• Revenue: $453 million for the third quarter of fiscal 2024.
• Net Loss: $33 million, or $0.84 per diluted share.
• Adjusted Net Loss: $17 million, or $0.45 per diluted share.
• Adjusted EBITDA: $68 million, with an adjusted EBITDA margin of 15.1%.
• Comparable Store Sales: Decreased 7.7% on a like-for-like calendar basis versus the prior period.
• New Store Openings: Three new stores opened in the third quarter; 10 new stores opened year-to-date.
• Capital Expenditures: $131 million invested during the quarter, with over 90% considered growth CapEx.
• Share Repurchases: $28 million repurchased during the quarter, totaling $88 million year-to-date.
• Cash Flow: $7 million operating cash outflow during the third quarter.
• Liquidity: Total liquidity of $546 million, including $9 million cash balance and $537 million available on the revolving credit facility.

• Warning! GuruFocus has detected 6 Warning Signs with PLAY.

Release Date: December 10, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Dave & Buster's Entertainment Inc (NASDAQ:PLAY) opened three new stores in the third quarter, which are on track to generate strong cash-on-cash returns.
• The company completed 11 new fully programmed remodels, with plans to have 44 completed by the end of fiscal 2024, which are outperforming the rest of the store base.
• There was strong year-over-year growth in the special events business, with optimism for the upcoming peak holiday season.
• The loyalty database now has over 7 million members, with loyalty members visiting 2.5 times more often and spending more per visit.
• Dave & Buster's Entertainment Inc (NASDAQ:PLAY) successfully refinanced a portion of its debt, extending maturities and increasing liquidity, which solidifies the balance sheet for the long term.

Negative Points

• Comparable store sales decreased by 7.7% on a like-for-like calendar basis versus the prior period.
• The third quarter financial results were negatively impacted by a material fickle calendar mismatch, adverse weather, and disruption due to remodel construction.
• The macroeconomic environment continues to be a headwind, particularly affecting the low-end consumer segment.
• The marketing optimization initiative has been challenging, with a need to rebalance media mix and improve digital marketing effectiveness.
• The company experienced a net loss of $33 million in the third quarter, with an adjusted net loss of $17 million.

Q & A Highlights

Q: How should we think about the plan that Chris Morris was critical in putting together, given his departure? Will the plan remain the same, and what attributes are you looking for in a new CEO? A: Kevin Sheehan, Interim CEO, emphasized that the plan remains intact and the Board, along with the management team, is committed to executing it. The search for a new CEO will focus on finding someone with strategic vision, operational execution, and financial performance capabilities. The goal is to integrate dining and entertainment into a cohesive, scalable, and profitable business model.

Q: Can you provide more detail on the guidance for EBITDA and how sales are driving that? A: Darin Harper, CFO, explained that the guidance assumes Q4 will perform similarly to Q3, with some modest improvements based on walk-in trends and forward bookings. The guidance is conservative to help investors navigate the comparability challenges due to calendar shifts and the previous year's 53-week fiscal year.

Q: How are the fully programmed remodels performing, and are they generating the expected returns? A: Kevin Sheehan noted that the initial phase of remodels is seeing double-digit growth, while subsequent remodels are experiencing mid- to high single-digit growth. The company is learning from these experiences and adjusting marketing and operational strategies to optimize returns.

Q: Is there any consideration to pulling back on the store-opening pace to focus on core operations and improve cash flow? A: Kevin Sheehan stated that there are no plans to slow down store openings due to the strong returns they generate. The company remains confident in its core strategy and believes that ongoing initiatives will yield positive results.

Q: What is the status of the marketing optimization initiative, and when can we expect to see its full impact? A: Kevin Sheehan acknowledged that marketing optimization has been challenging but remains a significant opportunity. The company is working on improving media mix, targeting, and loyalty programs. While foundational work took longer than expected, there is optimism about unlocking growth through these efforts.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.