Dave & Buster's Entertainment Inc (PLAY) Q4 2018 Earnings Conference Call Transcript

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Dave & Buster's Entertainment Inc (NASDAQ: PLAY)Q4 2018 Earnings Conference CallApril 02, 2019, 5:00 p.m. ET

Contents:

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  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, everyone. Welcome to the Dave & Buster's Entertainment, Inc. Fourth Quarter 2018 Earnings Results Conference Call. Today's call is being hosted by Brian Jenkins, Chief Executive Officer. I would like to remind everybody 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.

Arvind Bhatia -- Senior Director of Investor Relations

Thank you, James, and thank you all for joining us. On the call today are Brian Jenkins, Chief Executive Officer; and Joe DeProspero, Interim Chief Financial Officer. After comments from Mr. Jenkins and Mr. DeProspero, 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 would 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 Brian.

Brian Jenkins -- Chief Executive Officer

Thank you, Arvind. Good afternoon, everyone, and thank you for joining our call today. Well, 2018 marks the year of meaningful progress on our strategic priority. We delivered sequential improvement in comp sales throughout the year and drove strong new store performance leading to our eighth consecutive year of record sales and EBITDA. We also returned significant value to our shareholders in 2018 through nearly $150 million in share repurchases and by instituting a quarterly cash dividend. And, today, we also announced that our Board has authorized to expand our share repurchase program by an additional $200 million.

With respect to the fourth quarter, I'm pleased with our performance, including the return to positive comp sales. Comparable store sales increased 2.9%, which was ahead of our casual dining benchmark by 70 basis points. We believe an increased focus on value, a favorable holiday calendar, better weather and the ongoing improvement in our core offering were the key drivers of this growth. On a comparable week basis, we grow overall revenue by nearly 16% and EBITDA by approximately 6% during the quarter.

We continued to drive four strategic priorities to grow our brand. First, we remained focused on evolving our offering in Amusements, we are providing our guests with the most compelling games in the industry, we continue to have access to the best of what the industry has to offer often on a limited time exclusive basis. This access is due to our size, our scale and our ability to promote games on national TV.

In addition, our Amusements team is driving the creation of new proprietary games, a key differentiator for us, as evidenced by the successful launch of our virtual reality platform in 2018. Our ability to efficiently execute such a large scale national rollout is unmatched in the industry.

Looking at Q4, our new release, Dragonfrost VR was an excellent addition to our VR offerings and has performed well for us, at the same time Jurassic World VR Expedition, Halo, Connect 4 Hoops also remains strong. Our Q1 2019 slate includes several new proprietary titles available only at D&B in mid-February, ahead of the release of the Captain Marvel movie, we launched Marvel: Contest of Champions, featuring highly popular characters from the Marvel Universe. This title includes collectable cards designed really to foster repeat play. And then just last week we introduced Star Trek: Dark Remnant, our third VR title, further strengthening our library of VR attraction.

Finally, we're excited to announce today our fourth VR title, a game based on the Men in Black film series. We plan to introduce the title in Q2 around the June release of the Men in Black: International movie. This is the next movie in this popular franchise. And based on the strength of our VR offering, in early 2019, we implemented a price increase on our VR games in just over half of our stores.

Turning now to food and beverage, you may recall the underpinnings of our F&B evolution include a focus on simplification, quality and accessibility. Our simplification efforts allowed us to reduce the size of our February menu by another 15% on top of 20% reduction implemented a year ago. Our menu is now appropriately streamlined and still offers a great variety with approximately 40 food items and over 20 different handcrafted cocktail.

As for quality, we're not only focused on sourcing better raw ingredients, but also on improving techniques that create craveable flavors combined with excellent presentation. This is the foundation of our new food mantra, Crafting Craveability. To help bring that to life, we rolled out premium choice steaks in February in conjunction with the launch of our new menu. This rollout followed last year's burger and chicken upgrades. We have recrafted or rebranded some of our all-time favorites such as the new super stacked burger replacing Dave's double cheeseburger and Tuscan Chicken Alfredo replacing our Parmesan Chicken Alfredo.

We've also introduced healthier offerings such as an on trend simply grilled chicken with noodles or zucchini-based noodle that guest can substitute and process for alcoholic beverages. We added fresh juices and puree systemwide to further enhance flavor. All told, we've replaced or recrafted about three quarters of our menu over the past year and we will continue to innovate and evolve with the changing tastes of our guests. At the same time, we recognize that games are the primary driver guest visitation and expect it will take some time to build awareness for a new improved offering and enhance the S&P attachment rate. One of the ways, we are increasing the awareness is through improved messaging and quality callouts on our menu. And over time, we will look to feature food more prominently in our marketing campaign.

To improve accessibility, we recently launched a quick casual tenants in our drive (ph) store, we talked about that on the last call, really to gauge the potential demand for a more convenient and accessible food option. The offering has been well received by those who have experienced it. Initial demand has not been as strong as we anticipated, and we are working to improve in-store awareness, utilization and remain optimistic about this opportunity.

Our second strategic priority is to enhance our guest experience by improving service and reducing friction. We are putting greater emphasis on providing guest service that is friendly, available and memorable. To reduce friction, we are embracing new technologies, we kicked off 2019 with the national rollout of our new RFID Tap-and-Play Power Cards, which really enables our guests to experience an easier, faster and more accurate game activation. Our new cards are priced a little higher than our older cards, but also include more value through additional gameplay chip.

In our back office, we have completed the systemwide rollout of our new labor management system. And as we climb the learning curve, we expect to improve our scheduling efficiency with a primary goal of enhancing gesture. In the back half of 2019, we look forward to launching our new and improved mobile app, the new app has really been designed to offer greater functionality to our guests and ultimately drive better guest connection and engagement with our brand.

Our third strategic priority is to effectively communicate our offering and value. During the first half of the quarter, we focused on our value message through the Unlimited Wings, unlimited video game promotion on Game Day, an offer that clearly resonated with our guests later in the quarter. We highlighted the release of Dragonfrost, our new game news for the quarter.

And finally, toward the end of the quarter, we reintroduced Unlimited Wings game promotion, really focused on building traffic on Thursday. Now, beyond honing our promotions, we are also evolving our media mix and increasing our digital spend with more emphasis on programmatic, social media, search engine marketing and optimization. We are funding our digital media investment primarily by shifting dollars away from our national cable TV, but also through some incremental spending. Just to be clear here, this shift is the digital is gradual for us and national cable TV continues to represent the margin -- the majority of our media allocation.

Finally, I'll highlight our fourth and biggest long term driver of shareholder value, that is to expand our brand geographically, with 125 stores we are a clear leader in the combined entertainment and dining space. We remain confident in our long term target of 231 to 251 stores about two times our current size. This confidence is predicated on our track record of delivering excellent new store returns, even in the face of heightened competition by 2017 class of stores generated year one, cash-on-cash returns of over 60%, really one of the best in recent history.

And we plan to continue to grow our store base at a pace of 10% or more annually and are confident in our ability to capitalize on the board opportunity in front of us. During the fourth quarter, we opened three new stores. The first store was in Milford, Connecticut, an existing market for us. In addition, we opened a store in Birmingham, Alabama, and a store in Corpus Christi, Texas. Both new markets for our brand, the Corpus Christi store location is our second 17,000 square foot location while still early on here. We are very pleased with the performance of the 17K. And are excited about our ability to access smaller D&B in smaller markets with this format. For the full year, we added 15 new stores representing 14% unit growth, a new high watermark for new store openings, a great accomplishment for our team.

During fiscal 2019, we plan to open 15 to 16 new stores representing 12% unit growth net of a store closing, our 2019 directions (ph) was large format stores and new markets for our brand, really similar to last year, although we will be going to some smaller D&Bs this year. We've opened five new stores in Q1 so far, one in Louisville, Kentucky; North Hills, Pennsylvania; northern suburb of Pittsburgh; One in Thousand Oaks, California; Store in Daytona Beach, Florida. And most recently, Fairfax, Virginia. We plan to open two more stores this quarter; one in Fort Myers, Florida, and one in Sevierville, Tennessee for a total of seven new stores in the quarter with fully executed commitments, now 22 new sites, including nine stores under construction. Our confidence in our ability to execute our store expansion strategy remains high.

With that, I'll turn it over to Joe to discuss our financial performance and 2019 guidance. Joe?

Joe DeProspero -- Vice President of Finance and Interim Chief Financial Officer

Thank you, Brian, and good afternoon, everyone. Before I discuss our Q4 financial results, let me once again remind you that 2017 was a 53 week year. As a result, our fiscal year 2018 calendar shifted by one week and had one less week. In Q4 of this year, the unfavorable impact of one less week was $18.3 million on revenue, $2.5 million on EBITDA, and $3.3 million on adjusted EBITDA, but it had a 60 basis points favorable impact on EBITDA margins.

Also, to provide a more meaningful picture of our performance, I'll be pointing our comp sales on a comparable week basis adjusting for the calendar shift.

Turning now to some of the highlights during the fourth quarter. Total revenues increased 8.8% to $331.8 million versus $304.9 million reported in Q4 of last year. On a comparable 13-week basis, revenue was up 15.7%. This increase in revenue was driven by strong contribution from our 35 non-comparable stores, which represented 29% of our store base during the quarter and a 2.9% increase in comparable store sales. Non-comp store sales increased to $91.9 million, up from $53.4 million in the prior year on a comparable 13-week basis. Revenues from our 86 comparable stores increased to $243.3 million, up from $236.4 million in the prior year on a comparable 13-week basis.

Looking at overall reported sales by category, we grew Amusements and Other sales by 10.7% and Food and Beverage sales by 6.5%. During the quarter, Amusements and Other represented 55.5% of total revenues, a 100 basis points increase in mix from the prior year period continuing a long-term trend.

Breaking down comp sales in a comparable week basis, our walk-in sales were up 3.7%, while our special event sales were down 1.4%. In terms of category comp sales, Amusements was up 4.4%, and F&B was up 1.1%. Within F&B, food and bar business were up 1.3% and 0.9%, respectively. The gap between Amusements and F&B narrowed in the fourth quarter relative to the trend in Q3. The increase in F&B comps and reduced gap with Amusements was driven in part by the favorable impact of the All You Can Eat Wings promotion, partially offset by the unfavorable impact of a slight decline in special events, which has a higher mix of F&B.

The calendar shifts resulting from Christmas and New Year is moving from the weekend last year to weekday this year was a positive for us. Also, the impact of weather was positive for the full quarter as favorable weather in November, December was partially offset by the unfavorable impact of the polar vortex in late January. On the other hand, the combination of competitive intrusion and cannibalization continue to be a greater headwind compared to the same period last year, but sequentially the impact was flat.

Total cost of sales was $58.8 million in the quarter and as a percentage of sales with 20 basis points better versus the same period last year, reflecting improvement in SMB margins partially offset by lower amusement margins. Food and beverage cost as a percentage of food and beverage sales was 30 basis points favorable compared to last year as the impact of 2% in food pricing and 1.1% in bev pricing was partially offset by the unfavorable impact of slight commodity inflation. The impact at All You Can Eat Wings promotion and investment in our new burger and chicken.

Cost of amusement and other as a percentage of amusement and other sales was 10 basis points worse compared to last year. Amusement margins were favorably impacted by the ongoing shift toward simulation games, including our virtual reality games, but were offset by used tax on redemption items. Our operating payroll and benefits cost as a percentage of sales was 23.8% or 110 basis points worse year-over-year due to higher incentive compensation expense, the unfavorable impact of nearly 5% wage inflation, incremental investment and labor related to virtual reality, higher medical insurance claims compared to last year and the impact of non-comp stores.

Other store operating expenses were up 160 basis points year-over-year, primarily driven by higher occupancy costs and increased claims expense for Workers Comp and general liability, partially offset by leverage on our marketing expenses. G&A expenses were $16.1 million, up from $14.4 million in the prior year, reflecting higher bonus expense, increased headcount to support a growing store base, greater medical insurance claims and higher ICN legal expenses, partially offset by lower share based compensation expense.

As a percentage of revenues, G&A expenses were 10 basis points unfavorable versus the prior year. Pre-opening costs were $6 million versus $9.1 million in the fourth quarter of 2017. This decrease reflected fewer store openings in the quarter, as well as the timing of future store openings compared to last year. As a percentage of revenue, pre-opening costs were 1.8% or 120 basis points better compared to the prior year. EBITDA was $72.1 million, up 1.9% and EBITDA margins were 21.7%, down 150 basis points versus the prior year. On a comparable week basis, EBITDA was up 5.6% year-over-year and EBITDA margins were down 210 basis points.

Adjusted EBITDA of $80.2 million was down 2.8%, but on a comparable week basis was up 1.2%. Net interest expense for the quarter increased to $3.7 million, up from $2.6 million in the prior year, driven by increases in the underlying LIBOR rate and higher average debt levels resulting from our capital allocation initiatives, including share repurchases and the quarterly cash dividends.

Effective tax rate for the quarter was 21.1% compared to 10.6% in the year ago period. The year ago period included an $8 million non-recurring one-time favorable impact of our evaluation of our deferred tax positions under the Tax Cuts and Jobs Act.

We generated net income of $29.4 million or $0.75 per share on a diluted share base of $39.1 million compared to net income of $35.6 million or $0.85 per share on a diluted share base of $41.7 million in the fourth quarter of last year. Net income for the fourth quarter of 2017, exclusive of the beneficial impact of certain tax adjustments related to tax reform and an additional week in the quarter, was $27.3 million or $0.66 per diluted share.

Shifting to the balance sheet. At the end of the quarter, we had $394 million of outstanding debt, resulting in leverage of approximately 1.4 times EBITDA. In Q1 2019, we implemented an interest rate swap, which essentially fixes our interest rate on $350 million of debt until August 2022 at LIBOR of 2.5% plus an applicable margin. Given our current leverage ratio, the fixed rate is approximately 3.7%.

During the quarter, we've repurchased approximately 1.3 million shares of our common stock for $63 million. The inception-to-date total as of March 26, 2019, is 7.2 million shares for $375 million. We paid our second quarterly cash dividend of $0.15 per share during Q4.

Turning now to our outlook for fiscal year 2019. Total revenues are expected to range from $1.37 billion to $1.4 billion, up 8% to 11%. Comp store sales are expected to be flat to up to 1.5%. From a development perspective, we are targeting 15 to 16 new stores this year. In March, we closed our Duluth, Georgia store, which was at the end of its lease term. Net of Duluth store closing, we are planning on unit growth of approximately 12% consistent with our target of 10% or more annual unit growth.

In terms of store opening cadence, we plan to open 10 new stores in the first half this year versus 11 new stores on the first half of last year. We are projecting net income of $105 million to $117 million. Net income is based on an effective tax rate of 22% to 22.5%. Please note, this guidance reflects the new lease accounting standards, which we anticipate will have an immaterial impact on our net income. We estimate a diluted share count of approximately $37 million. We are projecting EBITDA of $285 million to $300 million for the fiscal year. We are expecting margin compression, primarily resulting from continued wage pressure and a rising mix of new stores that although have strong returns are modeled to have lower AUVs and margins compared to our existing stores. Net capital additions after tenant allowances and other landlord payments is projected to be between $190 million and $200 million, and will support our strong new store pipeline.

Thank you for your interest in Dave & Buster's. Now, I'll turn the call back over to Brian.

Brian Jenkins -- Chief Executive Officer

Thank you, Joe. I want to emphasize as an organization, we remain focused on four strategic priorities, which include evolving our offerings, improving our guest experience, effectively communicating our offering in value, and expanding our great brand.

Looking forward, we're poised to deliver yet another year of record revenue and EBITDA performance, our proven business model, strong team, robust real estate pipeline and financial flexibility, our competitive advantages that position us well for the future.

We're excited about the proprietary games we're launching this year, as well as our new menu that underscores our mantra of Crafting Craveability. Our operating team is putting greater intensity into the delivering service that is even more friendly, available and memorable. Our marketing team is focused on driving traffic by ensuring our message is resonating with guests and by selectively leaning in on value. We remain the leader in a large and growing market and are well positioned to capitalize on the unique growth opportunity ahead.

Finally, I want to take a minute to thank our entire D&B team for helping deliver another record year in 2018. The team continues to work hard to strengthen our foundation and position our brand for a vibrant future. I had the privilege, the opportunity to see many of our team members at our recent National General Managers Conference in Dallas, and I couldn't be more delighted with the talent we have been able to attract and the energy and passion they have for this great brand. As always, we appreciate the continued support of our shareholders and your interest in Dave & Buster's.

James, please open the lines for Q&A.

Questions and Answers:

Operator

Thank you, sir. (Operator Instructions) And we'll take our first question today from Andy Barish with Jefferies.

Andy Barish -- Jefferies -- Analyst

Yes. Good afternoon, guys. Just maybe peeling few layers on the same-store sales guide, why you are not expecting a little bit more when the comparisons are still relatively easy? You're building the VR library and how much pricing did you take on VR in terms of that material to 2019 comps?

Brian Jenkins -- Chief Executive Officer

Well, I think I'll backup, just a minute, Andy. First of all, we couldn't be more pleased with Q4 right now. The return to positive comps after five quarters, it was a big success for us passing casual dining benchmarks for the first time in quite some time. So, clearly, we focused on things around value with our Unlimited Wings video promotion. That was helpful to us in Q4. We estimate the wing promotion helped us in the neighborhood of 100 bps for the quarter. I talked a little bit about the calendar shift, the holiday shift, as well as weather in the quarter. We estimate that to be about 50 bps lift in our 2019 (ph) performance this quarter.

And then the improvement in the offering which you speak, you talk a little bit about VR. Obviously, that's an attraction we have this year that wasn't in place in 2017. So first of all, we're really excited to be in positive comp territory in Q4. And as we look to 2019, we're guiding comps to flat to up 15. We think that is a strong pursuit for this brand in the face of the competitive environment we face today. It's early in the year. We're excited about the lineup we have. As you mentioned, of our VR games, we announced -- we just launched Star Wars, we have Men in Black coming. We think it's going to be a broadly appealing IP for us.

We like our evolution in food. We think some of that -- it's going to take some time. It's not the primary reason for the visit at Dave & Busters, and we're going to continue to lean in on value, the unlimited wing combination with games and video, it's telling and we're going to pivot more toward digital. All those things, and we did take some price. And on the game side, we haven't done that in some time. We're doing all those things to drive positive costs, and we think we have to place up to do that. I think it's a prudent guide. I'll give you a little color and we don't typically do this, but I'm just going to get it out of the way. We -- Q1 is a very volatile quarter for this Company in that spring break at Easter shifts are significant. In past lives, we've hesitated to really talk about performance in the quarter. But I do want to share with you that through seven weeks before we started to hit that Easter's shift, we were off about 1%. We view that as good news. We are in positive land in a difficult environment. There's a lot of runway in here left to go and we're pursuing positive comps being flat to up and that's what our team is raking up every day trying to drive in 2019.

Andy Barish -- Jefferies -- Analyst

Thanks. And then just quickly on the games, I mean, was that Amusements, was that pricing broader than just VR or just the VR price increase that you mentioned?

Brian Jenkins -- Chief Executive Officer

There's really two aspects. With VR thing is relatively small, we did two things. We took a price increase -- as I said, a subset of our stores -- over half of our stores, not all incremental. You do get an impact on demand for the product and utilization rate. When you do that, it's not all incremental at price. But we did take a price, as I said in my prepared remarks on our Power Card, we launched our new RFID Power Card, tap and play. So you're able to just tap -- like -- better hotel room, definitely an easier, more accurate activation of the games. We did take a price increase related to that on the card. So an activation fee price increase that you will see as we move into next into 2019. And that's how we have done that in the past, but I think it will be additive to come.

Andy Barish -- Jefferies -- Analyst

Thanks for the clarification.

Brian Jenkins -- Chief Executive Officer

Thank you.

Operator

Next, we'll hear from Nicole Miller with Piper Jaffrey.

Nicole Miller Regan -- Piper Jaffray -- Analyst

Thank you. Good afternoon. I want to ask about strategy point number two and the guest experience, and I would imagine technology and the app and things that you were talking about, I believe you set to fall into that. What I'm curious about is, what kind of data are you able to get from your customer tune into the app or anywhere else for that matter, and how you're translating that into the strategy? And then just separate quick modeling question. What's a good share counts for 1Q, please? I just don't know the progression of the share repurchase in 4Q, so I want to make sure we get that right? Thank you very much.

Joe DeProspero -- Vice President of Finance and Interim Chief Financial Officer

Well, I mean, clearly, we are focused on driving improved service. Our service scores, I mean, we've been measuring service scores for a long time and we perform well, but our research back in 2017 suggested that we could be better and we know we can be better. So our team is working on being more friendly, more available and delivering a more memorable experience when guests come into our stores. We are, in general, a low frequent use and we need to drive frequency and drive repeat visitation. So that was a big part of our GM conference to really energize the team and they are working hard on trying to bring that to light every day in our stores. In terms of technology, we are working on mobile app that in our view would -- it will be a tool that will allow us to really Nicole, create a guest count that we don't have in a large way today. Our loyalty program does allow us to reach our guest and see some behaviors, but it is not broad. An

So this is an initiative by our team, our new CIO, JP Hurtado, who we brought from Royal Caribbean, who has much experience in guest spacing technologies and we're looking to launch the first version of that in the latter part of this year, in the second half this year. And I said this before, I think this is a journey for our brand. This is a place where we need to -- we need to get better and we're for investing more money in technology, in our capital guide as Joe mentioned, this year, than we have ever in my 12 years with this brand.

Nicole Miller Regan -- Piper Jaffray -- Analyst

Share count?

Joe DeProspero -- Vice President of Finance and Interim Chief Financial Officer

Yes, share count is projected to be 38 change, 38 and a little.

Nicole Miller Regan -- Piper Jaffray -- Analyst

Helpful, and very excited about that creation of that guest count data, eventually. Thank you very much.

Arvind Bhatia -- Senior Director of Investor Relations

Thank you, Nicole. You have a good evening.

Operator

Andrew Strelzik with BMO Capital Markets, has our next question.

Andrew Strelzik -- BMO Capital Markets -- Analyst

Hey, good afternoon. I have a question on the guidance relative to what you provided last quarter. So it sounds like the revenue growth implied by the new numbers is a little bit above where you had previously guided it, but the EBITDA growth is maybe a touch below prior. So I guess I'm just wondering what changed. Is that more value orientation? Is it the composition of the size units that you're thinking about, maybe the ad spend? What's changed into -- to lower the EBITDA growth relative to the revenue growth that's moved higher?

Brian Jenkins -- Chief Executive Officer

Well, first of all, Andrew, in my view, we issued strong guidance today. We're optimistic about our 2019 year. We are focused on delivering 12% net unit growth, net of a store closing. We're looking for costs to be up 1.5 at the high end, flat at the low end. And we believe we're well positioned to really set revenue and EBITDA high for next year in a very competitive environment. We are looking to continue to build stores which have great returns. We mentioned, when we issued that preliminary high level guidance last time, that we are entering the international (ph) markets that are smaller and our mix are smaller units relative to our current legacy base. It's going to be high going forward, even though we're building stores that are SKU large as a percent of total. There's many more smalls in the new store count this year than our legacy. So that's going to put some downward pressure as we have said on AUVs and pressure on margin as it relates to occupancy. We're definitely seeing labor headwinds. We don't anticipate, that's really going to subside and we're investing in this business.

We're going to -- we're playing the long ball here. We're a leader in this space and we're going to work hard to stay there and we're going to be investing in some places, particularly around IT and in terms of, is the guy better or worse in my view. The high-end of our guide is in and around, a little above of what we said, EBITDA at the high-end is about what we said. If you picked the low-end, yeah, a little lower, we're driving store growth here. This team is working very hard to continue to propel this brand forward.

Andrew Strelzik -- BMO Capital Markets -- Analyst

I appreciate the comments. Thank you very much. And I just have one quick follow-up on that. With respect to the labor management tool that you've implemented, you mentioned -- it sounds like that's going to be primarily to enhance the guest experience rather than some sort of cost savings opportunity. Can you just talk about maybe what the plans are to enhance the guest experience through that tool? Is there -- Is that part of the reinvestment, maybe, from a labor perspective?

Brian Jenkins -- Chief Executive Officer

Yeah. We've had a long history of labor improvement in my decade plus with the brand and we have indicated, I think, that with the labor pressure, particularly on wage rates, that for investors not to think about that continuing. There's some real headwinds there and we don't think it's correct and the right strategy long term to turn the needle down on labor. So our view of the labor, the new labor tool is to really try to match demand and peak labor needs and make sure we have the right number of people at the right time and we scale down at the appropriate time and we think the new tool is more nimble than our old one. We've had a tool for a long time. It actually help us a lot back in 2010, I think it was and this one is more nimble and I think there's a learning curve here. We completed the launch in -- somewhere in Q4, I can't remember the exact date, but that takes time to figure that out. So I would be thinking about it, more about delivering a better guest experience by matching labor with demand.

Andrew Strelzik -- BMO Capital Markets -- Analyst

Great. Thank you very much.

Brian Jenkins -- Chief Executive Officer

Thank you.

Operator

We'll now hear from Jake Bartlett with SunTrust.

Jake Bartlett -- SunTrust Robinson Humphrey, Inc. -- Analyst

Great. Thanks for taking the question. Brian, you opened up the box here, the bag in terms of the kind of the current trends in the first quarter here. So I wanted just to ask a couple of -- one question about that. And that is, I think you said 1% comps for seven weeks for the quarter, how does the weather affect you? I know it's been affecting restaurants. I would have actually thought that some of the rainy weather in California and in Florida would have helped you, but maybe if you can just help us understand that 1% and what were some of the factors in that?

Brian Jenkins -- Chief Executive Officer

Yeah. Actually, we -- I don't want to dissect too much. The first seven weeks, I've done enough by -- I'm being really transparent here with you guys on where we're at through the first seven weeks. We don't really show any weather tailwind in the first seven weeks, but I'll say that, Andrew. I will -- what I didn't say and I probably should have is Q1 volatile through seven weeks, we think pretty comparable here. We are in Easter shift time right now where Easter and spring breaks are shifting out really to week 11 and 12 for us. So we have big, big weeks to go, particularly in the northeast, and how this quarter ends up, and our guidance for zero to flat to up one and a half is full year guide. So I'm not trying to guide quarter here, but how this quarter goes will depend a lot on how the weather flows will be later in the quarter, which is in front of it. We've got some big, big weeks with this big ship.

Jake Bartlett -- SunTrust Robinson Humphrey, Inc. -- Analyst

Got it. That makes a lot of sense.

Brian Jenkins -- Chief Executive Officer

I'm sorry, did I say Andrew there? I'm sorry, Jake.

Jake Bartlett -- SunTrust Robinson Humphrey, Inc. -- Analyst

That's all right. That's all right. That's fine.

Brian Jenkins -- Chief Executive Officer

You can be here Andrew, if you'd like to.

Jake Bartlett -- SunTrust Robinson Humphrey, Inc. -- Analyst

I'll be Andrew. Just in terms of kind of thinking about the attractions there on the VR as you roll out throughout the year, would it be right to assume that the Dragonfrost -- I think it's been, you mentioned it's been successful, but it's not as your name that the consumers recognize on television and may be potentially less of a draw than something like Star Trek and Men in Black. Is that a correct assumption or did you find that that Dragonfrost was kind of had a similar impact that Jurassic Park might have had earlier in the year.

Brian Jenkins -- Chief Executive Officer

Well, there's no doubt, the launch of our VR platform that we've failed nationally, we're proud of that as a brand, national brand that scale 120 units across this country with Jurassic World. That is strong IP, it's broad -- has broad appeal, it's an experiential title, a little less interactive gameplay, more experiential. It was a great launch. Dragonfrost, in our view, appeals really a little bit more toward the younger audience. The gameplay is a little more -- it's much more dynamic. Star Trek is sort of a flip of that directive, it flips back, in my view, toward a little bit of an older audience. In Men in Black, we're going to come back with a -- I do, a very broad appeal with Men in Back. So I think we're developing a very good mix of offerings here for consumer groups and we've got a really good attraction list growing. So Jurassic World is still the number one game and I think it is because of the appeal. But we've got a good nucleus we're going right now and we're going to lean into this platform. It's one of the avenues that we have as a brand to introduce proprietary content, something that others don't -- the industry produces what they produce and -- but we can actually control our destiny a little more with this particular platform. So, we decided that we're going to wait and see.

Jake Bartlett -- SunTrust Robinson Humphrey, Inc. -- Analyst

Great. And then last question real quick. Would you describe your -- how you look for the pipeline of Amusements content throughout '19 as -- how do you -- how would you compare that to what you did in an '18? Lot of new things happen in '18, but did you feel like the 2019 you could have more games more frequently or maybe more impactful games less recently, or how would you tend to describe on a year-over-year basis?

Brian Jenkins -- Chief Executive Officer

So, as we said before, our overall game strategy is looking for compelling game content. We really want games that keep -- obviously people can't have a home that are larger than life, but that has pushed us toward bigger, better, more marquee titles. We definitely want a nice mix of proprietary games or an exclusive launches where we can -- we -- as I said before, our VR platform I think is the best vehicle for introduction of proprietary platform. So in terms of the 2019 game lineup, we've announced what we're going to announce right now, you know Marvel that we already launched, we just released Star Trek, and we announced Men in Black. And again we're continuing to work, the team is continuing to work on securing other titles that really fit that strategy, and I don't really have anything further I want to announce on the 2019 game lineup today.

Jake Bartlett -- SunTrust Robinson Humphrey, Inc. -- Analyst

Great. Thanks a lot. I appreciate it.

Brian Jenkins -- Chief Executive Officer

Thank you.

Joe DeProspero -- Vice President of Finance and Interim Chief Financial Officer

Thank you.

Operator

Next, we'll hear from Brian Vaccaro with Raymond James.

Brian Vaccaro -- Raymond James -- Analyst

Thanks, and good evening. I want to start with two quick clarifications, if I could. Back on the Amusements pricing that you took on VR and the RFID cards, what does that equate to in terms of effective year-on-year pricing within that segment?

Brian Jenkins -- Chief Executive Officer

I'd say, it's a long year to go and we're measuring that right now. But I would be thinking in the kind of mid 1% range, 1.5% or so on on on games right now. And what will see -- what happens with any impact, but right now we're not thinking that we have a lot of impact relates to Power Cards in terms of what we've seen so far, but it's a long year, so...

Joe DeProspero -- Vice President of Finance and Interim Chief Financial Officer

We expect it to be additive and accretive to comp.

Brian Vaccaro -- Raymond James -- Analyst

Okay. That's helpful. And on the EBITDA guidance, Joe, I know you said lease accounting is immaterial of net income, but was there any geography changes due to lease accounting that might have had an impact on EBITDA, I just wanted to check on that?

Joe DeProspero -- Vice President of Finance and Interim Chief Financial Officer

No material geography changes. It results in a immaterial increase in some expense, but once again that's immaterial.

Brian Vaccaro -- Raymond James -- Analyst

Okay. And then just on the topic of cannibalization and competition, can you comment on how you expect each dynamic to play out in 2019 maybe compared relative to what you saw in '18?

Joe DeProspero -- Vice President of Finance and Interim Chief Financial Officer

Sure. We think the combined impact of competitive intrusion and cannibalization will remain a headwind for us for the foreseeable future. I will say, in 2018, it was a part of incremental headwind relative to 2017. Given what we see with some of the units of our competitors and we do know what our new store pipeline looks like, we think that that impact in 2019 will be relatively flat to 2018. We are in attractive space, we're generating strong returns, we continue to attract some competitors, but once again we expect the impact in 2019 to be similar for the full-year to 2018.

Brian Jenkins -- Chief Executive Officer

I just -- just to add, that doesn't mean that it's not a significant headwind for us. We talked about this -- we are talking about it a couple of years ago. It shows that it has accelerated over the past couple of years and it is a meaningful headwind in our stores that are not impacted by competitive entrants or ourselves or perform very well. This is it -- it's a drag on our comps and it's something that we are working very hard to offset with our initiatives. So, it is a meaningful number.

Brian Vaccaro -- Raymond James -- Analyst

All right. I appreciate that color. And last one for me. Just thinking about that 2019 guidance, what are you seeing or expecting in terms of the food cost inflation outlook, commodity inflation? And did I hear correctly, marketing spend as a percent of sales might go up a little bit or I think you said spending might be up a little bit on marketing in 2019, Brian?

Brian Jenkins -- Chief Executive Officer

Yeah. We're -- food inflation is up a little bit.

Joe DeProspero -- Vice President of Finance and Interim Chief Financial Officer

Yeah. So first of all, food inflation for Q4 and for next year is, we expect some moderate inflation. But keep in mind, food costs for us is only about 8% of our sales, so it's less important for us. It's less of a factor for us as it is for casual dining, but once again relatively low inflation, as I'll call it, very low single digit in both Q4 and next year as well.

Brian Vaccaro -- Raymond James -- Analyst

Marketing?

Brian Jenkins -- Chief Executive Officer

Yeah, marketing, I don't want to give the exact marketing number. We expect at the high-end of our range that we will still leverage a little bit, but, yeah, we will be increasing our marketing above kind of inflationary kind of pressures here, partly due to some incremental spend in digital, partly just to the environment in general and the marketing there in terms of pricing. So a little bit of leverage at the high-end. We're in the low 3% of overall as a percent of sales right now, and we're not really trying to produce that here too much right now. We've got some investments we're going to make in the digital space and we've had some success there and we think that's a good credit for our brand.

Operator

(Operator Instructions) We'll hear from Jeff Farmer with Gordon Haskett.

Jeffrey Farmer -- Gordon Haskett Research Advisors -- Analyst

Thank you. Just diving deeper into the Q4 numbers, what did same-store sales look like both during and after that six-week run of unlimited wings and games? And I guess just looking for how aggressive can you be with running that type of promotion in the future?

Brian Jenkins -- Chief Executive Officer

Well, I pretty much gave you the pickup that we got -- that we estimate the rise for unlimited wings by 100 bps. That promotion ran early in the quarter, Jeff, so clearly the first part of the quarter was strong. I indicated actually on our year-end call and now confirmed again today that weather and the calendar is a net positive and that too was in and around, let's call it, the December holiday period. So we were stronger in the front, that's what that says. The positive strength was in the front, the polar vortex in January that hit around Martin Luther King, that was a net negative force, so we gave back a little there. So that's a little -- give you a little color on the cadence, and, as I said, before we get into the spring break Easter shift here, we're pleased to be in positive comp territory at 1% to kick off this year as we shoot and move toward 0 to 1.5 to the full year. So...

Jeffrey Farmer -- Gordon Haskett Research Advisors -- Analyst

Okay. That's helpful. And then it sounds like MENA (ph) productivity for that class of 2017 was greater than you had expected, assuming that's what I heard and heard that correctly, what's driving that strength?

Brian Jenkins -- Chief Executive Officer

Well, we had some stories on some pretty big DMA with big potential. And it was a great line of the store for us, no doubt. Our target -- our internal target is 35% year one, which we think is very, very strong target. I wouldn't condition yourself to a 60 plus, where we could be more happy with that class. But we think we had a great pipeline and we're targeting 35%. So...

Jeffrey Farmer -- Gordon Haskett Research Advisors -- Analyst

Okay. And then just last question related again to some of the other MENA productivity, but as relates to competitive encroachment how has that impacted your site selection, your market selection strategy? Have you pivoted in any way so I get to help to offset some of that MENA productivity -- or those competitive encroachment headwinds, anything you can do on that front in terms of either what market you go to or where you open sites in any certain market?

Brian Jenkins -- Chief Executive Officer

Well, our view -- as I said, we're the leader in the space, we are a traffic donor to our landlords when we come into a space we are helpful. So we continue to get the first call. So our view is to continue to payoff (technical difficulty) is on our total addressable market list, which we've mapped out and continue to update each year and it is on our list. We're going to seize the day and we want to be on offense as it relates to the site and not give it over to a competitor. It doesn't mean we're going to prevent them from getting into a space and clearly they're coming up -- they're opening in and around our stores every day, but we, in our view, are getting the prime site, we get the first call and our view is that we're not going to slow down, we're not going to dial back, slow down and let a competitor take a swipe at that we want to open.

Jeffrey Farmer -- Gordon Haskett Research Advisors -- Analyst

All right. Thank you.

Brian Jenkins -- Chief Executive Officer

Thank you.

Operator

Our next question comes from Jon Tower with Wells Fargo.

Jon Tower -- Wells Fargo Securities -- Analyst

There we going. Take it off mute. Thanks for taking the question.

Brian Jenkins -- Chief Executive Officer

(technical difficulty)

Jon Tower -- Wells Fargo Securities -- Analyst

Here we go. On the marketing side of the equation, just going back to your spend on television, can you just talk about the evolution of your TV marketing spend? Your dollars have obviously grown over the past few years if that percentage -- that low percentage, 3% or so, the state-and-play (ph), so are you hitting the market or television airwaves with more effective TRPs than in the past or are you guys at similar level? And then thinking about the digital side, how should we think about your digital marketing presence? Will it be more of a call to action on social media or some of these platforms through either -- some offers on food or on Amusement? And then how should we think about your digital presence with it integrating into your mobile app relaunch in the latter half of this year?

Brian Jenkins -- Chief Executive Officer

That's a lot of questions. Well, I did say pivot to digital. We have consistently advertised on national cable TV, moved it up over the years, and so historically the TRPs are pretty consistent. And if anything we've added on a week or two here or there over time, and we are pretty well covered in terms of media weeks as a brand, today -- as we sit here today. And my view is still that if we have a strong message, whether it be capital or games and/or value message, that can move the needle and drive traffic. So, we are not abandoning our TV -- national cable TV.

What we are doing is, in a test and measure kind of environment, definitely leaning more into the digital environment. And I'm not going to -- for competitive reasons, I'm not going to give you our mix, but we are pivoting a meaningful amount away from TV into digital, but we want to make sure that it is paying back and we are -- our tendency is and what we've seen were tends to revolve around promotional messages more so than just content. And we've got probably the most success on our social media of work and problematic over the TV top (inaudible). So, if that's an evolving effort by our Head of Marketing and Marketing team, and I think we learn more each day on what works and what doesn't here and that's probably going to be measured in how we pivot and make sure we're investing in things that make sense for us.

Jon Tower -- Wells Fargo Securities -- Analyst

Okay. And then just earlier, I think you'd mentioned in the call and maybe I misheard that that you're doing Unlimited Wing promotion again right now, is that correct?

Brian Jenkins -- Chief Executive Officer

Yeah, we are doing really two elements of the Unlimited Wing video. Obviously, it was impactful. Our value message one is driven by the offering, if we can change the numerator, have a better offering, better guest experience and deliver that piece of the equation, we're definitely focused on that. Here the wing thing -- the wing offer shows that price can make a difference as well. And so -- and I think we need to do those things to drive people in and we were successful so -- with that promotion. So what we are doing right now is using that promotion to drive and try to build our Thursday Day, that day part, we have half price games on Wednesday, that's the biggest day of week day that we have. So we are looking to see if we can build back day of week with this combined offer and we are running that offer right now around March Madness on Monday's and Thursday's. I'm sorry, Sunday. We have two more days here coming up.

Jon Tower -- Wells Fargo Securities -- Analyst

Thank you. Appreciate it.

Brian Jenkins -- Chief Executive Officer

Thank you.

Operator

We'll now hear from Stephen Anderson with Maxim Group.

Stephen Anderson -- Maxim Group -- Analyst

Yes. Good afternoon.

Brian Jenkins -- Chief Executive Officer

Good afternoon.

Joe DeProspero -- Vice President of Finance and Interim Chief Financial Officer

Hey, Stephen.

Stephen Anderson -- Maxim Group -- Analyst

Just a quick question. I wondering -- have you talked about a potential for international expansion and I just wanted to ask about the progress on the location Middle East?

Brian Jenkins -- Chief Executive Officer

Well, candidly, I hope to have some news to report. Look, we still view International as a good long-term opportunity for our brand. We think it will translate very well. We are in discussions with a number of partners. We have a partner in the Middle East that's been going slower than we expected. So we're excited about the opportunity. Clearly, near-term, we're much more focused on our domestic business right now. We think it's a long term opportunity. It is going slower than we would hope right now.

Stephen Anderson -- Maxim Group -- Analyst

Thank you.

Brian Jenkins -- Chief Executive Officer

Thank you.

Operator

That will conclude today's question-and-answer session. I will now turn the conference over to Brian Jenkins for any additional or closing remarks.

Brian Jenkins -- Chief Executive Officer

Well, thank you for your time this afternoon. We look forward to reviewing our first quarter results with you in June. Guys, have a good night.

Joe DeProspero -- Vice President of Finance and Interim Chief Financial Officer

Thank you.

Operator

That will conclude today's conference call. Thank you for your participation. You may now disconnect.

Duration: 59 minutes

Call participants:

Arvind Bhatia -- Senior Director of Investor Relations

Brian Jenkins -- Chief Executive Officer

Joe DeProspero -- Vice President of Finance and Interim Chief Financial Officer

Andy Barish -- Jefferies -- Analyst

Nicole Miller Regan -- Piper Jaffray -- Analyst

Andrew Strelzik -- BMO Capital Markets -- Analyst

Jake Bartlett -- SunTrust Robinson Humphrey, Inc. -- Analyst

Brian Vaccaro -- Raymond James -- Analyst

Jeffrey Farmer -- Gordon Haskett Research Advisors -- Analyst

Jon Tower -- Wells Fargo Securities -- Analyst

Stephen Anderson -- Maxim Group -- Analyst

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