DAVE AND BUSTERS ENTERTAINMENT INC

Capital Allocation Priorities

1. Share Repurchases

• Current Activity:
  • Repurchased $28 million of shares during the quarter.
  • Total repurchases year-to-date: $88 million.
  • Represents 2 million shares or 5.1% of outstanding shares as of fiscal '23.
• Future Authorization:
  • Remaining $112 million on Board-approved share repurchase authorization for opportunistic repurchases.

2. Capital Expenditures (CapEx)

• Total Investment:
  • $131 million invested in capital additions during the quarter.
  • Over 90% allocated to growth CapEx.
• Focus Areas:
  • New store openings.
  • Fully programmed remodels.

3. Debt Refinancing and Liquidity Management

• Refinancing Efforts:
  • Raised a new $700 million term loan due in 2031.
  • Redeemed $440 million of senior notes due in 2025.
  • Paid down $200 million of existing term loan principal due in 2029.
• Credit Facilities:
  • Upsized the revolving credit facility by $150 million to a total of $650 million.
  • Extended maturity to 2029.

4. Sale-Leaseback Transactions

• Recent Transactions:
  • Generated $28.5 million from the sale-leaseback of one store's real estate.
  • Year-to-date proceeds reach nearly $75 million.
• Purpose:
  • Replenish capital for further investment.
  • Monetize existing real property assets methodically.

Future Plans and New Initiatives

1. Store Expansion and Remodels

• New Store Openings:
  • Opened 10 new stores year-to-date.
  • Planned openings: 7 additional stores by the end of fiscal year.
  • International expansion with the first store in Bengaluru, India by year-end and five international stores in the next 12 months.
• Fully Programmed Remodels:
  • Completed 11 remodels in Q3; total expected by fiscal '24: 44 remodels.
  • Focus on high ROI remodels combining dining, sports bar, and new entertainment offerings.

2. Marketing Optimization

• Strategies Implemented:
  • Onboarded a new marketing agency.
  • Shifted media mix to 90% digital, 10% offline.
  • Enhanced tracking and optimization of digital marketing spend.
• Promotional Initiatives:
  • Relaunched the Eat & Play Combo.
  • Soft launched a Winter Pass to drive loyalty and visit frequency.

3. Loyalty Program Enhancement

• Database Growth:
  • Over 7 million loyalty members.
  • Loyalty members visit 2.5 times more and spend more per visit.
• Optimization Efforts:
  • Added internal and external resources to enhance the loyalty program’s value.
  • Aiming to grow the loyalty database and improve customer value.

4. Special Events Expansion

• Performance:
  • Year-over-year growth in special events business up mid-single digits.
• Enhancements:
  • Improved marketing support through paid media, digital channels, and in-store experiences.
  • Increased customer deposits for group events up low double digits.
  • Planning to expand the program to additional stores in 2025 based on performance.

5. Technology Enablement

• IT Enhancements:
  • Updated connectivity and server infrastructure.
  • Supports gaming ecosystem, remodels, kitchen enhancements, loyalty program, and new service models.
• Operational Improvements:
  • Enhanced data integration for strategic analysis.
  • Aimed at improving guest satisfaction and engagement.

6. Strategic Games Pricing

• Pricing Adjustments:
  • Increased chip prices for the first time in over 25 years.
  • Implemented strategic pricing based on real-time performance data.
• Future Investments:
  • Launching new games like The Human Crane to enhance entertainment offerings.

Summary

Dave & Buster's Entertainment Inc. is strategically allocating capital towards share repurchases, growth-oriented capital expenditures, debt refinancing, and sale-leaseback transactions to strengthen its financial position and fund expansion initiatives. The company is focused on expanding its store footprint, both domestically and internationally, while enhancing existing locations through fully programmed remodels that drive higher returns.

In addition to physical expansion, significant investments are being made in marketing optimization, loyalty program enhancements, and special events to drive customer engagement and revenue growth. Technological advancements are being leveraged to improve operational efficiency and guest experiences. Strategic pricing initiatives and the introduction of new entertainment offerings further support the company's growth objectives and market leadership in the out-of-home entertainment space.