Q3 2024 Dave & Buster's Entertainment Inc Earnings Call

So a conference specialist by pressing the star key followed by zero <unk>.

After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two.

Please note this event is being recorded.

Speaker Change: I would now like to turn the conference over to Cory Hatton, Vice President of Investor Relations and Treasurer. Please go ahead.

Speaker Change: Thank you operator, and welcome to everyone on the line.

Speaker Change: Joining me on today's call are Kevin Sheehan, our chair of the board and interim Chief Executive Officer, and Darin Harper, our Chief Financial Officer.

Speaker Change: 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.

Speaker Change: Before we begin the discussion on our company's third 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 1095.

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 risk factors and uncertainties have been published in our filings 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.

<unk> should review the reconciliation of these non-GAAP measures to the comparable GAAP measure contained in our earnings release. This afternoon.

Kevin Sheehan: And with that I would like to turn the call over to Kevin.

Kevin Sheehan: Thanks, Corey good afternoon, everyone and thank you for joining our call today.

Kevin Sheehan: As communicated in our press release, Chris Morris, our CEO has resigned to pursue other interests and I'm assuming the role as.

Kevin Sheehan: As chairman of the board and interim CEO.

Kevin Sheehan: Wanted to assure you that despite Christmas departure, it will be a strong and seamless continuation under my interim executive leadership.

Kevin Sheehan: I've done this before for Dave <unk> Buster's.

Kevin Sheehan: The fall of 2021, and two Chris started in the middle of 2022.

Kevin Sheehan: And I am excited to work with this management team the same plan, which we initially unveiled to you at our Investor Day in June 2023, and had been hard at work as a team to execute on ever since we will remain our focus.

Kevin Sheehan: We are working with Heidrick <unk> struggles a global executive search firm to identify the future permanent CEO of this great company.

Kevin Sheehan: On behalf of the whole entire.

Speaker Change: Board I would like to extend a thank you to Chris for the significant amount of LNG he dedicated to leading this company.

Kevin Sheehan: <unk>, two and a half years and we wish him all the very best in his future endeavors.

Kevin Sheehan: Now I will turn the call over to Darren to walk you through the results for the third quarter Darren.

Darren: Thank you, Kevin and good afternoon, everyone.

Darren: During the quarter, we continued to make progress towards our long term strategic goals. We opened three new stores, which are on track to generate strong cash on cash returns as we have demonstrated throughout our history.

Darren: Completed 11, new fully programmed remodels and are on track to have 44 completed by the end of fiscal 2024 are fully programmed remodels continue to outperform the rest of the store base and we are excited for the opportunity. These remodels give us to drive traffic sales and EBITDA.

Additionally, we saw strong year over year growth in our special events business and remain optimistic about the prospects for our event business.

Darren: Upcoming peak holiday season.

Darren: Season, following the rollout of our new banquet menu and the investments we've made in our in store sales managers.

Darren: Despite this progress our financial results for the third quarter, which is our historically lowest seasonal volume quarter of the year were negatively impacted as compared to the prior year by a material fiscal calendar mismatch adverse weather across many important regions and disruption to certain stores in our comp set.

Darren: As they underwent remodel construction.

Darren: Our new domestic store openings have consistently performed in line with or above expectations and historically high rois.

Speaker Change: In the third quarter, we opened two new Dave <unk> Busters stores, and Barbara as Bill West, Virginia, and Lombard, Illinois, and one new main events in Grand Rapids, Michigan.

Speaker Change: Quarter to date for Q4, we opened one new Dave <unk> Buster store in Clarksville, Tennessee, bringing us to a grand total of 10, new stores opened year to date.

Speaker Change: With one new start and our pipeline slipping into 2025, we expect to open four additional stores, three Dave and Busters, and Onemain event and the balance of this fiscal year.

Speaker Change: On the international franchise development front, we expect to have our first store open in Bangalore, India by the end of this fiscal year and five total international stores in the next 12 months with our respective franchise partners across the globe.

Speaker Change: So now let's step through a brief progress update on each of our six key organic growth initiatives first marketing optimization as.

Speaker Change: As we've said in the past we believe there is an opportunity to drive top line by improving the effectiveness of our marketing.

Speaker Change: We benefit from the highest brand awareness in the industry. We also know from our strong NPS scores that when customers come to our stores. They have an experience that they are very happy with.

Speaker Change: What we have been most focused on is ensuring that we have creative that effectively communicates the breadth quality and value of our offerings and that we deliver those messages to the right people at the right time.

Speaker Change: During the quarter, we fully on boarded a new marketing agency.

And since then we have done comprehensive testing as well as a review of our media strategy, including our media mix, our digital marketing analytics capabilities and customer targeting as well as our spend levels.

Speaker Change: Through this work we have discovered various opportunities to improve the effectiveness of our media strategy, including amongst other things implementing in capabilities to better track and optimize the return on our digital marketing spend as well as ensuring that we're spending dollars during the periods when they have the greatest impact.

Speaker Change: On the promotional side, we have recently revamped and relaunch, Dave and Busters beloved eat and play combo, which aims to communicate and demonstrate value and drive attach across the full breadth that Dave and busters offerings.

Speaker Change: Additionally, we recently did a soft launch test of a winter pass, which is aimed to drive loyalty visit frequency and food and beverage attach while providing a significant amount of value at three attractive pricing tier as.

Speaker Change: We like what we are seeing from the past since the launch of the test at 36, Dave and Busters stores and are moving quickly to rollout the offering systemwide.

Speaker Change: Our loyalty database now has over 7 million members. This is quite valuable as our loyalty members visit two five times more often and spend more with us over the course of their visits.

Speaker Change: In recent months, we have brought on additional internal and external resources to help us optimize our loyalty program and we believe significant opportunity exists to both continue to grow our loyalty database as well as further improve the value the customers get out of the program and the value we get from the customers in our database.

Overall, we believe the improvements we have continued to make in our creative our media spend our promotional calendar and our loyalty program position us to unlock material growth.

Speaker Change: Second strategic games pricing, our strategic gains pricing initiatives continues to show significant upside as a reminder, prior to this year. The company had not increased chip prices in more than 25 years, given the macro environment and after the results of our testing, we cautiously rollout higher gains pricing across the country, while still ensure.

Speaker Change: Seeing that we have the appropriate promotional offerings at the appropriate time to communicate and demonstrate the compelling value we offer our guests.

Speaker Change: We are excited about the capabilities that we have been able to unlock over the last several months as our enhanced game system allows for granular store level price adjustments based on increasingly real time performance data.

Speaker Change: We're also excited about a number of strategic investments we are planning for our midway in the coming months, which should only further enhance the value proposition we provide to our guests.

Speaker Change: We have a number of new games set to launch in advance of spring 2025, including the human Crane, which will be installed in the majority of Dave and Busters stores.

Speaker Change: And which is adding tangible excitement in the Dallas and Miami stores, we have tested it in.

Speaker Change: Games will always be what we are known for in the key differentiator to our business. We look forward to innovating on our offering and using us to solidify our leadership position in the out of home Entertainment space.

Speaker Change: Third improved food and beverage as a reminder, our food and beverage segment presents another opportunity to boost revenue and EBITDA by enhancing quality and service and returning customer engagement to historical levels with its attachment to games.

Speaker Change: Earlier this year, our new service model improved efficiency and the guest experience, which were supported by iterations of our revamped menu Kathy.

Speaker Change: Consequently, our guest satisfaction scores are continuing to show positive signs up six points in the third quarter versus the prior year.

Speaker Change: August also saw the launch of our phase four menu concentrating on beverage innovation and special events.

Speaker Change: Phase four enhancements drove encouraging improvements in F&B revenue.

Speaker Change: A number of F&B checks and F&B attach rate, we have come a long way and are now in a very compelling spot with our overall F&B offering.

Speaker Change: Fourth Remodels, we completed the remodel of 11, additional Dave and Busters stores in the third quarter and continue to expect to complete 44 total remodels by the end of fiscal 2024.

Speaker Change: As a reminder, when we started this remodel initiative, we tested in a number of different prototypes to see which could drive the highest returns.

Speaker Change: The conclusion of our initial effort was that the remodels that have the broadest offering which we referred to as fully program, which combined new and modernized dining room sports bar and game room, with new and easily Substitutable entertainment offerings like electronic shuffleboard electronic darts in the arena.

Speaker Change: Our immersive experience drove the highest ROI.

Speaker Change: We are encouraged that in aggregate are fully programming models continue to demonstrate improved top line performance.

It is also important to note that we are still in the early stages of this effort and we expect to see additional benefits as we progress on our remodel journey.

Speaker Change: Our rollout plan underscores our commitment to transforming the Dave <unk> busters experience across our entire system and by the end of this fiscal year, all new stores will look and feel like the fully programs prototype that youll give us a holistic portfolio of fresh orders upon program completion.

Speaker Change: Fifth special events, our special events business continued to perform well into the third quarter up mid single digits to the prior year.

Speaker Change: This bodes well for the fourth quarter as our special events business historically has a significantly higher percentage of sales over the prime holiday season than other periods of the year. Our marketing is now more appropriately supporting special events by utilizing paid media digital channels and in store experiences with bounce back so that drive.

Speaker Change: Cross selling.

Speaker Change: We're also explain offline media test to expand reach we are seeing encouraging signs of the strength with customer deposits for group events up low double digits versus this time last year, which has been supported by advancements in our online group booking engine.

Speaker Change: The addition of on premise sales manager into our stores is proving highly effective with our increasingly hands on approach of enhanced training for the special events teams.

While we feel comfortable at the current level.

Speaker Change: Of labor investments in our special events business the outperformance thus far of stores with dedicated sales managers indicates continued upside to expand the program to additional stores in 2025 should we achieve our internal targets this quarter.

Finally technology enablement are significant enhancements throughout the year have updated connectivity and server infrastructure, which was foundational in supporting our gaming ecosystem Remodels kitchen enhancements loyalty program and new service model.

Speaker Change: All of which will allow us to better integrate new property level insights into strategic analysis and enhance guest satisfaction and engagement.

Speaker Change: On the <unk> on the cost management front, we remain rigorous about finding ways to further optimize our cost structure at the store level and G&A level of our P&L. When we are encouraged by the results achieved this year that will allow us to grow margins as our various topline initiatives take hold in the coming quarters.

Speaker Change: Once we are making at store level it infrastructure and service center systems are enhancing our team members' productivity, which will unlock continuous improvement and allow us to scale the portfolio in ways that don't require a significant amount of additional resources in the years ahead.

Speaker Change: Most importantly, we aim to improve margins and reduce costs, while simultaneously enhancing the guest experience a challenging but rewarding achievement.

Speaker Change: Okay, turning to some additional financial detail in our third quarter of fiscal 2020 for comparable store sales decreased seven 7% on a like for like calendar basis versus the prior period.

Speaker Change: During the quarter, we generated revenue of $453 million net loss of $33 million or <unk> 84 per diluted share adjusted net loss of $17 million.

Speaker Change: Or 45 cents per diluted share and adjusted EBITDA of $68 million, resulting in an adjusted EBITDA margin of 15, 1%.

Speaker Change: Conciliations of all non-GAAP financial measures can be found in today's press release.

As a reminder, the third quarter is the lowest seasonal quarter from both the volume and EBITDA margin perspective, and as a result of a decline in same store sales has an outsized impact on year over year changes in adjusted EBITDA and adjusted EBITDA margin than in any other quarter of our fiscal year.

Speaker Change: As you know we do not typically provide guidance however, given the significant calendar shifts as well as the lack of comparability of a 52 week fiscal year lapping a 53 week fiscal year in the prior year amongst other factors we felt it appropriate at this time to give our perspective on where we.

Speaker Change: The year to end up.

But based on what we're seeing in walk in sales trends as well as our forward bookings on the special events side, we expect fiscal 2024, adjusted EBITDA to be within a range of $505 million and $515 million.

Speaker Change: In the quarter, we opportunistically refinanced a portion of our debt to extend maturities minimize interest costs and increase liquidity.

Speaker Change: We raised the new 700 million term loan due in 2031.

Speaker Change: We redeemed the remaining outstanding $440 million principal amount of our senior notes that were due in 2025, we paid down $200 million of existing term loan principal due in 2029.

Speaker Change: And we upsize the capacity of our revolving credit facility by $150 million to $650 million and extended its maturity for a fresh five years to 2029.

Speaker Change: I'd like to thank our bank partners for their consistent support and flawless execution in this important transaction, which solidifies our balance sheet for the long term as we continue to invest in our business.

Speaker Change: It also reemphasize the confidence our financial partners have in our go forward plan.

Speaker Change: We had a $7 million operating cash outflow during the third quarter ending the quarter with a cash balance of $9 million for total liquidity of $546 million when combined with the $537 million available on our upsized $650 million revolving credit facility net of outstanding letters of credit.

Speaker Change: We closed on an additional sale leaseback transaction for the real estate of one Dave and Busters store with an institutional real estate partner generating $28 5 million in proceeds.

Speaker Change: With the sale leaseback transaction, we closed in the second quarter. This takes our year to date proceeds to nearly $75 million and we have four owned and operating real estate assets today with one more wholly owned properties scheduled to open later this fiscal year we.

We find these types of transactions attractive to allow us to replenish our capital for further investment into the business.

Speaker Change: Being methodical in how and when we decided to monetize our existing and growing pipeline of real property assets.

Speaker Change: Turning to capital spending we invested a total of 131 million and capital additions during the quarter of which over 90% was considered growth capex.

Speaker Change: During the quarter due to our belief in the significant value we see in our shares at current levels, we repurchased $28 million of shares bringing total repurchases year to date to $88 million, representing 2 million shares or five 1% of the company's outstanding shares as of the end of fiscal 'twenty three.

Speaker Change: We still have $112 million remaining on our board approved share repurchase authorization to opportunistically repurchase our shares.

Speaker Change: With our expected healthy free cash flow into the future. We will work closely with our board to evaluate our new store growth remodel program other accretive growth investments and share repurchase opportunities to drive maximum shareholder value.

Speaker Change: Now, Kevin and I would be happy to answer any questions you might have Kevin can address any topics related to the board or management changes and I can take those related to our business performance. So operator. Please open the line for questions.

Speaker Change: We will now begin the question and answer session.

Speaker Change: To ask a question you May press Star then one on your telephone keypad.

Speaker Change: If you are using a speakerphone please pick up your handset before pressing the keys.

Speaker Change: To withdraw your question. Please press Star then two.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Speaker Change: The first question is from Jake Bartlett with <unk> Securities. Please go ahead.

Jake Bartlett: Great. Thank you for taking the question Kevin I wanted to start with Chris's departure, and really how we should think about the plan. The question. So.

Speaker Change: Clinical and putting together.

Jake Bartlett: He is left with the plan remains.

Speaker Change: How confident should we be that the plan stays as is or as you look for a new replacement new CEO.

Speaker Change: What do you look for in terms of attributes that might change the plan going forward.

Speaker Change: Second part of that question is what has not gone wrong.

Speaker Change: Right in your mind, so what needs to be course corrected in terms of kind of what's been executed so far.

Speaker Change: And then I have a couple of follow ups.

Speaker Change: Sure.

Speaker Change: When you when you listen to Joe's commentary on each of those initiatives you can't help but get excited because there is a lot of progress going on here.

And the scenes and.

Speaker Change: I am excited about that so the board and the whole management team.

Speaker Change: Way of background work very closely with Chris in devising the original plan.

Speaker Change: Our new plan was clearly defined or the underlying initiatives that we have a tremendous amount of confidence in and we will continue to execute against.

Speaker Change: I would just say in this intervening period a lot of my time will be focused square on that and making sure. We show tangible progress on each of these initiatives and drive things too.

Speaker Change: Move forward. So that we can show you. Some some success in each of these there is a lot of value in these so we want to make sure we communicate that to you guys along the way.

The only wildcard is the consumer environment has been somewhat conflicting this year and we have but we have a significant amount of optimism that things are progressing forward in a very encouraging way and for the year, our search to identify a very capable permanent CEO that shares. This vision is critical and it will be.

Speaker Change: The obvious to the right candidate that these are the things that will move.

Speaker Change: The meter forward.

Speaker Change: And as far as the successor CEO, we're looking for.

Speaker Change: You can take the textbook but.

It's really important we're looking for someone with.

Speaker Change: A clear lead in strategic vision.

Speaker Change: Operational execution getting things accomplished and financial performance of the company, we have to watch everything as we go through the balance sheet income statement cash flow and make sure the capital allocation is right.

Speaker Change: This rule demands of forward thinking leader, who can integrate the dining and entertainment experiences into a cohesive scalable and profitable business model, while fostering the innovation that Darren was talking to you about with so many of the things that we're working on.

Speaker Change: <unk>, which which.

Should translate into strong.

Speaker Change: Guest satisfaction and brand loyalty they would need to be an individual who can drive these critical initiatives initiatives forward as I said, we need to show you guys. The progress that we're making day by day quarter by quarter as the case may be but there's a lot of a lot of just went through.

Speaker Change: A series of meetings as a lot of very excited team members here.

Speaker Change: And I think it's going to be a very encouraging.

Fourth quarter and 2025, thank you.

Speaker Change: Great. Thank you.

Speaker Change: Follow up and it was very helpful to get that guidance for the year on EBITDA I think it's important for us to understand how sales is driving that so I'm, hoping you can give us a little more detail I know it's not typical.

Speaker Change: On the call.

Speaker Change: Year to date November how it's trended I'm trying to understand you gave us a range for EBITDA.

Speaker Change: How does that correspond in terms of sales and how confident are you in an acceleration.

Speaker Change: In the same store sales in the fourth quarter or perhaps not.

Speaker Change: Okay.

Jake Bartlett: Yeah, Yeah, Hey, Jake Darren.

Speaker Change: Yes.

We felt like given the.

Speaker Change: Yes.

Speaker Change: You are correct, we typically don't give guidance, but given the 53 week in the prior year.

Speaker Change: Calendar shifts and some other factors, we just thought it would be helpful to provide what we believe is a conservative level setting.

Speaker Change: And so regarding sales assumptions.

Speaker Change: The best way to think about it is.

Speaker Change: If we assume that Q4 performed similarly to Q3.

Speaker Change: Maybe with some modest improvements and this is based on what we're seeing in walk in trends in forward bookings.

Speaker Change: That kind of gives you some directions for how.

Speaker Change: How we thought about that EBITDA.

Speaker Change: Guide.

Speaker Change: <unk>.

Speaker Change: As we've articulated we're working on a number of things hard at work on a number of initiatives and we are optimistic in the near and medium term contribution that those are going to have.

Speaker Change: But we wanted to present, what we thought was a fairly conservative guide and just help.

Investors cut through some of the noise and some of the comparability challenges.

Okay and then just last last question just on that point it sounds like you've talked about.

Speaker Change: Higher bookings and considerably higher early deposits I believe your deferred revenue is down year, we maybe just kind of help us understand what we should how we should read it.

Speaker Change: In terms of deferred revenue.

Speaker Change: But in the context of that you mentioned I think youre talking about kind of the same store sales roughly being the same as they were in the fourth quarter as it were.

Speaker Change: Third but.

Speaker Change: But if you have those special events being part of the business you are seeing some good movement. There why would we expect that is there something maybe is walking's decelerated or something is there an offset that youre seeing that that would make us feel.

Speaker Change: Feel like the special events was not going to be dragging an improvement.

Speaker Change: Yeah, No no I would not look at it that way at all what I would say right now is where we are quarter to date.

Speaker Change: It's the preponderance of the quarter is yet ahead of us we still have 75% of our quarter.

Speaker Change: Between now and the end of Q4, and so with holiday shifts.

Speaker Change: From where we are quarter to date and with all of our.

Speaker Change: Special events predominantly happening over the next two to three weeks.

Speaker Change: We feel very confident about about where theyre going.

Speaker Change: But we didn't want to overextend.

Speaker Change: And and.

Speaker Change: Straight.

Any additional.

Speaker Change: Sort of walk in guidance.

Speaker Change: We feel very good about.

Speaker Change: What we have to offer.

Speaker Change: Going into Q4.

Speaker Change: And again I would say I would look at this guidance as a very conservative view just to help really level set it.

Speaker Change: Make sure people know at least generally how to how to approach Q4, just given Q4 in the prior year had a 50 <unk> week and just some other year over year noise. So I'd say, we're looking at this very conservatively.

Speaker Change: And are optimistic that we're going to have a strong Q4.

Speaker Change: Thank you very much I really appreciate it.

Speaker Change: The next question is from Andy Barish with Jefferies. Please go ahead.

Andy Barish: Hey, guys.

Speaker Change: Welcome back Kevin Stanley consistent.

Andy Barish: Hey, Dan.

Andy Barish: Just on the on the calendar shift benefit.

Andy Barish: Our guidance again without having to parse it too much.

Andy Barish: Assuming the negative impacting third quarter flips around in the fourth quarter and I know it doesn't.

Andy Barish: Fully offset an extra week, but can you give us some sense of sort of the.

Andy Barish: At least what's what's going on with that shift in the <unk>.

Yes, Yes, I think when you look at the impact in Q3 and there is a table in the earnings release that provides some color. There. If you haven't had a chance to digest that.

Andy Barish: The benefit in Q4 is going to be.

Andy Barish: Half of that or less.

Andy Barish: So it certainly would not look at that as it.

Andy Barish: It is hardly going to offset the 50 <unk> week. The 50, <unk> week had a $39 million impact in the prior year and this fiscal week shifts.

Andy Barish: Navy circa $5 million favorable impact in Q4, so hope that provides some context.

Andy Barish: Yes very helpful.

Andy Barish: And then.

Andy Barish: Yes.

Andy Barish: Maybe nitpicking here, but obviously important as you move into 'twenty five.

Andy Barish: You didn't kind of give a.

Andy Barish: <unk>.

Andy Barish: Sales increase in the fully program Remodels in.

Andy Barish: Prior to now I think you guys have kind of said hey, we need an NR seeing a double digit.

Andy Barish: Increase too.

Andy Barish: Justify the returns.

Andy Barish: Let's say a $3 $5 million investment so.

Andy Barish: Is there anything that youre seeing.

That's not generating similar types of returns or are you just kind of.

Andy Barish: Being a little bit more conservative right now.

Andy Barish: I think that that's an important area just to.

Andy Barish: To kind of.

Andy Barish: I'll parse out here.

Yes, yes.

Great question, what I'd say is our fully program to remodels or phase, one of Remodels, which which for the initial.

Call. It proof of concept Remodels, we are still seeing double digit.

Andy Barish: Growth in those locations.

Andy Barish: So we remain very pleased with how they're performing.

Andy Barish: The balance of the fully program Remodels are seen.

Andy Barish: Mid to high single digit growth.

Andy Barish: What I would say what I would say that we've learned is when we saw the success of this first remodels.

Andy Barish: We went into the hate less less aggressively push these out.

Andy Barish: And as we've done that.

Going through any of these programs.

Andy Barish: As Youre, probably aware as you pick up a lot of learnings along the way.

Andy Barish: There, where you need to tweak things, where you need to modify and so what we've learned is that there is opportunity for us to learn from how we.

Andy Barish: Rollout.

Andy Barish: Those initial four.

Andy Barish: A lot of dedicated effort there is.

Yeah, yeah, no, no, great, great question. What I'd say is our, our fully programmed models are are phase one of remodels, which, which were the initial, you know, call it proof of concept, um, remodels. We, we are still seeing um double digit um growth in in those locations, um.

Andy Barish: Up marketing there was additional training.

Andy Barish: That's when we started getting more aggressive with the rollout.

Andy Barish: We realize that those are really critical elements to really.

Andy Barish: Getting getting the best returns out of these.

Andy Barish: So with that being said, it's we've had a lot of learnings and we are now.

remained very pleased with, with her performing.

The, the, the balance of the fully programmed remodels are, are seen, um, you know, mid to high single digit growth.

Andy Barish: Sure.

Andy Barish: Making some changes to how we're messaging brand.

Andy Barish: Awareness of the remodel is very critical and so as we look at our phase III fully program Remodels, we're going back and plus enough, our marketing and messaging to more reflect what those first four were like.

What, what I'd say, what I'd say that we've learned is, you know, when we saw the success of this first remodels, um, um, we went into the, hey, let's let's aggressively push these out, um, and as we've done that, um, you know, going through any of these programs, um, as, as you're probably aware, is you, you, you pick up a lot of learnings along the way, where, where you need to tweak things, where you need to modify and so what, what we've learned is, is that there

Andy Barish: And focusing on some of those areas that we really excel that on those first four and we think that's really important.

Andy Barish: As we move forward with this with this remodel program.

there, there's opportunity for us to learn from how we, uh, roll out, um, those initial 4, you know, there's a lot of dedicated effort. There is, um, plused up marketing there is additional training, um, that's when we started getting more aggressive with the rollout, um.

Andy Barish: <unk>.

Andy Barish: I think thats right.

Andy Barish: Still still like our returns.

Andy Barish: We think we can optimize those returns even more and we have a pathway that we think is the correct one to do that.

Andy Barish: Yeah.

Okay helpful. And then just finally I know things are in flux.

Andy Barish: Annual budgets, probably being worked on.

We realize that those are really critical elements to really um getting, getting the best returns out of these.

There was some discussion.

Andy Barish: <unk> fully program Remodels for fiscal <unk>.

Andy Barish: <unk> five coming up can you comment on that at this point or would you.

So, so with that being said, it's, we've we've we've had a lot of learnings, and we are now, um, um, you know, making

Andy Barish: Rather hold off.

Speaker Change: Yes, I'd say I'd say, we're still very committed.

Some changes to, to how we're, we're messaging these brand of, of the, the awareness of the remodel is very critical. And so as we look at our phase 3 fully programmed remodels we are going back and, and plusing up um our marketing and messaging to more reflect what those 1st 4 were like, um, and, and, and focusing on some of those areas that, that, that we really excel at on on those 1st 4 and, and we think that's really important, um.

Dennis: Two obviously getting into 44, Dennis this year and and.

Dennis: And we're continuing to work with our board on what that cadence looks like for FY 'twenty five.

Dennis: If we chose to we could do 60 next year.

Dennis: I think we.

Dennis: We might take a little bit more judicious.

Dennis: Approach just to make sure that we can focus on delivering the right marketing the right ops execution with it.

Mhm

And as we move forward with this, with this, uh, remodel program, so, um, I, I, I think that's why so so still, still like our returns, um, we think we can optimize those returns even more and we have a pathway that that we think is is is the correct one to do that.

But we're still.

Dennis: Very excited about this program.

Dennis: And I think next time, we get together, we'll provide some more color on the quantum of Remodels, but.

Dennis: But needless to say, it's still a very key initiative and we're just working through what that cadence looks like for 25.

OK, helpful and then and then just finally I know you know things are in flux and the.

You know, the annual budget's probably being worked on, but there's some discussion of, of 60, you know, fully programmed remodels for fiscal.

Dennis: Okay. Thank you very much.

Speaker Change: The next question is from Sharon Zackfia with William Blair. Please go ahead.

You know, 25 coming up, um, can you comment on on that at this point it would be, um, rather hold off.

Sharon Zackfia: Hi, Thanks for taking the question I guess I wanted to ask about the brand and kind of your research with your core customers on where their relevancy is of the brand at this point.

Yeah, I'd say I, I'd say we're, we're still very committed, um, to, um, obviously getting the 44 done this this year and um and we're continuing to work with our board on what that cadence looks like for FY 25 we if we chose to we, we could do 60 next year, um, I, I think, you know, we, we might take a little bit more judicious of, of approach just to make sure that we can focus on delivering the right marketing.

Speaker Change: Or you think that can improve and then.

Speaker Change: On the Remodels I would be interested in hearing about the utilization of the social base.

Speaker Change: Yeah sure so.

Speaker Change: The first question.

Speaker Change: Four.

Speaker Change: Both the brands in terms of relevancy.

Speaker Change: We've done a lot of it.

The right ops execution with it.

Speaker Change: Extensive consumer research over the last couple of years or so.

Um, but we're still um very um excited about this program and, and I, I think next time we get together, we'll provide some more color on, on the, the quantum of, of remodels, but, um, but needless to say, it's, it, it's, it's still a very key initiative and we're just working through uh what that right cadence looks like for 25.

Speaker Change: <unk>.

Speaker Change: Our consumers love our brands.

Speaker Change: And the.

Speaker Change: Some of the most.

Speaker Change: The most compelling feedback that we've gotten which has influenced this remodel program and some of our other initiatives.

Is.

As is relevancy in terms of that entertainment innovation.

Speaker Change: The entertainment.

OK, thank you very much.

Speaker Change: Side as the key driver for the occasion for our guests, which is why it's important for us to deliver on that.

The next question is from Sharon Zaxia with William Blair. Please go ahead.

Hi, thanks for taking the question, I guess I wanted to ask about the brand and kind of your research with your core customers on where the relevancy is of the brand at this point, um, where you think that can improve and then on the, the remodels I'd be interested in hearing about the utilization of the social base.

Speaker Change: In the mid way through through incremental innovation from from an entertainment side.

Speaker Change: So.

Speaker Change: So it's remarkably consistent over the years that our product offering has high appeal and so we were.

Speaker Change: We're very much.

Speaker Change: Aligned aligning our strategy with with that.

Yeah, sure, so, um, you know, the, the, the first question

In terms of your second question in terms of the utilization of the social base in the arenas.

We, for, for

Both the brands in terms of relevancy, we, we've done a lot of um extensive consumer research, you know, over the last couple of years or so, um.

I think it's a.

We see some some differences on.

Speaker Change: With on a store by store basis with our Remodels.

The, you know, our consumers love our brands, um, and the, um, some of the most um the the most compelling feedback that we've gotten which has influenced this this remodel program and some of our other initiatives.

Speaker Change: Our locations are not prototypical, they're all it's a snowflake they are all different and so the placement of the social base in the arenas and each one is a little bit different but the number of.

I, um, is, is, is relevancy in terms of that entertainment, um, innovation, you know, the, the entertainment, um.

Tim: Social base in arenas as well Tim.

Speaker Change: Can differ.

Speaker Change: And that leads to different different usage.

Side is, is the key driver for for the occasion for our guests, which, which is why it's, it's important for us to, to deliver on that.

Speaker Change: And so we're continuing to learn how to further engage.

Speaker Change: Our guest with this new platform, because it's a new form of entertainment for us.

Um, in the midway through, through incremental, um, innovation from, from an entertainment side.

Speaker Change: But we we think we're just scratching the surface quite quite frankly, even in our fully program locations that are performing incredibly well.

So, um,

So it's, it's remarkably consistent over the years that our product offering has has high appeal and so we, we, um, we're, we're, we're very much um.

We just think we're scratching the surface on on the guest usage and awareness and traffic driving ability of these.

aligned aligning our strategy with with that.

Um, in terms of your second question, in terms of the utilization of of the social base and, and the arenas.

Speaker Change: These new forms of entertainment that we've put in place.

Speaker Change: So.

Speaker Change: So we think we can drive more and.

I think it's a, um, we, we, we see some, some differences on um with on a store by store basis with with our remodels.

Speaker Change: And we've got the teams focused on that a lot from a from a training from a staffing from a pricing from a length of game play.

Um, you know, our, our locations are not.

Speaker Change: To drive even more utilization.

Prototypical. They're all, it's a snowflake, they're all different and so the placement of the social base in the arenas in each one is, is a little bit different, but the number of

Andrew <unk>: The next question is from Andrew <unk> with BMO. Please go ahead.

Andrew: Hey, good afternoon, thanks for taking my questions.

Um, social bases and, and arenas as well, um, can, can differ. And, and that leads to different, different usage, um.

Andrew: My first one I know that you continue to talk about the strong returns you get on the new stores, but I guess, just as kind of you're implementing all of these things and doing the remodels and going down the path of repositioning the business is there any thoughts of pulling back on the store openings pace temporarily to.

And so we're we're continuing to learn how to further engage um our, our guest with this new platform because it is, it's a new form of entertainment for us, um, but we, we think we're just scratching the surface, quite, quite frankly, even in our fully programmed locations that are performing incredibly well, um, we, we, we, we just think we're scratching the surface on, on the guest usage and and awareness and and traffic.

Andrew: Focus on the core for a period of time and kind of get the comps in the right place improved cash flow profile I know you've talked about kind of getting with the board to talk about capital allocation priorities. So I'm just wondering if theres any consideration to that.

Andrew: Yes, it's a great question.

Andrew: At this moment, we would say no for a couple of reasons number one we get phenomenal returns.

driving ability of these um these new forms of entertainment that that we've put in place.

Andrew: On our on our new store openings and this is.

So, um,

Andrew: Our standard.

So, so we, we, we think we can drive more and um and we've got the teams focused on on that a lot from a from a training from a staffing from a pricing from a length of gameplay, um, to, to drive even more utilization.

Andrew: Size of the store are smaller locations as we go into smaller markets.

Andrew: In existing or new markets.

Andrew: And just to get really really great returns.

All of the things that we're focused on right now all the initiatives I just walked through.

The next question is from Andrew Stelzick with BMO. Please go ahead.

Andrew: While it's frustrating.

In this.

Hey, good afternoon. Thanks for taking the questions, um, my first one, I know that you

Andrew: In this environment to not see.

Andrew: The impact of all of these green shoots.

Continue to talk about the strong returns you get on the new stores, but I guess just as kind of you're implementing all these things and, and, and doing the remodels and going down the path of, of, of repositioning the business. Is there any thought of pulling back on the store openingspa temporarily to, you know, focus on the core for a period of time and kind of get the comps in the right place, improve the cash flow profile. I know you talked about.

Andrew: Poke through the macro environment.

Andrew: We are highly committed to highly confident that we're focused on all the right initiatives and when will that works in conjunction with our remodel program with the right marketing messaging the right innovation right ops execution.

Kind of getting with the board to talk about capital allocation priorities so I'm just wondering if there's any consideration to that.

Andrew: We believe we're going to start seeing the results of that so.

Uh, yeah, it's, it's, it's a great question, um, at, at this moment we, we would say no for a couple of reasons. Number one, we get phenomenal returns.

Andrew: So.

I think if you start having questions on that core strategy that could lead you to allocate capital away from new stores, but we're we're not close to that right now and remain very confident in that.

Um, on our, on our new store openings and, and this is

Um, you know, our standard, um, size of the store are our, our smaller locations as we go into smaller markets, um, in existing or new markets, um, continuing just to to get really, really great returns. Secondly, um, you know, all the things that we're focused on right now, all the initiatives that we just walk through.

Andrew: Okay and then.

Andrew: My other question is about the marketing optimization, which I think if I go back to the original.

Andrew: Yesterday deck was identified as the biggest revenue and EBITDA opportunity amongst all of the things that you guys had identified and it sounds like we're kind of still a work in progress towards that so from here I guess, what's the pathway when do we start to see that full expression of the marketing optimization really flow through and start to realize the benefits of <unk>.

Um, you know, while it's frustrating.

In this, um.

In this environment to not see um the impact of all these green shoots.

Andrew: How far away are we from that driver really playing out.

Um, poke through the macro environment, um, we, we are highly committed and highly confident that we're focused on all the right initiatives and when, when that works in conjunction with our remodel program with the right um marketing messaging, the right innovation, the right ops execution, um.

Speaker Change: Yes, it's a great question and I think we would say admittedly that has been one of the more challenging areas to address I think for a number of reasons.

Andrew: But we remain.

Very optimistic that there is a lot to untap there.

Um, you know, we, we believe we're we're going to start seeing the results of that. So

Speaker Change: So what I'd say is that there has been a a lot of learnings, particularly Lynn.

Um, so, you know, I, I, I think if you start having questions on that core strategy that could lead you to allocate capital away from new stores, but we're, we're we're not close to that right now and and remain very confident in that.

Andrew: When we look at the condition of the <unk>.

The underlying infrastructure of the availability of of actionable data.

OK, and then um my other question is about the marketing optimization which I think if I go back to the original.

Andrew: Our our analytics capability.

Andrew: It takes a while to build and I think.

investor day deck was identified as the biggest revenue and even up opportunity amongst all the things that you guys had identified.

We probably underestimated the amount of work that went into doing that and then once you get that foundation laid and then new partner and we brought in a new agency.

And it sounds like we're kind of still a work in progress towards that, so from here I guess what's, what's the pathway when do we start to see that?

Andrew: There was a number of things.

Full expression of the market marketing optimization really flow through and and start to realize the benefits of that, how far away are we from that driver really playing out?

Andrew: A number of things that we have learned and identified that we are now really starting to focus on.

And, and I think we would say admittedly that has been one of the, the, the more challenging um areas to address. I, I, I think for, for a number of reasons, um, but you know we remain um.

Andrew: A few examples of that is.

Andrew: Media mix, we shift.

Andrew: Shifted from our media mix.

Andrew: That had a good blend of.

Andrew: <unk> of <unk>.

Linear.

Andrew: <unk> offline and online, we really shifted to a 90% digital 10%.

Very optimistic that there is a lot to untap there.

Offline and while that shift to digital was the right move we likely overcorrected by completely eliminated television entirety firm from our mix.

So what I'd say is that there has been a, a lot of, of learnings, particularly when um when we look at the, the condition of the just the underlying infrastructure, the availability of of actionable data, um, you know, our, our analytics capability that, that, that takes a while to build and, and, and I think, you know, we probably underestimated the, the amount of work.

So we've we've been doing some tests in terms of linear and we've recently added some back to really drive top of funnel awareness, which we believe is showing some really really positive signs.

Andrew: We how we.

Andrew: Allocated some of our spend across locations.

That, that, that went into doing that. And then once you get that foundation laid, um, and then you partner and, and we brought in a new agency, um, you know, there was a number of things, um, a, a number of things that we have learned and identified that we are now really starting to focus on, um, you know, a few examples of that is, you know, media mix, you know, we shift, uh, shifted from a media mix.

Andrew: We've learned that we weren't allocating that as smartly as we could kind of go back to my comment on Remodels.

Andrew: It's we.

Andrew: We don't believe we were appropriately messaging and all the great things that we had.

Andrew: And so we are looking at that.

Andrew: That balance shift.

Andrew: Between awareness and relevance.

Andrew: We're taking our latest round of 40 program of Remodels and heading up on our on our spend there and starting to get some good some good returns.

You know, that had a good blend of, of, of linear um offline and online, we really shifted to a 90% digital, 10%.

Andrew: How how we're setting the stage in terms of.

Um, offline and, and, and while that shift to digital was the right move, you know, we, we likely overcorrected by completely eliminating TV entirety from, from, from our mix, um, so, so we've, um, we've been doing, um, some tests in terms of linear. We've recently added some back to really drive top of the funnel awareness, which, which we believe is showing some really, really positive signs. Um,

Andrew: How we know if our digital spend is appropriately driving.

Andrew: Are we targeting that gas properly.

And are they coming into our center after being delivered an impression.

Andrew: How how we have looked at our loyalty program.

Andrew: And how we're shifting that.

You know, we, how we, um, allocated some of our spend across locations, um, we've, we've learned that, you know, we, we weren't allocating that as smartly um as we could, kind of going back to my comment on, on remodels, um.

Andrew: So.

Andrew: That being said, we still there's a lot here theres a lot to unlock for us.

Andrew: And I think I think we may have overcorrected in some areas.

It's we

Andrew: Setting that foundation to took a little bit longer than we thought.

We don't believe we were appropriately messaging all the great things that we had, um, and so we are, are looking at that, um, at, at, at that balance shift.

Andrew: But our confidence and optimism about what that strategy can unlock.

Between awareness and relevance, um, we're, we're, we're taking our latest round of fully programming models and heading up on our, on our spend there and starting to get um some, some good, some good returns, um.

Andrew: We continue to be very passionate about.

Andrew: I know I said, a lot, but hope hopefully that provides.

Andrew: Some color that's helpful for you.

Speaker Change: The next question is from Dennis Geiger with UBS. Please go ahead.

You know, how, how we're, um, setting the stage in terms of um

Dennis Geiger: Great. Thank you I'm curious if you guys could talk at all about the friends would location sort of just the latest update there as it relates to year or two.

You know how we know if our digital spend is appropriately driving

Uh, are we targeting that guest properly, um, and, and are they coming into our center after being um delivered um an impression.

And then if anything else to share on those remodels on sort of that I know, it's early days for many of them.

Dennis Geiger: Just on the trajectory of the performance following the initial open.

Um

Dennis Geiger: Are they generally, especially phase one are they generally tracking in line or perhaps better than your expectations. Just how thats generally looked if there's anything notable to call out there.

How, how we are, have looked at our loyalty program, um, and, and how we're, we're shifting that.

Um, so,

So that being said, we, we still, uh, there's a lot here, there's a lot to unlock for us, um, and, and, you know, I think, I think we may have overcorrected in, in some areas, um, setting that foundation took took a little bit longer um than we thought.

Dennis Geiger: Yes, yes.

Dennis Geiger: Yes, so so friendswood and we I think mentioned.

Dennis Geiger: On the last call that big.

Dennis Geiger: Began lapping its remodel.

Dennis Geiger: From from the prior year.

Um, but our, our confidence and optimism about what that um strategy can unlock, uh, we, we continue to be very passionate about. So I, I know I said a lot, but hope, hopefully that provides um some color that's helpful for you.

Dennis Geiger: And we continue to be pleased with its performance.

Dennis Geiger: Obviously on a year over year basis that has moderated.

Lapping that our green over Green.

Dennis Geiger: But we continue to be.

Dennis Geiger: Pleased with with where Thats settled in.

The next question is from Dennis Geiger with UBS. Please go ahead.

Look I think with any of these remodel programs it's not.

Great thank you uh I'm curious if you guys could talk at all about the the Friendswood location sort of just the latest update there as it relates to to year two, and then if anything else to share on those remodels and sort of that I know it's early days for for many of them, um, but just on the trajectory of the performance following the initial open um as it, you know, are they generally, especially phase one, are they generally tracking in line or or you know perhaps better uh than than your expectations, um, just how that's, uh, generally looked if, if there's anything notable.

Dennis Geiger: It's not a linear view of the world where.

Dennis Geiger: Some.

Dennis Geiger: There is some variance to how these things perform.

Dennis Geiger: <unk>.

Dennis Geiger: But overall we.

Dennis Geiger: We're continuing to see that strong.

Dennis Geiger: Growth and are arent seeing anything there that has led us to believe that.

To call out there.

Dennis Geiger: Just a short term burst that that the guest or uninterested in that's not what we're seeing at all.

Yeah, um, yeah, so, so friends would, and, you know, we, I think mentioned um on, on my on the last call that

Dennis Geiger: We feel really good about that.

Um, began lapping its, it's remodel, um, from, from the prior year, um, and you know, we, we continue to be.

Dennis Geiger: Did you have another part to your question that I.

Dennis Geiger: Didn't address.

Speaker Change: No that's great I appreciate that just the second unrelated question then if I could just looking back at <unk>. Thank you and looking back at <unk> and you guys called out some of the pressures from weather and different things and clearly the macro just curious if.

Pleased with with its performance, um, you know, obviously on a year over year basis that has moderated and now now that it's lapping, now that we're green over green, um, but, but we continue to be, um, pleased with, with where that's settled in, um, look, I, I think with any of these remodel programs, it's not.

Speaker Change: Any other notable observations are the macro pressures still generally impacting.

Speaker Change: Visit patterns spending patterns and are generally similar way again, if you kind of cut through some of the noise maybe on some of the call out that you mentioned.

It's not a linear uh view of the world where, um, you know, some, um, um, you know, there's some variants that to how these things um perform, um, and, but, but, but overall we um

Speaker Change: Any kind of notable changes in those behaviors visits spending et cetera, better worse generally similar.

Speaker Change: Yeah look I would say that macro environment.

You know, we're, we're continuing to see that, that strong, um, growth and you know, aren't aren't seeing anything there that has led us to, to believe that, you know, it's a, it's a

Speaker Change: At best just continues to be that that headwind.

Speaker Change: Yeah.

Speaker Change: As mentioned previously, particularly at that low end consumer is really where we're feeling that client that decline.

Just a short term burst, um, that the guests are uninterested in that, that, that's not what we're seeing at all. So, so we, we, we feel really good about that, um.

Speaker Change: To the extent that their spend.

Did you have another part to your question that I that I didn't address.

Speaker Change: As is down twice as much as the other.

No, I, I, that's great. I, I appreciate that. Just the, the second, uh, unrelated question that if I could just in in looking back at at at 3 thank you and and looking back at at 3Q and you guys called out some of the, the pressures, you know, some, some weather and different things and, and clearly the, the macro just curious if um if any other notable observations or, you know, are the macro pressure still generally impacting, uh, visit patterns, spending patterns in a, in a generally similar way again if you kind of cut through some of the noise maybe on.

Speaker Change: Income quintile so.

Speaker Change: So we're continuing to see that pressure.

Speaker Change: On the consumer.

Speaker Change: So yes, so overall from a from a trend perspective.

Speaker Change: <unk> now look I wouldn't say, there's anything terribly meaningful from a trend.

Speaker Change: Change.

Speaker Change: From a regional performance perspective, we're seeing similar trend performance there. So I think it's.

Speaker Change: Just a little bit more of the same from a macro perspective.

Some of the callouts that you mentioned, um, any kind of notable changes in those behaviors visits, spending, etc. better, worse, generally similar. Thank you.

Speaker Change: From Q2 heading into Q3.

Speaker Change: The next question is from Todd Brooks with Benchmark Company. Please go ahead.

Yeah, look, I, I'd say that macro environments, um, you know, at, at best, just, you know, continues to be that, that headwind, um.

Todd Brooks: Hey, Thanks for taking my questions first question just following up on <unk> question.

Speaker Change: Darrin if you look at kind of some of the pressures that you called out in the third quarter between the calendar weather.

You know, as, as mentioned previously, particularly that that low end consumer is, is really where uh where we're feeling that client, that decline.

Speaker Change: The Remodels can you size, maybe what the bucket of that pressure meant from a same store sales drag and then on the remodel portion of that drag are the remodels is taking longer than expected, where it was a bigger than expected drag versus what you thought going in another quarter.

Um, to, to the extent that, you know, they're, they're spend, you know, is, is, is, is down twice as much as as the other um.

Income quintiles.

Speaker Change: Yes, so from a from a from a weather and remodel construction impact we estimate about 50 to 100 basis points of pressure on our comps.

So, so we're we're continuing to see that pressure, um, on, on the consumer, um.

So yeah, so I mean overall from a from a

trend perspective now, look, I, I wouldn't say there's anything terribly meaningful from from a trend change, um, you know, from a regional performance perspective we're we're seeing similar um trend performance there so I, I think it's, you know, it's just a little bit more of the same from a macro perspective, um, from, from Q2 heading into Q3.

Speaker Change: 707.

Speaker Change: The.

And that comp of down 77% is on a like for like basis, So that ignores the noise from from the calendar shift.

Speaker Change: So thats the biggest.

Speaker Change: That's the biggest call out in terms of the same store sales performance.

The next question is from Todd Brooks with the benchmark company. Please go ahead.

Speaker Change: And again <unk> got the macro.

Hey, thanks for taking my questions. Uh, first question, just following up on Dennis's question.

Speaker Change: Impact.

Speaker Change: And then again.

Speaker Change: A lot of what I kind of walked through particularly from a marketing perspective in terms of the opportunities that we've identified after.

Uh, Darren, if you look at kind of some of the pressures that you called out in the 3rd quarter between the calendar whether.

Uh, the remodels, can you size maybe what the bucket of that pressure meant from the same store sales drag and then on the remodel portion of that track or the remodels taking longer than expected or where was it bigger than expected drag versus what you thought going into the quarter.

Speaker Change: Bringing in a new agency partner.

Speaker Change: Those.

Speaker Change: Those changes and improvements and enhancements that we're making.

Are going to be into Q Q4, heading into Q1. So it's.

Speaker Change: It's difficult to know what kind of impacts that sort of unoptimized.

Yeah, so from a, from a, from a weather and remodel construction impact, we, we estimate about 50 to 100 basis points of pressure on our comps down 77.

Speaker Change: Sort of <unk>.

Speaker Change: Marketing had but.

Speaker Change: But I would say.

Speaker Change: Heading into these ensuing periods.

Um

The, um, and, and, and that cop of down 77 is on a like for like basis, so that, that ignores the noise from, from the calendar shift.

We feel good about.

Speaker Change: What we're able to do to help sort of fight some of these macro headwinds.

Brian Vaccaro: The next question is from Brian Vaccaro with Raymond James. Please go ahead.

Um, so that, that, that's the biggest.

Um, that's the biggest call out in in terms of the the same store sales performance.

Brian Vaccaro: Thanks, Darren you touched on it a little bit earlier, but Youll review of the advertising and the shift away from linear TV and recent years I'm curious just how much of a role you think that's played in the company's negative comp performance.

Um

You know, and, and, and again, then, then you've got the, the, the macro, um.

Impact

And then again,

You know, a lot of what I kind of walked through, particularly from a marketing perspective, um, in terms of the opportunities that we've um identified after uh bringing in a new agency partner, um.

Brian Vaccaro: Way to kind of frame that high level.

Brian Vaccaro: Yes.

Brian Vaccaro: Chance I can't speculate on what that impact might be.

Brian Vaccaro: You just don't know a lot of times when you.

Those um those changes and, and, and improvements and enhancements that we're making, um, you know, are gonna be into Q Q4 heading into a Q1, so, um, it's difficult to know what what kind of impacts that sort of unoptimized um.

Brian Vaccaro: <unk> had a brand thats it was very heavy linear.

Brian Vaccaro: To know.

Brian Vaccaro: Guardrail to guardrail goes very heavy digital.

Brian Vaccaro: Again, I think I think that that shift was generally the right, but I think we're now trying to say like do we need to balance. This does better in some of our testing is telling US, yes, we need to balance that better.

Um, sort of.

Marketing had but um but but I'd say, you know, heading into these ensuing periods, um, we, we feel good about um what we're able to do to to help sort of fight some of these macro headwinds.

Brian Vaccaro: Because we might be we might be missing a lot of that top of the funnel, which the brand is focused on not notwithstanding having very high brand awareness.

I can't speculate on what that impact will be.

The next question is from Brian Baccaro with Raymond James. Please go ahead.

Brian Vaccaro: I think that.

Brian Vaccaro: The biggest test will be as we rebalance it.

Uh, thanks. Uh, Darren you touched on it a little bit earlier, but your review of the advertising and and the shift away from linear TV in recent years. I'm curious just how much of a role you think that's played in the company's negative comp performance if if there's a way to kind of frame that high level.

Brian Vaccaro: We'll see what our performance looks like moving forward and.

Brian Vaccaro: And.

Brian Vaccaro: We feel like Theres, a lot of opportunity there.

This concludes our question and answer session I would like to turn the conference back over to Kevin Sheehan for any closing remarks.

Yeah, I, I, I can't, I, I can't speculate on, on what that impacts might be, um, you know, you, you, you just don't know a lot of times when you, um, you, you've, you've had a brand that's, you know, it was, was very heavy linear.

Kevin Sheehan: Thank you operator, and thank all of you for joining we look forward to speaking with you again soon and in the meantime happy holidays.

Kevin Sheehan: Our families to yours, thank you very much.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Um, to now, you know, guardrail to guardrail goes very heavy digital, um, which, which again I think, I think that that shift was, was generally the, the right, but I think we're now trying to say, look, do do we need to balance this this better and some of our testing is telling us, yeah, we, we need to balance that better, um, because we might be, we might be missing a lot of that that top of the funnel, you know, which, which the brand is focused on not notwithstanding having very high brand awareness.

So I, I can't speculate on, on what that impact will be, um, I, I think that the, the biggest test will be um as we rebalance it, um, we'll, we'll see what our performance looks like moving forward and um and, and, and.

We, we, we feel like there's a lot of opportunity there.

This concludes our question and answer session. I would like to attend the conference back over to Kevin Sheehan for any closing remarks.

Hey uh, thank you operator and thank all of you for joining. We look forward to speaking with you again soon. And in the meantime, happy holidays from our families to yours. Thank you very much.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.