Q3 2023 Dave & Buster's Entertainment Inc Earnings Call
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Good day, and welcome to the Dave and Busters third quarter 'twenty 'twenty earnings Conference call, all participants will be in a listen only mode.
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I'd now like to turn the conference over to Corey.
Cotton life's president of Investor Relations and Treasurer. Please go ahead.
Thank you operator, and welcome to everyone on the line.
In today's call will be Chris Morris, our Chief Executive Officer, and Mike <unk>, 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 <unk> Buster's Entertainment incorporated and is copyrighted.
Before we begin the discussion on our company's third quarter 2023 results I'd like to call your attention for 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 Securities Litigation Reform Act of 1095.
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.
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-GAAP measures to the comparable GAAP measure contained in our earnings announcement released this afternoon.
With that it is my pleasure to turn the call over to Chris.
Alright. Thank you Corey good afternoon, everyone and thank you for joining our call today.
In our third quarter of fiscal 2023, we generated revenue of $467 million and adjusted EBITDA of $82 million, both of which are slightly below the third quarter of fiscal 'twenty, two but meaningfully above the third quarter of 2019, even after adjusting for the acquisition of the main event.
We are operating in a unique and complex macroeconomic environment as we lap challenging comparisons to the prior year driven by robust post COVID-19 demand.
Despite these dynamics I am proud that due to the efforts of our talented and dedicated team as well as the strength and resiliency of our business model year to date in 2023, we have grown both revenue and adjusted EBITDA and have expanded adjusted EBITDA margins relative to the same period in fiscal 2022 on a pro forma basis.
Yes.
We'd also like to highlight that year to date, our revenue and adjusted EBITDA are also up meaningfully relative to 2019, even after adjusting for the acquisition of the main event and our adjusted EBITDA margins are up 390 basis points relative to 2019 nearly double the previously communicated.
So it's 200 basis point margin improvement.
Additionally, we are pleased to report that during the quarter, we have made significant progress against our key growth initiatives.
Okay.
Further detail in a moment, but on the organic growth front, we have seen meaningful success in the test we have implemented.
Our marketing pricing food and beverage Remodels and special event initiatives, which we will be rolling out across the broader portfolio in the coming weeks and months.
And which we expect will lead to substantial improvement in revenue profitability and cash flow.
As it relates to cost we have maintained a relentless focus on finding efficiencies and had success it will reduce our recurring cost base.
Furthermore, we have continued to open new stores at a highly attractive returns on investment and have continued to opportunistic we opportunistically return capital to shareholders in a highly accretive manner.
We remain as confident as ever in the billion dollar adjusted EBITDA target, we indicated during investor day and remain laser focused on delivering that result in the coming years.
I'd like to take a moment to go into more detail on the progress on our six key organic growth initiatives first marketing optimization.
We believe there is a huge opportunity to improve both conversion and guest frequency by making sure we get the right message to the right people at the right time.
During the quarter, we made significant progress towards that goal.
Through targeted investments and our new marketing technology infrastructure, we are building out our digital marketing engine, which we remain confident we'll begin bearing fruit in the early part of fiscal 2024.
With a particular focus on quick wins, we have already launched pilots across both owned and paid channels designed to provide a specific data driven learnings on how to effectively target both known and unknown guests.
That will enable us to engage with our guests more effectively and efficiently with personalized communications.
We will scale the learnings from the initial pilots in additional tests scheduled for the fourth quarter to inform our digital strategy efforts in 2024.
Ultimately this digital marketing engine will help us acquire more high value guest and increased frequency.
As well as lifetime value from our existing guests by better leveraging our data and technology to increase personalization and enhance the guest experience.
We already know the immense value of getting this right as previously disclosed guests in our loyalty database, which is now $5 4 million users already visit over 50% more frequently and spend approximately 15% more on each visit versus non loyalty guests.
Yeah.
Second strategic game pricing.
We historically have not had a robust gains pricing strategy as game prices were stagnant for decades and gain prices will also consistent across all regions nationwide. Despite obviously different economic conditions in different parts of the country.
We believe there is a significant opportunity to grow same store sales by strategically increasing gain prices, while still maintaining our strong our strong value proposition.
During the quarter, we initiated certain technology investments to facilitate our new gaming system, which will give us our desired capabilities to optimize the price of our games.
In advance of implementing the new system.
We have been testing a number of strategies to unlock a portion of the pricing opportunity in certain areas.
Okay.
Within our current system. These tests have shown encouraging results, which we will continue to fine tune ahead of rolling out across a broader portfolio in the coming weeks and months.
Third improved food and beverage we've talked a lot about the substantial improvement or I'm, sorry, the substantial opportunity, we see to improve the overall quality of our F&B offering.
During the last quarter, we spoke about a multi phased approach we are taking to rollout the dnb menu of the future. We also told you about the success. We saw during the initial test phase phase two which was designed with a sharp focus on operational execution by removing unnecessary complexity in the back of the house and improving speed of service to improve overall food.
Quality and drive more throughput at peak.
We are pleased to report that we launched phase two system wide on September 25th.
And it has had a positive and an immediate impact.
And only five short weeks of contribution to the third quarter the phase II menu drove.
Approximately 5% increase in food and beverage revenue per check and an almost 100 basis point improvement in F&B Cogs, all while improving the speed of service and overall food quality of the guest dining experience.
Simultaneous with the go live with Phase two we started testing phase three of our D&B menu in the future in 10 stores.
That assuming success, we would plan to launch system wide in April of 2024.
Phase III is particularly exciting for us as it is designed with the objective to further increase F&B sales through targeted culinary innovation around our appetizers bowls desserts and sides.
The lines with our new hospitality model and better meets the need states of our entertainment oriented guest.
Already in phase III testing, we're seeing incremental improvement in food shack.
Overall satisfaction scores and F&B attach rates above and beyond.
The favorable phase II results.
Fourth remodels.
While we believe our current stores deliver very high quality experience to our guests. We believe there are significant scope to remodel our store base as the majority of our boxes today essentially had the same look fuel layout and offerings as they did more than a decade ago.
After significant research and analysis, we've designed a remodel program that not only approve the physical appearance of our stores, but also represents the culmination of an interrelated strategic reset and how we will run our business more efficiently and better meet the need states of our guest.
Specifically, our remodel program was designed to accomplish the following.
Grow overall revenue through the introduction of disruptive entertainment product news.
Improved F&B sales through one a reconfigured dining room, improving operational execution and to an elevated and relevant new design.
Gross special event sales through the introduction of more group related entertainment options.
Improved guest engagement and gather important guests data analytics through the introduction of a digital guest platform.
And finally improve brand relevancy and attempt to return to refresh modern look and feel.
During our last call we had highlighted encouraging results from the first few weeks of the initial remodel test of our store in Friendswood, Texas.
While still early in its still just one store we are pleased to report.
But the encouraging financial results, we saw from our friends would store have not only continued but improved over the last few weeks and has exceeded our expectations driving a double digit sales uplift compared to the prior year and up more than 30% of sales uplift compared to 2019.
In addition to driving significant overall sales growth, our food and beverage mixes up nearly a full percentage point special event sales are up over 45% net promoter scores are up 15%. Our loyalty membership has increased at a faster rate than the rest of the system.
And we now have important guests data on thousands of guests through our digital guest engagement platform.
Notably based on what we're seeing we are highly confident this remodel is on pace to hit or exceed our target return threshold.
And we expect to value engineer, our future remodels to have an even better rois.
Given the initial encouraging results, we've instructed our development team to put us in a position to meaningfully accelerate the overall pace of remodels to the extent that results for future Remodels remain consistent with what we've seen so far as of now we plan to complete eight additional remodels in the fourth quarter of 2023 and three additional <unk>.
Remodels in early fiscal 2024.
Additionally, we have already begun permitting a significant number of additional remodels sites for fiscal 'twenty 'twenty, four and assuming success at additional test remodels.
We'll be in a position to complete a total of 40 to 45 remodels by the end of fiscal 2024 with the majority of the remaining D&B system remodeled by 'twenty 'twenty, five and 'twenty 'twenty six.
The upcoming remodel test results will continue to formulate our go forward plan with a strict stage gate process to ensure achievement of our target return on capital thresholds for all remodel capital.
Fifth special events, we continue to reinvigorate and put additional resources behind our special event business, which has allowed us to take a more aggressive approach to outbound prospecting at Dave <unk> Buster's brand.
We are seeing we are already seeing dividends and a 20 stores, where we embedded the dedicated sales manager earlier this year as they are pacing, 80% higher in terms of special event upsell revenue growth in the stores with our dedicated sales managers.
We have implemented several additional items at our special events product offering that are empowering our sales teams to drive more incremental revenue.
Our holiday showcase events, where we demonstrate our superior special events offerings to groups, both virtually and in person had nearly double the attendance of the prior year and.
In addition, our new Fms launched.
To engage with our special event customers will have a large impact on conversion and lead to additional repeat business.
All of this provides significant momentum in the fourth quarter, where we expect to eclipse pre pandemic levels and have already booked as many $10000 plus events for the quarter as we did in the entire fourth quarter of 2019.
Six technology enablement, we are powering the growth of all strategic initiatives through an optimized service model.
Enterprise game game ecosystem, New store I T infrastructure and improved data analytics.
At the beginning of the at the beginning of November we completed the domestic rollout of one day in server tablets, which enable our guests facing team team members to execute ordering and the closing of transactions from the palm of their hands. We are on track to have 61, D&B stores with updated it infrastructure by the <unk>.
Ended the year with the remainder complete in 2024.
With our adoption of our new ERP, we have streamlined the integration of our back office systems to maximize real time actionable insights for our teams and we are driving innovation with new football traffic technology that is being tested in three locations with the anticipation of a system wide rollout.
In 2024.
We strongly believe these initiatives will lead to additional revenue and adjusted EBITDA.
And we are laser focused on generating an attractive return on the rate on the required investments in this area.
In aggregate, we're confident these organic growth initiatives are trying to drive our business forward and create significant shareholder value.
We have conviction that we are focused in the right areas, making the right investments and that our recent operational achievements are indicative of the progress we're making towards this long term goal.
Our team of talented general managers and managing partners are doing a phenomenal job driving down labor cost, while improving overall satisfaction scores by implementing efficiencies in our back of house operations to reduce hours and redeploying a portion of those hours to front of house labor, particularly during peak.
Times.
We are confident that these efforts combined with the ongoing benefit of synergies.
A dramatically improved supply chain driving lower cost of goods sold and additional progress we were making in all areas of the business to sustainably to sustainably lower this company's cost base are creating a far more efficient and profitable organization overtime.
Furthermore, we continue to successfully open new stores, we opened three stores in the third quarter and we are on pace to open six additional stores in the fourth quarter three of which have already been opened.
This brings us to an expected total of 16 new stores in fiscal 2023.
We are very pleased with the performance of our new stores, which continue to generate highly attractive returns on investment.
On the international front with our previously announced franchise partnership in the Middle East, India, and Australia, We look forward to breaking ground on four international locations in fiscal 2024 with more announcements to come as we finalize partnership agreements and additional international geographies.
Acting upon.
Our confidence in our long term plan.
Our consistently strong free cash flow profile, our desire to return capital to shareholders and our conviction and the dislocation of our our valuation in the market, we repurchased $100 million worth of our shares in the third quarter and have now bought back 17, 5% of our <unk>.
Shares outstanding year to date in 2023.
While we will continue to prioritize high or high return on investments in this business and building new stores at attractive cash on cash returns. We will also continue to opportunistically and aggressively buy back shares when our shares trade materially below our view of fair value.
So with that now let me turn the call over to Mike to review, our third quarter results. Thanks, Chris.
I'm pleased to report financial results for the third quarter, which highlight our resilient business model and strong margin profile, we generated third quarter revenue of $467 million and adjusted EBITDA of $82 million for an EBITDA margin of 17, 5%.
A 350 basis point margin expansion versus the same period in 2019.
Net loss in the third quarter totaled $5 $2 million or 12 cents per diluted share.
We reported $400000 of adjusted net income or 1% of adjusted earnings per diluted share reconciliations of these non-GAAP financial measures can be found in today's press release.
Pro forma comparable store sales decreased seven 8% versus 2022, as we continue to lap robust prior year periods from a top line perspective.
As a reminder, in the third quarter, we are lapping over a third quarter of 2022 that had a 17, 5% comp to 2019.
On the same pro forma consolidated basis, when we look back at a more normalized level of business. We were up eight 1% versus the third quarter of 2019 led by the continued strength of our entertainment business.
Importantly, this eight 1% growth versus 2019 marks an improvement in trends relative to the second quarter of fiscal 'twenty, three which we interpret as a positive indicator that our most challenging comps are behind us.
Our special events business continues to recover with comparable sales up four 8% on a year over year basis.
In the third quarter and down only 3.5% in comparison to pro forma 2019 levels as.
As Chris stated earlier, we remain confident that the recovery trend fueled by our strategic investments will continue into the fourth quarter of four our special events business, where we expect to exceed 2019 levels on a comp store sales basis.
Despite the comp.
Down we generated $78 million in operating cash flow during the third quarter.
$2 $9 billion more than the $67 $9 million of operating cash flow generated in the prior year period.
Contributing to an ending cash balance of $64 million for total liquidity of $554 $2 million.
When combined with the $492 million available on our $500 million revolving credit facility net of outstanding letters of credit.
We ended the quarter with a net total leverage ratio of two three times as defined under our credit agreement.
We entered into a sale leaseback transaction for four operating Dave and Busters stores in the third quarter generating proceeds of $85 $8 million.
Net of sale leaseback proceeds received these stores are on track to generate significantly more attractive cash on cash returns than the already great returns on our remaining new store portfolio.
We are encouraged by the strong demand for our unique real estate assets and feel the long term partnerships that we've cultivated with our landlords and greater REIT community is a testament to the confidence that they have in our business model and our long term operational capabilities.
Based on our current development pipeline, we anticipate having an additional four owned and operating real estate assets by the end of fiscal 'twenty three.
With an additional seven owned real estate assets commencing operations in fiscal 'twenty four.
And another seven coming online in fiscal 'twenty five for a Grand total of 18 locations with owned real estate across both brands over the next two fiscal years.
We believe these wholly owned assets will provide us with financial flexibility to opportunistically and maximize the value of our real estate, providing us with significantly more capital to invest in our business or return to shareholders.
In the third quarter, we repurchased two 8 million shares at a total cost of $100 million.
As Chris mentioned total share repurchases to date in fiscal 'twenty, three or $8 5 million shares totaling $300 million and representing 17, 5% of our shares outstanding at the beginning of the year, we still have $100 million remaining on our board approved share repurchase program.
Turning to capital spending we invested a net total of $67 $4 million in capital additions during the third quarter.
Opening two new Dave <unk> Busters, and one new main event location, we've already opened three new Dave <unk> Busters during the fourth quarter of fiscal 'twenty three one in Colorado Springs, Colorado, Another in Lafayette, Louisiana, and a third in Pooler, Georgia and we are on track to open the remaining three Dave and Busters stores in.
The next few weeks, bringing us to a total of 16 new stores across both brands during fiscal 'twenty three.
To summarize we took advantage of our strong balance sheet liquidity and credit profile in the quarter to continue to invest in the business open new stores advance our remodel plans enter into a sale leaseback for the Ford D&B properties and return capital to shareholders via the $100 million share repurchase.
We are encouraged by the progress we are making in the quarter laying the foundation of investments related to our long term strategic plan and managing cost to continue to drive our recurring cost base lower.
The future is bright for this organization that we feel the actions. We're taking today are setting us up for many years, our financial success to come.
And with that operator, I'll open up the line for questions.
Thank you we will now begin the question and answer questions to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing dickies.
In fact any time your question has been actress and you would like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble or not yet.
Our first question comes from Andy Barish with Jefferies. Please go ahead.
Hey, good afternoon guys.
Just trying to get a sense of kind of the you know the underlying comparisons.
As we move through the fourth quarter or anything we should be aware of.
You know calendar shifts and all of that I know theres a lot, but I guess the bottom line is this.
Yeah, the trends versus 19, as you talked about sequentially better than the three Q then the two Q is it.
Is that something we should expect to continue here as we move into the holiday season and such.
Yeah, Hey, look I mean I.
I don't think there's anything really necessarily around the calendar shift in the fourth quarter should be relatively consistent with what you saw last year in fiscal 'twenty two.
I think from a trends perspective, you know look the trends relative to 'twenty, two and 19 have improved throughout the third quarter.
Subsequent to the quarter, especially on a walk inside a trends have continued to improve relative to last year and into 2019. However, most of the quarter is still ahead of us.
Just to give perspective November represents about 25% of our business in the quarter. So with seven nearly 75% still to go I think it's still too early to read too much into that at this point.
On a special event side since the quarter ended.
There's been a bit of a bit of a shift in the special events calendar.
So recent trends that we're seeing over the first five weeks of the quarter are meaningless at this point.
But any of that calendar shift gets taken care of in the quarter. So when youre looking quarter to quarter. There is no material shift as I've mentioned before.
But all in all a look given what we're seeing in the business. We remain confident that what we're doing is working.
And that we're ultimately going to be very successful in driving this business forward.
And then the one thing I'll add to that Andy is on special events. So as Mike said, there there is a calendar shifts and special events. However, when we look at our special events business. This year relative to prior year and relative to 2019 on a same week basis. So we've taken it into account.
That shift in weeks, we continue to see meaningful progress against where we were in 2019 and and certainly 2022.
So we feel very good about the effort, we're putting the special events.
And the impact that we're having on the business and feel very good about being in a position to.
Come in significantly ahead of 2019.
On special events got it.
Got it thanks, guys and then just one one quick follow up just to level set on.
On pricing I mean, you laid out in the strategic plan that kind of three year games pricing would be about 10%.
You know.
About 3% annualized I know that could could differ but how do we think about sort of the rollout right now changes in in tiered pricing you know by geography and then.
The potential for dynamic pricing I guess in 'twenty four how should we sort of think about what's in the numbers now or what you have visibility on for the next year or so.
Yeah. So.
Go through a good question, Chris can chime in and add.
Add to it so when we look at the strategic pricing.
We're in the process right now running tests and as we evaluate those tests will make adjustments. Accordingly, we are very aware that we want to maintain a value proposition, especially this.
Juncture, where the economy is in a hole.
However, regardless of that we still have full conviction that the amounts that we laid out in investor day over the long term period call. It that three year period will be achieved.
Achieved and part of our ongoing process.
To get to some of the other components of that pricing increase we need the new.
Game system to be installed that is on the roadmap to be done next year and 24. So we will see more things like you've had like on dynamic pricing and other intricacies to that effect would probably not hit until very late 'twenty four or probably in the 25 at this point.
Understood. Thank you guys.
Got it.
The next question comes from Jeff Farmer with Gordon Haskett. Please go ahead.
Good afternoon, and thank you.
A few quick questions. So first would be just.
On the loyalty membership understanding how that will be incredibly important in sort of that digital marketing journey, but can.
Can you help us understand the efforts that you guys have in place or will have in place to help drive loyalty membership ranks.
Yes sure Jeff.
Well the first one we were the.
But when we walked through all the opportunity on our marketing authorization there is.
As we've said many times there is tremendous opportunity to be more effective with our approach to marketing within that.
We believe strongly that there is incredible opportunity to improve our approach to digital marketing.
And.
That is the.
The past year, we've been hard at work, putting all the foundational building blocks in place so investing in all of the technology that will help us drive digital marketing and to maximize that opportunity. So when we think about you know the benefit of growing the loyalty database.
Clearly there is an opportunity.
For us to at the more engaged we are with our guests in a better position, we're going to be able to deliver a service model for that guest is tailored for the guest and are better positioned to deliver personalized messages to the guests and so we clearly see an opportunity to.
Build out our loyalty platform and and as we do that to improve both sides of it the service model as well as our marketing performance.
And the ways that we will do that is you know first we rolled out a mobile app instead of that was step one we intend over the next several years, we're just going to continue to make that that app better and better and so we will continue to refine it and and as we do we will be testing and learning and so we believe that.
There is incredible.
Opportunity. There secondly, we believe that there's an opportunity to and we've seen this in our remodeled store to improve our digital guest engagement platform at the store level and so being very deliberate about how we how.
How we.
Migrate our guests through the entire guest journey and do it in a way to where the mobile app should enhance Nat gas journey.
To enhance the overall service model and as we as we focused on enabling a better service model and a better guest experience, we believe that that will migrate more people into <unk>.
On the mobile App, which will then improve our loyalty database platform. So there's a number of different initiatives. Both in the the app itself as well as the service model and the way we engage with the guests at the store level.
But that's just one component of growing.
Achieving our goals for marketing optimization and improving our ability.
To be better yet.
Get better return on our investment dollars for digital marketing.
Okay. That's helpful and two other hopefully quick ones first is just on staffing a lot of.
Ah the restaurant companies Admittedly you guys were not a restaurant company, but all of.
This earning season pointed to much better staffing levels are much lower turnover trend are.
Turnover numbers driving some efficiencies some some labor efficiencies as it relates to your model anything that you guys can add as it relates to staffing.
No I think we're seeing the same things.
The you know go back a year or two years ago, where it was difficult to find.
Staffing it to get stores, even remotely close to par were.
Effectively at par and managing our hours accordingly based on business levels.
Okay and then.
Last one for me I apologize for being long winded here, but.
Probably three or four years ago arguably pre COVID-19.
A lot of focus with the Dave <unk> Busters name.
As it relates to both cannibalization and competitive competitive encroachment and some of the cannibalization concern obviously disappears with with the the main event acquisition, but.
As you are opening up these 16 boxes or stores this year and you're thinking about both of those two metrics or drivers of potential headwinds cannibalization competitive encroachment any update on how you guys are thinking about that or what you've seen.
Okay.
That's obviously something that we take a close look at and we can tell you that there is.
There's there's no significant concern at all on cannibalization.
We were getting phenomenal returns on the 16 units that that we've opened.
We feel great about that I think one of the advantages is now that we've designed the smaller prototype and we're going into that's opened the door for markets that we werent.
We weren't interested in pursuing because of the level of investment and so as we've shrunk our prototype that's provided us access into new markets.
And so that's that's helps cannibalization, but when we've gone through and looked at you know the our performance against the stores nearby at this point in time, we're not seeing anything at all Thats a concern and.
And we feel very confident and the white space opportunity that we laid out in investor day, and achieving that without significant cannibalization alright. Thank you.
Yeah.
Yeah.
Our next question comes from Brian Mullan with Piper Sandler. Please go ahead.
Thank you just a question on the question on the remodel program you shared some encouraging stats in the prepared remarks.
Clarification the pace for next year, specifically is that accelerated versus your prior thinking.
And then if so any color on what made you decide to accelerate it sounds like the test is going well, but I would also thank you. It's expected to go well so just any color would be great.
So the answer is yes.
We have now laid out a plan to be able to have to be in a position to have 40 to 45 remodeled stores done by the end of 2024 and that is an accelerated pace.
However, we were moving forward in a very controlled way and we were only get to 40 to 45. If we continue to see the same level of results and continue to not only hit that exceed our return on investment thresholds and so we're being very controlled but at the same time, we're wanting to move you know.
Fast in order to get maximize the opportunity that we see the reason for that yeah, I mean, you're absolutely right. We did expect.
The remodel program to be successful, however were exceeding our own expectations and our expectations were pretty high I think the thing that has us very encouraged not only not only the results that we're driving.
But.
The underlying.
Underpinning these results so specifically, what's leading to the improvement in the store and we can point to the strategic initiatives. The strategic objectives that we had when we designed the remodel so when we see you know our overall sales up double digits over prior year and up 30% over 2019, that's encouraging.
But when you're when you look at it and say.
We specifically designed the entertainment platform to bring news to the market.
And to provide more variety to the guest and we're driving more entertainment revenue through that entertainment product. When we specifically designed it to give our sales team more opportunity to drive special events. Because now we have items that appeal to group activities and our special events were up 45% that gives us confidence that.
We're approaching it the right way, we specifically designed the remodel program to drive throughput on the dining room, because our belief is one of the reasons why we've seen a decline in our F&B mix is because we haven't set our operators up for success. So we've addressed that in the remodel we've reconfigured the dining room to set our operators up for success and drive that throughput.
And even though we've grown our revenue and a very significant way our F&B mix, our F&B revenues actually outpaced everything else that we're doing so that gives us confidence and then the impact we're having on the guest experience. Our net promoter scores are up 15 points.
So that just again just bolsters our confidence.
So we're we're feeling very good about the what we've been able to achieve in friendswood and because we see those data points, we really believe that that validates our strategies and that gives us confidence to start to move faster, but at the same time being very controlled so we don't get ahead of ourselves on the investment.
Yeah.
Okay. Thank you that's great color. Thank you and then just a question on G&A you know if we make all the adjustments it seems like the underlying G&A has been running in the $18 million to $20 million range per quarter for the last several quarters is that a good run rate to think about for <unk> and into next year or are there any investments or some other items you'd.
I want us to be mindful of as we think about next year.
That's about $20 million is a fair pacing for where we would expect core G&A to be after you take out those adjustments.
Okay. Thanks, a lot.
Our next question comes from Brian Vaccaro with Raymond James. Please go ahead.
Hi, Thanks, and good evening My question I wanted to circle back on demand and now the percentages can sometimes get a little confusing given the big seasonal swings I think the comps versus 19 or quite a bit different between the two brands. So I guess, how would you characterize what you're seeing in terms of underlying demand in the third quarter maybe.
Compared to the second quarter are there any changes in behavior worth, noting any color on how the quarter progressed or anything else you'd be willing to highlight.
No I think.
Oh kind of refer back to.
An earlier question I would just go Q2 to Q3 haven't seen much in and a change in demand.
Though when we look at Q3 and what we have seen starting in October is improved results versus 22% versus 19 of those improved results.
Continued into November, but as I said earlier from a Q4 perspective, given the the the <unk>.
Size of the business, that's still to come with the Christmas holiday.
Winter break.
New year's MLK holiday in January those are all big events for us and so the vast majority of business from a revenue perspective will take place in the December and January period. So it's a little hard to take into account what we've seen for November to project that out over the rest of the quarter.
Okay, and then Mike I think you mentioned the calendar shift on special events sort of in November or in the fourth quarter can you just clarify what that shift is.
A lot of events start taking place after the Halloween.
<unk>.
Call it holiday or event.
And so what happens is versus 2019, our special event calendar is one week lagging versus what you had in 19 all of that goes away by the time you get to the Christmas holiday and all of that has been caught up.
So I would say little bit of a mismatch today versus 90, but that's only on a week to week trend basis for the whole quarter. It it's not relevant right and you had that similar dynamic last year that you highlighted compared to 19 correct correct. There was about three days in prior year.
Call It 15 business days of.
Peak periods that we were lapping over which by the way is one of the reasons why we don't give this up to date.
Where we are in the quarter our view anymore.
Understood. Okay, and then shifting gears to the game's pricing could you just share some more on the test that you run how much have you tested and in different regions. What have you learned.
How has it impacted sales and and and sorry, if I missed it earlier, but have you made the go decision on most of the system. What's the rollout look like on the on the strategic games pricing.
Yeah look our test right now is not to get too much into the weeds on an earnings call but.
It was roughly about it's 12 stores.
We've looked at various price points within that 12 stores.
And we're just continuing to evaluate those results and the impact that would have and we're looking at it holistically. So it's not only an impact on <unk>.
What your initial card load is but it's also on the overall revenues what kind of recharge rate do you have well also look at what the impact on dwell time, because we kind of look at all of that in its totality to understand the real value that we're driving.
So the customer as part of that value proposition. So we've got a few more weeks to go in our test.
We would probably look to make some type of pricing adjustment either late into Q1 or into early or sorry late into Q4 early into Q1.
Okay, Great. That's very helpful. And then last one for me just back to the Friendswood remodel I'm just curious if you could share more on what elements of the remodel you think are driving the uplift any specifics on how the social bays are performing or other new elements are worth highlighting.
Sure No. We're very pleased with our social days, both in terms of the entertainment revenue as well as the food and beverage attached that we're able to drive through our participants in the base. So.
Pleased with that we just rolled out a brand new <unk>.
Traction in Friendswood, just a couple of weeks ago, and so we'll be interested to see how that performs as well.
But I I.
In terms of the other items that are driving the performance that's everything that I just walked through just a minute ago. So we're very pleased with the performance.
And all in all areas. So the strategic objectives that I just walked everyone through in.
In every one of those areas.
We're making an impact on the business and so that just gives us a lot of confidence as we move forward that these are results that.
You know that we fully.
Back to continue to drive.
Alright, I'll pass it on thank you very much thank.
Thank you.
Uh huh.
Our next question comes from Sharon Zackfia with William Blair. Please go ahead.
Hi, good afternoon, I apologize if I missed this but given the accelerated pace of Remodels is there any impact on the 20th point development pipeline as a result, and how should we think about capex in 'twenty quite well and I'm just wanting to me.
Yes.
Yeah.
And so that is there a there would be no adjustment to our new store opening pipeline.
We're looking at 15, new locations and one remodel.
Which is consistent with the 16 that we've always discussed back with Investor day, and which will be kind of the I'll call. It a rounded number plus one minus one as you go through from a year to year basis.
When we look at the overall Capex, we laid out in the Investor day, what our Capex would be which was roughly about $340 million.
That number I think it would be relatively consistent on a net basis going forward, obviously as the remodels adjust from.
From a timing perspective.
We feel very confident with our leverage profile right now in the vast amount of liquidity, we have that we're willing to put that to work.
So yield the returns on an overall basis for the company Accordingly.
Great and then on phase three of the food and beverage plan. It does that gives back any of the food and beverage savings that you've achieved in phase two.
No it actually expands it.
Okay.
You bet.
Chris had alluded to would all be incremental to the savings that and.
Improvement that we've seen in phase two so it's just.
Basically phase two as one block phase III is the next building block and then we continue to innovate beyond that.
Okay and then last question for me on the remodel you've done so far have you done anything to drive traffic to their locations and where is that at that location or is it generally just word of mouth. I mean, how how is the word getting out that something has to do with Dave and busters.
So it started with the launch so on as we reopened friendswood and keep in mind that the unit was never closed. So we did all of the remodel activity keeping our unit open but when when we were ready to.
When the remodel was 100% done we treated it like a brand new opening so we had a VIP party and we invited you know.
A lot of very important people in the market and it's a invited a bunch of influencers and experienced the attractions.
We did a big community event, and then we've done quite a bit of our local store marketing sense.
Since opening.
But I will tell you. We're not you know I I don't want to leave anyone with the impression that part of the reason we're getting these results is because we've allocated significant incremental marketing dollars to the store because that's not the case.
We supported it with marketing, but it's been more in the ordinary course of business. The differences now we have news to talk about and we firmly believe that as we move forward.
One of the items that you know one of the ways that we reinvent reinvigorate this brand to get people interested is bringing disruptive product news to the market and we've got 90% brand awareness, we have strong brand attributes, but we haven't really innovated in a really long time.
So.
As we start to bring news to the market.
We think that that's going to generate trial and a renewed interest and we believe what we're seeing in fred's trends where it is.
A proof a proof point to that.
Thank you very much thank you.
Yeah.
Yeah.
This concludes our question and answer session I would now like to turn the conference back over to our CEO Chris.
Chris.
Thank you Mike.
Alright. Thank you operator in closing, we'd like to commend our team for all the hard work.
The behind the success at our growing portfolio of Dave and Busters and maintenance stores. We're excited for what lies ahead and are enthusiastic about the direction. We are steering. This company. So thank you all for joining happy holidays, we look forward to speaking with you again in the new year.
Yeah.
The conference has now concluded. Thank you for attending today's presentation you may all now.
I'll disconnect.