Q2 2024 Dave & Buster's Entertainment Inc Earnings Call
Good day and welcome to the David Buster's second quarter to 24 earnings conference call. I'll participate in the League of Legends.
Speaker Change: Shudon Media Systems, Please Signal Conference Specialist, Vice President of the Star TV Followed by Zero. After today's presentation, there will be an opportunity to ask questions.
Speaker Change: to ask a question, you may start the month on your telephone keypad.
Speaker Change: So we'll draw your questions, please rest our been to you.
Speaker Change: Please note, this event is being recorded.
Speaker Change: I would now like to turn the conference over to Cory Hatton, VP of Industrial Relations. Please go ahead.
Cory Hatton: Thank you, operator and welcome to everyone on the line.
Speaker Change: Joining me on today's call, our Chris Morris, our Chief Executive Officer and Darren Harper, our Chief Financial Officer.
Speaker Change: After our prepared remarks, we will be happy to take your questions.
Speaker Change: This call is being recorded on behalf of Dave investors entertainment incorporated and is copyrighted.
Speaker Change: Before we begin the discussion on our company's second quarter, 2024 results, I'd like to call your attention to the fact that in our prepared remarks and responses to questions, certain items may be discussed which are not entirely based on historical fact.
Speaker Change: 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 Change: All such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated.
Speaker Change: Information on these risks and uncertainties of in published and our filing with the SEC, which are available on our website.
Speaker Change: In addition, our remarks today will include references to financial measures that are not defined under generally accepted accounting principles.
Speaker Change: Investors should review the reconciliation of these non-gat measures to be comparable gap measure contained in our earnings, released this afternoon.
Speaker Change: and with that, it is my pleasure to turn the call over to Chris.
Chris Morris: Good afternoon, everyone, thank you for joining our call today.
Chris Morris: and our second quarter fiscal 24, we generated revenue of $557 million and adjusted EBITDA of $152 million.
Chris Morris: We are pleased with the progress we are making on our strategic initiatives and on the strong financial result achieved during the quarter.
Chris Morris: during the quarter we grew revenue and adjusted EBITDA, expanded our adjusted EBITDA margins and generated strong operating cash flow which allowed us to invest in the business and return cash to shareholders.
Chris Morris: We've also continued to make significant progress toward our strategic goals.
Chris Morris: Our initial fully program remodels continue to perform well, and we are excited about the remodels that had recently opened and well opened throughout the remainder of fiscal 24 and beyond.
Chris Morris: Our new menu continues to be releverced by our guests as indicated by improving F&B performance and guest satisfaction scores.
Chris Morris: We continue to refine our menu and are excited about the next phase of our menu rollout that just occurred in August.
Chris Morris: We've also continued to test our games and F&B pricing levels, which we have benefited our top line margins.
Chris Morris: and which we expect to bear more for going forward as we optimize our price and strategies.
Chris Morris: Additionally, we have seen material improvement in our special vent business with substantial growth and thanks to our sales in the quarter.
Chris Morris: and Geodate, and with the Ford Bookings for fiscal 24 currently significantly above the prior year period.
Chris Morris: Further, we have continued to open new domestic stores, which has consistently performed in line with or above our expectations.
Speaker Change: We've also managed our constructure well which is enabled us to expand our justice to Eva Dodd-Margins. While still delivering a high quality experience to our guests
Speaker Change: While we are disappointed with our same source sales performance during the quarter in this complex and challenging environment, we are laser-focused on our medium-term goals and encouraged by the progress we are making on each of the initiatives.
Speaker Change: We fully expect the impact of our initiatives that lead to growth and things to ourselves, revenue, EBITDA, and Casflow in the coming quarters.
Speaker Change: I will now give you a brief update on the progress of each of our strategic initiatives starting with our six key organic revenue growth initiatives.
Speaker Change: First Marketing Automization.
Speaker Change: As a reminder, we believe there's huge opportunity to improve both conversion and guest frequency with the right marketing approach.
Speaker Change: We've made a material shift to digital marketing in a way from linear TV over the past few years which allows us to move quickly on campaigns and rapidly address specific business needs while localizing and personalizing our messaging.
Speaker Change: The data we're going from the digital approach are immense and constantly feeling our market engine to progress forward with more actionable insights.
Speaker Change: These digital channels also allow us to be particularly nimble with our spend and enables us to quickly pivot when we are not achieving the desired results.
Speaker Change: Leveraging our learnings over the past few quarters, we are beginning to more strategically target our growing lullity database with creative and compelling tailored messaging to drive visit frequency and spend.
Speaker Change: We now have nearly 7 million loyalty members in our database, and Accu's members have grown over 25% on a year over your basis.
Speaker Change: As a reminder, these loyalty guests visit us two and a half times more frequently on average and spend 15% more per visit than non-lulity members.
Speaker Change: As we have discussed, we've been focused on a test and learn approach to our marketing.
Speaker Change: Due to a number of tests we had run across our portfolio over the last several weeks.
Speaker Change: We are excited for what we have to offer our guests for the fall season.
Speaker Change: In addition to our new food menu, our new beverage menu, our selection of new games and new experiences in particular in our remodel stores, which are rapidly increasing as a percentage of our portfolio.
Speaker Change: We also have a number of local store activations in compelling value-driven promotions tied to the fall football season that we expect to drive continued improvement in top-line trends at David Busters.
Speaker Change: On the main event side, we are applying many of the learnings we have gleaned from Dave and Busters and are excited about some recent strategies. We have executed a driver awareness excitement and attachment to our full product assortment.
Speaker Change: We are also laying the foundation of our plan to launch a loyalty program at main event in early 2025 that we think can emulate the success of the Dave and Buster's database.
Speaker Change: We will continue to optimize our media mix messaging and better leverage our scale and presence to drive traffic.
Speaker Change: We also are evaluating numerous partnerships that we expect will help improve traffic and sales turns later this year.
Speaker Change: We're particularly excited about a number of these big-name partnerships with the buzz we generated during the summer movie season with the box office success of Deadpool versus Wolverine and to our exclusive crane experience.
Speaker Change: Section Strategic Game Prices, we continue to believe there's a significant amount of upside on game pricing, and we've been particularly methodical in the current consumer environment while we continue.
Speaker Change: to gain insights from our various iterations of regional and gain specific tasks, constantly running within our gaming ecosystem.
Speaker Change: We have driven clear uplifts with our multi-tiered approach to regional pricing with the highest tier significantly outperforming the other tiers, and we are constantly evaluating performance to make changes on an individual store of basis. A technical ability that was unlocked with the recent enhancements to our gaming system.
Speaker Change: We are also increasingly applying these learnings from the David Buster's brand for the main event brand.
Speaker Change: Bird improved food and beverage. As a reminder, we see a tremendous opportunity to improve the overall quality and service model of our F&B offering and order to bring attachment back towards the historical levels and to drive increased revenue and even not.
Speaker Change: As a reminder, earlier this year, we successfully implemented a new service model, which is then focused on enhancing efficiency while improving the gap to experience and the quality of our food offering through a new menu.
Speaker Change: We are pleased with that initial success in this area as we've seen improvement and trends on the food side of our business, both during Q2 and subsequent to the quarter.
Speaker Change: As we mentioned on our last call in August, we launched our phase four menu, which is primarily focused on beverage innovation and special events.
Speaker Change: On the Beverage Side, as part of this new menu, we've introduced 13 new and 12 revised beverages, including premium drink offerings.
Speaker Change: that is significantly elevating our bar experience.
Speaker Change: We've also created a set of near-term beverage sales initiatives like a reinvigorated happy hour and improved sales and shift strategies for our bartenders to drive beverage attacks based on our ongoing research findings from guest feedback.
Speaker Change: We believe that this focus on improvement and beverage in addition to continued momentum and food will set up the F&B side of our business for success in the coming quarters.
Speaker Change: with respect to the special event side of Phase 4. Our new vehicle and new features, eight new menu items, and significant plating and menu revisions, creating additional opportunities for sales and shift on our special event team.
Speaker Change: We're excited for the opportunity that these new items give us a further ad to the momentum we are cleaning and special events.
Speaker Change: and which we will be told later.
Speaker Change: Fourth remodels are fully programmed remodels continue to perform well with positive sales trends.
Speaker Change: on both a year-over-year basis and on a pre-post-net-of-control basis.
Speaker Change: This sustained positive performance has solidified our confidence, that product news and innovation are a proven lever to ignite our momentum.
Speaker Change: We're pleased to report that our first fully program remodeled friends with Texas, just outside of Houston.
Speaker Change: has latched the anniversary of the remodel completion.
Speaker Change: and thus far in its second year, it is still copying up relative to prior year, which is a true testament to not only the success and healthy return profile of the remodler program, but most importantly, it's staying power as a complete strategic reset and new platform for sustainable growth.
Speaker Change: During the quarter re-modeled nine existing stores as our development team has gone into overdrive to accelerate the exciting investments we are making into the Dave and Buster stores.
Speaker Change: Stores of the future across the system. Interestingly, while we have not yet fully reintroduced our newest remodels in the respective markets with the same pre-opening and marketing push, we've done for our first batch of fully programmed remodels.
Speaker Change: We've still seen strong performance with aggregate year over year growth on both of pre-post and year over year bases over the last few weeks across these nine remodels.
Speaker Change: All told, we have opened 18 remodels and are on pace to have 29 remodels completed by the end of the third quarter and 44 remodels completed by the end of this fiscal year.
Speaker Change: Special Events. We continue to make considerable strides re-invigorating our special event business by repositioning the team with a more local hands-on approach and equipping them with enhanced training and tools to win in this area.
Speaker Change: The beginning in the back half of last year, we reinserted sales managers into several of our Dave and Buster stores at the test.
Speaker Change: The idea was that more dedicated on-premise sales managers would be able to tailor the gas experience at the individual store level and that aiming this team with more product news like the innovation of our Phase IV banquet menu and increase in our remodels, which further allows them to drive success for this business.
Speaker Change: We've also mentioned that due to the strong performance that we saw in those stores, that we would be reinserting sales managers into a significant number of additional stores.
Speaker Change: As of today, we now have over 70 on-premise sales managers inserted into the David Buschers portfolio.
Speaker Change: For please to report that this strategy has been working well driving high-single digits year over year growth, and special event sales across the entire data investor system during the second quarter with continues strong momentum in the third quarter.
Speaker Change: Additionally, as mentioned earlier, Ford bookies for the third and fourth quarter are meaningfully above where they were a year ago, which gives us confidence and excitement about our strategy, a momentum that's had of the peak special event holiday season in the fourth quarter.
Speaker Change: 6. Tech Enablement, as a reminder, we are powering the growth of all strategic initiatives through an optimized service model, enterprise gaming ecosystem, new store IT infrastructure, and improves data and analytics.
Speaker Change: Thus far in 2024, we have completed major IT enhancements to the whole David Buster system.
Speaker Change: which updated connectivity and all server infrastructure.
Speaker Change: This was Paramount to support our new service model because it heavily relies on wireless connectivity and stable computing power for all points of sale and PCs along with our handheld server tablets.
Speaker Change: We've also completed the back office modernization of our service center, and this is the first quarter we seamlessly close the books in our new ERP system.
Speaker Change: New Store Monitoring Technology has been installed in most of David Buster's locations, and we are working diligently to embed these new proper-level insights into our strategic analysis.
Speaker Change: Our mission of driving further innovation in our mobile app will continue throughout the balance of 2024 with the integration of additional features and games to better engage with our guests before during and after each visit.
Speaker Change: We are still just scratching the surface of what we can do with our growing world to database from a data analytics and product offering perspective.
Speaker Change: which we are excited to unveil to you in the coming quarters in our confident it will drive meaningful relevance and repeat visitation for our brains.
Speaker Change: We are proud of the achievements and long overdue investments we are making in this area which will enable us to lead the industry in a far more seamless and desirable guest experience.
Speaker Change: To summarize our organic growth initiative update, we remain convinced that we are putting our focus resources and investments in the right opportunities to grow the top line, and in doing so, that will drive meaningful shareholder return along the way.
Speaker Change: I had the pleasure of spending significant time with our storage generators this quarter. And with each interaction, I come away feeling more energized and passionate about our culture and the team members who are part of this great company.
Speaker Change: Their commitment to the cause of enhancing the guest experience and competitive spirits to win are remarkable.
Speaker Change: There is a positive ripple effect in the way that we treat our team members to how they treat each other.
Speaker Change: to how they serve the guests, to how that environment manifests in our stores, making them an enjoyable place for friends and families to create memorable experiences.
Speaker Change: We see this hospitality loud and clear in the Guest that is fashion metrics that we meticulously track with our combined OSDAD speed of service, overall cleanliness.
Speaker Change: and the fully independent, OSTAT social media scores all up materially on a year-over-year basis. And this improvement is even more pronounced when we compare our cohort of remodeled stores to the balance of the system.
Speaker Change: We are very confident that these results are not coincidental, and that the enhancements we are making to our service model coupled with the investments we are making in our remodels are driving the strong leading indicators of success.
Speaker Change: In addition to our DNA revenue growth initiatives, as we have discussed, we have also maintained a focus on managing our cost structure.
Speaker Change: Due to our always rigorous focus on managing expenses, we grew adjusted to EdaDone $11 million. For 8% and expanded our adjusted EdaDone margins, 130 basis points in the second quarter.
Speaker Change: It's important to note that why we are very focused on managing costs and enhancing margins. We've also strive to do that while ensuring we continue to deliver a high quality experience to our guests.
Speaker Change: We are proud that we have been able to cut costs and improve margins while simultaneously improving our guest status back to metrics which is not always, which is not always an easy balance to strike.
Speaker Change: with respect to new domestic DNAs during the second quarter we open two new David Vuster stores and Port St. Lucy, Florida and Johnson City, New York.
Speaker Change: Both are performing in line with our historically high ROIs. In the third quarter, we've already opened a new Dave Ambusters and Barbara Zill West Virginia, and a new main event in Grand Rapids, Michigan.
Speaker Change: We can continue to expect to open a total of 15 stores during fiscal 2024.
Speaker Change: On the International Development Front, we expect to open four to five stores in the next 12 months, with our respective franchise partners across the globe, as the commitment to develop a current total of 38 sites in counting comes to fruition.
Speaker Change: Reef Stacks, the first of these international sites to open before the end of the year.
Speaker Change: Our business is in an invaluable position with strong operating cash flow that it can simply generate to continue to grow and value.
Speaker Change: I'll be back with a new episode of the show.
Michael Quartieri: and Michael Quartieri.
Michael Quartieri: to update you on a progress as we find better and more efficient paths to unlock the value for all of us.
Michael Quartieri: Finally, before I turn the call over.
Darren Harper: to Darren.
Speaker Change: I would like to take a minute to introduce our new CFO Darren Harper.
Speaker Change: Darren and I have worked together during the transformative moments at multiple companies throughout our respective careers and I cannot be more excited to publicly welcome them on board.
Speaker Change: with his vast experience and intimate knowledge of the location-based entertainment states. He has hit the ground of running, overseeing the financial elements of the numerous initiatives we have going for, and I have a tremendous amount of confidence he will be a significant asset to our company.
Darren Harper: So with that, Darren, please walk us through a more detailed review of our Q2 results.
Darren Harper: Thanks Chris, and good afternoon everyone. Let me first start by saying how excited I am to be here and working on alongside Chris again. It's truly an honor to represent this great company and to work with the fact fantastic team that we've got here.
Speaker Change: So it turns into the results for the second quarter, Constor Sale decreased 6.3% on a calendar basis in the second quarter versus 2023.
Speaker Change: We generate a second quarter revenue, a 557 million, which reflects a year of year growth of 15 million or 3%.
Speaker Change: and adjusted the EBITDA of 152 million, which reflects year of year growth of 11 million or 8%.
Speaker Change: and an adjusted EBITDA margin of 27.2% which is a 130 basis point margin expansion versus the prior year and a 360 basis point margin expansion versus the same period in 2019.
Speaker Change: that income in the second quarter told 40 million or 99 cents per diluted share.
Speaker Change: We reported 46 million of adjusted net income for a dollar and 12 cents of adjusted earnings per diluted share.
Speaker Change: and Reconciliation's of all non-gap financial measures can be found in the press release from earlier today.
Speaker Change: We generated 102 million an operating cash flow during the second quarter, ended the quarter with a net cash balance of 13 million. For total liquidity of 494 million, when combined with the 481 million available on our 500 million dollar revolving credit facility, nets about standing letters of credit.
Speaker Change: We ended the quarter with a net total leverage ratio of 2.3 times as defined under our credit agreement.
Speaker Change: Our decisive plans for the David Buster Store Remodeled Program are progressing at an impressive cadence under the leadership of our best in class development team.
Speaker Change: We now have 18 completed remodels under our belts with 26 additional scheduled for the completion in the balance of fiscal 2024 as we approach critical maps of the system in fiscal 2025.
Speaker Change: The results that we have seen remain very encouraging with the earliest fully programmed remodeled units, continuing to significantly outperform the balance of the system.
Speaker Change: our first remodel of this program in Friendswood, Texas.
Speaker Change: completed its construction in August of 2023, and as Chris mentioned, that the testament to the effectiveness, stain power and potential upside of this remodel program.
Chris Morris: That the Friendswood Store is copying up in the early innings of the second year post-remodel.
Speaker Change: And the small update and reminder on sale lease back opportunities, we closed on the previously announced sale of two-day investors' properties in July, generating 45 known in proceeds.
Speaker Change: We have five owns and operating real estate assets today, with one more whole year under property scheduled to open later this year.
Speaker Change: We are being the thoughtful and how and when we decide to monetize these assets and we expect these assets So when to monetize to command a premium price in the market versus other comfortable real estate given our superior unique economics
Speaker Change: Storm Credit, the attractive brain attributes, and to make it to be in a long-term tenet of the space.
Speaker Change: Turning to capital spending, we invested the total of 112 million in capital editions during the second quarter, opening two Daven Busters and Fort State Lucy Florida and Johnson City, New York.
Speaker Change: We have already opened one new David Buster's and one new main event during the third quarter of us far. In Barbara'sville, West Virginia and Grand Rapids, Michigan, respectively.
Speaker Change: We continue to expect to open a total of 15 new stores across both brands during fiscal 24 with eight already open today.
Speaker Change: We have 140 million remaining on our board approved share-reporteous authorization to open to mystically repurchase our shares.
Speaker Change: As you know, we in our board are maniacally focused on driving shareholder value. We will use our significant excess cash flow to invest.
Speaker Change: and our celebrated remodel program, New Units, which continue to generate sizable cash on cash returns. Make a creative investment to support our organic growth initiatives.
Speaker Change: and opportunistically return capital to shareholders.
Speaker Change: Our team has a lot to be a proud of in the second quarter results.
Speaker Change: We grew just to leave a down, continue to expand our industry-leading adjusted to even our margins, progress to organic growth journey through strategic investments in our remodels and other initiatives and bot-back additional shares outstanding. All of which will benefit our shareholders of the long run.
Speaker Change: We also have a growing pipeline of attractive international frontiers.
Speaker Change: with our many franchise partners with four to five anticipated open in the next 12 months.
Speaker Change: I'm excited to be back at the financial helm of this great company, particularly at a sense it's well positioned for growth and I have a significant amount of confidence that the work we are putting into these two great brands will provide material upside for all of our stakeholders.
Speaker Change: Now with that, operator, please open the line for questions.
Speaker Change: Hatton, Michael Quartieri, Michael Quartieri, Michael Quartieri,
Michael Quartieri: Thank you.
Speaker Change: So now begin the question and answer session, should ask a question you may press start then one on your telephone keypad. If you're using a speaker phone, please pick up your hands up before pressing the key.
Speaker Change: If at any time your question has been addressed, and you'd like to enjoy your question, please start them to you. At this time, we'll pause momentarily, trust in the world after.
Speaker Change: The first question comes from Jay Bartlett with trust security, please go ahead.
Jay Bartlett: Gray, thank you so much for taking the question. My first was on the top line and so far you have your initiatives and places, seems like you're doing very common in them. Since your sales have to celebrate it though, so it looks like macro headwinds are off setting it.
Speaker Change: The question is, you express confidence in accelerating things for sales in coming quarters and that your issues are going to do that. I guess how can you feel so confident given the Mac O'Headwinds?
Speaker Change: Maybe in that answer, you could talk about whether you see the macro headwinds building or decreasing or just staying consistent, as well as whether you're seeing the improved or increased contribution from your initiatives in the last few months.
Jake: Jake, great question.
Jake: Yeah, the first thing I'll say is we continue to be very bullish about the long-term prospects of our initiative. So I think that's what you're hearing from us. The initiative that we work focused on.
Jake: We've shared with all of you the math and the upside and
Jake: There's still very, there's still a tremendous opportunity to add, you know, incredible value to this organization through executed on those initiatives. And as we've always said, you know, the one thing we can't control is the macro environment.
Jake: But make no mistake, there's real value creation opportunity on these initiatives and, you know, our stance really hasn't changed.
Jake: It is a top kind of consumer environment is complicated and there are headwinds in this business and we felt those headwinds in the second quarter and they're still there. I think what has us...
Jake: Excited as we move forward, more of our initiatives are starting to come online.
Jake: and when we look forward.
Jake: We really like what we're seeing on our remodel program and the remodel program is, you heard us talk about it as a strategic reset, it's the culmination of everything we're doing, all wrapped up into one and we continue to see very nice improvement on the remodels.
Jake: and so we've got the nine that we just opened this quarter, they opened towards the end of the quarter. But now we have 11 and Q3 and then 15 and Q4, and so those remodels at this point in time.
Jake: We continue to believe that they're going to continue to see the same results that we've seen in previous remodels.
Jake: and so that gives us a lot of optimism and addition to that, the other initiatives were focused on that I outlined with special events and the banquet season coming up and so on and so forth. That's what you're hearing from us is just confidence and the things that we're working on.
Yatton: Yatton, you know, just building on the commentary around the remodels.
Yatton: The last quarter and I think prior quarters you've been a little more specific, you said double digits, self-lift for the fully loaded remodel. Is that true? I'm wondering whether the omission is conspicuous or not or whether it just kind of the message remains the same. But anything changed there in terms of what kind of a lift you're getting from the remodel.
Speaker Change: No, no, nothing has changed. We're still seeing a double digit increase.
Speaker Change: and the first four fully programmed remodels and the nine that just came on, as I said, it's still very early, they're towards the end of the quarter, but at this point in time we're seeing a nice lift there and there's no reason to believe that they're performing in line with what we would expect.
Speaker Change: and I think on those in particular, we're seeing nice separation in sales.
Speaker Change: and we haven't even fully put our marketing muscle behind those yet and so that's you know and as we start getting more critical math, you know, there will just be more.
Speaker Change: Moore, we can do from a marketing standpoint to get out and tell the story of the future.
Hatton: and the last thing that Hatton has changed is we now have Friendswood in Year 2.
Speaker Change: and you know, that's always been very open about that but we don't, you know, time will tell, you know, what this looks like in year two and so far, you know, friends with it is green on green so that's very encouraging as well.
Speaker Change: that you know just speaks to the same power of what we're doing.
Speaker Change: Okay, great. And last question for me, you know, a pretty, you know, interesting or, you know, impressive feat to grow margins as you did, you know, hundreds of several basis points at the store level with such negative things or sale. So the question is want to make sure there's nothing in there that's.
Speaker Change: I have a normal, you know, that's not maybe enough, um, not recurring to be backed out, but just that we'll not, you know, happen or benefit you in the future or coming quarters. Anything in there that we should be wary about, and I guess the idea, the real question is...
Speaker Change: Can you drive, if we expect negative symptoms for the next quarter to, is it feasible to continue to drive restaurant level or sore level, large expansion?
Speaker Change: Yeah, I'm going to answer the first part of that, and I'll turn it over to Darren so they can comment on the second part. I mean, we're very proud of...
Darren Harper: The work that's going in to managing our bottom line, given the uncertain top line environment. And that's really, you know, it's so important that we do that as we're starting to continue execute these initiatives.
Darren Harper: and a period of time where the consumer environment is challenging and the team really stepped up and delivered.
Darren Harper: and we've implemented a number of cost cutting initiatives that are...
Darren Harper: You know, that there were coming through the PNL that we, in fact, will continue to benefit, you know, the rest of this year. We were managing our, you know, all the things within our control that the team is just doing an outstanding job managing those things. But we've seen very significant improvement in cost of sales.
Darren Harper: We're tightly managing labor in all areas, it's wage rates.
Darren Harper: are flat to down on a year or year basis, our productivity is improved.
Darren Harper: and we're doing all that at the same time, our guests experience metrics are improving. And as I said, I'm my prepared remarks. That's not easy to do. And the team is doing it just through managing the details every single week.
Darren Harper: and just being absolutely, you know, maniacal about protecting the bottom line. And then we've been able to capture some considerable DNA savings.
Darren Harper: and so there's real margin improvement in the numbers.
Darren Harper: that will not go in a way. And that's going to put us in the best possible position too.
Darren Harper: Navigate a challenging top line environment, and with respect to other items I'll let Darren kind of jump in on that.
Darren Harper: Yeah, just echo what Chris said, yeah, we feel like we have a number of levers here. And I think the brand has demonstrated that in being able to demand its margins to despite some sales at once.
Darren Harper: and every quarter there's noise in the prior year and there's always certain adjustments.
Darren Harper: in the current year in the prior year that
Darren Harper: Frequently just have an offsetting impact as we go along. I wouldn't raise.
Speaker Change: Anything of note.
Speaker Change: that is reflective in this quarter that we don't think is reflective of our ongoing trends of the business.
Speaker Change: Great. I really appreciate it. Thank you. Thank you.
Speaker Change: The next question comes with a farmer with Gordon Hatton. Please go ahead.
Gordon Hatton: Thank you, little specific here, but I think on the last call you presented that presentation that showed that I think you had 33 of the 165 stores running at that highest price increase tier as of Q1, I'm just curious.
Speaker Change: Where that stands as of QTO or currently in terms of the number of stores running at that highest pricing increase tier.
Speaker Change: We've made no material changes to the tiers.
Speaker Change: We feel like we're really good spot right now as you know.
Speaker Change: So we've gone through an extensive testing and learning process and we feel like that we've got the right formula. It's an area that we're going to continue to evaluate.
Speaker Change: and we now feel like that's a lover that we're going to be able to adjust or pull as we move forward. And so as we start planning for next year, there could be potentialism changes.
Speaker Change: As of right now, we feel like we're in a good spot and don't anticipate there haven't been any material changes and we don't anticipate any material changes for the rest of this year.
Speaker Change: Okay. Unrelated just in terms of trying to understand whether or not the demand headwinds are sort of for their mal routine or your scenes and stability.
Speaker Change: At the beginning, actually when you're reported to the Q1, you pointed to a low-single-digit-same source sales declines for the first, I think it was four or five weeks of Q2. You finished the quarter down six, the math implies sort of mid-dies, single-digit-same source sales declines over the balance of the quarter or so.
Speaker Change: Can you help us sort of reconcile what went on there sounds like you have more initiatives that were kicking in, but the Comps got softer, so was it the demand had ones that mounted just any color there would be helpful?
Speaker Change: And you know, that's we're not alone. Many others felt that same pressure. We saw equally, you know, main event in Dave Ambusters, the two brands that really had been moving in lockstep. And so, which is just another data point that, you know, we're dealing with something that's a little more macro. And so, it was a challenging summer.
Speaker Change: which is, again, you know, all the more reason why our team really hunkered down and you know, managed the bottom line and did all the great things that we did to control costs just to, you know, give ourselves a breathing room to continue to execute these initiatives.
Speaker Change: Ok, thank you.
Speaker Change: Yep.
Speaker Change: The next question comes with Andy Barish from Jeffrey. Peace, go ahead.
Andy Barish: Hey guys, um...
Andy Barish: I just wanted to dig into the highest price here that kind of performing well. I mean, does that?
Speaker Change: Show that that's a demographic that's also maybe a little higher than, you know, a broad cross-section and that that demos, you know, kind of hanging in there better than, you know, what we've heard from, you know, pressures being seen at the lower end, just trying to, you know, sort of tease that one point out as an opener.
Speaker Change: Well, it's the higher price here certainly is reflective of
Speaker Change: You know, a higher cost of living, you know, what we've talked about before, before we started enacting all these changes.
Speaker Change: We had one of the same price, there's a price in Times Square and that there's a price in Odoan Park Kansas and they were exactly the same.
Speaker Change: and so, you know, the higher price tier is reflecting more of the cost of living adjustments.
Speaker Change: We did play around with kind of like demo demographic profiles on household income and things of that nature, but for the most part generally speaking, our tiers are more in line with traditional pricing tiers that have to do with cost-of-living.
Speaker Change: Okay, and then um...
Speaker Change: just checking in on the rest of the remodels this year are a majority or all of those going to be fully programmed at this point.
Speaker Change: The Bathmajority of Humwell, we'll have three or four.
Speaker Change: that won't have the arena attraction, they'll have everything else but the arena and that's just simply because we don't have the space in those stores.
Speaker Change: But based on everything that we've seen to date suggests that.
Speaker Change: There's real value in a fully programmed entertainment offering.
Speaker Change: and so the plan is to continue to move forward with that type of offering, but we will continue to evaluate it as we always do and to make sure that hold ourselves to a strict return on investment threshold.
Speaker Change: We always leave room for adjustments if necessary, but at this point in time, that's the plan.
Speaker Change: and then just finally on food costs.
Speaker Change: You know, it's...
Speaker Change: You said you were managing a, I assume there's still some of the 50% off, you know, kind of.
Speaker Change: for motion discounting on food that you've used. How are you kind of measuring the returns on that? Is it, you know, is it driving some of the incremental traffic you expected and then?
Speaker Change: You know, does that kind of continue, you know, as we move forward to use it, you know, for certain times of, you know, of the quarter or things like that kind of like a boost when we needed.
Speaker Change: Yeah, so we talk a lot about just this approach of testing and learning and putting different things in the market and not moving away from just one big campaign and instead of that having an arsenal of tools that we can use to stimulate traffic.
Speaker Change: and so I would put half off food in that category. It's a tool that will be in our arsenal that we might use in the future from time to time depending on what we see.
Speaker Change: A couple of when we looked back on it, it was
Bro Keven: at Bro Keven, you know, and so we spent a lot of time making sure that we designed the economics in a way to where it would break even. It's half off food, but you know, that represents about 20% of our sales, and so it was something that we could achieve economically, and we did.
Bro Keven: and so that we felt great about that. It was loyalty-fenced, so you had to sign up for the loyalty program. So that helped mitigate the risk of cannibalization and it also drove loyalty-sign-ups that we were then able to use to engage.
Bro Keven: and so that's, you know, Hatton Thud is just an example of, it's more of an example of the approach that, that, that, you know, you should start to see from us, and testing and learning and we'll be finding a product that you'll find it off of their works we,
Bro Keven: We go deep with it, but you know constantly pulsing in what we think is necessary. Does that make sense? It does. Yes, and then just finally I know.
Bro Keven: You know, quarter to day basically August, I mean industry numbers got better.
Speaker Change: You know, are you willing to kind of comment on how you started the three two?
Speaker Change: Yeah, and as you know, we don't quantify intra-quarter results.
Speaker Change: You know, I'll say that it's just one period. We just wrapped up our first period in the quarter.
Speaker Change: that one period, the cells performance was better than the previous two periods.
Speaker Change: But it's just one quarter we still have...
Speaker Change: 2 periods left to this quarter, and so our focus is on the initiatives and continue to execute at a high level, managing the bottom line, and putting ourselves in a position to really get the most out of our remodels as they start to come online.
Speaker Change: Thanks for watching!
Speaker Change: Good. Thank you.
Speaker Change: The next question comes with Andrew Strelzick with BML Capital Market, please go ahead.
Speaker Change: Hey, this is Jared Luzinski on for Andrew Strauss, thank you for taking the question
Jared Luzinski: So you discussed the opportunity to accelerate the pace of remodels, but I'm wondering if there's an opportunity to...
Speaker Change: Improve Returns based on what you've learned from existing remodels and you could provide any color on how the company is prioritizing remodels through 2026 and whether that's based on store tenure geography or some other factor. Thank you.
Speaker Change: So, we're still, we're in the process of building out our plans for 25 or to school 25 year.
Speaker Change: and you know that's something that obviously we work in close partnership with our board and the board ultimately approves the capital outlay for 2025 and so what we're doing internally is we're making sure that we can
Speaker Change: to the extent that there's data there that suggest that, you know, from a capital allocation standpoint, it makes sense to move even faster that we have the ability to do that. And so, our development team is hard at work yet.
Speaker Change: Building Out all the plans to ramp up is as quickly as possible.
Speaker Change: but we're, you know, this is a team that is just very disciplined around.
Speaker Change: Ensuring that we're using our capital judiciously.
Speaker Change: and we're looking for every opportunity to maximize return on investment.
Speaker Change: State Tune on what our plans are for the future. Obviously, what you're hearing from us is that we like what we see and we want to do more of it. But we need to go through the planning process for next year.
Speaker Change: We are, you know, the team is spending a lot of time on, you know, continuing to look for a valuable engineering opportunities. We've already had quite a bit of success at doing that, but we're, you know, we're always challenged ourselves to try to get more.
Speaker Change: and we're also spending a lot of time just going through working closely with our operators to understand what's working and what's not.
Speaker Change: and what we do is to further drive the revenue opportunity with these remodels. And I'm convinced that we're very happy with what we're seeing. I'm convinced that we can even get more out of it. And so we're going to...
Speaker Change: We're spending a lot of time on it to optimize it.
Speaker Change: Great, thank you. And then I just wanted to get an update on how you're tracking against the marketing optimization initiative relative to your expectation.
Speaker Change: and you learned that you can share with us and then on loyalty, what would you attribute to the continued strengths and membership growth? I believe you said it was up 25% this quarter. What give you confidence that this growth is sustainable going forward? Thank you.
Speaker Change: Yeah, so...
Speaker Change: First starting with, I remember in the very early stages of marketing authorization and last quarter we provided an update on our investor-day presentation and we provided our rating and we indicated then that you know, we're still very much in the early stages. So,
Speaker Change: This is, you know, there's a lot that goes into it, you've got to build the technology, then you've got to build the capabilities, and then, you know, there's the whole test in the learning process, and so we're, I would say we're just now getting really started, and, and, and.
Speaker Change: to where we want to be. So that's...
Speaker Change: you know, we're pushing ourselves to move faster there. On loyalty, you know, I think that we're doing, you know, the team is just really making that a priority and looking for two opportunities, one to, you know, to encourage the signups.
Speaker Change: But then once you have a sign up to stay engaged with the guests and I think we're doing a much better job on both.
Speaker Change: The way we get more out of it is doing things like the loyalty sensing on Hatton.
Speaker Change: So we had a very compelling offer. It helped drive more awareness to the great F&B offering as we rolled up a new menu and we really drove sign-ups and then we were able to stay engaged with those guests and keep them engaged.
Speaker Change: and the better than we ever have in the past.
Speaker Change: Another test to all of this coming together is in our remodel stores, we're seeing a very significant increase.
Speaker Change: and Frequency.
Speaker Change: for loyalty numbers in a remodel versus a non-remodel. And that just goes to show that when you combine the right product offering and the right execution with the right level engagement, these tools really can pay off.
Speaker Change: and so that's just another point of validation that we think they're wrong to something here.
Speaker Change: in terms of, you know, I think the more, the, the, the,
Speaker Change: The 25% growth, I'm not going to put a number out there on expectations going forward, but I can tell you that we have pretty high expectations.
Speaker Change: and I just think that it's all about the way we engage, and it's all about being very personalized in the way we do it and earning the right to have a conversation with the guests and then delivering the right content to that guest.
Speaker Change: Ward, that's an area where we're just going to continue to strengthen that muscle. And so as I said, the very beginning, we're just now getting started.
Ward: Great. Thank you very much. Thank you.
Speaker Change: The next question comes with Brian the carol with Raymond James. Please go ahead.
Speaker Change: Hey, thanks and good evening. I want to ask a question just on the other operating cost line and obviously leverage that line despite the negative comp.
Speaker Change: I noted in the 10Q that it disclosed some again on some transactions. Could you quantify that? And then maybe more broadly talk about other sources of year-run-year favorability. You saw it within that line.
Speaker Change: I'll let Aaron answer that guy down.
Aaron: Yeah, one of the items in that line was a $4 million gain related to a termination of one of our cases in New York.
Aaron: You know that's the most notable just in terms of
Aaron: Flegging one off benefit for the period is the additional two operating days that we have.
Aaron: in Quarter Two, which added about a couple million dollars of Evida. And then you just have, you know, routine, you know, adjustments that come throughout the year as well. But that game is the most notable.
Speaker Change: Yeah, I was gonna ask you about that too there and the extra sales on those two days is...
Speaker Change: Ball Park say maybe $12-13 million. I guess sale days can change depending on seasonality and whatnot. And just had to think about the flow through on those sales because a lot of costs are approved for either weekly or monthly. Are you of a patent?
Speaker Change: Any of that matter? Yeah, no, they were low sales volume days. It was a Monday and a Tuesday. So it's about 4 million incremental sales with about a 50% flow through. So it's about a $2 million even dollar impact.
Speaker Change: Episode 2
Combs: Combs, I know it's tough to measure traffic, but could you give us a sense of how much price you'd estimated is reflected in your Q2 gear on your comps and just kind of level set what your latest thinking is on potentially taking additional pricing in the second half either F&B or amusement.
Speaker Change: At this point in time, we don't have plans to just price in a meaningful way for the second half of the year. As I said a minute ago, we were...
Speaker Change: just now in the process of building out our plans for 2025 and so, you know, we will certainly.
Speaker Change: Go through and have a pricing optimization plan for 2025, but we feel like we're in a good spot for the rest of this year.
Speaker Change: We don't get in, we don't disclose the granularity of all of our different initiatives and so what we're getting on price is not something that we're going to disclose that we have disclosed.
Speaker Change: Thank you for watching!
Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to Chris Morris for any closing remarks.
Chris Morris: Okay, well thank you so much for their participation today. We look forward to speaking to you and give the continue to give you a update on all of our initiatives. Thank you, Hatton.
Michael Quartieri: and Michael Quartieri.
Speaker Change: The conference has now concluded, thank you for up to an interdate presentation. You'll only now disconnect.
Speaker Change: ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶
Speaker Change: I'm Michael Quartieri, I'm Michael Quartieri, I'm Michael Quartieri, I'm [inaudible]