade title for D&B. Players of the arcade game will be able to share their achievements by connecting to their Xbox account, which will unlock a special badge on Microsoft's Halo Waypoint website. We expect to release this title early in our third fiscal quarter and believe it has strong potential. Within F&B, our new leadership is focused on quality, simplification, and accessibility.
We are happy with the response to our new and improved burger and are planning to launch our new chicken and steak products later this year, in line with our strategy of investing in quality that our guests can see and taste. Our pared-down menu, which we rolled out in February, is beginning to help us simplify some of the processes in the kitchen and will positively impact speed of service. In terms of accessibility, we remain on track to test a quick casual offering inside D&B during the back half of the year, and we continue to view this as a complementary delivery mechanism to casual dining inside our facilities.
Improving service and reducing friction in the guest experience is also a strategic priority for us, and we're focusing our attention on pain points at the front desk, at our bars, in the dining room, and while purchasing Power Cards and activating games. A combination of technology and operating processes, including how we deploy our people, are key elements of this strategy. We've begun testing digital media to understand its effectiveness relative to broadcast media. To be clear, while broadcast media has under-delivered recently, it will remain a key element of our advertising strategy in the near term as we read the results of our digital tests. The fourth strategic priority is driving 10% or more unit growth annually, which we firmly believe will be the biggest driver of value over the long term.
Our new stores continue to generate very strong cash-on-cash returns, even after taking into account the sales impact on the existing system. All of our strategic priorities are aimed at evolving the brand and improving relevance among our guests. We need to deliver new game content, food improvements, faster service, and effectively communicate these value enhancements to our guests. In terms of our guidance for 2018, we continue to expect year-over-year revenue growth on a 52-week basis in the 7%-11% range. At the midpoint of our guidance, we still expect EBITDA to be flat on a year-over-year. Brian will discuss this further in his prepared remarks. I'm sure you've all seen the organizational announcement we issued this afternoon. I am retiring from my role as CEO of Dave & Buster's, but I plan to remain on as chairman of the board.
This change has been part of our succession planning at the board level for some time now, and I believe a seamless transition is a good thing for the company. Most of you know that Brian and I have been the face of Dave & Buster's to the investment community since we went public in 2014. We've been close strategic partners in what we and this tremendous management team have achieved over those past 12 years. For the organization, this is a time of great excitement as we roll out a new virtual reality attraction that is highly differentiated and exclusive to D&B. While games and entertainment will always be the centerpiece of our brand, I'm optimistic about the changes that we're making to our food and beverage offering in order to be more relevant and more convenient for our guests.
As for the timing, it's just the right time for me personally. One can only see another milestone to be completed and push something like this off into the future. Some of you know that for my first 10 years as CEO of Dave & Buster's, I commuted from Dallas to New Haven while my wife was an officer at Yale University. Now that she's retired, I want to spend more time with her and the rest of my family. I continue to have a big emotional and financial stake in the success of Dave & Buster's. I will remain involved from a different chair, so I'm excited to have someone that I've partnered with for more than a decade take the CEO role. Now I'll turn it over to Brian.
Thank you, Steve, and good afternoon, everybody. I'd like to begin by thanking our incredibly talented team for their continued dedication as we evolve the brand and embark on our next phase of growth. Before I discuss our Q1 financial results and our 2018 guidance, let me remind you that 2017 was a 53-week year, and as a result, our fiscal year 2018 calendar shifted by one week and has one less week for the full year. Due to seasonality in our business, our quarterly results this year will not be directly comparable to our results last year. More specifically, in Q1 of this year, we had one less high-volume winter week compared to last year, and this shift had an unfavorable impact on revenue of $1.4 million, EBITDA of $1 million, and adjusted EBITDA of $0.9 million.
In order to provide a more meaningful picture of our performance, I'll be quoting our comp sales on a same calendar week basis, adjusting for this shift. Turning now to some of the highlights for the first quarter. Total revenues increased 9.2% to $332.2 million, versus $304.1 million reported in Q1 of last year. On a comparable week basis, revenue was up 9.7%, driven by strong contributions from our 26 non-comparable stores. Including the six stores that opened during the quarter, non-comp store sales increased to $74.5 million. That's up from $30.3 million in the prior year on a comparable week basis. However, revenues from our 86 comparable stores fell 4.9% to $260.2 million. That's down from $273.7 million in the prior year, again, on a comparable week basis. Looking at overall sales by category, amusement and other sales grew 10.4%, while food and beverage sales collectively grew 7.7%.
During the quarter, amusement and other represented 57.9% of total revenues, reflecting a 60-basis point increase from the prior year period, continuing a long-term trend. Breaking down comp sales, our walk-in sales fell 4.8%, while our special events business was down 6.4%. In terms of category comps, our amusements was down 4%, while our food and bar business was down 6.7% and 5% respectively. During the quarter, the combination of weather and the Easter calendar shift had a net neutral impact on our performance, while competitive intrusion and cannibalization had a slightly more unfavorable impact compared to last year. In terms of content, as Steve mentioned, our new games for Q1, Tomb Raider and Rampage, are doing well based on objective metrics like utilization rate, and we are optimistic about the upcoming launch of virtual reality.
In terms of cost, total cost of sales was $57.1 million in the quarter, and as a percentage of sales was 110 basis points higher versus the same period last year. Recall during Q1 of last year, we recorded a $2.5 million reduction in amusement cost resulting from the favorable settlement of a multi-year Texas use tax audit. Excluding this settlement, cost of sales would have been only 30 basis points higher year-over-year, reflecting a decline in F&B and amusement margins, partially offset by higher mix of amusement sales. Food and beverage cost as a percentage of food and beverage sales was 60 basis points higher compared to last year, as the unfavorable impact of commodity inflation, the impact of our newer stores, and investment in our new Angus burger was only partially offset by the favorable impact of food and beverage pricing.
Cost of amusement as a percentage of amusement and other sales was 170 basis points higher than last year, and excluding the favorable use tax settlement last year, would have only been 20 basis points higher year-over-year. This was driven by a change in product mix, partially offset by the favorable impact of the shift in gameplay toward simulation games. Our operating payroll and benefit cost as a percentage of sales was 21.9%, or up 50 basis points year-over-year due to deleverage of our comp stores and the unfavorable impact of about 4% wage inflation that was partially offset by year-over-year improvements in our non-comp store set, which represented 23% of our store base in the quarter. That said, please keep in mind that our newer stores do tend to be less efficient from a labor perspective relative to our mature stores.
Other store operating expenses were 110 basis points higher year-over-year, primarily driven by higher occupancy costs at our non-comp stores and deleveraging in our comp store base. Marketing expenses were also higher as a result of inflation in media costs and continued tests in the digital media space. Store operating income before depreciation and amortization was $108.8 million for the quarter compared to $107.6 million last year, reflecting growth of 1.1%. As a percentage of sales, this was a decrease of 260 basis points year-over-year to 32.8%, and excluding the favorable use tax settlement, a decrease of 180 basis points. G&A expenses were $15.7 million. That's up from $15 million in the prior year due to increased headcount and higher stock-based compensation, partially offset by lower incentive comp and legal costs.
As a percentage of revenues, our G&A expenses improved 20 basis points year-over-year. Pre-opening costs increased to $7.1 million. That's up $2.6 million from the first quarter of 2017. This was primarily due to an increase in store openings versus the prior year, as well as pre-spending associated with our strong remaining lineup of 2018 openings. As a percentage of revenue, pre-opening costs increased to 2.1%. That's up 60 basis points compared to the prior year. EBITDA was $86.1 million. That's down 2.3%, and EBITDA margins were 25.9%, and that's down 310 basis points versus the same period last year. On a comparable week basis and excluding the favorable 2017 use tax settlement, our EBITDA was up 1.8% year-over-year.
Adjusted EBITDA of $95.9 million grew slightly versus the prior year, marking our 31st consecutive quarter of growth. On a comparable week basis and excluding the use tax settlement, adjusted EBITDA grew by 4%. Net interest expense for the quarter increased to $2.9 million. That's up from $1.9 million in the prior year, driven by higher average debt levels resulting from our share buyback program and also due to increases in the underlying LIBOR rates. Our effective tax rate for the quarter was 24.4% compared to 31.4% in the year-ago period. That's been driven by a lower federal statutory rate under tax reform, partially offset by lower tax benefits from reduced stock option exercises. We generated net income of $42.2 million.
That's for $1.04 per share on a diluted share base of 40.6 million shares as compared to net income of $42.8 million or $0.98 per share in the first quarter of last year on a diluted share base of 43.5 million shares. Shifting to the balance sheet for just a minute. At the end of the quarter, we had just over $355 million of outstanding debt on our credit facility, resulting in low leverage of about 1.2 times EBITDA. During the quarter, we repurchased approximately 600,000 shares of our common stock for $27.4 million. The inception to date total now as of June 6th this year is 4.1 million shares or $218 million, leaving about $82 million under our current authorization. Turning now to our outlook for fiscal year 2018. We're reaffirming our prior guidance for 2018 on several key financial metrics.
Total revenues are expected to range from $1.2 billion to $1.24 billion. That's up 7%-11% on a comparable 52-week basis. This is unchanged from our prior guidance. We continue to project comp store sales on a comparable 52-week basis to be down low to mid-single digits. On a relative basis and at the upper end of our guidance, we expect second half comps to be better than the first half as we roll over easier comparisons. From a development perspective, our target remains to open 14 to 15 new stores, including two of our new 17K format stores. These openings will skew towards the large store format and new markets for our brand. We've already opened nine stores so far this year and currently have five stores under construction, so very confident in this guidance. We're projecting net income of $95 million to $110 million.
That, too, is unchanged from prior guidance based on an effective tax rate of about 24%, which includes the impact of new tax legislation. We are now estimating our diluted share count at approximately 40.5 million shares versus prior guidance of 41 million. We continue to project EBITDA of $255 million to $275 million for the fiscal year. In terms of capital, net capital additions after TI allowances and other landlord payments are now projected to be $179 million to $189 million. That's up about $9 million from our prior guidance due to additional spending on gains and remodel projects. Finally, I want to remind you that the impact of one less week in fiscal 2018 versus our 2017 year has an unfavorable impact on revenue and EBITDA of about $20 million and $4 million, respectively, on a full year basis. With that, I'll turn the call back to Steve.
Thank you, Brian. I'd like to review our recent and upcoming store development activities and the long-term opportunity for unit growth. As I mentioned in my opening remarks, we're very pleased with the response to our recent store openings. During the first quarter, we opened six new stores, in Rogers, Arkansas; Memphis, Tennessee; Wayne, New Jersey; Anchorage, Alaska, which is a new state for us; Madison, Wisconsin; and Rosemont, Illinois. Rogers was our first 17K format store, and I'm pleased to announce that our next 17K format store will be in Corpus Christi, Texas, later this year. It might be worth reminding everybody that the economics of the 17K store, we anticipate steady state AUVs of about $4 million to $4.5 million, store-level EBITDA margins of around 25%, cash investment, excluding TI of less than $5 million, and cash on cash returns in the low 20s for this format.
In the same quarter so far, we've already opened three stores, including Salt Lake City, Utah, which is also a new state for us, Massapequa, New York, which is on Long Island, and just today in Torrance, California, in the South Bay region of Los Angeles County. We plan to open two more stores during the quarter in Northridge, California, in the San Fernando Valley, and Staten Island, New York. As Brian mentioned, with nine stores open so far and five stores under construction, we are well on track to open the 14-15 stores that we guided this year, representing 13%-14% unit growth. These stores will skew towards new markets for our brand. Including the stores under construction, we currently have a total of 24 signed leases, providing us significant visibility on new store growth into 2019 and early 2020.
We remain confident that we have the strong and dedicated team needed to execute on our new store opening plan. In terms of square footage, at the higher end of the range, we expect 11 large stores this year, including nine that are approximately 10,000 sq ft and two that are between 30,000 and 40,000 sq ft. The remaining four stores will be comprised of two of our small store format and two of the 17K format stores. Our target is to ultimately open 231-251 locations in the United States and Canada, including 20-40 of the 17,000 sq ft stores. We plan to capture market share through unit growth at a consistent measured pace and by driving improvement in our comp store sales.
We can win by focusing on enhancing our offering, strengthening our execution inside the box, and ensuring that we're reaching our audiences effectively. As always, we appreciate your continued support and interest in Dave & Buster's. Operator, please open the lines for Q&A.
Thank you. Ladies and gentlemen, if you would like to ask a question today, you may do so by pressing star one on your telephone keypad. If you are using your speakerphone, please release your mute function so everyone else can reach their equipment. We also ask that you please limit yourself to one question with one follow-up. Again, everyone, that is star one. From San Francisco, we'll hear from Jake Bartlett.
Thanks for taking the question. The first one is the cadence of the same store sales throughout the quarter on a monthly basis. I believe what you communicated before was that same store sales had decelerated into the holidays and hadn't materially improved. Trying to get a sense as to, it sounds like it started at a lower level, then improved, but if you could confirm that'd be helpful.
That would be the way the math works on that. We did say both of those things that it deteriorated in December and January, and it continued on into the early part of the first quarter.
I'd also say, Jake, that the first quarter is a somewhat volatile quarter in that the Easter calendar shift and spring breaks and all that stuff make that really hard to read. Easter moved earlier, which is into the quarter, that does shift some of the sales earlier into the quarter than we had last year. That does make it hard to read, and that's why we really don't like to talk about the trends With that strictly within Q1.
Okay. That makes sense. If you could share what you've learned about the VR game and how it's performed in tests. Maybe if you have a couple of hours here of some of the stores that have had it running today or over the weekend. Any insight you could provide would be helpful, your level of confidence that the virtual reality is going to be a material driver to traffic.
Jake, we're very optimistic and excited about the VR concept that we're introducing, particularly with the intellectual property around Jurassic World. It's such a great launch of a platform that we plan to utilize with other titles over time. It does represent really the biggest investment we've made as a company in amusements, single game. We're going to follow it up later in the year with another game that we think will also resonate well with guests. We do have it rolling into stores right now. We'll be launching it really officially here, Thursday, I think the 14th. We're excited about that. We're very optimistic about the game. The reaction from our guests has been positive.
We view it as an attraction that can not only drive traffic, it's going to present well on our TV spot, but also drive some incremental spend while they're in the store because we are charging a separate price for it. Again, it's really early, we're excited about the product offering here, we think we're going to be able to leverage it with more of the library as we go down the road.
Great. Lastly, how confident are you then over the last six months, some of the changes you've made to menu, to service levels, to the quality product in the food and beverage side, is going to be effective or anything you can point to in terms of metrics or how you've measured customer satisfaction, just to give us confidence that the consumers are going to come in because of VR and hopefully become repeat users.
Jake, I think that there's a couple of questions wrapped into that. We clearly think that kind of driving customer sales is a priority for us, we're really focused on four things in order to do that. Brian mentioned content as one, that we believe is a big part of driving traffic. We have gone with an enhanced, simplified menu. We have invested in what we're calling quality that counts. We've done the burger. We're planning on doing some changes to our chicken and steak. We have new leadership in the F&B area in terms of our R&D function. We also plan to test quick casual later in the year. Improving service and reducing friction. There's some technology elements to that. We've deployed some additional kiosks. We're testing some RFID and different operating processes in terms of how we deploy people.
It's early for a lot of those to say that they are going to be things that we roll to the entire system. We have confidence that we'll be able to figure this out and come up with models that both enhance our service and also contribute to customer sales.
Moving on, we'll hear from Andy Barish with Jefferies.
Yes, I'm sorry about that. I was just trying to get a clarification, Brian, on your comments around the labor line in non-comp stores. I was just a little confused. It seemed as if you mentioned non-comp store labor was better year-over-year. Is that a function of some new procedures on new restaurant opening and glide path, or did I mishear that?
No, I probably just was not clear in my comments. What I was trying to say there is that we talked about this gap between our mature stores in terms of the efficiency on the hourly labor line, in particular, relative to our new or immature stores. What I was trying to communicate there was that gap of inefficiency narrowed quite a bit in Q1. The drag of our new stores was less, and that was helpful to us year-over-year.
Okay. I assume that's come from some focus on that area in the last year or so?
Well, I kind of say this every time. We're opening new stores every day and quite a few. It was six in the Q1, I think five, maybe in Q4, if I remember it right. There is a lot of effort trying to dial the stores in, continuing to deliver a great experience, but dial them and try to get them closer to our mature store base. It's a constant focus, and every day it's a new store to try to dial in. There's a team of people. We have some great operators out there that are working hard at it, and we have a tool, a labor management, workforce management tool that we've been using for a long time that we deployed at
To try to do that in a, let's call it, a smart way. We are in the midst of a rollout of a new tool that we think is better. We're probably 20 stores into it, I think, or so right now, but this is a tool that we think is a lot more state-of-the-art, more nimble, more real time. We're in the midst of that. We're going to continue to focus on labor. It's obviously one of the biggest line items we have.
Once again, ladies and gentlemen, that is star one to ask a question. We also ask that you please limit yourself to one question and one follow-up to allow everyone an opportunity to ask a question. We'll hear from Sharon Zackfia with William Blair.
Hi, good afternoon. Congratulations on the retirement and the promotion.
Thank you.
A couple of questions. On the VR, are you launching the media simultaneously with the launch on Thursday?
We've been rolling VR into the stores over the last about 10 days or so. We will have it in all the stores that are going to get it by Thursday, and that's when we will be launching the television advertising to support it.
Okay, great.
Yeah. It's helpful to have the attraction run and tested before we launch on air. That's actually by design. There are a couple of stores, just to clarify a little bit here. With some of the, I don't know if you guys remember, we had some of what we called our original smalls back in the day, 2008, 2009 timeframe, that will not be receiving the attraction. It's a couple stores, three. We are going to have some of the stores that are a long distance away. Let's call it Hawaii. That will be a little delayed getting the title, but we'll be largely out and rolled out by the 14th so we can get this on air. We're excited about it.
Okay. On the shift that you're talking about doing over time away from more traditional media towards digital, I know you said you were doing some tests. Do you have any early learnings on the effectiveness of digital with your business?
I think it's exactly a test your way into smarter and better deployment. You just get better at it as you utilize it more. I would say our early testing was, I would say, not outstanding. As we went through the quarter and as we come into this quarter, it's gotten better in terms of our ability to efficiently target and have a reasonable cost per acquisition. I think this will take a while for us to learn our way into. Again, as I said earlier, I think linear is still going to be a big part of what we do here over the next several quarters and probably over the next couple of years. Just to have that kind of broad voice against things like a VR attraction.
It's just really hard to get that out efficiently to a broad enough audience using the digital format.
Okay, last question. Do you have any thoughts on whether or not Fortnite is impacting your business negatively?
We've gotten that question a couple times. We haven't been able to correlate anything specifically to it. It's obviously a hugely popular game and one that lots of young adults as well as teenagers are playing. We have been keeping our eye on it, but we can't really draw any specific correlation.
Moving on, we'll hear from Andrew Strelzik with BMO Capital Markets.
Hey, good afternoon. I had a couple questions. First, you mentioned in talking about the amusement cost of sales, a product mix shift. I was just wondering exactly what you're referring to there and if that's something we should expect to continue.
We saw some shifts in some of the licensed merchandise that we kind of featured in our resets. We had a little bit of shift away from some of our imported products towards some licensed product in the quarter. I don't know that we'll see that continue totally because we tend to move the product around, and we'll have another reset here in the near future. I don't know if I'd count on it.
Okay. Among the initiatives on the food side that you had talked about previously, trying to emphasize the value that was already on the menu was among the things you had spoken about. I'm wondering if there were any signs that that has started to resonate.
A lot of that advertising actually occurred in the early part of the second quarter, and we're really not going to comment specific trends on the second quarter. We've tried to talk about recasting kind of our Eat & Play Combo or our combinations. Also on some of our drink offerings, which we think are a great value, and we didn't necessarily get a lot of credit for. We are going to be rolling what we've described earlier as three, four, five for happy hour across all our stores. Previously, we had a 50% off for happy hour, and people really didn't understand what that meant. Now we're saying, "Hey, all drinks are going to be either $3, $4, or $5 during happy hour." We tested a couple of ideas with respect to the Eat & Play Combo.
One specifically that we tried was, kind of buy a Power Card and then get 50% off your meal. That didn't resonate so well. That was probably the same issue as you have with 50% off cocktails, where people really are more interested in price certainty. If you've been watching television lately, we ran an Eat & Play Combo over another course in the last several weeks, all week long, which was a difference compared to what we had done previously. Over the next couple of weeks here, we'll be able to kind of get a better read through on what that really meant for us pre/post and net of control.
From Piper Jaffray, Nicole Miller.
Thanks. Good afternoon. Just a numbers question and a follow-up. Is the earnings guidance this year built off the $1.04 GAAP number that you have in the press release, or is it off the $ per share if we take the tax settlement into consideration? In the first quarter of the six openings, how many were large and how many were small? For the second quarter, the five stores, how many large and how many are small?
Nicole, I'm not totally sure I understood what you're asking about the $1.04 in the guide here.
Oh, I'm just looking, if you take out the tax settlement, that was a $0.04 benefit. Is that right, in the quarter?
Yeah. It was about Well, yeah, exactly $0.04.
Thanks.
You're talking about the Texas use tax settlement.
Yes.
It was about a $0.04 benefit.
Thank you.
Yeah.
Yep. Is guidance built up?
The guidance includes that. Our guidance also includes, you may recall, last year in our second quarter, we had a legal settlement of similar magnitude. On a full year basis, they kind of wash out. That happened in the second quarter as you kind of roll back the tape. Just kind of on a full year basis, we have two kind of large items, one good one in the first quarter and a negative one in the second, similar magnitude.
Okay.
You asked about store counts. We opened six stores in the quarter, as I mentioned. Four of them were large. One was small. One was our first, our 17K. Yep. In Rogers. That was the profile of how the stores opened up. Did she ask about second quarter too? Did you ask about second quarter? I'm sorry. I don't know that we've given that. I mentioned in the remarks, we're skewed earlier in the year. We've opened three so far in the quarter. I think we've got one left to go. Two left to go? Two left to go. Yep. At the end of the second quarter, we'll have three stores. Of those, four of them will be large stores. One will be a medium store.
Next we'll hear from Stephen Anderson with Maxim Group.
Yes. Good afternoon. I wanted to talk about the 14-15 locations. Those are going to be company-owned, North America. In the past, you talked about your international development outside North America, and you're looking to open your first one this year. Can you give any guidance as to which quarter you'll be doing this?
I think, first of all, just back to international more broadly. We still believe this is a long-term opportunity for us. Clearly, where most of our time right now is being focused on the domestic opportunity and the domestic priorities. The Middle East is really the store we're talking about to open towards the end of this fiscal year. Progress has been slower than we had hoped. They are making some progress, but I'd say it would be very late in 2018.
All right. Thank you.
We'll go to Brian Vaccaro with Raymond James.
Thanks, and good evening. Circling back on the improved comp performance as the quarter progressed, I'm just curious to get your perspective on what drove that improvement. Are there a couple of sort of company-specific initiatives or offers that you started to see particular traction on and they moved the needle, or would you say it's mainly the broader industry improvement that we saw in March and April compared to the chance then?
Well, I would go back to Brian's comment and make sure we don't ascribe too much to the cadence within the quarter, as that first quarter is highly volatile, by virtue of all the calendar shifts and what's going on with Easter and the rest of it. I think it's early to say that kind of some of the underlying things that we're doing have made a significant impact. Overall, did we improve on a sequential basis from the fourth quarter? Yes, we did. It was 100 basis points. Not tremendously significant, but we believe that we're on the right track with the four strategic priorities that we've been talking about, which again, is about content, simplifying our F&B, working on service, and the friction in our system. Then really on effectively communicating that new news as well as value.
We believe that's the right path for us, and we believe that we will be able to improve as we get a little more time under our belt with those things.
Okay. Shifting to the new units, pretty strong new unit performance that was evident in the quarter. I guess, to what do you attribute the better than expected performance? Is there a common thread or something that stands out in the class of 2018 so far, say, as it compares to the class of 2017 or 2016?
Well, just to be clear, we say new and non-comp. I did reference that we really thought the results from the new stores were very strong in the first quarter. Some of the non-comp stores, the ones that opened towards the end of last year, are very good for us as well. I would say that, among others, we did skew towards kind of some new markets for us. Those new markets tend to do well for us. I think we've talked about that in the past. Four of the six were in new markets during the course of the first quarter, and that's part of what we attribute it to. They tend to have a little bigger honeymoon than what we see in the existing markets.
Okay. That's helpful. If I could just take another stab at the labor cost line, Brian. If you look back at the fourth quarter, you saw 35 basis points of leverage on a down six comp, roughly. This quarter, it flipped the other way, 50 basis points on a slightly better comp. Can you help parse out sort of the underlying dynamics, why the cost per week was a little favorable this quarter versus the last two quarters of 2017?
Well, as I mentioned, we were about 50 basis points unfavorable for the quarter on the overall labor line. Really, the piece of that that we dialed back on was the management labor in the stores. The, let's call it, more fixed piece of the business. That by far was the most significant portion of that 50 basis points. Hourly, we kind of held our own despite having a negative comp close to 5% and having all these new stores. We actually felt pretty good about the way the hourly line looked. The deleveraging on our comp stores with that negative comp sales number was a headwind for us, though.
Okay. I think you said on the last quarter call and the one prior to, one of the big year-on-year benefits, if you want to call it that, was lower store bonuses. How about the store bonus line in Q1 2018 versus last year?
Not really a significance of that within the quarter at the store level.
Okay. Great. On the virtual reality, just a couple of specifics, if I could. How will customers pay? I know on the last call, you were talking about maybe going with the VR chip. Is that what you settled on? Just in terms of how will customers pay for it. Also, if you could just say, about how many days and hours per week will it be offered initially in the average store? Thank you.
We are going to sell it as an attraction, and we have created the capability within our systems to sell a VR chip both at our kiosk and obviously at a register. We will be able to sell a chip if a guest comes up to the attraction. We have point-of-sale device, actually, so they can do it there. They could have a server give them the chip or sell them the chip. They could do it at a kiosk. That's multiple points of purchase. I think the depth and number of hours that we plan to operate will depend somewhat on the store. Obviously, we have a range of performance within our portfolio. We're going to be operating this at night and on weekends primarily. It won't probably be operated all the time.
If we do really well and we're making marginal dollars, we'll evaluate that. We have a number of these stores that are going to get two of them. I think we've got about 15 high-volume stores that will have two units. I think the operating hours will be somewhat dependent on how we see the demand unfold.
Understood. Okay. Thank you.
At this time, I would like to turn the conference back over to Steve King for additional or concluding remarks.
Well, this will be my last earnings call as CEO, I want to thank all of you for your support over the years. Actually, with that, I'm going to turn it over to Brian to make some final remarks.
Okay. Thanks, Steve. First, I want to thank Steve and congratulate Steve for over 12 years of dedicated service to D&B. Under his great leadership, we've transformed the brand. We've reached some heights. More than doubled our store count, increased revenues to over $1 billion. Quadrupled our EBITDA. Very impressive performance. I want to thank him for that. On behalf of the entire D&B team and our board shareholders, I would like to thank Steve for a job well done and wish him well in his retirement. On a more personal note, I also want to thank Steve for his mentorship, his guidance to me over the past decade. It has been an absolute privilege for me to partner with him and the rest of our team here, and I look forward to his continued counsel as he serves as our chairman going forward.
As for me, I'm both honored and excited to take on the role of CEO of this great company. I'm 100% committed to work with our exceptional team to evolve the D&B brand and continue our long track record of growth. I sincerely appreciate the tireless efforts of both our store and corporate team members who work together to bring our brand to life each and every day in our stores for our guests. Over the past 20 years, I've developed a passion for the entertainment business. Having spent a decade with Six Flags and now over 11 years here at D&B, entertainment is in my DNA. I've always looked at our business through an entertainment lens and believe that our relatively low frequency continues to represent an opportunity for us.
Consistent with the priorities we've communicated, I'm confident that a laser focus on evolving our content and offering, improving our service, and reducing friction, and effectively communicating our new news and value will drive improved comp sales performance. We expect this, in combination with building great new stores, will create growth and shareholder value for years to come. I look forward to the next chapter of our success that our team will achieve together. Finally, I appreciate the continued support of our shareholders. I want to thank you for your time tonight and look forward to speaking to you again soon. Have a great evening.
Ladies and gentlemen, that does conclude today's presentation. We do thank everyone for your participation, and you may now disconnect.