Dave & Buster’s Entertainment (PLAY -1.40%)
Q2 2023 Earnings Call
Sep 06, 2023, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Dave & Buster’s second quarter 2023 earnings convention name. All contributors shall 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, vice chairman 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 immediately’s name shall be Chris Morris, our chief govt officer; and Mike Quartieri, our chief monetary officer. After our ready remarks, we shall be pleased 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 second quarter 2023 outcomes, I’d wish to name your consideration to the truth that in our remarks and our responses to questions, sure objects could also be mentioned which aren’t totally based mostly on historic truth. Any of these things needs to be thought of forward-looking statements regarding future occasions throughout 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 components and uncertainties have been printed in our filings with the SEC, which can be found on our web site. In addition, our remarks immediately will embody references to monetary measures that aren’t outlined beneath usually accepted accounting ideas. Investors ought to evaluation the reconciliation of those non-GAAP measures to the comparable GAAP measure contained in our earnings announcement launched this afternoon. With that, it’s my pleasure to show the decision over to Chris.

Chris Morris — President and Chief Executive Officer

All proper. Thank you, Cory. Good afternoon, everybody. Thank you for becoming a member of our name immediately.

We are happy to report report outcomes for the second quarter of fiscal 2023. We generated income of $542 million and adjusted EBITDA of $140 million, leading to an adjusted EBITDA margin of 25.9% for the quarter. In a number of moments, Mike will stroll you thru the small print of our monetary efficiency. As we take a step again and mirror on the place we’re, we stay as assured as ever in our capacity to execute in opposition to the quite a few and sizable progress initiatives that we specified by our latest investor day presentation through which we have now already begun implementing.

During the quarter, we’re happy that we proceed to open new shops at a extremely enticing returns on invested capital that we have now diligently managed our price construction and proceed to broaden our adjusted EBITDA margins, and that our distinctive workforce has achieved an outstanding job navigating our extremely worthwhile and resilient enterprise mannequin by a dynamic interval in our economic system and in opposition to robust top-line comparisons versus 2022. We are laser-focused on optimizing our enterprise and rising income, adjusted EBITDA, and money stream. We stay dedicated to our long-term goal of adjusted EBITDA of $1 billion and are making appreciable progress towards that objective. I’d wish to take a second to replace you on every of the six key natural progress initiatives.

First, advertising and marketing optimization. As a reminder, we strongly imagine that there’s a significant alternative to develop site visitors by ensuring we get the suitable message to the suitable folks on the proper time. To that finish, we have now efficiently accomplished our funding within the advertising and marketing know-how infrastructure and at the moment are within the means of constructing the digital advertising and marketing engine that we anticipate will start bearing fruit within the early a part of fiscal 2024. These instruments will play a key position in creating a extra personalised strategy to advertising and marketing by improved concentrating on and visitor engagement.

In addition, our loyalty database is now 5.2 million customers, up from 4.8 million customers final quarter, as our cellular app expertise retains getting higher. Continuing to develop our loyalty database shall be a key profit for our high and backside line as clients in our loyalty database go to roughly 50% extra often and spend roughly 15% extra after they go to. As a part of our broader effort to spotlight our superior watch providing and to make use of the sports activities calendar to drive visitation, this week, we launched our fall soccer marketing campaign together with an on a regular basis $5 Bites menu. We are additionally bringing again the profitable all-you-can-eat wings on Mondays and Thursdays, which our company will notably take pleasure in whereas cheering on their favourite groups.

Second, strategic recreation pricing. Playing video games is on the core of our enterprise mannequin and what we’re and can at all times be most identified for as a model. As highlighted throughout our investor day, we imagine there’s a important alternative to implement a brand new complete recreation pricing technique to drive significant further income, adjusted EBITDA, and money stream, whereas nonetheless sustaining our on a regular basis worth proposition with recreation costs nonetheless effectively under our friends. While we require sure investments to totally implement all parts of our new technique, we’re at present unlocking new methods to optimize regional pricing that we anticipate to have a constructive affect within the fourth quarter of 2023 throughout our key vacation interval.

Third, improved meals and beverage. As a reminder, important alternative exists to enhance our attachment fee in general income and earnings generated by meals and beverage enterprise by simplifying our choices, enhancing the standard of our choices, investing in know-how to speed up velocity of service, and optimizing our labor mannequin. We lately accomplished a check of the following part of our new Dave & Buster’s menu of the longer term, a brand new hospitality-focused service mannequin, which we’re happy to report was profitable. During the check, these shops noticed a low single-digit enhance in gross sales, 170 basis-point enchancment in meals price of gross sales, improved labor prices attributable to operational effectivity, improved velocity of service, and OSAT scores.

We are on observe to launch this part of our new menu and F&B technique systemwide by the tip of September. Fourth, remodels. We are within the means of modernizing and refreshing the appear and feel of our D&B shops, enhancing the structure to extend site visitors and general productiveness, in addition to implementing know-how to assist visitor engagement and introducing new leisure choices to drive site visitors for walk-in and particular occasion enterprise. I’m happy to report the profitable launch of our first of 12 check remodels which went dwell in mid-August, introducing our enhanced leisure choices.

Although it is solely been three weeks, the brand new format is being effectively obtained by our company and performing forward of expectations of a double-digit enchancment in comparable retailer gross sales progress developments. There shall be eight extra check remodels coming on-line within the steadiness of 2023 with the remaining three in 2024. Once these checks are full, we are going to present extra complete monetary observations of those check remodels and the way these preliminary outcomes are sharpening our technique for the deliberate rollout of the rework program to the remaining D&B areas in 2024 and past. However, you may relaxation assured that we stay laser-focused on producing extremely enticing returns on invested capital for the remodels.

This particular occasions, we proceed to imagine that there’s a important alternative to enhance execution in our particular occasion enterprise. While we have now recovered again to pre-COVID ranges on a mixed model foundation, we’re leveraging the strongest parts of the Main Event playbook to drive further gross sales at Dave & Buster’s, which continues to be meaningfully under pre-COVID ranges. We’ve accomplished the preliminary part of including gross sales managers to the shops, which has proven encouraging outcomes. For instance, whereas nonetheless within the early innings of the rollout of this initiative, on the shops the place we have made the adjustments, we have now seen greater than double the superior group bookings for Q3 and This autumn on common versus the remainder of the system.

While we anticipate important near-term enhancements within the particular occasion enterprise, we additionally anticipate the introduction of recent leisure choices in reference to our retailer rework program to be a catalyst for a particular occasion enterprise. Sixth, know-how enablement. At the shop degree, we’re centered on optimizing our present service mannequin and updating our retailer IT infrastructure, which can result in vastly improved information and analytics, higher visitor engagement, and improved visitor satisfaction. Our know-how leaders had been exhausting at work within the quarter, implementing a server pill resolution, choosing our enterprise POS of the longer term, putting in new kiosks, and dealing intently with our leisure and operations workforce on our remodels.

As with the remodels, we strongly imagine these initiatives will result in further income adjusted EBITDA, and we’re laser-focused on producing a beautiful return on the required funding on this space. In mixture, we’re assured our natural progress initiatives will create important shareholder worth over the long run. And our operational achievements within the quarter are indicative of the progress we’re making towards our objective. As Mike will talk about in higher element, our strategy to operating the enterprise with sharpened price controls enabled us to proceed to broaden our margins, which grew 120 foundation factors versus 2022 and at the moment are up 230 foundation factors within the second quarter versus 2019.

We proceed to seek out methods to completely cut back our price base that shall be notably highly effective for money stream technology because the momentum continues to construct as we execute in opposition to our long-term strategic plan. In the quarter, we opened two new Dave & Busters and one new Main Event. Our robust observe report of opening new shops stays intact for fiscal 2023 as we proceed to anticipate a complete of 16 new shops this 12 months throughout each manufacturers. Our new retailer openings proceed to carry out exceptionally effectively and generate robust money and money returns.

We are very happy with the progress being made all through all areas of the enterprise and have excessive conviction that our strategic plan will ship important shareholder worth. Despite the progress we have made towards our strategic plan and the demonstrated energy and resiliency of our enterprise mannequin, D&B stays extraordinarily undervalued by the market. To that finish, our board of administrators has accredited a rise to our present share repurchase authorization, bringing our present authorization to $200 million. While we proceed to prioritize excessive ROI investments within the enterprise and new shops, we will even proceed to opportunistically and aggressively purchase again shares when our shares commerce materially under our view at truthful worth.

So, now, let me flip the decision over to Mike for a evaluation of our second quarter outcomes. Mike?

Mike Quartieri — Chief Financial Officer

Thanks, Chris. We’re happy to report robust monetary outcomes for the second quarter, we generated second quarter income of $542.1 million and adjusted EBITDA of $140.3 million, a rise of 21.3% versus the prior 12 months. Net revenue within the second quarter totaled $25.9 million or $0.60 per diluted share. We reported $40.9 million of adjusted internet revenue or $0.94 of adjusted earnings per diluted share, which incorporates an adjustment for the $11.2 million loss on debt refinancing within the quarter.

Reconciliations of those new non-GAAP measures could be present in immediately’s press launch. Pro forma comparable retailer gross sales decreased 6.3% versus 2022 as we proceed to lap sturdy prior-year intervals from a top-line perspective. When we glance again at a extra normalized degree of enterprise, we’re up 5.8% versus 2019 on a consolidated foundation, led by the continued energy of our leisure enterprise. Our particular occasion enterprise continues to get better with revenues up 15.6% on a year-over-year foundation within the second quarter and stays near flat compared to professional forma 2019 ranges.

Our second quarter adjusted EBITDA improved 230 foundation factors to 25.9% versus 2019. As Chris talked about, we proceed to drive margin on this atmosphere with a laser concentrate on our price base, leaving no stone unturned throughout price of products offered, labor, retailer working bills, and G&A. We are assured within the levers that we have now to drag in all 4 of those price buckets that may consequence within the annualized run fee price financial savings of 40 million to 60 million as we specified by our investor day presentation. We generated $103.8 million of working money stream in the course of the second quarter, contributing to an ending money steadiness of $82.6 million for liquidity of over $572 million when mixed with the $490 million obtainable on our $500 million revolving credit score facility, internet of excellent letters of credit score.

We ended the quarter with a complete internet leverage ratio of two.1 occasions. Our robust steadiness sheet, low leverage, and superior money stream profile gives us with the power to put money into the enterprise to drive worthwhile progress and proceed to return capital to shareholders. As beforehand disclosed within the second quarter, we repurchased 2.1 million shares at a complete price of $74.5 million. And after growing our share repurchase authorization, we at present have $200 million of share repurchase authorization.

Also, within the quarter, we opportunistically repriced our credit score facility, lowering the unfold on our time period mortgage B and any future revolver borrowings by 1.25%. Turning to capital spending, we invested a complete of $82.6 million in capital additions in the course of the second quarter, opening two new Dave & Buster’s shops and one new Main Event. We’ve already opened one new Dave & Buster’s retailer in the course of the third quarter of fiscal 12 months 2023 and one new Main Event retailer as effectively. Also, as Chris talked about, we’re on observe to open a complete of 16 new shops and relocate one retailer throughout each manufacturers throughout fiscal 12 months ’23.

To summarize, we’re happy with the progress we made within the quarter, strengthening our firm’s monetary place with the favorable repricing of our time period mortgage B, returning capital to shareholders by way of our share buyback program, and establishing a quantifiable roadmap to execute upon by unveiling our long-term strategic plan at our investor day in June. There are quite a few alternatives for us to pursue within the quick close to time period and long run, and we stay centered on managing prices to unlock the utmost worth of those two nice manufacturers and ship the best attainable returns for our shareholders. Now, operator, please open up the road for questions.

Questions & Answers:

Operator

Today’s first query comes from Jake Bartlett at Truist. Please go forward.

Jake Bartlett — Truist Securities — Analyst

Great, thanks a lot for taking the query. My first is on the three-year plan, the billion {dollars} in EBITDA that you simply’re concentrating on by 12 months three. When you introduced, that it was a bit of — I wasn’t certain, you recognize, what the bottom 12 months was. I believe it was ’22, however you sort of qualify that because it depends upon the macro atmosphere.

So, my query is, you recognize, are you on observe with that three-year plan? Has that been pushed out a bit of bit? Or ought to we sort of take into consideration 12 months three as 2025?

Chris Morris — President and Chief Executive Officer

Yup. Hey, Jake, that is Chris. As we stated throughout investor day, you recognize we’re very enthusiastic and assured in our capacity to ship on that plan. You know, we — the three-year timeline that we put on the market, you recognize, what we’ll inform you is that, you recognize, that is not a set timeline, however there’s clearly a path towards $1 billion in EBITDA over the medium time period.

We have not shifted in any respect our pondering on, you recognize, delivering on the result of that plan. But we actually need to steer clear of placing like a set timeline on it. It was merely simply merely saying, “Look, there’s incredible opportunity in this business. There’s a clear line of sight on how we get to $1 billion.” It seems like that.

You know, we really feel assured that we are able to ship on that within the medium time period. You know, in phrases — which may shift a month or two, or six months or two, or, you recognize, even a 12 months or two, relying on issues which are occurring within the exterior atmosphere. But make no mistake, the chance is there. In phrases of the progress that we have made, you recognize, I’ll inform you that we’re proper in keeping with our plan.

We’re very inspired with the outcomes that we’re seeing with respect to the objects that we have carried out so far. You know, investor day was June thirteenth, so we’re solely just some months into this. But from what we’re seeing proper now, we’re much more assured than we had been three months in the past in the place we’re going and the place our groups — what our workforce is targeted on and our capacity to drive significant worth over the medium time period.

Jake Bartlett — Truist Securities — Analyst

Great, nice. Thank you. And my subsequent query is simply on the trajectory of the enterprise. So, clearly we’re — the comps versus ’19 have been decelerating fairly persistently now for the final 4 quarters.

What is your confidence that that is going to stabilize, that the surplus demand, primarily, that was sort of — that occurred post-COVID has labored its approach out and that it is best to see an acceleration? I suppose inside that query, are you seeing that but? Is there any — as you take a look at the developments throughout the quarter — you recognize, the quarter so far, any indication that you simply’re seeing that stabilization even exterior of a number of the initiatives, they appear actually promising arising within the subsequent quarter or two.

Chris Morris — President and Chief Executive Officer

Yeah, let me — I’ll begin, after which I’ll flip it over to Mike to simply so as to add some further colour commentary. You know, what you are going to persistently hear from us, that is the workforce that is very a lot centered on delivering on that long-term plan. And that is the place our focus is. You know, we’re enthusiastic about what we’re doing.

As I stated, there is a clear line of sight and our capacity to ship on that plan over the long term. And so we — we do not actually get caught up in month-to-month developments. What I’ll inform you is, you recognize, look, the comparisons to the prior 12 months are difficult. Last 12 months, at this time limit, you recognize, we have benefited from the post-COVID surge together with all of our friends.

And as we’re lapping that time frame on a year-over-year foundation, you recognize, comps are difficult. We’re happy that in comparison with 2019, we’re nonetheless up 6% over that comparability. And we’re notably happy and happy with the work that our workforce has achieved to navigate by this atmosphere and nonetheless ship on the underside line. And most significantly, we stay, you recognize, as assured as ever within the initiatives that we outlined throughout investor day and the thrilling alternative in entrance of us to drive significant worth.

Mike Quartieri — Chief Financial Officer

Yeah, I believe so as to add on to that, whenever you look again a 12 months in the past, we comped plus 17.5% in Q3. And so, that may be a enormous quantity to overlap. And so, whenever you return versus ’22, yeah, it is a powerful comp. We look again at ’19 and we see the — nonetheless the expansion within the enterprise that we wished to see, which is that 2% kind progress on an annual foundation going ahead, which is a extra normalized atmosphere that you’d anticipate to see in companies like ours.

What has us, at this level, we won’t management the macroeconomic components which are driving site visitors into these impact. What we do management is what occurs within the 4 partitions of our enterprise, and that is the kind of perspective and the — I say — I name it bringing it on daily basis to manage these 4 wall EBITDA and margins. And that is the worth that you simply’re seeing in that EBITDA margin immediately, even in the sort of atmosphere the place we are able to broaden on these EBITDA margins. The actions that we’re taking immediately round which are everlasting in nature and can have the ability to profit us even additional as site visitors and economic system returns again to extra normalized ranges.

Jake Bartlett — Truist Securities — Analyst

Great, thanks loads. I actually admire it.

Chris Morris — President and Chief Executive Officer

All proper. Thank you, Jake.

Operator

Our subsequent query immediately comes from Jeff Farmer, Gordon Haskett. Please go forward.

Jeff Farmer — Gordon Haskett Research Advisors — Analyst

Great, thanks. Just wished to begin with following up on Jake’s query. So, is there something you guys can share because it pertains to how the Q2 same-store gross sales form of completed relative to your inner expectations? Anything that caught you guys off guard, both positively or negatively?

Mike Quartieri — Chief Financial Officer

No, I believe as you take a look at the again finish of Q2 and what we’re seeing immediately, it is a comparatively constant degree of comp retailer gross sales. Unfortunately, it is a decline, however these ranges are fairly constant throughout the board. We consider every of the completely different demographics inside our enterprise. I’d say demographics of our client, but in addition from a geographic perspective.

And at this level, we’re not seeing anyone explicit group that is underperforming the remainder of the demographic space, in addition to the geography of these forms of outcomes.

Jeff Farmer — Gordon Haskett Research Advisors — Analyst

OK, that’s useful. And then it seems to be such as you guys noticed roughly 250 foundation factors of meals and beverage price favorability 12 months over 12 months. The query is, so numerous issues can affect that. So, both price initiatives, menu pricing, commodity inflation.

Can you assist us perceive what drove that degree of 250 foundation factors, which was greater than doubled what you noticed within the Q1? And then, as we transfer ahead, how ought to we be desirous about that? So, simply understanding the drivers of that price favorability and the way we needs to be desirous about it shifting over the following two quarters?

Mike Quartieri — Chief Financial Officer

Yeah, so whenever you take a look at the — the development in the price of items offered line for meals and beverage, there’s a few facets. One, we have not achieved something from a pricing perspective between Q1 and Q2. So, pricing there’s constant. The profit comes from continued work from a synergy perspective as we have gone by sort of the second spherical of contracts, the place contracts that had been fastened in nature wanted to run their time period after which we had been capable of then consolidate the procurement volumes and go after that from a price save perspective.

As Chris spoke to throughout his ready remarks. We’re testing new menu objects that yield a price profit to us from a price of products gross sales perspective. And then lastly, as we at all times search for extra enchancment from prep time and issues of that impact, the power from a commodity perspective, we’re seeing relative consistency commodities quarter to quarter. So, we’re benefiting on a commodity foundation comparatively simple from Q1 at about 3% enchancment on a year-over-year foundation.

Jeff Farmer — Gordon Haskett Research Advisors — Analyst

OK, thanks very a lot.

Mike Quartieri — Chief Financial Officer

Welcome.

Chris Morris — President and Chief Executive Officer

Thank you.

Operator

Thank you. And our subsequent query immediately comes from Brian Vaccaro with Raymond James. Please go forward.

Brian Vaccaro — Raymond James — Analyst

Hi, thanks and good night. I simply wished to ask concerning the comps once more and simply form of the cadence to promote by the quarter. Obviously, comps down within the sixes now. I simply need to get your perspective on what you suppose is driving that sequential softness and simply form of the well being of your client.

I believe you talked about it isn’t concentrated in any space. But is there something you are seeing day-part, or weekday versus weekend, or SMB versus amusements, simply any incremental context on what you suppose is driving that sequential softening?

Chris Morris — President and Chief Executive Officer

Yeah, Brian, I’ll take that after which allow you to wrap it up. You know, the very first thing I’ll say is — I’ll repeat what I stated to Jake earlier is, you recognize, final 12 months, a part of what we’re coping with is only a powerful comparability to the prior 12 months simply with, you recognize, the post-COVID surge. And, you recognize, our efficiency final 12 months benefited from that simply as our peer group did. And so, there’s a little bit of a troublesome comparability.

And as I stated, you recognize, after we evaluate ourselves to 2019, first, we’re happy with the expansion from 2019. Secondly, there was no — you recognize, there’s actually no materials development within the enterprise all through the quarter. It was pretty constant. You know, we have — as we at all times do, we have analyzed the heck out of our enterprise, you recognize, slicing and dicing it each single approach.

What I’ll inform you is there was nothing significant that got here out of that. You know, we expect that it was simply general — you recognize, relative to 2002, there was only a decline. So, there’s not one factor that we may actually level to that may recommend that it is associated to a shift in client habits by way of how they’re buying and selling at Dave and Buster’s or something alongside these traces.

Mike Quartieri — Chief Financial Officer

I believe one factor so as to add on that, what we’re seeing is for the purchasers which are coming in, they’re spending at constant ranges of what we traditionally have seen in that post-COVID atmosphere. So, whenever you take a look at our combine between income of revenues between amusement and meals and beverage, we’re nonetheless sort of holding at that one third, two thirds, with the 2 thirds being on the amusement facet.

Brian Vaccaro — Raymond James — Analyst

OK, thanks for that. And simply on the initiatives to optimize your pricing on the video games, may you elaborate on the adjustments that you simply’re making that may have an effect starting within the fourth quarter? Just a number of the specifics there. And any ballpark of how a lot of a pricing profit you anticipate that to yield beginning within the fourth quarter? And then, additionally, I believe you had been desirous about and possibly testing elevating the buy-in, the minimal buy-in degree, possibly from $15 to $20, if reminiscence serves. Have you decided on that entrance?

Chris Morris — President and Chief Executive Officer

Yeah, so I’ll provide the two essential takeaways, one towards the tip of the quarter, so there was actually no profit in Q2, we did regulate the speed card which is the buy-in on the kiosk. When you take a look at our pricing earlier than, the low-end entry level was $15. And then, it went from 15 to 25 to 35 to 45. We adjusted these fee playing cards to really begin with $20.

So, after which, it goes from 20 to 30 to 40 to 50. The greenback worth per chip that the shopper receives is constant. So, it actually wasn’t a lot of a high quality. Price change because it was a change in simply the buy-in quantity on the minimal degree, after which it went up by there.

The different side of what we’re trying to accomplish is we have talked earlier than. One of the strategic unlocks in pricing is the power to change pricing between geographic areas. So, no completely different than whenever you take a look at meals and beverage, you recognize, prices. And main metropolitan areas often price extra from a worth level than in additional regional markets or smaller cities.

Right now, our limitation is that each one pricing for all video games is constant throughout your complete system. We’re now capable of unlock that and have the ability to put regional pricing in place, which can begin going into check the following couple of weeks. One of the important thing issues we need to do although in doing such is be sure that we keep the worth of our product providing in relation to our friends. So, from that respect, we have not communicated nor would we what we expect that estimated progress can be in This autumn, however we might anticipate there to be one thing there.

Brian Vaccaro — Raymond James — Analyst

All proper, thanks. And then, simply the final one for me, if I may. I admire the replace you supplied on sure initiatives that you simply laid out on the analyst day, however I do know it is early days, however are you able to elaborate on the shopper response you have seen within the Friendswood rework? Any specifics on how the social base are performing or different particular adjustments that you simply made which are driving the rise most meaningfully? Thank you.

Chris Morris — President and Chief Executive Officer

Yeah, pleased to take action. I imply, we’re very happy with the visitor response locally on all facets of the rework, to be completely frank. As we stated in our ready remarks, it is solely three weeks, it is just one retailer. And so, you recognize, we’re making an attempt to be guarded in our enthusiasm.

But over the past three weeks, the Friendswood — that specific unit has outperformed our expectations. So, we’re feeling excellent about what we’ll have the ability to do with remodels. And we really feel excellent about increasing our leisure providing and doing it in a approach that we expect is on the coronary heart and heart of what a D&B visitor is in search of. So, to date, so good.

Brian Vaccaro — Raymond James — Analyst

All proper, I’ll get again within the queue. Thank you.

Chris Morris — President and Chief Executive Officer

Thank you.

Operator

And our subsequent query immediately comes from Andrew Strelzik with BMO. Please go forward.

Andrew Strelzik — BMO Capital Markets — Analyst

Good afternoon. Thanks for taking the questions. My first one, you recognize, appreciating definitely you can’t have an effect on the macro atmosphere. I suppose it is a query of the way you’re desirous about balancing the multiyear strategic plan and implementation of that versus flexibility on the close to in alternatives.

And so, I suppose, you recognize, it appears like there’s extra worth on the F&B facet, a number of the different adjustments that you simply talked about, some extra advertising and marketing round soccer. I imply, do you suppose that that addresses sort of what —

Chris Morris — President and Chief Executive Officer

Andrew, we misplaced you.

Andrew Strelzik — BMO Capital Markets — Analyst

Can you hear me now?

Chris Morris — President and Chief Executive Officer

Andrew, we’re having a connection drawback. Yeah, we misplaced you proper after you stated — do you thoughts simply ranging from the start?

Andrew Strelzik — BMO Capital Markets — Analyst

Yes, are you able to hear me now? Just need to be sure to can hear me.

Chris Morris — President and Chief Executive Officer

Yes, yeah, yeah, no, we obtained you.

Andrew Strelzik — BMO Capital Markets — Analyst

OK, nice. All proper, I suppose the query actually is how are you — like what’s the flexibility of the plan within the close to time period as you sort of navigate what’s a macro that you simply can’t management?

Chris Morris — President and Chief Executive Officer

Right.

Andrew Strelzik — BMO Capital Markets — Analyst

Do you consider the pricing alternatives in another way? Are there another applications you can implement that you simply’re desirous about to be adaptable to the present macro?

Chris Morris — President and Chief Executive Officer

Yeah, effectively, the quick reply is, you recognize, we’re very conscious of how we navigate the enterprise throughout this time period and nonetheless ship on our long-term targets. You know, a giant a part of that’s how we’re managing the associated fee construction. And you recognize, as I stated a minute in the past, I’m very happy with all of the work that our workforce is doing to handle the center of the P&L. And after we can navigate by the sort of atmosphere and nonetheless ship on the underside line, that gives only a great quantity of flexibility and offers us confidence to proceed to put money into the suitable areas of the enterprise.

With all that stated, although, you recognize, we’re shifting ahead with eyes extensive open and being very conscious of not getting too far forward of ourselves on funding spending and guaranteeing that we’re balancing all sides of the enterprise. I do not see — at this time limit, we’re not seeing something that may recommend that we have to rethink our strategic priorities. We’re nonetheless simply as dedicated as we had been June thirteenth on the areas that we outlined with you. Where we see — you recognize, the place we see some momentum within the enterprise is on the meals and beverage adjustments that we’re making.

And so, the area that we examined and that we will be rolling out in September, we really feel nice concerning the outcomes that we’re driving. And, you recognize, that is a really considerate strategy to meals and beverage. It’s not simply recipes, it is you know the way the menu — how we ship on that menu on the retailer degree and drive an excellent visitor expertise. That’s one thing that we will proceed to push ahead on, you recognize, the improved service mannequin to have the ability to promote that that phenomenal meals and beverage providing and to drive connect.

You know, that is one thing that we proceed to be centered on. Special occasions is an space — you recognize, so all of the areas that we outlined at this time limit, we’re nonetheless, you recognize, shifting ahead with the identical quantity of enthusiasm and the identical dedication. But clearly, you recognize, we’re doing it in a really cautious approach simply to verify we do not get forward of ourselves.

Andrew Strelzik — BMO Capital Markets — Analyst

OK, That’s nice. That’s useful. I admire that. And hopefully, you may nonetheless hear me.

I simply wished to rapidly, as a second query, ask about a number of the new shops that you simply guys have opened and sort of — you sounded fairly excited concerning the return profile and the efficiency of the brand new shops on this atmosphere. I’m simply curious sort of another colour you can share, how these are monitoring versus different prior courses, and so forth., can be nice. Thank you.

Chris Morris — President and Chief Executive Officer

I’ll simply say, you recognize, what we stated is — I imply, we had been persistently getting phenomenal returns. You know, that is — we have an excellent enterprise with nice margins and an excellent enterprise mannequin that delivers very robust money and money returns. And we’re happy with the economics of our most up-to-date new retailer openings. And so, you recognize, we will proceed to make new unit opening as a precedence in our capital allocation.

Andrew Strelzik — BMO Capital Markets — Analyst

Great. Thanks loads.

Operator

[Operator instructions] Our subsequent query comes from Dennis Geiger, UBS. Please go forward.

Dennis Geiger — UBS — Analyst

Great, thanks. I’m questioning in case you may speak a bit of bit extra concerning the menu enhancements or the menu of the longer term, which sounds notably attention-grabbing. Could you share form of roughly what number of shops had been in that check? Anything else form of on buyer suggestions scores to share, which I suppose sounds good. And then, simply as a fast reminder, that is rolling out throughout the system by the tip of this month.

Did I catch that accurately? Thank you.

Chris Morris — President and Chief Executive Officer

Yes, you caught that accurately. So, let me step again. So, in investor day, we stated enhancing meals and beverage is considered one of our six progress initiatives and particularly grown F&B connect. Our — that is a multi-phase — or, you recognize, our strategy to delivering on these outcomes is a multi-phased strategy.

What we examined, and we examined it in 10 areas, was the second part of this multi-phase strategy. But by this part, it has been extremely impactful, you recognize, and achieved by design. What we supposed to do is, first, let’s take away pointless working complexity as a result of we would like — you recognize, for us to ship a persistently high-quality product, we need to set our operators up for fulfillment. And we need to make investments labor in the suitable areas.

It’s going to result in high quality and enhanced visitor expertise. So, we deliberately eliminated working complexity. We — all the pieces that we’re doing is anchored in deep analysis. And so, we spent numerous time understanding how our company view our SMB providing and the place the gaps are.

And by that analysis, we felt like that there have been some areas on the menu that both weren’t needed. You know, our company — you recognize, there was no loyalty to these objects based mostly on our analysis, or we had been underdelivering on the execution. And so, we redesigned the menu in — with a — in an effort to shut that hole. That was the second piece that we did.

Third is there have been sure areas in our execution that we felt like that had been driving up meals prices with out actually including worth to satisfaction. And so, a part of what we purpose to do was to take away — you recognize, cut back that that added price to our meals prices when it wasn’t needed. And so, there have been some steps that had been doing that added pointless ingredient prices that basically did not make a distinction. And so, we modified these.

So, all of these are in our part two. And, you recognize, as you may see within the ends in that 10 unit checks, we’re very happy. We sort of hit on our marks. And the following part shall be launched — so, to roll this out throughout the system takes time and so we’re being considerate about it.

We rolled out part 2 the tip of September after which part 3 shall be in February subsequent 12 months. And then, at that time limit, part 3 will embody further innovation will actually begin to push the envelope on, you recognize, new merchandise. We’ll, you recognize, be very intentional about in-store advertising and marketing. And on the similar time, we’ll be rolling out an enhanced service mannequin, given our operators the instruments that they should actually ship in a giant approach.

So, it is pretty, you recognize, it is considerate and you recognize strategic and, you recognize, multistep. So, we’re happy.

Dennis Geiger — UBS — Analyst

Very useful colour. Appreciate that. Just yet another, wished to ask a bit of extra on promotions and advertising and marketing campaigns going ahead over the approaching quarters. And you highlighted some because it pertains to — for the soccer season, which sound compelling.

But are you able to speak possibly a bit of extra about, at a excessive degree at the very least, about, maybe, what the following 12 months might appear to be in desirous about promotions and campaigns relative to historic? Maybe you do not need to say an excessive amount of for aggressive causes. But simply, you recognize, desirous about the place meals prices are, and so forth., and possibly what that lets you do from a promotional standpoint. Just curious if something further to share there on the go ahead. Thank you.

Chris Morris — President and Chief Executive Officer

Nothing to share at this time limit. We’re nonetheless within the means of finalizing our advertising and marketing and calendar for subsequent 12 months. And so, you recognize, our workforce is, you recognize, very centered on constructing out an thrilling advertising and marketing calendar. And so, extra to return on that.

But nothing to share at this time limit. The calendar — the autumn soccer marketing campaign that we simply launched this week, you recognize, we’re fairly enthusiastic about that. You know, one, it simply provides us extra alternative to spotlight the nice sports activities watch provide that we have now within the market. Number two is, from our analysis, we all know that the buyer is gravitating to value-driven messages.

And so, based mostly on our idea testing, we really feel just like the $5 Bite message is a message that is going to resonate very effectively. And then, the — rolling out all-you-can-eat wings. You know, we went again and take a look at what the — the final time we did this and we talked to our operators. And we’re fairly inspired about, you recognize, what we’re doing on all-you-can-eat wings this go round.

It seemed to be a pleasant site visitors mover prior to now. And what we have achieved is we have retooled that to be much more efficient. So, once more, simply working intently with our operators to verify we’re setting them up for fulfillment. So, we just like the message.

We just like the advertising and marketing plan for the rest of this 12 months, and we’re fairly optimistic.

Dennis Geiger — UBS — Analyst

That’s nice. Appreciate it. Thank you.

Chris Morris — President and Chief Executive Officer

Yup. Thank you.

Operator

Thank you. Ladies and gents, this concludes our question-and-answer session. I’d like to show the convention again over to the administration workforce for any last remarks.

Chris Morris — President and Chief Executive Officer

OK, all proper, thanks very a lot, operator. In closing, we might wish to commend our workforce for the distinctive outcomes they proceed to provide throughout our rising portfolio of Dave & Buster’s and Main Event shops. Thank you all for becoming a member of. We sit up for talking with you once more subsequent quarter and protecting you apprised of our continued progress on our strategic initiatives.

Have an excellent day.

Operator

Thank you. This concludes immediately’s convention name. We thanks all for attending immediately’s presentation. [Operator signoff]

Duration: 0 minutes

Call contributors:

Cory Hatton — Vice President, Investor Relations and Treasurer

Chris Morris — President and Chief Executive Officer

Mike Quartieri — Chief Financial Officer

Jake Bartlett — Truist Securities — Analyst

Jeff Farmer — Gordon Haskett Research Advisors — Analyst

Brian Vaccaro — Raymond James — Analyst

Andrew Strelzik — BMO Capital Markets — Analyst

Dennis Geiger — UBS — Analyst

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