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Earnings call: Dave & Buster's sees growth, aims for $1 billion EBITDA

Published 12/08/2023, 07:51 AM
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PLAY
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Dave & Buster's Entertainment Inc. (PLAY) has reported a solid performance in the third quarter of fiscal 2023, with revenue hitting $467 million and adjusted EBITDA reaching $82 million. This marks an uptick compared to both the same period in 2022 and 2019, even when considering the impact of the Main Event acquisition. The company has been actively pursuing growth through various strategic initiatives and is on track with its ambitious target of $1 billion in adjusted EBITDA. With new store openings, share repurchases, and international expansion plans, Dave & Buster's is positioning itself for sustained growth.

Key Takeaways

- Dave & Buster's Q3 revenue was $467 million, with an adjusted EBITDA of $82 million.

- The company has seen growth compared to the same period in both 2022 and 2019.

- Key growth initiatives include marketing optimization and strategic game pricing.

- Dave & Buster's is confident in reaching a $1 billion adjusted EBITDA target.

- International expansion is underway, with new stores opened and more planned.

- The company repurchased $100 million worth of shares in Q3.

Company Outlook

Dave & Buster's is optimistic about its future, expecting to surpass pre-pandemic performance in the fourth quarter. The company has booked a significant number of high-value events and foresees exceeding the entire fourth quarter of 2019 in terms of such events. They are also expanding their footprint, with 16 new stores anticipated by the end of fiscal 2023 and ground-breaking on four international locations planned for fiscal 2024.

Bearish Highlights

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The company has noted a 7.8% decrease in pro forma comparable store sales compared to 2022. However, this figure is offset by an 8.1% increase compared to 2019. They are also implementing cost-saving measures, particularly in labor, to drive down expenses and improve satisfaction scores.

Bullish Highlights

Dave & Buster's has completed a sale-leaseback transaction for four operating stores, generating $85.8 million in proceeds. They have also reported a net total leverage ratio of 2.3x, reflecting a strong balance sheet. Furthermore, the company's remodel program is performing well, prompting an acceleration in the pace of store renovations.

Misses

Despite the overall positive outlook, the company has experienced a decrease in pro forma comparable store sales compared to the previous year. They are addressing this challenge through strategic initiatives, including dynamic pricing and loyalty membership growth.

QA highlights

- Executives discussed the positive impact of adding items to their special events product offering.

- Technology enablement through the rollout of OneDine server tablets and IT infrastructure updates is a focus area.

- The company is testing footfall traffic technology and evaluating game pricing strategies.

- Labor cost reductions and back-of-house efficiencies are being targeted to improve satisfaction scores.

Macroeconomic Context

The company's performance and strategic decisions are being made in the context of a competitive and changing entertainment landscape. Dave & Buster's is leveraging technology and customer engagement strategies to stay ahead, while also navigating the broader economic conditions that influence consumer spending and entertainment choices.

In summary, Dave & Buster's is moving forward with confidence, backed by a strong quarter and clear strategic initiatives. The company's focus on expansion, both domestically and internationally, along with its share repurchase program, reflects a commitment to growth and shareholder value. With a robust plan in place, Dave & Buster's is aiming to build on its recent successes and reach new financial heights in the coming years.

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