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Dave & Busters Entertainment (PLAY 2.41%)
Q4 2021 Earnings Call
Mar 29, 2022, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good day, and welcome to the Dave & Buster's Entertainment Incorporated fourth quarter 2021 earnings results conference Call. Today's conference is being recorded. Now I would like to turn the conference over to Michael Quartieri, chief financial officer, for opening remarks.

Michael Quartieri -- Executive Vice President and Chief Financial Officer

Thank you, operator, and thank you all for joining us today. Joining me on today's call are Kevin Sheehan, board chair and interim chief executive officer; and Margo Manning, chief operating officer. After our prepared comments, we will be happy to take your questions. This call is being recorded on behalf of Dave & Buster's Entertainment Incorporated and is copyrighted.

Before we begin our discussion on the company's 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.

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Investors should review the reconciliation of these non-GAAP measures to the comparable GAAP results contained in our earnings announcement released yesterday, which is also available on our website. Now I'll turn the call over to Kevin.

Kevin Sheehan -- Board Chair and Interim Chief Executive Officer

Thank you, Mike. Good morning, everyone. We are pleased to be speaking with you today as we reported another strong quarter of financial results. We have an exceptional business model, strong assets, and a talented group of team members who are delivering outstanding service and experiences to our guests.

We've made great progress as the fourth quarter revenue approached pre-COVID levels, while net income and adjusted EBITDA exceeded -- pre-COVID results compared to the fourth quarter of 2019. However, there's much more opportunity to unlock the potential of this business. We've begun a new phase of innovation, growth, and value creation here at Dave & Buster's. As I said last quarter, we have a great brand with significant scale, a passionate team and a fleet of stores in high traffic, high volume destination trade areas.

We are focused on optimizing our current stores, full potential, and accelerating innovation to drive incremental traffic to our brand. We're ramping up our unit growth this year and will begin a more formal program to remodel our stores and give them a fresh look that's more in line with our new prototype. We're broadening our entertainment offering to include more immersive sports viewing experiences, including improvements to the watch environment. As Margo will detail shortly, we recently announced a partnership with UFC and WWE to bring all their pay-per-view events to our D&B locations across North America.

Finally, our best-in-class arcade will get even better with our Summer of Games rollout supported by a significant marketing campaign. As you can tell, I'm very excited about the future of this company. We have meaningful upside and as you can see from our fourth quarter, we're on a way -- we are on our way to realizing that potential. At this time, Mike is going to cover the fourth quarter results and share some thoughts on our expectations for the first quarter and fiscal year 2022.

After that, our CEO Margo Manning will update you on our operations. Mike?

Michael Quartieri -- Executive Vice President and Chief Financial Officer

Thanks, Kevin. Our fourth quarter results demonstrated our ability to drive significant improvement in profitability with relatively flat comp store sales compared to 2019 despite COVID implications. We continue to see a benefit from a higher mix of amusements, and a leaner operating model. Even with headwinds from wage and commodity inflation, we've continued to grow margins and have offset these impacts through more efficient labor model enabled by technology, lean process improvements, proactive pricing adjustments, and more effective marketing investments.

Looking forward, we are poised for our stores to return to new levels benefiting from the removal of COVID restrictions, the return of special events, and the efforts of recent initiatives. For fourth quarter sales, we experienced a comp store sales decrease of 2.6%, excluding the 14 stores that had vaccine mandates during the quarter. Including all stores, we experienced negative 6.8% comp, and total revenue decline of 1.2% compared with 2019, reflecting softness due to the Omicron variant and associated vaccine mandates, and the reduced special events business due to COVID. Our walk-in sales continued to post positive comps at 2.1%, although our special event business continued to lag at negative 58% compared to 2019.

By month, our overall comps were positive 7.5% in November, negative 14.9% in December, and negative 8.4% in January, which highlights the timing of when the Omicron variant hit. Our walk-in comps, which excluded the impact of our lighting special events business during a seasonally strong holiday party season were positive 13.9% in November, negative 4.1% in December, and negative 0.9% in January. Regarding sales mix, amusement, and other had a positive 7% comp and with 65% of our overall mix compared with 56% of our mix in 2019. This is mainly due to minimal discounting and a continued shift to higher denomination power cards.

F&B had a negative 24% comp compared with 2019, a substantial portion of which was due to the special events business. Adjusted EBITDA for the quarter was 87.7 million, or 12.7% higher than the same period in 2019. This reflects a 25.5% adjusted EBITDA margin, which was over 300 basis points higher compared to the same period in 2019. The improved performance was primarily driven by the higher amusement mix and leverage on our labor due to a more efficient model.

Net income increased 700,000 to $25.7 million in the quarter compared with 2019, resulting in EPS of $0.52 per diluted share. These results generated positive operating cash flow in the quarter. We ended the quarter with $26 million in cash, and approximately $492.5 million of liquidity under our $500 million revolving credit facility, net of the outstanding letters of credit, and our net leverage ratio was only 1.2 times. Total long-term debt was $440 million at the end of the quarter, consisting of our senior notes maturing in 2025.

During the quarter, we redeemed $55 million of our senior secured notes, which resulted in a $1.7 million expense to redeem the notes, but we'll save $4.2 million in annualized interest. Turning to capital spending, we invested $26 million in capital additions, net attended allowances. We opened one new store during the quarter. In the first quarter, we planned to open two additional stores in April.

In fiscal year '22, we plan to open a total of eight new stores. As you can tell, we're pleased with the fourth quarter results and the sound financial footing we've established going into fiscal year '22. Turning to our outlook, I'd like to offer some insights for the first quarter of fiscal year '22. Regarding sales trends, our comp sales for the first eight weeks have been positive 5.4% compared to 2019.

Our walk-in business is up 9.1% on a quarter to-date basis, and our special events business is down 42% on the quarter to-date basis. Fiscal '22 projected capital additions, net intended allowances are expected to be approximately $200 million, with 70% dedicated to new stores and improvements to the existing stores, 10% for games, and 20% for infrastructure upgrades and replacements. In summary, our team continues to execute on our initiatives to drive organic growth, improve profitability and produce significant cash flow for the business. We are pleased with our progress and are well positioned as we enter in fiscal '22.

With that, I'll turn it over to Margo.

Margo Manning -- Chief Operating Officer

Thank you, Mike, and good morning, everyone. We continue our commitment to simplify store operations, improving our guest experience, and enhancing our food and beverage and entertainment offerings to drive sales and profitability. Our guest satisfaction [Inaudible] for show the menu change made in May of 2021 is appealing to our guests. Additionally, we have established a new cadence of four food and beverage limited time offers per year aimed at driving chefs and food attention.

Starting in Q1, we are rolling out reservation capabilities throughout the brand to make it even easier for our guests to dine with us. Guests will now be able to reserve a table in our dining rooms directly through the D&B website or via open-table. Our new service was designed to expand both reach and appeal. In Q4, we launched a tightly curated beverage selection that elevates the experience, adds new flavor profiles and improved relevancy.

In Q1, we'll make a strong push to revitalize our late night segment through a combination of marketing and programing efforts. Our Late Night Happy Hour initiative consists of a series at D&B Night, complete with custom content, daily takeovers featuring club mixes from nationally known and regional deejays taking over the airwaves at D&B life. As discussed on prior calls, we have launched several tests to determine the entertainment appeal programing. These tests indicate our guests have an appetite for new entertainment offerings, and we are continuing to refine these offerings with the goal of giving our guests more reason to visit.

As Kevin mentioned, early in Q1, we launched a nationwide partnership with both UFC and WWE to bring their pay-per-view events to the D&B locations across North America. This effort is to make Dave & Buster's, the place to be all-fights in an exciting, up tempo environment. The partnership with WWE will launch with WrestleMania on April 2nd and 3rd, and continues with the SummerSlam this July. In addition, we brought more attention to March Madness selling with visible signage and more integration on our digital signage, including a digital bracket that was updated throughout the tournament.

We have also been investing in enhanced technology to support our entertainment initiatives. With a phased rollout of live remote streaming capabilities into our stores that will allow us to broadcast real-time high definition video content such as DJ set concerts and stand up comedy. Next, let's move to the event sales recovery, which was depressed in Q4 during Omicron. -- While lagging walk-in sales, event sales have accelerated in recent weeks.

Specifically, we are seeing our corporate segment start to rebound. With the specialization of our sales team, we believe we are positioned to optimize outbound call activity to drive incremental sales. Our new centralized sales center, augmented by local store management, has already demonstrated an increased booking level for sales representative. The new D&B rewards program, which is linked to the D&B app, launched on November 8th, and continues to the exceed projection.

In Q1, a localized marketing campaign leveraging connected TV will be used to support spring break weeks throughout our brands. In addition, we are bringing back one of our most successful promotion, our eat and play combo will run as a limited time offer for the length of April, to capitalize on pent-up demand from our more value oriented guest. We believe our structure, this will drive incremental spending behavior and expose new guests to our brand. Lastly, I'm pleased to share that we've been able to improve our stores hourly staffing levels.

We're seeing an increase in our approach as well, which is a positive and refreshing trend for our team. This trend has enabled us to shift our focus on entertaining these new hires through training, skill development, and providing a great employee experience. To the entire D&B family, thank you for all of your efforts this past year. You are the heart of this brand and the reason the brand comes to life in our stores.

With that, I'll hand the call back over to you, Kevin.

Kevin Sheehan -- Board Chair and Interim Chief Executive Officer

Thanks, Margo. We're pleased with the results we delivered in the fourth quarter despite numerous headwinds, including vaccine mandates, Omicron, wage and labor pressures, supply chain challenges, and the lagging special events business. We are optimizing our return to a more normalized post-COVID environment, as the headwinds we have experienced become tailwinds fueling our business as we move forward. We have an exceptional business model, strong assets, and a talented team.

There is meaningful upside potential for this company and we are laser focused on driving that to reality. Our team is extremely excited about the prospects for '22 and 2023 and well beyond. Let me end with these thoughts. We came -- very close to reporting record fourth quarter revenue despite being significantly impacted by Omicron.

We're starting to see a recovery in our special events business, which was down by 72% on an annual basis in 2021 compared to 2019. We are shaping our strategic initiatives and also making great -- progress, improving margins. Our international efforts will start to blend in, we believe, beginning in the latter part of 2023, and then you can add in our heightened focus on sports viewing and sports betting. All of these actions will begin to write the script for the next couple of years.

So tighten your seatbelts as we are on the move. Now we'll take your questions. Thank you.

Questions & Answers:


Operator

[Operator instructions] We can go ahead and take our first question from Andy Barish with Jefferies.

Andy Baris -- Jefferies -- Analyst

Yeah. Hey, good morning, guys. Wanted to focus on the quarter-to-date results here in '22, which are impressive and just give us your sense if there is anything coming through as a key contributor and or spring break calendars, if there's anything to point out there? I know obviously, the last couple of years that's been a little messy. But let me stop there and then ask one more after this.

Kevin Sheehan -- Board Chair and Interim Chief Executive Officer

Andy, thanks for that question. It's actually very important because when you dig into the numbers, it really tells the true story of what's going on in this company, which is really significant. As you -- as we were going through the fourth quarter and we went through the first number of weeks, we were doing -- our growth was up 7.6%. And then around the middle of December, Omicron, as you know, hit us.

And that was such an important part of the holiday time and also a big time for special events that we're really starting to recover nicely. So the first portion of the quarter was up 7.5%, 7.6%, and the second portion of the quarter was down 12.2%. So that tells you inside those numbers the power of where we were going before the break out of Omicron. Then, when you do the same sort of mathematics and in the first quarter, in the first I think it was three weeks, we were down 8.3%.

And then once that all becomes subsided and we went back to business, our last five weeks have been up 13%. So you can really fully understand that we were -- other than the Omicron, this business is on fire. And it's just the beginning of it. We've got so many things that we've talked about on other calls that we're starting to shape to drive demand.

So we're excited about where we are today and we're excited about the prospects for the future. So I think with that incremental guidance, you guys can better understand what's going on inside the business and how we were significantly impacted by the Omicron is now behind us. You can understand why we feel so good about where we're going as a company.

Andy Baris -- Jefferies -- Analyst

Thanks, Kevin. And then just quickly, it seems like you're enjoying and having fun in the interim CEO role. Can you give us some perspective on where that search process stands, given, you've been in the role for a fairly extended period of time now?

Kevin Sheehan -- Board Chair and Interim Chief Executive Officer

Yeah. I mean, the reality is I'm 68 going on 69, and we deserve a young, younger, energetic, driven skill set that's going to build this brand in all the ways that we've talked about for the next five plus years. So I think, that's -- deserves some new blood, some fresh blood into our business. We have a great process going on in our [Inaudible] and governance committee of the board, and we've been very careful and very selective to try to find the right candidate, because this is such an important opportunity in getting the right person in for this next period of growth, and innovation is critical.

And I would say that, [Inaudible] I've been working like mad interviewing and vetting candidates. And we right now have, I would say, multiple very serious candidates that over the coming quarter hopefully, will announce a new CEO. So just stay tuned on that.

Andy Baris -- Jefferies -- Analyst

OK. Thanks, Kevin. Thanks, guys.

Operator

[Operator instructions] We'll go ahead and take our next question from Jeff Farmer with Gordon Haskett.

Jeff Farmer -- Gordon Haskett -- Analyst

Hi, good morning. Thank you, guys. You did touch on it, but I'm curious if you could provide some additional color on how your customers are responding to that rewards program rolled out and what's that -- what that has meant for their visit frequency and spend or any other relevant metric?

Margo Manning -- Chief Operating Officer

Hi, Jeff. It's Margo. So I have a I have a little bit of information. We are excited to see the spend in terms of the per person spend of our wealthy members increased compared to the prior nine months.

We've seen an increase in the user engagement being in the program longer, so they're spending more time on the average day. And just the user retention is also trending up. I don't have any current stats on them, but I would tell you on March, we were seeing the spend -- that was early on in the week higher per person as well. So we're encouraged.

Think about it, we just launched it in November 8th, and so we're excited about its potential because the early start has been very promising.

Jeff Farmer -- Gordon Haskett -- Analyst

OK. That's helpful. And then just as a follow up to Andy's question on the CEO. I heard, which you said loud and clear.

But the question is, from a from a business strategy perspective, are there decisions that will not be made until a new CEO is announced? Meaning, is that there -- are there some things that are pent up in terms of strategic opportunities that the company will not pursue until a new CEO is announced? And if so, understanding that is a challenging question, but what types of sort of decisions or strategic direction type things would those be?

Kevin Sheehan -- Board Chair and Interim Chief Executive Officer

Yes. I would say that on -- when you sit back and take a clean sheet of paper and say, "What are the opportunities for this company?" There is a lot of different things that we can be doing in this interim period that are going to drive demand and drive the success of this company. Having said that, I'm very cognizant of when the new CEO comes in, he or she has the ability to shape their future strategy with their own thoughts. So, I'm trying to be sensitive not to do things that are going to conflict with that.

But as I said, we have so much opportunity here that are clearly things that we could do that anybody coming in would say, "Wow, that makes sense. That makes sense." So we're running on all of those, but also being thoughtful not to take away from the great opportunity of a new person coming in.

Jeff Farmer -- Gordon Haskett -- Analyst

OK. Thank you.

Operator

All right. Well, go ahead and take our next question from Jake Bartlett with Truist Securities.

Jake Bartlett -- Truist Securities -- Analyst

Great. Thanks for taking the question. My first -- is on the decision to go back to the eat and play promotion. Throughout the pandemic, you've benefited from a very strong check or a very strong spend -- with less discounting.

So, you want to -- I'm wondering what that might do to your amusements checker or know -- that benefit, whether that's -- this could be the beginning of focusing more on traffic than than just the check driver that you've [Inaudible]. And also, it doesn't sound like a given the 13% more recent comps. But, are you seeing any wobbling from your consumer, given gas prices, -- other concerns that that investors have about the consumer here -- as they're contending with major inflation for non-discretionary items.

Kevin Sheehan -- Board Chair and Interim Chief Executive Officer

Yeah. So far to-date, and I think we've been through most of the nuances. We're seeing the strong demand continuing. But of course, we're being eyes wide open as to the emerging trends to make sure we're anticipating all of that.

One interesting -- I'm going to bring out that was missing in my view for this company, and Margo was hugely supportive of this. Well, we just recently had our general managers meeting in Las Vegas, where we had 144 GMs in there, and the regional GMs, and the leadership of the company together. And we introduced a new long-term incentive plan for the first time for all of our GMs. So we made an eye-focused that [Inaudible] if anybody knows my history about entrepreneurship and feeling like you're the owner.

So we made every one of these GMs eligible for a program that is 100% focused on organic growth of your store, of your domain. So the 40-year program and every -- you get a -- you can ride through it a little bit below or a little bit above and in each of the years. But on the four year basis, a kegger of 3% gets you into the money. A kegger above that gets you a disproportionate upside.

So we're excited about this because now there is a focus. -- They own their little their store, they own what goes on, they own the days of the week, they own the hours of the day. And we are now get equipping them with a bag of tricks. I call it a bag of tricks.

To the cabin world of simple ways of delivering things -- of things that we can help them to be better at driving their incremental store. So -- there's lots of those kinds of things going on. But that one in particular, I can't tell you, Michael will echo this. The team was wildly excited about now owning their store.

And they're going to do everything possible every single day to drive that, because if they hit their numbers and it's based on today's stock prices, which we all know is so significantly undervalued, because we need to prove to you guys that we're in business now for organic growth. But when we get to that finish line, if we deliver on that organic growth, the stock prices are going to be hugely different and that based on today's price. So these guys can make, guys and gals, can make a huge payout in four years. So they're raised to focus on that.

And I think that's just another example of the stuff that we're doing to drive behaviors of our team.

Michael Quartieri -- Executive Vice President and Chief Financial Officer

Yeah. I think one other point to happen -- It's Michael Quartieri, -- let me just add on one other point on just the mindset around understanding inflation and gas prices that's due on everybody. When we take a step back and just look at our business, seven days a week, the vast majority of our businesses coming through on that Friday, Saturday, Sunday period. So we also got to look for opportunities on how we could build them midweek, whether that's through promotional opportunities that we now see that are available and the like.

So it's really kind of driving through as many process a change. From a sales perspective to fill in the rest of the week, which we believe will just continue to add incremental revenue to the bottom line.

Jake Bartlett -- Truist Securities -- Analyst

Great. Thanks. That's really helpful. And then my other question was about the regional performance.

And imagine you're seeing more of recovery these days from markets like California in the Northeast. Can you let us know just in the context of quarter-to-date. Are the sales still down versus pre-COVID? In big markets like California in the Northeast and trying to understand really the juice that's still left in the tank as those markets recover.

Kevin Sheehan -- Board Chair and Interim Chief Executive Officer

It's for the most part, you can see a dramatic recovery quickly as people are out and about and wanting to enjoy themselves. So I would say -- I would say there's still some room to continue in some of the markets. They're not all perfect, but we've enjoyed in the last number of weeks quite a bit of that recovery. The thing that is going to provide some nice benefit as we move forward, because we're seeing it.

Our bookings on special events are back to actually, above historic levels on a week-to-week basis. So that's an emerging trend that given the environment that we're in, hopefully stays the same, will bring us back very quickly toward where we were pre pandemic.

Margo Manning -- Chief Operating Officer

And this is Margot, I'll just add in. As you know, in the Northeast and in California, we were facing vaccine mandates, which were burdensome for the stores, for sure, and dragging on sales. The Northeast is lifted. We still have a little bit in California.

So those would be outliers. But other than that, those markets have been performing very well for --

Jake Bartlett -- Truist Securities -- Analyst

Great. Thank you very much.

Operator

All right. We'll go ahead and take our next question from Brian Mullan with Deutsche Bank.

Brian Mullan -- Deutsche Bank -- Analyst

Hey. Thank you. The prior management had provided a framework of 200 basis points of EBITDA margin expansion versus 2019, once the average weekly sales were fully recaptured. But since that framework was first given, there's been an acceleration of inflation across the economy.

We've also seen, Kevin and Mike, both of you assuming [Inaudible] this thing would be helpful to clarify for everyone. Does that EBITDA margin expansion framework still stand? Or have there been any changes worth pointing out or noting?

Michael Quartieri -- Executive Vice President and Chief Financial Officer

Yeah. A couple of different points. So back to 2019, we're up 300 basis points. So that's obviously north of the 200 that we were talking about previously under old management.

Now some of that is coming from just a mix because amusement is 65% of our business versus 56%. Much lower level of labor associated with that. So we are getting some benefit from that, which is roughly about 900 points or sorry, 900 basis points, about a third of that is coming from that mix. The rest of it, when you think about inflation, not just from a labor perspective and a commodity, the price changes have helped offset that and the labor model changes that we made.

So just think about the introduction of xDine. xDine allowed us to increase the number of tables that a server can can handle by about a third. So you take that translation into your labor model, that means less headcount necessary. More efficient models, that helps offset that labor rate inflation, which is sitting today at about 20% for us.

And I don't see that changing because I don't see employees taking pay cuts in the future. So that's going to be here to stay and it's something that we're all that eyes wide open on how we are managing the just about. From a commodity perspective, it's primarily around meat. So your protein, so chicken and beef.

But again. we're able to offset that with a slight increase in pricing on our F&B, which is only about 5%. And if you think about that, there was no price increases prior to the last two years. So it's a very modest and reasonable price increase accordingly to what we're seeing in the market.

And so the combination of all of that is keeping us at that margin that we talked about that roughly 200% or 200 basis points.

Kevin Sheehan -- Board Chair and Interim Chief Executive Officer

So in other words, we see confidence. We have confidence that that 200 bips will continue through this calendar year -- but on into the future as we get better and better at honing in on our cost structure.

Brian Mullan -- Deutsche Bank -- Analyst

OK. Great. Thank you for all that. And then just a question on development.

Thanks for the guidance on eight new unit to open this year. Can you just speak to what type of formats you expect those to be? And I'm asking just to try to gauge if you'd expect the average weekly sales on those new units to mirror the existing base of stores? Or might they be different for some reasons in your planning? And then if you'd be willing to speak to how the pipeline is building for 2023 and beyond, would you expect that to accelerate next year, given all the work that you're doing now?

Michael Quartieri -- Executive Vice President and Chief Financial Officer

Yeah, sure. So start off with the eight stores that were opening is going to be a mix. Generally, we're targeting around that 25,000 square-foot location. But there are going to be some opportunities where we're able to get into space that's larger than that, and we'll be able to take advantage of that with the different types of format.

So it's really about what the location allows for, as opposed to we're only going with a set target and that's it. So we have some flexibility around that and that's what the plan is for these eight stores coming ip this year. As we get beyond that, we've got a solid pipeline already under development that takes us through the end of 2024. And so along that line, as I said earlier, we are targeting that that prime spot of about a 25,000 foot store.

That that level allows us to, I'll say, integrate into the markets when -- were density, as opposed to one mega center, we could have two smaller footprints and still yield the same return on invested capital as we've always have.

Kevin Sheehan -- Board Chair and Interim Chief Executive Officer

The other critically important thing for everyone to understand is the and it's not just the management team. The board is 100% behind this concept of we are going to invest in our existing stores to the point where we get everything closer to the footprint of what we're building today. And that every -- once we get through this, it's going to take us two or three years to get through all the stores, but then stay on a cycle, so that every store continues to have that fresh feel. And then with certain small modifications, we can keep it rolling.

But every seventh year, every store should get a major look and change. So that will help as well. And that -- is somewhat funded by the efficiency of the smaller stores, which is [Inaudible] a little bit -- by the cost of parts and building the stores, as you guys all know, because of what's going on in the environment. But at the end of the day, with not a lot of incremental capital, we're going to be able to accomplish this.

So we're really excited about this because I think, investing in our existing stores and making them feel fresh and exciting is going to drive organic growth as well.

Operator

All right, we can go ahead and take our next question from Andrew -- Strelzik, my apologies, from BMO.

Andrew Strelzik -- BMO Capital Markets -- Analyst

Great. Thank you very much. Good morning. I guess following up on the margin questions.

How much inflation across labor and [Audio gap] What are you thinking about as it stands today for 2022?

Kevin Sheehan -- Board Chair and Interim Chief Executive Officer

Yeah. I think from an overall rate perspective for labor it's roughly about 20%, and we don't see that changing any time in the future. And so, as I said, being able to do a more efficient labor model with xDine and other improvements that we've made, we're able to offset a significant portion of that. Plus, again, the mix between amusement versus F&B, helps provide some of that extra margin that covers those costs.

And then addition, in the future, you're going to see the return of special events. Our special events business is really about 60% of our F&B result. That will carry a slightly higher margin than normal F&B, because we have better planning for that and a more efficient labor model in the back of house for those types of events.

Andrew Strelzik -- BMO Capital Markets -- Analyst

Got it. OK. That makes sense. And then, Michael, I guess I was just curious.

You talked about the balance sheet, the net leverage on the balance sheet,. and some of the capex dynamics. I guess, I'm just curious at a high level how you think about utilizing the balance sheet, the right levels of leverage over time and any other thoughts? I know your last quarter obviously announced the [Inaudible] authorization. I'm just curious how you're thinking about those dynamics.

Thanks.

Michael Quartieri -- Executive Vice President and Chief Financial Officer

Look. Our net debt is 1.2 times. So obviously, Kevin can weigh in as well. The balance sheet can support more leverage, but we're not going to add leverage just for the sake of adding it.

We're going to have to make sure that what we do is very strategic that grows the long-term value of the company. But also from a strategic perspective, it's really about long-term growth. And so we have a balance sheet that allows us to do that, and we'll take advantage of that when the time comes.

Kevin Sheehan -- Board Chair and Interim Chief Executive Officer

I mean, at the end of the day, you have to expect that the management team will be evaluating the alternative uses of cash, because we don't want to push the return to our shareholders by paying down debt when we're 1.2 times levered. Of course, we will do that until we have some sort of a really successful strategic alternative. But at some point, it gets inefficient shareholders to pay down inexpensive debt.

Andrew Strelzik -- BMO Capital Markets -- Analyst

Great. Thank you very much.

Operator

And we'll go ahead and take our next question from Brian Vaccaro with Raymond James.

Brian Vaccaro -- Raymond James -- Analyst

Thanks, and good morning. I wanted to circle back on the quarter to date comments if we could, and just to make sure we're all on the same page. Mike, could you share what average weekly sales were in the quarter-to-date period, if you have that handy?

Michael Quartieri -- Executive Vice President and Chief Financial Officer

So, what we looked at for the for the first eight weeks, we've been looking right about $250 or $250,000 per store compared to 245 for the previous period. Now there is some seasonality, but at this point that's watch itself just based on the timing of when spring breaks are in the light. So at this point, we're behind that. So we feel that it is a relatively comparable period. 

Kevin Sheehan -- Board Chair and Interim Chief Executive Officer

And just remember, when you break that weekly performance now, between the first three weeks, as I had alluded to earlier in the call and this last five weeks, you'll see the bigger bump in the weekly results.

Brian Vaccaro -- Raymond James -- Analyst

Yes. Understood. And the comment on spring breaks. If we compare back to '19, I think Easter is just a few days difference back to '19.

Has there been a shift in spring breaks? Historically, we've talked about -- compare taking March and April together, has March benefited from some spring breaks that may be disconnected from Easter?

Michael Quartieri -- Executive Vice President and Chief Financial Officer

No. The differential would be like one week to the next week. So that's all behind us at this point. So when we talk about the first full week, any seasonality around spring break just is all behind us.

Brian Vaccaro -- Raymond James -- Analyst

OK. OK. And on the pricing front, I believe you were testing some price increases on amusement. Could you share how much of an increase did you settle on and when was that taken?

Kevin Sheehan -- Board Chair and Interim Chief Executive Officer

Yeah. It was actually -- we're testing and testing just to make sure we get this right. But I would say at the end of the day, the price increases that we've pushed out are going to pretty much be in the double digit on a net basis as we go forward, but maybe even a bit better than that.

Brian Vaccaro -- Raymond James -- Analyst

OK. And I guess in test on that pricing, I'm curious how much of an improvement in per caps spend you saw or you are seeing? I'm just thinking behaviorally, behaviorally about the consumer response to the average customer, sort of have a set spend, say load 15 or 25 on a card and when it's gone, it's gone and they leave. Or are you seeing some behavior where they're more inclined to reload the card and extend the visit?

Michael Quartieri -- Executive Vice President and Chief Financial Officer

No, I think it's a combination of both, which it's always been. I think really the meaningful adjustment was back in October when we raised the the actual what we called the buy-in-price. So when you had a minimum of, I say a $20 card and you increase that to $25, that's when we saw a little bit more of a bump up versus the -- COVID, coming out of COVID increase spend, which you saw in Q2 and I'd say Q1, Q2, when you get to Q3 sorry, Q4 because I'm so used to doing regular calendar quarters now we got them retail calendar. That's confusing.

But, when you get to the start of Q4, you saw that price increase go into place, but it didn't change the pricing of the actual game itself, it just changed the buy-in. And from that, we saw the positive impact, really no change in consumer behavior at that point. We've done some testing about changing the actual price of the game itself. That's still in test, but we still haven't seen any real change in customer behavior at this point.

But it's still --

Margo Manning -- Chief Operating Officer

A slight increase and recharge, but not significant. So we're still working that past.

Brian Vaccaro -- Raymond James -- Analyst

OK. Great. That's that's helpful. And then I guess last one for me.

Mike, I appreciate the business update with the quarter-to-date comps, but given all the moving pieces and movements in margin lines, labor or other opex etc., would you be willing to give some high level guardrails on the first quarter as it relates to EBITDA? Or even the annual EBITDA expectation that you would have assuming no change in COVID circumstances?

Kevin Sheehan -- Board Chair and Interim Chief Executive Officer

I think we're trying to get away from the guidance part of this so that we've got everybody looking at the business as we shape. But simple mathematics done by anybody, looking at that the breakdown of the first quarter the way I described it with the paint a few weeks and then this acceleration in the last five weeks to extrapolate that through the quarter, -- you can do the math. And I suspect you're going to come out that we're going to be in good shape for the quarter. Sorry to be --

Brian Vaccaro -- Raymond James -- Analyst

 Fair enough. I'll pass it along. Thank you.

Operator

And that will conclude today's question-and-answer session, Mr. Sheehan. At this time, I will turn the conference back to you for any additional or closing remarks.

Kevin Sheehan -- Board Chair and Interim Chief Executive Officer

Oh, thanks, everybody, for taking the time to listen to us this morning. I got to tell you, we're very excited about the prospects and all the different. We walked away from this general managers meeting about a week and a half ago with a lot of enthusiasm and excitement that was addicted to all of the people at the at the meeting. And so, we're on on the beginning of a new generation of growth in this business and a lot of innovation.

But thinking differently, the way I like to describe it is, we're not tainted by a long history, which is a very solid history. So don't get me wrong. But coming in and taking a clean sheet of paper and saying, "What is the art of the possible?", Mike alluded to the days of the week and the times of the day. And we're trying very hard to figure out what are the things that we can do late night with building that back to a level that people want to be there in the evenings to come and hang out with their friends to different types of events that could draw traffic on the lower bude days.

So lots to come. Stay tuned. And we're very happy with where we are and excited about the future. Thank you so much for joining us.

Operator

[Operator signoff]

Duration: 45 minutes

Call participants:

Michael Quartieri -- Executive Vice President and Chief Financial Officer

Kevin Sheehan -- Board Chair and Interim Chief Executive Officer

Margo Manning -- Chief Operating Officer

Andy Baris -- Jefferies -- Analyst

Jeff Farmer -- Gordon Haskett -- Analyst

Jake Bartlett -- Truist Securities -- Analyst

Brian Mullan -- Deutsche Bank -- Analyst

Andrew Strelzik -- BMO Capital Markets -- Analyst

Brian Vaccaro -- Raymond James -- Analyst

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