The 151-unit eatertainment chain will soon reveal a new direction that will guide its future marketing strategies, innovation pipeline, food and beverage offerings, store design, and hospitality model.
Dave & Buster's is one of the largest players in the family entertainment space, but the brand isn't so big that it's unwilling to learn from others in the segment, which played a big factor in its $835 million purchase of Main Event.
The acquired eatertainment chain has spent the past few years using a "long-term holistic approach to managing the business, anchored in strategic planning and operational execution," CEO Chris Morris said. This resulted in what he called a "successful reinvigoration of the Main Event brand." The numbers prove as much. Between 2015–2019, net revenue grew from $144 million to $297 million, and the footprint increased from 20 to 42 locations. In the 12 months ending in May, the company hauled in $422 million with 51 stores.
Morris expressed excitement about implementing the same approach to Dave & Buster's. He shared with investors on Tuesday that after a strategic review of the business—based in consumer research and learnings from operators—the chain's core brand position going forward will focus more on executing adult occasions ages 21–39.
"These 'crew connectors,' as we like to call them, are energized by social situations and in-the-know on culture and social trends happening at the time," Morris said during the brand's Q3 earnings call. "Over the months and years to come, this refined brand positioning will guide our marketing strategy, entertainment innovation pipeline, food and beverage offering, store design and layout, and tech-enabled hospitality model."
Additional information will be shared at Dave & Buster's Investor Day in January.
With Main Event now in the fold, the combined entity earned $481.2 million in Q3 revenue, a 51.3 percent increase year-over-year, and $90 million in adjusted EBITDA, a 31.9 percent bump compared to a year ago. Both are records for a quarter that's typically softer. Of that $481.2 million figure, Main Event contributed $106.8 million. Amusements represented 65.5 percent of sales while food and beverage accounted for 34.5 percent, which is a favorable mix since games require lower labor costs. In Q3 2019, Dave & Buster's total revenue was $299.35 million and amusements mixed 58.4 percent.
Pro forma combined comparable sales increased 13.3 percent versus 2021 and 17.5 percent against 2019. Through the first five weeks of the fourth quarter, pro forma comps increased 3.1 percent year-over-year and 9.2 percent versus 2019.
Heading into the thick of Q4, Dave & Buster's and Main Event's special event sales teams are focusing on a much stronger holiday banquet season after being hampered by COVID in 2020 and 2021. The business has nearly recovered to pre-COVID levels. Pro forma combined same-store sales for special events were only down 6.7 percent in Q3 versus 2019. That's a big improvement from Q2, when comps dropped 13.4 percent.
To note, on previous earnings calls, the company reported Dave & Buster's and Main Event financials separately, but moving forward, they will be announced on a consolidated basis. Main Event accounts for 20 percent of business, and executives are choosing not to get into granular data.
"I think just for perspective purposes, when we look and we manage the business, we're managing it as one consolidated entity," CFO Mike Quartieri explained. "We have one management team in place. We do look at both brands as having a slightly different offering, but the way we allocate the resources accordingly, we put both in that same vein. So, from our perspective, what we're trying to do is get to a point where we are commenting on the consolidated business as a whole because we are redeploying assets between both brands accordingly on a daily basis."
Despite price increases, Morris said the company hasn't seen any pushback from lower-end consumers. The CEO added that Dave & Buster's is seeing strength across all demographics. Also, there hasn't been a decline in average transaction value of the Power Card at kiosks.
Morris still feels like the brand has more pricing power if needed.
"We certainly have the metrics to anytime we raise prices, that's something that we take very seriously," the CEO said. "And so, we're always going back and doing the postmortem analysis. We're not seeing any pushback or negative reaction or change in consumer behavior related to the price increases. So, in fact, we still feel like that there is room in some aspects of our business to continue to raise prices. So, nothing there. I guess I would just point you back to the comments that we've been making is that the underlying trends in this business are still very good."
To date, Dave & Buster's and Main Event have realized $17 million in annualized synergies. The initial phase of this strategy, beginning at the end of Q2, was removing redundant headcount. The second step was around supply chain, more specifically combining purchasing power and renegotiating contracts. The next part is around systems-related and foundational structural items, like POS, back-office accounting systems, HR, and 401(k) plans. This portion has a lead time of 18–24 months, but should reap $6 million in savings.
The ultimate objective is $25 million in annualized synergies.
"The pace of implementing these synergies has accelerated as we swiftly addressed all redundant staffing, continued to combine our purchasing power to offset inflation, and moved toward combining the best-in-class systems across both brands," Morris said. "We are moving aggressively to fully capture synergy opportunities implementing superior operating initiatives and leveraging the scale of our combined operations."
As of October 30, there were 151 Dave & Buster's stores, 52 Main Event locations (inclusive of three The Summit locations, a small eatertainment chain in Colorado). In Q3, three Dave & Buster's outlets opened in Lynnwood, Washington; Long Beach, California; and Bakersfield, California. In the fourth quarter, there are plans to debut one Dave & Buster's and two Main Event outposts. Dave & Buster’s stores, which average 40,000 square feet, range in size between 16,000 and 70,000 square feet. Main Event stores, which average 54,000 square feet, range in size between 46,000 and 74,000 square feet.