Dave & Buster’s Entertainment (PLAY 5.70%)
Q1 2023 Earnings Call
Jun 06, 2023, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon and welcome to the Dave & Buster’s first-quarter 2023 earnings convention name. All members will likely be in listen-only mode. [Operator instructions] Please be aware, this occasion is being recorded. I’d now like to show the convention over to Cory Hatton, VP of investor relations and treasurer.

Please go forward.

Cory Hatton — Vice President, Investor Relations and Treasurer

Thank you, operator, and welcome to everybody on the road. Leading right this moment’s name will likely be Chris Morris, our chief govt officer; and Mike Quartieri, our chief monetary officer. After our ready remarks, we will likely be blissful to take your questions. This name is being recorded on behalf of Dave & Buster’s Entertainment, Inc., and is copyrighted.

Before we start the dialogue on our firm’s first-quarter 2023 outcomes, I’d wish to name your consideration to the truth that in our remarks and our responses to questions, sure gadgets could also be mentioned which aren’t fully primarily based on historic reality. Any of these things needs to be thought-about forward-looking statements referring to future occasions inside the which means of the Private Securities Litigation Reform Act of 1995. All such forward-looking statements are topic to dangers and uncertainties which may trigger precise outcomes to vary from these anticipated. Information on the varied danger elements and uncertainties have been printed in our filings with the SEC, which can be found on our web site.

In addition, our remarks right this moment will embody references to monetary measures that aren’t outlined underneath typically accepted accounting rules. Investors ought to evaluation the reconciliation of those non-GAAP measures to the comparable GAAP measure contained in our earnings announcement launched this afternoon. Pro forma financials, together with Main Event for the trailing 4 quarters ended April thirtieth, 2023, might be discovered immediately in our earnings launch this quarter. Now, it’s my pleasure to show the decision over to Chris.

Chris Morris — President and Chief Executive Officer

OK, thanks, Cory. Good afternoon, everybody, and thanks for becoming a member of our name right this moment. We are happy to report document outcomes for the primary quarter of fiscal 2023. In Q1, we generated document income of $597 million and document adjusted EBITDA of $182 million, leading to an adjusted EBITDA margin of 30.5%.

In a couple of moments, Mike will stroll you thru the small print of our monetary efficiency. In the primary quarter, our group did an exceptional job operating the enterprise. Our extraordinarily proficient group of operators and help heart staff proceed to execute on the breadth of strategic alternatives we have recognized to unlock important income progress and cost-efficiency alternatives in our enterprise. Our operational achievements within the quarter are indicative of the progress on our technique, and we’re additionally seeing improved visitor satisfaction scores as we excellent the service mannequin and optimize the position of our group members play as our most vital model ambassadors.

In addition, with key enhancements we have made to our culinary group, we’re working feverishly to enhance our total meals and beverage providing, together with enhancing the standard of the meals, simplifying the menu, enhancing working efficiencies, and upgrading guest-facing know-how to simplify the ordering course of, amongst different initiatives. We stay notably inspired by the chance for our particular occasion enterprise, which noticed important progress on a sequential foundation, returning again to 2019 ranges. We are taking full benefit of the restoration, and with the heightened focus we’re making use of to this vital enterprise, we have now a transparent path forward to develop meaningfully into the long run. The improved progress has been pushed by structural alignment adjustments to the group, each on the native retailer and help heart stage, and these adjustments are already bearing fruit.

As Mike will talk about extra in a couple of minutes, we proceed to be laser-focused on implementing efficiencies and decreasing prices throughout all areas of the enterprise. While we beforehand exceeded our synergy goal and have locked in at the very least $25 million in prices reductions on account of the mix with Main Event, we have now parlayed these efforts into operating the enterprise with sharpened price controls as we imagine important alternatives nonetheless exist to cut back our price base throughout price of products bought, retailer labor, retailer working bills, and company overhead. As you possibly can see, our outcomes this quarter are already benefiting from improved enter prices in addition to improved labor optimization. In mixture with our different initiatives, we count on these price efforts to drive a decrease price base, broaden our margins, and enhance money stream era.

Turning to market initiatives within the quarter. As a follow-on to our fall soccer marketing campaign, we proceed to dedicate a portion of our advertising spend to our watch expertise. The out-of-home social sports activities watch viewers is massive, and we really feel assured in our capability to drive each model relevancy and go to frequency by constructing even larger consciousness that Dave & Buster’s is America’s new favourite place to look at sports activities. Over the spring, we leveraged marquee NBA and faculty sports activities watching occasions to get the phrase out, and we’re featured in 30 NCAA basketball video games throughout convention championships, interesting to each households and younger adults.

We additionally ran over 60 spots in key NBA playoff video games to create consciousness nationally, in addition to in these native communities. The first quarter can be spring break season. So, in parallel, we ran a number of digital promotions concentrating on households in social, paid digital, and CRM to maintain D&B high of thoughts and within the consideration for households searching for out-of-home enjoyable throughout spring break. Running these packages and digital channels permits us to remain nimble by adjusting offers and spend primarily based on efficiency, in addition to timing, given spring break weeks differ so vastly throughout the nation.

We are very excited concerning the enhanced digital capabilities with the group that we have assembled to raise our capability to fulfill our friends the place they’re and maximize media effectiveness. Looking forward, summer season is a crucial time for our manufacturers as each households and younger adults search for enjoyable issues to do to fill lengthy days with experiences that permit them to attach. As we introduced yesterday, at Dave & Buster’s, our summer season marketing campaign contains a high-value, limited-time, 5 free video games promotion to drive visitors along side our new extremely interesting You Know You Want To marketing campaign. In the quarter, we opened one new Dave & Buster’s retailer in Puerto Rico and three new Main Event shops in Little Rock, Arkansas; Tucson, Arizona; and Lexington, Kentucky.

We additionally signed two worldwide franchise agreements for as much as 15 shops in India and as much as 5 shops in Australia. We proceed to be extraordinarily enthusiastic about the way forward for this group. We have two industry-leading manufacturers in Dave & Buster’s and Main Event. These manufacturers have distinctive enterprise fashions, robust property, and are led by proficient and passionate group of operators.

We have a transparent line of sight on the strategic alternatives forward for the enterprise and a administration group with a confirmed monitor document of superior execution. As proof of the conviction we have now within the long-term success of our enterprise and the worth we see in our shares, we have now repurchased $200 million of widespread inventory, so far, in fiscal 2023, decreasing our shares excellent by almost 12%. We have an extra $100 million remaining on our share repurchase authorization. We extremely encourage you to tune in to our digital Investor Day subsequent Tuesday, June thirteenth, at 7 a.m.

Central, the place we stay up for unveiling extra particulars about our imaginative and prescient and technique with you. With conclusions drawn from intensive analysis and area work by a administration group with a monitor document of profitable execution, we are going to particularly define the quite a few levers we have now to drive high and bottom-line progress, in addition to money stream over the subsequent three years. You’re not going to wish to miss this thrilling and informative occasion. With that, let me flip the decision over to Mike to evaluation our first-quarter outcomes.

Mike?

Mike Quartieri — Chief Financial Officer

Thanks, Chris. We’re happy to report robust monetary outcomes for the primary quarter. We generated document income of $597.3 million, document internet revenue of $70.1 million, and document adjusted EBITDA of $182.1 million within the first quarter. On a professional forma foundation, our first-quarter income and adjusted EBITDA replicate progress of three.8% and 4.6% reflective — respectively, relative to our first quarter of fiscal ’22.

We proceed to make important strides optimizing our enterprise mannequin to drive income, realized significant price financial savings throughout the corporate, and deploy capital at excessive ROI alternatives. We produced a 30.5% adjusted EBITDA margin within the first quarter and enchancment of 20 foundation factors versus the prior-year interval on a professional forma foundation. Our margin profile stays one in all our strongest attributes of our enterprise, and we’re assured within the levers we have now on the associated fee facet to defend it. Also, our strategic investments to decrease our total price base will likely be a significant catalyst to broaden margins as we proceed to develop and client confidence improves.

Pro forma comparable retailer gross sales decreased 4.1% versus 2022 as we lapped a really sturdy prior-year interval. Recall that in March and April of 2022, we noticed outsized comp efficiency of 15% and 26%, respectively, because the nation emerged from the omicron variant. When we glance again at a extra normalized stage of enterprise, we’re up 10.3% versus 2019 on a consolidated foundation. Our particular occasions enterprise proceed to develop in Q1 2023 with our mixed comps now flat to professional forma 2019 ranges.

We generated $92.4 million in working money stream in the course of the first quarter, contributing to an ending money stability of $91.5 million for complete liquidity of over $581 million when mixed with the $490 million accessible on our $500 million revolving credit score facility, internet of excellent letters of credit score. We ended the quarter with complete leverage ratio of two occasions. Our robust money stream era and conversion offers us the flexibility to concurrently put money into our system, develop new shops, and repurchase shares. As beforehand talked about, we repurchased 3.6 million shares within the first quarter at a complete price of $125.5 million.

And subsequent to the top of the quarter, we repurchased an extra 2.1 million shares at a complete price of $74.5 million, bringing the full purchases to the 5.7 million shares, totaling $200 million, representing almost 12% of our excellent shares as of the top of fiscal ’22. And we nonetheless have $100 million accessible on our remaining current share repurchase authorization. Turning to capital spending. We invested a complete of $50.8 million in capital additions in the course of the quarter, opening one new Dave & Buster’s retailer in Puerto Rico and three new Main Event shops in Little Rock, Arkansas; Tucson, Arizona; and Lexington, Kentucky.

We have already opened two new Dave & Buster’s shops in the course of the second quarter, one in Lubbock, Texas and the opposite in Queen Creek, Arizona. Consistent with our prior statements, we’re on monitor to open a complete of 16 new shops in the course of the fiscal 2023 interval comprised of 11 Dave & Buster’s and 5 Main Event areas, plus the relocation of our Dave & Buster’s Vernon Hills, Illinois retailer. To summarize, we’re extraordinarily excited concerning the robust execution in our enterprise, our progress capturing synergies, the quite a few progress alternatives for us to pursue, and the expertise and expertise of our group to drive progress regardless of the difficult macroeconomic surroundings. We stay targeted on intently managing prices and capital spending to make sure we strategically unlock the utmost worth of those two nice manufacturers and ship the very best returns potential for our shareholders.

We stay up for chatting with you once more in subsequent week at our digital Investor Day, the place will we be discussing our midterm progress technique intimately. Now, operator, you possibly can open up the road for questions.

Questions & Answers:

Operator

We will now start the question-and-answer session. [Operator instructions] Our first query will come from Andy Barish with Jefferies. You could now go forward.

Andy Barish — Jefferies — Analyst

Hey, good night, guys. Just a pair from me. Mike, in case you can level this towards something particular within the different working expense — you understand, different retailer working expense line that was, you understand, actually, together with different, you understand, expense areas, one the place, you understand, there have been some good enchancment versus our modeling. Anything, you understand, particular that is beginning to present up in that line or totally different from, you understand, previous — previous durations?

Mike Quartieri — Chief Financial Officer

Yeah, I’ll contact on a few issues. One, from a inflationary perspective, we’re beginning to see just a little little bit of deflation quarter sequential on our hourly wage charges. We’re down roughly a few half a % there, and we’re down about 3% quarter sequential on our commodities. So, that is benefiting our price of products bought on the high line.

Besides that, we’re persevering with to comprehend the synergies that are benefiting our G&A prices, and we have now continued to have a look at the opposite retailer working bills, whether or not that is retailer working provides, utilities, issues of that impact that we have been capable of put some packages in place to assist cut back these kinds of prices.

Andy Barish — Jefferies — Analyst

Got you. Thank you. And then, simply — only a follow-up. I’m certain we’ll — we’ll hear extra on this subsequent week, however the place are you form of within the transform checks and, you understand, a few of the new leisure, the — the social gaming features, and issues like that? Are a few of these out in shops at this level? Or, you understand, how will we form of take into consideration that for the remainder of ’23 after which — after which into ’24?

Chris Morris — President and Chief Executive Officer

Yeah, Andy, I’ll take that. This is Chris. And you are completely proper, subsequent week at our Investor Day, we’re actually excited to have the ability to stroll everyone by the small print of our plan. We’ve obtained lots to share with you.

Remodels are actually a type of gadgets. We, you understand, strongly see remodels as, you understand, one of many catalysts to — one of many key catalysts to get our high line transferring on a sustainable foundation. Right now, the primary transform to open will likely be late July, early August. So, we do not — we do not have a transform but available in the market.

We are — we have now 12 models which can be going by the allowing course of, and we count on to have six of these 12 executed this yr. And so, actually wanting ahead to getting these available in the market, and we’ll stroll you thru much more particulars subsequent week.

Andy Barish — Jefferies — Analyst

OK, very useful. Thanks, guys.

Chris Morris — President and Chief Executive Officer

All proper. Thank you.

Operator

Our subsequent query will come from Jake Bartlett with Truist. You could now go forward.

Jake Bartlett — Truist Securities — Analyst

Great. Thanks for — for taking the questions. My first is on the — the quarter to this point. You know, within the latest quarters, you’ve got talked about giving us some quarter-to-date tendencies on gross sales, so I’m hoping you are able to do that this quarter as effectively.

And that is one — one a part of the query. The different is, you understand, on the versus ’19 — the same-store gross sales versus ’19 has decelerated, you understand, the final three quarters? Kind of appears like there’s, you understand, constructing strain, possibly momentum is declining. I suppose your reply on the quarter-to-date goes to assist with that query. But what would you attribute that slowdown to? And do you — you understand, do you could have a view into reaccelerating that?

Chris Morris — President and Chief Executive Officer

This is Chris. Let me — I’ll take the primary a part of that query, then I’ll let Mike take a second half. You know, so with respect to offering intra-quarter gross sales figures, in our final name, we let everyone know that going ahead, that is a apply that we’re simply transferring away from. We wish to preserve our focus simply on extra of a longer-term method, however — so we’re not going to have the ability to present commentary on how we’re doing only for the, you understand, the primary few weeks of this quarter that we’re at the moment in.

But what I’ll — what I’ll let you know is our year-to-date comps by May versus our year-to-date comps by April, there’s actually no materials distinction between these two. But I would not learn an excessive amount of into that as a result of the month of May is simply actually such a small month drive. June and July is when the enterprise actually picks up simply from a seasonality standpoint. The month of May usually represents about 25% of our gross sales in the course of the quarter.

So, we’re actually wanting ahead to get it into the summer season months right here in June and July. Both of our manufacturers usually do very effectively throughout these months. And — and so, you understand, we’re — our focus is simply extra on the long term.

Jake Bartlett — Truist Securities — Analyst

[Inaudible]

Mike Quartieri — Chief Financial Officer

Yeah, I believe that close to the second a part of your query — I’d say simply regarding the second a part of your query about, you understand, wanting again to ’19, one factor we did be aware throughout this quarter, we did see, versus ’19, each month, we progressively improved. So, though there may be some decline once you’re , you understand, from quarter sequential, I believe that is simply extra concerning the pent-up demand within the economic system with extra {dollars} round COVID aid and all of the stimulus that was within the system that was simply being burnt off.

Jake Bartlett — Truist Securities — Analyst

Great, nice. I admire that. And I perceive on the — on the quarter to this point level. My different query was concerning the cadence of selling.

And you’ve got launched the — you understand, the 5 video games for — at no cost promotion, however this lapsed, I imagine, the summer season of video games which was relaunched final yr. So, I’m questioning if by way of, you understand, cadence and what we examine in opposition to on a promotional perspective, do you count on no matter your — what you are doing this summer season to be extra impactful? I imply, is there a motive to assume that — you understand, that your method this yr goes to have extra of a — be extra of a visitors driver than — than final yr’s method?

Chris Morris — President and Chief Executive Officer

Well, you understand, I’ll simply — typically talking, we’re — our purpose is that yearly, we intend to do higher than we did within the prior yr. So, you understand, typically talking, we totally count on that this marketing campaign goes to outperform prior yr’s marketing campaign. That’s simply the usual that we maintain ourselves to. What I’ll let you know is summer season video games, that is a promotion that the model has executed usually in the course of the summer season months.

And after we checked out — our group has dug in actually deep and regarded on the efficiency of all of the advertising actions over a very lengthy time frame. And our — our opinion is, final yr, that was one of many weakest campaigns of the yr. And after we went again and we checked out time, we actually — we did not actually see summer season video games actually transferring the needle in an enormous method after we regarded on the outcomes earlier than and after the advertising spend apart from within the 2018 yr after we did summer season video games and we — we tied it in with the launch of our new VR attraction with Jurassic Park. But except for that, it did not actually transfer the needle.

But we do know that our friends are searching for worth throughout this — this time period. We know that our friends are very keen to return in and make the most of the leisure providing. And so, we felt strongly that we would have liked to guide with leisure, and we would have liked to convey extra — you understand, convey some — some curiosity into the sport room. And primarily based on all of our idea testing, the supply that we’re operating, by far, outscored, you understand, anything in our idea testing.

So, we’re fairly optimistic simply primarily based on all of the analysis that we did. But, you understand, it simply launched yesterday, and so time will inform.

Jake Bartlett — Truist Securities — Analyst

Great. And then, final query actual fast on — on the share buybacks, good and aggressive, wish to see that. It appears like what you’ve got repurchased quarter to this point is about the place your money stability was on the finish of the quarter. I do know you’ve got been producing — or doubtless producing free money stream since then, however are you — is your method that will you’re taking down debt in an effort to — to purchase again shares? I simply wish to make sure that I perceive your method to the stability sheet.

Mike Quartieri — Chief Financial Officer

That can be conversations we have now forwards and backwards with the board. But relaxation assured, given our liquidity and the long run money stream era that we’re capable of produce and what we have executed traditionally on a free money stream conversion from EBITDA, we’re very comfy taking both method, both utilizing simply the money on the stability sheet or to take out a bit of debt on the revolver to take action.

Jake Bartlett — Truist Securities — Analyst

Great. I admire it.

Operator

Our subsequent query will come from Brian Vaccaro with Raymond James. You could now go forward.

Brian Vaccaro — Raymond James — Analyst

Hi. Thanks and good night. I simply needed to circle again to the comps within the first quarter and ask about it on a year-on-year foundation. And, man, it appears like each manufacturers have been down round 4% primarily based in your 10-Q disclosures.

And simply making an attempt to maintain in perspective, quarter to this point, you had mentioned was down low singles. It implies a sharper decline in April. And may you present extra coloration on what you assume is driving that decline? I imply, is it primarily the tough laps? Or are there any sequential adjustments in habits past regular seasonality that may be price highlighting like load — quantities being loaded on playing cards, or how customers are navigating the menu on the F&B facet, or simply something throughout revenue bands? Just any coloration can be useful there.

Chris Morris — President and Chief Executive Officer

This is — Brian, I’ll begin and allow you to wrap it up. I imply, the quick reply isn’t any, there’s — there’s nothing that is noticeable that occurred between March and April. There was a significantly larger examine in April, so we’re lapping, you understand, a a lot stronger quantity within the prior yr. And so, you understand, that is — that is positively a consideration.

As Mike talked about earlier, after we examine our outcomes to the 2019 yr, the pre-pandemic yr, we really noticed a sequential enchancment going from March to April. But we have — you understand, we have spent numerous time wanting — wanting on the numbers to see if there’s any tendencies that we must always pay attention to, adjustments in client habits, or something alongside these strains. And there was nothing noteworthy there.

Mike Quartieri — Chief Financial Officer

Yeah, I believe the one different factor so as to add on to your level of relating to our card hundreds, we have not seen any decline in that greenback worth. So, the well being of the client remains to be there. So, I believe it is actually extra round — it is a very powerful comp once you’re lapping over 26% progress, which is 9% larger than what we had within the — the March interval of 15% on a mixed foundation.

Brian Vaccaro — Raymond James — Analyst

OK, that is useful. And then, on the margin entrance, I simply needed to return to the feedback on labor, particularly. And you noticed, I believe, it was about 40 bps of — of deleverage, however comps be a down 4%. I suppose it appears like the associated fee per week is operating down 1% to 2% yr on yr by my math.

And I’m simply making an attempt to border the way you’re attaining that. If you can present extra, extra coloration on — on the way you’re optimizing the labor that you just’re deploying in — within the models. And, Mike, may you additionally simply give us what was year-on-year wage inflation within the quarter?

Mike Quartieri — Chief Financial Officer

Yeah, certain. So, I’ll begin with the start. How are we controlling labor proper now can be a testomony to Tony and the working group that we have now, very a lot a diligent view of wanting on the weekly forecast for gross sales. Analyzing that on a per-day foundation in an effort to get the staffing proper the place you are getting that staffing out of Monday by Thursday to actually hone it in on the weekend after we’re peaking the height is driving the labor total down.

But additionally, having the fitting labor on the proper time and the fitting place permits us to enhance our total scores with our friends and our visitor satisfaction. So, I believe from that perspective, it is actually about driving that self-discipline into it on a weekly foundation, every day, on a per shift foundation. And that sort of rigor is actually paying off for us. In regards to the wage inflation, offer you one second.

Overall, wages in Q1 — from an hourly perspective, This autumn was roughly $13.14. And we’re seeing now nearer to simply over $13 and with a few pennies above that. So, continued give attention to as we — as we change staff who’ve discovered — or have left, and so we’re getting the brand new staff on that turnover ratio, we’re capable of convey folks in at a barely decrease charge simply primarily based on the controls that we see and the self-discipline round our hiring practices.

Brian Vaccaro — Raymond James — Analyst

OK, nice. That’s useful. And I simply needed to return to the — final one for me. Just on the — the share repurchases and capital allocation, are you able to simply contact on the choice to purchase again inventory versus paying down debt with the speed in your time period mortgage now, I believe, about 10%? And I’m simply additionally curious the place you might be within the course of of probably refinancing some or your whole debt.

Thank you.

Mike Quartieri — Chief Financial Officer

Yeah, we undergo the train of how we view the — the — the — I’d say the intense undervalue of our shares in relation to that 10% debt and simply imagine that the shares have a larger worth of upside in an effort to repurchase that 200 million that we felt comfy with. In regards to refinancing potential, the comfortable name does come off June twenty ninth, and so we might be trying to make the most of the market. Assuming there’s a market which we’re all knocking on would — that there can be, to have the ability to reprice that debt — that debt accordingly and yield curiosity financial savings off of that.

Brian Vaccaro — Raymond James — Analyst

All proper, nice. I’ll move it alongside. Thank you.

Chris Morris — President and Chief Executive Officer

Thank you.

Mike Quartieri — Chief Financial Officer

Thank you.

Operator

Our subsequent query will come from Jeff Farmer with Gordon Haskett. You could now go forward.

Jeff Farmer — Gordon Haskett Research Advisors — Analyst

Great. Thank you. Just searching for a follow-up to a few earlier questions. Specifically, the primary one can be extra coloration on — in your visitor tendencies basically.

You touched on it, however I’m curious if there’s something extra notable throughout weekend, weekday, household, younger grownup revenue demographics, any — any method you wish to slice it. But is there something that you have observed by way of — of shift adjustments in latest months because the customers come underneath just a little bit extra strain?

Chris Morris — President and Chief Executive Officer

All proper. Yep, sorry, Q and I have been simply pointing to one another like who desires to take that one, and so I’m sorry. So, once more, I’ll let you know the quick reply is there is no — there was no materials shift all through the quarter in client habits tendencies, so it was fairly constant all through all three months of the quarter. You know, a few of the gadgets that you just talked about, you understand, look, we simply do not get into that stage of granularity in our disclosures.

And so, you understand, if there’s one thing that — that basically is materials that pops up, effectively, at that time limit, we’ll share it with you. But all through the quarter it was — you understand, all through all three durations, it was fairly constant.

Mike Quartieri — Chief Financial Officer

Yeah, and simply so as to add on high of that, it isn’t solely on the demographic stage from an revenue perspective for August, we additionally take a look at throughout the — the spectrum of all of the geographies and the DMAs that we’re in. And there’s not any specific space that is falling off greater than anything. So, every part’s been staying comparatively constant.

Jeff Farmer — Gordon Haskett Research Advisors — Analyst

OK. And this was additionally touched on, however numerous us are form of that that same-store gross sales metric versus 2019. It’s already been requested about, however I’m curious form of one factor that form of popped up and has been a dialog with traders is that, you understand, maybe the energy of the NFL marketing campaign in September, October into early November was — was form of stronger than everybody appreciated. And as you rolled off of that — once more, that is all form of theoretical, as you rolled off of that, doubtlessly, that turned just a little little bit of a visitors headwind otherwise you simply misplaced that tailwind.

So, do you subscribe to that in any respect? Do you assume that there was simply a lot energy round — or resonance with the NFL marketing campaign that after you form of rolled off of, that you just noticed this, I will not name it, normalization, however a downshift because it pertains to visitors tendencies?

Chris Morris — President and Chief Executive Officer

I do not assume I’d go that far. You know, yeah, what I’ll let you know is that we have been — we have been happy with the success of the marketing campaign, and, you understand, we discovered lots doing that. It was the primary time that we had, on a nationwide stage, promoted the watch facet at that stage. And then, you understand, to have somebody like Travis Kelce endorse it was — was an enormous win for us.

And that really helped inform our determination to do the Slam Dunk Deal after which make the most of — on the nationwide stage, make the most of March Madness in addition to NBA finals. So, very, more than happy with the outcomes there, however I do not assume I’d go so far as to, you understand, attribute that as, you understand, the distinction maker in our gross sales. I believe, you understand, we — at — at this time limit, you understand, we’re not seeing materials shifts all through the quarter. We did not see these materials shifts, in some way, inside the granular features of the enterprise.

We — you understand, there was — yeah, I believe simply lapping, you understand, a very difficult interval final yr has actually made it harder, and we will know much more in the course of the summer season months. Yeah, I believe, you understand, what have been — the summer season months are crucial to us. As I discussed, June, July, that is when, you understand younger, adults wish to come to us, in addition to households, and so it is a actually high-volume time frame for us. And what the buyer does over the summer season goes to be very, very attention-grabbing.

And so, proper now, we’re — we’re targeted on every part that we are able to management or targeted on the issues that we all know. And subsequent week, we will stroll you thru why we’re so passionate about, you understand, our plan. And we have — you understand, we have a variety of levers which can be accessible to us to — to develop this enterprise, and we actually stay up for strolling you thru all of these. And after we’re executed strolling you thru that, there will be no mistake that there’s appreciable upside on this enterprise.

So, proper now, we’re nonetheless making an attempt to determine precisely, you understand, the buyer surroundings and high line. We’ll know much more on the finish of the summer season, and we’re actually enthusiastic about our plan.

Jeff Farmer — Gordon Haskett Research Advisors — Analyst

I admire that and simply — only one extra, once more, one other follow-up. I apologize for being long-winded right here. But so, the margin efficiency, you understand, I’m getting form of real-time emails about this, how spectacular it was within the backdrop of the comp that you just guys delivered. And the query now turns into, are you guys form of — form of full tilt or maximizing the margin efficiencies that this enterprise can drive at this state, and that form of the very best we are able to hope is that you just maintain on to those margin efficiencies as you progress ahead? Or is there form of extra margin alternatives that — that lay forward above and past simply income progress? Is there different levers that you just guys have on the market that you just assume can proceed to drive margin enchancment above and past what you guys have already executed?

Chris Morris — President and Chief Executive Officer

Yeah, yeah. So, we — we see additional enchancment, and that is one of many gadgets that we’ll stroll you thru subsequent week. So, in case you may simply maintain off every week, we will offer you a ton of knowledge on it, and I imagine you are going to be more than happy.

Mike Quartieri — Chief Financial Officer

Yeah, the one factor I’ll add, Jeff, you understand, simply there’s a seasonality nature to our enterprise when it — particularly when it comes by simply your high line after which how that flows by. So, on this interval of Q1 and This autumn, we have traditionally at all times had our greatest margins. Q2 has been just about about common. And then, clearly, in Q3, when children return to highschool, it is our basic seasonally low time frame.

And then, you simply see that margin drop accordingly since you simply do not have the — the top-line flow-through that you just usually would see in these larger durations of Q1 and This autumn. So, simply to emphasise this level.

Jeff Farmer — Gordon Haskett Research Advisors — Analyst

I simply wish to say, I believe the investor clearly understands the seasonality facet of it. It’s simply the development within the margin, which was the factor that is getting the eye. So, I hear you loud and clear, and extra to return on the Investor Day. So, I admire it, guys.

Thank you.

Chris Morris — President and Chief Executive Officer

You obtained it.

Mike Quartieri — Chief Financial Officer

Thank you.

Operator

Our subsequent query will come from Sharon Zackfia with William Blair. You could now go forward.

Sharon Zackfia — William Blair and Company — Analyst

Hi. Hi, good afternoon. So, on the final earnings name, you talked a few uneven form of gross sales surroundings. I believe a part of that was associated to the motion in spring breaks, and it is at all times form of powerful in mid to late March to form of know the place issues are going to lie.

Do you’re feeling like, now, there’s extra predictability in your gross sales tendencies? And I’m additionally curious as to form of the way you’re viewing the aggressive surroundings at this level, whether or not you are seeing any extra incremental strain from new rivals opening form of like we used to listen to about with Dave & Buster’s again earlier than the pandemic?

Chris Morris — President and Chief Executive Officer

Let me go in reverse order. So, with respect to the competitors, there’s — that is not one thing you are going to hear from this group. You know, we’re targeted on, you understand, maximizing the alternatives that we have now in entrance of us with — with Dave & Buster’s, and we will stroll you thru our plans subsequent week. We’re tremendous enthusiastic about it.

As I mentioned a minute in the past, we have now so many levers that we’re — that we imagine we’re going to have the ability to successfully pull to get this enterprise transferring, that our plan is to outcompete. So, that is — that is our plan. With respect to the predictability of gross sales, relative to that time frame that you just simply referenced, the reply is sure, as a result of that time frame, final quarter, the final time we had our name, it was very complicated to know the underlying development within the enterprise as a result of there have been so many mismatches in spring break. And so, that was simply form of wreaking havoc with — with our numbers.

And so, clearly, we do not have that very same stage of mismatch occurring at this time limit. And so, comparatively talking, it is — we’re in a greater surroundings to get a really feel for gross sales. But on the identical time, I’ll additionally let you know that, you understand, with all of the chatter occurring within the macro surroundings across the client and what’s, you understand, what is going on to occur to the buyer — to client spending in the course of the summer season and within the fall, you understand, all of that stuff form of weighs on — on our capability to successfully predict gross sales. And so, as I discussed a minute in the past, you understand, we attempt to not get slowed down in that.

We simply attempt to keep actually targeted on the issues that we are able to management and — and, you understand, be as environment friendly as we are able to and, you understand, to aggressively execute the — the strategic — strategic initiatives that — that we have recognized.

Sharon Zackfia — William Blair and Company — Analyst

Thanks for that. And then, one query on the amusement comp down, you understand, 6.5%, is {that a} proxy for form of the visitors on the amusement facet? Or are you seeing form of decrease hundreds per card than you’d have seen within the year-ago interval?

Mike Quartieri — Chief Financial Officer

Yeah, I’ll take that. Actually, we’re really seeing a rise in a few of the card hundreds. So, there may be the idea of, as you give prospects that chance to commerce up in worth, that you just do get this nuance of a mother or father shopping for the higher-value card and splitting it between their children versus shopping for the 2 particular person playing cards. So, there’s a little little bit of that, however it is usually one of many indicators that we’re at all times waiting for as we measure that as for visitors and every other, name it, the flexibility to form of measure how our advertising campaigns and different worth alternatives that we have now to supply to our prospects.

Sharon Zackfia — William Blair and Company — Analyst

OK, thanks.

Chris Morris — President and Chief Executive Officer

Thank you.

Operator

Our subsequent query will come from Chris O’Cull with Stifel. You could now go forward.

Chris O’Cull — Stifel Financial Corp. — Analyst

Thanks. Good afternoon, guys. I had a follow-up query relating to that. Chris, given numerous the comp efficiency has been coming from test construct or pricing, how are you interested by that transferring ahead, particularly given the transaction efficiency? Does it offer you just a little pause about possibly making an attempt to boost the test with the next entry level with the Power Card? Or do you’re feeling like you possibly can nonetheless elevate that test going ahead?

Chris Morris — President and Chief Executive Officer

We nonetheless imagine that there is alternative to develop test, however, you understand, I hear you loud and clear that’s one thing that we have to proceed with warning simply because we at all times wish to shield the worth proposition. I believe in most of these companies, these low-frequency, high-experiential companies, you understand, the visitor is searching for — you understand, they give thought to worth otherwise than they could take into consideration worth on a restaurant chain. And so, we’re actually targeted on the general expertise. We imagine that there is nonetheless room on value in sure features of the enterprise.

We imagine that there are specific methods for us to be good about rising test however, on the identical time, you understand, giving — giving the friends one thing in return for worth. And so, once more, all of that will likely be — we’ll stroll by all of that subsequent week. And, you understand, you may — you may — I believe you are going to be happy with what you hear.

Chris O’Cull — Stifel Financial Corp. — Analyst

Great. And then, Michael, I simply had a query relating to a few of these latest Main Event openings. Can you give us an thought of how a lot you are spending to open these shops by way of simply the — the money outlay and — and the constructing prices and a few of these issues as a result of you have not opened that many Main Events? I’m simply curious to see what the funding price is for that enterprise.

Mike Quartieri — Chief Financial Officer

Yeah, I imply, simply offer you perspective, traditionally, Main Event would have used developer financing after they chosen the location, would have entered into that sale-leaseback on the time of closing, after which use these proceeds to offset the capital outlay. So, basically, you’d take a look at a Main Event as costing just a little over 20 million, 22 million. Given that it is a 55,000-plus-square-foot location with bowling, it has the next price to — to — to assemble. Use these off — off with these proceeds from the developer financing after which have a internet funding of about 8 million into it.

Where we’re it right this moment, given the energy of our stability sheet and the free money stream conversion, we’re really placing in that extra quantity and funding the complete quantity of the capex upfront with our current stability sheet and liquidity. What that does is it would inflate your capex spend, however in flip, we then will enter into sale-leasebacks as soon as the shop is open. And when doing so, by having it as an working asset, we’ll get a much better return on the money proceeds from that sale-leaseback that makes it well worth the effort and time to go forward and make the most of our stability sheet and shield ourselves from an total perspective. So, because it stands proper now, the pipeline of what is opened is all — was in — in place with Main Event on the time of the transaction.

So, we have not needed to make the most of our stability sheet but, however Murfreesboro will likely be our first one. So, you may see in all probability a few $30 million uptick in capex from our historic ranges once you mix the 2 firms. But once more, that improve is merely timing, and we get a much better return on doing the sale-leaseback as soon as that retailer is an working asset.

Chris O’Cull — Stifel Financial Corp. — Analyst

Is that your expectation that you will have form of a sales-to-investment ratio beneath one, with the margin — the excessive margin, will consequence within the larger 25% possibly plus money — on money returns? Or how are you interested by the unit economics for that enterprise?

Mike Quartieri — Chief Financial Officer

You’re considering of it appropriately.

Chris O’Cull — Stifel Financial Corp. — Analyst

OK, nice. Thanks, guys.

Chris Morris — President and Chief Executive Officer

Thank you.

Operator

Our subsequent query will come from Dennis Geiger with UBS. You could now go forward.

Dennis Geiger — UBS — Analyst

Great, thanks. One fast follow-up form of on the — on the shortage of adjustments in client habits. And you form of touched on it a bit right here, however — however any up to date ideas on the resiliency of the manufacturers into the more durable macro relative to prior, simply given what you’ve got seen and form of the shortage of any — any of these notable adjustments as — as you look forward over the approaching quarters or so?

Mike Quartieri — Chief Financial Officer

Yeah, I imply, I believe we’ll get into this just a little bit extra on Investor Day. But after we return and take a look at prior uncertainty available in the market, whether or not that is the ’08, ’09 disaster, you understand, the corporate carried out extraordinarily effectively. Although, you understand, comp retailer gross sales would have been down, however the quantity of adjusted EBITDA decline was far lower than what the comp retailer gross sales are. So, from that perspective, there is a very a lot of a protecting surroundings that we have now.

And as we get additional into most of these conditions or these environments, that is when the trade-down from the dearer trip into the staycation, which then yields into that Dave & Buster’s journey helps shield us in that — in that sort of an surroundings.

Dennis Geiger — UBS — Analyst

That sounds good. Looking ahead to subsequent week. Thanks, guys.

Chris Morris — President and Chief Executive Officer

Thank you.

Operator

This concludes our question-and-answer session. I want to flip the convention again over to Chris Morris for any closing remarks.

Chris Morris — President and Chief Executive Officer

All proper. Thank you, operator. In closing, we would wish to once more commend our group for the distinctive outcomes they proceed to provide at our shops throughout the nation. Thank you all for becoming a member of.

We stay up for retaining you apprised of our continued progress, on our progress initiatives, and revealing extra particulars about our long-term strategic plan at our Investor Day subsequent week. Thank you.

Operator

[Operator signoff]

Duration: 0 minutes

Call members:

Cory Hatton — Vice President, Investor Relations and Treasurer

Chris Morris — President and Chief Executive Officer

Mike Quartieri — Chief Financial Officer

Andy Barish — Jefferies — Analyst

Jake Bartlett — Truist Securities — Analyst

Brian Vaccaro — Raymond James — Analyst

Jeff Farmer — Gordon Haskett Research Advisors — Analyst

Sharon Zackfia — William Blair and Company — Analyst

Chris O’Cull — Stifel Financial Corp. — Analyst

Dennis Geiger — UBS — Analyst

More PLAY analysis

All earnings call transcripts