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During the Dave & Buster's earnings call after market close, CEO Chris Morris said the company’s record results in Q1 were driven by operational improvements, menu enhancements and simplification, and guest-facing technology upgrades.

Dave & Buster’s is bullish despite an uncertain economic environment

Dave & Buster’s turned in record profits and sales in Q1, and its special events business has returned to 2019 levels.

Though some signs of fading consumer resilience are starting to show in the restaurant space, that doesn’t yet seem to be the case at Dave & Buster’s. The company reported Q1 results Tuesday, including record revenue of $597 million, record net income of $70.1 million, and record adjusted EBITDA of $182.1 million. Further, adjusted EBITDA margins were 30.5%.

Notably, comp-store sales growth declined 4.1% versus 2022 as the company lapped an “outsized performance” following the dissipation of the Omicron variant. Compared to 2019, however, comp sales were up 10.3% on a consolidated basis.

During the earnings call after market close, CEO Chris Morris said the company’s record results in Q1 were driven by operational improvements, menu enhancements and simplification, and guest-facing technology upgrades. Also, the company’s special event business has returned to 2019 levels.

“We are taking full advantage of the recovery and … we have a clear path ahead to grow meaningfully into the future,” he said.

The company is also focused on “implementing efficiencies and reducing cost” across the business and is planning to share more on those initiatives June 12 during its Investor Day. For now, Morris said the 2022 acquisition of fellow eatertainment concept Main Event has yielded synergies, resulting in “at least” $25 million in cost reductions for things like cost of goods sold, labor, operating expenses and corporate overhead.

Meanwhile, Dave & Buster’s is dedicating more of its marketing spend to attract sports fans. In the spring, for instance, the company featured 30 NCAA basketball games and ran over 60 spots in NBA playoff games.

“This audience is large, and we feel confident in our ability to drive both brand relevancy and visit frequency by building even greater awareness that Dave & Buster’s is America’s new favorite place to watch sports,” Morris said.

The company is also dedicating marketing efforts, including social, paid digital and CRM, to stay top-of-mind during its busy summer season. And, earlier this week, Dave & Buster’s launched its summer campaign that includes five free games.

“Summer is an important time for our brands as both families and young adults look for fun things to do to fill long days with experience that allow them to connect,” Morris said. “Our summer campaign features a high value, limited-time, five-free-games promotion to drive traffic.”

June and July mark Dave & Buster’s busy time and the company has experienced improved staffing levels to prepare. CFO Mike Quartieri said the company has taken a “diligent view” of the weekly sales forecast to analyze per-day staffing needs to ensure peak weekends are fulfilled. This operational effort has led to improved guest satisfaction scores, he added.

All told, Dave & Buster’s executives are optimistic about the coming months, macroeconomic uncertainties aside. Morris notes, for instance, that the company is preparing to launch a remodel test and new entertainment components, which will also be revealed during Investor Day.

“We know our guests are looking for value during this period of time. We know our guests are eager to come in and take advantage of the entertainment offering and we felt strongly that we needed to lead with entertainment and bring some interest into the game room,” Morris said. “We’re pretty optimistic … but it just launched yesterday.”

The response to these initiatives could help insulate the company should a sharp downturn manifest in the coming months, as some economists expect. Morris said businesses like Dave & Buster’s – “low frequency, high experiential businesses” – tend to do well in such environments because they’re focused on an overall experience. As a benchmark, Quartieri added that the company “performed extremely well” during the Great Recession in 2008 and 2009.

“As we get further in these types of environments, that’s when the trade down from the more expensive vacation into the staycation, which then yields into that Dave & Buster’s trip, helps protect us in that type of environment,” Quartieri said.

Contact Alicia Kelso at [email protected]

TAGS: Finance
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