Dave & Buster's Entertainment, Inc.

Hello and welcome to the Dave & Buster's Entertainment Inc. First Quarter 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, just press star one again. We'll now turn the conference over to Corey Hatton, VP of Entertainment, Finance, Investor Relations, and Treasurer. Please go ahead.

Thank you, Operator, and welcome to everyone on the line. Joining me in the room on today's call are Tarun Lal, our Chief Executive Officer, and Darren Harper, our Chief Financial Officer. After our prepared remarks, we will be happy to answer any questions. This call is being recorded on behalf of Dave & Buster's Entertainment Incorporated and is copyrighted. Before we begin the discussion on our company's first quarter 2026 results, I'd like to call your attention to the fact that in our prepared remarks and responses to questions, certain items may be discussed which are not entirely based on historical fact. Any of these items should be considered forward-looking statements relating to future events within the meaning of the Private Securities Litigation Reform Act of 1995. All such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Information on these risks and uncertainties have been published in our filings with the SEC, which are available on our website. In addition, our remarks today will include references to financial measures that are not defined under generally accepted accounting principles. Investors should review the reconciliation of these non-GAAP measures to the comparable GAAP measure contained in our earnings released this afternoon. And with that, let me turn the call over to our CEO, Tarun.

Thank you, Corey. Good evening, everyone. I first want to speak directly to our Q1 results. which came in below both our own expectations and the expectations we set with you last quarter. We started the quarter well in February. The spring break calendar shift between March and April played out largely as expected. But the macro backdrop, elevated gas prices, geopolitical uncertainty, and a meaningful softness in consumer sentiment, they all were a real headwind in April. That said, we are not here to make excuses. We have a resilient business model and expect to be able to navigate these obstacles. Our same-store sales growth declined 5.4% in the first quarter of fiscal 2026. We found that our dollar per day messaging did not resonate as strongly as we hoped. And since then, we have pivoted to more compelling promotions, which are resonating with customers. We've also made significant progress in establishing partnerships with IP providers and expect to have exciting entertainment announcements for you in the coming months. We are making significant progress but want to remind you that we are in the early innings and look forward to providing updates as soon as possible. We have seen improvement quarter-to-date in the second quarter despite unfavorable weather with comps down approximately 4%. We remain confident in our ability to continue improving in the back half of the quarter. We are extremely excited about our summer offerings including our new games rollout, and the World Cup watch activation, which kicked off last Thursday. After nearly a year fully immersed in this business, I remain extremely confident in our ability to dramatically improve operating results. Over the past several years, we have drifted from the core elements that historically drove our success, investment in games, F&B, marketing, and operational excellence. We are systematically restoring each of these pillars now. We've also significantly strengthened our leadership team. In just the last month, we've added top caliber executives. A chief marketing officer in Jeremy Tucker, who joins us from AutoNation, Planet Fitness, Walt Disney, and Spin Master. A chief technology and digital officer in Kevin Fish, who joins us from Wingstop. And a chief legal officer in Rachel Morgan, who joins us from Nexstar. We're equally focused on field operations and culture because we know exceptional execution and guest experience drive traffic and sales. With that in mind, I'm delighted to share that we'll be announcing a new COO by next week. Now, we have the right strategy, the right team, and the right business model to create meaningful value for our guests and our shareholders. Our priorities this year remain clear. turn same-store sales sustainably positive and generate meaningful free cash flow. This management team is highly confident we will generate positive, compatible store sales growth in the remainder of the year, driving revenue and adjusted EBITDA growth and more than $100 million in free cash flow for the full year. Let me now provide an update on each pillar of our back-to-basics strategy. First, on marketing, we are rebuilding our strategy around discipline, a simplified promotional calendar, data-driven media mix modeling, and an optimized balance between TV and digital. Getting the right message to the right audience at the right time is one of our biggest opportunities to improve traffic, sales, and EBITDA. Our priority is rebuilding brand consideration through culturally relevant promotions and attractively priced offerings. we are still in the early innings of our marketing optimization. We've conducted a number of tests in the first quarter which have shown success and which we expect to roll out nationally this year. On the flip side, We also tested a number of items such as our dollar per day messaging and certain changes to our media spend, mix and target audience that had less success, but have provided us with valuable lessons and learnings for the future. On the earned media side, we've seen a lot of success with bold activations that generate meaningful earned media and put us into cultural conversations. For example, in May, we announced that we did place tickets to the World Cup finals inside our human crane and the response has been extraordinary. These shareable moments drive organic awareness. Beyond that, we are activating our loyalty program to drive personalized messaging and increase visit frequency. We're building a scalable special events engine that turn events into cultural moments and convert event guests into repeat walk-in visitors. Overall, we are very excited about the evolution of our marketing leadership and look forward to continued progress with Jeremy now at the helm as CMO. Second, our food and beverage business that has seen an early win from our back to basics strategy. Comparable food and beverage sales grew approximately 5% in Q1, driven by our return to the historically proven menu last October and by our strong eat-and-play combo execution. Before these changes, the share of gaming guests who also bought food had declined significantly as our menu drifted We've reversed that trend decisively in 2025, which has continued in 2026. Our ongoing success in food and beverage has resulted in nine straight months of positive F&B same-store sales. We have additionally exciting LTOs launching in the coming months, which we expect to be highly accretive. Main event rolled out a new menu last month, and we continue to test food-focused promotions, which have shown signs of success, and we expect to drive continued growth in the back half of the year. Third, our games offering. This management team strongly believes we need to reinvest in new games after a six-year pullback. New, relevant games and attractions are essential to driving both new and repeat visitation and same-store sales growth. Just a few weeks ago, we rolled out 10 new games, the most since 2017. Coupled with initial game investments in 2025, this reverses a prolonged period of underinvestment. And we expect to roll out at least five additional new games in the balance of 2026. This is a direct response to an abundance of customer feedback, citing a lack of newness on our traditional game floors, and we have moved with significant urgency to address it. We also know from our inaugural state of fund report that nearly half of the Americans say their lives lack fun, and more than half would prioritize fun if affordable options existed. Our strategy is simple. Give people exciting, affordable reasons to reconnect in the real world. The new lineup spans high-energy competition, immersive gameplay, and hands-on skill challenges. Highlights include Hot Wheels, Ultimate Speedway, Icy Slush Rush, John Wick Continental Pursuit, Odin's Hammer, and Perfect Pump, plus, of course, The Mandalorian and Grogu and Stranger Things IP alongside guest-tested original concepts. Many of these games are already pacing amongst the top revenue generators in their first weeks, which is validation of our continued midway investment. And this is only phase one. We have a lot more in the pipeline, including several exciting IP partnerships that I look forward to sharing soon. We're equally excited about leveraging our watch offering on massive 40-foot screens and 30-plus TV per location to drive visitation during the World Cup this summer. The World Cup, which kicked off on June 11th, is a major catalyst for our business. we have launched a full 360-degree activation, two new soccer-inspired arcade games, World Soccer and Kick and Win, plus exclusive tournament-themed food and drinks, including sliders inspired by the host countries. And as I mentioned, we put tickets to major World Cup matches inside our human cranes, including USA Group Stages game and all the way through the finals. We've also launched our Hattrick Watch Experience, a ticketed watch party for kickoff and championship matches with all-you-can-eat wings and fries and unlimited gameplay all day, starting at just $24.99. It has attracted significant crowds for the opening games, cheering on the Mexico 2-0 victory. This builds on the playbook we deployed during the Super Bowl and creates a repeatable high engagement format for major watch occasions that we will continue to enhance and make more pragmatic. Combined with our summer season spas, the World Cup activation positions us to capture significant incremental traffic during an already strong summer season. This revitalized product offering represents a meaningful step forward in quality, variety, and cultural relevance. We're combining world-class IP with innovative original concepts in a way that drives per capita spend and repeat visitation. For full year 26, our ambition is to continue evolving our play experience and position Dave & Buster's as the fun capital of America. Fourth, operations. We are investing in and energizing the field through training that empowers teams to deliver exceptional guest experiences. A collaborative culture supported by our shared service center is reducing turnover and creating an environment where our people and brand can thrive. As we discussed at the start of the year, our full year 26 obsession metric is speed of service, a one minute greet and four minutes drinks packed by coaching and performance management. We are sending a clear signal. Our success is tied directly to execution and to the guest experience. Finally, our revamped remodel program continues to progress. We are confident we have identified the right layout to drive traffic, improve productivity, and deliver strong ROIs at a reasonable cost. We recently opened six remodels and plan to open two more over the next few months. Early results from this new remodel prototype have been very encouraging, driving a strong seven percent comp uplift consistent with the far more expensive remodels of full year 24 and 25. as a reminder the new cohort of remodels cost approximately half of what the legacy remodels cost while still contributing a similar sales lift In fact, these remodels were positive in same store sales in the first quarter and year to date, providing us further confidence that we are executing on the optimal prototype. This renewed remodel strategy highlights the power and importance of continuing to invest in our core business as a key traffic and comp driver for our brands. Taking a step back, After COVID, this company moved away from the core and often simple elements that made it successful. Marketing and promotions, the F&B offerings, the annual investment in games and entertainment, operational excellence, and store refreshes that preserved what customers love about D&B all changed significantly. We are now actively going back to basics, restoring those elements piece by piece, and it is working. Armed with direct and candid feedback from the guests, we know that games' innovation and value are of utmost importance, and we are urgently addressing these issues. We know Q1 was disappointing. What I hope you take from tonight is that we understand why and that we are taking the right actions and that the underlying business is already responding. We have made meaningful progress over the past years and expect that progress to convert into financial results more quickly from here. Before I pass the call over to Darren, I want to be clear that we are highly focused on strict capital expenditure discipline, minimum ROI thresholds, and generating significant free cash flow. Net capex for full year 26 remains targeted at no more than $200 million, down from approximately $270 million in full year 25. and we are committed to very strict ROI thresholds and eliminating inefficient use of capital. We dynamically evaluate our capital investments plans, including our new store plans, and we'll make adjustments as we weigh the best returns for each dollar of capital. We continue to plan to open 11 total new stores in full year 26. If and as we make material adjustments to the same, we will communicate them to you. Very importantly, we continue to expect to deliver over $100 million in free cash flow this year. To talk about this more and review our financial results for the quarter, let me hand the call over to Darren Harper.