Q4 2024 Dave & Buster's Entertainment Inc Earnings Call
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Speaker Change: Good afternoon everyone and welcome to the Dave & Buster's Q4 and Fiscal Year end 2024 earnings call.
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Speaker Change: After today's presentation, there will be an opportunity to ask questions. Ask a question, you may press star, and then one on your touch to your telephones. If you draw your questions, you may press star and two.
We know today's event is being recorded.
Speaker Change: At this time, I'd like to turn the floor over to Cory Hatton, Head of Entertainment Finance, Buster Relations, and Treasurer. Please go ahead.
Thank you. Bye-bye.
Speaker Change: Thank you, operator, and welcome to everyone on the line. Joining me on today's call are Kevin Sheehan, our chair of the board and interim CEO and Darin Harper, our CFO .
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 & Buster's Entertainment Inc, and it's Copyrighted.
Speaker Change: Before we begin the discussion on our company's fourth quarter and fiscal year end 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 facts.
Speaker Change: Any of these items should be considered forward-looking statements relating to future events within the meaning of the Private Security's litigation reform act of 1995. All such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated.
Speaker Change: Information on these risks and uncertainties have been published in our fileings 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 the comparable GAT measure contained in our earnings released this afternoon.
Kevin Sheehan: And with that, let me turn the call over to Kevin.
Kevin Sheehan: Thank you Cory. Good afternoon everyone and thank you for joining our call today.
Kevin Sheehan: While we are disappointed by our results for the fourth quarter, we are very encouraged by the clear opportunities we have identified over the past few months.
Kevin Sheehan: and the most recent trends in the business and taking actions to unwind the stakes and make appropriate changes.
Kevin Sheehan: Previous leadership, while well-intentioned, made significant and ill-advised changes to marketing, food and beverage, operations, remodels, and games investment that negatively impacted the business.
for the avoidance of doubt.
Our Strategic Plan is the Right Plan.
Execution against it was flawed. [inaudible]
Kevin Sheehan: We are a highly confident that our current actions will lead to significantly improved revenue, adjusted EBITDA, free cash flow and shareholder value in the month of hand.
Kevin Sheehan: Results in March and April have notably improved from the trend of the fourth quarter and on through February and we expect results to continue to improve in the coming months.
Kevin Sheehan: Our financial position remains strong with relatively low leverage, no near-term debt maturities and no operative financial covenants.
That's in class store level economics.
and significant operating pre-cashlow generation.
Kevin Sheehan: to drive both revenue growth and free cash flow generation. Our team could not be more excited by the opportunities we see ahead to meaningfully improve the operating performance of the business and shareholder value.
Kevin Sheehan: Let me take a few minutes to highlight some of the issues we have identified with key elements of the business and the changes we have made are planning to make to unwind mistakes and deliver better execution and improved results.
As previously discussed,
Kevin Sheehan: We are much more in the process of returning to the basics of what made this company so successful in the past.
Kevin Sheehan: This is a simple business with an exceptional business model that was doing quite well. In attempting to improve the business that was already doing well, prior leadership made very dramatic and chaotic changes that among other things
Distracted, Confused, and Overwhelmed Our Customers and Our Operators [inaudible]
Kevin Sheehan: We went from 90% plus TV to essentially zero. Prior leadership also overwhelmed our customers and operators with way too many and often overlapping and conflicting promotions.
We have already reintroduced TV back.
Kevin Sheehan: and we have returned more closely to our historical cadence of promotional activity.
Kevin Sheehan: In particular, we have it reintroduced our historically most popular and successful promotion, our classic Eden Play combo
Kevin Sheehan: We will continue to promote this incredible value proposition in all of our marketing channels and are already seeing it as an increasing mix of old checks.
Speaker Change: On operations, we are overwhelming our operators with promotions and making too many other changes to menu.
Speaker Change: Service Style, Pricing, Labor Configuration, Remodel Activity and other changes while reducing or eliminating our training activities and we were not properly engaging with and listening to our operators.
Speaker Change: We have dialed back most of this and returned to the historical practice I have personally spent an enormous amount of time directly with our operators, hearing from them, hearing their issues,
Speaker Change: and the many opportunities that we see each and every day. We're also reintroducing our historical training practices and re-establishing our quality standards.
Speaker Change: On menu, we eliminated popular ticket-out trays and over-promoted lower ticket cherubles which led to a trade-down.
Speaker Change: We also have favorably changed our pricing architecture and changed our menu design and configuration. We have already made changes to the menu design and configuration and many of the pricing issues as well.
Speaker Change: On remodels, we didn't properly test our prototypes, we didn't listen to our operators, we didn't prioritize target stores to be remodeled well, and we've spent it well beyond budget on many stores.
Thanks for watching!
Speaker Change: We very strongly believe in our remodel strategy. We are currently re-evaluating our prototype in close collaboration with our operators. We prioritizing target stores.
and revising our budget spend and oversight.
Speaker Change: We completed an additional 15 remodels of DB stores for a total of 44 completed under the program which began in 2023 and this is an addition to almost a hundred stores that opened in the last seven years.
Speaker Change: Given the mixed results and the need to address certain flaws with the roll-out strategy,
We were preceding with a more measured pace
Speaker Change: There is no doubt that an effective Reed Romano program should deliver high returns on investment and drive meaningful, same-store sales growth.
Speaker Change: On Games Investment, prior leadership, the emphasized new games and development and investment, up until earlier this year, we had not introduced an observable number of new games into our stores in over two years.
Speaker Change: which is a significant departure from our historical practice and what we know to be the right way to run our business.
Speaker Change: We have been able to move quickly and have an all-star lineup of new games rolling out in the stores now leading the new lineup attractions is our all-new human crane.
Speaker Change: A life-sized version of the classic arcade claw machine experience that builds on the innovative qualities of the Dave & Buster's brand. The human crane allows guests to become the claw.
Speaker Change: Gently lowering into the sea of oversized prizes, with over 40 B&B stores operating the human crane today and plans to roll out 100 more locations in short order. The initial performance
Speaker Change: and we expect to see a less than six month payback on this usually successful addition to the midway. In addition to the human crane, we are launching six new premium arcade games.
You have seen challenge.
Speaker Change: A high-energy UFC theme fighting game exclusive to Dave & Buster's and further establishing our brand as the premier destination to watch every UFC fight.
Speaker Change: and fueling our watch program. Godzilla VR, where players immerse themselves in the virtual reality music battle against the colossal KJU creatures in a thrilling multi-century experience.
Speaker Change: NBA superstars were players compete at their favorite NBA icons in dynamic three versus three matches. Top Gun Maverick would play a step up into the cockpit and take on intense missions inspired by the blockbuster film.
Speaker Change: Game. And finally, Funko Funkade, where players can enjoy a retro-inspired game offering a chance to win exclusive Funko collectibles.
Speaker Change: These new games are just the beginning of the excitement we are rolling out in the summer with our revival of the summer of games to further enhance our midway experience.
Speaker Change: New Stewart Development, Delivering Exceptions High Returns and Investment, has continued to be a successfully executed part of our business strategy.
During the fourth quarter, we opened five new stores.
Speaker Change: Ford, New D&B's, and Clarkson, Tennessee, Mobile, Alabama, Nalzo Highell, and Bloomington, Indiana, and one main event store in Montclair, California for a total of 14 new stores added to the portfolio at this good 2024.
We are pleased to also report that in December
We opened our first international franchise location in India.
Speaker Change: Today, we have entered into 35 franchise partnership agreements with over 35 storage committed to development and we anticipate at least six additional franchise units opening in the next 12 months.
Speaker Change: As I see it, this will be one of the ingredients of our outsized growth as we look out into the future.
as a brief update on the CEO's search.
Speaker Change: to identify the future permanent CEO . We are betting numerous highly qualified and capable candidates.
Speaker Change: and are dedicated to engaging in a thorough and careful process to ensure we select the right individual who the board strongly believes can lead this company.
Speaker Change: In the interim, I am thoroughly enjoying working with this management team and remain 100% committed.
Speaker Change: to continue to work closely with the board to unwind the many clear issues we have identified and make them necessary and right changes to drive the performance of this business going forward.
Speaker Change: We will update you further when we have definitive news to report which is all we want to say about the topic on today's call, given the sensitivity of ongoing discussions with candidates.
Speaker Change: Now I will turn the call over to Darin to walk you through the financial results of the fourth quarter, Darin.
Darin Harper: Thank you, Kevin, and good afternoon everyone. Turning to a more detailed review of our financial.
Darin Harper: and our fourth quarter of fiscal 2024 comparable store sales decreased 9.4% on a light for light calendar basis, first of the prior year period.
Darin Harper: During the quarter, we generated revenue of $535 million, net income of $9 million, or 25 cents
Darin Harper: Adjusted Net Income of $27 million or $0.69 per diluted share, and adjusted EBITDA of $127 million resulting in an adjusted EBITDA margin of 23.8%.
Darin Harper: As a reminder, reconciliations of all non-gape financial measures can be found in today's press release.
Darin Harper: We generated 108.9 million in operating cash flow during the fourth quarter, and need the quarter with 6.9 million in cash.
Darin Harper: and 503.5 million of availability under our 650 million Revolving Credit Facility, net of 11.5 million in outstanding letters of credit. We ended the quarter with a total net total leverage ratio of 2.8 times.
Darin Harper: During the quarter of due to our belief in the significant value we see in our shares, we were purchased nearly 3 million shares for approximately 85 million dollars.
Darin Harper: bringing total repurchases for Fiscal 2024 to approximately 5 million shares representing 12.4% of our company's shares outstanding at the end of the prior Fiscal Year.
Darin Harper: Thus far, in fiscal 2025, we have repurchased an additional 1 million shares for approximately 24 million, and as of today, we have approximately 104 million remaining on our board approved share repurchase authorization to opportunistically repurchase our shares.
Darin Harper: With our expected healthy cash flow profile for fiscal 2025, we will continue to work closely with our board to evaluate our new store growth remodel program, other accretive growth investments and share repurchase opportunities to drive the maximum shareholder value.
Darin Harper: In the fourth quarter, we closed on an additional sales back transaction for the real estate of five properties, three Dave and Buster's in two main events, with an institutional real estate partner generating 111 million in proceeds.
Darin Harper: Coupled with the sale lease back transactions we closed in the second and third quarter, this took our fiscal 2024 sale lease back proceeds to approximately 185 million.
Darin Harper: We have eight-owned real estate assets today with more under contract in our new store development pipeline that we will be opportunistic to monetize.
Darin Harper: In fiscal 2024, we invested a total of 558 million and capital additions on gross phases, or 357 million on a net basis when factoring in payments from landlords.
Darin Harper: Our Capital Spending Plan is currently in a review and evolving for 2025. However, we have a renewed focus on converting our significant operating cash flow to free cash flow through elimination of impregnant and ineffective capital spend, more closely monitoring and managing every line of our capital expenditures.
Darin Harper: As previously discussed, we have meaningful cash flow generation that provides both significant protection and upside to our shareholders. And during 2025, we will demonstrate our ability to generate free cash flow, while continuing to invest in double digit new store growth.
Darin Harper: New Games, other high ROI initiatives, and a more diligently model program.
Darin Harper: To this end, we thought it prudent and helpful to provide our current expectations for certain key casual items that are readily in our control in fiscal 2025, which ends on the 3rd of February , 2026.
Darin Harper: We currently expect total capital expenditures to not exceed 220 million. This includes spend on Net's new store capital, remodeled and other initiatives.
Games Capital and Maintenance Capital.
Darin Harper: And finally, no material changes to working capital as an expected source of cash in fiscal 2025, given the beneficial timing disconnect of the upfront cash paid for power cards, and the often delayed revenue recognition under our county standards.
Darin Harper: We continue to be firmly committed to our high RLI and historically successful news store strategy. We plan to open 10 to 12 news stores in fiscal 2025 and one additional store relocation in Honolulu, Hawaii.
And with that, operator, please open the line for questions.
Darin Harper: Ladies and gentlemen, at this time we'll begin the question and answer session. To ask a question you may press star and then one on your touched on phones. If you are using a speaker phone, we do ask that you please pick up the hand set before pressing the keys to ensure the best sound quality.
So, if you're all your questions, you may press star and two [inaudible]
Darin Harper: Once again, let us star in then one to join the question cube. We'll put a pause momentarily to assemble the roster.
Thank you.
Our first question today comes from the
Andy Barrett from Jeffries, please go ahead with your question.
Andy Barrett: Hey guys, just wondering, you know, kind of where you've seen the improvements in March and into April here.
Andy Barrett: And you know, just given obviously some of the changes and uncertainties that have been created in the economy, anything sort of up to date in the last week or so that you're willing to share.
Andy Barrett: I mean, I would just say generally, you know, if you look at the fourth quarter which we're reporting on and the month of February , which we were doing all of the time to get ready to, you know, hopefully change the course of the business, March and April are looking at...
Andy Barrett: I would say markedly better and it's in traffic, it's in ticket on the FMV side, a little bit of beverage pricing but food as well and we see that trend continuing as we get a little further and further into this.
Andy Barrett: getting really back and starting to take advantage on top of that.
Andy Barrett: of all the strategic opportunities that we talked to you guys about a while ago.
Andy Barrett: and a list of Kevin's initiatives as well. So, you know, we've got a lot in store and we're excited about what's going on here at Dave & Buster's.
Andy Barrett: Yeah, I just want to get a sense of where we are, you know, with all that going on.
Andy Barrett: Yeah, you know this year the holidays played out quite differently and-
Andy Barrett: And even with a little incentive program I have with GMs in the field, we're looking at March and April together, but the way the business is building is consistent with what I said in my comments.
Speaker Change: And Andy at Bitmore Context, we are still in a net unfavorable position with those spring break mismatches. So this week in the following rule will be very, very favorable for us and coming into it, we're feeling really good about what we are with the unfavorability blended in.
Speaker Change: Gotcha. And then just on the on the cat-back, I mean, that is a, you know, you just spent 170 million gross in the 4Q. I don't know if the net number in front of me, but the 220 million net, I understand.
You know, landlord, tenant improvements. Is there any?
Speaker Change: Dale Eastback, cash against that capex as well. I'm just trying to understand, obviously capex has been off because you've been buying some properties and things like that. So just trying to understand how that rolls in.
Speaker Change: Typical TI as well as sales specs in FY25.
Speaker Change: You know, I'd say we're taking a fairly conservative point of view with that, but it does assume that where we own fee-simple property, we anticipate being able to transact on that.
Okay, thanks dad.
Speaker Change: Our next question comes from Andrew Strelzik from BMO. Please go ahead with your question.
Andrew Strelzick: Hey, thanks for taking the questions. My first one I wanted to ask about.
Speaker Change: The Back to Basics Strategy and what that means for the cost structure. Are you adding back costs? I know there's been a lot of efforts made to manage the P&L. And what is the implication, I guess, for the remodel case? You said it would be tempered. So what is your updated expectation there? So what is your updated expectation there? So what is your updated expectation there?
Speaker Change: Yeah, when you talk about that basically, I'm talking about the operating business, but I can cover the cadence of what you just also mentioned.
Speaker Change: But, you know, getting back and taking our dollars for marketing and moving them more back towards TV.
Speaker Change: and making sure we do an ROI on those dollars and getting better at an ROI on our digital dollars, so spending smarter and better.
Space, as you think about it, if we haven't been on TV and we're not-
Speaker Change: Telling anybody anything new, we've got all these great new games [inaudible]
Speaker Change: that remind the gamers that there's a reason to come back to Dave & Buster's.
Speaker Change: on the menu. So we're going to redo that menu with a pushback towards where we were.
Speaker Change: I think that's going to bring back our audience once those menu items. So, doing that...
But as far as, you know,
Speaker Change: So all of this will be accomplished without a really any significant change or meaningful change at all in the margins.
Speaker Change: Okay, and remodeling, sorry, and then I have one other question.
Speaker Change: Yeah, on the remodels, we were spending an awful lot of money and we were doing stores that weren't needing a remodel and so we've now done a lot of work behind the scenes where we're
Speaker Change: Readdressing, by the way, I had announced this program when I was in the interim seat back three years ago, and the opportunity really was to brighten the store.
Speaker Change: bring new energy to the midway and the opportunities around the store and line of sight.
Speaker Change: and kind of take something new with the front of the store. And that could be accomplished with a lot less money than what we were spending money on that had...
Speaker Change: So many opportunities that had no ROI. So just a more thoughtful exercise in getting the bank for the buck and we're going to learn as we go, we'll do some and see how they play out and then build upon that. But rather do it...
Speaker Change: without overwhelming the cost structure that we learned from the ones we do.
Speaker Change: And we'll have 16 remodels and FY25 that will be fully accreted to this year with those remodels being completed within FY25.
Speaker Change: Okay, okay. And then my other question is about the value proposition. So as you, you know, looked at the execution against the strategy and I know that they're you reference some of the pricing that was taken F&B previously and I'd be curious for you to address also the amusement side. Do you feel like?
Speaker Change: There is a value proposition issue for the brand. Have you done work around the consumer perception there? I'm just curious as you kind of come back to digging through all the different pieces over the last couple of years, how that in your view stacks up. [inaudible]
Darin Harper: Let me start it with the gaming side and then I'll hand it off to Darin, but on the gaming side, we are looking at the value proposition on the game opportunity for the guests.
Darin Harper: We're about to put in testing on two different tests with a bunch of stores in each test to extend the time of play, but still create the same value opportunity for us but to improve the guest's experience.
Darin Harper: So I think we all expect that to be a favorable result, so that's part A, and then Darin will take the rest of us to that.
Speaker Change: Yeah, so from and up in me perspective, so we have not taken discrete price on our menu since Q4 of last year.
Speaker Change: But we're actively evaluating our pricing strategy to understand how we stay competitive with respect to out-of-home and other casual diners. You know what I'd also say too is we're very focused on food attach.
Speaker Change: So, we believe we can drive, check, beyond just taking discrete menu price or eating play combo. It was a great example. Seen some really good opt-in there, seeing our attached grow as our operators.
Speaker Change: are incentive to sell the Eden Play combo. We've offered the Eden Play combo now on our kiosk so we prompt our guests that we're maybe just going to come in and play games.
Speaker Change: to upgrade their common. We're seeing 90% of our guests do that.
Speaker Change: We just added some higher price entree items like RIDs and a scene that nice, high mix in there as well. So there's other ways that we can drive check roof beyond just price.
Got it. Thank you very much.
Speaker Change: Our next question comes from Dennis Geiger from UDS. Please go ahead with your question.
Kevin Sheehan: Great, thanks guys. I have two high-level questions. Kevin, the first one, maybe sort of in light of the comments you made kind of around unwinding some of some ill-advised changes to initiatives.
Speaker Change: Can you break down sort of how you think about some of the recent traffic and sales pressures over the past several quarters? How much of that maybe is macro versus brand positioning versus self-inflicted if that makes sense?
Speaker Change: Yeah, it actually does, and I think there's a little share on each but I think some of the unintended consequences of, you know, we went forward with some game changer kind of ideas.
Speaker Change: that took a lot of space off the arcade or off the F and B floor, so we took space away. And we didn't test the opportunity before rolling it out to multiple stores. And so...
Speaker Change: and so, you know, that I would call, you know, our own Ms.
Speaker Change: And so we're correcting that now where we're taking all the noise out of the opportunity so that the guests can play it easy and try to make it presentable for them. So that portion I would say was our own mistakes.
Speaker Change: I would say some of it was the macro, but the good news is at the end of the day, as we strengthen the business and get back on our feet and do the things we need to do, the things that have always made us successful.
Speaker Change: that the inertia from the economic landscape should be muted by these really strong strains of getting back to the visits that we know we should be at.
If I don't know if I said that well for you.
Thanks for watching!
Speaker Change: Our next question comes from Jake Bartlett, from Truist Securities. Please go ahead with your question.
Jake Bartlett: Great, thank you so much for taking the question. Kevin, my question is kind of back of it the idea that you were doing well before some of these changes were made. My understanding was that prior management team was trying to put in place some...
Jake Bartlett: So basically some kind of some moat, some differentiation, some competitive differentiation, to really better compete in an environment that was getting more and more competitive. Historically, your same for sales were before COVID, we're struggling. So the question is, getting back to what you were doing, is that good enough in your view in terms of the approach, or do you think that while you need to write some of these mistakes. So what made you awesome?
Jake Bartlett: You still need to figure out how to improve the differentiation and how to become a better competitor for the long term.
to see that benefit playing out.
So...
Jake Bartlett: You know, all good intentions on trying to do that but it was just not our demographic for the most part.
Jake Bartlett: and so, you know, on a minor way maybe we get some incremental lift on that, but we need to find the opportunities that are going to drive our consumers, our guests.
Jake Bartlett: to spend more money in the stores and to bring them back into the stores. So I think it was the right direction but what the wrong attractions kind of thing.
Speaker Change: Our next question comes from Sharon Zackfia from William Blair, please go ahead with your question
Sharon Zoxia: Hi, thanks for taking the question. I guess on the improvement you've seen in March and April , I know you had talked about historically over the past year seeing a kind of disproportionate weakness with a lower income consumer. Have you seen that consumer improve along with the broader business?
Darin Harper: Hey Sharon, it's Darren. Yeah, look, the credit card data that we analyzed has a bit of a delay to it. Overall, I'd say at least leading up through January and February , we saw consistent trends.
with that low end consumer. But, you know, as we've—
Darin Harper: You know, gone back on TV and really plushed up that top of the funnel awareness.
Darin Harper: We, with promoting Eat and Play combo and now are new games.
Darin Harper: We do believe that we can target that lower end guest and drive more visitation. Don't have enough data at the moment to be able to ascertain exactly what sort of improvement we're seeing there.
Thank you for watching!
Brian Vaccaro: Our next question comes from Brian Vaccaro from Raymond Jeans. Please go ahead with your question.
Brian Vaccaro: Hi, thanks a good evening. I'm different just back to the CapEx outlook. I understand that 220 million net, but what would be the gross CapEx guidance before sale lease facts? Or maybe you could walk us through the buckets of new units, remodels and sort of maintenance and other?
Can I have a follow-up?
Brian Vaccaro: Yeah, sure. So look, we've got a lot of flexibility with our capital spending, you know, up and down and across categories. And, you know, as we get...
Brian Vaccaro: More visibility in the coming weeks. We'll continue to tighten up some of those buckets and so.
Brian Vaccaro: So we've elected not to provide a breakdown today. That said, you know, what I would say is if you go back
Brian Vaccaro: to some of the underlying assumptions that we have for net new-store Catholics from our June 2023.
Investor Day.
Brian Vaccaro: and then assume, you know, 10 to 12 new locations along with a reload. I think that's going to get you in a pretty good spot from a new store capital perspective and then...
Brian Vaccaro: provides some assumptions there that I would moderate up some for inflation and some incremental game roll-out.
Brian Vaccaro: But I think that'll give you a kind of a good sense for maintenance cat-backs. And then sort of the plug I would think as remodel and other growth initiatives.
Brian Vaccaro: So hopefully that can kind of help you sort of think about how to model out those buckets.
Speaker Change: Our next question comes from Brian Mullin from Piper Sandler. Please go ahead with your question.
Brian Mullen: Thank you. I just want to ask about the competitive environment in the category. If I were to rewind to pre-COVID, the growth of the entertainment category competitors, it was often cited as a headwind.
Speaker Change: The Saints for Sales back then by a prior management team. Kevin, you later came as interim CEO later on. Obviously, you wound up buying one of those competitors.
Brian Mullen: Main Event. So my question is just Kevin, as you come back into this seat again and you look at the current competitive environment, you know, how do you view the landscape and? [inaudible]
Brian Mullen: Do you think that the growth of competitors has been a factor to some of the recent top-line struggles, or do you really believe it's all just internal execution related, just would love to get your perspective?
Brian Mullen: You know, I'd like to use the excuses. It's the competitive thing, but it's not. I think it was mostly our own execution.
Brian Mullen: But, you know, our team is so thoughtful, we're building stores and keeping an eye on what's happening. It's not any greater today than it was several years ago.
So I think that's the good news is because...
You know, if we get this right,
Brian Mullen: and we've got a lot of other initiatives that we're working on that should drive.
Revenue and...
Thank you.
Brian Mullen: Looking at the days of the week and you know we're not getting revenue in certain days and we should emphasize more on those and the times of the day we lost our late night
Happy Hour of Time.
Revenue, and we need to get back to that.
Brian Mullen: We need to be thinking about this as a seven-day-a-week business and we're going to start doing some tests on lunch. You guys know that you go out to lunch and restaurants are packed and there's plenty of room in our restaurants and so we're going to do a bunch of tests with maybe 10 stores in each test.
Brian Mullen: and have a, you know, I'm going to make this up, but we haven't firmed up the pricing yet, say $11.99 lunch.
Brian Mullen: that includes a play card for an hour that you could use and think about that. It's only the electricity because at that time of the day the store is not dizzy and so that could be a great experience for you and your friends, assuming you have friends but you and your friends going out to lunch. [inaudible]
Brian Mullen: and after lunch you go out and you shoot hoops and say, you know, I'm going to beat you and blah, blah, blah and so you have this great experience vis-a-vis anything else you would have in going to any other type of restaurant.
Brian Mullen: So, you know, it's a card that would expire after 60 minutes or whatever the period is or it would have a $10 free player or $50 so we'll test a few iterations but we think that because at the end of the day the success of this business
Brian Mullen: is 100% traffic and we need to bring more people and more guests into our stores and everyday counts.
Brian Mullen: and so I want everybody thinking that way because when they think that way that's what's going to create the green shoots that are going to come out of not only the support center but also out of the stores and I'm really excited about the opportunities that lie ahead to this business.
Thank you.
Speaker Change: And ladies and gentlemen, our final question today comes from Todd Brooks from the benchmark company. Please go ahead with your question.
Todd Brooks: Hey, thanks for squeezing me in. I'll lump to clarification points together here. Kevin, you talked about a more reasonable approach on the spend of remodels.
Todd Brooks: Can you talk to how much you're able to lower the hurdle rate? I think the old rebiles were requiring a low double digit type of hurdle rate to get them to pencil. So how much will that be lowered and then on the TV advertising?
Todd Brooks: If we look to fiscal 25, maybe what's the mix kind of entering Q1 here for how much we're back to TV spend versus digital and what's your hope for an exit rate coming out of 25? Thank you
Todd Brooks: If we get good returns and we can see the ROI's, we'll move up from there. So we're going to do this step by step. That's why I said at the top of the call that we're probably 55 or 60% of the way there. We're doing a lot of this stuff because we know it stinkably, it makes sense.
Todd Brooks: But before we go too far, we want to make sure we've true it up.
Thank you.
Todd Brooks: Yeah, and then with respect to your first question on the hurdle rate, we think when we optimize and value-engineer this remodeled to the right way, it'll be...
and Ned.
Todd Brooks: at the high single digit hurdle rate rather than mid-team hurdle rate.
Todd Brooks: puts us in a lot better position to get to the right ROI. Obviously we think with the right elements to the remodel and the right execution, we would anticipate more than that, but it certainly
Thank you. Thank you.
Speaker Change: And ladies and gentlemen, with that we'll conclude today's question and answer session. I'd like to turn the floor back over to Kevin Sheehan for any closing remarks.
Kevin Sheehan: Thank you, Operator, and thank you all for joining us today in closing fiscal 24 with certainly challenging for our company.
Kevin Sheehan: but with the intense focus and dedication I've seen from our leadership.
Kevin Sheehan: and our team members in the field. I firmly believe that we are turning this ship around and I'm excited for what 2025 holds.
Kevin Sheehan: With powerful renewed energy at the company, tangible results we are seeing numerous remaining opportunities to drive shareholder value.
Kevin Sheehan: We understand there is a significant amount of uncertainty in the market right now.
Kevin Sheehan: and over the last several weeks from tariffs and other concerns influencing the consumers.
Kevin Sheehan: However, we are confident with our compelling product offering and value proposition and that will continue to be in high demand as the consumer seeks out experiences to make the day a little
Kevin Sheehan: Three cash flow, further bolstering our already strong balance sheet position. We look forward to speaking with you again soon and have a great evening.
Thank you.
Thank you.
Speaker Change: And ladies and gentlemen, with that will conclude today's conference call. We do thank you for attending today's presentation. You may now disconnect your lines.