Dave & Buster's Entertainment (PLAY) Q3 2023 Earnings Call Transcript

Dave & Buster's Entertainment (PLAY 0.62%)
Q3 2023 Earnings Call
Dec 05, 2023, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Dave and Buster's third quarter 2023 earnings conference call. All participants will be in a listen-only mode. [Operator instructions] Please note this event is being recorded. I would now like to turn the conference over to Cory Hatton, vice president of investor relations and treasurer.

Please go ahead, sir.

Cory Hatton -- Vice President, Investor Relations and Treasurer

Thank you, operator, and welcome to everyone on the line. Leading today's call will be Chris Morris, our chief executive officer; and Mike Quartieri, our chief financial officer. After our prepared remarks, we will be happy to take your questions. This call is being recorded.

On behalf of Dave and Buster's Entertainment, Inc. and is copyrighted. Before we begin the discussion on our company's third quarter 2023 results, I'd like to call your attention to the fact that in our remarks and our 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 the various risk factors 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 announcement released this afternoon.

With that, it is my pleasure to turn the call over to Chris.

Chris Morris -- Chief Executive Officer

All right. Thank you, Cory, and good afternoon, everyone, and thank you for joining our call today. In our third quarter of fiscal 2023, we generated revenue of $467 million and adjusted EBITDA of $82 million, both of which are slightly below the third quarter of fiscal '22 but meaningfully above the third quarter of 2019, even after adjusting for the acquisition of Main Event. We are operating in a unique and complex macroeconomic environment as we lapped challenging comparisons to the prior year, driven by robust post-COVID demand.

Despite these dynamics, I am proud that due to the efforts of our talented and dedicated team, as well as the strength and resiliency of our business model, year to date in 2023, we have grown both revenue and adjusted EBITDA and have expanded adjusted EBITDA margins relative to the same period in fiscal 2022 on a pro forma basis. We'd also like to highlight that year to date, our revenue and adjusted EBITDA are also up meaningfully relative to 2019, even after adjusting for the acquisition of Main Event, and our adjusted EBITDA margins are up 390 basis points relative to 2019, nearly double the previously communicated goal of 200-basis-point margin improvement. Additionally, we are pleased to report that during the quarter, we have made significant progress against our key growth initiatives. We will provide further detail in a moment.

But on the organic growth front, we have seen meaningful success in the tests we have implemented in our marketing, pricing, food and beverage, remodels, and special event initiatives, which we will be rolling out across the broader portfolio in the coming weeks and months in which we expect will lead to substantial improvement in revenue, profitability, and cash flow. As it relates to cost, we have maintained a relentless focus on finding efficiencies and have successfully reduced our recurring cost base. Furthermore, we have continued to open new stores at a highly attractive returns on investment and have continued to opportunistically return capital to shareholders in a highly accretive manner. We remain as confident as ever in the billion-dollar adjusted EBITDA target we indicated during investor day and remain laser-focused on delivering that result in the coming years.

I'd like to take a moment to go into more detail on the progress on our six key organic growth initiatives. First, marketing optimization. We believe there is a huge opportunity to improve both conversion and guest frequency by making sure we get the right message to the right people at the right time. During the quarter, we made significant progress toward that goal.

Through targeted investments in our new marketing technology infrastructure, we are building out our digital marketing engine which we remain confident will begin bearing fruit in the early part of fiscal 2024. With a particular focus on quick wins, we have already launched pilots across both owned and paid channels designed to provide specific data-driven learnings on how to effectively target both known and unknown guests that will enable us to engage with our guests more effectively and efficiently with personalized communications. We will scale the learnings from the initial pilots in additional tests scheduled for the fourth quarter to inform our digital strategy efforts in 2024. Ultimately, this digital marketing engine will help us acquire more high-value guests in increased frequency, as well as lifetime value from our existing guests by better leveraging our data and technology to increase personalization and enhance the guest experience.

We already know the immense value of getting this right. As previously disclosed, guests in our loyalty database, which is now 5.4 million users, already visit over 50% more frequently and spend approximately 15% more on each visit versus non-loyalty guests. Second, strategic game pricing. We historically have not had a robust games pricing strategy as game prices were stagnant for decades, and game prices were also consistent across all regions nationwide despite obviously different economic conditions in different parts of the country.

We believe there is a significant opportunity to grow same-store sales by strategically increasing game prices while still maintaining our strong value proposition. During the quarter, we initiated certain technology investments to facilitate our new gaming system, which will give us our desired capabilities to optimize the price of our games. In advance of implementing the new system, we have been testing a number of strategies to unlock a portion of the pricing opportunity in certain areas within our current system. These tests have shown encouraging results, which we will continue to fine-tune ahead of rolling out across our broader portfolio in the coming weeks and months.

Third, improved food and beverage. We've talked a lot about the substantial improvement -- or I'm sorry, the substantial opportunity we see to improve the overall quality of our F&B offering. During the last quarter, we spoke about the multiphase approach we are taking to roll out the D&B menu of the future. We also told you about the success we saw during the initial test phase, Phase 2, which was designed with a sharp focus on operational execution by removing unnecessary complexity in the back of the house and improving speed of service to improve overall food quality and drive more throughput at peak.

We are pleased to report that we launched Phase 2 systemwide on September 25, and it has had a positive and an immediate impact. In only five short weeks of contribution to the third quarter, the Phase 2 menu drove an approximately 5% increase in food and beverage revenue per check and an almost 100-basis-point improvement in F&B COGS, all while improving the speed of service and overall food quality of the guest dining experience. Simultaneous with the go-live of Phase 2, we started testing Phase 3 of our D&B menu of the future in ten stores that, assuming success, we would plan to launch systemwide in April of 2024. Phase 3 is particularly exciting for us as it is designed with the objective to further increase F&B sales through targeted culinary innovation around our appetizers, bowls, desserts, and sides that aligns with our new hospitality model and better meets the need states of our entertainment-oriented guests.

Already in Phase 3 testing, we are seeing incremental improvement in food check, overall satisfaction scores, and F&B attach rates above and beyond the favorable Phase 2 results. Fourth, remodels. While we believe our current stores deliver a very high-quality experience to our guests, we believe there is significant scope to remodel our store base as the majority of our boxes today essentially have the same look, feel, layout, and offerings as they did more than a decade ago. After significant research and analysis, we've designed a remodel program that not only improves the physical appearance of our stores but also represents the culmination of an interrelated strategic reset in how we will run our business more efficiently and better meet the need states of our guests.

Specifically, our remodel program was designed to accomplish the following: grow overall revenue through the introduction of disruptive entertainment product news; improve F&B sales through, one, a reconfigured dining room, improving operational execution, and two, an elevated and relevant new design growth; grow special event sales through the introduction of more group-related entertainment options; improve guest engagement and gather important guest data analytics through the introduction of a digital guest platform; and finally, improve brand relevancy in attempt to return through a fresh, modern look and feel. During the last call, we had highlighted encouraging results from the first few weeks of the initial remodel test of our store in Friendswood, Texas. While still early and still just one store, we are pleased to report that the encouraging financial results we saw from our Friendswood store have not only continued but improved over the last few weeks, and it exceeded our expectations, driving a double-digit sales uplift compared to the Prior year and a more than 30% sales uplift compared to 2019. In addition to driving significant overall sales growth, our food and beverage mix is up nearly a full percentage point.

Special event sales are up over 45%. Net promoter scores are up 15%. Our loyalty membership has increased at a faster rate than the rest of the system, and we now have important guest data on thousands of guests through our digital guest engagement platform. Notably, based on what we were seeing, we are highly confident this remodel is on pace to hit or exceed our target return threshold, and we expect to value engineer future remodels to have an even better ROIs.

Given the initial encouraging results, we've instructed our development team to put us in the position to meaningfully accelerate their overall pace of remodels to the extent that results for future remodels remain consistent with what we've seen so far. As of now, we plan to complete eight additional remodels in the fourth quarter of 2023 and three additional remodels in early fiscal 2024. Additionally, we have already begun permitting a significant number of additional remodel sites for fiscal 2024. And assuming success of additional test remodels, we'll be in a position to complete a total of 40 to 45 remodels by the end of fiscal 2024 with the majority of the remaining D&B system remodeled by 2025 and 2026.

The upcoming remodel test results will continue to formulate our go-forward plan with a strict stage gate process to ensure achievement of our target return on capital thresholds for all remodel capital. Next, special events. We continue to reinvigorate and put additional resources behind our special event business, which has allowed us to take a more aggressive approach to outbound prospecting at the Dave and Buster's brand. We are seeing -- we are already seeing dividends in the 20 stores where we embedded the dedicated sales manager earlier this year as they are pacing 80% higher in terms of special event upsell revenue growth than the stores without dedicated sales managers.

We've implemented several additional items at our special events product offering that are empowering our sales teams to drive more incremental revenue. Our holiday showcase events, where we demonstrate our superior special events offerings to groups, both virtually and in person, had nearly double the attendance of the prior year. In addition, our new SMS launch to engage with our special event customers will have a large impact on conversion and lead to additional repeat business. All of this provides significant momentum in the fourth quarter where we expect to eclipse pre-pandemic levels and have already booked as many $10,000-plus events for the quarter as we did in the entire fourth quarter of 2019.

Next, technology enablement. We are powering the growth of all strategic initiatives through an optimized service model, enterprise game ecosystem, new store IT infrastructure, and improved data analytics. At the beginning of November, we completed the domestic rollout of OneDine Server Tablets, which enable our guest-facing team members to execute ordering and the closing out of transactions from the palm of their hands. We are on track to have 61 D&B stores with updated IT infrastructure by the end of the year with the remainder complete in 2024.

With our adoption of our -- of a new ERP, we have streamlined the integration of our backoff systems to maximize real-time actionable insights for our teams, and we are driving innovation with new footfall traffic technology that is being tested in three locations with the anticipation of a systemwide rollout in 2024. We strongly believe these initiatives will lead to additional revenue in adjusted EBITDA, and we are laser-focused on generating an attractive return on the required investments in this area. In aggregate, we are confident these organic growth initiatives are primed to drive our business forward and create significant shareholder value. We have conviction that that we are focused in the right areas, making the right investments, and that our recent operational achievements are indicative of the progress we were making toward this long-term goal.

Our team of talented general managers and managing partners are doing a phenomenal job driving down labor costs while improving overall satisfaction scores by implementing efficiencies in our back-of-house operations to reduce hours and redeploying a portion of those hours to front-of-house labor, particularly during peak times. We are confident that these efforts, combined with the ongoing benefit of synergies, a dramatically improved supply chain driving lower cost of goods sold, and additional progress we are making in all areas of the business to sustainably lower this company's cost base, are creating a far more efficient and profitable organization over time. Furthermore, we continue to successfully open new stores. We opened three stores in the third quarter, and we are on pace to open six additional stores in the fourth quarter, three of which have already been opened.

This brings us to an expected total of 16 new stores in fiscal 2023. We are very pleased with the performance of our new stores, which continue to generate highly attractive returns on investment. On the international front, with our previously announced franchise partnership in the Middle East, India, and Australia, we look forward to breaking ground on four international locations in fiscal 2024 with more announcements to come as we finalize partnership agreements in additional international geographies. Acting upon our confidence in our long-term plan, our consistently strong free cash flow profile, our desire to return capital to shareholders, and our conviction in the dislocation of our valuation in the market, we repurchased $100 million worth of our shares in the third quarter and have now bought back 17.5% of our shares outstanding year to date in 2023.

While we will continue to prioritize high return on investments in this business and building new stores at attractive cash-on-cash returns, we will also continue to opportunistically and aggressively buy back shares when our shares trade materially below our view of fair value. So with that, now let me turn the call over to Mike to review our third quarter results.

Mike Quartieri -- Chief Financial Officer

Thanks, Chris. We are pleased to report financial results for the third quarter which highlight our resilient business model and strong margin profile. We generated third quarter revenue of $467 million and adjusted EBITDA of $82 million for an EBITDA margin of 17.5%, a 350-basis-point margin expansion versus the same period in 2019. Net loss in the third quarter totaled $5.2 million or $0.12 per diluted share.

We reported $400,000 of adjusted net income or $0.01 of adjusted earnings per diluted share. Reconciliations of these non-GAAP financial measures can be found in today's press release. Pro forma comparable store sales decreased 7.8% versus 2022 As we continue to lap robust prior-year periods from a top-line perspective. As a reminder, in the third quarter, we are lapping over a third quarter of 2022 that had a 17.5% comp to 2019.

On the same pro forma consolidated basis, when we look back at a more normalized level of business, we were up 8.1% versus the third quarter of 2019, led by the continued strength of our entertainment business. Importantly, this 8.1% growth versus 2019 marks an improvement in trends relative to the second quarter of fiscal '23, which we interpret as a positive indicator that our most challenging comps are behind us. Our special event business continues to recover with comparable sales up 4.8% on a year-over-year basis in the third quarter and down only 3.5% in comparison to pro forma 2019 levels. As Chris stated earlier, we remain confident that the recovery trend fueled by our strategic investments will continue into the fourth quarter for our special event business where we expect to exceed 2019 levels on a comp store sales basis.

Despite the comp being down, we generated $70.8 million in operating cash flow during the third quarter, a $2.9 million more than the $67.9 million of operating cash flow generated in the prior-year period, contributing to an ending cash balance of $64 million for total liquidity of $554.2 million when combined with the $490.2 million available on our $500 million revolving credit facility, net of outstanding letters of credit. We ended the quarter with a net total leverage ratio of 2.3 times as defined under our credit agreement. We entered into a sale-leaseback transaction for four operating Dave and Buster's stores in the third quarter, generating proceeds of $85.8 million. Net of sale-leaseback proceeds received, these stores are on track to generate significantly more attractive cash-on-cash returns than the already great returns on our remaining new store portfolio.

We are encouraged by the strong demand for our unique real estate assets and feel the long-term partnerships that we've cultivated with our landlords and greater REIT community is a testament to the confidence that they have in our business model and our long-term operational capabilities. Based on our current development pipeline, we anticipate having an additional four owned and operating real estate assets by the end of fiscal '23 with an additional seven owned real estate assets commencing operations in fiscal '24 and another seven coming online in fiscal '25 for a grand total of 18 locations with owned real estate across both brands over the next two fiscal years. We believe these wholly owned assets will provide us with financial flexibility to opportunistically maximize the value of our real estate, providing us with significantly more capital to invest in our business or return to shareholders. In the third quarter, we repurchased 2.8 million shares at a total cost of $100 million.

As Chris mentioned, total share repurchases to date in fiscal '23 are 8.5 million shares, totaling $300 million and representing 17.5% of our shares outstanding at the beginning of the year. We still have $100 million remaining on our board-approved share repurchase program. Turning to capital spending, we invested a net total of $67.4 million in capital additions during the third quarter, opening two new Dave and Buster's and one new Main Event location. We have already opened three new Dave and Buster's during the fourth quarter of fiscal '23, one in Colorado Springs, Colorado; another in Lafayette, Louisiana; and a third in Pooler, Georgia.

And we are on track to open the remaining three Dave and Buster's stores in the next few weeks, bringing us to a total of 16 new stores across both brands during fiscal '23. To summarize, we took advantage of our strong balance sheet, liquidity, and credit profile in the quarter to continue to invest in the business, open new stores, advance our remodel plans, enter into a sale-leaseback for the four D&B properties, and return capital to shareholders via the $100 million share repurchases. We are encouraged by the progress we are making in the quarter, laying the foundation of investments related to our long-term strategic plan and managing costs to continue to drive our recurring cost base lower. The future is bright for this organization, and we feel the actions we are taking today are setting us up for many years of financial success to come.

And with that, operator, I'll open up the line for questions.

Questions & Answers:

Operator

Thank you. [Operator instructions] Our first question comes from Andy Barish with Jefferies. Please go ahead.

Andy Barish -- Jefferies -- Analyst

Hey, good afternoon, guys. Just trying to get a sense of kind of the underlying comparisons as we move through the fourth quarter. Anything we should be aware of with calendar shifts and all that? I know there's a lot, but I guess the bottom line is the trends versus '19, as you talked about, sequentially better in the 3Q than the 2Q is. Is that something we should expect to continue here as we move into the holiday season and such?

Mike Quartieri -- Chief Financial Officer

Yeah. Hey, look, Andy, I don't think there's anything really necessarily around a calendar shift in the fourth quarter, should be relatively consistent with what you saw last year in fiscal '22. I think from a trends perspective, look, the trends relative to '22 and '19 have improved throughout the third quarter. Subsequent to the quarter, especially on the walk-in side, trends have continued to improve relative to last year and into 2019.

However, most of the quarter is still ahead of us. Just to give perspective, November represents about 25% of our business in the quarter. So with nearly 75% still to go, I think it's still too early to read too much into that at this point. On the special events side, since the quarter ended, there's been a bit of a shift in the special events calendar.

So recent trends that we're seeing over the first five weeks of the quarter are meaningless at this point. But any of that calendar shift gets taken care of in the quarter. So when you're looking quarter to quarter, there is no material shift, as I mentioned before. But all in all, look, given what we're seeing in the business, we remain confident that what we're doing is working and that we're ultimately going to be very successful in driving this business forward.

Chris Morris -- Chief Executive Officer

And then one thing I'll add to that, Andy, is on special events. So as Mike said, there is a calendar shift in special events. However, when we look at our special event business this year relative to prior year and relative to 2019 on a same-week basis, so taking into account that shift in weeks, we continue to see meaningful progress against where we were in 2019 and certainly 2022. So we feel very good about the effort we're putting in the special events and the impact that we're having on the business and feel very good about being in a position to come in significantly ahead of 2019 on special events.

Andy Barish -- Jefferies -- Analyst

Got it. Thanks, guys. And then just one quick follow-up, just to level set on pricing. I mean, you laid out in the strategic plan that kind of three-yeargames pricing would be about 10%, about 3% annualized.

I know that could differ. But how do we think about sort of the rollout right now of changes in tiered pricing by geography and then the potential for dynamic pricing, I guess, in '24? How should we sort of think about what's in the numbers now or what you have visibility on for the next year or so?

Mike Quartieri -- Chief Financial Officer

Yeah. So I'll go through the question. Chris can chime in and add to it. So when we look at the strategic pricing, we're in the process right now of running tests.

And as we evaluate those tests, we'll make adjustments accordingly. We are very aware that we want to maintain a value proposition, especially at this juncture of where the economy is in a whole. However, regardless of that, we still have full conviction that the amounts that we laid out in investor day over the long-term period, call it that three-year period, will be achieved and part of our ongoing process. To get to some of the other components of that pricing increase, we need the new game system to be installed.

That is on the road map to be done next year in '24. So we'll see more things like you've had on like dynamic pricing and other intricacies to that effect would probably not hit until very late '24 or probably into '25 at this point.

Andy Barish -- Jefferies -- Analyst

Understood. Thank you, guys.

Mike Quartieri -- Chief Financial Officer

You got it.

Operator

The next question comes from Jeff Farmer with Gordon Haskett. Please go ahead.

Jeff Farmer -- Gordon Haskett -- Analyst

Good afternoon, and thank you. A few quick questions. So first would be just on the loyalty membership, understanding how that will be incredibly important in sort of that digital marketing journey. But can you help us understand the efforts that you guys have in place or will have in place to help drive loyalty membership ranks?

Chris Morris -- Chief Executive Officer

Yeah. Sure, Jeff. Well, the first one, we were the -- when we walked through all the opportunity on marketing optimization, there is -- as we've said many times, there's tremendous opportunity to be more effective with our approach to marketing. Within that, we believe strongly that there is incredible opportunity to improve our approach to digital marketing.

And that is the past year, we've been hard at work at putting all the foundational building blocks in place, so investing in all the technology that will help us drive digital marketing and to maximize that opportunity. So when we think about the benefit of growing the loyalty database, clearly, there is an opportunity for us to -- that the more engaged we are with our guests, then the better position we're going to be able to deliver a service model for that guest, that's tailored for the guest and a better position to deliver personalized messages to the guest. And so we clearly see an opportunity to build out our loyalty platform and as we do that to improve both sides of it, the service model, as well as our marketing performance. The ways that we will do that is, first, we rolled out a mobile app, and so that was step one.

We intend over the next several years, we're just going to continue to make that app better and better, and so we'll continue to refine it. And as we do, we'll be testing and learning. And so we believe that there is incredible opportunity there. Secondly, we believe that there is an opportunity to -- and we've seen this in our remodeled store to improve our digital guest engagement platform at the store level and so being very deliberate about how we migrate a guest through the entire guest journey and do it in a way to where the mobile app should enhance that guest journey to enhance the overall service model.

And as we focus on enabling a better service model, a better guest experience, we believe that that will migrate more people into the mobile app, which will then improve our loyalty database platform. So there's a number of different initiatives, both in the app itself, as well as the service model, and the way we engage with the guests at the store level. But that's just one component of growing -- achieving our goals for marketing and optimization and improving our ability to be better -- get better return on our investment dollars for digital marketing.

Jeff Farmer -- Gordon Haskett -- Analyst

OK. That's helpful. Two other hopefully quick ones. First is just on staffing.

A lot of the restaurant companies, admittedly you guys are not a restaurant company, but have this earnings season pointed to much better staffing levels, much lower turnover trend -- turnover numbers, driving some efficiencies, some labor efficiencies. As it relates to your model, anything that you guys can add as it relates to staffing?

Mike Quartieri -- Chief Financial Officer

No. I think we're seeing the same things. The -- go back a year and two years ago, where it was difficult to find staffing and get stores even remotely close to par, we're effectively at par and managing our hours accordingly based on business levels.

Jeff Farmer -- Gordon Haskett -- Analyst

OK. And then last one for me, I apologize for being long winded here. But probably 3 or 4 years ago, arguably pre-COVID, a lot of focus with the Dave and Buster's name as it relates to both cannibalization and competitive encroachment. And some of the cannibalization concern obviously disappears with the Main Event acquisition.

But as you're opening up these 16 boxes or stores this year and you're thinking about both of those two metrics or drivers of potential headwinds, cannibalization, competitive encroachment, any update on how you guys are thinking about that or what you've seen?

Chris Morris -- Chief Executive Officer

That's obviously something that we take a close look at, and we can tell you that there's no significant concern at all in cannibalization. We were getting phenomenal returns on the 16 units that we've opened. We feel great about that. I think one of the advantages is now that we've designed this smaller prototype and we're going into -- that's opened the door for markets that we weren't interested in pursuing because of the level of investment.

And so as we've shrunk our prototype, that's provided us access into new markets, and so that's helped cannibalization. But when we've gone through and looked at the -- our performance against the stores nearby, at this point in time, we're not seeing anything at all that's a concern. And we feel very confident in the white space opportunity that we laid out in investor day and achieving that without significant cannibalization.

Jeff Farmer -- Gordon Haskett -- Analyst

All right. Thank you.

Operator

Our next question comes from Brian Mullan with Piper Sandler. Please go ahead.

Brian Mullan -- Piper Sandler -- Analyst

Thank you. Just a question on the question on the remodel program. You shared some encouraging stats in the prepared remarks. Just clarification, the pace for next year specifically, is that accelerated versus your prior thinking? And then if so, any color on what made you decide to accelerate? It sounds like the test is going well, but I would also think you expect it to go well.

So just any color would be great.

Chris Morris -- Chief Executive Officer

So the answer is yes. We've now laid out a plan to be able to have -- to be in a position to have 40 to 45 remodel stores done by the end of 2024, and that is an accelerated pace. The -- however, we're moving forward in a very controlled way, and we were only get to 40 to 45 if we continue to see the same level of results and continue to not only hit but exceed our return on investment thresholds. And so we're being very controlled.

But at the same time, we're wanting to move fast in order to get -- maximize the opportunity that we see. The reason for that, yeah, I mean, you're absolutely right. We did expect the remodel program to be successful. However, we're exceeding our own expectations, and our expectations were pretty high.

I think the thing that has us very encouraged is not only the results that we're driving but the underlying -- the underpinnings of those results, so specifically what's leading to the improvement in the store. And we can point to the strategic initiatives, the strategic objectives that we had when we designed the remodel. So when we see our overall sales up double digits over prior year and up 30% over 2019, that's encouraging. But when you're -- when you look at it and say we specifically designed the entertainment platform to bring news to the market and provide more variety to the guest, and we're driving more entertainment revenue through that entertainment product.

When we specifically designed it to give our sales team more opportunity to drive special events because now we have items that appeal to group activities and our special events are up 45%, that gives us confidence that we're approaching it the right way. We specifically designed the remodel program to drive throughput on the dining room because our belief is one of the reasons why we've seen a decline in our F&B mix is because we haven't set our operators up for success. So we've addressed that in the remodel. We've reconfigured the dining room to set our operators up for success and drive that throughput.

And even though we've grown our revenue in a very significant way, our F&B mix, our F&B revenues actually outpaced everything else that we're doing. So that gives us confidence. And then the impact we're having on the guest experience, our net promoter scores are up 15 points. So that just -- again just bolsters our confidence.

And so we're feeling very good about what we've been able to achieve in Friendswood. And because we see those data points, we really believe that that validates our strategies, and that gives us confidence to start to move faster but at the same time being very controlled, so we don't get ahead of ourselves on the investment.

Brian Mullan -- Piper Sandler -- Analyst

OK. Thank you. That's great color. Thank you.

And then just a question on G&A. If we make all the adjustments, it seems like the underlying G&A has been running in the $18 million to $20 million range per quarter for the last several quarters. Is that a good run rate to think about for 4Q and into next year? Or are there any investments or some other items you'd want us to be mindful of as we think about next year?

Mike Quartieri -- Chief Financial Officer

No. That's a -- about $20 million is a fair pacing for where we would expect core G&A to be after you take out those adjustments.

Brian Mullan -- Piper Sandler -- Analyst

OK. Thanks a lot.

Operator

Or next question comes from Brian Vaccaro with Raymond James. Please go ahead.

Brian Vaccaro -- Raymond James -- Analyst

Hi. Thanks, and good evening. My question, I wanted to circle back on demand. And the percentages can sometimes get a little confusing given the big seasonal swings.

I think the comps versus '19 are quite a bit different between the two brands. So I guess how would you characterize what you're seeing in terms of underlying demand in the third quarter maybe compared to the second quarter? Are there any changes in behavior worth noting, any color on how the quarter progressed, or anything else you'd be willing to highlight?

Mike Quartieri -- Chief Financial Officer

No. I think -- I'll kind of refer back to an earlier question. I would just go Q2 to Q3 haven't seen much in a change in demand. Though when we look at Q3, what we have seen starting in October is improved results versus '22 and versus '19, and those improved results have continued into November.

But as I said earlier, from a Q4 perspective, given the size of the business that's still to come with the Christmas holiday, winter break, New Year's, MLK holiday in January, those are all big events for us, and so the vast majority of business from a revenue perspective will take place in the December and January period. So it's a little hard to take into account what we've seen for November to project that out over the rest of the quarter.

Brian Vaccaro -- Raymond James -- Analyst

OK. And then, Mike, I think you mentioned a calendar shift on special events sort of in November or in the fourth quarter. Can you just clarify what that shift is?

Mike Quartieri -- Chief Financial Officer

A lot of the events start taking place after the Halloween, call it holiday or event. And so what happens is versus 2019, our special event calendar is one week lagging versus what you had in '19. All of that goes away by the time you get to the Christmas holiday, and all of that has been caught up. So although it's a little bit of a mismatch today versus '19, but that's only on a week-to-week trend basis.

For the whole quarter, it's not relevant.

Brian Vaccaro -- Raymond James -- Analyst

Right. And you had that similar dynamic last year that you highlighted compared to '19, correct?

Mike Quartieri -- Chief Financial Officer

Correct. There was about three days in prior year during that, call it, 15 business days of peak period that we were lapping over, which, by the way, is one of the reasons why we don't give this up to date where we are in the quarter of view anymore.

Brian Vaccaro -- Raymond James -- Analyst

Understood. OK. And then shifting gears to the games pricing, could you just share some more on the tests that you've run? How much have you tested in different regions? What have you learned? How has it impacted sales? And sorry if I missed it earlier, but have you made the go decision on most of the system? What's the rollout look like on the strategic games pricing?

Mike Quartieri -- Chief Financial Officer

Yeah. Look, our test right now is not to get too much in the weeds on an earnings call but is roughly about -- its 12 stores. We've looked at various price points within that 12 stores, and we're just continuing to evaluate those results and the impact that would have, and we're looking at it holistically. So it's not only an impact on what your initial card load is, but it's also on the overall revenues, what kind of recharge rate do you have.

We also look at what the impact on dwell time because we kind of look at all that in its totality to understand the real value that we're driving to the customer and is part of that value proposition. So we've got a few more weeks to go in our test, and we would probably look to make some type of pricing adjustment, either late into Q1 or into early -- or sorry, late into Q4 or early into Q1.

Brian Vaccaro -- Raymond James -- Analyst

OK, great. That's very helpful. And then last one for me, just back to the Friendswood remodel. I'm just curious if you could share more on what elements of the remodel you think are driving the uplift? Any specifics on how the social bays are performing or other new elements worth highlighting?

Chris Morris -- Chief Executive Officer

Sure. No. We're very pleased with social bays, both in terms of entertainment revenue, as well as the food and beverage attached, that we're able to drive through participants in the bays. So very pleased with that.

We just rolled out a brand-new attraction in Friendswood just a couple of weeks ago, and so we'll be interested to see how that performs as well. But in terms of the other items that are driving the performance, it's everything that I just walked through just a minute ago. So we're very pleased with the performance and all in all areas. So the strategic objectives that I just walked everyone through, in every one of those areas, we're making an impact on the business.

And so that just gives us a lot of confidence as we move forward that these are results that we fully expect to continue to drive.

Brian Vaccaro -- Raymond James -- Analyst

All right. I'll pass it along. Thank you very much.

Chris Morris -- Chief Executive Officer

Yeah, thank you.

Operator

Our next question comes from Sharon Zackfia with William Blair. Please go ahead.

Sharon Zackfia -- William Blair -- Analyst

Hi. Good afternoon. I apologize if I missed this. But given the accelerated pace of remodels, is there any impact on the '24 development pipeline as a result? And how should we think about capex in '24 relative to '23?

Mike Quartieri -- Chief Financial Officer

Yeah. I'll answer that. A, there will be no adjustment to our new store opening pipeline. We're looking at 15 new locations and one remodel, which is consistent with the 16 that we've always discussed back at the investor day and which will be kind of the, I'll call it, the rounded number, plus one minus one, as you go through from a year-to-year basis.

When we look at the overall capex, we laid out in the investor day what our capex would be, which was roughly about $340 million. That number, I think, would be relatively consistent on a net basis going forward. Obviously, as the remodels adjust from a timing perspective, we feel very confident with our leverage profile right now and the vast amount of liquidity we have that we're willing to put that to work to yield the returns on an overall basis for the company accordingly.

Sharon Zackfia -- William Blair -- Analyst

Great and then on Phase 3 of the food and beverage plan, does that give back any of the food and beverage savings that you achieved in Phase 2?

Mike Quartieri -- Chief Financial Officer

No. It actually expands it.

Sharon Zackfia -- William Blair -- Analyst

OK.

Mike Quartieri -- Chief Financial Officer

The number that Chris had alluded to would all be incremental to the savings and improvement that we've seen in Phase 2. So it's just -- basically, Phase 2 is one block. Phase 3 is the next building block, and then we continue to innovate beyond that.

Sharon Zackfia -- William Blair -- Analyst

OK. And then last question for me, on the remodel you've done so far, have you done anything to drive traffic to the locations? Or is it the location or is it generally just word of mouth? I mean, how is word getting out that something is new at Dave and Buster's?

Chris Morris -- Chief Executive Officer

So it started with the launch so on -- as we reopened Friendswood, and keep in mind that the unit was never closed, so we did all of the remodel activity keeping that unit open. But when we were ready to -- when the remodel was 100% done, we treated it like a brand-new opening. So we had a VIP party, and we invited a lot of very important people in the market and invited a bunch of influencers in to experience the attractions. We did a big community event, and then we've done quite a bit of local store marketing since opening.

But I'll tell you, we're not -- I don't want to leave anyone with the impression that part of the reason we're getting these results is because we've allocated significant incremental marketing dollars to the store because that's not the case. We've supported it with marketing, but it's been more in the ordinary course of business. The difference is now we have news to talk about, and we firmly believe that, as we move forward, one of the items that -- one of the ways that we reinvigorate this brand and get people interested is bringing disruptive product news to the market. And we've got 90% brand awareness.

We have strong brand attributes, but we haven't really innovated in a really long time. And so as we start to bring news to the market, we think that that's going to generate trial and a renewed interest, and we believe what we're seeing in Friendswood is a proof point to that.

Sharon Zackfia -- William Blair -- Analyst

Thank you very much.

Chris Morris -- Chief Executive Officer

Thank you.

Operator

This concludes the question-and-answer session. I would now like to turn the conference back over to our CEO, Chris Morris, for any closing remarks.

Chris Morris -- Chief Executive Officer

All right. Thank you, operator. In closing, we'd like to commend our team for all the hard work, the behind the success at our growing portfolio of Dave and Buster's and Main Event stores. We're excited for what lies ahead and are enthusiastic about the direction we are steering this company.

So thank you, all, for joining. Happy Holidays. We look forward to speaking with you again in the New Year.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Cory Hatton -- Vice President, Investor Relations and Treasurer

Chris Morris -- Chief Executive Officer

Mike Quartieri -- Chief Financial Officer

Andy Barish -- Jefferies -- Analyst

Jeff Farmer -- Gordon Haskett -- Analyst

Brian Mullan -- Piper Sandler -- Analyst

Brian Vaccaro -- Raymond James -- Analyst

Sharon Zackfia -- William Blair -- Analyst

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