Q2 2023 Dave & Buster's Entertainment Inc Earnings Call
Speaker 1: You're listening to Dave & Buster's Live!
You were listening to Dave and Busters life.
Speaker 2: And welcome to the Dave & Buster's second quarter of 2023 earnings conference call.
Good day and welcome to the Dave <unk> Busters second quarter 2023 earnings Conference call.
All participants will be in listen only mode.
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Please note this event is being recorded.
Now, let's turn the conference over to Cory Hutton, Vice President of Investor Relations and Treasurer. Please go ahead.
Thank you operator, and welcome to everyone on the line.
Speaker 1: Leading today's call will be Chris Morris, our Chief Executive Officer, and Mike Cortari, our Chief Financial Officer. After our prepared remarks, we will be happy to answer any questions you may have.
Leading today's call will be Chris Morris, our Chief Executive Officer, and Mike Terry <unk>, Our Chief Financial Officer.
After our prepared remarks, we'll be happy to take your questions.
Speaker 1: This call is being recorded on behalf of Dave and Buster's Entertainment Incorporated and is copyrighted.
This call is being recorded on behalf of Dave and Busters Entertainment incorporated and is copyrighted.
Speaker 1: Before we begin the discussion on our company's second quarter 2023 results, I'd like to call your attention to the fact that in our remarks and our responses to questions, certain items may be discussed, which are not entirely based on historical facts.
Before we begin the discussion on our company's second quarter 2023 results.
I'd like to call your attention to the fact that in our remarks and our responses to questions certain items may be discussed which are not entirely based on historical fact.
Speaker 1: Any of these items should be considered forward-looking statements relating to future events within the meaning of the Private Securities Litigation Reform Act of 1995.
Any of these items should be considered forward looking statements relating to future events within the meaning of the private Securities Litigation Reform Act of 1995.
Speaker 1: All such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated.
All such forward looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated.
Speaker 1: Information on the various risk factors and uncertainties have been published in our filings with the SEC which are available on our website.
Information on the various risk factors and uncertainties have been published in our filings with the SEC, which are available on our website.
Speaker 1: In addition, our remarks today will include references to financial measures that are not defined under generally accepted accounting principles.
In addition, our remarks today will include references to financial measures that are not defined under generally accepted accounting principles.
Speaker 1: Investors should review the reconciliation of these non-GAT measures to the comparable GAT measure contained in our earnings announcement released this afternoon.
Investors should review the reconciliation of these non-GAAP measures to the comparable GAAP measure are contained in our earnings announcement released this afternoon.
Speaker 1: With that, it is my pleasure to turn the call over to Chris.
With that it is my pleasure to turn the call over to Chris.
Speaker 3: All right, thank you, Cory. Good afternoon, everyone. Thank you for joining our call today.
Alright. Thank you Corey good afternoon, everyone. Thank you for joining our call today.
Speaker 3: We are pleased to report record results for the second quarter of fiscal 2023. We generated revenue of $542 million and adjusted EBITDA of $140 million, resulting in an adjusted EBITDA margin of 25.9% for the quarter.
We were pleased to report record results for the second quarter of fiscal 2023, we generated revenue of $542 million and adjusted EBITDA of $140 million, resulting in an adjusted EBITDA margin of 25, 9% for the quarter.
Speaker 3: In a few moments, Michael will walk you through the details of our financial performance.
In a few moments Mike will walk you through the details of our financial performance.
Speaker 3: As we take a step back and reflect on where we are, we remain as confident as ever in our ability to execute against the numerous and sizable growth initiatives that we laid out in our recent investor day presentation, and which we have already begun implementing.
As we take a step back and reflect on where we are we remain as confident as ever in our ability to execute against the numerous and sizable growth initiatives that we laid out in our recent investor day presentation in which we have already begun implementing.
Speaker 3: During the quarter, we are pleased that we continue to open new stores that the highly tractors returns on invested capital that we've diligently managed our cost structure and continued to expand our adjusted EBITDA margins. And that our exceptional team has done a phenomenal job navigating our highly profitable and resilient business model through a dynamic period in our economy and against strong top-line comparisons versus 2022.
During the quarter. We were pleased that we continue to open new stores at a highly attractive returns on invested capital.
We've diligently managed our cost structure and continued to expand our adjusted EBITDA margins and that our exceptional team has done a phenomenal job navigating our highly profitable and resilient business model through a dynamic period in our economy and against strong topline comparisons versus 2022.
Speaker 3: We are laser focused on optimizing our business and growing revenue, adjusted EBITDA and cash flow. We remain committed to our long-term target of adjusted EBITDA of $1 billion and are making considerable progress towards that goal.
We are laser focused on optimizing our business and growing revenue adjusted EBITDA and cash flow.
We remain committed to our long term target of adjusted EBITDA of $1 billion and are making considerable progress towards that goal.
Speaker 3: I'd like to take a moment to update you on each of the six key organic growth initiatives. First, marketing optimization. As a reminder, we strongly believe that there is a meaningful opportunity to grow traffic by making sure we get the right message to the right people at the right time.
I'd like to take a moment to update you on each of the six key organic growth initiatives first marketing authorization.
As a reminder, we strongly believe that there is a meaningful opportunity to.
Opportunity to grow traffic by making sure we get the right message to the right people at the right time to.
Speaker 3: To that end, we have successfully completed our investment and the marketing technology infrastructure and are now in the process of building the digital marketing engine that we expect will begin bearing fruit in the early part of fiscal 2024.
To that end, we have successfully completed our investment in the marketing technology infrastructure and are now in the process of building the digital marketing engine that we expect will begin bearing fruit in the early part of fiscal 'twenty 'twenty four.
Speaker 3: These tools will play a key role in developing a more personalized approach to marketing through improved targeting and guest engagement.
These tools will play a key role in developing a more personalized approach to marketing through improved targeting and guest engagement.
Speaker 3: In addition, our loyalty database is now 5.2 million users up from 4.8 million users last quarter, as our mobile app experience keeps getting better.
In addition, our loyalty database is now $5 2 million users up from 4.8 million users last quarter as our mobile app experience keeps getting better.
Speaker 3: Continuing to grow our loyalty database will be a key benefit for our top and bottom line as customers in our loyalty database visit approximately 50% more frequently and spend approximately 15% more when they visit.
Continuing to grow our loyalty database will be a key benefit for our top and bottom line as customers in our loyalty database visit approximately 50% more frequently and spend approximately 15% more when they visit.
Speaker 3: As part of our broader effort to highlight our superior watch offering and to use the sports calendar to drive visitation, this week we launched our Fall Football campaign along with an everyday $5 bites menu.
As part of our broader effort to highlight our superior of watch offering and to use the sports calendar to drive visitation.
This week, we launched our fall football campaign, along with an everyday $5 bites menu.
Speaker 3: We are also bringing back the successful All You Can Eat wings on Mondays and Thursdays, which our guests will particularly enjoy while cheering on their favorite teams.
We're also bringing back the successful all you can eat wings on Mondays, and Thursdays, which are gas wells, particularly enjoy while sharing on their favorite teams.
Second strategic game pricing.
Speaker 3: Playing games is at the core of our business model and what we are and will always be most known for the brand.
Playing games is at the core of our business model and what we are and will always be most known for as a brand.
Speaker 3: As highlighted during our investor day, we believe there is a significant opportunity to implement a new comprehensive game pricing strategy to drive meaningful additional revenue adjusted to Yvada in cash flow while still maintaining our everyday value proposition with game prices still well below our peers.
As highlighted during our Investor day, we believe there's a significant opportunity to implement a new comprehensive game pricing strategy to drive meaningful additional revenue adjusted EBITDA and cash flow, while still maintaining our everyday value proposition with game prices still well below our peers.
Speaker 3: While we require certain investments to fully implement all elements of our new strategy, we are currently unlocking new ways to optimize regional pricing that we expect to have a positive impact in the fourth quarter of 2023 during our key holiday period.
While we require certain investments to fully implement all elements of our new strategy. We are currently unlocking new ways to optimize regional pricing that we expect to have a positive impact in the fourth quarter of 2023 during our key holiday period.
Third improved food and beverage.
Speaker 3: As a reminder, significant opportunity exists to improve our attachment rate and overall revenue and profits generated by food and beverage business by simplifying our offerings, improving the quality of our offerings, investing in technology to accelerate speed of service, and optimizing our labor model. We resource letters in all traditional marshaled sections to recognize our
As a reminder, a significant opportunity exists to improve our attachment rate and overall revenue and profits generated by food and beverage business by simplifying our offerings improving the quality of our offerings.
Investing in technology to accelerate speed of service and optimizing our labor models.
We recently completed a test.
Speaker 3: of the next phase of our new Dave Ambusters menu of the future and new hospitality focus service model, which we are pleased to report was successful. During the tests, these stores saw a low single digit increase in sales, 170 basis point improvement in food cost as fails, improved labor costs due to operational efficiency, improved speed of service,ront,
The next phase of our new Dave and Busters menu of the future and new hospitality focused service model, which we are pleased to report was successful during the task. These stores saw a low single digit increase in sales of 170 basis point improvement in food cost of sales improved labor costs due to.
<unk> efficiency.
Improved speed of service and SaaS scores.
Speaker 3: We are on track to launch this phase of our new menu and F&B strategy system wide by the end of September .
We are on track to launch this phase of our new menu and F&B strategy system wide by the end of September .
Speaker 3: Fourth remodels, we are in the process of modernizing and refreshing the looking fill of our D&B stores, improving the layout to increase traffic and overall productivity, as well as implementing technology to support guest engagement, and introducing new entertainment offerings to drive traffic for walk-in and special event business.
Fourth Remodels, we are in the process of modernizing and refreshing the look and feel of our D&B stores.
Improving the lay out to increase traffic and overall productivity as well as implementing technology to support guest engagement and introducing new entertainment offerings to drive traffic for walk in and special event business.
Speaker 3: I'm pleased to report the successful launch of our first of 12 test remodels, which went live in mid-August, introducing our enhanced in-
I'm pleased to report the successful launch of our first of 12 test Remodels, which went live in mid August .
Introducing our enhanced entertainment offerings.
Speaker 3: Although it's only been three weeks, the new format is being well received by our guests and performing ahead of expectations of a double-digit improvement in comparable stores sales growth trends.
Although it's only been three weeks the new format is being well received by our guests and performing ahead of expectations of a double digit improvement in conference to comparable store sales growth trends.
Speaker 3: There will be eight more test remodels coming online in the balance of 2023, with the remaining three in 2024.
There will be eight more test remodels coming online in the balance of 2023 with the remaining three in 2024.
Speaker 3: Once these tests are complete, we will provide more comprehensive financial observations of these test remodels and how these initial results are sharpening our strategy for the planned rollout of the remodel program for the remaining D&D locations in 2024 and beyond.
11. These tests are complete we will provide more comprehensive financial observations of these test remodels and how these initial results are sharpening our strategy for the planned rollout of the remodel program to the remaining D&B locations in 'twenty 'twenty four and beyond.
Speaker 3: However, you can rest assured that we remain laser focused on generating highly attractive returns on the invested capital for the re-model.
However, you can rest assured that we remain laser focused on generating highly attractive returns on invested capital for the Remodels.
Speaker 3: Fifth special events, we continue to believe that there is a significant opportunity to improve execution or special event business.
That's a special events, we continue to believe that there is a significant opportunity to improve execution in our special event business.
Speaker 3: While we have recovered back to pre-COVID levels on a combined brand basis, we are leveraging the strongest elements of the main event playbook to drive additional fails at Dave Ambusters, which is still meaningfully below pre-COVID levels.
Well, we have recovered back to pre COVID-19 levels on a combined brand basis, we are leveraging the strongest elements of the main event playbook to drive additional sales at Dave <unk>, Buster's, which is still meaningfully below pre COVID-19 levels.
Speaker 3: We've completed the initial phase of adding sales managers to the stores, which is shown encouraging results.
We've completed the initial phase of adding sales managers to the stores, which has shown encouraging results.
Speaker 3: For example, while still in the early innings of the rollout of this initiative, at the stores where you've made the changes, we've seen more than double the advanced group bookings for Q3 and Q4 on average versus the rest of the system.
For example, while still in the early innings of the rollout of this initiative.
At the stores, where you've made the changes we have seen more than double the advanced group bookings for Q3 and Q4 on average versus the rest of the system.
Speaker 3: While we expect significant near-term improvements in the special event business, we also expect the introduction of new entertainment offerings and connection with our STORROR remodel program to be a catalyst for a special event business.
While we expect significant near term improvements in our special event business. We also expect the introduction of new entertainment offerings in connection with our store remodel program to be a catalyst for a special event business.
Speaker 3: We have six technology enablement. At the store level, we are focused on optimizing our current service model and updating our store, IT infrastructure, which will lead to vastly improved data and analytics, better guest engagement and improved guest satisfaction.
Six technology enablement at the store level, we are focused on optimizing our current service model and updating our store.
Infrastructure, which will lead to vastly improved data and analytics better guest engagement and improve guest satisfaction.
Speaker 3: Our technology leaders were hard at work in the quarter implementing a server tablet solution, selecting our enterprise POS of the future, installing new kiosk and working closely with our entertainment and operations team on our remodel.
Our technology leaders are hard at work in the quarter implementing a server tablet solution selecting our enterprise P. O S. A in the future installing new kiosks are working closely with our entertainment and the operations team on our Remodels.
Speaker 3: As with the remodels, we strongly believe these initiatives will lead to additional revenue adjusted EBITDA and we are laser focused on generating an attractive return on the required investment in this area.
As with the Remodels, we strongly believe these initiatives will lead to additional revenue adjusted EBITDA and we are laser focused on generating an attractive return on.
The required investment in this area.
Speaker 3: In aggregate, we are confident our organic growth initiatives will create significant shareholder value over the long term and our operational achievements in the quarter are indicative of the progress we are making towards our goal.
In aggregate, we are confident our organic growth initiatives will create significant shareholder value over the long term and our operational achievements in the quarter are indicative of the progress we're making towards our goal.
Speaker 3: As Michael discussed in greater detail, our approach to running the business was sharpened cost controls, enabled us to continue to expand our margins which grew 120 basis points versus 2022, and are now 230 basis points in the second quarter versus 2019.
As Mike will discuss in greater detail our approach to running the business with sharp and cost controls enabled us to continue to expand our margins, which grew 120 basis points versus 2022 and are now 230 basis points in the second quarter versus 2019.
Speaker 3: We continue to find ways to permanently reduce our cost base that will be particularly powerful for cashflow generation as the momentum continues to build as we execute against our long-term strategic plan.
We continue to find ways to permanently reduce our cost base that will be particularly powerful for cash flow generation as the momentum continues to build as we execute against our long term strategic plan.
Speaker 3: In the quarter, we open two new Dave and Busters in one new main event. Our strong track record of opening new stores remains intact for fiscal 2023, as we continue to expect a total of 16 new stores this year across both brands.
In the quarter, we opened two new Dave <unk> Busters, and one new main event, our strong track record of opening new stores remains intact for fiscal 2023, as we continue to expect a total of 16 new stores this year across both brands.
Speaker 3: Our new store openings continue to perform exceptionally well and generate strong cash and cash returns.
Our new store openings continue to perform exceptionally well and generate strong cash on cash returns.
Speaker 3: We are very pleased with the progress being made throughout all areas of the business and have high conviction that our strategic plan will deliver significant shareholder value.
We are very pleased with the progress being made throughout all areas of the business and have high conviction that our strategic plan will deliver significant shareholder value.
Speaker 3: Despite the progress we've made towards our strategic plan in the demonstrated strength and resiliency of our business model, D&B remains extremely undervalued by the market.
Despite the progress we've made towards our strategic plan and the demonstrated strength and resiliency of our business model D&B remains extremely undervalued by the market.
Speaker 3: To that end, our board of directors has approved an increase to our current Sherry Purchase Authorization bringing our current authorization to $200 million.
To that end our board of directors has approved an increase to our current share repurchase authorization, bringing our current authorization to $200 million.
Speaker 3: While we continue to prioritize high ROI investments in the business and new stores, we will also continue to opportunistically and aggressively buy back shares when our shares trade materially below our view of fair value.
While we continue to prioritize high ROI investments in the business and new stores. We will also continue to opportunistically and aggressively buy back shares when our shares trade materially below our view of fair value.
Speaker 3: So now let me turn the call over to Mike for a review of our second quarter results. Mike.
So now let me turn the call over to Mike for a review of our second quarter results Mike.
Speaker 4: Thanks, Chris. We're pleased to report strong financial results for the second quarter. We've generated second quarter revenue of $542.1 million and adjusted EBITDA of $140.3 million and increase of 21.3% versus the prior year.
Thanks, Chris.
Pleased to report strong financial results for the second quarter, we generated second quarter revenue of $542 $1 million and adjusted EBITDA of $143 million, an increase of 21, 3% versus the prior year.
Speaker 4: Net income in the second quarter total $25.9 million or 60 cents per diluted share.
Net income in the second quarter totaled $25 $9 million or 60 cents per diluted share.
Speaker 4: Re-reported $40.9 million of adjusted net income or 94 cents of adjusted earnings per deluded share, which includes an adjustment for the $11.2 million loss on debt refinancing in the quarter. Reconciliation of these new non- GAAP measures can be found in today's press release.
We reported $49 million of adjusted net income or 94 cents of adjusted earnings per diluted share, which includes an adjustment for the 11 $2 million loss on debt refinancing in the quarter reconciliations of these new non-GAAP measures can be found in today's press release.
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Speaker 4: Proforma comparable store sales decreased 6.3% versus 2022, as we continue to lap robust fire year periods from a top line perspective.
Pro forma comparable store sales decreased six 3% versus 2022, as we continue to lap robust prior year periods from a topline perspective.
Speaker 4: When we look back at a more normalized level of business, we are up 5.8% versus 2019 on a consolidated basis led by the continued strength of our entertainment business.
When we look back at a more normalized level of business, we were up five 8% versus 2019 on a consolidated basis led by the continued strength of our entertainment business.
Speaker 4: Our special events business continues to recover with revenues of 15.6% on a year-over-year base.
Our special events business continues to recover with revenues up 15, 6% on a year over year basis.
Speaker 4: In the second quarter and remains close to flat in comparison to Proforma 2019 love.
In the second quarter and remained close to flat in comparison to pro forma 2019 levels.
Speaker 4: Our second quarter adjusted eBeta improved 230 basis points to
Our second quarter, adjusted EBITDA improved 230 basis points.
Speaker 4: 25.9% versus 2019. As Chris mentioned, we continue to drive margin in this environment with a laser focus on our cost base, leaving no stone unturned across cost of goods sold, labor, store operating expenses, and GNA.
25, 9% versus 2019 as Chris mentioned, we continue to drive margin in this environment with a laser focus on our cost base, leaving no stone unturned across cost of goods sold labor store operating expenses and G&A. We are confident in the levers that we have.
Speaker 4: We are confident in the levers that we have to pull and all four of these cost buckets that will result in the annualized run rate cost savings of 40 to 60 million as we laid out in our investor day presentation.
To pull in all four of these cost buckets that will result in the annualized run rate cost savings of $40 million to $60 million as we laid out in our Investor day presentation.
Speaker 4: We generated $103.8 million of operating cash flow during the second quarter, contributing to an ending cash balance of $82.6 million for liquidity of over $572 million when combined with the $490 million available on our $500 million revolving credit facility, net of outstanding letters of credit.
We generated $103 $8 million of operating cash flow during the second quarter contributing to an ending cash balance of $82 $6 million for liquidity of over $572 million when combined with the $490 million available on our $500 million revolving credit.
So the net of outstanding letters of credit.
Speaker 4: We ended the quarter with a total net leverage ratio of 2.1 time.
We ended the quarter with a total net leverage ratio of two one times.
Speaker 4: Our strong balance sheet, low leverage and superior cash flow profile provides us with the ability to invest in the business to drive profitable growth and continue to return capital to shareholders.
Our strong balance sheet low leverage and superior cash flow profile provides us with the ability to invest in the business to drive profitable growth.
And continue to return capital to shareholders.
Speaker 4: As previously disclosed in the second quarter, we repurchased 2.1 million shares at a total cost of $74.5 million. And after increasing our share repurchase authorization, we currently have $200 million of share repurchase.
As previously disclosed in the second quarter, we repurchased two 1 million shares at a total cost of $74 $5 million.
And after increasing our share repurchase authorization, we currently have $200 million.
Of share repurchase authorization.
Speaker 4: Also in the quarter, we opportunistically reprised our credit facility, reducing the spread on our term loan fee and any future revolver borrowings by 1.25%.
Also in the quarter, we opportunistically repriced, our credit facility, reducing the spread on our term loan b and any future revolver borrowings by 1.25%.
Speaker 4: Turning to capital spending, we invested a total of $82.6 million in capital additions during the second quarter. Opening two new Dave and Buster stores and one new main event.
Turning to capital spending we invested a total of $82 $6 million in capital additions during the second quarter.
Opening two new Dave <unk> Busters stores, and one new main event.
Speaker 4: We've already opened one new Dave and Buster store during the third quarter of fiscal year 2023. And one.
We've already opened one new Dave <unk> Buster store during the third quarter of fiscal year 2023.
And one new main event store as well.
Speaker 4: Also, as Chris mentioned, we are on track to open the total of 16 new stores and relocate one store across both brands during fiscal year 20th.
Also as Chris mentioned, we are on track to open a total of 16, new stores and relocate one store across both brands during fiscal year 'twenty three.
Operator: You're listening to Dave & Buster's Live! Thank you, operator, and welcome to everyone on the line.
Speaker 4: To summarize, we are pleased with the progress we made in the quarter, strengthening our company's financial position with the favorable repricing of our TermLone B, returning capital to shareholders VR share by back program, and establishing a quantifiable roadmap to execute upon by unveiling our long-term strategic plan at our investor day in
To summarize we are pleased with the progress we made in the quarter strengthening our company's financial position was the favorable repricing of our term loan b returning capital to shareholders via our share buyback program and establishing a quantifiable roadmap to execute upon by unveiling our long term.
T J planned at our Investor day in June .
Speaker 4: There are numerous opportunities for us to pursue in the immediate, near-term, and long-term. And we remain focused on managing costs to unlock the maximum value of these two great brands and deliver the highest possible returns for our shareholders. Now operator, please open the line for questions. Thank you. If you would like to ask a question, please first start on the one on your telephone.
There are numerous opportunities for us to pursue in the immediate near term and long term and we remain focused on managing cost to unlock the maximum value of these two great brands and deliver the highest possible returns for our shareholders.
Now operator, please open up the line for questions.
Thank you.
Cory Hatton: Leading today's call will be Chris Morris, our Chief Executive Officer, and Mike Quartieri, our Chief Financial Officer. After our prepared remarks, we will be happy to take your questions. This call is being recorded on behalf of Dave & Buster's Entertainment Inc and is copyrighted.
To ask a question. Please press Star then one on your telephone keypad.
If you are using a speaker phone we ask that you. Please pickup your handset before pressing the keys.
Definitely point your question has been addressed.
Please press Star then two.
Today's first question comes from Jake Bartlett.
Cory Hatton: Before we begin the discussion on our company's second quarter, 2023 results, I'd like to call your attention to the fact that in our remarks and our responses to questions, certain items may be discussed, which are not entirely based on historical fact. Any of these items should be considered forward-looking statements relating to future events within the meaning of the Private Security's 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 have been published in our filings with the SEC, which are available on our website.
Please go ahead.
Speaker 3: Great, thank you so much for taking the question. My first is on the three year plan, the billion dollars even though you're targeting by year three. When you presented that, it was a little, you know, I wasn't sure, you know, what the base year was, I think it was 22, but you can qualify that, but it depends on the macro environment. So my question is, you know, are you on track with that three year plan? You know, has that been pushed out a little bit or should we kind of think about year three as of 2024?
Great. Thank you so much for taking the question. My first is on the on the three year plan the $1 billion in EBITDA that you're targeting by year three when you presented that it was a little I wasn't sure.
What the base year was I think it was 22, but you kind of qualify embedded but it depends on the macro environment. So my question is are.
Are you on track with that three year plan has that been pushed out a little bit or should we kind of think about your three as of 2025.
Speaker 3: Yep, hey, Jake, this is Chris. You know, as we said during investor day, you know, we're very enthusiastic and confident in our ability to deliver on that plan. You know, we, the three-year timeline that we put out there, you know, what we'll tell you is that, you know, that's not a fixed timeline, but there's clearly a path towards a billion dollars in EBITDAG over the medium term.
Yeah, Hey, Jake this is Chris.
As we said during Investor day, we're very enthusiastic and confident in our ability to deliver on that plan.
Cory Hatton: In addition, our remarks today will include references to financial measures that are not defined under generally accepted accounting principles. Investors should review the reconciliation of these non-gap measures to the comparable gap measure contained in our earnings announcement released this afternoon.
The three year timeline that we put out there you know what we will tell you is that that's not a fixed timeline.
But there is clearly a path towards a $1 billion in EBITDA over the medium term, we haven't shifted at all our thinking on delivering on the outcome of that plan.
Speaker 3: We haven't shifted at all our thinking on, you know, the delivering on the outcome of that plan. But we really want to stay away from putting like a fixed timeline on it. It was merely just simply saying, look, there's incredible opportunity in this business. There's a clear line of sight on how we get to a billion dollars. It feels like that, you know, we feel confident that we can deliver on that in the medium term.
Christopher Morris: With that, it is my pleasure to turn the call over to Chris. All right, thank you, Corey. Good afternoon, everyone. Thank you for joining our call today. We are pleased to report record results for the second quarter of fiscal 2023. We generated revenue of $542 million and adjusted EBITDA of $140 million, resulting in an adjusted EBITDA margin of 25.9% for the quarter.
But we really want to stay away from putting in like a fixed timeline on it. It was merely just simply saying look there's incredible opportunity in this business. There is a clear line of sight on how we get to $1 billion. It feels like that we feel confident that we can deliver on that in the medium term.
Speaker 3: you know in terms that might shift a month or two or six months or two or you know even a year or two depending on you know things that are happening in the external environment.
In terms that might shift a month or two or six months or two or even a year or two depending on things that are happening in the external environment, but make no mistake. The opportunity is there in terms of the progress that we've made I will tell you that we are right in line with with our plan.
Christopher Morris: In a few moments, Mike will walk you through the details of our financial performance. As we take a step back and reflect on where we are, we remain as confident as ever in our ability to execute against the numerous incisable growth initiatives that we laid out in our recent investor day presentation, in which we have already begun implementing. During the quarter, we are pleased that we continue to open new stores that a highly tractive returns on invested capital, that we have diligently managed our cost structure and continued to expand our adjusted EBITDA margins, and that our exceptional team has done a phenomenal job navigating our highly profitable and resilient business model through a dynamic period in our economy, and against strong coupling comparisons versus 2022. We are laser focused on optimizing our business and growing revenue, adjusted EBITDA and cashflow. We remain committed to our long-term target of adjusted EBITDA of $1 billion in our making considerable progress towards that goal.
Speaker 3: But make no mistake, the opportunity is there. In terms of the progress that we've made, I'll tell you that we are right in line with our plan. We're very encouraged with the results that we're seeing with respect to the items that we've implemented thus far. Investor Day was June 13th, so we're only just a few months into this.
Very encouraged with the results that we're seeing with respect to the items that we've implemented thus far investor.
Investor Day was June 13th so were only just a few months into this.
Speaker 3: but from what what we're what we're seeing right now we're we're even more confident than we were three months ago and where we're going and Where it came but what our team focused on and our ability to drive meaningful value You know over the medium term
But from what what we're what we're seeing right now we're even more confident than we were three months ago, and where we're going and where it came about what our team is focused on and our ability to drive meaningful value.
Over the medium term.
Speaker 5: Great, great, thank you. And my next question is just on the...
Great Great. Thank you and my next question is just on the trajectory of the business. So obviously were the comps versus 19 has been decelerating pretty consistently now for the last four quarters. What is your confidence that that's going to stabilize.
Speaker 5: It's actually the business. Obviously, the cost versus 19 have been accelerating pretty consistently now to the last.
Speaker 5: for quarters, what is your confidence that that's going to stabilize, that, you know, the excess demand essentially that was kind of, you know, that occurred post COVID has worked its way out and that you should see at least in a re-acceleration. I guess within that question, you know, are you seeing that yet? Is there any, you know, as you look at the trends within the quarter, the quarter to date, any indication that you're seeing that stabilization?
The excess demand essentially that was kind of.
That occurred post Covid has worked its way out and that you should see it.
Christopher Morris: I'd like to take a moment to update you on each of the six key organic growth initiatives. First, marketing authorization. As a reminder, we strongly believe that there is a meaningful opportunity to grow traffic by making sure we get the right message to the right people at the right time. To that end, we have successfully completed our investment in the marketing technology infrastructure and are now in the process of building the digital marketing engine that we expect will begin bearing fruit in the early part of fiscal 2024.
And we acceleration I guess within that question. You know are you seeing that yet is there any as you look at the trends within the quarter.
Quarter to date any indication that youre seeing that stabilization.
Speaker 5: You know, even outside of some of the initiatives that you're really promising coming up in the next quarter.
Even even outside of some of the initiatives that.
It really promising coming up in the next quarter or two.
Speaker 3: Yeah, let me all start and then I'll turn it over to Mike just to add some additional color commentary. You know, what you're going to consistently hear from us. This is the team that's very much focused on delivering on that long-term plan. And that's where our focus is, you know, we're excited about what we're doing. As I said, there's a clear line of sight and our ability to deliver on that plan over the long run. And so we don't really get caught up in, you know, months and months trends. What I'll tell you is...
Yes, let me I'll start and then I'll turn it over to Mike to just to add some additional color commentary.
You know what youre going to consistently hear from us in this this is a team that's very much focused on delivering on that long term plan and that's where our focus is.
Christopher Morris: These tools will play a key role in developing a more personalized approach to marketing through improved targeting and guest engagement. In addition, our loyalty database is now 5.2 million users up from 4.8 million users last quarter as our mobile app experience keeps getting better. Continuing to grow our loyalty database will be a key benefit for our top and bottom line as customers in our loyalty database visit approximately 50% more frequently and spend approximately 15% more when they visit. As part of our broader effort to highlight our superior watch offering and to use the sports calendar to drive visitation, this week we launched our fall football campaign along with an everyday $5 bites menu.
We're excited about what we're doing as I said, there's a clear line of sight and our ability to deliver on that plan over the long run and so where we don't really get caught up in month to month trends, but what I will tell you is yes.
Speaker 3: You know, look, the comparisons to the prior year are challenging. Last year at this point in time, you know, we benefited from the post-COVID surge along with all of our peers.
Yes look the comparisons to the prior year are challenging last year at this point in time.
We benefited from the post Covid surge along with all of our peers and as we're lapping that that period of time on a year over year basis comps are challenging.
Speaker 3: And as we're lapping that period of time on a year over your basis, you know, concert challenging, we're pleased that compared to 2019, we're still up 6% over that comparison. And we're particularly pleased and proud of the work that our team has done to navigate through this environment and still deliver on the bottom line. Thank you.
We're pleased that compared to 2019 were still up 6% over that that comparison, and we're particularly pleased and proud of the work that our team has done to.
Christopher Morris: We are also bringing back the successful All You Can Eat Wings on Mondays and Thursdays which our guests will particularly enjoy while cheering on their favorite teams. Second, strategic game pricing. Playing games is at the core of our business model and what we are and will always be most known for as a brand. As highlighted during our investor day we believe there is a significant opportunity to implement a new comprehensive game pricing strategy to drive meaningful additional revenue adjusted to Yvda and cash flow while still maintaining our everyday value proposition with game prices still well below our peers.
To navigate through this environment and still deliver on the bottom line.
Speaker 3: And most importantly, we remain, you know, as confident as ever in the initiatives that we outlined during investor day and the exciting opportunity in front of us to drive meaningful value.
And most importantly, we remain as confident as ever.
And the initiatives that we outlined during investor day, and the exciting opportunity in front of us to drive meaningful value.
Speaker 4: Yeah, I think that's okay to add onto that thing. When you look back a year ago, we calmed plus 17 and a half percent in cute.
Yes.
Add on to that when you look back a year ago, we Comped plus 17, 5% in Q3, and so that is a huge number to overlap and so when you go back versus 22, yes, it's a tough comp we look back at 19, and we see still the growth in the business that we wanted to see which is that.
Speaker 4: And so that is a huge number to overlap. And so when you go back versus 22, yeah, it's a tough comp. We look back at 19 and we see the still the growth in the business that we wanted to see, which is that 2% type growth on an annual basis going forward, which is a more normalized environment that you would expect to see in businesses like ours.
Christopher Morris: While we require certain investments to fully implement all elements of our new strategy, we are currently unlocking new ways to optimize regional pricing that we expect to have a positive impact in the fourth quarter of 2023 during our key holiday period.
2% type growth.
On an annual basis going forward, which is a more normalized environment that you would expect to see in businesses like ours.
Speaker 4: What has us at this point, we can't control the macro economic factors that are driving traffic and those effects. What we do control is what happens in the four walls of our business. And that's the type of attitude and the, I say, I call it bringing it every day to control those four wall EBITDA margins. And that's the value that you're seeing in that EBITDA margin today, even in this type of environment where we can expand on those EBITDA margins.
What has us at this point.
Christopher Morris: Third, improved food and beverage. As a reminder significant opportunity exists to improve our attachment rate and overall revenue and profits generated by food and beverage business by simplifying our offerings, improving the quality of our offerings, investing in technology to accelerate speed of service, and optimizing our labor model. We recently completed a test of the next phase of our new Dave Ambusters menu of the future and new hospitality focus service model which we are pleased to report was successful.
Can't control the macro economic factors that are driving traffic into those affect what we do control is what happens in the four walls of our business and that's the type of attitude in the.
Let's say I call it bringing it everyday to control those four wall EBITDA margins and that's the value that you are seeing in that EBITDA margin today, even in this type of environment, where we can expand on those EBITDA margins. The actions that we're taking today around that will are permanent in nature and will be able to benefit us even.
Christopher Morris: During the tests these stores saw a low single-digit increase in sales 170 basis point improvement in food cost as fails, improved labor costs due to operational efficiency, improved speed of service and OSAS course. We are on track to launch this phase of our new menu and F&B strategy system wide by the end of September.
Speaker 4: The actions that we're taking today around that will are permanent in nature and will be able to benefit us even further as traffic and economy returns back to more normalized levels.
Further as traffic and economy returns back to more normalized levels.
Great. Thanks, a lot I really appreciate it.
Speaker 2: All right, thank you, Jake. Our next question today comes from Jeff Farnward.
Alright, Thank you Jake.
Next question today comes from Jeff Farmer of Gordon Haskett. Please go ahead, great. Thanks, just wanted to start with following up on <unk> question. So is there anything you guys can share as it relates to how the Q2 same store sales sort of finished relative to your internal expectations anything that caught you guys off guard either pause.
Speaker 5: Great thanks. Just wanted to start with following up on Jake's question. So is there anything you guys can share as it relates to how the Q2 seems for sales sort of finished relative to your internal expectations anything that caught you guys off guard either positively or negatively
Christopher Morris: Fourth remodels, we are in the process of modernizing and refreshing the look and feel of our D&B stores, improving the layout to increase traffic and overall productivity as well as implementing technology to support guest engagement and introducing new entertainment offerings to drive traffic for walk-in and special business. I'm pleased to report the successful launch of our first of 12 test remodels which went live in mid-August, introducing our enhanced entertainment offerings. Although it's only been three weeks, the new format is being well received by our guests and performing ahead of expectations of a double digit improvement and comparable store sales growth trends.
<unk> or or negatively.
Speaker 4: I think as you look at the back end of Q2 and what we're seeing today, it's a relatively consistent level of comp-store sales. Unfortunately, it's a decline, but those levels are pretty consistent across the board. We evaluate each of the different demographics within our business.
No I think as you look at the back end of Q2, and what we're seeing today.
A relatively consistent level of comp store sales. Unfortunately, it's a decline.
Christopher Morris: There will be eight more test remodels coming online in the balance of 2023 with their remaining three in 2024. Once these tests are complete, we will provide more comprehensive financial observations of these test remodels and how these initial results are sharpening our strategy for the planned rollout of the remodeled program to the remaining D&B locations in 2024 and beyond. However, you can rest assured that we remain laser focused on generating highly attractive returns on invested capital for the remodels.
But those levels are pretty consistent across the board.
We evaluate each of the different demographics within our business.
Speaker 4: I would say demographics of our consumer, but also from a geographic perspective. And at this point, we're not seeing any one particular group.
I'd say demographics of our consumer but also from a geographic perspective.
At this point, we're not seeing any one particular group that is underperforming the rest of the demographic area as well as the geography of those types of results.
Speaker 4: that's underperforming the rest of the demographic area as well as the geography of those types of results.
Speaker 5: Okay, that is helpful and then it looks like you guys saw roughly 250 basis points of food and beverage cost for your ability year over year.
Okay.
That is helpful. And then it looks like you guys saw roughly 250 basis points of our food and beverage cost favorability year over year.
Speaker 5: The question is, so a lot of things can impact that. So either cost initiatives, menu pricing, commodity inflation.
Question is so lot of things can impact that so either cost initiatives menu pricing commodity inflation can you help us understand what drove that level of 250 basis points, which was more than doubled more than doubled what you saw in Q1, and then as we move forward how should we be thinking about that so just understanding the drivers.
Speaker 5: Can you help us understand what drove that level of 250 basis points, which was more than doubled, more than doubled, what you saw in the Q1? And as we move forward, how should we be thinking about that? So just understanding the drivers of that cost availability and how we should be thinking about it moving over the next.
Christopher Morris: Fifth special events, we continue to believe that there is a significant opportunity to improve execution in our special event business. While we have recovered back to pre-COVID levels on a combined brand basis, we are leveraging the strongest elements of the main event playbook to drive additional sales at Dave Ambusters, which is still meaningfully below pre-COVID levels. We've completed the initial phase of adding sales managers to the stores which has shown encouraging results.
Of that cost favorability and how we should be thinking about it moving over the next few quarters.
Speaker 4: Yeah, so when you look at the improvement in the cost of goods sold line for food and beverage, there's a couple of aspects. One, we haven't done anything from a pricing perspective between Q1 and Q2. So pricing there is consists.
Yeah. So when you look at the improvement in the cost of goods sold line for food and beverage and Theres a couple of aspects one.
We haven't done anything from a pricing perspective between Q1 and Q2, so pricing there is consistent.
Speaker 4: The benefit comes from continued work from a synergy perspective. As we've gone through kind of the second round of contracts where contracts that were fixed in nature needed to run their term and then we were able to then consolidate the procurement volumes and go after that from a cost-safe perspective.
The benefit comes from continued work from a synergy perspective.
Christopher Morris: For example, while still in the early innings of the rollout of this initiative, at the stores where you've made the changes, we've seen more than double the advanced group bookings for Q3 and Q4 on average versus the rest of the system. While we expect significant near-term improvements in the special event business, we also expect the introduction of new entertainment offerings and connection with our store remodel program to be a catalyst for a special event business.
We've gone through kind of the second round of contracts were contracts that were fixed in nature needed to run their term and then we were able to then consolidate the procurement.
Volumes and go after that from a cost save perspective.
Speaker 4: As Chris spoke to during his prepared remarks, we're testing new menu items that yield a cost.
As Chris spoke to during his prepared remarks, we're testing new menu items.
That yielded a cost.
Speaker 4: benefit to us from a cost of good self-perspective. And then lastly, as we always look for more improvement from prep time and things of that effect, the ability from a commodity perspective, we are seeing relative consistency, commodities quarter to quarter, so we're benefiting on a commodity basis, relatively, as they straightforward from Q1, at about 3% improvement on a year over your basis.
<unk>.
The benefit to us from a cost of goods sales perspective, and then lastly, as we always look for more improvement from prep time and things to that effect.
Christopher Morris: Six, technology enablement. At the store level, we are focused on optimizing our current service model and updating our store IT infrastructure, which will lead to vastly improved data and analytics, better guest engagement, and improved guest satisfaction. Our technology leaders were hard at work in the quarter, implementing a server tablet solution, selecting our enterprise POS of the future, installing new kiosk and working closely with our entertainment and operations team on our remodels. As with the remodels, we strongly believe these initiatives will lead to additional revenue adjusted to EBITDA, and we are laser focused on generating an attractive return on the required investment in this area.
The ability from a commodity perspective, we are seeing relative consistency.
Commodities quarter to quarter. So we are benefiting.
On a commodity basis relatively.
That's a straightforward from Q1 at about 3% improvement on a year over year basis.
Okay. Thank you very much.
Well. Thank you. Thank you and our next question today comes from Brian Vaccaro with Raymond James. Please go ahead.
Speaker 6: I think some good evening. I just want to ask about the comps again and just sort of the cadence to sell through the quarter. Obviously comps down in the sixes now. And I just want to get your perspective on what you think is driving that sequential softness and just sort of the healthier consumer. Yeah, I think you mentioned it's not concentrated in any area, but is there anything you're seeing day part or week day versus weekend or F&B versus amusement? It's just any incremental context.
Hi, Thanks, and good evening.
Wanted to ask about the comps again, and just sort of the cadence you saw through the quarter, obviously comps down in the sixes now and I'm just just want to get your perspective on what you think is driving that sequential softness and just sort of the health of your consumer Yes. I think you mentioned, it's not concentrated in any area, but is there anything youre seeing day part or weekday versus.
Christopher Morris: In aggregate, we are confident our organic growth initiatives will create significant shareholder value over the long term, and our operational achievements in the quarter are indicative of the progress we are making towards our goal. As Michael discussed in greater detail, our approach to running the business with sharpened cost controls enabled us to continue to expand our margins, which grew 120 basis points versus 2022 and are now 230 basis points in the second quarter versus 2019.
This weekend or F&B versus amusements, just any incremental context.
Speaker 6: on what you think is driving this, that sequential self-inning.
On what you think is driving that sequential softening.
Speaker 3: Yeah, Brian , I'll take that and then let you wrap it up. First thing I'll say is I'll repeat what I said to Jake earlier is
Yes, Brian I'll take that and then let you wrap it up.
First the first thing I'll say is I'll repeat what I said to Jake earlier as you.
Speaker 3: You know, last year, you're part of what we're dealing with is just a tough comparison to the prior year, just with the post-COVID surge and, you know, our performance.
Last year, we are part of what we're dealing with is just a tough comparison to the prior year.
Just with the post Covid surge and our performance last year benefited as Matt just as our peer group did and so there is a bit of a tough comparison and as I said, when we compare ourselves to 2019.
Christopher Morris: In the quarter, we opened two new Dave & Busters in one new main event. Our strong track record of opening new stores remains intact for fiscal 2023 as we continue to expect a total of 16 new stores this year across both brands. Our new store openings continue to perform exceptionally well and generate strong cash on cash returns.
Speaker 3: last year benefited from that just as our peer group did. And so there is a bit of a tough comparison. And as I said, when we compare ourselves to 2019,
Speaker 3: First, we're pleased with the growth from 2019. Secondly, there was really no material trend in the business throughout the quarter. It was fairly consistent.
First we're pleased with the growth from 2019 secondly.
There was no.
There's really no material trend in the business throughout the quarter. It was it was fairly consistent.
Christopher Morris: We are very pleased with the progress being made throughout all areas of the business and have high conviction that our strategic plan will deliver significant shareholder value. Despite the progress we've made towards our strategic plan and the demonstrated strength and resiliency of our business model, D&B remains extremely undervalued by the market. To that end, our board of directors has approved an increase to our current share repurchase authorization bringing our current authorization to $200 million. While we continue to prioritize high ROI investments in the business and new stores, we will also continue to opportunistically and aggressively buy back shares when our shares trade materially below our view of fair value.
Speaker 3: You know, we've, as we always do, we've analyzed the heck out of our business, sliced and indict it every single way. What I'll tell you is there was nothing meaningful that came out of that. You know, we think that it was just overall.
You know we've as we always do we've analyzed the heck out of our business slicing and dicing every single way.
What I'll tell you is there is nothing meaningful that came out of that.
We think that it was just overall.
Speaker 3: you know relative to two thousand two there there was just you know a decline So there's there's not one thing that we could really point to that would suggest that it's related to a shift in consumer behavior In terms of you know how they're trading that Dave investors or anything along those lines
Relative to 2002, there was just a decline.
So theres not one thing that we could really point to that would suggest that it's related to a shift in consumer behavior in terms of how they're trading that Dave and busters or anything along those lines.
Speaker 4: I think one thing to add on that, what we are seeing is for the customers that are coming in, they are spending at consistent levels of what we historically have seen in that posting COVID environment. So when you look at our mix between revenues, between amusement and food and beverage, we're still kind of holding at that one third, two thirds with the two thirds being on the amusement side.
Yes, I think one thing to add on that what we are seeing is for the customers that are coming in they are spending at consistent levels of what we historically have seen in that post COVID-19 environment. So when you look at our mix between revenue of revenues between amusement and food and beverage, we're still kind of holding it.
Michael Quartieri: So now let me turn the call over to Mike for a review of our second quarter results. Mike, thanks Chris. We're pleased to report strong financial results for the second quarter. We generated second quarter revenue of $542.1 million and adjusted EBITDA of $140.3 million and increase of 21.3% versus the prior year. Net income in the second quarter totaled $25.9 million or 60 cents per diluted share. We reported $40.9 million of adjusted net income or 94 cents of adjusted earnings per diluted share, which includes an adjustment for the $11.2 million loss on debt refinancing in the quarter.
Now one third two thirds with the two thirds being on the amusement side.
Speaker 6: Okay, thank you for that. And just on the initiatives to optimize your pricing on the game.
Okay. Thank you for that and just on the on the initiatives to optimize your pricing on the games could you elaborate on the changes that you're making that will have an impact beginning in the fourth quarter. Just some of the specifics there and any any ballpark of how much of a pricing benefit you expect that to yield start.
Speaker 6: Could you elaborate on the changes that you're making that will have an impact beginning in the fourth quarter, just some of the specifics there, and any ballpark of how much of a pricing benefit you expect that to yield starting in the fourth quarter? And then also I think you were thinking about and maybe testing raising the buy-in, the minimum buy-in level, maybe from $15 to $20 of memory serves, have you made a decision on that front?
In the fourth quarter and then also I think you were thinking about and maybe testing raising the buy in at a minimum buying level, maybe 15 to $20. If memory serves have you made a decision on that front.
Michael Quartieri: Reconciliation of these new non-gap measures can be found in today's press release. Proforma comparable store sales decreased 6.3% versus 2022, as we continue to lap robust prior year periods from a top line perspective. When we look back at a more normalized level of business, we are up 5.8% versus 2019 on a consolidated basis led by the continued strength of our entertainment business. Our special event business continues to recover with revenues of 15.6% on a year over year basis in the second quarter and remains close to flat in comparison to pro forma 2019 levels.
Speaker 4: Yeah, so I'll give you the two main takeaways. One, at towards the end of the quarter, so there was really no benefit in Q2. We did adjust the rate card, which is the buy-in at the kiosk.
Yeah. So I'll give you the two main takeaways one.
Towards the end of the quarter. So there was really no benefit in Q2, we did adjust the rate card, which is the buy in at the kiosk.
Speaker 4: You look at our pricing before the low end entry point was $15 and then it went from 15 to 25 to 35 to 45. We adjusted those rate cards to actually start with $20. So it then goes from 20 to 30 to 40 to 50.
When you look at our pricing before the low end entry point was $15 and then it went from 15 to 25 to 35 to 45.
We adjusted those rate cards to actually start with $20. So and then it goes from 20 to 30% to 40%.
Speaker 4: The dollar value per chip that the customer receives is consistent. So it really wasn't much of a quality price change as it was a change in just the buy and amount at the minimum level and then it went up through there.
The dollar value per ship that the customer receives is consistent so it really wasn't much of a call. It a price change as it was a change in just the by an amount at the minimum level and then went up through there.
Michael Quartieri: Our second quarter adjusted EBITDA improved 230 basis points to 25.9% versus 2019. As Chris mentioned, we continue to drive margin in this environment with a laser focus on our cost base, leaving no stone unturned across cost of goods sold, labor, store operating expenses and GNA. We are confident in the levers that we have to pull in all four of these cost buckets that will result in the annualized run rate cost savings of 40 to 60 million as we laid out in our investor day presentation.
Speaker 4: The other aspect of what we're looking to accomplish is, we've talked before, one of the strategic unlocks in pricing is the ability to alter pricing between geographic areas. So no different than when you look at food and beverage, you know, costs in major metropolitan areas, usually costs more from a price point than in more regional markets or smaller towns.
The other aspect of what we're looking to accomplish is.
We've talked before one of the strategic unlocks in pricing is the ability to alter pricing between geographic areas. So no different than when you look at food and beverage.
In major Metropolitan areas. These limited costs more from a price point then.
More regional markets or smaller towns.
Speaker 4: Right now our limitation is that all pricing for all games is consistent across the entire system. We're now able to unlock that and be able to put regional pricing in place.
Right now our limitation is that all pricing for all games is consistent across the entire system, we're now able to unlock that and be able to put regional pricing in place.
Michael Quartieri: We generated $103.8 million of operating cash flow during the second quarter, contributing to an ending cash balance of $82.6 million for liquidity of over $572 million when combined with the $490 million available on our $500 million revolving credit facility, net of outstanding letters of credit. We ended the quarter with a total net leverage ratio of 2.1 times. Our strong balance sheet, low leverage and superior cash flow profile provides us with the ability to invest in the business to drive profitable growth and continue to return capital to shareholders.
Speaker 4: which will start going into test in the next couple of weeks. One of the key things we want to do though in doing such is make sure that we maintain the value of our product offering in relation to our peers. So from that respect, we haven't communicated nor would we, what we think that estimated growth would be in Q4, but we would expect there to be some.
It will start going into test in the next couple of weeks one of the key things we wanted to do though in doing such is make sure that we maintain the value of our.
Product offering in relation to our peers so.
From that respect.
We haven't communicated nor would we what we think that estimated growth would be in Q4, but we would expect there to be something there.
Speaker 6: All right, thanks. And then just the last one for me if I could. I appreciate the update you provided on certain initiatives that you laid up the analyst day. But I know it's early days, but can you elaborate on the customer response you've seen in the Friendswood remodel? Any specifics on how the social bays are performing or other specific changes that you made that are driving the increase most meaningfully? Thank you.
Alright, Thanks, and then just the last one for me if I could.
We see it the update you provided on certain initiatives that you laid out at the analyst day, but I know it's early days, but can you elaborate on the customer response, you've seen in the friends would remodel any specifics on how the social bays are performing or other specific changes that you made that are driving the increase most meaningfully. Thank you.
Michael Quartieri: As previously disclosed in the second quarter, we repurchased 2.1 million shares at a total cost of $74.5 million and after increasing our share repurchase authorization, we currently have $200 million of share repurchase authorization. Also in the quarter, we opportunistically reprised our credit facility, reducing the spread on our term loan fee and any future revolver borrowings by 1.25%. Turning to capital spending, we invested a total of $82.6 million in capital additions during the second quarter, opening two new Dave & Buster stores and one new main event.
Speaker 3: Happy to do so. I mean, it's we're very pleased with the guest response.
Yes happy to do so I mean, it's we're very pleased with the guest response and in the community.
Speaker 3: in the community on all aspects of the remodel to be perfectly framed.
On all aspects of the remodel to be perfectly Frank.
Speaker 3: as we spent in our preparatory marks, it's only three weeks, it's only one store. And so we're trying to be guarded and in our enthusiasm.
As we said in our prepared remarks, it's only three weeks, it's only one store.
And so we're trying to be guarded.
And our enthusiasm.
Speaker 3: But, you know, over the last three weeks, that friends, that particular unit has outperformed our expectations. So we're feeling very good about...
But over the last three weeks.
The friends that particular unit has outperformed our expectations. So we're feeling very good.
Michael Quartieri: We've already opened one new Dave & Buster store during the third quarter of fiscal year 2023. And one new main event store as well. Also as Chris mentioned, we are on track to open a total of 16 new stores and relocate one store across both brands during fiscal year 23.
About.
Speaker 3: What will be able to do with remodels? And we saw very good about expanding our entertainment offering and doing it in a way.
Well, what what will be able to do with the remodels.
And we feel very good about expanding our entertainment offering and doing it in a way.
Speaker 3: that we think is that the heart and center of what a DMB guest is looking for. So, so far, so good. All right, I'll get back to the queue. Thank you.
That we think is at the heart and center of what a D&B guest is looking for.
So so far so good.
Michael Quartieri: To summarize, we are pleased with the progress we made in the quarter, strengthening our company's financial position with the favorable repricing of our term loan fee, returning capital to shareholders VR share by back program and establishing a quantifiable roadmap to execute upon by unveiling our long term strategic plan at our investor day in June. There are numerous opportunities for us to pursue in the immediate near term and long term, and we remain focused on managing costs to unlock the maximum value of these two great brands and deliver the highest possible returns for our shareholders.
Alright, I will get back in the queue. Thank you.
Thank you.
And our next question today comes from Andrew <unk> with BMO. Please go ahead.
Speaker 7: And you can have a new lecture taking the questions. My first one, you know, appreciating certainly that you can't.
Hey, good afternoon, thanks for taking the questions.
My first one.
Appreciating certainly that you can.
Speaker 7: the macro environment. I guess the question how you're thinking about bouncing the multi-ststrategic planning implementation of that versus like flexibility on the on the mirror in opportunities. And so I guess you know sounds like there's more value on the F and B side, some of the other changes that you talked about. Some are marking around football. I mean, do you think that that addresses the cell link. Here we lots of you.
I think the macro environment.
A question on how you are thinking about balancing the.
The multiyear strategic plan and implementation of that versus like flexibility on the on the newer opportunities and so I guess.
It sounds like there is more value on the F&B side some of the other changes that you talked about.
Senior marketing around football I mean, do you think that that addresses kind of what.
Operator: Now operator, please open up the line for questions. Thank you. If you would like to ask a question, please press star than one on your telephone keypad. If you're using a speaker phone, we ask you please pick up your handset before pressing the keys. If at any point your question has been addressed, do you like to withdraw your question, please press star than two.
Andrew We lost you.
Speaker 3: Andrew, we're having a connection problem. Yeah, we lost you right after you said. Did you mind just starting from the beginning? Yeah.
Andrew.
Having a connection problem yes.
Yes, we lost you right. After you said.
Do you mind, just starting from the beginning.
Yes can you hear me now I just wanted to show you can hear me yes.
Speaker 3: Yes, yeah, yeah, no, we got you. I'm okay. All right. I guess the question really is how are you like what is the flexibility of the
Yes, yes, yes, no we got Ya.
Jake Bartlett: Today's first question comes from Jake Bartlett at Trist. Please go ahead. Great, thank you so much for taking the question. My first is on the three year plan, the billion dollars and even though you're targeting by year three, when you presented that it was a little, you know, I wasn't sure, you know, what the base year was, I think it was 22, but you can qualify that it depends on the macro environment.
Alright, I guess the question is really is like what is the flexibility of the plan in the near term.
Speaker 7: as you kind of navigate what isn't a macro that you cannot control. You think about the pricing opportunities differently. Are there any other programs that you can implement that you're thinking about to be adaptable to the current macro?
As you kind of navigate what isn't.
So that you cannot control do you think about the primary opportunities differently are there any other programs that you can implement that you're thinking about to be adaptable to the current macro.
Yes, well.
Speaker 3: that the short answer is, you know, we're very mindful of, you know, how we, how we navigate the business during this period of time is still delivered on our long term goals.
The short answer is you know, we're very mindful of how we how we navigate the business. During this period of time and still deliver on our long term goals.
Christopher Morris: So my question is, you know, are you on track with that three year plan, you know, has that been pushed out a little bit or should we kind of think about your three as 2020. You know, as we said during investor day, we're very enthusiastic and confident in our ability to deliver on that plan. You know, the three-year timeline that we put out there, what we'll tell you is that that's not a fixed timeline, but there's clearly a path towards a billion dollars in EBITDAG over the medium term.
Sure.
Speaker 3: A big part of that is how we're managing the cost structure. And as I said a minute ago, I'm very proud of all the work that our team is doing to manage the middle of the P&L. And when we can navigate through this type of environment and still deliver on the bottom line, that provides just a tremendous about flexibility and gives us confidence to continue to invest in the right areas of the business.
A big part of that is how we're managing the cost structure and.
Christopher Morris: We haven't shifted at all our thinking on, you know, delivering on the outcome of that plan, but we really want to stay away from putting like a fixed timeline on it. It was merely just simply saying, look there's incredible opportunity in this business, there's a clear line of sight on how we get to a billion dollars. It feels like that, you know, we feel confident that we can deliver on that in the medium term.
As I said a minute ago I'm very proud of all the work that our team is doing to manage the middle of the P&L.
And when we can navigate through this type of environment and still deliver on the bottom line that provides just a tremendous amount of flexibility.
It gives us confidence to continue to invest in the right areas of the business.
Speaker 3: With all that said though, you know, we're moving forward with the eyes wide open and being very mindful of not getting too far ahead of ourselves.
With all that said, though we're.
We're moving forward with eyes wide open and being very mindful of not getting too far ahead of ourselves on investment spending and ensuring that we're balancing all sides of the business.
Speaker 3: on investment spending and ensuring that we're balancing all sides of the business.
Speaker 3: I don't see at this point in time, we're not seeing anything that would suggest that we need to rethink our strategic priorities. We're still just as committed as we were June 13th on the areas that we outlined with you. Where we see momentum in the business.
I don't see at this point in time, we're not seeing anything that would suggest that we're going to that we need to rethink our strategic priorities. We're still just as committed as we as we were June 13th on the areas that we outlined with you.
Christopher Morris: You know, in terms that might shift a month or two or six months or two, or you know, even a year or two depending on, you know, things that are happening in the external environment. But make no mistake, the opportunity is there. In terms of the progress that we've made, you know, I'll tell you that we are right in line with our plan. We're very encouraged with the results that we're seeing with respect to the items that we've implemented thus far.
Where we see.
Where we see some momentum in the business.
Speaker 3: is on the food and beverage changes that we're making. And so the space that we tested that we're going to be rolling out in September , we feel great about the results that we're driving. And that's, you know, that's a very thoughtful approach to food and beverage. It's not just recipes. It's, you know, how the menu, how we deliver on that menu at the store level and drive a great guest experience.
On the food and beverage changes that we're making.
And so the space that we test it isn't that we're going to be rolling out in September we feel great about the results that we're driving and that's you know that's a.
Christopher Morris: You know, investor day was June 13th, so we're only just a few months into this. But from what we're seeing right now, we're even more confident than we were three months ago. And where we're going and where it came, but what our team focused on and our ability to drive meaningful value. You know, over the medium term.
Very thoughtful approach to food and beverage it's not just recipes.
How the menu.
How we deliver on that menu at the store level and drive a great guest experience.
Speaker 3: That's something that we're going to continue to push forward on. You know, then hand service model to be able to promote that phenomenal student beverage offering and to drive attach. You know, that's something that we continue to be focused on. Special events is an area. You know, so all the areas that we outlined at this point in time, we're still.
That's something that we're going to continue to push forward on.
The enhanced service model too.
To be able to promote that that phenomenon certain beverage offering and to drive attach that's something that we continue to be focused on special events is an area. So all of the areas that we outlined at this point in time, we're still.
Christopher Morris: Great, great. Thank you. And my next question is just on the trajectory of the business. Obviously we're the comps versus 19 have been to celebrating pretty consistently now for the last four quarters. What is your confidence that that's going to stabilize that the excess demand essentially that was kind of, you know, that occurred post COVID has worked its way out and that you should see in a re acceleration. I guess within that question, you know, are you seeing that yet?
Speaker 3: You know, moving forward with the same amount of enthusiasm and the same commitment, but obviously, you know, we're doing it in a very careful way just to make sure we don't get ahead of ourselves.
Moving forward with the same amount of enthusiasm and the same commitment that obviously, we're doing it in a very careful way just to make sure. We don't get ahead of ourselves.
Speaker 7: Okay, that's great. I appreciate that and hopefully you can still hear me. I just wanted to quickly a second question ask about
Okay Thats.
That's helpful. I appreciate that and hopefully you can still hear me I just wanted to quickly.
Christopher Morris: Is there any as you look at the trends within the quarter, you know, the quarter to date any indication that you're seeing that stabilization. You know, even even outside of some of the initiatives that seem you're really promising coming up in the next quarter or two. Yeah, let me all start and I'll turn it over to Mike just to add some additional color commentary. You know, what you're going to consistently hear from us, this is the team that's very much focused on delivering on that long term plan.
The second question asking about.
Speaker 7: Some of the new stores that you guys have opened and kind of getting sounded pretty excited about the return profile and the performance of the new stores in this environment. I'm just curious kind of any other color that you can share, how those are tracking versus other prior classes, et cetera, would be great. But I'll just say what we said is, I mean, we were consistently getting phenomenal returns. You know, we've got a great business with great margins and a great business model that delivers very strong cash run cash returns.
Some of the new stores that you guys are open to it.
You sounded pretty excited about the return profile of the performance of the new stores in this environment I'm, just curious kind of any other color that you can share how those are tracking versus prior classes et cetera would be great but no.
Well I'll just say you know what we said is I mean, we were consistently getting phenomenal returns. This is we've got a great business with great margins and a great business.
Christopher Morris: And that that's where our focus is, you know, we're excited about what we're doing. As I said, there's a clear line of sight and our ability to deliver on that plan over the long run. And so we don't really get caught up in, you know, months and months trends. What I'll tell you is, you know, look, the comparisons to the prior year are challenging. Last year at this point in time, you know, we benefited from the post COVID surge along with all of our peers.
Model that delivers very strong cash on cash returns.
Speaker 4: and we're pleased with the economics of our most recent news store openings. And so, you know, but we're gonna continue to make new unit openings of priority in our capital allocation. Great, thanks a lot.
And we're pleased with the economics of our most recent new store openings and so.
No.
But we're going to continue to make new unit openings a priority in our capital allocation.
Christopher Morris: And as we're we're lapping that that period of time on a year over your basis, you know, concert challenging. We're pleased that compared to 2019, we're still up 6% over that comparison. And we're particularly pleased and proud of the work that our team has done to navigate through this environment and still deliver on the bottom line. And most importantly, we remain, you know, as confident as ever in the initiatives that we outlined during investor day and the exciting opportunity in front of us to drive meaningful value, to add on to that thing.
Great. Thanks, a lot.
Thank you and ladies and gentlemen, as a reminder, if you'd like to ask a question. Please press Star then one our next question comes from Dennis Geiger UBS. Please go ahead.
Speaker 8: Great, thank you. I'm wondering if you could talk a little bit more about the menu enhancements or the menu of the future, which sounds particularly interesting. Could you share sort of approximately how many stores were written that test? Anything else sort of on customer feedback scores to share which I guess sounds good. And then just a quick reminder, that's ruling out across the system by the end of this month. Did I catch that correctly?
Great. Thank you I'm wondering if you could talk a little bit more about the menu enhancements or the menu of the future, which sounds particularly interesting.
Could you share sort of approximately how many stores were written that test.
Else sort of AWN on customer feedback scores to share, which I guess it sounds good and then just a quick reminder, that's rolling out across the system by the end of this month.
I catch that correctly. Thank you.
Speaker 3: Yes, you caught that for our colleagues. So let me step back. So in investor day, we set improving food and beverage as one of our six growth initiatives and specifically grown F and B attached.
Yes, you got that correctly so.
But let me step back.
So at Investor Day, we said improving food and beverage is one of our six growth initiatives and specifically growing F&B attached.
Christopher Morris: When you look back a year ago, we comped plus 17.5% in Q3. And so that is a huge number to overlap. And so when you go back versus 22, yeah, it's a tough comp. We look back at 19 and we see the still the growth in the business that we wanted to see, which is that 2% type growth on an annual basis going forward, which is a more normalized environment that you would expect to see in businesses like ours.
Speaker 3: are that that's a multi phase or you know our approach to delivering on those outcomes.
Or that's a multi phase are you know our approach to delivering on those outcomes.
Speaker 3: is a multi-phase approach. What we tested and we tested it in 10 locations was the second phase of this multi-phase approach.
<unk> is a multi phased approach what we tested and we tested it in 10 locations, but it's the second phase of this multi phase approach.
Speaker 4: But through this phase, it's been highly impactful. And done by design, what we intended to do was first, let's remove unnecessary operating complexity.
But through this phase it's been highly impactful and.
And done by design, what we intended to do is first let's remove unnecessary operating complexity.
Christopher Morris: What has us at this point, we can't control the macroeconomic factors that are driving traffic into those effects. What we do control is what happens in the four walls of our business. And that's the type of attitude and the, I say, I call it bringing it every day to control those four wall EBITDA margins. And that's the value that you're seeing in that EBITDA margin today, even in this type of environment where we can expand on those EBITDA margins. The actions that we're taking today around that will are permanent in nature and will be able to benefit us even further as traffic and an economy returns back to more normalized levels.
Speaker 3: because we want, you know, for us to deliver a consistently high quality product, we want to set our operators up for success.
Because we want.
For for us to deliver a consistently high quality product, we want to set our operators up for success and we want to invest the labor in the right areas is going to lead to quality and enhanced guest experience. So we intentionally removed.
Speaker 3: And we want to invest labor in the right areas. It's going to lead to quality and enhanced guest experience. So we intentionally removed operating complexity.
Operating complexity.
Speaker 3: We, everything that we're doing is anchored in deep research. And so we spend a lot of time understanding how our guests view our F&B offering and where the gaps are.
We everything that we're doing is anchored in deep research and so we spent a lot of time understanding how our guests view, our F&B offering and where the gaps are and through that research. We felt like that there were some areas on the menu that either.
Speaker 3: And through that research, we felt like that there were some areas on the menu that either weren't necessary. You know, our guests, you know, there was no loyalty to those items based on our research.
Jake Bartlett: Great. Thanks a lot. I really appreciate it. All right. Thank you, Jake.
Jeffrey Farmer: Our next question today comes from Jeff Farmer, Gordon Haskets. Please go ahead. Great. Thanks. Just wanted to start with following up on Jake's question.
Werent necessary. Our guests you know there was no loyalty to those items based on our research or.
Speaker 3: or we were under delivering on the execution. And so we redesigned the menu with an effort to close that gap. That was the second piece that we did. Third is there are certain areas in our execution that we thought like that were driving up food cost without really adding value to satisfaction.
We were under delivering on the execution and so we redesigned the menu.
Jeffrey Farmer: So is there anything you guys can share as it relates to how the Q2 seems for sales sort of finished relative to your internal expectations, anything that caught you guys off guard either positively or negatively? I think as you look at the back end of Q2 and what we're seeing today, it's a relatively consistent level of comp store sales. Unfortunately, it's a decline. But those levels are pretty consistent across the board.
And in an effort to close that gap that that was the second piece that we did a third is there are certain areas in our execution that.
We felt like that we are driving up food cost without really adding value to.
Satisfaction and so part of what we aim to do is to.
Speaker 3: And so part of what we aim to do is to...
Speaker 3: remove, you know, reduce that added cost to our food costs when it wasn't necessary. And so there were some steps that we're doing that added, you know, unnecessary ingredient costs that, you know, really didn't make a difference. So we changed those.
Remove.
Jeffrey Farmer: We evaluate each of the different demographics within our business. I'd say demographics of our consumer, but also from a geographic perspective. And at this point, we're not seeing any one particular group that's underperforming the rest of the demographic area as well as the geography of those types of results. Okay. That is helpful.
Reduce that that added cost to our food cost.
When it wasn't necessary and so there are some steps that were doing that added.
Necessary ingredient costs that really doesn't make a difference and so we changed those.
Speaker 3: So all of those are in our phase two. And as you can see in the results in that 10 unit test, we're very pleased to be kind of hit on all marks.
So all of those are in our phase two.
And as you can see in our results in that 10 unit tests were very pleased to be kind of hit on all marks.
Speaker 4: And the next phase will be launched, you know, so to roll this out across the system takes time. And so we're being thoughtful about it. We roll out phase two to end of September . And then phase three will be in February next year. And at that point in time, phase three will include additional innovation. We'll really start to push the envelope on, you know, you know, new products. We'll, we'll,
Michael Quartieri: And then it looks like you guys saw roughly 250 basis points of food and beverage cost favorability year over year. The question is, so a lot of things can impact that. So either cost initiatives, menu pricing, commodity inflation, can you help us understand what drove that level of 250 basis points, which was more than doubled, more than doubled what you saw in the Q1. And then as we move forward, how should we be thinking about that?
And.
The next phase will be launched so to roll this out across the system. It takes time and so we're being thoughtful about it we rollout phase two to the end of September and then phase three will be in February next year and at that point in time.
Phase III will include additional innovation will really start to push the envelope on.
New products.
Well.
Speaker 3: you know, be very intentional about instore marketing and at the same time we'll be rolling out an enhanced service model.
It will be very intentional about in store marketing and at the same time, we'll be rolling out an enhanced service model.
Michael Quartieri: So just understanding the drivers of that cost favorability and how we should be thinking about it moving over the next two quarters. Yeah, so when you look at the improvement in the cost of goods sold line for food and beverage, there's a couple of aspects. One, we haven't done anything from a pricing perspective between Q1 and Q2. So pricing there is consistent. The benefit comes from continued work from a synergy perspective.
Speaker 4: given our operate as the tools that they need to really deliver in a big way.
Given our operators the tools that they need to really deliver in a big way.
Speaker 3: So it's fairly, you know, it's thoughtful and, you know, strategic and, you know, multi-step. So.
So it's fairly.
It's thoughtful and.
Strategic and.
Multi.
Multi step so.
We're pleased.
That's very helpful color I appreciate that just one more.
Speaker 3: very helpful color. I appreciate that. Just one more.
Speaker 3: wanted to start to ask a little more on promotions and marketing campaigns going forward over the coming quarters. I think I highlighted some as it relates to for the football season, which sound compelling. But can you talk maybe a little more about at a high level, at least, about perhaps what the next 12 months may look like in thinking about promotions and campaigns related to historical, maybe you don't want to say.
Wanted to just try to ask a little more on promotions and marketing campaigns going forward over the coming quarters.
Michael Quartieri: As we've gone through kind of the second round of contracts where contracts that were fixed in nature needed to run their term. And then we were able to then consolidate the procurement volumes and go after that from a cost-safe perspective. As Chris spoke to during his prepared remarks, we're testing new menu items that yield a cost- benefit to us from a cost of the sales perspective. And then lastly, as we always look for more improvement from prep time and things of that effect, the ability from a commodity perspective, we are seeing relative consistency, commodities quarter to quarter, so we're benefiting on a commodity basis relatively as a straightforward from Q1 at about 3% improvement on a year-over-year basis. Okay, thank you very much.
I noted some as it relates to the.
Michael Quartieri: Well, thank you.
Both season, which sound compelling, but can you talk maybe a little more about it at a high level at least about perhaps what the what the next 12 months may look like in thinking about promotions and campaigns relative to historical.
Maybe you don't want to say.
Speaker 3: too much for competitive reasons, but just thinking about where food costs are, et cetera, and maybe what that allows you to do from a promotional standpoint. Just curious if anything additional to share there on the GoFullware. Thank you.
Too much for competitive reasons, but just thinking about where food costs are et cetera, and maybe what that allows you to do.
From a promotional standpoint, just curious if anything additional to share there on the go forward. Thank you.
Speaker 4: Nothing to share at this point in time. We're still in the process of finalizing our marketing calendar for next year. And so our team is very focused on building out an exciting marketing calendar. And so more to come on that, but nothing to share at this point in time.
Nothing to share at this point in time, where we're still in the process of finalizing our marketing calendar for next year and so our team is.
You know very focused on building out.
An exciting marketing calendar.
And so more to come on that but nothing to share at this point in time.
Brian Zikaro: Thank you, and our next question today comes from Brian Zikaro with Raymond James, please go ahead. Hi, thanks and good evening. I just wanted to ask about the comps again, and just sort of the cadence to sell through the quarter. Obviously, comps down in the 60s now, and I just want to get your perspective on what you think is driving that sequential softness, and just sort of the healthier consumer. Yeah, I think you mentioned it's not concentrated in any area, but is there anything you're seeing day part or week day versus weekend or F&B versus amusement?
Speaker 4: The calendar, the fall football campaign that we just launched this week, we're pretty excited about that. One, it just gives us more opportunity to highlight the great sports watch offer that we have in the marketplace.
The calendar.
The fall football campaign that we just launched this week, we're pretty excited about that.
One it just gives us more opportunity to highlight the great sports watch offer that we have in the marketplace.
Brian Zikaro: It's just any incremental context on what you think is driving the sequential softening. Yeah, Brian, I'll take that and then let Q wrap it up. First thing I'll say is I'll repeat what I said to Jake earlier is, you know, last year, you're part of what we're dealing with, is just a tough comparison to the prior year, just with the post-COVID surge and, you know, our performance last year benefited from that just as our peer group did.
Speaker 4: Number two is from our research, we know that the consumer is gravitating to value driven messages. So based on our concept testing, we feel like the $5 bite messages and messages is going to resonate very well.
Number two is from our research we know that the consumer is grab.
Gravitate into value driven messages and so based on our concept testing, we feel like the $5 byte messages a message that's going to resonate very well.
And then the rolling out all you can eat wings, we went back and looked at times looking at what the.
Speaker 4: In the last time we did this and we talked to our operators and we're pretty encouraged about
The last time, we did this and we talked to our operators.
And we're pretty encouraged about.
Speaker 4: you know what we're doing on all you can eat wings, this go around, it appeared to be a nice traffic mover in the past and what we've done is we've re-tooled that to be even more effective. So again, just working closely with our operators to make sure we're setting them up for success. So we like the message, we like the marketing plan for the remainder of this year and we're pretty optimistic.
What we're doing on all you can eat wings. This go around it and it appeared to be a nice traffic mover in the past and what we've done is we've retooled that to be even more effective.
So again, just working closely with our operators to make sure we're setting them up for success.
Brian Zikaro: And so there is a bit of a tough comparison, and as I said, you know, when we compare ourselves to 2019, first, we're pleased with the growth from 2019. Secondly, there was really no material trend in the business throughout the quarter. It was fairly consistent. As we always do, we've analyzed the heck out of our business, slicing and dice it every single way. What I'll tell you is there was nothing meaningful that came out of that.
So.
We like the message, we like the marketing plan for the remainder.
This year and we're pretty optimistic.
That's great I appreciate it thank you.
Yes. Thank you. Thank you gentlemen, this concludes our question and answer session I would like to turn the conference back over to the management team for any final remarks.
Speaker 2: ladiesand gentlemen this includes our question-and-answer session I'd like to turn the conference back over to the.
Speaker 4: Okay, all right. Thank you very much, operator. In closing, we'd like to commend our team for the exceptional results they continue to produce across our growing portfolio of Dave and Buster's and main event stores. Thank you all for joining. We look forward to speaking with you again next quarter and keeping you apprised of our continued progress and our strategic initiatives. Have a great day. Thank you.
Okay. All right. Thank you very much operator in closing, we'd like to commend our team for the exceptional results. They continue to produce across our growing portfolio of Dave and Busters and main event stores. Thank you all for joining we look forward to speaking with you again next quarter and keeping you apprised of our continued progress on our strategic initiatives have a great day.
Brian Zikaro: We think that it was just overall relative to 2002. There was just a decline. So there's not one thing that we could really point to that would suggest that it's related to a shift in consumer behavior in terms of how they're trading that Dave and Buster's are anything along those lines. I think one thing to add on that, what we are seeing is for the customers that are coming in, they are spending at consistent levels of what we historically have seen in that posting COVID environment. So when you look at our mix between revenues, between amusement and food and beverage, we're still kind of holding at that one third, two thirds with the two thirds being on the amusement side.
Thank you. This concludes today's conference call. Thank you all for attending today's presentation.
Now disconnect your lines and have a wonderful day.
Christopher Morris: Okay, thank you for that. And just on the initiatives to optimize your pricing on the games, could you elaborate on the changes that you're making that will have an impact beginning in the fourth quarter, just some of the specifics there and any any ballpark of how much of a pricing benefit you expect that to yield starting in the fourth quarter. And then also I think you were thinking about and maybe testing raising the buy-in, the minimum buy-in level, maybe from $15 to $20 of memory serves.
Christopher Morris: Have you made a decision on that from that front? Yeah, so I'll give you the two main takeaways. One, towards the end of the quarter, so there was really no benefit in Q2. We did adjust the rate card, which is the buy-in at the kiosk. So it then it goes from 20 to 30 to 40 to 50. The dollar value per chip that the customer receives is consistent. So it really wasn't much of a quality price change as it was a change in just the buy-in amount at the minimum level and then it went up through there.
Christopher Morris: The other aspect of what we're looking to accomplish is, we've talked before, one of the strategic unlocks in pricing is the ability to alter pricing between geographic areas. So no different than when you look at food and beverage costs in major metropolitan areas, usually costs more from a price point than in more regional markets or smaller towns. Right now our limitation is that all pricing for all games is consistent across the entire system.
Christopher Morris: We're now able to unlock that and be able to put regional pricing in place, which will start going into test in the next couple of weeks. One of the key things we want to do though in doing such is make sure that we maintain the value of our product offering in relation to our peers. So from that respect, we haven't communicated nor would we what we think that estimated growth would be in queue for, but we would expect there to be something there.
Christopher Morris: All right, thanks. And then just the last one for me if I could. I appreciate the update you provided on certain initiatives that you laid up the analyst day. But I know it's early days, but can you elaborate on the customer response you've seen and the friends would remodel any specifics on how the social bays are performing or other specific changes that you made that are driving the increase. Most meaning play.
Christopher Morris: Thank you. Yeah, happy to do so. I mean, it's we're very pleased with the guest response in the community on all aspects of the remodel to be perfectly frank. As we said in our prepared remarks, you know, it's only three weeks. It's only one store. And so, you know, we're trying to be guarded and in our enthusiasm. But, you know, over the last three weeks, that friends, that particular unit has outperformed our expectations.
Christopher Morris: So we're feeling very good about what we'll be able to do with remodels. And we feel very good about expanding our entertainment offering and doing it in a way that we think is that the heart and center of what a DMB guest is looking for. So so far, so good. All right, I'll get back in the queue. Thank you.
Andrew Strelzik: And the next question today comes from Andrew Strelzig with. BMO, please go ahead. And again, afternoon. Thanks for taking the questions. My first one, you know, appreciating certainly that you can't affect the macro environment. You know, I guess the question how you're thinking about balancing the multi strategic planning implementation of that versus like flexibility on the on the mirror in opportunities. And so I guess, you know, sounds like there's more value on the F and B side, some of the other changes that you talked about. Some are marking around football. I mean, do you think that that addresses kind of what? Andrew, we lost you. Andrew, we're having a connection problem. Yeah, we lost you right after you said.
Christopher Morris: Did you mind just starting from the beginning? Yes. Can you hear me now? I just want to make sure you have the flexibility of a plan in your term. As you, you know, kind of navigate what isn't a macro that you cannot control. You think about the price of opportunities differently. Are there any other programs that you can implement that you're thinking about to be adaptable to the current macro? Yeah, well, the short answer is, you know, we're very mindful of how we navigate the business during this period of time is still delivered on our long-term goals.
Christopher Morris: You know, a big part of that is how we're managing the cost structure. And, you know, as I said a minute ago, I'm very proud of all the work that our team is doing to manage the middle of the panel. And when, you know, we can navigate through this type of environment and still deliver on the bottom line, that provides just a tremendous amount of flexibility and gives us confidence to continue to invest in the right areas of the business.
Christopher Morris: With all that said, though, you know, we're moving forward with highs wide open and being very mindful of not getting too far ahead of ourselves on investment spending and ensuring that we're balancing all sides of the business. I don't see at this point in time, we're not seeing anything that would suggest that we're going to that we need to rethink our strategic priorities. We're still just as committed as we as we were June 13 on the areas that we outlined with you.
Christopher Morris: Where we see, you know, where we see some momentum in the business is on the food and beverage changes that we're making. And so the space that we tested and that we're going to be rolling out in September, we feel great about the results that we're driving. And that's, you know, that's a very thoughtful approach to food and beverage. It's not just recipes. It's, you know, how the menu, how we deliver on that menu at the store level and drive a great guest experience.
Christopher Morris: That's something that we're going to continue to push forward on. You know, then hand service model to be able to promote that phenomenal food and beverage offering and to drive a touch. You know, that's something that we continue to be focused on. Special events is an area. You know, so all the areas that we outlined at this point in time, we're still you know, moving forward with the same amount of enthusiasm and the same commitment. But obviously, you know, we're doing it in a very careful way just to make sure we don't get ahead of ourselves. Okay, that's great. It's helpful. I appreciate that, and hopefully you can still hear me.
Christopher Morris: I just wanted to quickly, as a second question, ask about some of the new stories that you guys have opened, and kind of the media sounded pretty excited about the return profile and the performance of the new stores in this environment. I'm just curious, kind of any other color that you can share, how those are tracking versus other prior classes, etc, would be great. But I'll just say, you know, what we said is, I mean, we were consistently getting phenomenal returns.
Christopher Morris: You know, we've got a great business with great margins and a great business model that delivers very strong cash and cash returns. And we're pleased with the economics of our most recent new store openings. And so, you know, but we're going to continue to make new unit openings and priority in our capital allocation. Great. Thanks a lot.
Operator: Thank you.
Dennis Geiger: And ladies and gentlemen, as a reminder, if you'd like to ask a question, please press star then one. Our next question comes from Dennis Geiger, UBS. Please go ahead. Great. Thank you.
Dennis Geiger: I'm wondering if you could talk a little bit more about the menu enhancements or the menu of the future, which sounds particularly interesting. Could you share a sort of approximately how many stores were written that test? Anything else sort of on on customer feedback scores to share, which I guess sounds good. And then just a quick reminder, that's rolling out across the system by the end of this month. Did I catch that correctly?
Dennis Geiger: Thank you. Yes, you caught that for actually so let me step back. So in investor day, we said improving food and beverage was one of our six growth initiatives and specifically grown F&B attached. That's a multi phase or, you know, our approach to delivering on those outcomes is a multi phase approach. What we tested and we tested it in 10 locations was the second phase of this multi phase approach. But through this phase, it's been highly impactful.
Dennis Geiger: And, you know, and done by design what we intended to do is first, let's remove unnecessary operating complexity because we want, you know, for us to deliver a consistently high quality product, we want to set our operators up for success. And we want to invest labor in the right areas that's going to lead to quality and enhanced guest experience. So we intentionally removed operating complexity. We, everything that we're doing is anchored in deep research.
Dennis Geiger: And so we spent a lot of time understanding how our guests view our F&B offering and where the gaps are. And through that research, we felt like that there were some areas on the menu that either weren't necessary. You know, our guests, you know, there was no loyalty to those items based on our research or we were under delivering on the execution. And so we redesigned the menu with an effort to close that gap.
Dennis Geiger: That was the second piece that we did. Third is there were certain areas in our execution that we felt like that were driving up food costs without really adding value to satisfaction. And so part of what we aim to do is to to remove, you know, reduce that added cost to our food cost when it wasn't necessary. And so there were some steps that were doing that added, you know, unnecessary ingredient costs that, you know, really didn't make a difference.
Dennis Geiger: And so we changed those. So all of those are in our phase two. And, you know, as you can see in the results in that ten unit tests, we're very pleased. We kind of hit on all marks. And the next phase will be launched, you know, so, you know, to roll this out across the system takes time. And so we're being thoughtful about it. We roll out phase two to end of September.
Dennis Geiger: And then phase three will be in February next year. And at that point in time, phase three will include additional innovation. We'll really start to push the envelope on, you know, you know, new products. We'll, we'll, you know, be very intentional about in-store marketing. And at the same time, we'll be rolling out and enhanced service model. Given our, our operative, the tools that they need to really deliver in a big way. So it's fairly, you know, it's thoughtful and, you know, strategic and, you know, multi-step.
Dennis Geiger: So we're pleased. Very helpful color. Appreciate that.
Dennis Geiger: Just one more. I wanted to say to ask a little more on promotions and marketing campaigns going forward over the coming quarters. I think I highlighted some as it relates to for the football season, which sound compelling. But can you talk maybe a little more about, at a high level, at least about perhaps what the, what the next 12 months may look like in thinking about promotions and campaigns related to historical, maybe you don't want to say too much, you know, for competitive reasons.
Dennis Geiger: But just, you know, in thinking about where where food costs are, et cetera. And maybe what that allows you to do from a promotional standpoint. Just curious if anything additional to share there on the go forward. Thank you. Nothing to share at this point in time. We're still in the process of finalizing our marketing calendar for next year. And so, you know, our team is, you know, very focused on building out an exciting marketing calendar.
Dennis Geiger: And so, you know, more to come on that, but nothing to share at this point in time. The calendar, the fall football campaign that we just launched this week, you know, we're pretty excited about that. You know, one, it just gives us more opportunity to highlight the great sports watch offer that we have in the marketplace. Number two is, you know, from our research, we know that the consumer is gravitating to value driven messages.
Dennis Geiger: And so, based on our concept testing, we feel like the $5 bite messages and messages kind of resonate very well. And then the rolling out, all you can eat wings, you know, we went back and looked at time, you know, look at what the last time we did this and we talked to our operators. And we're pretty encouraged about, you know, what we're doing on all you can eat wings, this go around.
Dennis Geiger: It appeared to be a nice traffic mover in the past. And what we've done is we've retooled that to be even more effective. So, again, just working closely with our operators to make sure we're setting them up for success. So, we like the message. We like the marketing plan for the remainder of this year and we're pretty optimistic. That's great. Appreciate it.
Dennis Geiger: Thank you.
Christopher Morris: I would like to turn the conference back over to the management team for any final remarks. Okay. All right. Thank you very much operator. In closing, we'd like to commend our team for the exceptional results they continue to produce across our growing portfolio of Dave and Buster's and main event stores. Thank you all for joining. We look forward to speaking with you again next quarter and keeping you apprised of our continued progress on our strategic initiatives. Have a great day. Thank you.
Operator: This includes today's conference call. We thank you all for attending today's presentation. You may now select your lines.