Dave & Buster's Entertainment, Inc.

Q2 2021 Earnings Conference Call


spk_0: good afternoon everyone and welcome to the dave and busters entertainment incorporated second quarter twenty twenty one earnings results conference call today cause being hosted by brian jenkins chief executive officer he will be joined by mccall by scott bowman chief financial officer and margot manning chief operating officer i'd like to remind everyone that this call is being recorded and will be available for replay be getting later today now i would like to turn the conference over to scott bowen for opening remarks
spk_1: but you could feel they feel for joining us today in addition to boy i'm in more go to have rain and coleman or chief marketing officer joining us today that for prepared on that will be happy to push those this disco be recorded on behalf of they've invested in england incorporated and is copyrighted before we begin our discussion on the computers old about the call your attention to the fact that in remarks and responses to question certain i maybe just as which are not entirely based on historical facts under the right should be considered forward looking statements really in the future events within the meaning of the private securities litigation or maximizing their lisa i'll put forward looking statements are subject to risks and uncertainties which could cause actual results to differ from those anticipated information on the various was backers and uncertainties have been published in our filings with the a t v that are available on a website in addition or remarks for they will include references the financial measures that are not define on are generally accepted accounting principles and gutter should review the reconciliation of the non get measures to the comparable gap results contained in our earnings announcement believe this afternoon which is also available on our website
spk_2: now from the call over to brian
spk_1: thanks god and thank you everyone for to and enough this afternoon
spk_2: over the past eighteen months or team had successfully navigated kobe challenges while at the same time accelerated our strategic initiatives we have had a single go to emerge stronger more competitive company
spk_1: i am pleased to report today that we have accomplish that goal or branded back and we are stronger than ever the second quarter results we announced earlier today are compelling prove that this team's extraordinary efforts have succeeded we achieve record setting financial performance became new high water mark on virtually all financial metrics second quarter revenue at three hundred seventy eight million dollars was an all time quarterly hyper surpassing twenty nineteen by thirty three million dollars are successful school by the return to positive car sales of three point six percent hundred to two twenty nineteen levels even more impressive with are strongly that a performance we'd move by the hundred million mark for the first time in any quarter in our history achieving a hundred and fourteen million and eat it up but thirty six million dollars or forty four percent from two to have twenty ninety our operations team did an outstanding job leveraging you ordered pay technologies adapting their service model and optimizing costs to deliver our first better needed a margin to craft thirty percent exceeding the twenty nineteen two to compare flat older seven hundred basis points during the quarter we were also able to bring our two stores in canada back online marking the complete reopening other store base and important milestone for a company last year when the coded he was our imperative we successfully rebuild a strong capital structure bolstered by equity infusion a new bond offering and i'm an amended credit facility we now have a significant flexibility run our business and invest in our future with the record setting operating cash flow generated in two to he reduced our net debt outstanding by nearly ninety million dollars providing us with over four hundred and forty million and a they all available liquidity at the end of the quarter as further evidence of our confidence in the business we recently we announced that we intend to redeem ten percent or fifty five million dollars of our outstanding barnes using available cash we have come a very long way in just over a year be strong results were made possible by an unwavering focus over the past year and a half to accelerate initiative to make us stronger company in our second quarter reintroduced an entirely new menu that broadens are appeal and is easier for stores to execute over the summer we made a meaningful investment in our team and offering with the interaction of seven new games we also took steps to widen their entertainment moons by offering program to them and select market all early on we are confident these efforts will broaden our reefs and increase visit frequency and we are accelerating our investment in our entertainment t team to bring that for life we leapfrog traditional order of hey platforms with the system wide will laugh that our new mobile web enabled platform mobile web adoption have been extremely strong significantly exceeding our expectations the majority of our death now use the technology and our success on this fraud has been crucial in facilitating a more efficient operation while also allowing us to deliver a great the be experience the solidify our team and a challenging labour environment we provided tipperary pay incentive to our team members this quarter and succeeded in attracting the talent necessary to deliver an outstanding quarter under the leadership of female brain and coleman who you will hear from in a moment we are or new creative and media buying agencies and revamped our brand message and media strategy these changes culminated with a concentrated media investment the summer to relaunch our brand with a new voice featuring our new menu and gains this was part of our new marketing strategy to shift spending from the shorter periods to increase focus on windows that would have the most and back and those two changes were meaningful cops sales were up seven percent in the final eight weeks the to to a marked improvement from the first five weeks to the color that was down for perspective and despite a few hadn't and we're encouraged that are cops fails to the first five weeks of cute couturier including labour day are still up vs twenty nineteen reflecting the strength and the resiliency of our brand with dramatic improvements in our financial foundation in the first half of this year we've also begun to rebuild or new store pry bar with the recent opening of our store in bellevue washington and one store in brooklyn new york plan for key for me it has special open for stores and twenty twenty one we plan to open between the a stores next year representing a meaningful acceleration compared to twenty twenty one as we have discussed in the past right sizing the store format for the market and sales potential is a priority for us we are extremely pleased with the performance of our most recent new eighteen k small corner store that opened at the beginning of this year our gainesville florida store the first freestanding small format unit that we have built from the ground up generating nearly six million in revenue during the first half of twenty twenty alone absolutely crushing our expectations for revenue iba and return on investment we are encouraged about the efficiency of throughput of this new format and the potential to leverage it a new markets this quarter's performance proves that our brand is resilient and resonates with guests of all ages we are thrilled with our record setting performance and excited about continuing that momentum in the back half of the year
spk_3: at the time a mascot cover our second quarter results in a little bit more details here some insight on our expectations for the remainder of the year after that our ceo mark manning and see him a rain and coleman will cover in more detail the operating in marketing innovation
spk_1: we've implemented the summers was well we have plan for the second half cup thanks brian or second quarter results reflect a significant effect acceleration and sales of profitability for dave and busters which generated impressive cash flow to the business weekend a decoder with all hundred and forty two stores open including one new store that open during the quarter of all of our stores open we're seeing strong a man program rapid sales growth in california stores at a ramped up during the quarter with record sales and strong execution of a margin and and initiatives we were able to produce record profitability but a quarter total revenues at three hundred seventy eight million one all time record and included a three point six percent increase in comparable store sale compared with the second quarter twenty nineteen average weekly sales were two hundred a thousand per week for the quarter percent two thousand and six two hundred six thousand for the second quarter of twenty nine until the category fail the news and swept seventeen percent cop or the epa and be business with down seventeen percent compared with night or amusement increase was given mostly by an increase in per capita spending prepping be the decline of mainly due to decline and unit so partially offset by a slight increase in per capita than me to quench elite units versus twenty nineteen improve significantly for both fnb and amusements compared with the first four herbal for sale showed acceleration during the quarter compared to twenty nineteen but cancer negative for percent to the first finally to the corner and plus seven percent for the last eight weeks of at work good sequential improvement was driven by improve traffic jams which was partially driven by more effective marketing and or a peanut butter california source regarding fails next amusements another were sixty seven percent of total sales for the quarter versus sixty percent and a second quarter twenty nine key get by few discounts and a ship the high denomination powerhouse keep it up at a quarter was an all time record of one hundred fourteen million or thirty point two percent of sales and representative seven hundred twenty nine basis point improvement compared with the same period and twenty nineteen improve performance was given by a higher news and smacks leverage on my record due to lower sapping level and really not breaking model a three million dollar reduction and pretty open cost and operating expense leverage from higher sales adjusted leave it up with a quarter with one hundred ip million or thirty one point six percent of sales representing a six hundred and sixty basis point improvement compared with the same period and twenty ninety net income increased sixty three percent from twenty nineteen fifty three million and a quarter resulting in a ninety percent increase in fps two dollars seven per diluted share he's improved operating results produce one hundred and twenty one million and operating cash flow during the quarter and we ended a quarter with the hundred eighty million in cash and virile outstanding on a revolving credit facility for long term debt stood at five hundred and fifty million at the end of the quarter and city number senior secure note maturing and twenty twenty five as part of our capital allocation strategy and to capitalize on our current cash position he originally made the decision to regain fifty five million other senior secured notes using and redemption option in our adventure agreement as background we may we deem up to ten percent of the note that redemption price of one hundred and three percent of the principal amount during the first twelve months after issues you may redeem another ten percent of the notes during the second twelve months after issue on which begins at the end of october by executing the ten percent redemption he will paid a one point seven million premium of the principal amount to a demon out i will say or point two million in analyzed interest additionally that the under the quarter we had approximately forty one million have negotiated rent different on the balance sheet we expect to pay back approximately fourteen million of the for grant truck remainder fiscal twenty twenty one twenty two million in fiscal twenty twenty two and remained to thereafter regarding factory on do to current iris backlogs we now expect a delay in receiving approximately fifty million the funds from cares that gorgeous place and and the carry back and twenty twenty that we now expect to receive his refunds and mid to late twenty twenty do turning the capital spending we open one the store in the second quarter and the dust a total of thirty nine million in capital additions not a tenant allowances that's going to the end of the corner we opened one additional store at the end of august and fourth quarter we claim to open one additional new store and relocate and existing store to finish the year with formula openings and one relocation which will bring us to hundred and forty four stores by the end of fiscal year overall we are very pleased with the second quarter results and the found funny to putting we have established going into the back after the year turning to our out what i would like to offer some advice the third quarter of fiscal twenty twenty one but the housekeeping know out i could provide some details on reporting and guidance going forward regarding our profitability metrics we will place more emphasis on adjusted he put our first that either that going forward
spk_4: if it to be responded to investors who prefer that metric at a better represent the to normalize earnings power up with it
spk_1: regarding guidance as a bit of continued to normalize we will be reverting back to annual guide and starting than twenty twenty two but updates provided quarterly regarding recent trends cop feels for the first five weeks including labour day have been over one percent compared to twenty ninth he be fighting broadly strength despite negative impacts due to changes in school calendars unfavorable weather encoded resurgence in our se market based on current trends we expect total third quarter comparable store sales to be approximately in line with the quarter did a trend compared with the third quarter and twenty nineteen we expect third quarter he out to be significantly higher than third quarter twenty nine he over some slight moderation compared with the percentage increase in the second quarter this reflects margin improvement like feet are two hundred basis points target which is driven by improvement in gross margin people on benefits and pre opening expenses keep in mind that the level of these benefits may change over time that we continue to work towards one on the like operations from a cap x perspective we're up eating or guidance complain to invest ninety i two hundred million and twenty twenty one which compares with higher guidance such fifty five to seventy nine based on current financial position where taking the opportunity to invest in additional fourteen million in our stores accelerate the rollout of new technology upgrade our life i capability and upgrade equipment and select stores he got great will improve the get experience and will accelerate our technology deployment to further drive strong returns additionally were taking up hurting me to accelerate development on several her pipeline stores help maximize their impact and twenty twenty two
spk_5: and summary or team has done and maxed out a outstanding job during the first have only reopening all of our stores on implementing a number of impactful initiative that of it hands profitability and cashflow are well positioned for the second half and our petitioning the happy prefer to go out and twenty twenty two are closely managing the ongoing effects of
spk_2: a pandemic
spk_6: but that alternate over tomorrow basis that i echo the appreciation for our tremendous second quarter effort we believe the new and you game and service model and it's it is that we've been implementing as a cast my man and the concentrated forget that we had played against streamlining store execution is helping to drive are strong out and enhance profitability let's start by talking about our menu initiative it design simplified operational execution improvised are catholic quality ingredients and enhance flavor profile says deployment and may have of our hot confessed hours are either new or refreshed option in addition we conducted an extensive many pricing cast that gave us confidence to take a price increase affected late august of that inflation pressure based on our justification rate will continue to watch the menu performance to gain a full understanding of it's impact on failed and the guess experiences over a longer time frame on the beverage from we completed our barracks analysis and are now using the research to evolve or beverage offer him a good news here is that the research data indicate er beverage menu is attractive to our gas and simply made some targeted refinements to expand its appeal and reach our goal is to launch a freshly curated average menu eighty for to improve relevance an attachment in order to drive epic fail next i want to talk about our entertainment and it's death which is among some of the most important work we are dealing in key to we launched several tests to determine the entertainment appeal of programming we successfully healthy the famed trivia night with picked a drink either this or easy to execute and our off that easy to market to our guest we intend to rapidly expanding tapped to more market this fall off based on his early success additionally we continue to refine our like music cast these are highly and gaping at that their health during the week and a brain guess into our stored to have fun during what is typically considered off peak time it's fall or introduce additional entertainment format incorporating music film content and live in or accent and of course it would not be fall without talking about half the thought this year will be amplifying the db football experience from an entertainment standpoint wolverines heavily into our custom video content with new proprietary video elements to help our guest three game before kick off with an added interface into debut live radio format and key markets will introduce like held to amplify alexa ballgame the performer will engage guess before during and after that up game with activities and five away our intention is to use this program model throughout the year and expand it's further and twenty twenty two as we continue to look for ways to get the get more reason to come visit the and the now have turned to staffing the labor market continues to be challenging and key to we made a temporary investment and hiring programs and retention and as and we gained significant staff tracks and which bolstered are staffing levels for what with a very busy summer two three will bring a seasonal drop that combined with our new technology to will put less pressure on cafe this will give us time to lift our fight to the holiday season our intention is to selectively extend assets that the staffing perkins out we need to ensure that we have the team and place to bring in the critical to for holiday season our brand why to allow at the new service model has been completed and it provides a more integrated in toward guess to experience the new service model combines tablet and a mobile web platform to enable a completely contact list order pay experience from for the point that two days over fifty percent of our guest chat or utilizing this mobile channel this technology will help transform our business model and it allows us to operate more efficiently he does a strong with adoption binary god we are continuing our task of a completely self serve mobile web enabled gets experience in two of our stores on a fire earnings call by and mentioned that we implemented a new gets be back to the dahlia it's a comprehensive school that gathered in store and social feedback to identify trends to improve the offering and the execution given the challenging environment we're really pleased with the summer resolve and will use these guest and fight to continuously improve or indoor experience to wrap up i want to recognize and faith or entire team for the exceptional performance with quarter during my sport is it the team members working hard
spk_7: deliver a fun experience to the gas and here at our home office this team has worked to provide a critical support needed to fat are stored that for a great summer we are energized by our records setting results with quarter and we'd love to carry that momentum forward and without altering the call over to you bring them anymore i'm sure we have to put
spk_6: on your marketing strategy
spk_2: to begin today during the performance and and look at to our future market
spk_8: he broke the summer campaign which range from meet you too early july employer
spk_7: do window be and here
spk_9: the carpentry marine corps dispute with dave and busters
spk_7: this change in strategy focus and marketing communication and criminal visitation overgenerous weird we also dramatically change or medium mr and keeps shifting the majority of our spin to digital media insurance company will not be more surgical with are you sorry
spk_6: while maintaining high levels of view impression and percentage of total media
spk_7: but it can see we also leveraged first party third party do to improve the conversion rates across me it's more intelligent approach to are you targeting was punctuated first christian i want to choose sure sure communications from discomfort and your messages too emotional connection that drive visitation the new creative captures the shared winning spears and a simple yet powerful visual and auditory breed expression being beaten
spk_2: distributed in consumer demand combined with the strategic marketing good and evil but his delivery substantial improvement and can't feel him during the commercial window
spk_7: we were also able to codified learning for the back half of twenty twenty one or two three to four consider your thoughts on to media winters
spk_1: or thought football winter breach
spk_7: before saddam media will support selected stores which over the next for sports watching audiences reaching about how for system media spin will be lower than the summer in addition to the media push we will also be bolstering the brain sports credibility and dry and five two months sports fan three partnership with part of my audiences satirical purged sports talk well as a mature for him in november we will launch a new winter to follow of the framework of authority they returned to i have been more diverse array evacuations cross channel the media time for that will again leverage our consumer data to improved version of came off to the clutch and component to drive and roman and or do was program that's right after several generations and consumer tech we're developing gauging you deem be rewards program
spk_1: the new tv reward program him out a hard just from trees actual rebates to pass for a shot that his achievement
spk_7: the program which launches in or you for guess for games played someone to airline programs that incentivized mouse moslem
spk_6: the new team you reborn will to introduce functionality are challenges are just incomplete unique combination i'm both digital and physical rewards
spk_8: finally this program we need strict been linked to the dmv out at an incremental functionality and further proving apps relevance for growing user
spk_7: from loyalty to media or marketing team is always learning how to mind to meet the changing consumer we're focused not increasing our don't get database to drive more profitable sales increase personalization and ultimately connect more deeply with our town it's constant informed evolution once you will get back to maneuver competitors and bill for in called for years to come
spk_10: while back in time for is closing remarks
spk_1: the thanks and
spk_11: we're extremely grave i'd see how enthusiastically get around the country has returned to database that's we feel more confident than ever about the unique position we built over the past forty years in the innovations that we've a minute over the past eighteen months to enhance the get experience in
spk_1: every facet other business the focus on fully implementing the remaining elements are beverage and the new service model programming and martinez's and to fully staffer stores our record setting second quarter performance pool way a brand and tenacity of our team owner thanks again for their dedication and their passion and for everything they do everyday to help our guess turn an ordinary day into an extraordinary entertainment experience
spk_0: now we'd like to open the called your questions operate thank you ladies and gentlemen if you'd like to ask a question please press star followed by the number one on your telephone keypad if you're calling from a speaker phone please make sure you mean something is off to ensure your signatory to equipment we ask that you please limit yourself to one question and one fella question again star went to ask a question
spk_12: we'll go first to andy bearish from jeffries your line is open
spk_13: hey guys amazing that's amazing results over the summer that's awesome
spk_14: on any
spk_12: on on a secure such thing as starting to or maybe hope for a little bit more you are food and beverage sell you know with the role of new menu and and that you know really did noticeably and during the quarter is anything
spk_1: on you know kind of to add on that know there is that you step on africa that's going to take a little bit of time given me a given customer patterns
spk_2: really good question the in the you know we will look we're extremely pleased with the the traffic move that we had in both amusement and and food for the quarter
spk_1: you know by the end of the quarter when we hit the month of july our amusement traffic was back and positive territory up close to two percent and measure about power college dinner or food traffic is measured by the other other see food would put down a little that down about three percent by the of the recorder so see cultural improvement of significant other sister the first quarter so luckily work extremely pleased with know getting the business back and deposit account territory for the first time in quite some time in was that traffic news we've seen and as gotten into non in his prepared remarks you know we continue to see significant per capita live in the amusements piece of the business so we're getting very high volumes were not discounting ah
spk_12: so probably get surprising that we're we're seeing you know amusements health reform here gotta understand and then it's a quick far as long as we have and on on the line on on on the words as you look at the twenty this is the disk drive on frequency more so of existing customers or spanned and then on you know any any explicit costs to go out the program or or or discounting commentary you know when when customers or or at
spk_7: you know points where they can redeem rewards and things like that
spk_1: absolutely great question any of thank you
spk_7: the first saw drive the intention of the program it it's intended to driver frequent spend ah
spk_15: vi v points for games played in front of i've got to do like a lot
spk_7: first place show that can be more to station or increased spend burger ah there are three laos the program remember for grassroots from player to icon some legend and there will be to configure award that each south of that are progression thrall to be micro awards in between may time to years an activity peter towards range from digital bad for ya tigers to bonus points yet ah the new and eight percent
spk_12: calm down on that as a percentage of total or teach them
spk_16: got it thank you very much
spk_0: thank you
spk_17: and next so that you jake bartlett from true securities your line is open great thanks for taking the question in and also you know progress museum you're meeting returned to above a few dozen a few mobile suits who quickly and know my question was just on are just trying to understand some of the that the drivers a he's a good news volatility in the things are sales trends in your that the loot the deceleration of the last five weeks straight to see it's too
spk_11: positive but could you point you did the major factors there on whether it's it's the your they did it into their focus on the peak periods for your advertising some and be put back in a lot i was he the doctor the window but you anything they're the struggling to deceleration or you know i think the big question on one question on busters mind is the delta
spk_1: impact in how your can engage in whether that's really the primary driver to the deceleration here and i am a follow yeah out of the and a nice to hear from the jake first oversaw as a as a certain amount in my remarks super super to kurds die the strong recovery saw over the course of the second quarter again really nice to get back into positive top territory get out of steak dinner with we discussed on some of the out that we were looking towards the summer window or really doubt that the appropriate time to get back out with a media voice with new games you're in in combination with the new menu
spk_18: and go back and really concentrate some and doesn't during that time and i think ah that was obviously very impactful and we saw a pretty nice a trajectory change in the back part of cute to said super super pleased with the result lot harder work on the part of our team and operators did a just for now
spk_1: and all job you know entertaining our guess the summer so super happy about that as we as we hit this on august period in and enter into the into our third quarter look i i'm i'm super close to the nose up as a brand been positive comp
spk_19: right now as we as we enter the third quarter we're we're encouraged by that as well yes it is a slight some decline from our due to to results but you know what there have been a number of factors you know there's from pocket says some of the markets where school cows
spk_1: years that had shifted there's other there are some headwinds and from places are around some of the hurricane activity that you know popped up our like to the contrary really with i don't and henry and then you know i love we do have some markets were coded cases have researched and we have seen some we a regional softening on that but you know this this in my view as a as a bump in the road you know last year with a crater i would call at this year the pomp and
spk_17: you know we're we're gonna we're gonna get to the gym or hi we're we're super cars would wear this business it's right now
spk_14: great thanks i'm in in in the fall of his just really on on your entertainment content nothing and watch and your phone for a while now we've been kind of waiting to see what you're going to do with with sports betting and sort of new arrangement snaring i noticed your personally
spk_2: willing to bar so this morning so or boston sports so you know any any update their or maybe be some of the put some takes you know i'm you camp why why we haven't seen agreement yet or or maybe in such an agreement am in is off the table at this point in any up in the health
spk_1: i'm i'm margo talk a little bit about that broader entertainment yeah we're we're we're actively are aggressively pursuing programming amber
spk_2: know and i'll get to the sports betting your cycles super play with you know the line up a new games we launched the summer you know his first
spk_1: i mean a significant investment seven title biggest internationally that and two year so nice did you know put some new content out for gas i we we have
spk_18: you know are some exciting title of the plan for the balance of the year specifically
spk_1: we plan to launch but transformers the are title here as we had our fourth quarter window and you know that is one of the highest grossing film patches of the law tragedy of all time so excited about that
spk_2: he mentioned last quarter we delay the top and to the are title that we have under development and that is gonna get delayed again because it and film getting pushed into the next summer go on but were already with that title but we will be pushing that
spk_1: and on and what markets are gonna do about programming the everyone like say your question or up for getting a we continue to explore a sports betting partnership we we do believe that it will represent a me on the internet meant to our appeal as a sport watching destination we're working on that were an actor discussion
spk_6: i'm only final i got a grain of god will have more to share and on our way out in a thing of the show and that was hired and or at work really excited and happy and package
spk_20: on a historic area time we have held back okay
spk_6: has been to train yet i have that right tracks and actually are like to expand port that we're doing that work at a be and tryna was played the and we have expressed
spk_20: for that the younger attack weren't about that i find that point that we start hacking attacks upon our and
spk_6: the product store trap
spk_21: as as in a way out right
spk_6: and now
spk_22: and and contest
spk_6: deploy that a lifeline that as entertainment has asked other family network refined are encouraged by as a good sign when we talk about off the fall and tribe or
spk_20: our video alabama line of orders for as that we really identify the scale and style that you right
spk_6: take that to market twenty two and a lot of different way as movie premiere or miracle that the ability to take that much as it was most excited about it
spk_23: i think about or remain calm and
spk_24: and we really get more him down
spk_0: executing a look at it
spk_25: thanks op
spk_1: next mexico you just farmer for gordon haskins your line is open thank you armed you guys did touch on menu pricing that can quantify any place in actions you taken across ah food and beverage segments or amusement segment side of the business of over the summer and again any insight into what you might be planning to do with the potential august price increases it yet so we we talked about as the menu prices increased on nicht mit single digits we haven't done anything yet proactively on the amusement side but keep in mind that in effect we do have an price increase on induced inside your similar to what we talked about last time and in it and that's due to really very little discounting in the amusements area in with a dummy and that we've seen lately he he and amusement we haven't really been doing much of any discounting we're still seems to me and there and and so you don't really think about the forgetting treat me as ever seen an indigenous better he opposed to thirty percent do we measure about forty percent of their arrest me about forty percent a is just really do to not doing the discounting that be done about so on
spk_2: that it's been yell at the capability for us you know without taking a be as specific pricing action
spk_1: discipline back on the discounting says that found that it's helping as the too pricey any we thought you know was was warranted you know that about two years since we've done any kind of fighting activity
spk_3: on food and beverage
spk_2: and so yeah that will help offset your somebody you know other inflationary pressures that we see in the business
spk_25: okay and then you know you did you click on it and them the mid single digit food increase that we're talking about is really just a recent event here august thirty depth and it's right there it's clarify
spk_1: okay that cell phone and similar jarvik you had also mentioned are touched on a leash wager inflation so question is why i guess what do you currently seen in the wage rate inflation environment and i'm not referring to overtime and things like that the just pure wagering inflation for our the employees on and was a what you saw i would say in the second quarter and then your expectations for the third quarter amara things and get much more challenging your or we've seen and things get about a challenges are going to get and then it sort of moderators we get into twenty twenty two any any sort of inside there would be helpful drag as we look at that wage inflation so yeah we've seen that pressure just like many and the other scale and industry and you are a nation that that were seen the cabinet single digit increase in your life or vs twain eighty and we do expect that to continue for the back half of the year though we think that there will be a continuing your high demand for labor in the labor market will continue to be tight
spk_2: yeah based that it's kind of our view a couple days a think about you know in the back half that you know could you change things one way or the other you know with unemployment benefits going away here very soon and then you're potentially more people returning you know to work you know that could be a dynamic that alters that estimate but we do feel like they'll be you know lung a similar level of inflation for the remainder year
spk_1: and you
spk_3: koga what i mean that the good thing here that despite of wage pressures is your the africa operators in terms of on implementing role in our son of the new technology around mobile lab and are pure handheld it's really hot up a center and a big way more wrong hurting been phenomenal job in a working through that the top help mitigate some of that wage pressure there those funny
spk_26: just in terms of our kitchen the the teams said become
spk_0: with that with that to is more still
spk_27: an early age thirty days right orgasmatron
spk_17: i thank you again
spk_1: yes and next so that you brand in front of a bank your line is open and thank you to if we look at your he did ah margins for the first half of this year you know they appear to be up about orange in city basis points first the first half of of twenty nineteen which is obviously very strong alimony is it is there might be any of these year prior even done margin expansion framework and even if there's some moderation from here here to the he was a margin expansion in a normal easier to build new ultimately proved to be greater than two hundred basis points on sustainable the church does it he added account bound yoko backyard your commitment was two hundred basis points of improvement you don't want we had between a p a the and yeah that was an analysis that was done on at twenty nineteen ca structure can yeah there's other things that you can help or hurt that number going forward with inflationary pressures or benefits with the on unproved gross margins and a little appeal things spotted to the things like that but if you're a basic point a gun going to yeah be a comparison other toilet king ca structure in and the things that we were proactively feeling that would reduce costs and that area so as you know we done in a better than that and yet so as we are look forward and we see the improvement in are gross margin mainly due to a higher a nice and next yeah that alone here we think will be you know somewhat sustainable out with a know term and yet so he network with that are kind of candidate our forecasts we would you feel confident that we can achieve at least that two hundred basis points you know at that point i kinda you the you as we think about he knows the most recent me a second quarter and we did over t v are quite a bit and he adjusted to give you a little bit of covered on that as you think about your positive car feel that you know if by itself your health bar or margins with a strong quote do that would keen on those comes for sale now gross margin in a was as well above the last year as well yeah most of out with due to meet with max okay okay expenses or to downplay the that's just the nature of the a building fewer stored yes so those with those same because margin of reopening especially or or to gamble that the a what will a completed in that two hundred basis points out improvement because we yeah we were more focus on another a structural side of the business than so we excluded those to item you're known as those could happen flow and so it turns out you know they they've been favorable force and so we feel enjoyed that at a rebuilding and then on the payroll benefit side he knows we've seen a little more favorite build a there as well
spk_27: hi brian mention yeah the rollout of technology so that certainly has helped us and we're still trying to to step up here to so we're making progress there but you're still try and to or increased tapping and so as we do that and get closer to the outcome or normalize no capping then you know that that benefit now or
spk_17: come down a little bit but some you're all that being said i'm will really
spk_27: we are excited about what we're seeing a in the paper believe that were seen and your more than ever for feel focused on you know maintaining
spk_1: yeah that commitment know that we made and new as we grow sales data for sure that that is on on the bottom one
spk_11: okay great thank you for all that that's great color and and are under development pipeline
spk_1: encouraging to see expecting succeed new units and twenty twenty two you know my question as the look to twenty twenty three and beyond what is the right pieces uni growth through this business is six to eight units going to be the sweet spot for you
spk_2: or their scenarios where me or maybe you could open more than just any color on your current thinking well it as a as i noted on my mark you know put the financial foundation really to center really really strong place where it now
spk_1: you know we're flying a lot of cash for a more profitable than we've ever been in our history we're just we're just an early good place right now and
spk_2: so he development team are also some you know in my view the best philip goodness is very active right now
spk_3: working are pipeline i was playing and twenty twenty we stood down on a lot and he had protected in the mode if you will but you know by now we're aggressively pursuing i units and dumb as i mentioned you know we we have eight on a fixed date on target for next the next year a very good about ah
spk_28: our ability to hit those numbers be we actually have nine
spk_1: properties under these right now that are in our pipeline and then we got nine additional locations ah and and it's growing as we look towards our on twenty twenty three on of yeah so we're we're actively working twenty twenty three and twenty twenty four right now ha i really wanna step out in the epic number right this moment we do still has work to do
spk_2: i'm too
spk_29: build our leadership and straight you know the weep
spk_0: twenty twenty was tough on our business tough on are clean ah
spk_6: we had some work to do to to rebuild the bench strength to be able to accelerate
spk_30: kinda twenty twenty three but we're we're very optimistic about where we stand and double quotes active in that but on and own opinion that camera today thank you
spk_1: i you
spk_6: and next so that you nicole miller from piper sailor line is open
spk_30: thank you for the updating congrats on the performance on few questions the first as
spk_1: how for the get that the currently the land could you translate that comp or three to to date and to a movie or share their twenty twenty one vs twenty twenty comparison so we get really mp mother seasonality right and also the same for either that you either that on what you said about you but i can write that down clay quickly enough and if possible translate that had and wow thank you so which which part would you like to repeat on on a better i'll answer unless you said a three you should be higher but then you said something else i just didn't catch that i'm sorry
spk_31: in relation to to kill
spk_30: oh okay so calm the as we think about third quarter be that are you know we think it will significantly
spk_32: be he has twenty nine he numbers on some hundred dollars game point you know what a what i was trying to buy a while if you look at
spk_33: the be yeah pv to protect the is though we thought you to your week we'll update what will be dumb as much as as you to from a personal standpoint vs twenty eight team but you know based on crime trends wiki tiki three but automatically beating
spk_11: kittery it with nike
spk_1: okay and then the one point three percent comp what is that on a you v basis or you know just underlying that i know it's it's a hot you know crazy percentage number of help what does that translate into at twenty twenty one twenty twenty pounds
spk_3: either way wall
spk_2: fill the gap
spk_30: yeah so and we we can have been in the practices you're giving a copper to the twenty nine p and so yeah i'd be happy to be think about he has a car without the avionics good should really kind of mirror you know that that cop and are you need you know in twenty nine teen was about ten and ten and a half billion or so or store also it has the
spk_34: we're just slightly higher than that you have given one point three percent come
spk_1: okay that a worked on and then
spk_35: alex i point out with helpful to hear about like going forward on and maybe we could talk about that we acceleration to get to the going forward so for tweet tweet to and six to eight it sounds like those almost be allies or sound signed me says but i just wanted to confirm and are these new source to the pipeline where they they are prior
spk_2: and that kind of where they they they opening and sorry last part number international back in again i thought maybe i should just pick your brain on that because you know you're in a really good position and eighty that's something that comes back as an opportunity so thanks for jokes again for taking my questions
spk_1: the
spk_2: nice to hear from them
spk_1: yeah that is a a dictator we're talking about four twenty or twenty three two we're all in our prieto the pipeline so deeply this is a reactivation
spk_3: of stairs that we had on top of a previously
spk_1: de de de de de lean a little bit more towards our existing markets for us
spk_2: a couple the couple california in the neck so
spk_1: i'm and then it got a couple of the small format stores as well and new market so there's a couple to or so of the sort of twenty thousand and lower so image of we're really excited about that or not what it could mean for us and need for our total addressable market worry that
spk_36: going there right now i'm in terms of how how deeply think we can go given the strength about off the and so but yeah all a to those are the top and or were in our five hundred for as our with the truth
spk_11: additional nine that we are working many of those were in their quito the pipeline as well
spk_30: that we paused on fear and so lot of those were in the next prior
spk_37: in done it as i mentioned we're continuing to look at that not only new properties that warning that makes but some additional sites that we had on our radar quick oh that so very active now lot better position to be an enduring at least negotiations that we are
spk_0: and for most of the twenty twenty an our development team way to focus found on the pipeline back
spk_3: they're encouraged and the really international you know that it's something that you know pre kobe that we deemphasize has we sought to really focus our attention on the core the domestic opportunity and business and that is something that we are
spk_17: our
spk_38: revisiting right now on i have anything really to report on that that is something that
spk_20: we are
spk_6: to the to read sitting right now
spk_39: thanks again appreciate it
spk_40: like unicode
spk_6: and mexico to andrew strauss act from be ammo here line is open
spk_41: i agree thanks for taking the questions like a couple quick ones for me i'd love to hear a little bit more about our what you're learning and maybe any surprises rating has been different with the roll out the the web platform and that the tablet the job going on there i don't know
spk_6: if there's you know jack implications or consumer behavior implications are viewed mentioned deficiencies a couple times of there's margin implications there's anything on that would be great to hear
spk_42: i are now
spk_6: so much at all and as powerful think about that that than that our part that as as as really enable that kept trying to get that area as i'm aware that has point that we want our the time added to your your point we are i'm him early day
spk_43: the other be count as we have been able to expand access and we have been able to read it
spk_3: wow and again when i have with you about it
spk_1: one of the thing that
spk_7: i'll leave and my time as as get our get more comfortable with that as be entertained more comfortable with that and as we've learned the best way to refinance that it will become more powerful over time
spk_1: so are there with a short time horizon it's really too early
spk_7: to comment on that the where we think it will and that i will definitely sure that we continue say the journey and as i guess when you get it i get the west on your profile
spk_3: how do i was definitely surprised about the guess love look at our house you know the have a fifty percent of our just take that back on your thing that has that as been a really positive okay that's that's great to hear
spk_17: i wanted to ask also on marketing the i know there's been a lot of changes in terms of the channels and and and the levels it's center i guess i'm just trying to to frame up as i think about the margin profound going forward you know he is astronomer at the linda being a larger than normal market your normal march two years used to try i did die when kind of what that gonna look like based on learnings from the journey help on how did you check you that looks over time would be helpful as well
spk_1: yeah so we're still gaining marines as we come through each working for mearsheimer right now her for here we anticipate spending to be slightly over thirty nine research twenty one nine our last year and forty i'm retiring he ah get our winter way approach approximately about two thirds of that movie spend will be castrated you chief keef for on a lotta concentration comes from consolidating media spend with a reporter not necessary or worse but that does that answer questions yeah yeah that's that's exactly as looking for thank you and for just one last week when for me yeah just in terms of the capital allocation philosophy is is is dave and busters is not gonna be and i know you're not guy what if it's not going to be a ten percent plus the grower kind of going forward obviously the performances is very strong the cash flow i very strong as well i'm just curious how you're thinking about allocating that the you know whether it's a dividend or me going back in that direction or trying to get shoulders it seems like that there's a lot of opportunity there so just curious for your perspective
spk_44: i'm sure and of itself some a big picture standpoint here we do want to maintain or flexibility here
spk_45: in the near term the are intended to be levels at the dentist in overtime
spk_0: in you will balance out against the broader capital allocation strategy
spk_46: the have to keep your teeth creek priority for us will be used or obese you know so we are starting to ramp up some there the a week we can great returns on our stores in a we have to revise more efficient format of that i could help us
spk_47: even even bigger returns especially on the small school format so we wanna make sure that know that is kind of at the top the list but we also learned that circle better you know we'd be fun than some adults will settle for business with a technology but you're more recently you know we're spending in a more dollars to a
spk_3: upgrade or limit you know our
spk_1: the equipment here to make it out best and class or that watch customer and yeah we want to make sure that your stores in good shape
spk_11: can after that he i'm returning ucas has to shareholders you share buybacks and dividends
spk_2: the or they'll have no lower priority at least in the near term
spk_3: the let me change in overtime you know but for right now i'm most interested in going to business and the library in the balance
spk_1: thank you very much appreciated like you're under
spk_46: and next to go to chris a call from stiefel carolina's up and i think the i stick in a question i had a follow up question regarding the development
spk_1: it sounds like you're hoping to get back to like a twenty nineteen development pace maybe within the next couple two to three years given the type of gross you're talking about is that it is at a reasonable the assumption or in my hearing right i don't i don't i don't they got picked a twenty three number like a you know we're
spk_2: only twenty two are targeting on right now because you know a meaningful it's a small a farm
spk_46: for this year
spk_48: you know we're we're pleased with i kind of pacing i think it's what we can digest
spk_1: it's it's really all we can get done for twenty twenty two at the i do think it over time will be able to the some acceleration that again i'm gonna a moustache short of picking you know exact numbers for for twenty three twenty four right now but we we have similar thing to do with the leadership team and the bench trying to the opener stored on well i think you know prick oh they really did that better than anybody in this business and we had a really really strong track record they got a doberman go back a little bit here but yeah i think we can walk away towards on acceleration but i wanna pick a number right brand for the and any kind of the company was investing in a brand study to didn't by opportunities to improve the brands relevance and can keep better and i'm just wondering do you still believe there's a need to complete
spk_49: the and and was a major been a remodel program within the system
spk_0: god i think it's really important that to read and best i was with back into the core core business and whether that you know look and feel and that's my car and or content whether that be games for the that be a broadening our entertainment glance through pro
spk_12: ramming we do feel a bit we need to be an innovative company anywhere where the return space for a reason you know and we have a lot of folks that are you entering the space
spk_27: many of them chasing you know our a these are returns and said have been a week we need to continue to ah
spk_1: anything so yeah i think it's really important and that that will involve some investment in the core business and and and involve touching our stores with some commentators i think it's actually really important
spk_50: to my last one is and should we expect the cap extending to continue to rise from this ninety five hundred million and twenty two
spk_1: or he or she stayed this level
spk_2: yet where are you will not really giving guy to seattle on that i feel i can say is that yeah and in all likelihood it it they will increase any in just for
spk_12: he has a simple reason that the want to build more stores you know that that will cause an increase in then you know what bryant insane as well yes so be a we'd been spending
spk_51: bless you know on on eight min pin and things like that because of the need on during the time seller for slowly the on ramp you know back up in here we will continue to do that next year
spk_19: you know looking at you know refreshes and remodel that is out enact consideration said i look at yale capital plans for next year
spk_1: great thanks guys again
spk_12: and next to about two brands car from raymond james your line is open
spk_1: i thanks and good evening of just spawn up on seasonality and just to make sure we're on the same page and i believe august is an average month historically so maybe around two hundred grand that a good about it for thing about august nineteen scott can you confirm that accurate and then just also remind us how that monthly sales seasonality sort of
spk_12: through the arrested three que
spk_1: sure yeah yeah what it what i would play brian as far as you get into august as the first couple weeks a fairly normal again it starts to drop off in the back half of august and then you know you the like a backpack of august and september and october is when we see our seasonal did he know which is in on average about eighty five percent of the average you know for the the whole chain for the young terms with average weekly fail okay great so that that up one point three that he did quarter the day that coded and eight average weekly sales is is in that ballpark of around two hundred thousand and then the around though for the first
spk_52: a bird five weeks to the third quarter
spk_12: the the average weekly sales was was one eighty seven up for those hairs likely
spk_0: okay great great and on a small store format of glad to hear game shows up the such a strong start can you remind us what the expected cash investment is on that smaller prototype
spk_53: yeah so before that for that type of photo outside blind mean be the average as that eighteen thousand square foot store so you know it's between six and man six million
spk_1: okay great and then just last one back the capital allocation of thinking about the balance sheet what's the right level of debt for the business in your view in a post covered world and are there any targets on on net debt either die or adjusted leverage that you have the mind thank you
spk_53: the a good question for we don't we don't have a hard leverage target yeah you know you're a lot of will need a little bit more time he know to establish how the new normal for cash flow and you know seen a cat that need that we need to know the business and so as that picture becomes little bit more clear
spk_1: i'm an as were also able to continue to the letter to visit forget will take that all into account but first and foremost you want to make sure that we have it out with able to that back into the business know whether that easier to sort of new stores or other thing but also that the leftover your cash to the extent there is some we would like to continue to a letter you know the business for the foreseeable future as to as they start the normalize you know a little bit more you know will probably be able to talk more about a luggage target but that's or general thoughts
spk_3: right now
spk_53: i appreciate that contact thank you sir and next to that you share in zackfia family and blair your line is happen hey it's a mattress on for sharon or thanks for taking the question at ten a question on per card spam levels poachers famous this during your comments but have you seen any moderation and per card spend so far in the third quarter i really fear for our hearts know if it continues to be very strong so we haven't seen than any meaningful got that
spk_3: okay thanks and then i'm just a quick question on labor i understand it were released it sounds like you feel comfortable basically on on your staffing levels been wondering if you could tell us anything about what your staffing levels are like now versus twenty nineteen
spk_1: yeah so i can start off with the for sapping level you know still in our less than twenty nineteen so yeah there's there's a little while ago he has the to get out my were young we want to be but it we're make the progress in yeah i think the other thing keep in mind is
spk_2: yeah that technology that we put him in the store with our mobile order and pay you know or functionality as well that happens he knows is really helping and the keep in mind that yeah we just finished a roll out the know that technology towards the end of july and as those it's okay for soldier a film running
spk_1: the and getting efficient enough with that technology but we think that will show help us continue as we continue to to move or so that might be bothered that that is still in a little while ago and now we will
spk_2: he of he ah
spk_1: keep garbage family knows as a for
spk_7: how can god and then last one for me
spk_54: to talk a little bit about the private party business and how that's been trending
spk_7: and then how are you thinking about their business
spk_55: heading into the holiday season given that this one is gonna be relatively normalized compared to last year obviously
spk_8: yeah i was really good question
spk_7: you know i get first and foremost for
spk_53: we report the numbers for the second quarter
spk_56: her pleased with the recovery inner in walk walking distance i mean we were
spk_0: up double digits and and walk and sales for the second quarter so really strong recovery
spk_27: in our special then businesses like walk so far we a while we did see and how are saved the gradual improvement in bookings relative torn between ip ugly head towards our fourth quarter
spk_3: you know it's not in the same place today as are walking and so if we think about cut out the heading towards the fourth quarter which is the answer because for special events for us we typically see booking start to pick up in late september pick time in october and november
spk_27: for all important december ninth and know it's really i am in my view pretty hard to predict how corporate as he demands can apply our i now
spk_15: we do feel like the booking window maybe a little bit more the laden and actually maybe a little more compressed ah than a typical year in the face of from about kobe resurgence were seen though the good news is that we gotta a lot of runway here in front of us as we head towards the again of a big fourth quarter typically for
spk_27: and our team is working really hard to maximize that the potential of we're towards that here
spk_3: right that we are being proactive several
spk_1: and we're launching here
spk_57: q
spk_1: the lounge just report calculus i can appreciate you squeeze man thanks
spk_2: you bet
spk_27: emma kick our last question from john tower at wells fargo your line is open
spk_15: great often takes your scrutiny me and i appreciate it
spk_39: at those curious that you're clearly type the group clearly ah
spk_6: customers are using your business a little bit differently than say the same period and twenty nine team given the higher mix of amusement vs earth is that the food and beverage but i was wondering if you could talk a little bit about how the customers are using you as out of that maybe it's weekday vs weekend
spk_58: and even within the day are you seeing on perhaps said earlier start to the day at least maybe during the second quarter with with more kids around and out of school and the allergies what are you seeing with respect to your larger family visits are those still depressed curses say the the individuals coming in
spk_6: versus twenty ninety levels
spk_59: lot of questions in there
spk_11: i am i would say or mix by day weekend is materially different we elope where we're definitely are are are late night businesses not as strong
spk_60: you know where we we have our constraints go on our friday and saturday night for not as strong as they were prieto that right now so you know so it's quite remarkable really that were you know putting up kind of numbers we are with the some constraints around the late late night so
spk_6: and you know we're we're we're super pleased with that with the makes a business right now you know if we think about moving forward lot of initiatives that we're working on are trying to drive utilization and frequency particularly in some of these two days weekdays and some of the things mario's talking about the and doing from up a program perspective her laser focused on those windows to try to drive on a tuesday or thursday to a higher higher place than we have historically you know poorly wednesday's is a kind of a hero day of week during week pay for all of it's discount or than it's really are only discounts right now that we have out there are so in a we're looking to really try to drag compelling reasons to visit aware of broader spectrum of days and we have it's sparkling spicy focused on that
spk_61: that we have a lotta capacity the goes on you're under utilized and that's a that's a focus worth
spk_62: got it and in on friday and saturday nights are you still ah
spk_6: constrain on on your hours meeting into this fiscal third quarter the our saw as such as far as ah we don't necessarily have offered door as
spk_63: oh that as late as they get
spk_10: added as our where the third quarter in order to accommodate at the program
spk_0: at the top it off
spk_64: got it and then last one for me and is mentioned a few calls ago but i am curious if there's any updates to be had on the virtual brand testing that you'd done a couple markets
spk_1: wings our that that is so we have can
spk_0: offer our pastures american can lot of factors are too late and

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