Dave & Buster’s Entertainment (PLAY -2.79%)
Q3 2022 Earnings Call
Dec 06, 2022, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon, and welcome to Dave & Buster’s Entertainment, Inc. third-quarter 2022 convention name. All members can be in a listen-only mode. [Operator instructions] After at the moment’s presentation, there can be a possibility to ask query.

[Operator instructions] Please notice that this occasion is being recorded. I might now like to show the convention over to Mr. Cory Hatton, vp of investor relations and treasurer. Please go forward, sir.

Cory Hatton — Vice President, Investor Relations and Treasurer

Thank you, operator, and welcome to everybody on the road. Leading at the moment’s name is our chief govt officer, Chris Morris; and Michael Quartieri, our chief monetary officer. After our ready remarks, we can be comfortable 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 outcomes, I’d prefer 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 completely primarily based on historic reality. Any of this stuff must be thought of forward-looking statements referring to future occasions inside the that means of the Private Securities Litigation Reform Act of 1995. All such forward-looking statements are topic to dangers and uncertainties, which might trigger precise outcomes to vary from these anticipated.

Information on the assorted threat components and uncertainties have been revealed in our filings with the SEC which can be found on our web site. In addition, our remarks at the 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, which can also be accessible on our web site. Also, professional forma financials together with Main Event for the trailing 4 quarters ended October 30, 2022, can be found on the backside of the Events and Presentations part of our IR web site.

Now, I’ll flip the decision over to Chris.

Chris Morris — Chief Executive Officer

OK. Thank you, Cory, and good afternoon, everybody, and thanks for becoming a member of our name at the moment. We are happy to report sturdy monetary outcomes for the third quarter, that are clearly indicative of the progress we’re making on our progress technique. We delivered document income for the quarter, pushed by double-digit comparable gross sales progress, which, in flip, led to document adjusted EBITDA for the quarter regardless of the difficult macro and inflationary setting.

I wish to acknowledge the excellent effort of our groups, each within the subject and right here in our assist heart, that produced these document outcomes as we proceed the work of integration to develop into a extra environment friendly group. Since our final analyst name, our group has been targeted on three key work streams: one, successfully managing the merger integration; two, long-term strategic planning; and three, managing gross sales and profitability within the close to time period to offset the continuing inflationary stress in our enterprise. I’m happy to say we’re forward of schedule and exceeding expectations in all three areas. As it pertains to our merger integration, our group’s excellence in execution has accelerated the tempo of realizing the anticipated advantages.

To date, over $17 million of annualized synergies had been applied and we proceed to be assured in our $25 million goal. The tempo of implementing these synergies has accelerated as we swiftly addressed all redundant staffing, continued to mix our buying energy to offset inflation, and moved towards combining the best-in-class techniques throughout each manufacturers. We are transferring aggressively to completely seize synergy alternatives implementing superior working initiatives and leveraging the size of our mixed operations. Secondly, our groups have been aggressively targeted on growing our long-term strategic plan to additional cement the Dave & Buster’s and Main Event manufacturers as simple leaders in location-based leisure and add significant long-term shareholder worth.

Based on an intensive strategic evaluation of the enterprise, anchored and deep client analysis, and spending appreciable time studying immediately from our operators, our core model place for our Dave & Buster’s model going ahead will carry better focus to executing grownup events aged 21 to 39 who’re visiting our areas to have a good time with their squad. These crew connectors, as we prefer to name them, are energized by social conditions and in-the-know on tradition and social tendencies occurring on the time. Over the months and years to come back, this refined model positioning will information our advertising and marketing technique, leisure innovation pipeline, meals and beverage providing, retailer design and structure, and tech-enabled hospitality mannequin. This long-term holistic method to managing the enterprise anchored in strategic planning and operational execution led to the profitable reinvigoration of the Main Event model, and we’re excited to use the identical method to the bigger Dave & Buster’s enterprise.

We stay up for sharing extra particulars with you at our Investor Day within the early a part of subsequent 12 months. Lastly, our groups have been targeted on mitigating inflationary pressures with considerate pricing and elevated working efficiencies. Despite ongoing inflationary price stress within the enterprise, we have now made nice progress and proceed to seek out alternatives to handle our price and enhance our profitability. In addition to the work on price controls, we’re more than happy with the top-line momentum all through our portfolio.

As indicated by our third quarter outcomes, visitors proceed to go to and spend at wholesome charges. On the advertising and marketing entrance, in Q3, we launched our National Where Winners Watch Football marketing campaign, that includes Kansas City Chiefs nice Travis Kelce, designed to drive consciousness of Dave & Buster’s as an awesome soccer viewing vacation spot, which contributed to our sturdy Q3 efficiency. In November, we lately accomplished our Eat & Play Combo promotion at Dave & Buster’s. We’ve had great success with our native concentrate on World Cup Watch activations and are excited in regards to the launch of our Impossible Holiday Hangout contest, which can carry collectively 4 mates from across the nation to spend the vacation collectively at Dave & Buster’s in Kansas City.

As we head into This fall, our Special Event gross sales groups and working groups are aggressively targeted on delivering a powerful vacation banquet season. We are optimistic that the upcoming vacation season will present further momentum as we enter the New Year as our Special Events enterprise has practically recovered to pre-COVID ranges. We are 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, sturdy property, and proficient groups. Bringing these manufacturers collectively underneath one umbrella presents our firm with distinctive progress alternatives, which can profit all stakeholders. We have a transparent line of sight on the strategic alternatives forward for the Dave & Buster’s model and a world-class administration group with a confirmed monitor document of superior execution. We consider there may be significant upside potential for this firm and our stakeholders, and we’re working diligently to comprehend that potential.

Let me take a minute to recap just a few progress initiatives which have me excited in regards to the alternative in entrance of us. The continued improvement and rollout of our improved hospitality-based service mannequin, the model consciousness work that is driving innovation of our product providing, and in flip, how we method the refresh program for our shops. The continued restoration of our Special Event enterprise, our improvement pipeline of recent shops for each manufacturers our progress on growing our worldwide franchisee community, the tenacity of our groups to determine and implement our synergy alternatives. And final however actually not least, the confirmed capabilities of the chief administration group which supplies me confidence in our potential to succeed.

To put it succinctly, in every single place we glance, we’re seeing vital progress alternatives, and we’re poised to unlock long-term shareholder worth. So, now with that, let me flip the decision over to Mike to evaluation our Q3 outcomes.

Mike Quartieri — Chief Financial Officer

Thanks, Chris. We’re happy with our monetary outcomes for the third quarter and inspired by the tendencies persevering with into the fourth quarter. Amidst appreciable financial uncertainty, we stay targeted on efficiently managing our newly mixed enterprise, which generated document income of $481 million and produced a document $90 million of adjusted EBITDA within the third quarter, which I’ll remind you is holistically our seasonally softest quarter of the fiscal 12 months. We produced an 18.7% adjusted EBITDA margin within the third quarter, which represents a 320-basis-point enchancment above the 15.5% margin of the third quarter of 2019.

We proceed to be laser-focused on optimizing our price construction and unlocking our synergy goal of $25 million from the mixture with Main Event. With regards to professional forma comparable retailer gross sales figures, I’d prefer to direct you to the supplemental schedule titled December 2022 supplemental professional forma monetary knowledge posted within the Events and Presentations part on our IR web site. I’d like to spotlight that the sturdy comp gross sales figures within the third quarter of 13.3% versus 2021 and 17.5% comp versus 2019 on a consolidated foundation. Notably, our SMB enterprise has continued to enhance with our tailor-made new menu choices and SMB represents an growing mixture of our complete income versus the prior-year interval.

Additionally, our Special Events enterprise continues to offer great upside because it continues to normalize the pre-pandemic ranges with the professional forma mixed comps down solely 6.7% this quarter versus 2019 compared to final quarter when it was comping down 13.4% versus 2019. We generated $68 million in working money circulate in the course of the quarter, contributing to an ending money steadiness of $108 million for complete liquidity of just about $600 million when mixed with the undrawn revolving credit score facility. We ended the quarter with a web complete leverage ratio of two.2 instances. Turning to capital spending.

We invested a complete of $64 million in capital additions and opened three new Dave & Buster shops: one in Lynnwood, Washington; one in Long Beach, California; and the opposite in Bakersfield, California. We plan to open one new Dave & Buster’s branded retailer and two Main Event branded shops within the fourth quarter of fiscal ’22. Finally, let me replace you on comparable retailer gross sales by the primary 5 weeks of the quarter. Pro forma mixed comparable retailer gross sales has elevated 3.1% in comparison with the identical interval in 2021 and 9.2% in comparison with the identical interval in 2019.

We estimate that the calendar shift of the vacation season because it particularly pertains to our particular occasions enterprise in ’22 versus 2019 for this five-week interval represents a short lived destructive 3% general comp headwind and which can reverse within the remaining weeks of December. To summarize, we’re excited in regards to the sturdy 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 setting. 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 best returns attainable for our shareholders. Now, operator, please open up the road for questions.

Questions & Answers:

Operator

Thank you. We will now start the question-and-answer session. [Operator instructions] And the primary query will come from Andy Barish with Jefferies. Please go forward.

Andy Barish — Jefferies — Analyst

Yes. Hey, guys. Happy holidays. Just a few ideas on the highest line for those who might.

Were you happy with Eat & Play in November, I assume, firstly? And then secondly, are you able to discuss to us about form of the significance of December for the quarter and any quantification perhaps on how we must always take into consideration form of seasonality versus the 3Q as you form of take a look at common unit volumes?

Chris Morris — Chief Executive Officer

Hey, Andy, that is Chris. I’ll begin and let Q form of fill in some further shade. In phrases of Eat & Play, what I’d let you know is that we’re happy with the tendencies in our enterprise on high line, and that features the month of November. When we take a look at our complete arsenal of promoting actions, those that I stroll you thru, first, the NFL marketing campaign, we felt that did a really good job bringing consciousness to the sports activities viewing.

We proceed to see good gross sales outcomes on the weekends, which we predict is a mixture of, first, the marketing campaign, we consider was profitable. And secondly, our operators are very keenly targeted on maximizing throughput on the weekend, and so we predict that that helps. The Eat & Play Combo in November, we’re happy with. As we take a look at actually making an attempt to grasp the contribution that promotion had, the information is a little bit murky.

But general, we’re happy that we did it. We don’t have any regrets. The factor I’ll let you know about that exact platform is it is a part of — it is a kind of promotions that’s identifiable to the D&B expertise. And over time, there’s a number of model fairness, a number of promotional fairness in that exact marketing campaign.

And so, I might look to see us to proceed to do it. But we’ll — going ahead, we’ll be very selective once we do it versus form of an always-on sort of promotion, however no regrets in any respect in November. And then as Q walked you thru, as we predict by our This fall gross sales efficiency, general, we’re happy. When you make the changes for the timing there’s nonetheless appreciable momentum on this enterprise on each manufacturers.

And the December interval is an important interval, as you talked about, due to the vast majority of our gross sales throughout that interval for the Main Event model and a good portion of the gross sales for the Dave & Buster’s model comes from Special Events. And our groups are laser-focused on maximizing the chance on Special Events. It’s been a few years since that demand has been there. The demand is again, and we intend to optimize that.

And so, we have got the groups targeted. We’re promoting and our operators are able to execute — and we — at this cut-off date, we’re approaching pre-Covid ranges, which we’re more than happy about.

Mike Quartieri — Chief Financial Officer

Yes. Andy, only one different thought. Just on the timing and what you see within the first 5 weeks. So, if you concentrate on our Special Events enterprise, the height of that takes place within the three-week interval main as much as the Christmas vacation, and so in 2022, this peak consists of the week of December 5, the present week that we’re in, the twelfth and the nineteenth.

But for those who return and take a look at 2019, the Christmas vacation was on a Tuesday, Wednesday, which precipitated that three-week interval to push ahead. So, the weeks had been actually December 2, ninth, and sixteenth. So, the distinction between simply December 2 versus December 5 on this interval is important to us, and that is what’s inflicting a couple of 3% headwind in our comp retailer gross sales for simply this five-week interval. We’ll get the good thing about that on the again finish as we get nearer to that Christmas vacation week, we’ll choose up that further piece of enterprise at that time.

And so, general, for the month of December, while you take this noise out between the 5 weeks within the full quarter, we’re extraordinarily happy with the extent of labor that we’re seeing by our gross sales group and what we predict we’ll expertise from the Special Events enterprise as a complete for the month of December.

Andy Barish — Jefferies — Analyst

Thank you very a lot.

Operator

The subsequent query will come from Jake Bartlett with Truist Securities. Please go forward.

Jake Bartlett — Truist Securities — Analyst

Thank you. This is Jake. I had a query on — simply so we will perceive the tendencies. I believe you are reporting same-store gross sales only for Dave & Buster’s as a result of the Main Event shops, I do not suppose are thought of comp base, and then you definitely’re giving us professional forma.

The steering is in professional forma, however I believe you are going to be reporting simply the same-store gross sales for Dave & Busters if I obtained that proper. Can you give us what the quarter-to-date was for Dave & Buster’s because it pertains to the 13.6% versus ’19 that you just reported within the third quarter?

Mike Quartieri — Chief Financial Officer

Yes. I believe only for perspective functions, once we look and we handle the enterprise, we’re managing it as one consolidated entity. We have one administration group in place. We do take a look at each manufacturers as having a barely totally different providing however the best way we allocate the sources accordingly, we put each in that very same vein.

So, from our perspective, what we’re making an attempt to do is get to some extent the place we’re commenting on the consolidated enterprise as a complete as a result of we’re redeploying property between each manufacturers accordingly each day.

Jake Bartlett — Truist Securities — Analyst

OK. And simply — I’m making an attempt to consider the tendencies right here. And it appears like simply as we — the primary 5 weeks of the third quarter, for Dave & Buster’s alone, I believe that is all you offered on the time was 17.6% and then you definitely reported 13.6% steering is for — even on a consolidated foundation, vital deceleration — or not steering however the quarter-to-date, even once we’re making that three-point adjustment to 12% versus the 17.5%. There does appear to be a deceleration happening.

You know, I assume, you recognize your ideas on what’s driving that. The Eat & Play, while you ran in April, drove a very huge and fairly — actually sturdy lead to same-store gross sales, does not appear to be repeating. What do you suppose is driving the — it looks like what it appears like is decelerating momentum.

Mike Quartieri — Chief Financial Officer

Well, I believe I’ve taken the purpose. If you are trying versus ’21, you do have the influence of the delta variant coming to an in depth form of the tip of October, which November had a pleasant bump. If you recall throughout our earnings name a 12 months in the past once we commented on November, we had comp retailer gross sales at Dave & Busters, which was 14-plus % for that month alone on the walk-in enterprise. So, from a ’21 perspective, we’re lapping that at this cut-off date.

When you take a look at the steadiness of the 12 months in that ’21 interval, then omicron hit, and the enterprise fell off dramatically. So, we do count on to have a a lot simpler comp for the December, January interval as we go ahead.

Jake Bartlett — Truist Securities — Analyst

Well, I used to be speaking versus ’19. You began the third quarter at 17.6% after which it was 13.6% for the quarter and now it is nearer to 12% consolidated. So, there is a deceleration versus ’19. Is there — what do you suppose is driving that?

Mike Quartieri — Chief Financial Officer

I might simply take a look at simply general tendencies within the enterprise. I believe from a back-to-school perspective, there are financial points which are on the market, though we do not see it as a lot. I imply, to speak about comp retailer gross sales on the ranges that we’re versus ’19, I believe it is nonetheless a exceptional element of this enterprise that reveals the power of the general enterprise in itself.

Jake Bartlett — Truist Securities — Analyst

Agreed. And only one query on the — as we take into consideration the quarter-to-date after which we take into consideration I consider the remark was that — or perhaps you’ll be able to verify that you just count on the Special Events enterprise to be above ’19 ranges, so form of not a drag. But ought to we consider the entire quarter — if demand form of ranges stay the identical, we’d take into consideration the quarters being increased than the quarter-to-date simply as you contemplate the elevate that you’ve got, I believe, most likely some visibility on for the Special Events. Should we take into consideration the quarter as increased than what the quarter-to-date is simply on condition that dynamic?

Chris Morris — Chief Executive Officer

The brief reply is sure. I imply, for those who take a look at quarter-to-date gross sales, simply adjusting for the vacation mismatch, which as Mike mentioned, we count on that mismatch to get better as we transfer into December, that alone would let you know that we count on the quarter-to-date quantity to finish up higher than the 5 weeks. But then you definitely issue that into simply the power within the enterprise, the concentrate on Special Events, the pacing that we’re on proper now to ship on Special Events, we really feel nice. We really feel nice in regards to the enterprise.

We really feel nice in regards to the tendencies and excited that we’re ready to finish the 12 months on a very excessive notice.

Jake Bartlett — Truist Securities — Analyst

Great. Thanks rather a lot. Appreciate it.

Mike Quartieri — Chief Financial Officer

Thank you.

Operator

Your subsequent query will come from Andrew Strelzik with BMO Capital Markets. Please go forward.

Andrew Strelzik — BMO Capital Markets — Analyst

Hey, good afternoon. Thanks for taking the questions. My first one, I used to be curious for those who suppose there’s any purpose to consider recognizing form of that the general momentum of the enterprise remains to be sturdy, that there was a contact of a slowdown. Do you suppose there’s any purpose to consider that you just’re seeing any pushback from a number of the pricing or a number of the pricing changes on the sport degree perhaps that you just made, do you have got form of any metrics or knowledge factors that you just’re watching to gauge that?

Chris Morris — Chief Executive Officer

Yes. So, we actually have the metrics to anytime we elevate costs, that is one thing that we take very severely. And so, we’re all the time going again and doing the postmortem evaluation. We’re not seeing — we’re not seeing any pushback or destructive response or change in client conduct associated to the value will increase.

So, actually, we nonetheless really feel like that there’s room in some facets of our enterprise to proceed to lift costs. So, nothing there. I assume I might simply level you again to the feedback that we have been making is that there is nonetheless — the underlying tendencies on this enterprise are nonetheless superb. 

Andrew Strelzik — BMO Capital Markets — Analyst

Sure.

Chris Morris — Chief Executive Officer

And so, we nonetheless be ok with that.

Andrew Strelzik — BMO Capital Markets — Analyst

OK. Great. And then on the synergies and the mixing, what precisely do you have got left to do there? And you talked in regards to the $17 million annualized, I consider. How a lot of the $25 million do you truly count on to comprehend this 12 months on a reported foundation?

Mike Quartieri — Chief Financial Officer

OK. So, first a part of your query, what’s left to do? I’ll form of stroll you thru what’s been achieved and the place we’re headed. So, rapid actions that had been taken on the finish of Q2 had been actually across the head depend the place we removed the duplicative nature of you do not want two chief monetary officers. You do not want two CEOs and the like.

So, these choices had been made rapidly and applied swiftly. The subsequent section that you just’re seeing proper now, which gave us the boldness to up the ante from $20 million to $25 million is de facto round our provide chain the place we have been in a position to mix the buying energy of each manufacturers, renegotiate contracts. That work is now achieved, and we’re now getting into the following section of that element, which is round taking sure contracts out to bid. And so, that RFP course of takes a little bit bit longer, way more demanding on the procurement group relatively than simply taking a look at contracts, consolidating and eliminating the one which’s least favorable for us.

The subsequent section, which I name the extra longer toll step ahead, is de facto round extra systems-related and extra foundational structural gadgets that we have to make modifications to — consolidating, whether or not it is the POS system, back-office accounting techniques, HR techniques, combining 401(ok) plans. It’s that sort of labor that is in course of. And that is the lengthy lead time that takes the 18 to 24 months that we quoted beforehand once we began this course of. As far as what we predict we will expertise or see come by, I believe it is no less than like directionally about $6 million coming by in that interval.

A variety of that’s what we’re seeing in our meals and beverage costing, which helps to offset a number of the inflationary components that we have seen earlier than.

Andrew Strelzik — BMO Capital Markets — Analyst

OK. Perfect. Extremely useful. And if I might simply squeeze one final fast one in right here.

You gave the replace on 4Q openings. Is there any change in the best way you are fascinated about the ’23 retailer openings? Or I simply did not hear an replace to that. Thanks.

Mike Quartieri — Chief Financial Officer

No, not at the moment. We are very aware of the timing because it pertains to any provide chain points, getting governmental approvals on the native degree for allowing, and issues to that impact. So, the 15 to 17 that we have talked about earlier within the final quarter remains to be in place, however we’ll be offering extra particulars and updates once we get to our Investor Day arising within the April time-frame.

Andrew Strelzik — BMO Capital Markets — Analyst

Great. Thank you very a lot.

Mike Quartieri — Chief Financial Officer

You’re welcome.

Chris Morris — Chief Executive Officer

Thank you.

Operator

The subsequent query will come from Brian Vaccaro with Raymond James. Please go forward.

Brian Vaccaro — Raymond James — Analyst

Hi. Thanks, and good night. I simply wished to circle again to the comps and a number of the mixed versus model tendencies. I imply, the 2 manufacturers have clearly been producing very totally different ranges of AUVs versus 2019.

And I believe it is vital to attempt to keep no less than a little bit perspective, no less than within the close to time period on how the 2 companies are trending as a result of one was up 30% and 40% and one was up, say, 10%, what have you ever on the DB aspect. So, I assume simply within the spirit of lowering the chance of any confusion, might you present any breakdown between the quarter-to-date comp, D&B and Main Event, and perhaps give us some perspective on common weekly gross sales, understanding there’s Special Events transferring round? But simply to attempt to preserve us all on the identical web page, given the transferring items right here.

Mike Quartieri — Chief Financial Officer

Yes. Look, I’ll give it to you the perfect that I can. So, for those who’re trying on the quarter-to-date from a median weekly gross sales perspective. And once more, we’re working with each manufacturers.

It’s about $183,000. That is similar to what we have seen beforehand. It’s the identical form of primary $184,000 that you just noticed in Q3. So, the weekly common of what we’re seeing is pretty in step with that degree of, name it, differentiation or break up between the Main Event within the Dave & Buster’s model that you just noticed again in Q3 that we confirmed within the element to assist all people get their arms round what Main Event is and that will help you guys together with your modeling perspective.

Now, for those who — I’ll add on to, for those who’re trying on the consolidated common weekly gross sales for ’21 for each manufacturers, on a consolidated foundation, that might be about $177,000. And for those who’re trying again to 2019, that quantity is about $171,000. So, there may be significant progress within the quarter throughout that interval, simply between — the totally different manufacturers are, I might say, sticking in keeping with the trajectories that we noticed beforehand.

Brian Vaccaro — Raymond James — Analyst

OK. Perhaps you would be prepared to perhaps — OK, we’ll keep to the mixed. So, versus ’19, Europe, I believe you mentioned 17.5% on a mixed three-year comp within the third — on this quarter you simply reported, and that is slowed to say, perhaps within the 12% now for those who make the Special Events adjustment. Has the — so you’ve got moderated, as an example, underlying by, name it, 500 foundation factors.

I do not know for those who’d agree with that top degree, however round 500 bps versus ’19. Is one model decelerating greater than the opposite? Can you present any qualitative perspective on Main Event versus D&B that three-year pattern, one versus the opposite?

Chris Morris — Chief Executive Officer

Yes. So, there is not any noticeable distinction between the tendencies. This is — what you are seeing is simply final quarter, we offered the small print for Main Event to assist buyers and analysts within the modeling since Main Event was not public earlier than. Now, rolling into the Dave & Buster’s, we thought it was vital to offer that element so you may regulate.

And then going ahead, I admire the place you are coming from, wanting extra element. But going ahead, that is the disclosures that we have elected to pursue, and it is reflective of how, as Q mentioned — or as Mike mentioned, it is reflective of how we’re managing the enterprise. Main Event is 20% of our enterprise. We do not wish to get into offering granular knowledge.

We do not present that throughout any totally different areas. And we’re targeted on managing your complete enterprise, and that is how we’re trying on the enterprise, and that is how we wish to talk the enterprise. To the extent that there ever is a cloth shift between the 2 manufacturers, and it is — and we deem that it’s a necessity to speak about that, then we’ll achieve this. simply as we have now achieved previously.

So, the tendencies heading into 5 weeks for This fall, proportionately between the 2 manufacturers is similar to the place we have been. This simply — however that is the disclosure that we’re going with going ahead.

Brian Vaccaro — Raymond James — Analyst

OK. Understood. Fair sufficient. My follow-up, I assume, is on the margin entrance.

And I assume I’ll take the opposite opex line right here. Saw fairly a little bit of leverage on the opposite opex line, I assume, versus our expectations or in comparison with what you noticed in final quarter if we’re making an attempt to base it out a little bit bit. Can you simply form of, at a excessive degree, transfer by a number of the places and takes? I do know generally, there are swings in advertising and marketing, swings in R&M and different spend ranges which may present up in that line. Mike, any assistance on form of the places and takes on that line within the quarter can be very useful.

Thank you.

Mike Quartieri — Chief Financial Officer

Yes. I believe from a puts-and-takes perspective, I believe we proceed to see increased prices round this space. Two parts of that. Part of it’s exterior janitorial providers.

As we — as we have talked about earlier than, as we reopened put up pandemic, discovering labor was tough, so we did a number of outsourcing at that time. As we’re seeing at the moment a restoration within the labor market the place we have got 12% extra job candidates for positions at the moment than we noticed a 12 months in the past, we’re in a position to now begin going again on a strategic foundation and searching and evaluating whether or not these prices are higher off in-house versus exterior. So, there may be that piece of enterprise that is going. We proceed to see increased prices round safety.

Wage inflation there has not come down. When you are requested to incorporate safety from the native municipality due to sure areas that they’ve reduce on, that could be a price that we’re absorbing, and we wish to try this as a result of we take the protection of our prospects, firstly, as one of the vital desk stakes they’ve in selecting to come back to a Dave & Buster’s or a Main Event. We additionally take a look at issues from a repairs and upkeep perspective. We are trying by — for those who form of return put up pandemic, there was a number of deferred upkeep within the constructing.

So, some folks have come again, and we have now made a little bit bit extra of funding there on the R&M aspect from an expense perspective. Now the restoration facets of what is offsetting a few of that’s the utility prices that we spoke about earlier than, it was a very popular summer season that all of us had excessive increased power prices that we needed to cope with, not solely from the utilization but additionally from a charge perspective, that utilization is clearly coming down as we get to the cooler months of the wintertime. And so, these are just about the 4 places and takes that we have now.

Brian Vaccaro — Raymond James — Analyst

Appreciate that. I’ll cross it alongside. Thank you.

Mike Quartieri — Chief Financial Officer

You obtained it.

Operator

The subsequent query will come from Jeff Farmer with Gordon Haskett. Please go forward.

Jeff Farmer — Gordon Haskett — Analyst

Thanks. I’ve a few questions for you guys. So, are you able to simply replace us on what you are seeing from the lower-income client? How giant is that this cohort for you guys? And how are they behaving?

Chris Morris — Chief Executive Officer

Sure. I’ll take that. We’re continually making an attempt to grasp our enterprise, perceive the tendencies, and positively understanding how our visitor profiles are impacting our enterprise. And there’s actually nothing noteworthy there.

There’s nonetheless power in our enterprise throughout all demos. We’re not seeing — we’ve not seen a disproportionate shift in tendencies on a lower-end client.

Jeff Farmer — Gordon Haskett — Analyst

OK. And then simply actually two modeling ones. The first is straightforward, which is which — what rate of interest ought to we be utilizing within the mannequin, contemplating the motion in charges on the market? And then you definitely guys had been speaking about 25% commodity inflation final time we heard from you. What’s the replace there?

Mike Quartieri — Chief Financial Officer

Let me begin off with commodity inflation. So, for those who’re taking a look at 21%, I ought to say, versus 21%. In Q2, we had been up 17%. In Q3, we’re solely up 9%.

And a number of piece of that’s the work that we have been doing round our synergies and actually driving dwelling on the renegotiation of contracts and mixed buying energy to decrease our commodity prices at that time. When you take a look at our rate of interest Remember, we have got the 7.625 notes which are excellent. And while you’re taking a look at LIBOR — or sorry, LIBOR — SOFR, the place at SOFR plus 500 is the time period mortgage. So, you may simply take a look at the ahead yield curve for SOFR for the following 12 months, and that offers you your rate of interest.

Jeff Farmer — Gordon Haskett — Analyst

OK. Thank you.

Operator

The subsequent query will come from Sharon Zackfia with William Blair. Please go forward.

Sharon Zackfia — William Blair — Analyst

Hi. Good afternoon. I assume the query on the spend per card. I do know that it has been fairly elevated form of within the early innings popping out of the pandemic for Dave & Buster’s.

How has that been trending now as we have gotten to perhaps a extra normalized pandemic standing with the patron?

Mike Quartieri — Chief Financial Officer

Yes. We are at a similar constant degree of what we noticed popping out of the pandemic. So, for those who take a look at it over the past 12 months, we have seen no decline within the common transaction worth of the Power Card on the kiosks.

Sharon Zackfia — William Blair — Analyst

Right. And then on the EBITDA margin, I do know you’ve got been concentrating on 200 foundation factors over ’19. I wish to verify that that is additionally a goal for the fourth quarter. And then past form of this present quarter, I assume we’re not going to be speaking about 2019 anymore.

I believe issues develop into a little bit bit extra apples-to-apples once we get into 2023. I’m simply curious on the Dave & Buster’s enterprise. Given that you just guys have contemporary eyes on the enterprise, there had been a number of volatility pre-pandemic with comps destructive. I imply, what do you contemplate a win for Dave & Buster’s? Is it barely constructive comps, mid-single? Like what is the profitable situation right here as you concentrate on Dave & Buster’s and extra of a form of steady-state setting, once we’re not speaking in regards to the client nonetheless getting again to regular patterns?

Mike Quartieri — Chief Financial Officer

Well, I’ll deal with the primary a part of your query with reference to margin. Yes, I’m getting fairly uninterested in speaking about 2019 ranges as properly. But as you do look again to ’21, you continue to see whether or not it is the delta variant or the omicron variant, it simply makes for a loud comparability. So, that is why we have been offering ’21 and ’19.

The 200-basis-point dedication that was given a year-plus in the past, we nonetheless stay dedicated that that is what we’ll be capable of obtain on this This fall interval.

Chris Morris — Chief Executive Officer

And then, Sharon, when it comes to defining the win, look, we’re right here to develop this enterprise. We wish to — we’re maniacal about rising our enterprise by only a very sharp concentrate on the visitor expertise and driving income by the best way we handle, the best way we handle our enterprise and handle the throughput and concentrate on visitor satisfaction. And so, actually, I assume what defines profitable is simply the magnitude of the expansion. We wish to develop as a lot as attainable.

in all areas of the enterprise. So, beginning — we’re very targeted on rising our visitor counts and maximizing our income alternative. So, we wish to develop our verify and we wish to do it in a manner the place it’s totally worthwhile, and we circulate {dollars} to the underside line and maximize EBITDA, and open as many shops as we will sooner or later. So, I do not know precisely the best way to reply your query.

I can let you know that we’re — we consider proper now we’re profitable. We’re happy with the outcomes that we’re seeing within the fourth quarter. And as we glance by the noise of this vacation mismatch and what we’re seeing on Special Events coming into December, we’re in a profitable place proper now. And so, it is actually simply when it comes to — we all the time need extra.

And so, as we transfer ahead, this can be a group that’s fully targeted on maximizing each single progress alternative however doing it the precise option to result in sustainable outcomes. Hopefully, that solutions your query.

Sharon Zackfia — William Blair — Analyst

Yes. I think you may inform us extra when you have got the Analyst Day, so thanks.

Chris Morris — Chief Executive Officer

Yes.

Operator

This concludes our question-and-answer session. I want to flip the convention again over to Mr. Chris Morris, chief govt officer, for any closing remarks. Please go forward.

Chris Morris — Chief Executive Officer

All proper. Thank you, operator. In closing, we might prefer to once more commend our group for the distinctive outcomes they proceed to supply at our shops throughout the nation and for all of the laborious work being achieved at our Dallas assist heart to combine the Main Event enterprise and optimize the infrastructure to assist the intense future of those two phenomenal manufacturers. Thank you for becoming a member of.

We stay up for protecting you apprised of our continued progress on progress initiatives, and we stay up for internet hosting you at our Investor Day within the early a part of the 12 months. So, comfortable holidays, all people. Thank you.

Operator

[Operator signoff]

Duration: 0 minutes

Call members:

Cory Hatton — Vice President, Investor Relations and Treasurer

Chris Morris — Chief Executive Officer

Mike Quartieri — Chief Financial Officer

Andy Barish — Jefferies — Analyst

Jake Bartlett — Truist Securities — Analyst

Andrew Strelzik — BMO Capital Markets — Analyst

Brian Vaccaro — Raymond James — Analyst

Jeff Farmer — Gordon Haskett — Analyst

Sharon Zackfia — William Blair — Analyst

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